<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-43609
Information contained herein is subject to completion or amendment. These
securities may not be sold nor may offers to buy be accepted prior to the
delivery of a final Prospectus Supplement. This Prospectus Supplement and the
Prospectus to which it relates shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale
of these securities in any state in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED FEBRUARY 25, 1998
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED FEBRUARY 25, 1998)
$898,128,487 (APPROXIMATE)
NATIONSLINK FUNDING CORPORATION
DEPOSITOR
MIDLAND LOAN SERVICES, L.P.
MASTER SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-1
The NationsLink Funding Corporation, Commercial Mortgage Pass-Through
Certificates, Series 1998-1 (the "Certificates") will consist of 16 classes
(each, a "Class") of Certificates, designated as: (i) the Class A-1, Class A-2
and Class A-3 Certificates (collectively, the "Class A Certificates"); (ii) the
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J and Class
K Certificates (collectively, with the Class A Certificates, the "Sequential Pay
Certificates"); (iii) the Class X-1 and Class X-2 Certificates (collectively,
the "Class X Certificates" and collectively with the Sequential Pay
Certificates, the "REMIC Regular Certificates"); and (iv) the Class R-I and
Class R-II Certificates (collectively, the "REMIC Residual Certificates"). Only
the Class X, Class A, Class B, Class C, Class D and Class E Certificates
(collectively, the "Offered Certificates") are offered hereby. The respective
Classes of Offered Certificates will be issued in the aggregate principal
amounts (each, a "Certificate Balance") or, in the case of the Class X
Certificates, in the aggregate notional amounts (each, a "Notional Amount"), and
will accrue interest at the per annum rates (each, a "Pass-Through Rate"), set
forth or otherwise described in the table below.
(cover page continued on following pages)
------------------------
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE
OFFERED CERTIFICATES. THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN
OR OBLIGATION OF THE DEPOSITOR OR ANY OF ITS AFFILIATES, INCLUDING NATIONSBANK
CORPORATION, THE DEPOSITOR'S ULTIMATE PARENT. NEITHER THE OFFERED CERTIFICATES
NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE UNITED STATES
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY THE DEPOSITOR OR ANY OF ITS AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
================================================================================================================
INITIAL CERTIFICATE ASSUMED FINAL
BALANCE OR PASS-THROUGH DISTRIBUTION RATINGS
CLASS NOTIONAL AMOUNT(1) RATE DATE(2) (MOODY'S/DCR/FITCH)(3)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1............ $199,017,108 % January 20, 2005 Aaa/AAA/NR
- ----------------------------------------------------------------------------------------------------------------
Class A-2............ $ 81,648,044 % December 20, 2006 Aaa/AAA/NR
- ----------------------------------------------------------------------------------------------------------------
Class A-3............ $433,755,237 % December 20, 2007 Aaa/AAA/NR
- ----------------------------------------------------------------------------------------------------------------
Class X-1............ $714,348,947(5) %(6) December 20, 2007 Aaa/AAA/NR
- ----------------------------------------------------------------------------------------------------------------
Class X-2............ $306,149,551(7) %(8) March 20, 2008 Aaa/AAA/AAA
- ----------------------------------------------------------------------------------------------------------------
Class B.............. $ 53,581,529 % January 20, 2008 Aa2/AA/AA
- ----------------------------------------------------------------------------------------------------------------
Class C.............. $ 56,133,030 % January 20, 2008 A2/A/A
- ----------------------------------------------------------------------------------------------------------------
Class D.............. $ 48,478,526 % January 20, 2008 Baa2/BBB/BBB
- ----------------------------------------------------------------------------------------------------------------
Class E.............. $ 25,515,013 % January 20, 2008 Baa3/NR/NR
================================================================================================================
<CAPTION>
===================== ====================
RATED FINAL
DISTRIBUTION
CLASS DATE(4)
- --------------------- -------------------
<S> <C>
Class A-1............ March 20, 2030
- ------------------------------------------
Class A-2............ March 20, 2030
- ------------------------------------------
Class A-3............ March 20, 2030
- ------------------------------------------
Class X-1............ March 20, 2030
- ------------------------------------------
Class X-2............ March 20, 2030
- ------------------------------------------
Class B.............. March 20, 2030
- ------------------------------------------
Class C.............. March 20, 2030
- ------------------------------------------
Class D.............. March 20, 2030
- ------------------------------------------
Class E.............. March 20, 2030
==========================================
</TABLE>
(footnotes on page S-3)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" BEGINNING ON PAGE S-20 IN THIS PROSPECTUS SUPPLEMENT AND THE
INFORMATION SET FORTH UNDER "RISK FACTORS" BEGINNING ON PAGE 15 IN THE
PROSPECTUS BEFORE PURCHASING ANY OF THE OFFERED CERTIFICATES.
The Offered Certificates will be purchased by NationsBanc Montgomery
Securities LLC (in such capacity, the "Underwriter") from the Depositor and will
be offered by the Underwriter from time to time to the public in negotiated
transactions or otherwise at varying prices to be determined at the time of sale
(which prices will include interest from the Cut-off Date). Proceeds to the
Depositor from the sale of the Offered Certificates will be an amount equal to
approximately [ ]% of the initial aggregate Certificate Balance of the
Offered Certificates, plus accrued interest on all the Offered Certificates,
before deducting expenses payable by the Depositor. The Offered Certificates are
offered by the Underwriter, subject to prior sale, when, as and if delivered to
and accepted by the Underwriter and subject to its right to reject orders in
whole or in part. It is expected that delivery of the Offered Certificates to
the Underwriter will be made in book-entry form through the Same-Day Funds
Settlement System of The Depository Trust Company ("DTC"), on or about March
1998 (the "Delivery Date"), against payment therefor in immediately available
funds.
------------------------
NATIONSBANC MONTGOMERY SECURITIES LLC
March , 1998
<PAGE> 2
NationsLink Funding Corporation
- -------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificates, Series 1998-1
Geographic Overview of Mortgage Pool
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
[MAP]
<TABLE>
<CAPTION>
% OF
NUMBER OF AGGREGATE INITIAL
MORTGAGED CUT-OFF DATE POOL
STATES PROPERTIES BALANCE BALANCE
----------------- ---------- -------------- -------
<S> <C> <C> <C>
Florida.............. 36 $ 228,146,632 22.4%
California........... 21 $ 158,196,661 15.5%
NC................... 10 $ 101,161,511 9.9%
GA................... 11 $ 50,898,740 5.0%
IN................... 16 $ 49,638,043 4.9%
LA................... 8 $ 45,470,693 4.5%
TX................... 10 $ 40,178,127 3.9%
VA................... 9 $ 36,658,337 3.6%
NV................... 5 $ 32,940,080 3.2%
NY................... 9 $ 30,774,197 3.0%
MO................... 8 $ 28,608,668 2.8%
NM................... 7 $ 23,033,121 2.3%
UT................... 7 $ 22,304,347 2.2%
CO................... 3 $ 22,248,797 2.2%
AZ................... 2 $ 20,192,744 2.0%
MD................... 6 $ 16,359,504 1.6%
MA................... 6 $ 14,831,559 1.5%
OR................... 3 $ 11,854,152 1.2%
CT................... 3 $ 10,316,048 1.0%
MS................... 1 $ 10,156,015 1.0%
OK................... 2 $ 9,983,868 1.0%
WA................... 3 $ 9,931,868 1.0%
SC................... 4 $ 9,317,382 0.9%
TN................... 3 $ 8,846,141 0.9%
MI................... 2 $ 7,696,392 0.8%
NE................... 1 $ 4,484,109 0.4%
DC................... 1 $ 4,136,192 0.4%
DE................... 1 $ 3,958,922 0.4%
OH................... 1 $ 3,392,040 0.3%
NJ................... 1 $ 2,890,743 0.3%
KS................... 1 $ 1,994,924 0.2%
</TABLE>
MORTGAGE POOL BY PROPERTY TYPE
- ------------------------------
[PIE CHART]
<TABLE>
<S> <C>
Multifamily..... 48.6%
Retail.......... 30%
Hotel........... 4.9%
Industrial...... 4.3%
Office.......... 4.2%
Healthcare...... 4%
Franchise....... 3.3%
Mini Storage.... 0.4%
Golf Course..... 0.3%
</TABLE>
<PAGE> 3
(footnotes from cover)
(1) Subject to a variance of plus or minus 5%.
(2) The "Assumed Final Distribution Date" with respect to any Class of Offered
Certificates is the Distribution Date on which the final distribution would
occur for such Class of Certificates based upon the assumptions, among
others, that all payments are made when due and that no Mortgage Loan is
prepaid, in whole or in part, prior to its stated maturity. The actual
performance and experience of the Mortgage Loans will likely differ from
such assumptions. See "Yield and Maturity Considerations" herein.
(3) It is a condition to their issuance that the respective Classes of Offered
Certificates be assigned ratings by Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") and/or Fitch IBCA, Inc.
("Fitch"; and together with Moody's and DCR, the "Rating Agencies") no lower
than those set forth above. The ratings on the Offered Certificates do not
represent any assessments of (i) the likelihood or frequency of voluntary or
involuntary principal prepayments on the Mortgage Loans, (ii) the degree to
which such prepayments might differ from those originally anticipated or
(iii) whether and to what extent Prepayment Premiums will be received. Also
a security rating does not represent any assessment of the yield to maturity
that investors may experience or the possibility that the Class X
Certificateholders might not fully recover their investment in the event of
rapid prepayments of the Mortgage Loans (including both voluntary and
involuntary prepayments).
(4) The "Rated Final Distribution Date" for each Class of Offered Certificates
has been set at the first Distribution Date that follows two years after the
end of the amortization term for the Mortgage Loan that, as of the Cut-off
Date, has the longest remaining amortization term, irrespective of its
scheduled maturity. See "Ratings" herein.
(5) The Class X-1 Certificates will not have a Certificate Balance. The Class
X-1 Certificates will accrue interest on a Notional Amount that is equal to
approximately 99.99% of the aggregate of the Certificate Balances of the
Class A Certificates outstanding from time to time.
(6) Initial Pass-Through Rate. The related Pass-Through Rate is variable and
will, in general, equal the excess, if any, of the weighted average of the
Net Mortgage Rates (as defined herein) of all the Mortgage Loans from time
to time, over the weighted average of the Pass-Through Rates for the Class A
Certificates from time to time.
(7) The Class X-2 Certificates will not have a Certificate Balance. The Class
X-2 Certificates will accrue interest on a Notional Amount that is equal to
approximately 99.99% of the aggregate of the Certificate Balances of all the
Classes of Sequential Pay Certificates, other than the Class A Certificates,
outstanding from time to time.
(8) Initial Pass-Through Rate. The related Pass-Through Rate is variable and
will, in general, equal the excess, if any, of the weighted average of the
Net Mortgage Rates (as defined herein) of all the Mortgage Loans from time
to time, over the weighted average of the Pass-Through Rates for all the
Classes of Sequential Pay Certificates, other than the Class A Certificates,
from time to time.
(continued from cover)
The Certificates will represent in the aggregate the entire beneficial
ownership interest in a trust (the "Trust") established by NationsLink Funding
Corporation (the "Depositor"), the assets of which (such assets collectively,
the "Trust Fund") will consist primarily of a segregated pool (the "Mortgage
Pool") of 201 conventional, multifamily and commercial mortgage loans (the
"Mortgage Loans") having the characteristics described herein. As of March 1,
1998 (the "Cut-off Date"), the Mortgage Loans had an aggregate principal
balance, after taking into account all payments of principal due on or before
such date, whether or not received, of approximately $1,020,600,558 (the
"Initial Pool Balance"), subject to a variance of plus or minus 5%.
Distributions on the Certificates will be made, to the extent of available
funds, on the 20th day of each month or, if any such 20th day is not a business
day, then on the next succeeding business day, beginning in April 1998 (each, a
"Distribution Date"). As more fully described herein, distributions allocable to
interest accrued on each Class of the REMIC Regular Certificates (the REMIC
Residual Certificates will not accrue interest) will be made on each
Distribution Date based on the Pass-Through Rate then applicable to such Class
and the Certificate Balance or, in the case of the Class X Certificates, the
Notional Amount of such Class outstanding immediately prior to such Distribution
Date. Distributions allocable to principal of the respective Classes of
Sequential Pay Certificates will be made in the amounts and in accordance with
the priorities described herein until the Certificate Balance of each such Class
is reduced to zero. Neither the Class X Certificates nor the REMIC Residual
Certificates will have a Certificate Balance or entitle the holders thereof to
receive distributions of principal. Any prepayment premiums, penalties or fees
("Prepayment Premiums") actually collected on the Mortgage Loans will be
distributed among the respective Classes of REMIC Regular Certificates in the
amounts and in accordance with the priorities described herein. See "Description
of the Certificates -- Distributions" herein.
S-3
<PAGE> 4
As and to the extent described herein, the respective rights of the holders
of the Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J,
Class K and REMIC Residual Certificates (collectively, the "Subordinate
Certificates") to receive distributions of amounts collected or advanced on or
in respect of the Mortgage Loans will be subordinated to those of the holders of
the Class X and Class A Certificates (collectively, the "Senior Certificates")
and, further, to those of the holders of each other Class of Subordinate
Certificates, if any, with an earlier alphabetical Class designation. See
"Description of the Certificates -- Distributions" and "-- Subordination;
Allocation of Losses and Certain Expenses" herein.
The yield to maturity of each Class of Offered Certificates will depend on,
among other things, the rate and timing of principal payments (including by
reason of prepayments, loan extensions, defaults and liquidations) and losses on
or in respect of the Mortgage Loans that result in a reduction of the
Certificate Balance or Notional Amount of such Class. The yield to maturity of
the Class X Certificates will be highly sensitive to the rate and timing of
principal payments (including by reason of prepayments, loan extensions,
defaults and liquidation) and losses on the Mortgage Loans. The yield to
maturity of the Class X-1 Certificates will be particularly sensitive to the
rate and timing of prepayments, and the yield to maturity of the Class X-2
Certificates will be particularly sensitive to the rate and timing of losses.
Investors in the Class X Certificates should fully consider the associated
risks, including the risk that an extremely rapid rate of amortization,
prepayment and other liquidation of the Mortgage Loans could result in the
failure of such investors to recoup fully their initial investments. Any delay
in collection of a Balloon Payment on any Mortgage Loan that would otherwise be
distributable in reduction of the Certificate Balance of a Class of Sequential
Pay Certificates, whether such delay is due to borrower default or to
modification of the related Mortgage Loan as described herein, will likely
extend the weighted average life of such Class of Certificates. See "Risk
Factors", "Description of the Certificates -- Distributions" and "Yield and
Maturity Considerations" herein. See also "Yield and Maturity Considerations"
and "Risk Factors -- Effect of Prepayments on Average Life of Certificates" in
the Prospectus.
As described herein, two separate "real estate mortgage investment conduit"
("REMIC") elections will be made with respect to the Trust Fund for federal
income tax purposes (the REMICs formed thereby being herein referred to as
"REMIC I" and "REMIC II", respectively). The Offered Certificates will evidence
"regular interests" in REMIC II. See "Certain Federal Income Tax Consequences"
herein and in the Prospectus.
There is currently no secondary market for the Offered Certificates. The
Underwriter intends to make a secondary market in the Offered Certificates, but
is not obligated to do so. There can be no assurance that such a market will
develop or, if it does develop, that it will continue. The Offered Certificates
will not be listed on any securities exchange. See "Risk Factors -- The
Certificates -- Limited Liquidity" herein.
THE PROSPECTUS THAT ACCOMPANIES THIS PROSPECTUS SUPPLEMENT CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING THAT IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL TO OBTAIN MATERIAL INFORMATION CONCERNING THE OFFERED
CERTIFICATES. SALES OF THE OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED BOTH THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS MAY BE USED BY NATIONSBANC
MONTGOMERY SECURITIES LLC ("NATIONSBANC MONTGOMERY"), AN AFFILIATE OF THE
DEPOSITOR AND A WHOLLY-OWNED SUBSIDIARY OF NATIONSBANK CORPORATION, IN
CONNECTION WITH OFFERS AND SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE
CERTIFICATES. NATIONSBANC MONTGOMERY MAY ACT AS PRINCIPAL OR AGENT IN SUCH
TRANSACTIONS. SUCH SALES WILL BE MADE AT PRICES RELATED TO PREVAILING MARKET
PRICES AT THE TIME OF SALE.
S-4
<PAGE> 5
EXECUTIVE SUMMARY
The following Executive Summary does not include all relevant information
relating to the securities and collateral described herein, particularly with
respect to the risks and special considerations involved with an investment in
such securities, and is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Certain capitalized terms used in this Executive
Summary may be defined elsewhere in this Prospectus Supplement, including in
Annex A hereto, or in the Prospectus. An "Index of Principal Definitions" is
included at the end of both this Prospectus Supplement and the Prospectus. Terms
that are used but not defined in this Prospectus Supplement will have the
meanings specified in the Prospectus.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
INITIAL APPROXIMATE PASS-THROUGH WEIGHT
CERTIFICATE PERCENTAGE OF APPROXIMATE RATE AS AVERAGE
BALANCE OR INITIAL POOL INITIAL CREDIT OF DELIVERY LIFE
CLASS RATINGS(1) NOTIONAL AMOUNT(2) BALANCE SUPPORT DESCRIPTION DATE (YEARS)(3)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
- -----------------------------------------------------------------------------------------------------------------------------------
A-1 Aaa/AAA/NR $199,017,108 19.50% 30.00% Fixed Rate 5.01
- -----------------------------------------------------------------------------------------------------------------------------------
A-2 Aaa/AAA/NR $ 81,648,044 8.00% 30.00% Fixed Rate 7.29
- -----------------------------------------------------------------------------------------------------------------------------------
A-3 Aaa/AAA/NR $433,755,237 42.50% 30.00% Fixed Rate 9.46
- -----------------------------------------------------------------------------------------------------------------------------------
X-1 Aaa/AAA/NR $714,348,947(4) N/A N/A Variable 7.97
Rate
(Interest
Only)
- -----------------------------------------------------------------------------------------------------------------------------------
X-2 Aaa/AAA/AAA $306,149,551(4) N/A N/A Variable 9.83
Rate
(Interest
Only)
- -----------------------------------------------------------------------------------------------------------------------------------
B Aa2/AA/AA $ 53,581,529 5.25% 24.75% Fixed Rate 9.76
- -----------------------------------------------------------------------------------------------------------------------------------
C A2/A/A $ 56,133,030 5.50% 19.25% Fixed Rate 9.81
- -----------------------------------------------------------------------------------------------------------------------------------
D Baa2/BBB/BBB $ 48,478,526 4.75% 14.50% Fixed Rate 9.81
- -----------------------------------------------------------------------------------------------------------------------------------
E Baa3/NR/NR $ 25,515,013 2.50% 12.00% Fixed Rate 9.81
- -----------------------------------------------------------------------------------------------------------------------------------
Private Certificates -- Not Offered Hereby
- -----------------------------------------------------------------------------------------------------------------------------------
F (Not Offered) $51,030,027 5.00% 7.00% Fixed Rate 9.83
- -----------------------------------------------------------------------------------------------------------------------------------
G (Not Offered) $10,206,005 1.00% 6.00% Fixed Rate 9.89
- -----------------------------------------------------------------------------------------------------------------------------------
H (Not Offered) $25,515,013 2.50% 3.50% Fixed Rate 9.89
- -----------------------------------------------------------------------------------------------------------------------------------
J (Not Offered) $12,247,206 1.20% 2.30% Fixed Rate 9.91
- -----------------------------------------------------------------------------------------------------------------------------------
K (Not Offered) $23,473,819 2.30% N/A Fixed Rate 9.97
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------- ------------------------
CLASS PRINCIPAL WINDOW
- ---------------------------------
<S> <C>
Offered Certificates
- ---------------------------------
A-1 4/20/98-1/20/05
- ---------------------------------
A-2 1/20/05-12/20/06
- ---------------------------------
A-3 12/20/06-12/20/07
- ---------------------------------
X-1 N/A
- ---------------------------------
X-2 N/A
- ---------------------------------
B 12/20/07-1/20/08
- ---------------------------------
C 1/20/08-1/20/08
- ---------------------------------
D 1/20/08-1/20/08
- ---------------------------------
E 1/20/08-1/20/08
- ---------------------------------
Private Certificates
-- Not Offered
Hereby
- ---------------------------------
F 1/20/08-2/20/08
- ---------------------------------
G 2/20/08-2/20/08
- ---------------------------------
H 2/20/08-2/20/08
- ---------------------------------
J 2/20/08-3/20/08
- ---------------------------------
K 3/20/08-3/20/08
- ---------------------------------
</TABLE>
(1) Ratings shown are those of Moody's, DCR and Fitch, respectively. Classes
marked "NR" will not be rated by the applicable Rating Agency.
(2) Subject to a variance of plus or minus 5%.
(3) Based on the Maturity Assumptions (as defined in "Yield and Maturity
Considerations" herein).
(4) Notional Amount.
S-5
<PAGE> 6
Set forth below is certain information regarding the Mortgage Loans and the
Mortgaged Properties as of the Cut-off Date (all weighted averages set forth
below are based on the respective Cut-off Date Balances (as defined herein) of
the Mortgage Loans). Such information is described, and additional information
regarding the Mortgage Loans and the Mortgaged Properties is set forth, under
"Description of the Mortgage Pool" herein and in Annex A hereto.
MORTGAGE POOL CHARACTERISTICS
<TABLE>
<CAPTION>
ENTIRE MORTGAGE POOL
CHARACTERISTICS (APPROXIMATE)
- --------------- --------------------
<S> <C>
Initial Pool Balance......................... $ 1,020,600,558
Number of Mortgage Loans..................... 201
Number of Mortgaged Properties............... 201
Average Cut-off Date Balance................. $ 5,077,615
Weighted Average Mortgage Rate............... 7.701%
Weighted Average Remaining Lock-Out Period... 41 months
Weighted Average Remaining Term to
Maturity................................... 109 months
Weighted Average Underwriting Debt Service
Coverage Ratio............................. 1.47x
Weighted Average Cut-off Date Loan-to-Value
Ratio...................................... 72.2%
</TABLE>
"Cut-off Date Loan-to-Value Ratio", "Lock-Out Period" and "Underwriting
Debt Service Coverage Ratio" are calculated as described in Annex A hereto.
S-6
<PAGE> 7
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary may
be defined elsewhere in this Prospectus Supplement, including in Annex A hereto,
or in the Prospectus. An "Index of Principal Definitions" is included at the end
of both this Prospectus Supplement and the Prospectus. Terms that are used but
not defined in this Prospectus Supplement will have the meanings specified in
the Prospectus.
TITLE OF CERTIFICATES AND DESIGNATION OF CLASSES
NationsLink Funding Corporation, Commercial Mortgage Pass-Through
Certificates, Series 1998-1. The Certificates will consist of 16 classes (each,
a "Class"), designated as: (i) the Class A-1, Class A-2 and Class A-3
Certificates (collectively, the "Class A Certificates"); (ii) the Class B, Class
C, Class D, Class E, Class F, Class G, Class H, Class J and Class K Certificates
(collectively with the Class A Certificates, the "Sequential Pay Certificates");
(iii) the Class X-1 and Class X-2 Certificates (collectively, the "Class X
Certificates," and collectively with the Sequential Pay Certificates, the "REMIC
Regular Certificates"); and (iv) the Class R-I and Class R-II Certificates
(collectively, the "REMIC Residual Certificates"). Only the Class X, Class A,
Class B, Class C, Class D and Class E Certificates (collectively, the "Offered
Certificates") are offered hereby.
The Class F, Class G, Class H, Class J and Class K Certificates and the
REMIC Residual Certificates (collectively, the "Private Certificates") have not
been registered under the Securities Act of 1933, as amended, and are not
offered hereby. Accordingly, to the extent this Prospectus Supplement contains
information regarding the terms of the Private Certificates, such information is
provided because of its potential relevance to a prospective purchaser of an
Offered Certificate.
DEPOSITOR
NationsLink Funding Corporation. The Depositor, a Delaware corporation, is
a subsidiary of NationsBank, N.A. The Depositor maintains its principal office
at NationsBank Corporate Center, 100 North Tryon Street, Charlotte, North
Carolina 28255. See "The Depositor" and "Method of Distribution" herein. Neither
the Depositor nor any of its affiliates has insured or guaranteed the Offered
Certificates.
TRUSTEE
Norwest Bank Minnesota, National Association. See "Description of the
Certificates -- The Trustee" herein. The Trustee will also have certain duties
with respect to REMIC administration (in such capacity, the "REMIC
Administrator").
MASTER SERVICER
Midland Loan Services, L.P., a Missouri limited partnership. See "Servicing
of the Mortgage Loans -- The Master Servicer" herein.
SPECIAL SERVICER
Lennar Partners, Inc. See "Servicing of the Mortgage Loans -- The Special
Servicer" herein.
MORTGAGE LOAN SELLER
NationsBank, N.A. The Mortgage Loan Seller, a national banking association,
is the parent of the Depositor and a wholly-owned subsidiary of NB Holdings
Corporation, which in turn is a wholly-owned subsidiary of NationsBank
Corporation. The Mortgage Loan Seller maintains its principal office at
NationsBank Corporate Center, 100 North Tryon Street, Charlotte, North Carolina
28255. The Mortgage Loan Seller is the successor in interest to NationsBanc
Mortgage Capital Corporation ("NMCC") as
S-7
<PAGE> 8
described under "Description of the Certificates -- General" herein. See also
"Description of the Mortgage Pool -- The Mortgage Loan Seller" herein.
CUT-OFF DATE
March 1, 1998.
DELIVERY DATE
On or about March , 1998.
RECORD DATE
With respect to each Class of Offered Certificates and each Distribution
Date, the last business day of the calendar month immediately preceding the
month in which such Distribution Date occurs.
DISTRIBUTION DATE
The 20th day of each month or, if any such 20th day is not a business day,
the next succeeding business day, commencing in April 1998.
DETERMINATION DATE
The 10th day of each month or, if any such 10th day is not a business day,
the immediately preceding business day, commencing in April 1998.
COLLECTION PERIOD
With respect to any Distribution Date, the period that begins immediately
following the Determination Date in the calendar month preceding the month in
which such Distribution Date occurs (or, in the case of the initial Distribution
Date, that begins immediately following the Cut-off Date) and ends on and
includes the Determination Date in the calendar month in which such Distribution
Date occurs.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry form in original
denominations of: (i) in the case of the Class A Certificates, $10,000 actual
principal amount and in any whole dollar denomination in excess thereof; (ii) in
the case of the Class X Certificates, $1,000,000 notional principal amount and
in any whole dollar denomination in excess thereof; and (iii) in the case of the
other Offered Certificates, $100,000 actual principal amount and in any whole
dollar denomination in excess thereof. Each Class of Offered Certificates will
be represented by one or more Certificates registered in the name of Cede & Co.,
as nominee of The Depository Trust Company ("DTC"). No person acquiring an
interest in an Offered Certificate (any such person, a "Certificate Owner") will
be entitled to receive a fully registered physical certificate (a "Definitive
Certificate") representing such interest, except under the limited circumstances
described herein and in the Prospectus. See "Description of the
Certificates -- Registration and Denominations" herein and "Description of the
Certificates -- Book-Entry Registration and Definitive Certificates" in the
Prospectus.
THE MORTGAGE POOL
The Mortgage Pool will consist of 201 conventional, multifamily and
commercial mortgage loans (the "Mortgage Loans"), with an aggregate Cut-off Date
Balance of approximately $1,020,600,558 (the "Initial Pool Balance"), subject to
a variance of plus or minus 5%. All numerical information provided herein with
respect to the Mortgage Loans is provided on an approximate basis. All weighted
average information provided herein with respect to the Mortgage Loans reflects
weighting by related Cut-off Date Balance. All percentages of the Mortgage Pool,
or of any specified sub-group thereof, referred to herein without further
description are approximate percentages by aggregate Cut-off Date Balance. See
"Description of the Mortgage Pool -- Changes in Mortgage Pool Characteristics"
herein.
S-8
<PAGE> 9
The "Cut-off Date Balance" of each Mortgage Loan is the unpaid principal
balance thereof as of the Cut-off Date, after application of all payments of
principal due on or before such date, whether or not received. The Cut-off Date
Balances of the Mortgage Loans range from $568,681 to $36,501,176 and the
average Cut-off Date Balance is $5,077,615.
Each Mortgage Loan is evidenced by a promissory note (a "Mortgage Note")
and is secured by a mortgage, deed of trust or similar security instrument (a
"Mortgage") that creates a first mortgage lien on a fee simple and/or leasehold
interest in real property (a "Mortgaged Property") used for commercial or
multifamily residential purposes, together with all buildings and improvements
and certain personal property located thereon.
Each of 6 separate sets of Mortgage Loans contains Mortgage Loans (the
"Cross-Collateralized Mortgage Loans") that are, solely as among the Mortgage
Loans in each such particular set, cross-defaulted and cross-collateralized with
each other, although the cross-collateralization with respect to each of three
such sets is limited as described herein. The largest set of related
Cross-Collateralized Mortgage Loans represents 4.3% of the Initial Pool Balance.
See "Description of the Mortgage Pool -- General" herein and Annex A hereto.
In general, with limited exception, the Mortgage Loans constitute
nonrecourse obligations of the related borrower and, upon any such borrower's
default in the payment of any amount due under the related Mortgage Loan, the
holder thereof may look only to the related Mortgaged Property for satisfaction
of the borrower's obligation. In those cases where recourse to a borrower or
guarantor is permitted by the loan documents, the Depositor has not undertaken
an evaluation of the financial condition of any such person, and prospective
investors should thus consider all of the Mortgage Loans to be nonrecourse. None
of the Mortgage Loans is insured or guaranteed by the United States, any
governmental agency or instrumentality or any private mortgage insurer. See
"Description of the Mortgage Pool -- General".
Set forth below are the number of Mortgaged Properties, and the approximate
percentage of the Initial Pool Balance secured by such Mortgaged Properties,
located in the five states with the highest concentrations:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
STATE PROPERTIES BALANCE
- ----- ---------- -------------
<S> <C> <C>
Florida..................................................... 36 22.4%
California.................................................. 21 15.5
North Carolina.............................................. 10 9.9
Georgia..................................................... 11 5.0
Indiana..................................................... 16 4.9
</TABLE>
The remaining Mortgaged Properties are located throughout 25 other states
and the District of Columbia, with no more than 4.5% of the Initial Pool Balance
secured by Mortgaged Properties located in any such other jurisdiction.
Set forth below are the number of Mortgaged Properties, and the approximate
percentage of the Initial Pool Balance secured by such Mortgaged Properties,
operated for each indicated purpose:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
PROPERTIES BALANCE(1)
---------- -------------
<S> <C> <C>
Multifamily................................................. 100 48.6%
Retail...................................................... 57 30.0
Hotel....................................................... 7 4.9
Industrial.................................................. 2 4.3
Office...................................................... 13 4.2
Health Care................................................. 8 4.0
Franchise Restaurant........................................ 12 3.3
Other....................................................... 2 0.7
</TABLE>
- ---------------
(1) The sum of the percentages in this column may not equal 100% due to
rounding.
S-9
<PAGE> 10
Each of the Mortgage Loans provides for scheduled payments of principal and
interest ("Monthly Payments") to be due on the first day of each month (as to
each such Mortgage Loan, the "Due Date").
All of the Mortgage Loans bear interest at a rate per annum (a "Mortgage
Rate") that is fixed for the remaining term of the Mortgage Loan. No Mortgage
Loan permits negative amortization or the deferral of accrued interest. See
"Description of the Mortgage Pool -- Certain Terms and Conditions of the
Mortgage Loans -- Amortization of Principal" herein.
All of the Mortgage Loans accrue interest on the basis of the actual number
of days elapsed in the relevant month of accrual and a 360-day year (an
"Actual/360 Basis"). See "Description of the Mortgage Pool -- Certain Terms and
Conditions of the Mortgage Loans -- Mortgage Rates; Calculations of Interest"
herein.
Two hundred of the Mortgage Loans (the "Balloon Loans"), which represent
99.9% of the Initial Pool Balance, provide for monthly payments of principal
based on amortization schedules significantly longer than the respective
remaining terms thereof, thereby leaving substantial principal amounts due and
payable (each such payment, together with the corresponding interest payment, a
"Balloon Payment") on their respective maturity dates, unless prepaid prior
thereto. The remaining Mortgage Loan, which represents 0.1% of the Initial Pool
Balance, is fully amortizing. See "Description of the Mortgage Pool -- Certain
Terms and Conditions of the Mortgage Loans -- Amortization of Principal" herein.
All of the Mortgage Loans provided as of origination for, sequentially, (a)
a period (a "Lock-out Period") during which voluntary principal prepayments are
prohibited, followed by (b) a period (a "Prepayment Premium Period") during
which any voluntary principal prepayment must be accompanied by a prepayment
premium, penalty or fee (a "Prepayment Premium"), followed by (c) a period (an
"Open Period") during which voluntary principal prepayments may be made without
an accompanying Prepayment Premium. Voluntary principal prepayments may be made
in full or in part after any Lock-out Period, subject to certain limitations
and, during a Prepayment Premium Period, payment of the applicable Prepayment
Premium. As of the Cut-off Date, the remaining Lock-out Periods ranged from 8
months to 48 months, with a weighted average remaining Lock-out Period of 41
months. The Open Period for each Mortgage Loan begins six months (or, for
certain Mortgage Loans, 12 months) prior to stated maturity. Prepayment Premiums
on the Mortgage Loans are generally calculated either on the basis of a yield
maintenance formula (subject, in certain instances, to a minimum equal to a
specified percentage of the principal amount prepaid) or as a percentage (which
may decline over time) of the principal amount prepaid. The prepayment terms of
each of the Mortgage Loans are more fully described in Annex A. See "Risk
Factors -- The Mortgage Loans -- Prepayment Premiums" and "Description of the
Mortgage Pool -- Certain Terms and Conditions of the Mortgage
Loans -- Prepayment Provisions" herein.
As of the Cut-off Date, the Mortgage Loans had the following additional
characteristics: (i) Mortgage Rates ranging from 6.720% per annum to 9.830% per
annum and a weighted average Mortgage Rate of 7.701% per annum; (ii) remaining
terms to stated maturity ranging from 56 months to 120 months and a weighted
average remaining term to stated maturity of 109 months; (iii) remaining
amortization terms (calculated on a 30/360 Basis for purposes of the accrual of
interest) ranging from 118 months to 360 months and a weighted average remaining
amortization term of 331 months; (iv) Cut-off Date Loan-to-Value Ratios ranging
from 27.2% to 82.8% and a weighted average Cut-off Date Loan-to-Value Ratio of
72.2%; (v) Maturity Date Loan-to-Value Ratios ranging from 26.7% to 75.8% and a
weighted average Maturity Date Loan-to-Value Ratio of 62.9% (the one
fully-amortizing Mortgage Loan would have a Maturity Date Loan-to-Value Ratio of
0.0%); and (vi) Underwriting Debt Service Coverage Ratios ranging from 1.19x to
4.24x and a weighted average Underwriting Debt Service Coverage Ratio of 1.47x.
"Cut-off Date Loan-to-Value Ratio," "Maturity Date Loan-to-Value Ratio" and
"Underwriting Debt Service Coverage Ratio" are each defined in Annex A hereto.
For more detailed statistical information regarding the Mortgage Pool, see
Annex A hereto.
All of the Mortgage Loans were originated during the 18 months preceding
the Cut-off Date.
On or before the Delivery Date, the Mortgage Loan Seller will, at the
direction of the Depositor, transfer all of the Mortgage Loans, without
recourse, to the Trustee for the benefit of holders of the Certificates (the
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<PAGE> 11
"Certificateholders"). The Mortgage Loan Seller will make certain
representations and warranties regarding the characteristics of the Mortgage
Loans. As more particularly described herein, the Mortgage Loan Seller will be
obligated to cure any material breach of any such representation or warranty
made by the Mortgage Loan Seller with respect to the Mortgage Loans or
repurchase the affected Mortgage Loan.
The Mortgage Loans are being sold without recourse, and the Mortgage Loan
Seller will not have any obligations with respect to the Offered Certificates
other than pursuant to such representations, warranties and repurchase
obligations. The Depositor will make no representations or warranties with
respect to the Mortgage Loans and will have no obligation to repurchase or
replace Mortgage Loans with deficient documentation or which are otherwise
defective. See "Description of the Mortgage Pool" and "Risk Factors -- The
Mortgage Loans" herein and "Description of the Trust Funds" and "Certain Legal
Aspects of Mortgage Loans" in the Prospectus.
The Mortgage Loans will be serviced and administered by the Master Servicer
and, if circumstances require, the Special Servicer, pursuant to the Pooling
Agreement (as defined below) and generally in accordance with the discussion set
forth under "Servicing of the Mortgage Loans" herein and "Description of the
Pooling Agreements" in the Prospectus. The compensation to be received by the
Master Servicer (including Master Servicing Fees) and the Special Servicer
(including Standby Fees, Special Servicing Fees and Workout Fees) for their
services is described herein under "Servicing of the Mortgage Loans -- Servicing
and Other Compensation and Payment of Expenses".
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to an Amended and Restated Pooling
and Servicing Agreement, to be dated as of the Cut-off Date (the "Pooling
Agreement"), among the Depositor, the Master Servicer, the Special Servicer, the
Trustee, the REMIC Administrator and the Mortgage Loan Seller, and will
represent in the aggregate the entire beneficial ownership interest in a trust
(the "Trust") the assets of which (such assets collectively, the "Trust Fund")
will consist primarily of the Mortgage Pool.
A. CERTIFICATE BALANCES AND NOTIONAL AMOUNTS
Upon initial issuance, each Class of Offered Certificates will have the
Certificate Balance or Notional Amount set forth for such Class on the cover
page hereof (in each case, subject to a variance of plus or minus 5%). Upon
initial issuance, the Class F, Class G, Class H, Class J and Class K
Certificates will have an aggregate Certificate Balance equal to the excess of
the Initial Pool Balance over the aggregate Certificate Balance of the Class A,
Class B, Class C, Class D and Class E Certificates.
The "Certificate Balance" of any Class of Sequential Pay Certificates
outstanding at any time will be the then-aggregate stated principal amount of
such Class. On each Distribution Date, the Certificate Balance of each Class of
Sequential Pay Certificates will be reduced by any distributions of principal
actually made on such Class of Certificates on such Distribution Date, and will
be further reduced by any losses on or in respect of the Mortgage Loans
(referred to herein as "Realized Losses") and by certain Trust Fund expenses
(referred to herein as "Additional Trust Fund Expenses") allocated to the
principal of such Class of Certificates on such Distribution Date. See
"Description of the Certificates -- Distributions" and "-- Subordination;
Allocation of Losses and Certain Expenses" herein.
The Class X-1 Certificates will not have a Certificate Balance; such Class
of Certificates will instead represent the right to receive distributions of
interest accrued as described herein on a notional principal amount (a "Notional
Amount") equal to approximately 99.99% of the aggregate of the Certificate
Balances of the Class A Certificates outstanding from time to time. The Notional
Amount of the Class X-1 Certificates is used solely for the purpose of
determining the amount of interest to be distributed on such Class of
Certificates and does not represent the right to receive any distributions of
principal.
The Class X-2 Certificates will not have a Certificate Balance; such Class
of Certificates will instead represent the right to receive distributions of
interest accrued as described herein on a Notional Amount equal to approximately
99.99% of the aggregate of the Certificate Balances of all the Classes of
Sequential Pay
S-11
<PAGE> 12
Certificates, other than the Class A Certificates, outstanding from time to
time. The Notional Amount of the Class X-2 Certificates is used solely for the
purpose of determining the amount of interest to be distributed on such Class of
Certificates and does not represent the right to receive any distributions of
principal.
No Class of REMIC Residual Certificates will have a Certificate Balance or
a Notional Amount.
A Class of Offered Certificates will be considered outstanding until its
Certificate Balance or Notional Amount is reduced to zero; provided, however,
that, under very limited circumstances, reimbursements of any previously
allocated Realized Losses and Additional Trust Fund Expenses may thereafter be
made with respect thereto. See "Description of the Certificates -- Certificate
Balances and a Notional Amount" and "-- Distributions" herein.
B. PASS-THROUGH RATES
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D and Class E Certificates for each Distribution Date
are set forth on the cover page hereof.
The Pass-Through Rate applicable to the Class X-1 Certificates for each
Distribution Date will, in general, equal the excess, if any, of (i) the
weighted average of the Net Mortgage Rates for all the Mortgage Loans (weighted
on the basis of their respective Stated Principal Balances (as defined herein)
immediately following the preceding Distribution Date (or, in the case of the
initial Distribution Date, as of the Cut-off Date), over (ii) the weighted
average of the Pass-Through Rates applicable to the Class A Certificates for
such Distribution Date (weighted on the basis of their respective Certificate
Balances immediately prior to such Distribution Date).
The Pass-Through Rate applicable to the Class X-2 Certificates for each
Distribution Date will, in general, equal the excess, if any, of (i) the
weighted average of the Net Mortgage Rates for all the Mortgage Loans (weighted
on the basis of their respective Stated Principal Balances (as defined herein)
immediately following the preceding Distribution Date (or, in the case of the
initial Distribution Date, as of the Cut-off Date), over (ii) the weighted
average of the Pass-Through Rates applicable to all the Classes of Sequential
Pay Certificates, other than the Class A Certificates, for such Distribution
Date (weighted on the basis of their respective Certificate Balances immediately
prior to such Distribution Date).
The Pass-Through Rates applicable to the Class F, Class G, Class H, Class J
and Class K Certificates for each Distribution Date are set forth on page S-53
hereof.
The "Net Mortgage Rate" with respect to any Mortgage Loan is, in general, a
per annum rate equal to the related Mortgage Rate in effect from time to time,
minus the aggregate of the per annum rates applicable to the calculation of the
monthly fees payable to the Master Servicer (including the Standby Fee payable
by the Master Servicer to the Special Servicer) and the Trustee with respect to
such Mortgage Loan (such monthly fees, collectively, the "Administrative Fees";
and such aggregate rate, the "Administrative Fee Rate"); provided that solely
for purposes of calculating the Pass-Through Rate for the Class X Certificates,
the Net Mortgage Rate of such Mortgage Loan for any one-month period preceding a
related Due Date will be the annualized rate at which interest would have to
accrue in respect of such loan on the basis of a 360-day year consisting of
twelve 30-day months (which is the basis on which interest accrues in respect of
the REMIC Regular Certificates) in order to produce the aggregate amount of
interest actually accrued in respect of such loan during such one-month period
at the related Mortgage Rate (net of the related Administrative Fee Rate. As of
the Cut-off Date (without regard to the adjustment to the basis of accrual
described in the proviso to the second preceding sentence), the Net Mortgage
Rates for the Mortgage Loans will range from 6.576% per annum to 9.661% per
annum, with a weighted average Net Mortgage Rate of 7.543% per annum. See
"Servicing of the Mortgage Loans -- Servicing and Other Compensation and Payment
of Expenses" and "Description of the Certificates -- Pass-Through Rates" herein.
C. DISTRIBUTIONS OF INTEREST AND PRINCIPAL
The total of all payments or other collections (or advances in lieu
thereof) on or in respect of the Mortgage Loans (exclusive of Prepayment
Premiums) that are available for distributions of interest on and
S-12
<PAGE> 13
principal of the Certificates on any Distribution Date is herein referred to as
the "Available Distribution Amount" for such date. See "Description of the
Certificates -- Distributions -- The Available Distribution Amount" herein.
On each Distribution Date, the Trustee will apply the Available
Distribution Amount for such date for the following purposes and in the
following order of priority:
(1) to pay interest to the holders of the Class A-1, Class A-2, Class
A-3, Class X-1 and Class X-2 Certificates (collectively, the "Senior
Certificates"), up to an amount equal to, and pro rata as among such
Classes in accordance with, all Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(2) to pay principal first to the holders of the Class A-1
Certificates, second to the Class A-2 Certificates and third to the Class
A-3 Certificates, up to an amount equal to the lesser of (a) the then-
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount (as defined below)
for such Distribution Date;
(3) to reimburse the holders of the Class A-1, Class A-2 and Class A-3
Certificates, up to an amount equal to, and pro rata as among such Classes
in accordance with, the respective amounts of Realized Losses and
Additional Trust Fund Expenses, if any, previously allocated to the
Certificate Balances of such Classes of Certificates and for which no
reimbursement has previously been paid; and
(4) to make payments on the other Classes of Certificates
(collectively, the "Subordinate Certificates") as contemplated below;
provided that, on each Distribution Date as of which the aggregate Certificate
Balance of the Subordinate Certificates is to be or has been reduced to zero,
and in any event on the final Distribution Date in connection with a termination
of the Trust (see "Description of the Certificates -- Termination" herein), the
payments of principal to be made as contemplated by clause (2) above with
respect to the Class A Certificates will be so made (subject to available funds)
to the holders of the respective Classes of such Certificates, up to an amount
equal to, and pro rata as among such Classes in accordance with, the respective
then-outstanding Certificate Balances of such Classes of Certificates.
On each Distribution Date, following the above-described distributions on
the Senior Certificates, the Trustee will apply the remaining portion, if any,
of the Available Distribution Amount for such date to make payments to the
holders of each of the remaining Classes of Sequential Pay Certificates, in
alphabetical order of Class designation, in each case for the following purposes
and in the following order of priority (i.e., payments under clauses (1), (2)
and (3) below, in that order, to the holders of the Class B Certificates, then
payments under clauses (1), (2) and (3) below, in that order, to the holders of
the Class C Certificates, and so forth in such manner with respect to,
sequentially, the Class D, Class E, Class F, Class G, Class H, Class J and Class
K Certificates, in that order):
(1) to pay interest to the holders of such Class of Certificates, up
to an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(2) if the Certificate Balances of the Class A Certificates and of
each other Class of Sequential Pay Certificates, if any, with an earlier
alphabetical Class designation have been reduced to zero, to pay principal
to the holders of such Class of Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class of
Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date; and
(3) to reimburse the holders of such Class of Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to such Class of Certificates and for which no
reimbursement has previously been paid;
S-13
<PAGE> 14
provided that, on the final Distribution Date in connection with a termination
of the Trust, the payments of principal to be made as contemplated by clause (2)
above with respect to any Class of Sequential Pay Certificates will be so made
(subject to available funds) to the holders of such Class of Certificates up to
an amount equal to the entire then-outstanding Certificate Balance of such Class
of Certificates.
Any portion of the Available Distribution Amount for any Distribution Date
that is not otherwise payable to the holders of REMIC Regular Certificates as
contemplated above will be paid to the holders of the REMIC Residual
Certificates.
Reimbursement of previously allocated Realized Losses and Additional Trust
Fund Expenses will not constitute distributions of principal for any purpose and
will not result in an additional reduction in the Certificate Balance of the
Class of Certificates in respect of which any such reimbursement is made.
The "Distributable Certificate Interest" in respect of any Class of REMIC
Regular Certificates for any Distribution Date will generally equal one month's
interest at the applicable Pass-Through Rate accrued on the Certificate Balance
or Notional Amount, as the case may be, of such Class of Certificates
outstanding immediately prior to such Distribution Date, reduced (to not less
than zero) by such Class of Certificates' allocable share (calculated as
described herein) of any Net Aggregate Prepayment Interest Shortfall (as defined
herein) for such Distribution Date. Distributable Certificate Interest will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
See "Description of the Certificates -- Distributions -- Distributable
Certificate Interest" and "Servicing of the Mortgage Loans -- Servicing and
Other Compensation and Payment of Expenses" herein.
The "Principal Distribution Amount" for any Distribution Date, will, in
general, equal the aggregate of the following:
(a) the principal portions of all Monthly Payments (other than Balloon
Payments) and any Assumed Monthly Payments (as defined below) due or deemed
due, as the case may be, in respect of the Mortgage Loans for their
respective Due Dates occurring during the related Collection Period;
(b) all voluntary principal prepayments received on the Mortgage Loans
during the related Collection Period;
(c) with respect to any Mortgage Loan as to which the related stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal (exclusive of any voluntary principal prepayment
and any amount described in clause (d) below) made by or on behalf of the
related borrower during the related Collection Period, net of any portion
of such payment that represents a recovery of the principal portion of any
Monthly Payment (other than a Balloon Payment) due, or the principal
portion of any Assumed Monthly Payment deemed due, in respect of such
Mortgage Loan on a Due Date during or prior to the related Collection
Period and not previously recovered;
(d) all Liquidation Proceeds (net of Liquidation Expenses) and
Insurance and Condemnation Proceeds (each as defined in the Prospectus)
received on the Mortgage Loans during the related Collection Period that
were identified and applied by the Master Servicer as recoveries of
principal thereof, in each case net of any portion of such amounts that
represents a recovery of the principal portion of any Monthly Payment
(other than a Balloon Payment) due, or the principal portion of any Assumed
Monthly Payment deemed due, in respect of the related Mortgage Loan on a
Due Date during or prior to the related Collection Period and not
previously recovered; and
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of (i) the Principal Distribution
Amount for the immediately preceding Distribution Date, over (ii) the
aggregate distributions of principal made on the Sequential Pay
Certificates on such immediately preceding Distribution Date.
For purposes of the foregoing, the "Monthly Payment" due on any Mortgage
Loan on any related Due Date will reflect any waiver, modification or amendment
of the terms of such Mortgage Loan, whether agreed to by the Master Servicer or
Special Servicer or resulting from a bankruptcy, insolvency or similar
proceeding involving the related borrower.
S-14
<PAGE> 15
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i) any
Mortgage Loan that is delinquent in respect of its Balloon Payment beyond the
first Determination Date that follows its stated maturity date and as to which
no arrangements have been agreed to for collection of the delinquent amounts; or
(ii) any Mortgage Loan as to which the related Mortgaged Property has been
acquired on behalf of the Certificateholders through foreclosure, deed in lieu
of foreclosure or otherwise (each such property, upon acquisition, an "REO
Property"). The Assumed Monthly Payment deemed due on any such Mortgage Loan
delinquent as to its Balloon Payment, for its stated maturity date and for each
successive Due Date that it remains outstanding, will equal the Monthly Payment
that would have been due thereon on such date if the related Balloon Payment had
not come due, but rather such Mortgage Loan had continued to amortize in
accordance with its amortization schedule, if any, in effect immediately prior
to maturity and had continued to accrue interest in accordance with its terms in
effect immediately prior to maturity. The Assumed Monthly Payment deemed due on
any such Mortgage Loan as to which the related Mortgaged Property has become an
REO Property, for each Due Date that such REO Property remains part of the Trust
Fund, will equal the Monthly Payment (or, in the case of a Mortgage Loan
delinquent in respect of its Balloon Payment as described in the prior sentence,
the Assumed Monthly Payment) due on the last Due Date prior to the acquisition
of such REO Property.
D. DISTRIBUTION OF PREPAYMENT PREMIUMS
Any Prepayment Premiums actually collected with respect to the Mortgage
Loans during any particular Collection Period will, in general, be distributed
on the related Distribution Date as follows: first, to the holders of the Class
X-1 Certificates, the holders of the Class X-2 Certificates and the holders of
the respective Classes of the Class A, Class B, Class C, Class D and Class E
Certificates then entitled to distributions of principal in an amount equal to,
and pro rata in accordance with, the corresponding PV Yield Loss Amounts (as
defined herein) for each such Class of Certificates; and, second, to the holders
of the Class X-1 and Class X-2 Certificates, pro rata in accordance with the
corresponding Notional Amounts for each such Class of Certificates as of the
preceding Distribution Date (after giving effect to any reductions in such
Notional Amounts as of such preceding Distribution Date), in an amount equal to
the remaining portion, if any, of such Prepayment Premiums. See "Description of
the Certificates -- Distributions -- Distributions of Prepayment Premiums"
herein.
P&I ADVANCES
Subject to a recoverability determination as described herein, and further
subject to certain limitations involving Mortgage Loans as to which the related
Mortgaged Property has declined in value as described herein, the Master
Servicer is required to make advances (each, a "P&I Advance") with respect to
each Distribution Date for the benefit of the Certificateholders in an amount
generally equal to the aggregate of all Monthly Payments (other than Balloon
Payments) and any Assumed Monthly Payments, in each case net of related Master
Servicing Fees and Workout Fees, that (a) were due or deemed due, as the case
may be, in respect of the Mortgage Loans during the related Collection Period
and (b) were not paid by or on behalf of the related borrowers or otherwise
collected as of the close of business on the last day of the related Collection
Period. Subject to a recoverability determination as described herein, if the
Master Servicer fails to make a required P&I Advance, the Trustee will be
required to make such P&I Advance.
As more fully described herein, the Master Servicer and the Trustee will
each be entitled to interest on any P&I Advances made, and the Master Servicer,
the Special Servicer and the Trustee will each be entitled to interest on
certain servicing expenses incurred, by or on behalf of it. Such interest will
accrue from the date any such P&I Advance is made or such servicing expense is
incurred at a rate per annum equal to the "prime rate" as published in the
"Money Rates" section of The Wall Street Journal, as such "prime rate" may
change from time to time (the "Reimbursement Rate"). Such interest on any P&I
Advance or servicing expense will be paid: first, out of Default Interest (as
defined herein) and late payment charges collected on the related Mortgage Loan
(but only if such items accrued after such Mortgage Loan became a Specially
Serviced Mortgage Loan); and, second, at any time coinciding with or following
the reimbursement of such P&I Advance or such servicing expense, out of general
collections on the Mortgage Pool then held by the Master
S-15
<PAGE> 16
Servicer. See "Description of the Certificates -- P&I Advances" and "Servicing
of the Mortgage Loans -- Servicing and Other Compensation and Payment of
Expenses" herein and "Description of the Certificates -- Advances in Respect of
Delinquencies" and "The Pooling and Servicing Agreements -- Certificate Account"
in the Prospectus.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
As and to the extent described herein, the Subordinate Certificates will,
in the case of each Class thereof, be subordinated with respect to distributions
of interest and principal to the Senior Certificates and, further, to each other
Class of Subordinate Certificates, if any, with an earlier alphabetical Class
designation.
Additional Trust Fund Expenses and any Realized Losses attributable to
interest will reduce the Available Distribution Amount for the following
Distribution Date below amounts otherwise distributable, and accordingly will be
borne by the Classes of Certificates then entitled to distributions of interest
and principal in inverse order of the priority of distributions set forth above
under "Distributions -- Application of the Available Distribution Amount."
Accordingly, any such expenses or losses will be borne first from amounts then
distributable to the Class K, Class J, Class H, Class G, Class F, Class E, Class
D, Class C and Class B Certificates, sequentially in that order, and lastly pro
rata to the Class A and, to the extent allocated to interest, Class X
Certificates. Because amounts payable to more subordinate classes will generally
only be attributable to interest until all principal of more senior classes has
been paid in full, such allocation will generally result entirely in reductions
in distribution of interest only. If, following the distributions to be made in
respect of the Certificates on any Distribution Date, the aggregate Stated
Principal Balance of the Mortgage Pool that will be outstanding immediately
following such Distribution Date is less than the then-aggregate Certificate
Balance of the Sequential Pay Certificates, the Certificate Balances of the
Class K, Class J, Class H, Class G, Class F, Class E, Class D, Class C and Class
B Certificates will be reduced, sequentially in that order, in the case of each
such Class until such deficit (or the related Certificate Balance) is reduced to
zero (whichever occurs first). If any portion of such deficit remains at such
time as the Certificate Balances of such Classes of Certificates are reduced to
zero, then the respective Certificate Balances of the Class A-1, Class A-2 and
Class A-3 Certificates will be reduced, pro rata in accordance with the relative
sizes of the remaining Certificate Balances of such Classes of Certificates,
until such deficit (or each such Certificate Balance) is reduced to zero. Any
such deficit will, in general, be the result of Realized Losses incurred in
respect of the Mortgage Pool and, in certain limited circumstances, Additional
Trust Fund Expenses. Accordingly, the foregoing shortfalls in interest and
reductions in the Certificate Balances of the respective Classes of the
Sequential Pay Certificates will constitute allocations of any such Realized
Losses and Additional Trust Fund Expenses.
TREATMENT OF REO PROPERTIES
Notwithstanding that any Mortgaged Property may be acquired as part of the
Trust Fund through foreclosure, deed in lieu of foreclosure or otherwise, the
related Mortgage Loan will, for purposes of, among other things, determining
distributions on, and allocations of Realized Losses and Additional Trust Fund
Expenses to, the Certificates, as well as determining Master Servicing Fees,
Standby Fees, Special Servicing Fees and Trustee Fees generally be treated as
having remained outstanding until each such REO Property is liquidated. Among
other things, such Mortgage Loan will be taken into account when determining the
Pass-Through Rates for the Class X Certificates and the Principal Distribution
Amount. Operating revenues and other proceeds derived from each REO Property
(after application thereof to pay certain costs and taxes, including certain
reimbursements payable to the Master Servicer, the Special Servicer and/or the
Trustee, incurred in connection with the operation and disposition of such REO
Property) will be "applied" or treated by the Master Servicer as principal,
interest and other amounts "due" on the related Mortgage Loan; and, subject to a
recoverability determination as more fully described herein (see "Description of
the Certificates -- P&I Advances"), the Master Servicer and the Trustee will be
obligated to make P&I Advances in respect of such Mortgage Loan, in all cases as
if such Mortgage Loan had remained outstanding.
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CONTROLLING CLASS
The holder (or holders) of Certificates representing a majority interest in
the Controlling Class will have the right, subject to certain conditions
described herein, to replace the Special Servicer. The "Controlling Class" will
be, as of any date of determination, the outstanding Class of Sequential Pay
Certificates with the lowest payment priority (the Class A Certificates being
treated as a single class for this purpose) that has a then outstanding
Certificate Balance at least equal to the greater of (a) 1% of the outstanding
aggregate Certificate Balance as of the Delivery Date or (b) 25% of its initial
Certificate Balance (or, if no Class of Sequential Pay Certificates has a
Certificate Balance at least equal to 1% of the outstanding aggregate
Certificate Balance as of the Delivery Date or 25% of its initial Certificate
Balance, then the "Controlling Class" shall be the outstanding Class of
Sequential Pay Certificates with the largest outstanding Certificate Balance).
The Controlling Class will initially be the Class K Certificates. In addition,
as more particularly described herein, any holder or holders of Certificates
representing a majority interest in the Controlling Class will have the option
of purchasing defaulted Mortgage Loans from time to time at the Purchase Price
specified herein. It is anticipated that Lennar Partners, Inc. (which is the
Special Servicer) or an entity related thereto will acquire certain of the
Certificates, including Private Certificates that will constitute all or a part
of the initial "Controlling Class". See "Servicing of the Mortgage Loans -- The
Special Servicer" and "-- Sale of Defaulted Mortgage Loans" herein.
OPTIONAL TERMINATION
At its option, the Master Servicer or any holder or holders (other than the
Depositor or the Mortgage Loan Seller) of Certificates representing a majority
interest in the Controlling Class may purchase all of the Mortgage Loans and REO
Properties, and thereby effect a termination of the Trust and early retirement
of the then-outstanding Certificates, on any Distribution Date on which the
remaining aggregate Stated Principal Balance of the Mortgage Pool is less than
1.0% of the Initial Pool Balance. See "Description of the
Certificates -- Termination" herein and in the Prospectus.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, two separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to designated
portions of the Trust Fund, the resulting REMICs being herein referred to as
"REMIC I" and "REMIC II", respectively. The assets of REMIC I will include the
Mortgage Loans, any REO Properties acquired on behalf of the Certificateholders
and amounts with respect thereto contained in the Certificate Account, the
Distribution Account and the REO Accounts (each as defined in the Prospectus).
The assets of REMIC II will consist of the separate uncertificated "regular
interests" in REMIC I and amounts in the Distribution Account with respect
thereto. For federal income tax purposes, (i) the Class R-I Certificates will be
the sole class of "residual interests" in REMIC I, (ii) the REMIC Regular
Certificates will evidence the "regular interests" in, and generally will be
treated as debt obligations of, REMIC II, and (iii) the Class R-II Certificates
will be the sole class of "residual interests" in REMIC II. See "Certain Federal
Income Tax Consequences -- General" herein.
For federal income tax reporting purposes, it is anticipated that the Class
[ ] Certificates will not, and the Class [ ] Certificates
will, be treated as having been issued with original issue discount. The
prepayment assumption that will be used for purposes of computing the accrual of
original issue discount, market discount and premium, if any, for federal income
tax purposes will be that the Mortgage Loans will not prepay (that is, a CPR of
0%). However, no representation is made that the Mortgage Loans will not prepay
or that, if they do, they will prepay at any particular rate.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period, a Certificateholder will
be permitted to offset such amount only against the future positive accruals of
original issue discount (if any) from such Certificate. See "Certain Federal
Income Tax Consequences" herein and "Certain Federal Income Tax
Consequences -- REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount" in the Prospectus.
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For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences" herein and in the Prospectus.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement arrangement
subject to Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code (each such plan or other
retirement arrangement, a "Plan") should review carefully with its legal
advisors whether the purchase or holding of Offered Certificates could give rise
to a transaction that is prohibited or that is not otherwise permitted either
under ERISA or Section 4975 of the Code or whether there exists any statutory or
administrative exemption applicable to an investment therein.
The U.S. Department of Labor has issued to NationsBank Corporation an
individual prohibited transaction exemption, Prohibited Transaction Exemption
93-31 (the "Exemption"), which generally exempts from the application of certain
of the prohibited transaction provisions of Section 406 of ERISA and the excise
taxes imposed on such prohibited transactions by Section 4975(a) and (b) of the
Code, transactions relating to the purchase, sale and holding of certain
pass-through certificates underwritten by an underwriting syndicate or selling
group of which NationsBanc Montgomery Securities LLC, as a wholly-owned
subsidiary of NationsBank Corporation, is a manager and the servicing and
operation of related asset pools, provided that certain conditions are
satisfied. The Depositor expects that the Exemption will generally apply to the
Senior Certificates, but that they will not apply to the Class B, Class C, Class
D and Class E Certificates. As a result, no transfer of a Class B, Class C,
Class D or Class E Certificate or any interest therein may be made to a Plan or
to any person who is directly or indirectly purchasing such Certificate or
interest therein on behalf of, as named fiduciary of, as trustee of, or with
assets of a Plan, unless the purchase and holding of any such Certificate or
interest therein is exempt from the prohibited transaction provisions of Section
406 of ERISA and Section 4975 of the Code under Prohibited Transaction Class
Exemption 95-60, which exemption provides an exemption from the prohibited
transaction rules for certain transactions involving an insurance company
general account, or under Section 401(c) of ERISA, which may provide limited
relief from the prohibited transaction rules for certain transactions involving
an insurance company general account. See "Certain ERISA Considerations" herein
and in the Prospectus.
RATINGS
It is a condition to their issuance that the respective Classes of Offered
Certificates receive the credit ratings indicated below from Moody's Investors
Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") and/or Fitch
IBCA, Inc. ("Fitch"; and, together with Moody's and DCR, the "Rating Agencies"):
<TABLE>
<CAPTION>
CLASS MOODY'S DCR FITCH
- ----- ------- --- -----
<S> <C> <C> <C>
Class A-1................................................... Aaa AAA NR
Class A-2................................................... Aaa AAA NR
Class A-3................................................... Aaa AAA NR
Class X-1................................................... Aaa AAA NR
Class X-2................................................... Aaa AAA AAA
Class B..................................................... Aa2 AA AA
Class C..................................................... A2 A A
Class D..................................................... Baa2 BBB BBB
Class E..................................................... Baa3 NR NR
</TABLE>
The ratings of the Offered Certificates address the timely payment thereon
of interest on each Distribution Date and, except in the case of the Class X
Certificates, the ultimate payment thereon of principal on or before the Rated
Final Distribution Date. The ratings take into consideration the credit quality
of the Mortgage Pool, structural and legal aspects associated with the
Certificates, and the extent to which the payment stream from the Mortgage Pool
is adequate to make payments of principal and/or interest, as applicable,
required under the Offered Certificates. The ratings of the Offered Certificates
do not, however, address the tax attributes thereof or of the Trust. In
addition, the ratings on the Offered Certificates do not represent any
assessment of (i) the likelihood or frequency of voluntary or involuntary
principal prepayments
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on the Mortgage Loans, (ii) the degree to which such prepayments might differ
from those originally anticipated or (iii) whether and to what extent Prepayment
Premiums will be received on the Mortgage Loans. Also a security rating does not
represent any assessment of the yield to maturity that investors may experience
or the possibility that the Class X Certificateholders might not fully recover
their investment in the event of rapid prepayments of the Mortgage Loans
(including both voluntary and involuntary prepayments). The ratings of the
Offered Certificates also do not address certain other matters as described
under "Ratings" herein. In general, the ratings thus address credit risk and not
prepayment risk. As described herein, the amounts payable with respect to the
Class X Certificates consist only of interest (and, to the extent described
herein, may consist of a portion of the Prepayment Premiums actually collected
on the Mortgage Loans). If the entire pool were to prepay in the initial month,
with the result that the Class X Certificateholders receive only a single
month's interest and thus suffer a nearly complete loss of their investment, all
amounts "due" to such Certificateholders will nevertheless have been paid, and
such result is consistent with the ratings received on the Class X Certificates.
The Notional Amounts upon which interest is calculated with respect to the Class
X Certificates are subject to reduction in connection with each reduction in the
Certificate Balance of a Class of Sequential Pay Certificates, whether as a
result of principal payments or the allocation of Realized Losses. The ratings
on the Class X Certificates do not address the timing or magnitude of reduction
of such Notional Amounts, but only the obligation to pay interest timely on such
Notional Amounts as so reduced from time to time. Accordingly, the ratings on
the Class X Certificates should be evaluated independently from similar ratings
on other types of securities. There is no assurance that any such rating will
not be lowered, qualified or withdrawn by a Rating Agency, if, in its judgment,
circumstances so warrant. There can be no assurance whether any other rating
agency will rate any of the Offered Certificates, or if one does, what rating
such agency will assign. 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 agency. See "Ratings" herein and "Risk Factors -- Limited
Nature of Ratings" in the Prospectus.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
within the meaning of the Secondary Mortgage Market Enhancement Act of 1984, as
amended ("SMMEA"). As a result, the appropriate characterization of the Offered
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase the Offered Certificates,
may be subject to significant interpretative uncertainties. Investors should
consult their own legal advisors to determine whether and to what extent the
Offered Certificates constitute legal investments for them. See "Legal
Investment" herein and in the Prospectus.
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RISK FACTORS
Prospective purchasers of Offered Certificates should consider, among other
things, the following factors (as well as the factors set forth under "Risk
Factors" in the Prospectus) in connection with an investment therein.
THE CERTIFICATES
Limited Liquidity. There is currently no secondary market for the Offered
Certificates. The Depositor has been advised by the Underwriter that they
presently intend to make a secondary market in the Offered Certificates;
however, the Underwriter has no obligation to do so and any market making
activity may be discontinued at any time. There can be no assurance that a
secondary market for the Offered Certificates will develop or, if it does
develop, that it will provide holders of Offered Certificates with liquidity of
investment or that it will continue for the life of the Offered Certificates.
The Offered Certificates will not be listed on any securities exchange. See
"Risk Factors -- Limited Liquidity of Offered Certificates" in the Prospectus.
Certain Yield Considerations. The yield on any Offered Certificate will
depend on (a) the price at which such Certificate is purchased by an investor
and (b) the rate, timing and amount of distributions on such Certificate. The
rate, timing and amount of distributions on any Offered Certificate will, in
turn, depend on, among other things, (v) the Pass-Through Rate for such
Certificate, (w) the rate and timing of principal payments (including principal
prepayments) and other principal collections on or in respect of the Mortgage
Loans and the extent to which such amounts are to be applied or otherwise result
in a reduction of the Certificate Balance or Notional Amount of the Class of
Certificates to which such Certificate belongs, (x) the rate, timing and
severity of Realized Losses and Additional Trust Fund Expenses and the extent to
which such losses and expenses result in the failure to pay interest on, or a
reduction of the Certificate Balance or Notional Amount of, the Class of
Certificates to which such Certificate belongs, (y) the timing and severity of
any Net Aggregate Prepayment Interest Shortfalls and the extent to which such
shortfalls are allocated in reduction of the Distributable Certificate Interest
payable on the Class of Certificates to which such Certificate belongs and (z)
the extent to which Prepayment Premiums are collected and, in turn, distributed
on the Class of Certificates to which such Certificate belongs. Except for the
Pass-Through Rates on the Class A, Class B, Class C, Class D and Class E
Certificates (which are, in each case, fixed), it is impossible to predict with
certainty any of the factors described in the preceding sentence. Accordingly,
investors may find it difficult to analyze the effect that such factors might
have on the yield to maturity of any Class of Offered Certificates. See
"Description of the Mortgage Pool", "Description of the
Certificates -- Distributions" and "-- Subordination; Allocation of Losses and
Certain Expenses" and "Yield and Maturity Considerations" herein. See also
"Yield and Maturity Considerations" in the Prospectus.
The yield to maturity of the Class X Certificates will be highly sensitive
to the rate and timing of principal payments (including by reason of
prepayments, loan extensions, defaults and liquidations) and losses on the
Mortgage Loans, and investors in the Class X Certificates should fully consider
the associated risks, including the risk that an extremely rapid rate of
amortization, prepayment or other liquidation of the Mortgage Loans could result
in the failure of such investors to recoup fully their initial investments.
Because the Notional Amount of the Class X-1 Certificates is equal to
approximately 99.99% of the aggregate of the Certificate Balances of the Class A
Certificates outstanding from time to time, any payment of principal in respect
of any Mortgage Loan that is applied in reduction of the Certificate Balance of
any such Class of Class A Certificates will reduce such Notional Amount.
Similarly, because the Notional Amount of the Class X-2 Certificates is equal to
approximately 99.99% of the aggregate of the Certificate Balances of all the
Classes of Sequential Pay Certificates, other than the Class A Certificates,
outstanding from time to time, any payment of principal in respect of any
Mortgage Loan that is applied in reduction of the Certificate Balance of any
such Class of Sequential Pay Certificates will reduce such Notional Amount.
In general, in the case of the Class X Certificates and any other Class of
Offered Certificates purchased at a premium, if principal payments on the
Mortgage Loans occur at a rate faster than anticipated at the time of purchase,
then (to the extent that the required Prepayment Premiums are not received or
are distributable to a different Class of Certificates) the investors' actual
yield to maturity will be lower than that assumed at the
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time of purchase. Conversely, in the case of any Class of Offered Certificates
purchased at a discount, if principal payments on the Mortgage Loans occur at a
rate slower than anticipated at the time of purchase, then (to the extent that
the required Prepayment Premiums are not received or are distributable to a
different Class of Certificates) the investors' actual yield to maturity will be
lower than that assumed at the time of purchase. Prepayment Premiums, even if
available and distributable on the Class X Certificates or other Class of
Offered Certificates, may not be sufficient to offset fully any loss in yield on
such Class or Classes of Certificates attributable to the related prepayments of
the Mortgage Loans.
Potential Conflicts of Interest. As described herein, the Special Servicer
will have considerable latitude in determining whether to liquidate or modify
defaulted Mortgage Loans, subject to certain limitations. See "Servicing of the
Mortgage Loans -- Modifications, Waivers, Amendments and Consents" herein.
Subject to the conditions described herein, including approval from the Rating
Agencies, the holder or holders of Certificates representing a majority interest
in the Controlling Class can replace the existing Special Servicer and
substitute any such holder or an affiliate thereof as the successor. The
"Controlling Class" will be, as of any date of determination, the outstanding
Class of Sequential Pay Certificates with the lowest payment priority (the Class
A Certificates being treated as a single class for this purpose) that has a then
outstanding Certificate Balance at least equal to the greater of (a) 1% of the
outstanding aggregate Certificate Balance as of the Delivery Date or (b) 25% of
its initial Certificate Balance (or, if no Class of Sequential Pay Certificates
has a Certificate Balance at least equal to 1% of the outstanding aggregate
Certificate Balance as of the Delivery Date or 25% of its initial Certificate
Balance, then the "Controlling Class" shall be the outstanding Class of
Sequential Pay Certificates with the largest outstanding Certificate Balance),
and may have interests in conflict with those of the holders of the Offered
Certificates. Lennar Partners, Inc. (which is the Special Servicer) or an entity
related thereto may acquire certain of the Certificates, including Private
Certificates that will constitute all or part of the initial "Controlling
Class". Accordingly, investors in the Offered Certificates should consider that,
although the Special Servicer will be obligated to act in accordance with the
terms of the Pooling Agreement and will be governed by the servicing standard
described herein, it may have interests when dealing with defaulted Mortgage
Loans that are in conflict with those of holders of the Offered Certificates.
THE MORTGAGE LOANS
Nature of the Mortgaged Properties. The Mortgaged Properties consist
solely of multifamily rental and commercial properties. Lending on the security
of income-producing properties is generally viewed as exposing a lender to a
greater risk of loss than lending on the security of one- to four-family
residences. Multifamily and commercial real estate lending typically involves
larger loans, and repayment is typically dependent upon the successful operation
of the related real estate project. Income from and the market value of the
Mortgaged Properties would be adversely affected if space in the Mortgaged
Properties could not be leased, if tenants were unable to meet their obligations
or if for any other reason rental payments could not be collected (or, in the
case of an owner occupied property, if the owner's business declined).
Successful operation of an income-producing real estate project is dependent
upon, among other things, economic conditions generally and in the area of such
project, the degree to which such project competes with other projects in the
area, operating costs and the performance of the management agent, if any. In
some cases, that operation may also be affected by circumstances outside the
control of the borrower or lender, such as the quality or stability of the
surrounding neighborhood, the development of competing projects or businesses,
maintenance expenses (including energy costs), and changes in laws (including
the imposition of rent control or stabilization laws in the case of multifamily
rental properties and changes in the tax laws). If the cash flow from a
particular property is reduced (for example, if leases are not obtained or
renewed, if tenant defaults increase or rental rates decline or, in the case of
a property occupied by its owner, if the owner's business declines), the
borrower's ability to repay the loan may be impaired and the resale value of the
particular property may decline.
In the case of most Mortgage Loans, there will be existing leases at the
related Mortgaged Property that expire during the term of the Mortgage Loan and
there can be no assurance that such leases will be renewed or that the subject
space will be relet at no less than comparable rental rates. In addition, there
can be no
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guaranty that a commercial tenant will continue operations throughout the term
of its lease. The borrowers' income would be adversely affected if tenants were
unable to pay rent, if space were unable to be rented on favorable terms or at
all, or if a significant tenant were to become a debtor in a bankruptcy case
under the United States Bankruptcy Code. For example, if any borrower were to
relet or renew the existing leases at rental rates significantly lower than
expected rates, then such borrower's funds from operations may be adversely
affected. Changes in payment patterns by tenants may result from a variety of
social, legal and economic factors, including, without limitation, the rate of
inflation and unemployment levels and may be reflected in the rental rates
offered for comparable space. In addition, upon reletting or renewing existing
leases at commercial properties, borrowers will likely be required to pay
leasing commissions and tenant improvement costs which may adversely affect cash
flow from the Mortgaged Property. There can be no assurances whether, or to what
extent, economic, legal or social factors will affect future rental or repayment
patterns. See "Description of the Mortgage Pool -- Additional Mortgage Loan
Information -- Tenant Matters" herein.
Lending on commercial properties, which represent security for 51.4% of the
Initial Pool Balance, is generally perceived as involving greater risk than
lending on the security of multifamily residential properties, and certain types
of commercial properties are exposed to particular risks. See "-- The Mortgage
Loans -- Risks Particular to Retail Properties", "-- The Mortgage Loans -- Risks
Particular to Health Care Properties", "-- The Mortgage Loans -- Risks
Particular to Hotels" and "-- The Mortgage Loans -- Risks Particular to Office
Properties" below.
Management. The successful operation of a real estate project is dependent
on the performance and viability of the property manager of such project. The
property manager is responsible for responding to changes in the local market,
planning and implementing the rental structure (including establishing levels of
rent payments) or the business plan, as the case may be, and ensuring that
maintenance and capital improvements can be carried out in a timely fashion.
Accordingly, by controlling costs, providing appropriate service to tenants and
seeing to the maintenance of improvements, sound property management can improve
occupancy rates/business and cash flow, reduce operating and repair costs and
preserve building value. On the other hand, management errors can, in some
cases, impair the long term viability of a real estate project. There are 21
groups of Mortgaged Properties that have the same or related management. No
group of such Mortgaged Properties with the same or related management
represents security for more than 4.3% of the Initial Pool Balance.
Balloon Payments. Two hundred of the Mortgage Loans, which represent 99.9%
of the Initial Pool Balance, will have substantial payments (that is, Balloon
Payments) due at their respective stated maturities, in each case unless the
Mortgage Loan is previously prepaid. One hundred forty-three of the Balloon
Loans, representing 66.3% of the Initial Pool Balance, will have Balloon
Payments due during the period from October 2007 through March 2008. Mortgage
Loans with Balloon Payments involve a greater risk to the lender than fully
amortizing loans, 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 at a price sufficient to permit the borrower to
make the Balloon Payment. The ability of a borrower to accomplish this goal will
be affected by a number of factors occurring at the time of attempted sale or
refinancing, including the level of available mortgage rates, the fair market
value of the property, the borrower's equity in the related property, the
financial condition of the borrower and operating history of the property, tax
laws, prevailing economic conditions and the availability of credit for
multifamily or commercial properties, as the case may be. See "Description of
the Mortgage Pool -- Certain Terms and Conditions of the Mortgage Loans" and
"-- Additional Mortgage Loan Information" herein and "Risk Factors -- Certain
Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage
Loans -- Increased Risk of Default Associated with Balloon Payments" in the
Prospectus.
In order to maximize recoveries on defaulted Mortgage Loans, the Pooling
Agreement enables the Special Servicer to extend, modify or otherwise deal with
Mortgage Loans that are in material default or as to which a payment default
(including the failure to make a Balloon Payment) is reasonably foreseeable;
subject, however, to the limitation that the maturity date of the Mortgage Loan
may not be extended beyond a date that is two years prior to the Rated Final
Distribution Date and to the other limitations described under "Servicing of the
Mortgage Loans -- Modifications, Waivers, Amendments and Consents" herein. There
can
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be no assurance, however, that any such extension or modification will increase
the present value of recoveries in a given case. Any delay in collection of a
Balloon Payment that would otherwise be distributable in respect of a Class of
Offered Certificates, whether such delay is due to borrower default or to
modification of the related Mortgage Loan by the Special Servicer, will likely
extend the weighted average life of such Class of Offered Certificates. See
"Yield and Maturity Considerations" herein and in the Prospectus.
Risks Particular to Multifamily Properties. One hundred of the Mortgage
Loans, representing 48.6% of the Initial Pool Balance, are secured by
multifamily Mortgaged Properties. In the case of multifamily lending in
particular, adverse economic conditions, either local or national, may limit the
amount of rent that can be charged and may result in a reduction in timely rent
payments or a reduction in occupancy levels. Occupancy and rent levels may also
be affected by construction of additional housing units, local military base
closings, a downturn in the financial condition of a significant company or type
of industry in the locale, and national and local politics, including current or
future rent stabilization and rent control laws and agreements. In addition, the
level of mortgage interest rates may encourage tenants to purchase single-family
housing. Further, the cost of operating a multifamily property may increase,
including the costs of utilities and the costs of required capital expenditures.
All of these conditions and events may increase the possibility that a borrower
may be unable to meet its obligations under its Mortgage Loan.
Risks Particular to Retail Properties. Fifty-seven of the Mortgage Loans,
representing 30.0% of the Initial Pool Balance, are secured by retail Mortgaged
Properties. In addition to risks generally associated with income-producing real
estate, retail properties are also affected significantly by adverse changes in
consumer spending patterns, local competitive conditions (such as the supply of
retail space or the existence or construction of new competitive shopping
centers or shopping malls), alternative forms of retailing (such as direct mail
and video shopping networks which reduce the need for retail space by retail
companies), the quality and philosophy of management, the attractiveness of the
properties to tenants and their customers or clients, the public perception of
the safety of customers at shopping malls and shopping centers, and the need to
make major repairs or improvements to satisfy the needs of major tenants.
Retail properties also are directly affected by the strength of retail
sales generally. The retailing industry is currently undergoing consolidation
due to many factors, including growth in discount retailing and mail order
merchandisers. If the sales by tenants in the Mortgaged Properties that contain
retail space were to decline, the rents that are based on a percentage of
revenues may decline and tenants may be unable to pay the fixed portion of their
rents or other occupancy costs. Retail properties may be adversely affected if a
significant tenant ceases operations at such locations (which may occur on
account of a voluntary decision not to renew a lease, bankruptcy or insolvency
of such tenant, such tenant's general cessation of business activities or for
other reasons). Significant tenants at a retail property play an important part
in generating customer traffic and making a retail property a desirable location
for other tenants at such property. In addition, certain tenants at retail
properties may be entitled to terminate their leases if an anchor tenant fails
to renew or terminates its lease, becomes the subject of a bankruptcy proceeding
or ceases operations at such property. In such cases, there can be no assurance
that any such anchor tenants will continue to occupy space in the related
shopping centers.
Risks Particular to Restaurant Franchises. Twelve of the Mortgage Loans,
representing approximately 3.3% of the Initial Pool Balance, are secured by
Mortgaged Properties operated as restaurants. See "Description of the Mortgage
Pool -- Significant Mortgage Loans -- The Applebee's Mortgage Loans" herein.
Restaurant franchises are subject to various risks which may be in addition to
those associated with other retail establishments. Chain restaurants may be
operated under franchise agreements, and such agreements typically do not
contain provisions protective of lenders. A borrower's rights as franchisee
typically may be terminated without informing the lender, and the borrower may
be precluded from competing with the franchisor upon termination. In addition, a
lender that acquires title to a restaurant site through foreclosure or similar
proceedings may be restricted in the use of such site or may be unable to
succeed to the rights of the franchisee under the related franchise agreement.
The transferability of a franchise agreement otherwise may be restricted, and
federal and state franchise regulations may impose additional risks (including
the risk that the transfer of a franchise acquired through foreclosure or
similar proceedings may require registration with governmental authorities or
disclosure to prospective transferees).
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Risks Particular to Senior Housing/Health Care Properties. Eight of the
Mortgaged Properties, which represent approximately 4.0% of the Initial Pool
Balance, are operated as skilled nursing facilities or assisted living
facilities. Loans secured by liens on properties of these types pose risks not
associated with loans secured by liens on other types of income-producing real
estate. Providers of long-term nursing care and other medical services are
subject to federal and state laws that relate to the adequacy of medical care,
distribution of pharmaceuticals, rate setting, equipment, personnel, operating
policies and additions to facilities and services and, to the extent dependent
on patients whose fees are reimbursed by private insurers, to the reimbursement
policies of such insurers. In addition, facilities where such care or other
medical services are provided are subject to periodic inspection by governmental
authorities to determine compliance with various standards necessary for
continued licensing under state law and continued participation in the Medicaid
and Medicare reimbursement programs. The failure of any such borrowers to
maintain or renew any required license or regulatory approval could prevent it
from continuing operations at a Mortgaged Property (in which case no revenues
would be received from such property or portion thereof requiring licensing) or,
if applicable, bar it from participation in government reimbursement programs.
Furthermore, in the event of foreclosure, there can be no assurance that the
Trustee (or Master Servicer or Special Servicer) or purchaser in a foreclosure
sale would be entitled to the rights under such licenses and such party may have
to apply in its own right for such a license. There can be no assurance that a
new license could be obtained.
Nursing facilities may receive a substantial portion of their revenues from
government reimbursement programs, primarily Medicaid and Medicare. Medicaid and
Medicare are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings, policy interpretations, delays by fiscal
intermediaries and government funding restrictions. Moreover, governmental
payors have employed cost-containment measures that limit payments to health
care providers, and there are currently under consideration various proposals
for national health care reform that could further limit those payments.
Accordingly, there can be no assurance that payments under government
reimbursement programs will, in the future, be sufficient to fully reimburse the
cost of caring for program beneficiaries. If not, net operating income of the
Mortgaged Properties that receive revenues from those sources, and consequently
the ability of the related borrowers to meet their Mortgage Loan obligations,
could be adversely affected.
Risks Particular to Office Properties. Thirteen of the Mortgage Loans,
representing approximately 4.2% of the Initial Pool Balance, are secured by
Office Mortgaged Properties. Office properties may be adversely affected if a
significant tenant ceases operations at such properties (which may occur on
account of a voluntary decision not to renew a lease, bankruptcy or insolvency
of such tenant, such tenant's general cessation of business activities or for
other reasons). Ability to relet vacant office space may be adversely affected
by a general economic decline in the relevant geographic area. In addition,
there may be significant costs associated with tenant improvements and
concessions in connection with reletting office space.
Risks Particular to Hotels. Seven of the Mortgaged Loans, representing
approximately 4.9% of the Initial Pool Balance, are secured by Mortgaged
Properties operated as hotels. Various factors, including location, quality and
franchise affiliation, affect the economic viability of a hotel. Adverse
economic conditions, either local, regional or national, may limit the amount
that may be charged for a room and may result in a reduction in occupancy
levels. The construction of competing hotels or motels can have similar effects.
Because hotel rooms generally are rented for short periods of time, hotel
properties tend to respond more quickly to adverse economic conditions and
competition than do other commercial properties. In addition, the franchise
license may be owned by an entity operating the hotel and not the borrower or,
if the franchise license is owned by the borrower, the transferability of the
related franchise license agreement may be restricted and, in the event of a
foreclosure on a hotel property, the mortgagee may not have the right to use the
franchise license without the franchisor's consent. Furthermore, the ability of
a hotel to attract customers, and some of such hotel's revenues, may depend in
large part on its having a liquor license. Such a license may not be
transferable.
Risks Particular to Mini-Storage Facilities. One of the Mortgaged
Properties, representing security for approximately 0.4% of the Initial Pool
Balance, is operated as a mini-storage facility. Mini-storage (or self-storage)
properties are considered vulnerable to competition, because both acquisition
costs and break-even occupancy are relatively low. The conversion of
mini-storage facilities to alternative uses would generally
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require substantial capital expenditures. Thus, if the operation of any of the
mini-storage Mortgaged Properties becomes unprofitable due to decreased demand,
competition, age of improvements or other factors such that the borrower becomes
unable to meet its obligations on the related Mortgage Loan, the liquidation
value of that mini-storage Mortgaged Property may be substantially less,
relative to the amount owning on the Mortgage Loan, than would be the case if
the mini-storage Mortgaged Property were readily adaptable to other uses. Tenant
privacy, anonymity and efficient access may heighten environmental risks. No
environmental assessment of a Mortgaged Property included an inspection of the
contents of the self-storage units included in the self-storage Mortgaged
Properties and there is no assurance that all of the units included in the
mini-storage Mortgaged Properties are free from hazardous substances or other
pollutants or contaminants or will remain so in the future.
Risks Particular to Golf Courses. One of the Mortgaged Properties,
representing security for approximately 0.3% of the Initial Pool Balance, is
secured by a daily fee golf course. Revenues for golf courses are largely
dependent on club memberships and greens fees, and revenues from related
amenities such as pro shops and dining facilities. Further, private and
semi-private golf courses may be adversely affected by a significant number of
membership reductions (whether through withdrawals, deaths of members or
otherwise), to the extent membership deposits must be returned on withdrawal,
particularly to the extent any such refunds exceed reserves established
therefor. In addition, the performance of golf courses may be adversely affected
by weather and climate conditions, the availability and quality of competing
facilities, and the age profile of its membership. Further, alternative uses of
the property (other than any clubhouse facilities) are largely limited to
opportunities for development as vacant land.
Risks of Subordinate Financing. Seven Mortgaged Properties, representing
security for 7.7% of the Initial Pool Balance, are encumbered by secured
subordinated debt. In six of such cases, the holders of the subordinate debt
have agreed not to foreclose for so long as the related Mortgage Loan is
outstanding and the Trust is not pursuing a foreclosure action; however with
respect to one such Mortgage Loan, representing 1.8% of the Initial Pool
Balance, the subordinate debt holder is permitted to replace the 1% general
partner of the related borrower. In the remaining such case, a Mortgage Loan
representing 0.1% of the Initial Pool Balance, the related holder of subordinate
indebtedness has made no such agreement not to foreclose. In addition, in the
case of 10 Mortgage Loans, representing 4.9% of the Initial Pool Balance, the
borrower is permitted to incur subordinated debt secured by the related
Mortgaged Property if certain conditions are satisfied. Other than in such
cases, the Mortgage Loans either prohibit the related borrower from encumbering
the Mortgaged Property with additional secured debt or require the consent of
the holder of the first lien prior to so encumbering such property. However, a
violation of such prohibition may not become evident until the related Mortgage
Loan otherwise defaults. The existence of any such subordinated indebtedness may
increase the difficulty of refinancing the related Mortgage Loan at maturity and
the possibility that reduced cash flow could result in deferred maintenance.
Also, in the event that the holder of the subordinated debt files for bankruptcy
or is placed in involuntary receivership, foreclosure on the Mortgaged Property
could be delayed. See "Certain Legal Aspects of Mortgage Loans -- Subordinate
Financing" in the Prospectus.
Limited Recourse. The Mortgage Loans generally are nonrecourse obligations
of the borrowers. In those cases where recourse to a borrower or guarantor is
permitted by the loan documents, the Depositor has not undertaken any evaluation
of the financial condition of any such person (in many cases, the borrower is a
special purpose entity having no assets other than those pledged to secure the
related Mortgage Loan). Accordingly, prospective investors should consider all
of the Mortgage Loans to be nonrecourse loans as to which recourse in the case
of default will be limited to the related Mortgaged Property or Properties
securing the defaulted Mortgage Loan. Consequently, payment on each Mortgage
Loan prior to maturity is dependent primarily on the sufficiency of the net
operating income of the related Mortgaged Property or Properties and, at
maturity (whether at scheduled maturity or, in the event of a default under the
related Mortgage Loan, upon the acceleration of such maturity), upon the
then-market value of the related Mortgaged Property or the ability of the
related borrower to refinance the Mortgaged Property. Neither the Certificates
nor the Mortgage Loans are insured or guaranteed by any governmental entity, by
any private mortgage insurer, or by the Depositor, the Mortgage Loan Seller, any
originator, the Underwriter, the Master Servicer, the Special Servicer, the
Trustee, the REMIC Administrator, any of their respective affiliates or, in
general, by any other
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person. However, as more fully described under "Description of the Mortgage
Pool -- Representations and Warranties; Repurchases" herein, the Mortgage Loan
Seller will be obligated to repurchase certain of the Mortgage Loans if its
representations and warranties concerning such Mortgage Loans are materially
breached.
Environmental Considerations. An environmental site assessment (or an
update of a previously conducted assessment) was performed (generally in a
manner consistent with industry-wide standards) at each of the Mortgaged
Properties during or after May 1996. No such assessment or update otherwise
revealed any material adverse environmental condition or circumstance at any
Mortgaged Property, except as described under "Description of the Mortgage
Pool -- Certain Underwriting Matters -- Environmental Assessments" herein, and
further except in those cases in which an operations and maintenance plan
(including, in several cases, in respect of asbestos containing materials, radon
and lead-based paint), periodic monitoring of nearby properties or the
establishment of an escrow reserve to cover the estimated cost of remediation
was recommended, and which recommended actions have been or are expected to be
implemented in the manner and within the time frames specified in the related
Mortgage Loan documents. There can be no assurance, however, that all
environmental conditions and risks have been identified in such environmental
assessments or that all recommended operations and maintenance plans have been
or will continue to be implemented.
Certain federal, state and local laws, regulations and ordinances govern
the management, removal, encapsulation or disturbance of asbestos-containing
materials ("ACMs"). Such laws, as well as common law standards, may impose
liability for releases of or exposure to ACMs and may provide for third parties
to seek recovery from owners or operators of real properties for personal
injuries associated with such releases.
Recent federal legislation will in the future require owners of residential
housing constructed prior to 1978 to disclose to potential residents or
purchasers any known lead-based paint hazards and will impose treble damages for
any failure to so notify. In addition, the ingestion of lead-based paint chips
or dust particles by children can result in lead poisoning, and the owner of a
property where such circumstances exist may be held liable for such injuries and
for the costs of removal or encapsulation of the lead-based paint. Testing for
lead-based paint or lead in the water was conducted with respect to certain of
the Mortgaged Properties, generally based on the age and/or condition thereof.
The information contained herein concerning environmental conditions at the
Mortgaged Properties is based on the environmental assessments and has not been
independently verified by the Depositor, the Mortgage Loan Seller, the
Underwriter, the Master Servicer, the Special Servicer, the Trustee, the REMIC
Administrator, or any of their respective affiliates.
The Pooling Agreement requires that the Special Servicer obtain an
environmental site assessment of a Mortgaged Property prior to acquiring title
thereto or assuming its operation. Such requirement precludes enforcement of the
security for the related Mortgage Loan until a satisfactory environmental site
assessment is obtained (or until any required remedial action is taken), but
will decrease the likelihood that the Trust will become liable for a material
adverse environmental condition at the Mortgaged Property. However, there can be
no assurance that the requirements of the Pooling Agreement will effectively
insulate the Trust from potential liability for a materially adverse
environmental condition at any Mortgaged Property. See "Servicing of the
Mortgage Loans" herein and "The Pooling and Servicing Agreements -- Realization
Upon Defaulted Mortgage Loans", "Risk Factors -- Certain Factors Affecting
Delinquency, Foreclosure and Loss of the Mortgage Loans -- Risk of Liability
Arising from Environmental Conditions" and "Certain Legal Aspects of Mortgage
Loans -- Environmental Considerations" in the Prospectus.
Limitations on Enforceability of Cross-Collateralization. As described
under "Description of the Mortgage Pool -- General" herein, the Mortgage Pool
includes 6 sets of Cross-Collateralized Mortgage Loans, each of which sets
represents between 0.2% and 4.3% of the Initial Pool Balance, although in each
of 3 such sets the benefits of the cross-collateralization are subject to the
limitations described herein. These arrangements seek to reduce the risk that
the inability of one or more of the Mortgaged Properties securing any such set
of Cross-Collateralized Mortgage Loans or any such Mortgage Loan with multiple
Mortgaged Properties to generate net operating income sufficient to pay debt
service will result in defaults and ultimate losses. In addition, one or more of
the related Mortgaged Properties for certain sets of related Cross-
Collateralized Mortgage Loans may be released from the lien of the applicable
Mortgage under the
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circumstances described herein under "Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans."
Certain related Cross-Collateralized Mortgage Loans have different
borrowers. Cross-collateralization arrangements involving more than one borrower
could be challenged as a fraudulent conveyance by creditors of a borrower or by
the representative of the bankruptcy estate of a borrower, if a borrower were to
become a debtor in a bankruptcy case. Accordingly, a lien granted by a borrower
to secure repayment of another borrower's Mortgage Loan could be avoided if a
court were to determine that (i) such borrower was insolvent at the time of
granting the lien, was rendered insolvent by the granting of the lien, was left
with inadequate capital, or was not able to pay its debts as they matured and
(ii) the borrower did not, when it allowed its Mortgaged Property to be
encumbered by a lien securing the entire indebtedness represented by the other
Mortgage Loan, receive fair consideration or reasonably equivalent value for
pledging such Mortgaged Property for the equal benefit of the other borrower.
Related Parties. Certain groups of borrowers under the Mortgage Loans are
affiliated or under common control with one another. However, no such group of
affiliated borrowers are obligors on Mortgage Loans representing more than 4.3%
of the Initial Pool Balance. In addition, tenants in certain Mortgaged
Properties also may be tenants in other Mortgaged Properties, and certain
tenants may be owned by affiliates of the borrowers or otherwise related to or
affiliated with a borrower. In addition, there are several cases in which a
particular entity is a tenant at multiple Mortgaged Properties, and although it
may not be a Major Tenant at any such property, it may be significant to the
success of such properties. In such circumstances, any adverse circumstances
relating to a borrower or tenant or a respective affiliate and affecting one of
the related Mortgage Loans or Mortgaged Properties could arise in connection
with the other related Mortgage Loans or Mortgaged Properties. In particular,
the bankruptcy or insolvency of any such borrower or tenant or respective
affiliate could have an adverse effect on the operation of all of the related
Mortgaged Properties and on the ability of such related Mortgaged Properties to
produce sufficient cash flow to make required payments on the related Mortgage
Loans. For example, if a person that owns or directly or indirectly controls
several Mortgaged Properties experiences financial difficulty at one Mortgaged
Property, it could defer maintenance at one or more other Mortgaged Properties
in order to satisfy current expenses with respect to the Mortgaged Property
experiencing financial difficulty, or it could attempt to avert foreclosure by
filing a bankruptcy petition that might have the effect of interrupting Monthly
Payments for an indefinite period on all the related Mortgage Loans. See
"Certain Legal Aspects of Mortgage Loans -- Bankruptcy Laws" in the Prospectus.
In addition, a number of the borrowers under the Mortgage Loans are limited or
general partnerships. Under certain circumstances, the bankruptcy of the general
partner in a partnership may result in the dissolution of such partnership. The
dissolution of a borrower partnership, the winding-up of its affairs and the
distribution of its assets could result in an acceleration of its payment
obligations under the related Mortgage Loan.
Geographic Concentration. Thirty-six of the Mortgaged Properties, which
constitute security for 22.4% of the Initial Pool Balance, are located in
Florida; 21 of the Mortgaged Properties, which constitute security for 15.5% of
the Initial Pool Balance, are located in California; 10 of the Mortgaged
Properties, which constitute security for 9.9% of the Initial Pool Balance, are
located in North Carolina; 11 of the Mortgaged Properties, which constitute
security for 5.0% of the Initial Pool Balance, are located in Georgia; and 16 of
the Mortgaged Properties, which constitute security for 4.9% of the Initial Pool
Balance, are located in Indiana. No more than 5.8% of Initial Pool Balance is
secured by Mortgaged Properties located in any particular county in Florida, and
no more than 4.7% of the Initial Pool Balance is secured by Mortgaged Properties
located in any particular county in California. In general, a concentration of
Mortgaged Properties in a particular state or region increases the exposure of
the Mortgage Pool to any adverse economic developments that may occur in such
state or region, conditions in the real estate market where the Mortgaged
Properties securing the related Mortgage Loans are located, changes in
governmental rules and fiscal policies, acts of nature, including floods,
tornadoes and earthquakes (which may result in uninsured losses), and other
factors which are beyond the control of the borrowers.
Other Concentrations. Forty-nine Mortgage Loans have Cut-off Date Balances
that are higher than the average Cut-off Date Balance. The largest single
Mortgage Loan, by Cut-off Date Balance, represents approximately 3.6% of the
Initial Pool Balance, and the largest group of Cross-Collateralized Mortgage
Loans, by Cut-off Date Balances, represents in the aggregate approximately 4.3%
of the Initial Pool Balance. The ten
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largest Mortgage Loans (including groups of Cross-Collateralized Mortgage Loans)
have Cut-off Date Balances that represent in the aggregate approximately 26.6%
of the Initial Pool Balance. In general, concentrations in a mortgage pool of
loans with larger than average balances can result in losses that are more
severe, relative to the size of the pool, than would be the case if the
aggregate balance of such pool were more evenly distributed.
Risk of Changes in Concentrations. As payments in respect of principal
(including in the form of voluntary principal prepayments, Liquidations Proceeds
and the repurchase prices for any Mortgage Loans repurchased due to breaches of
representations or warranties) are received with respect to the Mortgage Loans,
the remaining Mortgage Loans as a group may exhibit increased concentration with
respect to the type of properties, property characteristics, number of borrowers
and affiliated borrowers and geographic location. Because principal on the
Sequential Pay Certificates is payable in sequential order, the Classes thereof
that have a lower or later priority with respect to the payment of principal are
relatively more likely to be exposed to any risks associated with changes in
concentrations of borrower, loan or property characteristics.
Prepayment Premiums. With limited exception, all of the Mortgage Loans
require, for a specified period following the end of the related Lock-out
Period, that any voluntary principal prepayment be accompanied by a Prepayment
Premium. Prepayment Premiums are generally calculated either as a percentage
(which may decline over time) of the principal amount prepaid or on the basis of
a yield maintenance formula (subject, in certain instances, to a minimum equal
to a specified percentage of the amount prepaid). See "Description of the
Mortgage Pool -- Certain Terms and Conditions of the Mortgage
Loans -- Prepayment Provisions" herein. Any Prepayment Premiums actually
collected on the Mortgage Loans will be distributed among the respective Classes
of the REMIC Regular Certificates in the amounts and in accordance with the
priorities described herein under "Description of the
Certificates -- Distributions -- Distributions of Prepayment Premiums". The
Depositor, however, makes no representation as to the collectability of any
Prepayment Premium.
The enforceability, under the laws of a number of states, of provisions
similar to the provisions of the Mortgage Loans providing for the payment of a
Prepayment Premium upon an involuntary prepayment is unclear. No assurance can
be given that, at any time that any Prepayment Premium is required to be made in
connection with an involuntary prepayment, the obligation to pay such Prepayment
Premium will be enforceable under applicable law or, if enforceable, that the
foreclosure proceeds will be sufficient to make such payment. Liquidation
Proceeds recovered in respect of any defaulted Mortgage Loan will, in general,
be applied to cover outstanding servicing expenses and unpaid principal and
interest prior to being applied to cover any Prepayment Premium due in
connection with the liquidation of such Mortgage Loan. In addition, the Special
Servicer may waive a Prepayment Premium in connection with obtaining a pay-off
of a defaulted Mortgage Loan. See "Servicing of the Mortgage
Loans -- Modifications, Waivers, Amendments and Consents" herein and "Certain
Legal Aspects of Mortgage Loans -- Default Interest and Limitations on
Prepayments" in the Prospectus.
No Prepayment Premium will be payable in connection with any repurchase of
a Mortgage Loan by the Mortgage Loan Seller for a material breach of
representation or warranty on the part of the Mortgage Loan Seller or any
failure to deliver documentation relating thereto, nor will any Prepayment
Premium be payable in connection with the purchase of all of the Mortgage Loans
and any REO Properties by the Master Servicer or any holder or holders of
Certificates evidencing a majority interest in the Controlling Class in
connection with the termination of the Trust or in connection with the purchase
of defaulted Mortgage Loans by the Master Servicer, Special Servicer or any
holder or holders of Certificates evidencing a majority interest in the
Controlling Class. See "Description of the Mortgage Pool -- Assignment of the
Mortgage Loans; Repurchases" and "-- Representations and Warranties;
Repurchases", "Servicing of the Mortgage Loans -- Sale of Defaulted Mortgage
Loans" and "Description of the Certificates -- Termination" herein.
Limited Information. The information set forth in this Prospectus
Supplement with respect to the Mortgage Loans is derived principally from (i) a
review of the available credit and legal files relating to the Mortgage Loans,
(ii) inspections of the Mortgaged Properties undertaken by or on behalf of the
Mortgage Loan Seller with respect to the Mortgage Loans, (iii) unaudited
operating statements for the Mortgaged Properties supplied by the borrowers,
(iv) appraisals for the Mortgaged Properties that generally were performed at
origination (which appraisals were used in presenting information regarding the
values of the
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Mortgaged Properties as of the Cut-off Date under "Description of the Mortgage
Pool" and under Annex A for illustrative purposes only) and/or (v) information
supplied by entities from which the Mortgage Loan Seller acquired, or which
currently service, certain of the Mortgage Loans. Also, several Mortgage Loans
constitute acquisition financing; and, accordingly, limited or no operating
information is available with respect to the related Mortgaged Property.
Moreover, all of the Mortgage Loans were originated during the preceding 18
months and, consequently, there are limited or, in the case of 13 Mortgage Loans
(representing 14.5% of the Initial Pool Balance) that will make their first
Monthly Payment in March or April 1998, no payment histories with respect to the
Mortgage Loans.
Litigation. Affiliated borrowers with respect to the Days Suites Mortgage
Loan, which represents 2.9% of the Initial Pool Balance, were debtors in
bankruptcy until 1995. In addition, certain other borrowers and the principals
of certain borrowers may have been involved in bankruptcy or similar proceedings
or have otherwise been parties to real estate-related litigation.
HUD has filed a civil complaint against two of the directors of (and owners
of a controlling interest in) the general partner of the borrower relating to
the Mortgage Loan secured by the Mortgaged Property identified on Annex A as
Tramway Village Apartments, which represents 0.4% of the Initial Pool Balance
(the "Tramway Village Mortgaged Property"). The complaint alleges
misappropriation of funds from HUD-financed projects in connection with the sale
of management fees. Such directors dispute the allegations and deny any
wrongdoing. HUD has previously taken enforcement actions against another
corporation unrelated to the Mortgaged Property in which such directors were
principals. The Tramway Village Mortgaged Property is managed by Charter Realty
Group, in which neither such director has any ownership interest.
There may also be other legal proceedings pending and, from time to time,
threatened against the borrowers and their affiliates relating to the business
of or arising out of the ordinary course of business of the borrowers and their
affiliates. There can be no assurance that such litigation will not have a
material adverse effect on the distributions to Certificateholders.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 201 conventional, multifamily and
commercial mortgage loans (the "Mortgage Loans") with an aggregate Cut-off Date
Balance of $1,020,600,558 (the "Initial Pool Balance"), subject to a variance of
plus or minus 5%. See "Description of the Trust Funds" and "Certain Legal
Aspects of Mortgage Loans" in the Prospectus. The "Cut-off Date Balance" of each
Mortgage Loan is the unpaid principal balance thereof as of March 1, 1998 (the
"Cut-off Date"), after application of all payments of principal due on or before
such date, whether or not received. All numerical information provided herein
with respect to the Mortgage Loans is provided on an approximate basis. All
weighted average information provided herein with respect to the Mortgage Loans
reflects weighting by related Cut-off Date Balance. All percentages of the
Mortgage Pool, or of any specified sub-group thereof, referred to herein without
further description are approximate percentages by aggregate Cut-off Date
Balance.
Each Mortgage Loan is evidenced by a promissory note (a "Mortgage Note")
and secured by a mortgage, deed of trust or other similar security instrument (a
"Mortgage") that creates a first mortgage lien on a fee simple and/or leasehold
interest in real property (a "Mortgaged Property"). Each Mortgaged Property is
improved by (i) an apartment building or complex consisting of five or more
rental living units or a mobile home park (a "Multifamily Mortgaged Property";
and any Mortgage Loan secured thereby, a "Multifamily Loan") (100 Loans,
representing 48.6% of the Initial Pool Balance), or (ii) a retail shopping mall
or center, a franchise restaurant, an office building or complex, a hotel, a
health care facility, an industrial building, a self storage facility or a golf
course (a "Commercial Mortgaged Property"; and any Mortgage Loan secured
thereby, a "Commercial Loan").
Each of 6 sets of Mortgage Loans contains Mortgage Loans (the
"Cross-Collateralized Mortgage Loans") that are, solely as among such Mortgage
Loans in such particular set, cross-defaulted and cross-collateralized with each
other; provided that, in the case of 3 such sets of Cross-Collateralized
Mortgage Loans, representing 2.0%, 1.2% and 0.2%, respectively, of the Initial
Pool Balance, the benefits of the cross-
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collateralization are, as regards any related Mortgaged Property, limited to the
difference between the original and current balances of the corresponding
Cross-Collateralized Mortgage Loan in the subject set. The largest set of
related Cross-Collateralized Mortgage Loans represents 4.3% of the Initial Pool
Balance. Each of the Cross-Collateralized Mortgage Loans is evidenced by a
separate Mortgage Note and secured by a separate Mortgage, which Mortgage
contains provisions creating the relevant cross-collateralization and
cross-default arrangements. See Annex A hereto for information regarding the
Cross-Collateralized Mortgage Loans and see "Risk Factors -- The Mortgage
Loans -- Limitations on Enforceability of Cross-Collateralization" herein.
In general, with limited exception, the Mortgage Loans constitute
nonrecourse obligations of the related borrower and, upon any such borrower's
default in the payment of any amount due under the related Mortgage Loan, the
holder thereof may look only to the related Mortgaged Property or Properties for
satisfaction of the borrower's obligation. In addition, in those cases where
recourse to a borrower or guarantor is permitted by the loan documents, the
Depositor has not undertaken an evaluation of the financial condition of any
such person, and prospective investors should thus consider all of the Mortgage
Loans to be nonrecourse. None of the Mortgage Loans is insured or guaranteed by
the United States, any governmental entity or instrumentality, or any private
mortgage insurer. See "Risk Factors -- The Mortgage Loans -- Limited Recourse"
herein.
Thirty-six of the Mortgaged Properties, which constitute security for 22.4%
of the Initial Pool Balance, are located in Florida; 21 of the Mortgaged
Properties, which constitute security for 15.5% of the Initial Pool Balance, are
located in California; 10 of the Mortgaged Properties, which constitute security
for 9.9% of the Initial Pool Balance, are located in North Carolina; 11 of the
Mortgaged Properties, which constitute security for 5.0% of the Initial Pool
Balance, are located in Georgia; and 16 of the Mortgaged Properties, which
constitute security for 4.9% of the Initial Pool Balance, are located in
Indiana. The remaining Mortgaged Properties are located throughout 25 other
states and the District of Columbia, with no more than 4.5% of the Initial Pool
Balance secured by Mortgaged Properties located in any such other jurisdiction.
On or before the Delivery Date, the Mortgage Loan Seller will, at the
direction of the Depositor, transfer all of the Mortgage Loans, without
recourse, to the Trustee for the benefit of the Certificateholders. See "-- The
Mortgage Loan Seller and "-- Assignment of the Mortgage Loans; Repurchase"
below.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. Each of the Mortgage Loans provides for scheduled payments of
principal and interest ("Monthly Payments") to be due on the first day of each
month (as to each such Mortgage Loan, the "Due Date").
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at a rate per annum (a "Mortgage Rate") that is fixed for the remaining
term of the Mortgage Loan. As of the Cut-off Date, the Mortgage Rates of the
Mortgage Loans ranged from 6.720% per annum to 9.830% per annum, and the
weighted average Mortgage Rate of the Mortgage Loans was 7.701%. No Mortgage
Loan permits negative amortization or the deferral of accrued interest.
All Mortgage Loans accrue interest on the basis of the actual number of
days elapsed in the relevant month of accrual and a 360-day year (an "Actual/360
Basis"). The Monthly Payment for each Actual/360 Mortgage Loan is determined as
though The Mortgage Loan accrued interest on the basis of a 360-day year
consisting of twelve 30-day months (a "30/360 Basis"), and the portion of such
Monthly Payment allocated to interest is determined based on interest accrued in
the preceding month on an Actual/360 Basis with the balance allocated to
amortize principal. As a result, the full amortization term is longer than would
be the case if calculated on a 30/360 Basis, and the Balloon Payment on any such
Mortgage Loan will be larger than would be the case if interest accrued on a
30/360 Basis.
Amortization of Principal. Two hundred of the Mortgage Loans, which
represent 99.9% of the Initial Pool Balance, provide for monthly payments of
principal based on amortization schedules significantly longer than the
respective remaining terms thereof, thereby leaving substantial principal
amounts due and payable (each such payment, together with the corresponding
interest payment, a "Balloon Payment") on their
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respective maturity dates, unless prepaid prior thereto. The remaining Mortgage
Loan, which represents 0.1% of the Initial Pool Balance, is a fully amortizing
loan.
The original term to stated maturity of each Mortgage Loan was between 60
and 120 months. The original amortization schedules of the Mortgage Loans
(calculated, in the case of Actual/360 Mortgage Loans on a 30/360 Basis for the
purposes of the accrual of interest) ranged from 120 to 360 months. As of the
Cut-off Date, the remaining terms to stated maturity of the Mortgage Loans will
range from 56 to 120 months, and the weighted average remaining term to stated
maturity of the Mortgage Loans will be 109 months. As of the Cut-off Date, the
remaining amortization terms of the Mortgage Loans (calculated on a 30/360 Basis
for the accrual of interest) will range from 118 to 360 months, and the weighted
average remaining amortization term (calculated on a 30/360 Basis for purposes
of the accrual of interest) of the Mortgage Loans will be 331 months. See "Risk
Factors -- The Mortgage Loans -- Balloon Payments" herein.
Prepayment Provisions. All of the Mortgage Loans provided as of
origination for, sequentially, (a) a period (a "Lock-out Period") during which
voluntary principal prepayments are prohibited, followed by (b) a period (a
"Prepayment Premium Period") during which any voluntary principal prepayment be
accompanied by a premium, penalty, or fee (a "Prepayment Premium"), followed by
(c) a period (an "Open Period") during which voluntary principal prepayments may
be made without an accompanying Prepayment Premium. Voluntary principal
prepayments (after any Lock-out Period) may be made in full or in part, subject
to certain limitations and, during a Prepayment Premium Period, payment of the
applicable Prepayment Premium. As of the Cut-off Date, the remaining Lock-out
Periods ranged from 8 months to 48 months, with a weighted average remaining
Lock-out Period of 41 months. The Open Period for each Mortgage Loan begins six
months (or, for certain Mortgage Loans, 12 months) prior to stated maturity.
Prepayment Premiums on the Mortgage Loans are generally calculated either on the
basis of a yield maintenance formula (subject, in certain instances, to a
minimum equal to a specified percentage of the principal amount prepaid) or as a
percentage (which may decline over time) of the principal amount prepaid. The
prepayment terms of each of the Mortgage Loans are more particularly described
in Annex A hereto.
As more fully described herein, Prepayment Premiums actually collected on
the Mortgage Loans will be distributed to the respective Classes of
Certificateholders in the amounts and priorities described under "Description of
the Certificates -- Distributions -- Distributions of Prepayment Premiums"
herein. The Depositor makes no representation as to the enforceability of the
provision of any Mortgage Loan requiring the payment of a Prepayment Premium or
as to the collectability of any Prepayment Premium. See "Risk Factors -- The
Mortgage Loans -- Prepayment Premiums" herein and "Certain Legal Aspects of
Mortgage Loans -- Default Interest and Limitations on Prepayments" in the
Prospectus.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. Substantially all of
the Mortgage Loans contain both "due-on-sale" and "due-on-encumbrance" clauses
that in each case, subject to certain limited exceptions, permit the holder of
the Mortgage to accelerate the maturity of the related Mortgage Loan if the
borrower sells or otherwise transfers or encumbers the related Mortgaged
Property or prohibit the borrower from doing so without consent of the holder of
the Mortgage. See "-- Additional Mortgage Loan Information -- Subordinate
Financing" herein. Certain of the Mortgage Loans permit transfer of the related
Mortgaged Property if certain specified conditions are satisfied or if the
transfer is to a borrower reasonably acceptable to the lender. The Master
Servicer or the Special Servicer, as applicable, will determine, in a manner
consistent with the servicing standard described herein under "Servicing of the
Mortgage Loans -- General" and with the REMIC Provisions, whether to exercise
any right the holder of any Mortgage may have under any such clause to
accelerate payment of the related Mortgage Loan upon, or to withhold its consent
to, any transfer or further encumbrance of the related Mortgaged Property;
provided, however, that neither the Master Servicer nor the Special Servicer
shall waive any right it has, or grant any consent that it may otherwise
withhold, under any related "due-on-sale" or "due-on-encumbrance" clause unless
it: (i) shall have received written confirmation from each Rating Agency that
such action would not result in the qualification, downgrade or withdrawal of
the rating then assigned by such Rating Agency to any Class of Certificates,
such confirmation to be required in the case of any waiver of rights under a
related "due-on-sale" clause only if the then-outstanding principal balance of
the subject Mortgage Loan (together with the then-outstanding aggregate
principal balance of all other Mortgage Loans to the same borrower or borrowers
that are, to the
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actual knowledge of the Master Servicer, affiliated) exceeds 2% of the
then-outstanding principal balance of all of the Mortgage Loans; and (ii) shall
have provided, at least five days prior to the granting of such waiver or
consent, to any majority Certificateholder of the Controlling Class and, in the
case of the Master Servicer, to the Special Servicer, written notice of the
matter and a written explanation of the surrounding circumstances and, upon
request made within such five-day period, shall have discussed the matter with
such majority Certificateholder of the Controlling Class and, in the case of the
Master Servicer, with the Special Servicer. See "The Pooling and Servicing
Agreements -- Due-on-Sale and Due-on-Encumbrance Provisions" and "Certain Legal
Aspects of Mortgage Loans -- Due-on-Sale and Due-on-Encumbrance" in the
Prospectus.
SIGNIFICANT MORTGAGE LOANS
Certain of the larger Mortgage Loans or groups of Mortgage Loans (by
outstanding principal balance) are described below. Terms used below relating to
underwriting or property characteristics have the meaning assigned to such term
in Annex A.
Research Tri-Center Mortgage Loans. Two Mortgage Loans (the "Research
South Mortgage Loan" and the "Research North Mortgage Loan," respectively, and
collectively, the "Research Tri-Center Mortgage Loans") are cross-defaulted and
cross-collateralized with each other, and are secured by fee mortgages on two
certain industrial properties, Research Tri-Center South A and Research
Tri-Center North B, respectively, each of which is located in Durham, North
Carolina. The Research Tri-Center Mortgage Loans were originated on January 30,
1998 and, with an aggregate Cut-off Date Balance of $43,867,379.57, represent
4.3% of the Initial Pool Balance.
Research Tri-Center South A was completed in 1994. Glaxo-Wellcome
Pharmaceuticals, Inc. and International Business Machines Corporation are the
largest tenants, leasing 170,000 square feet and 120,000 square feet,
respectively, of an available 680,200 square feet of Net Rentable Area (SF). As
of December 1, 1997, Research Tri-Center South A was 93% occupied.
The Underwriting NOI determined for Research Tri-Center South A is
$2,586,635. The Appraisal Value of Research Tri-Center South A as of November
26, 1997 was $29,150,000.
Research Tri-Center North B was completed in 1990. IBM is the lone tenant,
leasing 100% of the available 421,500 square feet of Net Rentable Area (SF).
The Underwriting NOI determined for Research Tri-Center North B is
$2,189,275. The Appraisal Value of Research Tri-Center North B as of November
26, 1997 was $25,750,000.
The Underwriting DSCR determined for the Research Tri-Center South A
Mortgage Loan and the Research Tri-Center North B Mortgage Loan are 1.38x and
1.32x, respectively.
Silver Sands Mortgage Loan. One of the Mortgage Loans (the "Silver Sands
Mortgage Loan") is secured by a fee mortgage encumbering Silver Sands Factory
Stores, an unanchored retail property located on East Highway 98 in Sandestin,
Florida. The Silver Sands Mortgage Loan was originated on December 29, 1997 and,
with a Cut-off Date Balance of $36,501,176.31, represents 3.6% of the Initial
Pool Balance.
Silver Sands Factory Stores was completed in 1986 and renovated in 1996.
Reebok/Rockport and The Gap are the largest tenants, leasing 13,157 square feet
and 10,285 square feet, respectively, of an available 373,737 square feet of Net
Rentable Area (SF). As of November 14, 1997, Silver Sands Factory Stores was 96%
occupied.
The Underwriting NOI determined for Silver Sands Factory Stores is
$5,254,599, which results in an Underwriting DSCR of 1.71x. The Appraisal Value
of Silver Sands Factory Stores as of November 1, 1997 was $67,000,000.
Flagler Park Mortgage Loan. One of the Mortgage Loans (the "Flagler Park
Mortgage Loan") is secured by a fee mortgage encumbering Flagler Park Plaza
Shopping Center, a grocery-anchored retail
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property located in Miami, Florida. The Flagler Park Mortgage Loan was
originated on January 30, 1998 and, with a Cut-off Date Balance of
$29,963,774.40, represents 2.9% of the Initial Pool Balance.
Flagler Park Plaza Shopping Center was completed in 1990. Publix and
Service Merchandise are the largest tenants, leasing 56,000 square feet and
50,000 square feet, respectively, of an available 348,877 square feet of Net
Rentable Area (SF). As of November 30, 1997, Flagler Park Plaza Shopping Center
was 95% occupied.
The Underwriting NOI determined for Flagler Park Plaza Shopping Center is
$3,141,988, which results in an Underwriting DSCR of 1.31x. The Appraisal Value
of Flagler Park Plaza Shopping Center as of November 13, 1997 was $37,925,000.
Days Suites Mortgage Loan. One of the Mortgage Loans (the "Days Suites
Mortgage Loan") is secured by a fee mortgage encumbering Days Suites Kissimmee
Lodge, a limited-service hotel property operated under a franchise license
agreement with Days Inn of America, Inc. Days Suites Kissimmee Lodge is located
near Walt Disney World in Kissimmee, Florida. The Days Suites Mortgage Loan was
originated on August 29, 1997 and, with a Cut-off Date Balance of
$29,190,339.31, represents 2.9% of the Initial Pool Balance.
Days Suites Kissimmee Lodge was built in 1974 and renovated in 1989.
Improvements consist of multiple buildings representing an aggregate 603 rooms
and 363,400 square feet of Net Rentable Area (SF). As of November 30, 1997, Days
Suites Kissimmee Lodge was 85% occupied.
The borrower (the "Days Suites Borrower") under the Days Suites Mortgage
Loan is also the obligor of subordinated debt that is secured by neither Days
Suites Kissimmee Lodge nor any of the other collateral for the Mortgage Loan.
Such debt, in the amount of $1,290,000.00 was obtained in connection with the
origination of the Days Suites Mortgage Loan. The Days Suites Borrower is not
required to make, nor may the related obligee demand, any payment in connection
with such debt until the Days Suites Mortgage Loan is paid in full. Affiliated
borrowers with respect to the Days Suites Mortgage Loan were debtors in
bankruptcy until 1995.
The Underwriting NOI determined for Days Suites Kissimmee Lodge is
$4,830,298, which results in an Underwriting DSCR of 1.67x. The Appraisal Value
of Days Suites Kissimmee Lodge as of July 1, 1997 was $42,500,000.
La Terraza Mortgage Loan. One of the Mortgage Loans (the "La Terraza
Mortgage Loan") is secured by a fee mortgage on La Terraza Apartments, a
multifamily property located in San Diego, California. The La Terraza Mortgage
Loan was originated on October 9, 1997 and, with a Cut-off Date Balance of
$27,916,466.70, represents 2.7% of the Initial Pool Balance.
La Terraza Apartments was completed in 1989 and renovated in 1997.
Improvements consist of a mix of one, two and three-bedroom units representing
an aggregate 402 units and 393,724 square feet of Net Rentable Area (SF). As of
November 30 ,1997, La Terraza Apartments was 98% occupied.
The Underwriting NOI determined for La Terraza Apartments is $2,893,797,
which results in an Underwriting DSCR of 1.23x. The Appraisal Value of La
Terraza Apartments as of August 31, 1997 was $37,900,000.
University Towers Mortgage Loan. One of the Mortgage Loans (the
"University Towers Mortgage Loan") is secured by a fee mortgage on University
Towers, a student dormitory located near the campus of North Carolina State
University in Raleigh, North Carolina. The University Towers Mortgage Loan was
originated on February 11, 1998 and, with a Cut-off Date Balance of
$26,500,000.00, represents 2.6% of the Initial Pool Balance.
University Towers was completed in 1989. Improvements consist of a single,
nine-story building containing 936 one-room units which, in aggregate, represent
213,767 square feet of Net Rentable Area (SF). As of October 31, 1997,
University Towers was 100% occupied.
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The Underwriting NOI determined for University Towers is $2,853,847, which
results in an Underwriting DSCR of 1.38x. The Appraisal Value of University
Towers as of November 26, 1997 was $34,500,000.
The Applebee's Mortgage Loans. Two sets of Mortgage Loans contain, in the
aggregate, twelve Mortgage Loans (the "Applebee's Mortgage Loans") that are
secured by fee or leasehold mortgages on twelve Applebee's franchise restaurant
properties (the "Applebee's Restaurants") and are, solely as among such
Applebee's Mortgage Loans in such particular set, cross-defaulted and
cross-collateralized with each other, subject to certain limitations. The
Applebee's Mortgage Loans were originated on October 10, 1997. One set of
Applebee's Mortgage Loans contains eight Applebee's Mortgage Loans and, with an
aggregate Cut-off Date Balance of $20,796,652.29, represents 2.0% of the Initial
Pool Balance. The other set of Applebee's Mortgage Loans contains four
Applebee's Mortgage Loans and, with an aggregate Cut-off Date Balance of
$12,423,251.35, represents 1.2% of the Initial Pool Balance.
Each of the Applebee's Restaurants is located in Indiana and is operated
under a franchise license agreement with Applebee's International. The
Applebee's Restaurants were completed between 1993 and 1997, and range in size
from 5,000 square feet to 6,000 square feet.
The Underwriting NOI determined for each Applebee's Restaurant is between
$343,741 and $587,342. The Underwriting DSCR determined for each Applebee's
Mortgage Loan ranges in value from 1.31x to 1.77x. The Appraisal Value of each
Applebee's Restaurant as of October 1, 1997 was between $3,980,000 and
$5,030,000.
ADDITIONAL MORTGAGE LOAN INFORMATION
General. For a detailed presentation of certain characteristics of the
Mortgage Loans and Mortgaged Properties, on an individual basis and in tabular
format, see Annex A hereto. Certain capitalized terms that appear herein are
defined in Annex A.
Delinquencies. No Mortgage Loan will be as of the Cut-off Date, or has
been since origination, 30 days or more delinquent in respect of any Monthly
Payment. All of the Mortgage Loans were originated during the 18 months prior to
the Cut-off Date. In addition, in the case of 13 Mortgage Loans, representing
14.5% of the Initial Pool Balance, no payment history is available because the
first payment on each such Mortgage Loan is due in March or April 1998.
Tenant Matters. Fifty-one of the retail, office and industrial Mortgaged
Properties, which represent security for 18.3% of the Initial Pool Balance, are
leased in large part to one or more Major Tenants or are wholly or in large part
owner-occupied. Four companies are Major Tenants with respect to more than one
Mortgaged Property, with the related groups of Mortgage Loans representing 1.5%,
1.2%, 1.0%, and 0.9%, of the Initial Pool Balance. In addition, there are
several cases in which a particular entity is a tenant at multiple Mortgaged
Properties, and although it may not be a Major Tenant at any such property, it
may be significant to the success of such properties. "Major Tenants" means any
tenant at a Commercial Mortgaged Property that rents at least 20% of the
Leasable Square Footage (as defined in Annex A) at such property.
Certain of the Multifamily Mortgaged Properties have material
concentrations of student tenants.
Ground Leases. Eight of the Mortgage Loans, which represent 4.6% of the
Initial Pool Balance, are, in each such case, secured by a Mortgage on the
applicable borrower's leasehold interest in the related Mortgaged Property. In
each case, either (i) the ground lessor has subordinated its interest in the
related Mortgaged Property to the interest of the holder of the related Mortgage
Loan or (ii) the ground lessor has agreed to give the holder of the Mortgage
Loan notice of, and has granted such holder the right to cure, any default or
breach by the lessee. See "Certain Legal Aspects of Mortgage
Loans -- Foreclosure -- Leasehold Considerations" in the Prospectus.
Subordinate Financing. Seven of the Mortgaged Properties, representing
security for 7.7% of the Initial Pool Balance, are encumbered by secured
subordinated debt. In six of such cases, the holders of the subordinated debt
have agreed not to foreclose for so long as the related Mortgage Loan is
outstanding and the Trust is not pursuing a foreclosure action; however, with
respect to one such Mortgage Loan, representing
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1.8% of the Initial Pool Balance, the subordinate debt holder is permitted to
replace the 1% general partner of the Mortgagor. In the remaining case, a
Mortgage Loan representing 0.1% of the Initial Pool Balance, the related holder
of subordinate indebtedness has made no such agreement not to foreclose. In
addition, in the case of ten Mortgage Loans, representing 4.9% of the Initial
Pool Balance, the borrower is permitted to incur subordinated debt secured by
the related Mortgaged Property if certain conditions are satisfied. Other than
in such cases, the Mortgage Loans either prohibit the related borrower from
encumbering the Mortgaged Property with additional secured debt or require the
consent of the holder of the first lien prior to so encumbering such property.
The existence of any such subordinated indebtedness may increase the difficulty
of refinancing the related Mortgage Loan at maturity and the possibility that
reduced cash flow could result in deferred maintenance. Also, in the event that
the holder of the subordinated debt files for bankruptcy or is placed in
involuntary receivership, foreclosing on the Mortgaged Property could be
delayed. See "Certain Legal Aspects of Mortgage Loans -- Subordinate Financing"
in the Prospectus. In addition, in several cases, borrowers under the Mortgage
Loans have incurred or, under the terms of the related Mortgage Loans may incur,
unsecured indebtedness.
Health Care Properties. Eight Mortgage Loans, which represent 4.0% of the
Initial Pool Balance, are secured by liens on health care properties. Health
care facilities typically receive a substantial portion of their revenues from
government reimbursement programs, primarily Medicaid and Medicare. Medicaid and
Medicare are subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings, policy interpretations, delays by fiscal
intermediaries and government funding restrictions, all of which can adversely
affect revenues from operation. Moreover, governmental payors have employed
cost-containment measures that limit payments to health care providers and there
are currently under consideration various proposals for national health care
relief that could further limit these payments. In addition, providers of long-
term nursing care and other medical services are highly regulated by federal,
state and local law and are subject to, among other things, federal and state
licensing requirements, facility inspections, rate setting, reimbursement
policies, and laws relating to the adequacy of medical care, distribution of
pharmaceuticals, equipment, personnel, operating policies and maintenance of and
additions to facilities and services, any or all of which factors can increase
the cost of operation, limit growth and, in extreme cases, require or result in
suspension or cessation of operations.
Lender/Borrower Relationships. The Mortgage Loan Seller or the Depositor
or their affiliates may maintain certain banking or other relationships with
borrowers under the Mortgage Loans or their affiliates, and proceeds of the
Mortgage Loans may, in certain limited cases, be used by such borrowers or their
affiliates in whole or in part to pay indebtedness owed to the Mortgage Loan
Seller, the Depositor or such other entities. The borrower with respect to three
of the Mortgage Loans, representing 1.5% of the Initial Pool Balance, is
NationsBank Community Development Corporation, an affiliate of the Depositor and
the Mortgage Loan Seller.
CERTAIN UNDERWRITING MATTERS
Environmental Assessments. Each of the Mortgaged Properties was subject to
a "Phase I" environmental assessment or an update of a previously conducted
assessment, which assessment or update was conducted generally in accordance
with industry-wide standards, during or after May 1996. No such assessment or
update otherwise revealed any material adverse environmental condition or
circumstance at any Mortgaged Property, except as set forth below or in certain
other cases in which an operations and maintenance plan (including, in several
cases, in respect of asbestos containing materials, lead based paint and radon),
periodic monitoring of nearby properties or the establishment of an escrow
reserve to cover the estimated cost of remediation was recommended, and which
recommended actions have been or are expected to be implemented in the manner
and within the time frames specified in the related Mortgage Loan documents.
There can be no assurance that recommended operations and maintenance plans have
been or will continue to be implemented. In many cases, certain adverse
environmental conditions were not tested for. For example, lead based paint and
radon were tested for only at Multifamily Mortgaged Properties and only if, in
the case of lead based paint, the age of the Mortgaged Property warranted such
testing and, in the case of radon, radon is prevalent in the geographic area
where the Mortgaged Property is located.
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Certain of the Mortgaged Properties have off-site leaking underground
storage tank sites located nearby which the environmental consultant has advised
are not likely to contaminate the related Mortgaged Properties but will require
future monitoring. The environmental assessments revealed other adverse
environmental conditions such as the existence of storage tanks needing
replacement or removal, PCBs in equipment on-site and elevated radon levels, in
connection with which environmental reserves have been established and/or
removal or monitoring programs have been implemented.
The information contained herein regarding environmental conditions at the
Mortgaged Properties is based on the environmental assessments and has not been
independently verified by the Depositor, the Mortgage Loan Seller, the
Underwriter, the Master Servicer, the Special Servicer, the Trustee, the REMIC
Administrator, or any of their respective affiliates. There can be no assurance
that all environmental conditions and risks have been identified in such
environmental assessments or studies, as applicable, or that any such
environmental conditions will not have material adverse effect on the value or
cash flow of the related Mortgaged Property.
Property Condition Assessments. Inspections of all of the Mortgaged
Properties were conducted by independent licensed engineers in connection with
or subsequent to the origination of the related Mortgage Loan. Such inspections
were generally commissioned to inspect the exterior walls, roofing, interior
construction, mechanical and electrical systems and general condition of the
site, buildings and other improvements located at a Mortgaged Property. With
respect to certain of the Mortgage Loans, the resulting reports indicated a
variety of deferred maintenance items and recommended capital improvements. The
estimated cost of the necessary repairs or replacements at a Mortgaged Property
was included in the related property condition assessment; and, in the case of
certain Mortgaged Properties, such cost exceeded $100,000. In general, with
limited exception, cash reserves were established to fund such estimated
deferred maintenance or replacement items. In addition, various Mortgage Loans
require monthly deposits into cash reserve accounts to fund property maintenance
expenses.
Appraisals and Market Studies. An appraisal of each of the related
Mortgaged Properties was performed (or an existing appraisal updated) in
connection with or subsequent to the origination of each Mortgage Loan, by an
independent appraiser that is either a member of the Appraisal Institute ("MAI")
or state-certified, in order to establish that the appraised value of the
related Mortgaged Property or Properties exceeded the original principal balance
of the Mortgage Loan (or, in the case of certain sets of related Cross-
Collateralized Mortgage Loans, the aggregate original principal balance of such
sets), such appraisal or property valuation was prepared on or about the
"Appraisal Date" indicated on Annex A hereto, and except in the case of the
Mortgage Loans relating to Mortgaged Properties operated as restaurants and
certain other Mortgage Loans, conforms to the appraisal guidelines set forth in
Title XI of the Federal Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA"). In general, such appraisals represent the analysis and
opinions of the respective appraisers at or before the time made, and are not
guarantees of, and may not be indicative of, present or future value. There can
be no assurance that another appraiser would not have arrived at a different
valuation, even if such appraiser used the same general approach to and same
method of appraising the property. In addition, appraisals seek to establish the
amount a typically motivated buyer would pay a typically motivated seller. Such
amount could be significantly higher than the amount obtained from the sale of a
Mortgaged Property under a distress or liquidation sale.
None of the Depositor, the Mortgage Loan Seller, the Underwriter, the
Master Servicer, the Special Servicer, the Trustee, the REMIC Administrator, or
any of their respective affiliates has prepared or conducted its own separate
appraisal or reappraisal of any Mortgaged Property.
Zoning and Building Code Compliance. The Mortgage Loan Seller has examined
whether the use and operation of the related Mortgaged Properties were in
compliance in all material respects with all applicable zoning, land-use,
environmental, building, fire and health ordinances, rules, regulations and
orders applicable to such Mortgaged Properties at the time such Mortgage Loans
were originated. Establishment of such compliance may have been supported by
legal opinions, certifications from government officials and/or representations
by the related borrower contained in the related Mortgage Loan documents.
Certain violations may exist, but the Mortgage Loan Seller does not consider
them to be material. In some cases, the use,
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operation and/or structure of the related Mortgaged Property constitutes a
permitted nonconforming use and/or structure that may not be rebuilt to its
current state in the event of a material casualty event. With respect to such
Mortgaged Properties, the Mortgage Loan Seller has determined that in the event
of a material casualty affecting the Mortgaged Property that either: (i)
insurance proceeds would be available and sufficient to pay off the related
Mortgage Loan in full, (ii) the Mortgaged Property, if permitted to be repaired
or restored in conformity with current law, would constitute adequate security
for the related Mortgage Loan or (iii) the risk that the entire Mortgaged
Property would suffer a material casualty to such a magnitude that it could not
be rebuilt to its current state is remote. Although the lender expects insurance
proceeds to be available for application to the related Mortgage Loan in the
event of a material casualty, no assurance can be given that such proceeds would
be sufficient to pay off such Mortgage Loan in full. In addition, if the
Mortgaged Property were to be repaired or restored in conformity with current
law, no assurance can be given as to what its value would be relative to the
remaining balance of the related Mortgage Loan or what would be the
revenue-producing potential of the property.
Hazard, Liability and Other Insurance. Substantially all of the Mortgages
require that each Mortgaged Property be insured by a hazard insurance policy in
an amount (subject to a customary deductible) at least equal to the lesser of
the outstanding principal balance of the related Mortgage Loan and 100% of the
full insurable replacement cost of the improvements located on the related
Mortgaged Property, and if applicable, that the related hazard insurance policy
contain appropriate endorsements to avoid the application of co-insurance and
not permit reduction in insurance proceeds for depreciation; provided that, in
the case of certain of the Mortgage Loans, the hazard insurance may be in such
other amounts as was required by the related originators. In addition, if any
portion of a Mortgaged Property securing any Mortgage Loan was, at the time of
the origination of such Mortgage Loan, in an area identified in the Federal
Register by the Flood Emergency Management Agency as having special flood
hazards, and flood insurance was available, a flood insurance policy meeting any
requirements of the then-current guidelines of the Federal Insurance
Administration is required to be in effect with a generally acceptable insurance
carrier, in an amount representing coverage not less than the least of (1) the
outstanding principal balance of such Mortgage Loan, (2 the full insurable value
of such Mortgaged Property, (3) the maximum amount of insurance available under
the National Flood Insurance Act of 1968, as amended and (4) 100% of the
replacement cost of the improvements located on the related Mortgaged Property.
In general, the standard form of hazard insurance policy covers physical damage
to, or destruction of, the improvements on the Mortgaged Property by fire,
lightning, explosion, smoke, windstorm and hail, riot or strike and civil
commotion, subject to the conditions and exclusions set forth in each policy.
Each Mortgage generally also requires the related borrower to maintain
comprehensive general liability insurance against claims for personal and bodily
injury, death or property damage occurring on, in or about the related Mortgaged
Property in an amount customarily required by institutional lenders.
Each Mortgage generally further requires the related borrower to maintain
business interruption insurance in an amount not less than 100% of the projected
rental income from the related Mortgaged Property for not less than twelve
months (or, in the case of a Mortgaged Property not having an elevator, for at
least a six month period).
In general, the Mortgage Loans (including those secured by Mortgaged
Properties located in California) do not require earthquake insurance.
THE MORTGAGE LOAN SELLER
The Mortgage Loan Seller is a national banking association. The principal
office of The Mortgage Loan Seller is in Charlotte, North Carolina. The Mortgage
Loan Seller is a wholly-owned subsidiary of NationsBank Holdings Corporation,
which in turn is a wholly-owned subsidiary of NationsBank Corporation. The
Mortgage Loan Seller is the successor in interest to NationsBanc Mortgage
Capital Corporation as described under "Description of the Certificates-General"
herein.
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ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES
On or prior to the Delivery Date, at the direction of the Depositor, the
Mortgage Loan Seller will assign, sell and transfer the Mortgage Loans, without
recourse, to the Trustee for the benefit of the Certificateholders. In
connection with such assignment, the Mortgage Loan Seller will be required to
deliver the following documents, among others, to the Trustee with respect to
each Mortgage Loan: (a) the original Mortgage Note, endorsed (without recourse)
to the order of the Trustee; (b) the original or a copy of the related
Mortgage(s), together with originals or copies of any intervening assignments of
such document(s), in each case (unless the particular document has not been
returned from the applicable recording office) with evidence of recording
thereon; (c) the original or a copy of any related assignment(s) of leases and
rents (if any such item is a document separate from the Mortgage), together with
originals or copies of any intervening assignments of such document(s), in each
case (unless the particular document has not been returned from the applicable
recording office) with evidence of recording thereon; (d) an assignment of each
related Mortgage in favor of the Trustee, in recordable form (or a certified
copy of such assignment as sent for recording); (e) an assignment of any related
assignment(s) of leases and rents (if any such item is a document separate from
the Mortgage) in favor of the Trustee, in recordable form (or a certified copy
of such assignment as sent for recording); (f) an original or copy of the
related lender's title insurance policy (or, if a title insurance policy has not
yet been issued, a commitment for title insurance "marked-up" at the closing of
such Mortgage Loan); (g) an assignment in favor of the Trustee of each effective
UCC financing statement in the possession of the transferor (or a certified copy
of such assignment as sent for filing); and (h) in those cases where applicable,
the original or a copy of the related ground lease.
The Trustee will be required to review the documents delivered thereto by
the Mortgage Loan Seller with respect to each Mortgage Loan within a specified
period following such delivery, and the Trustee will hold the related documents
in trust. If it is found during the course of such review or at any time
thereafter that any of the above-described documents was not delivered with
respect to any Mortgage Loan or that any such document is defective, and in
either case such omission or defect materially and adversely affects the value
of the related Mortgage Loan or the interests of Certificateholders therein,
then the Mortgage Loan Seller will be obligated, except as otherwise described
below, within a period of 120 days (or 90 days, in the event of a defect that
causes the Mortgage Loan to not constitute a "qualified mortgage" within the
meaning of Section 860G(a)(3) of the Code) following its receipt of notice of
such omission or defect, to deliver the missing documents or cure the defect in
all material respects, as the case may be, or to repurchase (or cause the
repurchase of) the affected Mortgage Loan at a price (the "Purchase Price")
generally equal to the unpaid principal balance of such Mortgage Loan, plus any
accrued but unpaid interest thereon at the related Mortgage Rate to but not
including the Due Date in the Collection Period of repurchase, plus any related
unreimbursed Servicing Advances (as defined herein). The cure/repurchase
obligations of the Mortgage Loan Seller will constitute the sole remedies
available to the Certificateholders for any failure on the part of the Mortgage
Loan Seller to deliver any of the above-described documents with respect to any
Mortgage Loan or for any defect in any such document, and neither the Depositor
nor any other person will be obligated to repurchase the affected Mortgage Loan
if either the Mortgage Loan Seller defaults on its obligation to do so.
Notwithstanding the foregoing, if any of the above-described documents is not
delivered with respect to any Mortgage Loan because such document has been
submitted for recording, and neither such document nor a copy thereof, in either
case with evidence of recording thereon, can be obtained because of delays on
the part of the applicable recording office, then the Mortgage Loan Seller will
not be required to repurchase (or cause the repurchase of) the affected Mortgage
Loan on the basis of such missing document so long as it continues in good faith
attempt to obtain such document or such copy.
The Pooling Agreement will require that the assignments in favor of the
Trustee with respect to each Mortgage Loan described in clauses (d) and (e) of
the second preceding paragraph be submitted for recording in the real property
records of the appropriate jurisdictions within a specified number of days
following the Delivery Date at the expense of the Depositor. See "the Pooling
and Servicing Agreements -- Assignment of Mortgage Loans; Repurchases" in the
Prospectus.
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REPRESENTATIONS AND WARRANTIES; REPURCHASES
In the Pooling Agreement, the Mortgage Loan Seller will be required to
represent and warrant with respect to the Mortgage Loans as of the Delivery Date
or as of such other date specifically provided in the related representation or
warranty, among other things, substantially as follows: (i) the information set
forth in the schedule of Mortgage Loans (the "Mortgage Loan Schedule") attached
to the Pooling Agreement (which will contain a limited portion of the
information set forth in Annex A) is true and correct in all material respects
as of the Cut-off Date; (ii) each Mortgage securing a Mortgage Loan is a valid
first lien on the related Mortgaged Property subject only to (A) the lien of
current real estate taxes and assessments not yet due and payable, (B)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record, (C) rights of tenants (whether under ground leases,
space leases or operating leases) at the Mortgaged Property to remain following
a foreclosure or similar proceeding (provided that such tenants are performing
under such leases), (D) exceptions and exclusions specifically referred to in
the related lender's title insurance policy issued or, as evidenced by a
"marked-up" commitment, to be issued in respect of such Mortgage Loan and (E) if
such Mortgage Loan is cross-collateralized with any other Mortgage Loan, the
lien of the Mortgage for such other Mortgage Loan (the exceptions set forth in
the foregoing clauses (A), (B), (C), (D), and (E) collectively, "Permitted
Encumbrances"); (iii) the Mortgage(s) and Mortgage Note for each Mortgage Loan
and all other documents to which the related borrower is a party and which
evidence or secure such Mortgage Loan, are the legal, valid and binding
obligations of the related borrower (subject to any non-recourse provisions
contained in any of the foregoing agreements and any applicable state
anti-deficiency legislation), enforceable in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other laws relating to or affecting
the rights of creditors generally and by general principles of equity regardless
of whether such enforcement is considered in a proceeding in equity or at law;
(iv) no Mortgage Loan was as of the Cut-off Date, or during the twelve-month
period prior thereto, 30 days or more delinquent in respect of any Monthly
Payment, without giving effect to any applicable grace period; (v) there is no
valid offset, defense or counterclaim to any Mortgage Loan; (vi) it has not
waived any material default, breach, violation or event of acceleration existing
under any Mortgage or Mortgage Note; (vii) it has not received actual notice
that (A) there is any proceeding pending or threatened for the total or partial
condemnation of any Mortgaged Property, or (B) there is any material damage at
any Mortgaged Property that materially and adversely affects the value of such
Mortgaged Property; (viii) all insurance coverage required under each Mortgage
securing a Mortgage Loan is in full force and effect with respect to the related
Mortgaged Property; (ix) at origination, each Mortgage Loan complied in all
material respects with all requirements of federal and state law, including
those requirements pertaining to usury, relating to the origination of such
Mortgage Loan; (x) in connection with or subsequent to the origination of the
related Mortgage Loan, one or more environmental site assessments (or an update
of a previously conducted assessment) has been performed with respect to each
Mortgaged Property, and it, having made no independent inquiry other than
reviewing the resulting report(s) and/or employing an environmental consultant
to perform the assessments or updates referenced herein, has no knowledge of any
material and adverse environmental condition or circumstance affecting such
Mortgaged Property that was not disclosed in the related report(s); (xi) the
lien of each Mortgage is insured by a title insurance policy issued by a
nationally recognized title insurance company that insures the originator, its
successors and assigns, as to the first priority lien of such Mortgage in the
original principal amount of the related Mortgage Loan after all advances of
principal, subject only to Permitted Encumbrances (or, if a title insurance
policy has not yet been issued in respect of any Mortgage Loan, a policy meeting
the foregoing description is evidenced by a commitment for title insurance
"marked-up" at the closing of such loan); (xii) the proceeds of each Mortgage
Loan have been fully disbursed, and there is no requirement for future advances
thereunder; (xiii) the terms of the Mortgage Note and Mortgage(s) for each
Mortgage Loan have not been impaired, waived, altered or modified in any
material respect, except as specifically set forth in the related Mortgage File
or indicated on the Mortgage Loan Schedule; (xiv) there are no delinquent taxes,
ground rents, insurance premiums, assessments, including, without limitation,
assessments payable in future installments, or other similar outstanding charges
(and, to its actual knowledge, at the origination of such Mortgage Loan, there
were no delinquent water charges or sewer rents) affecting the related Mortgaged
Property; (xv) the related borrower's interest in each Mortgaged Property
securing a Mortgage Loan consists of a fee simple and/or leasehold estate
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or interest in real property; (xvi) no Mortgage Loan contains any equity
participation by the lender, provides for any contingent or additional interest
in the form of participation in the cash flow of the related Mortgaged Property
or provides for the negative amortization of interest; and (xvii) all escrow
deposits (including capital improvements and environmental remediation reserves)
relating to each Mortgage Loan that were required to be delivered to the
mortgagee under the terms of the related loan documents have been received and,
to the extent of any remaining balances of such escrow deposits, are in the
possession or under the control of the representing party or its agents (which
shall include the Master Servicer). In the Pooling Agreement, the Mortgage Loan
Seller will also be required to represent and warrant, as of the Delivery Date,
that, immediately prior to the transfer of the Mortgage Loans to the Trustee,
the Mortgage Loan Seller had good and marketable title to, and was the sole
owner of, each Mortgage Loan and had full right and authority to sell, assign
and transfer such Mortgage Loan.
If the Mortgage Loan Seller discovers or is notified of a breach of any of
the foregoing representations and warranties with respect to any Mortgage Loan,
and such breach materially and adversely affects the value of such Mortgage Loan
or the interests of Certificateholders therein, then the Mortgage Loan Seller
will be obligated, within a period of 120 days (or 90 days, in the event of a
defect that causes the Mortgage Loan to not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code) following its discovery or
receipt of notice of such breach, to cure such breach in all material respects
or to repurchase (or cause the repurchase of) the affected Mortgage Loan at the
applicable Purchase Price.
The foregoing cure/repurchase obligation of the Mortgage Loan Seller will
constitute the sole remedy available to the Certificateholders for any breach of
any of the foregoing representations and warranties, and neither the Depositor
nor any other person will be obligated to repurchase any affected Mortgage Loan
in connection with a breach of such representations and warranties if the
Mortgage Loan Seller defaults on its obligation to do so. The Mortgage Loan
Seller will be the sole Warranting Party (as defined in the Prospectus) in
respect of the Mortgage Loans. See "The Pooling and Servicing
Agreements -- Representations and Warranties; Repurchases" in the Prospectus.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the time the Offered Certificates are issued, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the Cut-off
Date. Prior to the issuance of the Offered Certificates, a Mortgage Loan may be
removed from the Mortgage Pool if the Depositor deems such removal necessary or
appropriate or if it is prepaid. A limited number of other mortgage loans may be
included in the Mortgage Pool prior to the issuance of the Offered Certificates,
unless including such mortgage loans would materially alter the characteristics
of the Mortgage Pool as described herein. The Depositor believes that the
information set forth herein will be representative of the characteristics of
the Mortgage Pool as it will be constituted at the time the Offered Certificates
are issued, although the range of Mortgage Rates and maturities, as well as the
other characteristics of the Mortgage Loans described herein, may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Delivery Date and
will be filed, together with the Pooling Agreement, with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from or added to
the Mortgage Pool as set forth in the preceding paragraph, such removal or
addition will be noted in the Form 8-K.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will each be required to service and administer the respective
Mortgage Loans for which it is responsible, in the best interests and for the
benefit of the Certificateholders, in accordance with any and all applicable
laws, the terms
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of the Pooling Agreement, related insurance policies and the respective Mortgage
Loans and, to the extent consistent with the foregoing, the following standard
(the "Servicing Standard"): (a) in the same manner in which, and with the same
care, skill, prudence and diligence with which, the Master Servicer or Special
Servicer, as the case may be, generally services and administers similar
mortgage loans or assets, as applicable, for third parties or generally services
and administers similar mortgage loans or assets, as applicable, held in its own
portfolio, whichever servicing procedure is of a higher standard; (b) with a
view to the timely collection of all scheduled payments of principal and
interest under the Mortgage Loans or, if a Mortgage Loan comes into and
continues in default and if, in the good faith and reasonable judgment of the
Special Servicer, no satisfactory arrangements can be made for the collection of
the delinquent payments, the maximization of the recovery on such Mortgage Loan
to the Certificateholders (collectively) on a present value basis; and (c)
without regard to (i) any relationship that the Master Servicer or the Special
Servicer, as the case may be, or any affiliate thereof may have with any related
borrower; (ii) the ownership of any Certificate by the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof; (iii) the Master
Servicer's obligation to make Advances (as defined herein); (iv) the Special
Servicer's obligation to make (or to direct the Master Servicer to make)
Servicing Advances (as defined herein); and (v) the right of the Master Servicer
or the Special Servicer, as the case may be, or any affiliate thereof to receive
compensation for its services or reimbursement of costs under the Pooling
Agreement or with respect to any particular transaction.
In general, the Master Servicer will be responsible for the servicing and
administration of all the Mortgage Loans as to which no Servicing Transfer Event
(as defined herein) has occurred and all Corrected Mortgage Loans (as defined
herein), and the Special Servicer will be obligated to service and administer
each Mortgage Loan (other than a Corrected Mortgage Loan) as to which a
Servicing Transfer Event has occurred (each, a "Specially Serviced Mortgage
Loan") and each Mortgaged Property acquired on behalf of the Certificateholders
in respect of a defaulted Mortgage Loan through foreclosure, deed-in-lieu of
foreclosure or otherwise (upon acquisition, an "REO Property"). A "Servicing
Transfer Event" with respect to any Mortgage Loan consists of any of the
following events: (i) the related borrower has failed to make when due any
Balloon Payment, which failure has continued, or the Master Servicer determines
in its good faith and reasonable judgment will continue, unremedied for 30 days;
(ii) the related borrower has failed to make when due any Monthly Payment (other
than a Balloon Payment) or any other payment required under the related Mortgage
Note or the related Mortgage(s), which failure has continued, or the Master
Servicer determines in its good faith and reasonable judgment will continue,
unremedied for 60 days; (iii) the Master Servicer has determined in its good
faith and reasonable judgment that a default in the making of a Monthly Payment
(including a Balloon Payment) or any other payment required under the related
Mortgage Note or the related Mortgage(s) is likely to occur within 30 days and
is likely to remain unremedied for at least 60 days or, in the case of a Balloon
Payment, for at least 30 days; (iv) there shall have occurred a default under
the related loan documents, other than as described in clause (i) or (ii) above,
that may, in the Master Servicer's good faith and reasonable judgment,
materially impair the value of the related Mortgaged Property as security for
the Mortgage Loan or otherwise materially and adversely affect the interests of
Certificateholders, which default has continued unremedied for the applicable
cure period under the terms of the Mortgage Loan (or, if no cure period is
specified, 60 days); (v) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case under any
present or future federal or state bankruptcy, insolvency or similar law or the
appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the related borrower and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; (vi) the
related borrower shall have consented to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to such borrower or
of or relating to all or substantially all of its property; (vii) the related
borrower shall have admitted in writing its inability to pay its debts generally
as they become due, filed a petition to take advantage of any applicable
insolvency or reorganization statute, made an assignment for the benefit of its
creditors, or voluntarily suspended payment of its obligations; or (viii) the
Master Servicer shall have received notice of the commencement of foreclosure or
similar proceedings with respect to the related Mortgaged Property or
Properties. The Master Servicer shall continue to collect information and
prepare all reports to the Trustee required under the Pooling Agreement
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with respect to any Specially Serviced Mortgage Loans and REO Properties, and
further to render incidental services with respect to any Specially Serviced
Mortgage Loans and REO Properties as are specifically provided for in the
Pooling Agreement. The Master Servicer and the Special Servicer shall not have
any responsibility for the performance by each other of their respective duties
under the Pooling Agreement.
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan (and
will become a "Corrected Mortgage Loan" as to which the Master Servicer will
re-assume servicing responsibilities) at such time as such of the following as
are applicable occur with respect to the circumstances identified above that
caused the Mortgage Loan to be characterized as a Specially Serviced Mortgage
Loan (and provided that no other Servicing Transfer Event then exists):
(w) with respect to the circumstances described in clauses (i) and
(ii) of the preceding paragraph, the related borrower has made three
consecutive full and timely Monthly Payments under the terms of such
Mortgage Loan (as such terms may be changed or modified in connection with
a bankruptcy or similar proceeding involving the related borrower or by
reason of a modification, waiver or amendment granted or agreed to by the
Special Servicer);
(x) with respect to the circumstances described in clauses (iii), (v),
(vi) and (vii) of the preceding paragraph, such circumstances cease to
exist in the good faith and reasonable judgment of the Special Servicer;
(y) with respect to the circumstances described in clause (iv) of the
preceding paragraph, such default is cured; and
(z) with respect to the circumstances described in clause (viii) of
the preceding paragraph, such proceedings are terminated.
The Special Servicer will prepare a report (an "Asset Status Report") for
each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later
than 30 days after the servicing of such Mortgage Loan is transferred to the
Special Servicer. Each Asset Status Report will be delivered to the Directing
Certificateholder (as defined below), the Master Servicer and the Rating
Agencies. The Directing Certificateholder may object to any Asset Status Report
within 10 business days of receipt; provided, however, that the Special Servicer
shall implement the recommended action as outlined in such Asset Status Report
if it makes an affirmative determination that such objection is not in the best
interest of all the Certificateholders. In connection with making such
affirmative determination, the Special Servicer may request a vote by all
Certificateholders, and shall in any event take the recommended action after
making such affirmative determination. If the Directing Certificateholder does
not disapprove an Asset Status Report within 10 business days, the Special
Servicer shall implement the recommended action as outlined in such Asset Status
Report. If the Directing Certificateholder disapproves such Asset Status Report
and the Special Servicer has not made the affirmative determination described
above, the Special Servicer will revise such Asset Status Report as soon as
practicable thereafter, but in no event later than 30 days after such
disapproval. The Special Servicer will revise such Asset Status Report until the
Directing Certificateholder fails to disapprove such revised Asset Status Report
as described above or until the Special Servicer makes a determination that such
objection is not in the best interests of the Certificateholders.
The "Directing Certificateholder" is the Controlling Class
Certificateholder selected by the Majority Certificateholder of the Controlling
Class, as certified by the Trustee from time to time; provided, however, that
(i) absent such selection, or (ii) until a Directing Certificateholder is so
selected, or (iii) upon receipt of a notice from a majority of the Controlling
Class, by Certificate Principal Balance, that a Directing Certificateholder is
no longer designated, the Controlling Class Certificateholder that owns the
largest aggregate Certificate Balance of the Controlling Class will be the
Directing Certificateholder.
A "Controlling Class Certificateholder" is each Holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified to
the Trustee from time to time by such Holder (or Certificate Owner).
The Controlling Class as of the Delivery Date will be the Class K
Certificates.
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The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Directing Certificateholder that
would cause it to violate applicable law, the Pooling Agreement, including the
Servicing Standards, or the REMIC Provisions.
The Master Servicer and Special Servicer will each be required to service
and administer any group of related Cross-Collateralized Mortgage Loans as a
single Mortgage Loan as and when it deems necessary and appropriate, consistent
with the Servicing Standard. If any Cross-Collateralized Mortgage Loan becomes a
Specially Serviced Mortgage Loan, then each other Mortgage Loan that is
cross-collateralized with it shall also become a Specially Serviced Mortgage
Loan. Similarly, no Cross-Collateralized Mortgage Loan shall subsequently become
a Corrected Mortgage Loan, unless and until all Servicing Transfer Events in
respect of each other Mortgage Loan with which it is cross-collateralized, are
remediated or otherwise addressed as contemplated above.
Set forth below is a description of certain pertinent provisions of the
Pooling Agreement relating to the servicing of the Mortgage Loans. Reference is
also made to the Prospectus, in particular to the section captioned "The Pooling
and Servicing Agreements," for additional important information regarding the
terms and conditions of the Pooling Agreement as such terms and conditions
relate to the rights and obligations of the Master Servicer and the Special
Servicer thereunder.
THE MASTER SERVICER
Midland Loan Services, L.P. ("Midland"), the Master Servicer, was organized
under the laws of Missouri in 1992 as a limited partnership. Midland is a real
estate financial services company which provides loan servicing and asset
management for large pools of commercial and multifamily real estate assets and
originates commercial real estate loans. Midland's address is 210 West 10th
Street, 6th Floor, Kansas City, Missouri 64105.
Midland and PNC Bank, N.A. ("PNC") have reached an agreement under which
substantially all of Midland's assets will be acquired and substantially all of
Midland's liabilities will be assumed by Midland Loan Services, Inc., a newly
formed Delaware corporation that is a wholly owned subsidiary of PNC. The
closing of this transaction, which is subject to the satisfaction of certain
conditions, is expected to occur in April of 1998. Upon the closing of this
transaction, Midland Loan Services, Inc. will perform all of Midland's duties
and obligations under the Pooling Agreement.
As of January 31, 1998, Midland and its affiliates were responsible for
servicing approximately 12,936 commercial and multifamily loans with an
aggregate principal balance of approximately $23.9 billion, the collateral for
which is located in all 50 states, Puerto Rico and the District of Columbia.
With respect to such loans, approximately 11,198 loans with an aggregate
principal balance of approximately $17.5 billion pertain to commercial and
multifamily mortgage-backed securities. Midland has been approved as a master
and special servicer for investment grade-rated commercial and multifamily
mortgage-backed securities by Fitch and Moody's. The information set forth
herein concerning the Master Servicer has been provided by it and neither the
Depositor nor the Underwriter makes any representation or warranty as to the
accuracy or completeness of such information.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation, a subsidiary of LNR Property
Corporation ("LNR"), will serve as the Special Servicer and in such capacity
will be responsible for servicing the Specially Serviced Mortgage Loans. The
principal executive offices of the Special Servicer are located at 760 N.W.
107th Avenue, Miami, Florida 33172, and its telephone number is (305) 485-2000.
LNR, its subsidiaries and affiliates are involved in the real estate investment
and management business and engage principally in (i) developing, acquiring and
actively managing commercial and residential multi-family rental real estate,
(ii) acquiring portfolios of commercial mortgage loans and properties and
providing workout, property management and asset sale services with regard to
the portfolio assets, (iii) acting as special servicer with regard to commercial
mortgage pools which are the subject of commercial mortgage backed securities
("CMBS"), (iv) acquiring unrated and rated CMBS issued with regard to commercial
mortgage pools as to
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which the Special Servicer acts as special servicer, and (v) making mortgage
loans to companies and individuals engaged in commercial real estate activities
and to developers and builders of residential communities. The Special Servicer
has regional offices located across the country in Florida, Georgia, and
California. As of September 30, 1997, the Special Servicer and its affiliates
were managing a portfolio including over 6,800 assets in most states with an
original face value of over $19.9 billion, most of which are commercial real
estate assets. Included in this managed portfolio are $14 billion of commercial
real estate assets representing 37 securitization transactions, for which the
Special Servicer is the master servicer or special servicer. The Special
Servicer and its affiliates own and are in the business of acquiring assets
similar in type to the assets of the Trust Fund. Accordingly, the assets of the
Special Servicer and its affiliates may, depending upon the particular
circumstances, including the nature and location of such assets, compete with
the Mortgaged Properties for tenants, purchasers, financing and so forth.
The information set forth herein concerning the Special Servicer has been
provided by the Special Servicer, and neither the Depositor nor the Underwriter
make any representation or warranty as to the accuracy or completeness of such
information.
SUB-SERVICERS
The Master Servicer and Special Servicer may each delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that the Master
Servicer or Special Servicer, as the case may be, will remain obligated under
the Pooling Agreement for such delegated duties. A majority of the Mortgage
Loans are currently being primary serviced by third-party servicers that are
entitled to and will become Sub-Servicers of such loans on behalf of the Master
Servicer. Each sub-servicing agreement between the Master Servicer or Special
Servicer, as the case may be, and a Sub-Servicer (each, a "Sub-Servicing
Agreement") must provide that, if for any reason the Master Servicer or Special
Servicer, as the case may be, is no longer acting in such capacity, the Trustee
or any successor to such Master Servicer or Special Servicer may (i) assume such
party's rights and obligations under such Sub-Servicing Agreement, (ii) enter
into a new Sub-Servicing Agreement with such Sub-Servicer on such terms as the
Trustee or such other successor Master Servicer or Special Servicer and such
Sub-Servicer shall mutually agree or (iii) terminate such Sub-Servicer without
cause (but only upon payment to the Sub-Servicer of specified compensation). The
Master Servicer and Special Servicer will each be required to monitor the
performance of Sub-Servicers retained by it.
The Master Servicer and Special Servicer will each be solely liable for all
fees owed by it to any Sub-Servicer retained thereby, irrespective of whether
its compensation pursuant to the Pooling Agreement is sufficient to pay such
fees. Each Sub-Servicer retained thereby will be reimbursed by the Master
Servicer or Special Servicer, as the case may be, for certain expenditures which
it makes, generally to the same extent the Master Servicer or Special Servicer
would be reimbursed under the Pooling Agreement. See " -- Servicing and Other
Compensation and Payment of Expenses" herein.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its master servicing activities will be the Master Servicing Fee. The "Master
Servicing Fee" will be payable monthly on a loan-by-loan basis from amounts
received in respect of interest on each Mortgage Loan (including Specially
Serviced Mortgage Loans and Mortgage Loans as to which the related Mortgaged
Property has become an REO Property), will accrue at the applicable Master
Servicing Fee Rate and will be computed on the basis of the same principal
amount and for the same number of days respecting which any related interest
payment on the related Mortgage Loan is computed under the terms of the related
Mortgage Note and applicable law. The "Master Servicing Fee Rate" will range
from 0.091% to 0.391% per annum, on a loan-by-loan basis, with a weighted
average Master Servicing Fee Rate of 0.154% per annum as of the Cut-off Date. In
the event that Midland shall resign or be terminated as the Master Servicer and
a successor Master Servicer shall agree for any reason to perform services of
the Master Servicer for an amount (the "Successor Servicer Retained Fee") less
than the Master Servicing Fee, no part of any excess of the Master Servicing Fee
over the Successor Servicer Retained Fee will be available for payment to
Certificateholders. As additional servicing compensation, the
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Master Servicer will be entitled to retain Prepayment Interest Excesses (as
described below) collected on the Mortgage Loans. In addition, the Master
Servicer will be authorized to invest or direct the investment of funds held in
any and all accounts maintained by it that constitute part of the Certificate
Account, in certain government securities and other investment grade obligations
specified in the Pooling Agreement ("Permitted Investments"), and the Master
Servicer will be entitled to retain any interest or other income earned on such
funds, but will be required to cover any losses from its own funds without any
right to reimbursement.
If a borrower prepays a Mortgage Loan, in whole or in part, after the Due
Date but on or before the Determination Date in any calendar month, the amount
of interest (net of related Master Servicing Fees) accrued on such prepayment
from such Due Date to, but not including, the date of prepayment (or any later
date through which interest accrues) will, to the extent actually collected,
constitute a "Prepayment Interest Excess". Conversely, if a borrower prepays a
Mortgage Loan, in whole or in part, after the Determination Date in any calendar
month and does not pay interest on such prepayment through the end of such
calendar month, then the shortfall in a full month's interest (net of related
Master Servicing Fees) on such prepayment will constitute a "Prepayment Interest
Shortfall". Prepayment Interest Excesses collected on the Mortgage Loans will be
retained by the Master Servicer as additional servicing compensation. The Master
Servicer will cover, out of its own funds, any Prepayment Interest Shortfalls
incurred with respect to the Mortgage Loans during any Collection Period, but
only to the extent of Prepayment Interest Excesses and a portion of its
aggregate Master Servicing Fee for the related Collection Period, which portion
is, in the case of each and every Mortgage Loan, calculated at 0.015% per annum.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities will be the Standby Fee, the Special Servicing
Fee, the Workout Fee and the Liquidation Fee. The "Standby Fee" will accrue with
respect to each Mortgage Loan (including a Specially Serviced Mortgage Loan and
a Mortgage Loan as to which the related Mortgaged Property has become an REO
Property) in the same manner as the Master Servicing Fee, and will be payable by
the Master Servicer out of its Master Servicing Fees received with respect to
such Mortgage Loan. The "Special Servicing Fee" will accrue with respect to each
Specially Serviced Mortgage Loan and each Mortgage Loan as to which the related
Mortgaged Property has become an REO Property, at a rate equal to 0.25% per
annum (the "Special Servicing Fee Rate"), on the basis of the same principal
amount and for the same number of days respecting which any related interest
payment due or deemed due on such Mortgage Loan is computed under the related
Mortgage Loan and applicable law. All such Special Servicing Fees will be
payable monthly from general collections on the Mortgage Loans and any REO
Properties on deposit in the Certificate Account from time to time. A "Workout
Fee" will in general be payable with respect to each Corrected Mortgage Loan. As
to each Corrected Mortgage Loan, the Workout Fee will be payable out of, and
will be calculated by application of a "Workout Fee Rate" of 1.0% to, each
collection of interest (other than Default Interest (as defined below)) and
principal (including scheduled payments, prepayments, Balloon Payments and
payments at maturity) received on such Mortgage Loan for so long as it remains a
Corrected Mortgage Loan. The Workout Fee with respect to any Corrected Mortgage
Loan will cease to be payable if such loan again becomes a Specially Serviced
Mortgage Loan or if the related Mortgaged Property becomes an REO Property;
provided that a new Workout Fee will become payable if and when such Mortgage
Loan again becomes a Corrected Mortgage Loan. If the Special Servicer is
terminated (other than for cause) or resigns, it shall retain the right to
receive any and all Workout Fees payable with respect to Mortgage Loans that
became Corrected Mortgage Loans during the period that it acted as Special
Servicer and were still such at the time of such termination or resignation (and
the successor Special Servicer shall not be entitled to any portion of such
Workout Fees), in each case until the Workout Fee for any such loan ceases to be
payable in accordance with the preceding sentence. A "Liquidation Fee" will be
payable with respect to each Specially Serviced Mortgage Loan as to which the
Special Servicer obtains a full or discounted payoff with respect thereto from
the related borrower and, except as otherwise described below, with respect to
any Specially Serviced Mortgage Loan or REO Property as to which the Special
Servicer receives any Liquidation Proceeds. As to each such Specially Serviced
Mortgage Loan and REO Property, the Liquidation Fee will be payable from, and
will be calculated by application of a "Liquidation Fee Rate" of 1.0% to, the
related payment or proceeds (other than any portion thereof that represents
accrued but unpaid Default Interest). Notwithstanding anything to the contrary
described above, no Liquidation Fee will be payable based on, or out of,
Liquidation Proceeds
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received in connection with (i) the repurchase of any Mortgage Loan by the
Mortgage Loan Seller for a breach of representation or warranty or for defective
or deficient Mortgage Loan documentation so long as such repurchase occurs
within 120 days of the Mortgage Loan Seller's notice or discovery of such
breach, defect or deficiency, (ii) the purchase of any Specially Serviced
Mortgage Loan or REO Property by the Master Servicer, the Special Servicer or
any holder or holders of Certificates evidencing a majority interest in the
Controlling Class or (iii) the purchase of all of the Mortgage Loans and REO
Properties by the Master Servicer or any holder or holders of Certificates
evidencing a majority interest in the Controlling Class in connection with the
termination of the Trust. If, however, Liquidation Proceeds are received with
respect to any Corrected Mortgage Loan and the Special Servicer is properly
entitled to a Workout Fee, such Workout Fee will be payable based on and out of
the portion of such Liquidation Proceeds that constitute principal and/or
interest. The Special Servicer will be authorized to invest or direct the
investment of funds held in any accounts maintained by it that constitute part
of the Certificate Account, in Permitted Investments, and the Special Servicer
will be entitled to retain any interest or other income earned on such funds,
but will be required to cover any losses from its own funds without any right to
reimbursement.
The Master Servicer and the Special Servicer will each be responsible for
the fees of any Sub-Servicers retained by it (without right of reimbursement
therefor). As additional servicing compensation, the Sub-Servicers (or, to the
extent such Sub-Servicers are not entitled thereto, the Master Servicer) with
respect to Mortgage Loans that are not Specially Serviced Mortgage Loans, and
the Special Servicer with respect to Specially Serviced Mortgage Loans,
generally will be entitled to retain all assumption and modification fees,
"Default Interest" (that is, interest in excess of interest at the related
Mortgage Rate accrued as a result of a default) and late payment charges (to the
extent such Default Interest and/or late payment charges are not otherwise
applied to cover interest on Advances if received on a Specially Serviced
Mortgage Loan), charges for beneficiary statements or demands and any similar
fees, in each case to the extent actually paid by the borrowers with respect to
such Mortgage Loans (and, accordingly, such amounts will not be available for
distribution to Certificateholders). The respective Sub-Servicers (or, to the
extent such Sub-Servicers are not entitled thereto, the Master Servicer) shall
be entitled to receive all amounts collected for checks returned for
insufficient funds with respect to all Mortgage Loans (including Specially
Serviced Mortgage Loans) as additional servicing compensation. Default Interest
and late payment charges accrued in respect of any Mortgage Loan after it has
become a Specially Serviced Mortgage Loan are to be applied to cover interest on
Advances in respect of such Mortgage Loan. In addition, collections on a
Mortgage Loan are to be applied to interest (at the related Mortgage Rate) and
principal then due and owing prior to being applied to Default Interest and late
payment charges.
The Master Servicer and the Special Servicer will, in general, each be
required to pay its overhead and any general and administrative expenses
incurred by it in connection with its servicing activities under the Pooling
Agreement, and neither will be entitled to reimbursement therefor except as
expressly provided in the Pooling Agreement. In general, customary, reasonable
and necessary "out of pocket" costs and expenses incurred by the Master Servicer
or Special Servicer in connection with the servicing of a Mortgage Loan after a
default, delinquency or other unanticipated event, or in connection with the
administration of any REO Property, will constitute "Servicing Advances"
(Servicing Advances and P&I Advances, collectively, "Advances") and, in all
cases, will be reimbursable from future payments and other collections,
including in the form of Insurance Proceeds, Condemnation Proceeds and
Liquidation Proceeds, on or in respect of the related Mortgage Loan or REO
Property ("Related Proceeds"). Notwithstanding the foregoing, the Master
Servicer and the Special Servicer will each be permitted to pay, or to direct
the payment of, certain servicing expenses directly out of the Certificate
Account and at times without regard to the relationship between the expense and
the funds from which it is being paid (including in connection with the
remediation of any adverse environmental circumstance or condition at a
Mortgaged Property or an REO Property, although in such specific circumstances
the Master Servicer may advance the costs thereof). In addition, the Special
Servicer may from time to time require the Master Servicer to reimburse it for
any Servicing Advance made thereby (in which case, such Servicing Advance will
be deemed to have been made by the Master Servicer). Furthermore, if the Special
Servicer (i) is required under the Pooling Agreement to direct the Master
Servicer to make a Servicing Advance or (ii) is otherwise aware a reasonable
period in advance that it is reasonably likely that the Special Servicer will
incur a cost or expense that will, when incurred, constitute a
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Servicing Advance, the Special Servicer is required to (in the case of clause
(i) preceding), or is required to use reasonable efforts to (in the case of
clause (ii) preceding), request that the Master Servicer make such Advance, such
request to be made in writing and in a timely manner that does not adversely
affect the interests of any Certificateholder; provided, however, that the
Special Servicer is obligated to make any Servicing Advance in an emergency or
in circumstances where the failure to make the Advance in lieu of requesting
that the Master Servicer make such Advance would be inconsistent with the
Servicing Standard; and provided, further, that the Special Servicer is
obligated to make any Servicing Advance with respect to Specially Serviced
Mortgage Loans and REO Properties that it fails to timely request the Master
Servicer to make. The Master Servicer will be required to make any such
Servicing Advance that it is requested by the Special Servicer to so make within
five business days of the Master Servicer's receipt of such request. The Special
Servicer will, with limited exception as described in the preceding sentence, be
relieved of any obligations with respect to an Advance that it timely requests
the Master Servicer to make (regardless of whether or not the Master Servicer
makes that Advance).
If the Master Servicer or Special Servicer is required under the Pooling
Agreement to make a Servicing Advance, but neither does so within 15 days after
such Servicing Advance is required to be made, then the Trustee will, if it has
actual knowledge of such failure, be required to give the defaulting party
notice of such failure and, if such failure continues for one more business day,
the Trustee will be required to make such Servicing Advance.
The Master Servicer, the Special Servicer and the Trustee will be obligated
to make Servicing Advances only to the extent that such Servicing Advances are,
in the reasonable and good faith judgment of the Master Servicer, the Special
Servicer or the Trustee, as the case may be, ultimately recoverable from Related
Proceeds (any Servicing Advance not so recoverable, a "Nonrecoverable Servicing
Advance").
The foregoing paragraph notwithstanding, the Master Servicer is required
(at the direction of the Special Servicer if a Specially Serviced Mortgage Loan
or an REO Property is involved) to pay directly out of the Certificate Account
any servicing expense that, if paid by the Master Servicer or the Special
Servicer, would constitute a Nonrecoverable Servicing Advance; provided that the
Master Servicer (or the Special Servicer, if a Specially Serviced Mortgage Loan
or an REO Property is involved) has determined in accordance with the Servicing
Standard that making such payment is in the best interests of the
Certificateholders (as a collective whole), as evidenced by an officer's
certificate delivered promptly to the Trustee, the Depositor and the Rating
Agencies, setting forth the basis for such determination and accompanied by any
supporting information the Master Servicer or the Special Servicer may have
obtained.
As and to the extent described herein, the Master Servicer, the Special
Servicer and the Trustee are each entitled to receive interest at the
Reimbursement Rate on Servicing Advances made thereby. See "The Pooling and
Servicing Agreements -- Certificate Account" and "-- Servicing Compensation and
Payment of Expenses" in the Prospectus and "Description of the
Certificates -- P&I Advances" herein.
EVIDENCE AS TO COMPLIANCE
On or before April 30 of each year, beginning April 30, 1999, each of the
Master Servicer and the Special Servicer, at its expense, will be required to
cause a firm of independent public accountants that is a member of the American
Institute of Certified Public Accountants to furnish a statement to the
Depositor and the Trustee to the effect that such firm has examined such
documents and records as it has deemed necessary and appropriate relating to the
Master Servicer's or Special Servicer's, as the case may be, servicing of the
Mortgage Loans under the Pooling Agreement or servicing of mortgage loans
similar to the Mortgage Loans under substantially similar agreements for the
preceding calendar year (or during the period from the date of commencement of
the Master Servicer's or Special Servicer's, as the case may be, duties under
the Pooling Agreement until the end of such preceding calendar year in the case
of the first such certificate) and that the assertion of the management of the
Master Servicer or Special Servicer, as the case may be, that it maintained an
effective internal control system over servicing of the Mortgage Loans or
similar mortgage loans is fairly stated in all material respects, based upon
established criteria, which statement meets the standards applicable to
accountants' reports intended for general distribution.
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The Pooling Agreement will also require that, on or before a specified date
in each year, each of the Master Servicer and the Special Servicer deliver to
the Trustee a statement signed by one or more officers thereof to the effect
that the Master Servicer or Special Servicer, as the case may be, has fulfilled
its material obligations under the Pooling Agreement in all material respects
throughout the preceding calendar year or the portion thereof during which the
Certificates were outstanding.
MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS
The Master Servicer and the Special Servicer each may, consistent with the
Servicing Standard, agree to any modification, waiver or amendment of any term
of, forgive or defer the payment of interest on and principal of, permit the
release, addition or substitution of collateral securing, and/or permit the
release of the borrower on or any guarantor of any Mortgage Loan it is required
to service and administer, without the consent of the Trustee or any
Certificateholder, subject, however, to each of the following limitations,
conditions and restrictions:
(i) with limited exception, the Master Servicer may not agree to any
modification, waiver or amendment of any term of, or take any of the other
above referenced actions with respect to, any Mortgage Loan it is required
to service and administer that would affect the amount or timing of any
related payment of principal, interest or other amount payable thereunder
or, in the Master Servicer's good faith and reasonable judgment, would
materially impair the security for such Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon; however, the Special
Servicer may agree to any modification, waiver or amendment of any term of,
or take any of the other above referenced actions with respect to, a
Specially Serviced Mortgage Loan that would have any such effect, but only
if a material default on such Mortgage Loan has occurred or, in the Special
Servicer's reasonable and good faith judgment, a default in respect of
payment on such Mortgage Loan is reasonably foreseeable, and such
modification, waiver, amendment or other action is reasonably likely to
produce a greater recovery to Certificateholders (collectively) on a
present value basis than would liquidation as certified to the Trustee in
an officer's certificate;
(ii) the Special Servicer may not, in connection with any particular
extension, extend the maturity date of a Mortgage Loan beyond a date that
is two years prior to the Rated Final Distribution Date;
(iii) neither the Master Servicer nor the Special Servicer may make or
permit any modification, waiver or amendment of any term of, or take any of
the other above referenced actions with respect to, any Mortgage Loan that
would (A) cause either REMIC I or REMIC II to fail to qualify as a REMIC
under the Code or result in the imposition of any tax on "prohibited
transactions" or "contributions" after the startup date of either such
REMIC under the REMIC Provisions or (B) cause any Mortgage Loan to cease to
be a "qualified mortgage" within the meaning of Section 860G(a)(3) of the
Code (neither the Master Servicer nor the Special Servicer shall be liable
for judgments as regards decisions made under this subsection which were
made in good faith and, unless it would constitute bad faith or gross
negligence to do so, each of the Master Servicer and the Special Servicer
may rely on opinions of counsel in making such decisions);
(iv) neither the Master Servicer nor the Special Servicer may permit
any borrower to add or substitute any collateral for an outstanding
Mortgage Loan, which collateral constitutes real property, unless the
Special Servicer shall have first determined in accordance with the
Servicing Standard, based upon a Phase I environmental assessment (and such
additional environmental testing as the Special Servicer deems necessary
and appropriate), that such additional or substitute collateral is in
compliance with applicable environmental laws and regulations and that
there are no circumstances or conditions present with respect to such new
collateral relating to the use, management or disposal of any hazardous
materials for which investigation, testing, monitoring, containment,
clean-up or remediation would be required under any then applicable
environmental laws and/or regulations; and
(v) with limited exceptions, neither the Master Servicer nor the
Special Servicer shall release any collateral securing an outstanding
Mortgage Loan;
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provided that (x) the limitations, conditions and restrictions set forth in
clauses (i) through (v) above will not apply to any of the above referenced
actions in respect of any term of any Mortgage Loan that is required under the
terms of such Mortgage Loan in effect on the Delivery Date, and (y)
notwithstanding clauses (i) through (v) above, neither the Master Servicer nor
the Special Servicer will be required to oppose the confirmation of a plan in
any bankruptcy or similar proceeding involving a borrower if in their reasonable
and good faith judgment such opposition would not ultimately prevent the
confirmation of such plan or one substantially similar.
SALE OF DEFAULTED MORTGAGE LOANS
The Pooling Agreement grants to the Master Servicer, the Special Servicer
and any holder or holders of Certificates evidencing a majority interest in the
Controlling Class a right to purchase from the Trust certain defaulted Mortgage
Loans in the priority described below. If the Special Servicer has determined,
in its good faith and reasonable judgment, that any defaulted Mortgage Loan will
become the subject of a foreclosure sale or similar proceeding and that the sale
of such Mortgage Loan under the circumstances described in this paragraph is in
accordance with the Servicing Standard, the Special Servicer will be required to
promptly so notify in writing the Trustee and the Master Servicer, and the
Trustee will be required, within 10 days after receipt of such notice, to notify
the holder (or holders) of the Controlling Class. A single holder or particular
group of holders of Certificates evidencing a majority interest in the
Controlling Class may, at its or their option, purchase any such defaulted
Mortgage Loan from the Trust, at a price equal to the applicable Purchase Price.
If such Certificateholder(s) has (have) not purchased such defaulted Mortgage
Loan within 15 days of its having received notice in respect thereof, either the
Special Servicer or the Master Servicer, in that order, may, at its option,
purchase such defaulted Mortgage Loan from the Trust, at a price equal to the
applicable Purchase Price.
The Special Servicer may offer to sell any defaulted Mortgage Loan that has
not otherwise been purchased as described in the prior paragraph, if and when
the Special Servicer determines, consistent with the Servicing Standard, that
such a sale would be in the best economic interests of the Trust. Such offer is
to be made in a commercially reasonable manner for a period of not less than 30
days. Unless the Special Servicer determines that acceptance of any offer would
not be in the best economic interests of the Trust, the Special Servicer shall
accept the highest cash offer received from any person that constitutes a fair
price (which may be less than the Purchase Price) for such Mortgage Loan;
provided that none of the Special Servicer, the Master Servicer, the Depositor,
the Mortgage Loan Seller, the holder of any Certificate or any affiliate of any
such party (each, an "Interested Person") may purchase such Mortgage Loan (or
any REO Property acquired in respect thereof) for less than the Purchase Price
unless at least two other offers are received from independent third parties at
a price that is less than the Purchase Price and the price proposed by any
Interested Persons; and provided, further, that neither the Trustee nor an
affiliate thereof may make an offer for any such Mortgage Loan. See also "The
Pooling and Servicing Agreements--Realization Upon Defaulted Mortgage Loans" in
the Prospectus.
REO PROPERTIES
If title to any Mortgaged Property is acquired by the Special Servicer on
behalf of the Certificateholders, the Special Servicer, on behalf of such
holders, will be required to sell the Mortgaged Property not later than the end
of third calendar year following the year of acquisition, unless (i) the
Internal Revenue Service grants an extension of time to sell such property (an
"REO Extension") or (ii) the Special Servicer obtains an opinion of independent
counsel generally to the effect that the holding of the property subsequent to
the end of the third calendar year following the year in which such acquisition
occurred will not result in the imposition of a tax on the Trust or cause REMIC
I or REMIC II to fail to qualify as a REMIC under the Code. Subject to the
foregoing, the Special Servicer will generally be required to solicit cash
offers for any Mortgaged Property so acquired in such a manner as will be
reasonably likely to realize a fair price for such property. The Special
Servicer may retain an independent contractor to operate and manage any REO
Property; however, the retention of an independent contractor will not relieve
the Special Servicer of its obligations with respect to such REO Property.
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In general, the Special Servicer 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's net after-tax proceeds from
such property. The Special Servicer could determine that it would not be
commercially feasible to manage and operate such property in a manner that would
avoid the imposition of a tax on "net income from foreclosure property".
Generally, net income from foreclosure property means income which does not
qualify as "rents from real property" within the meaning of Code Section
856(c)(3)(A) and Treasury regulations thereunder or as income from the sale of
such REO Property. "Rents from real property" do not include the portion of any
rental based on the net income or gain of any tenant or sub-tenant. No
determination has been made whether rent on any of the Mortgaged Properties
meets this requirement. "Rents from real property" include charges for services
customarily furnished or rendered in connection with the rental of real
property, whether or not the charges are separately stated. Services furnished
to the tenants of a particular building will be considered as customary if, in
the geographic market in which the building is located, tenants in buildings
which are of similar Class are customarily provided with the service. No
determination has been made whether the services furnished to the tenants of the
Mortgaged Properties are "customary" within the meaning of applicable
regulations. It is therefore possible that a portion of the rental income with
respect to a Mortgaged Property owned by the Trust Fund, presumably allocated
based on the value of any non-qualifying services, would not constitute "rents
from real property." In addition to the foregoing, any net income from a trade
or business operated or managed by an independent contractor on a Mortgaged
Property owned by REMIC I, including but not limited to a hotel or skilled
nursing care business, will not constitute "rents from real property." Any of
the foregoing types of income instead constitute "net income from foreclosure
property," which would be taxable to REMIC I at the highest marginal federal
corporate rate (currently 35%) and may also be subject to state or local taxes.
Any such taxes would be chargeable against the related income for purposes of
determining the Net REO Proceeds available for distribution to holders of
Certificates. See "Certain Federal Income Tax Consequences --
REMICs -- Prohibited Transactions Tax and Other Taxes."
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
Commencing in 1999, the Master Servicer is required to perform (or cause to
be performed) physical inspections of each Mortgaged Property (other than REO
Properties and Mortgaged Properties securing Specially Serviced Mortgage Loans)
at least once every two years (or, if the related Mortgage Loan has a
then-current balance greater than $2,000,000, at least once every year). In
addition, the Special Servicer, subject to statutory limitations or limitations
set forth in the related loan documents, is required to perform a physical
inspection of each Mortgaged Property as soon as practicable after servicing of
the related Mortgage Loan is transferred thereto. The Special Servicer and the
Master Servicer will each be required to prepare (or cause to be prepared) as
soon as reasonably possible a written report of each such inspection performed
thereby describing the condition of the Mortgaged Property.
With respect to each Mortgage Loan that requires the borrower to deliver
quarterly or annual operating statements with respect to the related Mortgaged
Property, the Master Servicer or the Special Servicer, depending on which is
obligated to service such Mortgage Loan, is also required to make reasonable
efforts to collect and review such statements. However, there can be no
assurance that any operating statements required to be delivered will in fact be
so delivered, nor is the Master Servicer or the Special Servicer likely to have
any practical means of compelling such delivery in the case of an otherwise
performing Mortgage Loan.
TERMINATION OF THE SPECIAL SERVICER
The holder or holders of Certificates evidencing a majority interest in the
Controlling Class may at any time replace any Special Servicer. Such holder(s)
shall designate a replacement to so serve by the delivery to the Trustee of a
written notice stating such designation. The Trustee shall, promptly after
receiving any such notice, so notify the Rating Agencies. If the designated
replacement is acceptable to the Trustee, which approval may not be unreasonably
withheld, the designated replacement shall become the Special Servicer as of the
date the Trustee shall have received: (i) written confirmation from each Rating
Agency stating that if the designated replacement were to serve as Special
Servicer under the Pooling Agreement, the then-current
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rating or ratings of one or more Classes of the Certificates would not be
qualified, downgraded or withdrawn as a result thereof; (ii) a written
acceptance of all obligations of the Special Servicer, executed by the
designated replacement; and (iii) an opinion of counsel to the effect that the
designation of such replacement to serve as Special Servicer is in compliance
with the Pooling Agreement, that the designated replacement will be bound by the
terms of the Pooling Agreement and that the Pooling Agreement will be
enforceable against such designated replacement in accordance with its terms.
The existing Special Servicer shall be deemed to have resigned simultaneously
with such designated replacement's becoming the Special Servicer under the
Pooling Agreement.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The NationsLink Funding Corporation, Commercial Mortgage Pass-Through
Certificates, Series 1998-1 (the "Certificates") will be issued on or about
March , 1998 (the "Delivery Date"), pursuant to an Amended and Restated
Pooling and Servicing Agreement, to be dated as of the Cut-off Date (the
"Pooling Agreement"), among the Depositor, the Master Servicer, the Special
Servicer, the Trustee, the REMIC Administrator and the Mortgage Loan Seller, and
will represent in the aggregate the entire beneficial ownership interest in a
trust (the "Trust"), the assets of which (such assets collectively, the "Trust
Fund") include: (i) the Mortgage Loans and all payments thereunder and proceeds
thereof received after the Cut-off Date (exclusive of payments of principal,
interest and other amounts due thereon on or before the Cut-off Date); (ii) any
REO Properties; and (iii) such funds or assets as from time to time are
deposited in the Certificate Account (see "The Pooling and Servicing
Agreements -- Certificate Account" in the Prospectus).
The Trust was originally formed on February 12, 1998 pursuant to the
Pooling and Servicing Agreement, dated February 12, 1998, among NationsBanc
Mortgage Capital Corporation ("NMCC"), the Depositor and the Trustee (the
"Original Trust Agreement"). The formation of the Trust in advance of the
Delivery Date was effected as an administrative convenience in order to
facilitate the timely assignment to the Trustee of the Mortgage Loans that had
been originated or acquired by NMCC prior to the effective date of the Merger
and Assignment described below (such Mortgage Loans, the "NMCC Mortgage Loans").
Under the Original Trust Agreement, NMCC, as the sole beneficiary of the Trust,
retained the entire beneficial interest in the Mortgage Loans and the other
assets of the Trust, all responsibility for their servicing and administration,
and custody of all related documents. On February 17, 1998, NMCC merged with and
into NB Holdings Corporation, which then assigned substantially all of NMCC's
rights and obligations, including all its rights and obligations in respect of
the NMCC Mortgage Loans under the Original Trust Agreement and its 100%
ownership of the Depositor, to the Mortgage Loan Seller (such transactions, the
"Merger and Assignment"). As a result of the Merger and Assignment, the Mortgage
Loan Seller became the successor to NMCC in all respects as regards the NMCC
Mortgage Loans, and the Depositor became a wholly-owned subsidiary of the
Mortgage Loan Seller. Effective on the Delivery Date, the Original Trust
Agreement will be amended and restated by the Pooling Agreement. The Mortgage
Loan Seller will transfer the remaining Mortgage Loans (the "NationsBank
Mortgage Loans") to the Depositor, which will in turn transfer such Mortgage
Loans to the Trust, in each case on or prior to the Delivery Date, and in
accordance with the Pooling Agreement, the Mortgage Loan Seller and the
Depositor will make certain representations and warranties and will be required
to deliver certain documents and take such other actions in respect of all the
Mortgage Loans as described under "Description of the Mortgage
Loans -- Assignment of the Mortgage Loans; Repurchases" herein. The Mortgage
Loan Seller will also transfer its 100% beneficial interest in the Trust to the
Depositor on the Delivery Date, and on and after such date such interest will be
represented solely by the Certificates (in the aggregate) in accordance with the
Pooling Agreement as described below.
The Certificates will consist of 16 classes (each, a "Class") to be
designated as: (i) the Class A-1, Class A-2 and Class A-3 Certificates
(collectively, the "Class A Certificates"); (ii) the Class B Certificates, the
Class C Certificates, the Class D Certificates, the Class E Certificates, the
Class F Certificates, the Class G Certificates, the Class H Certificates, the
Class J Certificates and the Class K Certificates (collectively with the Class A
Certificates, the "Sequential Pay Certificates"); (iii) the Class X-1 and Class
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X-2 Certificates (collectively, the "Class X Certificates", and the Class X
Certificates, collectively with the Sequential Pay Certificates, the "REMIC
Regular Certificates"); and (iv) the Class R-I Certificates and the Class R-II
Certificates (collectively, the "REMIC Residual Certificates"). Only the Class
X, Class A, Class B, Class C, Class D and Class E Certificates (collectively,
the "Offered Certificates") are offered hereby.
The Class F, Class G, Class H, Class J and Class K Certificates and the
REMIC Residual Certificates (collectively, the "Private Certificates") have not
been registered under the Securities Act and are not offered hereby.
Accordingly, to the extent this Prospectus Supplement contains information
regarding the terms of the Private Certificates, such information is provided
because of its potential relevance to a prospective purchaser of an Offered
Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format in
denominations of: (i) in the case of the Class A Certificates, $10,000 actual
principal amount and in any whole dollar denomination in excess thereof; (ii) in
the case of the Class X Certificates, $1,000,000 notional principal amount and
in any whole dollar denomination in excess thereof; and (iii) in the case of the
other Offered Certificates, $100,000 actual principal amount and in any whole
dollar denomination in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more Certificates registered in the name of the nominee of The Depository Trust
Company ("DTC"). The Depositor has been informed by DTC that DTC's nominee will
be Cede & Co. No beneficial owner of an Offered Certificate (each, a
"Certificate Owner") will be entitled to receive a fully registered physical
certificate (a "Definitive Certificate") representing its interest in such Class
, except under the limited circumstances described under "Description of the
Certificates -- Book-Entry Registration and Definitive Certificates" in the
Prospectus. Unless and until Definitive Certificates are issued in respect of
the Offered Certificates, beneficial ownership interests in each such Class of
Certificates will be maintained and transferred on the book-entry records of DTC
and its participating organizations (its "Participants"), and all references to
actions by holders of each such Class of Certificates will refer to actions
taken by DTC upon instructions received from the related Certificate Owners
through its Participants in accordance with DTC procedures, and all references
herein to payments, notices, reports and statements to holders of each such
Class of Certificates will refer to payments, notices, reports and statements to
DTC or Cede & Co., as the registered holder thereof, for distribution to the
related Certificate Owners through its Participants in accordance with DTC
procedures. The form of such payments and transfers may result in certain delays
in receipt of payments by an investor and may restrict an investor's ability to
pledge its securities. See "Description of the Certificates -- Book-Entry
Registration and Definitive Certificates" in the Prospectus. The Trustee will
initially serve as registrar (in such capacity, the "Certificate Registrar") for
purposes of recording and otherwise providing for the registration of the
Offered Certificates and, if and to the extent Definitive Certificates are
issued in respect thereof, of transfers and exchanges of the Offered
Certificates.
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CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Upon initial issuance, the respective classes of Sequential Pay
Certificates will have the following Certificate Balances (in each case, subject
to a variance of plus or minus 5%):
<TABLE>
<CAPTION>
INITIAL CERTIFICATE APPROXIMATE
BALANCE OR APPROXIMATE PERCENT INITIAL
NOTIONAL OF INITIAL CREDIT
CLASS AMOUNT POOL BALANCE SUPPORT
- ----- ------------------- ------------------- -----------
<S> <C> <C> <C>
Class A-1.............................. $ 199,017,108 19.50% 30.00%
Class A-2.............................. 81,648,044 8.00 30.00
Class A-3.............................. 433,755,237 42.50 30.00
Class X-1.............................. 714,348,947 N/A N/A
Class X-2.............................. 306,149,551 N/A N/A
Class B................................ 53,581,529 5.25 24.75
Class C................................ 56,133,030 5.50 19.25
Class D................................ 48,478,526 4.75 14.50
Class E................................ 25,515,013 2.50 12.00
Class F................................ 51,030,027 5.00 7.00
Class G................................ 10,206,005 1.00 6.00
Class H................................ 25,515,013 2.50 3.50
Class J................................ 12,247,206 1.20 2.30
Class K................................ 23,473,819 2.30 N/A
</TABLE>
The "Certificate Balance" of any Class of Sequential Pay Certificates
outstanding at any time will be the then aggregate stated principal amount
thereof. On each Distribution Date, the Certificate Balance of each Class of
Sequential Pay Certificates will be reduced by any distributions of principal
actually made on such Class of Certificates on such Distribution Date, and will
be further reduced by any Realized Losses and Additional Trust Fund Expenses
allocated to such Class of Certificates on such Distribution Date. See
"-- Distributions" and "-- Subordination; Allocation of Losses and Certain
Expenses" below.
The Class X-1 Certificates will not have a Certificate Balance. The Class
X-1 Certificates will represent the right to receive distributions of interest
accrued as described herein on a notional principal amount (a "Notional Amount")
equal to approximately 99.99% of the aggregate of the Certificate Balances of
the Class A Certificates, outstanding from time to time.
The Class X-2 Certificate will not have a Certificate Balance. The Class
X-2 Certificates will represent the right to receive distribution of interest
accrued as described herein on a Notional Amount equal to approximately 99.99%
of the aggregate of the Certificate Balances of all of the Classes of Sequential
Pay Certificates, other than the Class A Certificates, outstanding from time to
time.
No class of REMIC Residual Certificates will have a Certificate Balance or
a Notional Amount.
A Class of Offered Certificates will be considered to be outstanding until
its Certificate Balance or Notional Amount, as the case may be, is reduced to
zero; provided, however, that, under very limited circumstances, reimbursement
of any previously allocated Realized Losses and Additional Trust Fund Expenses
may thereafter be made with respect thereto.
PASS-THROUGH RATES
The Pass-Through Rates applicable to the Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D and Class E Certificates will, at all times, be equal
to [ ]%, [ ]%, [ ]%, [ ]%, [ ]% and [ ]% per annum,
respectively.
The Pass-Through Rate applicable to the Class X-1 Certificates for the
initial Distribution Date will equal approximately [ ]% per annum. The
Pass-Through Rate applicable to the Class X-1 Certificates for each subsequent
Distribution Date will, in general, equal the excess, if any, of (i) the
weighted average of the Net Mortgage Rates for all the Mortgage Loans (weighted
on the basis of their respective Stated Principal
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Balances immediately following the preceding Distribution Date), over (ii) the
weighted average of the Pass-Through Rates applicable to the Class A
Certificates for such Distribution Date (weighted on the basis of their
respective Certificate Balances immediately prior to such Distribution Date).
The Pass-Through Rate applicable to the Class X-2 Certificates for the
initial Distribution Date will equal approximately [ ]% per annum. The
Pass-Through Rate applicable to the Class X-2 Certificates for each subsequent
Distribution Date will, in general, equal the excess, if any, of (i) the
weighted average of the Net Mortgage Rates for all the Mortgage Loans (weighted
on the basis of their respective Stated Principal Balances immediately following
the preceding Distribution Date), over (ii) the weighted average of the Pass-
Through Rates applicable to all the Classes of Sequential Pay Certificates,
other than the Class A Certificates, for such Distribution Date (weighted on the
basis of their respective Certificate Balances immediately prior to such
Distribution Date).
The Pass-Through Rates applicable to the Class F, Class G, Class H, Class J
and Class K Certificates will, at all times, be equal to [ ]%, [ ]%,
[ ]%, [ ]% and [ ]% per annum, respectively.
The "Net Mortgage Rate" with respect to any Mortgage Loan is, in general, a
per annum rate equal to the related Mortgage Rate in effect from time to time,
minus the sum of the applicable Master Servicing Fee Rate (including the Standby
Fee rate) and the per annum rate at which the monthly Trustee Fee are calculated
(such sum, the "Administrative Fee Rate"); provided that if any Mortgage Loan
does not accrue interest on the basis of a 360-day year consisting of twelve
30-day months (which is the basis on which interest accrues in respect of the
REMIC Regular Certificates), then, solely for purposes of calculating the Pass-
Through Rates on the Class X Certificates, the Net Mortgage Rate of such
Mortgage Loan for any one-month period preceding a related Due Date will be the
annualized rate at which interest would have to accrue in respect of such loan
on the basis of a 360-day year consisting of twelve 30-day months in order to
produce the aggregate amount of interest actually accrued in respect of such
loan during such one-month period at the related Mortgage Rate (net of the
related Administrative Fee Rate). As of the Cut-off Date (without regard to the
adjustment described in the proviso to the second preceding sentence), the Net
Mortgage Rates for the Mortgage Loans will range from 6.576% per annum to 9.661%
per annum, with a weighted average Net Mortgage Rate of 7.543% per annum. See
"Servicing of the Mortgage Loans -- Servicing and Other Compensation and Payment
of Expenses" herein.
The "Stated Principal Balance" of each Mortgage Loan will initially equal
the Cut-off Date Balance thereof and will be permanently reduced (to not less
than zero) on each Distribution Date by (i) any payments or other collections
(or advances in lieu thereof) of principal on such Mortgage Loan that have been
(or, if they had not been applied to cover Additional Trust Fund Expenses, would
have been) distributed on the Certificates on such date, and (ii) the principal
portion of any Realized Loss incurred in respect of such Mortgage Loan during
the related Collection Period.
The "Collection Period" for each Distribution Date is the period that
begins immediately following the Determination Date in the calendar month
preceding the month in which such Distribution Date occurs (or, in the case of
the initial Distribution Date, immediately following the Cut-off Date) and ends
on the Determination Date in the calendar month in which such Distribution Date
occurs. The "Determination Date" will be the 10th day of each month or, if any
such 10th day is not a business day, the immediately preceding business day.
DISTRIBUTIONS
General. Distributions on or with respect to the Certificates will be made
by the Trustee, to the extent of available funds, on the 20th day of each month
or, if any such 20th day is not a business day, then on the next succeeding
business day, commencing in April 1998 (each, a "Distribution Date"). Except as
otherwise described below, all such distributions will be made to the persons in
whose names the Certificates are registered at the close of business on the
related Record Date and, as to each such person, will be made by wire transfer
in immediately available funds to the account specified by the Certificateholder
at a bank or other entity having appropriate facilities therefor, if such
Certificateholder will have provided the Trustee with written wiring
instructions no less than five business days prior to the related Record Date,
or otherwise by
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check mailed to such Certificateholder. Until Definitive Certificates are issued
in respect thereof, Cede & Co. will be the registered holder of the Offered
Certificates. See "-- Registration and Denominations" above. The final
distribution on any Certificate (determined without regard to any possible
future reimbursement of any Realized Losses or Additional Trust Fund Expense
previously allocated to such Certificate) will be made in like manner, but only
upon presentation and surrender of such Certificate at the location that will be
specified in a notice of the pendency of such final distribution. Any
distribution that is to be made with respect to a Certificate in reimbursement
of a Realized Loss or Additional Trust Fund Expense previously allocated
thereto, which reimbursement is to occur after the date on which such
Certificate is surrendered as contemplated by the preceding sentence (the
likelihood of any such distribution being remote), will be made by check mailed
to the Certificateholder that surrendered such Certificate. All distributions
made on or with respect to a Class of Certificates will be allocated pro rata
among such Certificates based on their respective percentage interests in such
Class.
With respect to any Distribution Date and any Class of Certificates, the
"Record Date" will be the last business day of the calendar month immediately
preceding the month in which such Distribution Date occurs.
The Available Distribution Amount. With respect to any Distribution Date,
distributions of interest on and principal of the Certificates will be made from
the Available Distribution Amount for such Distribution Date. The "Available
Distribution Amount" for any Distribution Date will, in general, equal (a) all
amounts on deposit in the Certificate Account as of the close of business on the
related Determination Date, exclusive of any portion thereof that represents one
or more of the following:
(i) Monthly Payments collected but due on a Due Date subsequent to the
related Collection Period;
(ii) Prepayment Premiums (which are separately distributable on the
Certificates as hereinafter described);
(iii) amounts that are payable or reimbursable to any person other
than the Certificateholders (including amounts payable to the Master
Servicer, the Special Servicer, any Sub-Servicers or the Trustee as
compensation (including Trustee Fees, Master Servicing Fees, Special
Servicing Fees, Workout Fees, Liquidation Fees, Default Interest and late
payment charges (to the extent not otherwise applied to cover interest on
Advances), assumption fees and modification fees), amounts payable in
reimbursement of outstanding Advances, together with interest thereon, and
amounts payable in respect of other Additional Trust Fund Expenses); and
(iv) amounts deposited in the Certificate Account in error; plus
(b) to the extent not already included in clause (a), any P&I Advances made
with respect to such Distribution Date and any payments made by the Master
Servicer to cover Prepayment Interest Shortfalls incurred during the related
Collection Period.
See "The Pooling and Servicing Agreements -- Certificate Account" in the
Prospectus.
Application of the Available Distribution Amount. On each Distribution
Date, the Trustee will apply the Available Distribution Amount for such date for
the following purposes and in the following order of priority:
(1) to pay interest to the holders of the Class A-1, Class A-2, Class
A-3, Class X-1 and Class X-2 Certificates (collectively, the "Senior
Certificates"), up to an amount equal to, and pro rata as among such
Classes in accordance with, all Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(2) to pay principal first to the holders of the Class A-1
Certificates, second to the holders of the Class A-2 Certificates and third
to the holders of the Class A-3 Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class of
Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date;
(3) to reimburse the holders of the Class A-1, Class A-2 and Class A-3
Certificates, up to an amount equal to, and pro rata as among such Classes
in accordance with, the respective amounts of
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Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Classes of Certificates and for which no reimbursement
has previously been paid; and
(4) to make payments on the other Classes of Certificates
(collectively, the "Subordinate Certificates") as contemplated below;
provided that, on each Distribution Date as of which the aggregate Certificate
Balance of the Subordinate Certificates is to be or has been reduced to zero,
and in any event on the final Distribution Date in connection with a termination
of the Trust (see "--Termination" below), the payments of principal to be made
as contemplated by clause (2) above with respect to the Class A Certificates,
will be so made (subject to available funds) to the holders of the respective
Classes of such Certificates, up to an amount equal to, and pro rata as among
such Classes in accordance with, the respective then outstanding Certificate
Balances of such Classes of Certificates.
On each Distribution Date, following the above-described distributions on
the Senior Certificates, the Trustee will apply the remaining portion, if any,
of the Available Distribution Amount for such date for the following purposes
and in the following order of priority:
(1) to pay interest to the holders of the Class B Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(2) if the Certificate Balances of the Class A Certificates have been
reduced to zero, to pay principal to the holders of the Class B
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(3) to reimburse the holders of the Class B Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been paid;
(4) to pay interest to the holders of the Class C Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(5) if the Certificate Balances of the Class A and Class B
Certificates have been reduced to zero, to pay principal to the holders of
the Class C Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(6) to reimburse the holders of the Class C Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(7) to pay interest to the holders of the Class D Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(8) if the Certificate Balances of the Class A, Class B and Class C
Certificates have been reduced to zero, to pay principal to the holders of
the Class D Certificates, up to an amount equal to the lesser of (a) the
then outstanding Certificate Balance of such Class of Certificates and (b)
the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(9) to reimburse the holders of the Class D Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
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(10) to pay interest to the holders of the Class E Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(11) if the Certificate Balances of the Class A, Class B, Class C and
Class D Certificates have been reduced to zero, to pay principal to the
holders of the Class E Certificates, up to an amount equal to the lesser of
(a) the then outstanding Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution Amount for such
Distribution Date;
(12) to reimburse the holders of the Class E Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(13) to pay interest to the holders of the Class F Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(14) if the Certificate Balances of the Class A, Class B, Class C,
Class D and Class E Certificates have been reduced to zero, to pay
principal to the holders of the Class F Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date;
(15) to reimburse the holders of the Class F Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(16) to pay interest to the holders of the Class G Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(17) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E and Class F Certificates have been reduced to zero, to pay
principal to the holders of the Class G Certificates, up to an amount equal
to the lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date;
(18) to reimburse the holders of the Class G Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(19) to pay interest to the holders of the Class H Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(20) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F and Class G Certificates have been reduced to
zero, to pay principal to the holders of the Class H Certificates, up to an
amount equal to the lesser of (a) the then outstanding Certificate Balance
of such Class of Certificates and (b) the remaining portion of the
Principal Distribution Amount for such Distribution Date;
(21) to reimburse the holders of the Class H Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(22) to pay interest to the holders of the Class J Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(23) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G and Class H Certificates have been
reduced to zero, to pay principal to the holders of the Class J
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Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(24) to reimburse the holders of the Class J Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
(25) to pay interest to the holders of the Class K Certificates, up to
an amount equal to all Distributable Certificate Interest in respect of
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(26) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G, Class H and Class J Certificates have
been reduced to zero, to pay principal to the holders of the Class K
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Certificate Balance of such Class of Certificates and (b) the
remaining portion of the Principal Distribution Amount for such
Distribution Date;
(27) to reimburse the holders of the Class K Certificates, up to an
amount equal to all Realized Losses and Additional Trust Fund Expenses, if
any, previously allocated to the Certificate Balance of such Class of
Certificates and for which no reimbursement has previously been received;
and
(28) to pay to the holders of the REMIC Residual Certificates, the
balance, if any, of the Available Distribution Amount for such Distribution
Date;
provided that, on the final Distribution Date in connection with a termination
of the Trust, the payments of principal to be made as contemplated by any of
clauses (2), (5), (8), (11), (14), (17), (20), (23) and (26) above with respect
to any Class of Sequential Pay Certificates, will be so made (subject to
available funds) up to an amount equal to the entire then outstanding
Certificate Balance of such Class of Certificates.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates for each
Distribution Date is equal to the Accrued Certificate Interest in respect of
such Class of Certificates for such Distribution Date, reduced by such Class of
Certificates' allocable share (calculated as described below) of any Net
Aggregate Prepayment Interest Shortfall for such Distribution Date.
The "Accrued Certificate Interest" in respect of each Class of REMIC
Regular Certificates for each Distribution Date is equal to one month's interest
at the Pass-Through Rate applicable to such Class of Certificates for such
Distribution Date accrued on the related Certificate Balance or Notional Amount,
as the case may be, outstanding immediately prior to such Distribution Date.
Accrued Certificate Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
To the extent of Prepayment Interest Excesses and a portion of its
aggregate Master Servicing Fee for the related Collection Period, which portion
is, in the case of each and every Mortgage Loan, calculated at 0.015% per annum,
the Master Servicer is required to make a non-reimbursable payment with respect
to each Distribution Date to cover the aggregate of any Prepayment Interest
Shortfalls incurred with respect to the Mortgage Pool during such Collection
Period. The "Net Aggregate Prepayment Interest Shortfall" for any Distribution
Date will be the amount, if any, by which (a) the aggregate of all Prepayment
Interest Shortfalls incurred with respect to the Mortgage Pool during the
related Collection Period, exceeds (b) any such payment made by the Master
Servicer with respect to such Distribution Date to cover such Prepayment
Interest Shortfalls. See "Servicing of the Mortgage Loans -- Servicing and Other
Compensation and Payment of Expenses" herein. The Net Aggregate Prepayment
Interest Shortfall, if any, for each Distribution Date will be allocated on such
Distribution Date: pro rata among the Classes of REMIC Regular Certificates, in
each case up to an amount equal to the lesser of any remaining unallocated
portion of such Net Aggregate Prepayment Interest Shortfall and any Accrued
Certificate Interest in respect of the particular Class of Certificates for such
Distribution Date.
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Principal Distribution Amount. The "Principal Distribution Amount" for any
Distribution Date will, in general, equal the aggregate of the following:
(a) the principal portions of all Monthly Payments (other than Balloon
Payments) and any Assumed Monthly Payments due or deemed due, as the case
may be, in respect of the Mortgage Loans for their respective Due Dates
occurring during the related Collection Period;
(b) all voluntary principal prepayments received on the Mortgage Loans
during the related Collection Period;
(c) with respect to any Balloon Loan as to which the related stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal (exclusive of any voluntary principal prepayment
and any amount described in clause (d) below) made by or on behalf of the
related borrower during the related Collection Period, net of any portion
of such payment that represents a recovery of the principal portion of any
Monthly Payment (other than a Balloon Payment) due, or the principal
portion of any Assumed Monthly Payment deemed due, in respect of such
Mortgage Loan on a Due Date during or prior to the related Collection
Period and not previously recovered;
(d) all Liquidation Proceeds and Insurance and Condemnation Proceeds
received on the Mortgage Loans during the related Collection Period that
were identified and applied by the Master Servicer as recoveries of
principal thereof, in each case net of any portion of such amounts that
represents a recovery of the principal portion of any Monthly Payment
(other than a Balloon Payment) due, or the principal portion of any Assumed
Monthly Payment deemed due, in respect of the related Mortgage Loan on a
Due Date during or prior to the related Collection Period and not
previously recovered; and
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of (i) the Principal Distribution
Amount for the immediately preceding Distribution Date, over (ii) the
aggregate distributions of principal made on the Sequential Pay
Certificates in respect of such Principal Distribution Amount on such
immediately preceding Distribution Date.
For purposes of the foregoing, the Monthly Payment due on any Mortgage Loan
on any related Due Date will reflect any waiver, modification or amendment of
the terms of such Mortgage Loan, whether agreed to by the Master Servicer or
Special Servicer or resulting from a bankruptcy, insolvency or similar
proceeding involving the related borrower.
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i) any
Mortgage Loan that is delinquent in respect of its Balloon Payment beyond the
first Determination Date that follows its stated maturity date and as to which
no arrangements have been agreed to for collection of the delinquent amounts; or
(ii) any Mortgage Loan as to which the related Mortgaged Property has become an
REO Property. The Assumed Monthly Payment deemed due on any such Mortgage Loan
delinquent as to its Balloon Payment, for its stated maturity date and for each
successive Due Date that it remains outstanding, will equal the Monthly Payment
that would have been due thereon on such date if the related Balloon Payment had
not come due, but rather such Mortgage Loan had continued to amortize in
accordance with its amortization schedule, if any, in effect immediately prior
to maturity and had continued to accrue interest in accordance with such loan's
terms in effect immediately prior to maturity. The Assumed Monthly Payment
deemed due on any such Mortgage Loan as to which the related Mortgaged Property
has become an REO Property, for each Due Date that such REO Property remains
part of the Trust Fund, will equal the Monthly Payment (or, in the case of a
Mortgage Loan delinquent in respect of its Balloon Payment as described in the
prior sentence, the Assumed Monthly Payment) due on the last Due Date prior to
the acquisition of such REO Property.
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Distributions of Prepayment Premiums. Any Prepayment Premiums (whether
described in the related Mortgage Loan documents as yield maintenance amounts or
fixed prepayment premiums) actually collected during any particular Collection
Period as the result of prepayments of principal on the Mortgage Loans will be
distributed in respect of the REMIC Regular Certificates outstanding on the
related Distribution Date (and will not be applied to reduce the outstanding
Certificate Balance of any such Class) in the following amount and order of
priority:
(a) first, to the holders of the Class X-1 Certificates, the holders
of the Class X-2 Certificates and the holders of the respective Class or
Classes of the Class A, Class B, Class C, Class D and Class E Certificates
then entitled to distributions of principal on such Distribution Date, up
to an amount equal to the corresponding PV Yield Loss Amount (as defined
below) for each such Class of Certificates, pro rata in accordance with
their respective entitlement; and
(b) second, to the extent of any portion of such Prepayment Premiums
remaining following the distributions described in the preceding clause
(a), to the holders of the Class X-1 and Class X-2 Certificates, pro rata
based on the Notional Amounts of each such Class as of the preceding
Distribution Date (after giving effect to any reduction in such Notional
Amounts on such Distribution Date.
The "PV Yield Loss Amount" for any Distribution Date means, with respect to
each Class of REMIC Regular Certificates as to which any payment of principal is
to be applied on such Distribution Date in reduction of its Certificate Balance,
and each Class of Class X Certificates, as the case may be, an amount equal to
the product of the applicable Annuity Factor and the applicable Lost Coupon
Amount.
For purposes of computing the PV Yield Loss Amount for any Class of REMIC
Regular Certificates for any Distribution Date, the following definitions shall
apply:
The "Annuity Factor" for any Class of Certificates is equal to the
following:
(-n)
1-(1+T)
---------------
T
n = either (i) one-twelfth of the number of months from such
Distribution Date to the Assumed Final Distribution Date for such Class,
if the Assumed Final Distribution Date for such Class is later than such
Distribution Date, or (ii) zero, if the Assumed Final Distribution Date
for such Class is earlier than such Distribution Date. In the case of a
Class of Offered Certificates, its Assumed Final Distribution Date is
set forth on the cover hereof.
T = the Reinvestment Yield.
The PV Yield Loss Amount for the Class F, Class G, Class H, Class J and
Class K Certificates, and for any Class of Sequential Pay Certificates that is
not receiving a distribution of principal, is zero.
The "Lost Coupon Amount" means: (a) with respect to any Class of the
Classes of Class A, Class B, Class C, Class D and Class E Certificates as to
which a prepayment of principal is to be applied on such Distribution Date in
reduction of its Certificate Balance (after application of scheduled principal
payments), the product of (x) the amount, if any, by which the Pass-Through Rate
for such Class exceeds the applicable Reinvestment Yield and (y) the aggregate
amount of principal in respect of prepayments on the Mortgage Loans paid to such
Class in reduction of its Certificate Balance on such Distribution Date; and (b)
with respect to the Class X-1 or the Class X-2 Certificates, the product of (x)
the Pass-Through Rate applicable to such Class for such Distribution Date, (y) a
fraction, the numerator of which is the Notional Amount of such Class as of the
preceding Distribution Date (after giving effect to any reduction in such
Notional Amount on such preceding Distribution Date), and the denominator of
which is the aggregate Notional Amount of the Class X Certificates as of such
preceding Distribution Date (after giving effect to any reduction in such
Notional Amounts on such preceding Distribution Date), and (z) the amount by
which the aggregate Notional Amount of the Class X Certificates is reduced in
respect of prepayments on the Mortgage Loans on such Distribution Date.
The "Reinvestment Yield" for any Class of Certificates and any Distribution
Date will be a rate determined by the Trustee, in its good faith, equal to the
average yield for "This Week" as most recently reported by the Federal Reserve
Board in Federal Reserve Statistical Release H.15 (519) for U.S. Treasury
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securities with a maturity coterminus with the Assumed Final Distribution Date
for such Class. If there is no U.S. Treasury security listed with a maturity
coterminus with the Assumed Final Distribution Date for such Class, then the
Reinvestment Yield will be a rate determined by the Trustee, in its good faith,
equal to the interpolated yield to maturity of U.S. Treasury securities with
maturities next longer and shorter than such remaining term to maturity (such
interpolated yield to be rounded to the nearest whole multiple of 1/100 of 1%
per annum, if the interpolated yield is not such a multiple). In the event the
yields of U.S. Treasury securities are no longer published in Federal Reserve
Statistical Release H.15(519), the Trustee will be permitted to select a
comparable publication to determine the Reinvestment Yield.
The Depositor makes no representation as to the enforceability of the
provision of any Mortgage Note requiring the payment of a Prepayment Premium or
of the collectability of any Prepayment Premium. See "Description of the
Mortgage Pool -- Certain Terms and Conditions of the Mortgage
Loans -- Prepayment Provisions" and "Risk Factors -- The Mortgage
Loans -- Prepayment Premiums" herein.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of, among other things, determining distributions on the Certificates,
allocations of Realized Losses and Additional Trust Fund Expenses to the
Certificates, and the amount of Master Servicing Fees, Standby Fees, Special
Servicing Fees and Trustee Fees payable under the Pooling Agreement, as having
remained outstanding until such REO Property is liquidated. Among other things,
such Mortgage Loan will be taken into account when determining the Pass-Through
Rates for the Class X Certificates and the Principal Distribution Amount for
each Distribution Date. In connection therewith, operating revenues and other
proceeds derived from such REO Property (after application thereof to pay
certain costs and taxes, including certain reimbursements payable to the Master
Servicer, the Special Servicer and/or the Trustee, incurred in connection with
the operation and disposition of such REO Property) will be "applied" by the
Master Servicer as principal, interest and other amounts "due" on such Mortgage
Loan; and, subject to the recoverability determination described below (see
"-- P&I Advances"), the Master Servicer and the Trustee will be required to make
P&I Advances in respect of such Mortgage Loan, in all cases as if such Mortgage
Loan had remained outstanding.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
As and to the extent described herein, the rights of holders of the
Subordinate Certificates to receive distributions of amounts collected or
advanced on the Mortgage Loans will, in the case of each Class thereof, be
subordinated to the rights of holders of the Senior Certificates and, further,
to the rights of holders of each other Class of Subordinate Certificates, if
any, with an earlier alphabetical Class designation. This subordination is
intended to enhance the likelihood of timely receipt by holders of the
respective Classes of Senior Certificates of the full amount of Distributable
Certificate Interest payable in respect of their Certificates on each
Distribution Date, and the ultimate receipt by holders of the respective Classes
of Class A Certificates of principal equal to, in each such case, the entire
related Certificate Balance. Similarly, but to decreasing degrees, this
subordination is also intended to enhance the likelihood of timely receipt by
holders of the other Classes of Offered Certificates of the full amount of
Distributable Certificate Interest payable in respect of their Certificates on
each Distribution Date, and the ultimate receipt by holders of the other Classes
of Offered Certificates of principal equal to, in each such case, the entire
related Certificate Balance. The subordination of any Class of Subordinate
Certificates will be accomplished by, among other things, the application of the
Available Distribution Amount on each Distribution Date in the order of priority
described under "-- Distributions -- Application of the Available Distribution
Amount" above. No other form of Credit Support will be available for the benefit
of holders of the Offered Certificates.
If, following the distributions to be made in respect of the Certificates
on any Distribution Date, the aggregate Stated Principal Balance of the Mortgage
Pool that will be outstanding immediately following such Distribution Date is
less than the then aggregate Certificate Balance of the Sequential Pay
Certificates, the Certificate Balances of the Class K, Class J, Class H, Class
G, Class F, Class E, Class D, Class C and Class B Certificates will be reduced,
sequentially in that order, in the case of each such Class until such deficit
(or the related Certificate Balance) is reduced to zero (whichever occurs
first). If any portion of such deficit remains
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at such time as the Certificate Balances of such Classes of Certificates are
reduced to zero, then the respective Certificate Balances of the Class A-1,
Class A-2 and Class A-3 Certificates will be reduced, pro rata in accordance
with the relative sizes of the remaining Certificate Balances of such Classes of
Certificates, until such deficit (or each such Certificate Balance) is reduced
to zero. Any such deficit will, in general, be the result of Realized Losses
incurred in respect of the Mortgage Loans and/or Additional Trust Fund Expenses
to the extent paid from funds which would otherwise have been used to make
distributions of principal. Accordingly, the foregoing reductions in the
Certificate Balances of the respective Classes of the Sequential Pay
Certificates will constitute an allocation of any such Realized Losses and
Additional Trust Fund Expenses. Any such reduction in the Certificate Balance of
a Class of Sequential Pay Certificates will result in a corresponding reduction
in the Notional Amount of the Class X Certificates.
"Realized Losses" are losses on or in respect of the Mortgage Loans arising
from the inability of the Master Servicer and/or the Special Servicer to collect
all amounts due and owing under any such Mortgage Loan, including by reason of
the fraud or bankruptcy of a borrower or a casualty of any nature at a Mortgaged
Property, to the extent not covered by insurance. The Realized Loss in respect
of a liquidated Mortgage Loan (or related REO Property) is an amount generally
equal to the excess, if any, of (a) the outstanding principal balance of such
Mortgage Loan as of the date of liquidation, together with (i) all accrued and
unpaid interest thereon at the related Mortgage Rate to but not including the
Due Date in the Collection Period in which the liquidation occurred and (ii) all
related unreimbursed Servicing Advances and outstanding liquidation expenses,
over (b) the aggregate amount of Liquidation Proceeds, if any, recovered in
connection with such liquidation. If any portion of the debt due under a
Mortgage Loan is forgiven, whether in connection with a modification, waiver or
amendment granted or agreed to by the Master Servicer or the Special Servicer or
in connection with the bankruptcy or similar proceeding involving the related
borrower, the amount so forgiven also will be treated as a Realized Loss.
"Additional Trust Fund Expenses" include, among other things, (i) all
Special Servicing Fees, Workout Fees and Liquidation Fees paid to the Special
Servicer, (ii) any interest paid to the Master Servicer, the Special Servicer
and/or the Trustee in respect of unreimbursed Advances, (iii) the cost of
various opinions of counsel required or permitted to be obtained in connection
with the servicing of the Mortgage Loans and the administration of the Trust
Fund, (iv) certain unanticipated, non-Mortgage Loan specific expenses of the
Trust, including certain reimbursements and indemnifications to the Trustee as
described under "The Pooling and Servicing Agreements -- Certain Matters
Regarding the Trustee" in the Prospectus, certain reimbursements to the Master
Servicer, the Special Servicer, the REMIC Administrator and the Depositor as
described under "The Pooling and Servicing Agreements -- Certain Matters
Regarding the Master Servicer, the Special Servicer, the REMIC Administrator and
the Depositor" in the Prospectus and certain federal, state and local taxes, and
certain tax-related expenses, payable out of the Trust Fund as described under
"Certain Federal Income Tax Consequences -- Possible Taxes on Income From
Foreclosure Property and Other Taxes" herein and "Certain Federal Income Tax
Consequences -- Taxation of Owners of REMIC Regular Certificates -- Prohibited
Transactions Tax and Other Taxes" in the Prospectus, (v) if not advanced by the
Master Servicer, any amounts expended on behalf of the Trust to remediate an
adverse environmental condition at any Mortgaged Property securing a defaulted
Mortgage Loan (see "The Pooling and Servicing Agreements -- Realization Upon
Defaulted Mortgage Loans" in the Prospectus), and (vi) any other expense of the
Trust Fund not specifically included in the calculation of "Realized Loss" for
which there is no corresponding collection from a borrower. Additional Trust
Fund Expenses will reduce amounts payable to Certificateholders and,
consequently, may result in a loss on the Offered Certificates.
P&I ADVANCES
With respect to each Distribution Date, the Master Servicer will be
obligated, subject to the recoverability determination described below, to make
advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as and to the extent provided in the Pooling Agreement,
funds held in the Certificate Account that are not required to be part of the
Available Distribution Amount for such Distribution Date, in an amount generally
equal to the aggregate of all Monthly Payments (other than Balloon Payments) and
any Assumed Monthly Payments, in each case net of related Master Servicing Fees
and
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Workout Fees, that were due or deemed due, as the case may be, in respect of the
Mortgage Loans during the related Collection Period and that were not paid by or
on behalf of the related borrowers or otherwise collected as of the close of
business on the last day of the related Collection Period. The Master Servicer's
obligations to make P&I Advances in respect of any Mortgage Loan will continue
through liquidation of such Mortgage Loan or disposition of any REO Property
acquired in respect thereof. Notwithstanding the foregoing, if it is determined
that an Appraisal Reduction Amount (as defined below) exists with respect to any
Required Appraisal Mortgage Loan (as defined below), then, with respect to the
Distribution Date immediately following the date of such determination and with
respect to each subsequent Distribution Date for so long as such Appraisal
Reduction Amount exists, in the event of subsequent delinquencies on such
Mortgage Loan, the interest portion of the P&I Advance required to be made in
respect of such Mortgage Loan will be reduced (no reduction to be made in the
principal portion, however) to an amount equal to the product of (i) the amount
of the interest portion of such P&I Advance that would otherwise be required to
be made for such Distribution Date without regard to this sentence, multiplied
by (ii) a fraction (expressed as a percentage), the numerator of which is equal
to the Stated Principal Balance of such Mortgage Loan, net of such Appraisal
Reduction Amount, and the denominator of which is equal to the Stated Principal
Balance of such Mortgage Loan. See "--Appraisal Reductions" below. Subject to
the recoverability determination described below, if the Master Servicer fails
to make a required P&I Advance, the Trustee will be required to make such P&I
Advance. See "-- The Trustee" below.
The Master Servicer and the Trustee will each be entitled to recover any
P&I Advance made out of its own funds from any Related Proceeds. Notwithstanding
the foregoing, neither the Master Servicer nor the Trustee will be obligated to
make any P&I Advance that it determines in its reasonable good faith judgment
would, if made, not be recoverable out of Related Proceeds (a "Nonrecoverable
P&I Advance"; and, together with a Nonrecoverable Servicing Advance,
"Nonrecoverable Advances"), and the Master Servicer and the Trustee, as
applicable, will be entitled to recover any P&I Advance that at any time is
determined to be a Nonrecoverable P&I Advance out of funds received on or in
respect of other Mortgage Loans. See "Description of the
Certificates -- Advances in Respect of Delinquencies" and "The Pooling and
Servicing Agreements -- Certificate Account" in the Prospectus.
The Master Servicer and the Trustee will each be entitled with respect to
any Advance made thereby, and the Special Servicer will be entitled with respect
to any Servicing Advance made thereby, to interest accrued on the amount of such
Advance for so long as it is outstanding at a rate per annum (the "Reimbursement
Rate") equal to the "prime rate" as published in the "Money Rates" section of
The Wall Street Journal, as such "prime rate" may change from time to time. Such
interest on any Advance will be payable to the Master Servicer, the Special
Servicer or the Trustee, as the case may be, first, out of Default Interest and
late payment charges collected on the related Mortgage Loan (but only if such
items accrued after such Mortgage Loan became a Specially Serviced Mortgage
Loan) and, second, at any time coinciding with or following the reimbursement of
such Advance, out of any amounts then on deposit in the Certificate Account. Any
delay between a Sub-Servicer's receipt of a late collection of a Monthly Payment
as to which a P&I Advance was made and the forwarding of such late collection to
the Master Servicer will increase the amount of interest accrued and payable to
the Master Servicer or the Trustee, as the case may be, on such P&I Advance. To
the extent not offset by Default Interest and/or late payment charges accrued
and actually collected on the related Mortgage Loan while it is a Specially
Serviced Mortgage Loan, interest accrued on outstanding Advances will result in
a reduction in amounts payable on the Certificates.
APPRAISAL REDUCTIONS
Within 90 days (or within such longer period as the Master Servicer or the
Special Servicer, as applicable, is diligently and in good faith proceeding to
obtain such) after the earliest of (i) the date on which any Mortgage Loan
becomes a Modified Mortgage Loan (as defined below), (ii) the 60th day following
the occurrence of any uncured delinquency in Monthly Payments with respect to
any Mortgage Loan, (iii) the date on which a receiver is appointed and continues
in such capacity in respect of the Mortgaged Property securing any Mortgage
Loan, (iv) the date on which the borrower under any Mortgage Loan becomes the
subject of bankruptcy or insolvency proceedings, and (v) the date on which a
Mortgaged Property securing
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any Mortgage Loan becomes an REO Property (each such Mortgage Loan, a "Required
Appraisal Loan"; and each such date, a "Required Appraisal Date"), the Master
Servicer or the Special Servicer, as applicable, will be required to obtain an
appraisal of the related Mortgaged Property from an independent MAI-designated
appraiser, unless such an appraisal had previously been obtained within the
prior twelve months. The cost of such appraisal will be advanced by the Master
Servicer, subject to its right to be reimbursed therefor as a Servicing Advance.
As a result of any such appraisal, it may be determined that an Appraisal
Reduction Amount exists with respect to the related Required Appraisal Loan. The
"Appraisal Reduction Amount" for any Required Appraisal Loan will, in general,
be an amount (determined as of the Determination Date immediately succeeding the
later of the date on which the relevant appraisal is obtained and the earliest
relevant Required Appraisal Date) equal to the excess, if any, of (a) the sum of
(i) the Stated Principal Balance of such Required Appraisal Loan, (ii) to the
extent not previously advanced by or on behalf of the Master Servicer or the
Trustee, all unpaid interest on the Required Appraisal Loan through the most
recent Due Date prior to such Determination Date at a per annum rate equal to
the sum of the related Net Mortgage Rate and the per annum rate at which the
Trustee Fee is calculated, (iii) all accrued but unpaid Master Servicing Fees
and Special Servicing Fees in respect of such Required Appraisal Loan, (iv) all
related unreimbursed Advances made by or on behalf of the Master Servicer, the
Special Servicer or the Trustee with respect to such Required Appraisal Loan
plus interest accrued thereon at the Reimbursement Rate and (v) all currently
due and unpaid real estate taxes and assessments, insurance premiums and, if
applicable, ground rents in respect of the related Mortgaged Property (net of
any escrow reserves held by the Master Servicer or Special Servicer to cover any
such item), over (b) 90% of an amount equal to (i) the appraised value of the
related Mortgaged Property or REO Property as determined by such appraisal, net
of (ii) the amount of any liens on such property (not otherwise arising out of
the items described in clause (a)(v) above) that are prior to the lien of the
Required Appraisal Loan; provided that, if an appraisal is required to be
obtained as contemplated by the first sentence of this paragraph but has not
been received within the 90-day period contemplated by such sentence, then until
(but just until) such appraisal is obtained the Appraisal Reduction Amount for
the subject Required Appraisal Loan will be deemed to equal 30% of the Stated
Principal Balance of such Required Appraisal Loan (after receipt of such
appraisal, the Appraisal Reduction Amount, if any, will be calculated without
regard to this proviso).
With respect to each Required Appraisal Loan (unless such Mortgage Loan has
become a Corrected Mortgage Loan and has remained current for twelve consecutive
Monthly Payments, and no other Servicing Transfer Event has occurred with
respect thereto during the preceding twelve months, in which case it will cease
to be a Required Appraisal Loan), the Special Servicer is required, within 30
days of each anniversary of such Mortgage Loan having become a Required
Appraisal Loan, to order an update of the prior appraisal (the cost of which
will be advanced by the Master Servicer at the direction of the Special Servicer
and will be reimbursable as a Servicing Advance). Based upon such appraisal, the
Special Servicer is to redetermine and report to the Trustee and the Master
Servicer the Appraisal Reduction Amount, if any, with respect to such Mortgage
Loan.
A "Modified Mortgage Loan" is any Mortgage Loan as to which any Servicing
Transfer Event has occurred and which has been modified by the Special Servicer
in a manner that: (A) affects the amount or timing of any payment of principal
or interest due thereon (other than, or in addition to, bringing current Monthly
Payments with respect to such Mortgage Loan); (B) except as expressly
contemplated by the related Mortgage, results in a release of the lien of the
Mortgage on any material portion of the related Mortgaged Property without a
corresponding principal prepayment in an amount not less than the fair market
value (as is) of the property to be released; or (C) in the good faith and
reasonable judgment of the Special Servicer, otherwise materially impairs the
security for such Mortgage Loan or reduces the likelihood of timely payment of
amounts due thereon.
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REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
Trustee Reports. Based solely on information provided in monthly reports
prepared by the Master Servicer and the Special Servicer and delivered to the
Trustee, the Trustee will be required to prepare and/or forward on each
Distribution Date to the holders of each Class of REMIC Regular Certificates,
the following statements and reports (collectively, the "Distribution Date
Statement") substantially in the forms set forth in Annex C (although such forms
may be subject to change over time) and substantially containing the information
set forth below:
(1) A statement setting forth, among other things: (i) the amount of
distributions, if any, made on such Distribution Date to the holders of
each Class of REMIC Regular Certificates and applied to reduce the
respective Certificate Balances thereof; (ii) the amount of distributions,
if any, made on such Distribution Date to the holders of each Class of
REMIC Regular Certificates allocable to Distributable Certificate Interest
and Prepayment Premiums; (iii) the Available Distribution Amount for such
Distribution Date; (iv) the aggregate amount of P&I Advances made in
respect of the immediately preceding Distribution Date; (v) the aggregate
Stated Principal Balance of the Mortgage Pool outstanding immediately
before and immediately after such Distribution Date; (vi) the number,
aggregate principal balance, weighted average remaining term to maturity
and weighted average Mortgage Rate of the Mortgage Pool as of the end of
the Collection Period for the prior Distribution Date; (vii) as of the
close of business on the last day of the most recently ended calendar
month, the number and aggregate unpaid principal balance of Mortgage Loans
(A) delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent 90
days or more, and (D) as to which foreclosure proceedings have been
commenced; (viii) with respect to any REO Property included in the Trust
Fund as of the end of the Collection Period for such Distribution Date, the
principal balance of the Mortgage Loan as of the date such Mortgage Loan
became delinquent; (ix) the Accrued Certificate Interest and Distributable
Certificate Interest in respect of each Class of REMIC Regular Certificates
for such Distribution Date; (x) the aggregate amount of Distributable
Certificate Interest payable in respect of each Class of REMIC Regular
Certificates on such Distribution Date, including, without limitation, any
Distributable Certificate Interest remaining unpaid from prior Distribution
Dates; (xi) any unpaid Distributable Certificate Interest in respect of
such Class of REMIC Regular Certificates after giving effect to the
distributions made on such Distribution Date; (xii) the Pass-Through Rate
for each Class of REMIC Regular Certificates for such Distribution Date;
(xiii) the Principal Distribution Amount for such Distribution Date,
separately identifying the respective components of such amount; (xiv) the
aggregate of all Realized Losses incurred during the related Collection
Period and, aggregated by type, all Additional Trust Fund Expenses incurred
during the related Collection Period; (xv) the Certificate Balance or
Notional Amount, as the case may be, of each Class of REMIC Regular
Certificates outstanding immediately before and immediately after such
Distribution Date, separately identifying any reduction therein due to the
allocation of Realized Losses and Additional Trust Fund Expenses on such
Distribution Date; (xvi) the aggregate amount of servicing fees paid to the
Master Servicer and the Special Servicer, collectively and separately,
during the Collection Period for the prior Distribution Date; and (xvii) a
brief description of any material waiver, modification or amendment of any
Mortgage Loan entered into by the Master Servicer or Special Servicer
pursuant to the Pooling Agreement during the related Collection Period. In
the case of information furnished pursuant to clauses (i) and (ii) above,
the amounts shall be expressed as a dollar amount in the aggregate for all
Certificates of each applicable Class and per a specified denomination.
(2) A report containing information regarding the Mortgage Loans as of
the close of business on the immediately preceding Determination Date,
which report shall contain certain of the categories of information
regarding the Mortgage Loans set forth in this Prospectus Supplement in the
tables under the caption "Annex A: Certain Characteristics of the Mortgage
Loans" (calculated, where applicable, on the basis of the most recent
relevant information provided by the borrowers to the Master Servicer or
the Special Servicer and by the Master Servicer or the Special Servicer, as
the case may be, to the Trustee) and such information shall be presented in
a loan-by-loan and tabular format substantially similar to the formats
utilized in this Prospectus Supplement on Annex A (provided that no
information will be
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provided as to any repair and replacement or other cash reserve and the
only financial information to be reported on an ongoing basis will be
actual expenses, actual revenues and actual net operating income for the
respective Mortgaged Properties and a debt service coverage ratio
calculated on the basis thereof).
Servicer Reports. The Servicer is required to deliver to the Trustee on
the Business Day prior to each Distribution Date, and the Trustee is to deliver
to each Certificateholder, and, if requested in writing, any potential investor
in the Certificates, on each Distribution Date, the following five reports (the
"Servicer Reports"), all of which will be made available electronically to any
interested party via the Trustee's Website:
(1) A "Delinquent Loan Status Report" setting forth, among other
things, those Mortgage Loans which, as of the close of business on the last
day of the most recently ended calendar month, were delinquent 30-59 days,
delinquent 60-89 days, delinquent 90 days or more, current but specially
serviced, or in foreclosure but not REO Property.
(2) An "Historical Loan Modification Report" setting forth, among
other things, those Mortgage Loans which, as of the close of business on
the immediately preceding Determination Date, have been modified pursuant
to the Pooling Agreement (i) during the Collection Period ending on such
Determination Date and (ii) since the Cut-off Date, showing the original
and the revised terms thereof.
(3) An "Historical Loss Report" setting forth, among other things, as
of the close of business on the immediately preceding Determination Date,
(i) the aggregate amount of Liquidation Proceeds received, and liquidation
expenses incurred, both during the Collection Period ending on such
Determination Date and historically, and (ii) the amount of Realized Losses
occurring during such Collection Period and historically, set forth on a
Mortgage Loan-by-Mortgage Loan basis.
(4) A "REO Status Report" setting forth, among other things, with
respect to each REO Property that was included in the Trust Fund as of the
close of business on the immediately preceding Determination Date, (i) the
acquisition date of such REO Property, (ii) the amount of income collected
with respect to any REO Property (net of related expenses) and other
amounts, if any, received on such REO Property during the Collection Period
ending on such Determination Date and (iii) the value of the REO Property
based on the most recent appraisal or other valuation thereof available to
the Master Servicer as of such Determination Date (including any prepared
internally by the Special Servicer).
(5) A "Special Servicer Loan Status Report" setting forth, among other
things, as of the close of business on the immediately preceding
Determination Date, (i) the aggregate principal balance of all Specially
Serviced Mortgage Loans and (ii) a loan-by-loan listing of all Specially
Serviced Mortgage Loans indicating their status, date and reason for
transfer to the Special Servicer.
None of the Distribution Date Statement or the Servicer Reports will
include any information that the Master Servicer deems to be confidential. The
information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Master Servicer prior to the related
Distribution Date. None of the Master Servicer, the Special Servicer or the
Trustee shall be responsible for the accuracy or completeness of any information
supplied to it by a borrower or other third party that is included in any
reports, statements, materials or information prepared or provided by the Master
Servicer, the Special Servicer or the Trustee, as applicable.
The Master Servicer is also required to deliver to the Trustee within 130
days following the end of each calendar quarter, commencing with the calendar
quarter ending June 30, 1998, with respect to each Mortgaged Property and REO
Property, an "Operating Statement Analysis" in electronic form containing
revenue, expense and net operating income information normalized using the
methodology described in Annex A as of the end of such calendar quarter (but
only to the extent, in the case of a Mortgaged Property, that the related
borrower is required by the Mortgage to deliver, or otherwise agrees to provide,
such information) for such Mortgaged Property or REO Property as of the end of
such calendar quarter. Certificate Owners who have certified to the Master
Servicer as to their beneficial ownership of any Offered Certificate may, to the
extent such owners request them, obtain copies of any of the Operating Statement
Analyses described above. Conveyance of notices and other communications by DTC
to Participants, and by Participants to Certificate Owners, will be governed by
arrangements among them, subject to any statutory or
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regulatory requirements as may be in effect from time to time. The Master
Servicer, the Special Servicer, the Trustee, the Depositor, the REMIC
Administrator, the Mortgage Loan Seller and the Certificate Registrar are
required to recognize as Certificateholders only those persons in whose names
the Certificates are registered on the books and records of the Certificate
Registrar.
The Trustee will make available each month, to any interested party, the
Distribution Date Statement via the Trustee's Website, electronic bulletin board
and its fax-on-demand service. In addition, the Trustee will make available each
month the Servicer Reports on the Trustee's Website. The Trustee's Website will
be located at "www.securitieslink.net/cmbs". The Trustee's electronic bulletin
board may be accessed by calling (301) 815-6620, and its fax-on-demand service
may be accessed by calling (301) 815-6610. In addition, the Trustee will also
make Mortgage Loan information as presented in the CSSA loan setup file and CSSA
loan periodic update file format available each month to any Certificateholder,
any Certificate Owner, the Rating Agencies, the parties hereto or any other
interested party via the Trustee's Website. In addition, pursuant to the Pooling
Agreement, the Trustee will make available, as a convenience for interested
parties (and not in furtherance of the distribution of the Prospectus or the
Prospectus Supplement under the securities laws), the Pooling Agreement, the
Prospectus and the Prospectus Supplement via the Trustee's Website. The Trustee
will make no representations or warranties as to the accuracy or completeness of
such documents and will assume no responsibility therefor.
In connection with providing access to the Trustee's Website or electronic
bulletin board, the Trustee may require registration and the acceptance of a
disclaimer. The Trustee shall not be liable for the dissemination of information
in accordance with the Pooling Agreement.
For a discussion of certain annual information reports to be furnished by
the Trustee to persons who at any time during the prior calendar year were
holders of the Offered Certificates, see "Description of the
Certificates -- Reports to Certificateholders" in the Prospectus.
Other Information. The Pooling Agreement requires that the Trustee make
available at its offices, during normal business hours, upon reasonable advance
written notice, for review by any holder or Certificate Owner of an Offered
Certificate or any person identified to the Trustee by any such holder or
Certificate Owner as a prospective transferee of an Offered Certificate or any
interest therein, originals or copies of, among other things, the following
items: (a) all officer's certificates delivered to the Trustee since the
Delivery Date as described under "Servicing of the Mortgage Loans -- Evidence as
to Compliance" herein, (b) all accountant's reports delivered to the Trustee
since the Delivery Date as described under "Servicing of the Mortgage
Loans -- Evidence as to Compliance" herein, and (c) the Mortgage Note, Mortgage
and other legal documents relating to each Mortgage Loan, including any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Master Servicer or the Special Servicer and delivered to the
Trustee. In addition, the Master Servicer is required to make available, during
normal business hours, upon reasonable advance written notice, for review by any
holder or Certificate Owner of an Offered Certificate or any person identified
to the Master Servicer as a prospective transferee of an Offered Certificate or
any interest therein, originals or copies of any and all documents (in the case
of documents generated by the Special Servicer, to the extent received
therefrom) that constitute the servicing file for each Mortgage Loan, in each
case except to the extent the Master Servicer in its reasonable, good faith
determination believes that any item of information contained in such servicing
file is of a nature that it should be conveyed to all Certificateholders at the
same time, in which case the Master Servicer is required, as soon as reasonably
possible following its receipt of any such item of information, to disclose such
item of information to the Trustee for inclusion by the Trustee along with the
Distribution Date Statement referred to under "-- Reports to Certificateholders;
Certain Available Information -- Trustee Reports" above; provided that, until
the Trustee has either disclosed such information to all Certificateholders
along with the Distribution Date Statement or has properly filed such
information with the Securities and Exchange Commission on behalf of the Trust
under the Securities Exchange Act of 1934, the Master Servicer is entitled to
withhold such item of information from any Certificateholder or Certificate
Owner or prospective transferee of a Certificate or an interest therein; and,
provided, further, that the Master Servicer is not required to make information
contained in any servicing file available to any person to the extent that doing
so is prohibited by applicable law or by any documents related to a Mortgage
Loan.
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The Trustee and, subject to the last sentence of the prior paragraph, the
Master Servicer will each make available, upon reasonable advance written notice
and at the expense of the requesting party, originals or copies of the items
referred to in the prior paragraph that are maintained thereby, to
Certificateholders, Certificate Owners and prospective purchasers of
Certificates and interests therein; provided that the Trustee and Master
Servicer may each require (a) in the case of a Certificate Owner, a written
confirmation executed by the requesting person or entity, in a form reasonably
acceptable to the Trustee or Master Servicer, as applicable, generally to the
effect that such person or entity is a beneficial owner of Offered Certificates
and will keep such information confidential, and (b) in the case of a
prospective purchaser, confirmation executed by the requesting person or entity,
in a form reasonably acceptable to the Trustee or Master Servicer, as
applicable, generally to the effect that such person or entity is a prospective
purchaser of Offered Certificates or an interest therein, is requesting the
information solely for use in evaluating a possible investment in such
Certificates and will otherwise keep such information confidential.
Certificateholders, by the acceptance of their Certificates, will be deemed to
have agreed to keep such information confidential.
VOTING RIGHTS
At all times during the term of the Pooling Agreement, 95.0% of the voting
rights for the Certificates (the "Voting Rights") shall be allocated among the
holders of the respective Classes of Sequential Pay Certificates in proportion
to the Certificate Balances of their Certificates and 5.0% of the Voting Rights
shall be allocated to the holders of the Class X-1 and Class X-2 Certificates in
proportion to their Notional Amounts. Voting Rights allocated to a Class of
Certificateholders shall be allocated among such Certificateholders in
proportion to the percentage interests in such Class evidenced by their
respective Certificates. See "Description of the Certificates -- Voting Rights"
in the Prospectus.
TERMINATION
The obligations created by the Pooling Agreement will terminate following
the earliest of (i) the final payment (or advance in respect thereof) or other
liquidation of the last Mortgage Loan or related REO Property remaining in the
Trust Fund, and (ii) the purchase of all of the Mortgage Loans and REO
Properties remaining in the Trust Fund by the Master Servicer or by any holder
or holders (other than the Depositor or Mortgage Loan Seller) of Certificates
representing a majority interest in the Controlling Class. Written notice of
termination of the Pooling Agreement will be given to each Certificateholder,
and the final distribution with respect to each Certificate will be made only
upon surrender and cancellation of such Certificate at the office of the
Certificate Registrar or other location specified in such notice of termination.
Any such purchase by the Master Servicer or the majority holder(s) of the
Controlling Class of all the Mortgage Loans and REO Properties remaining in the
Trust Fund is required to be made at a price equal to (a) the sum of (i) the
aggregate Purchase Price of all the Mortgage Loans then included in the Trust
Fund (other than any Mortgage Loans as to which the related Mortgaged Properties
have become REO Properties) and (ii) the fair market value of all REO Properties
then included in the Trust Fund, as determined by an appraiser mutually agreed
upon by the Master Servicer and the Trustee, minus (b) (solely in the case of a
purchase by the Master Servicer) the aggregate of all amounts payable or
reimbursable to the Master Servicer under the Pooling Agreement. Such purchase
will effect early retirement of the then outstanding Certificates, but the right
of the Master Servicer or the majority holder(s) of the Controlling Class to
effect such termination is subject to the requirement that the then aggregate
Stated Principal Balance of the Mortgage Pool be less than 1.0% of the Initial
Pool Balance. The purchase price paid by the Master Servicer or the majority
holder(s) of the Controlling Class, exclusive of any portion thereof payable or
reimbursable to any person other than the Certificateholders, will constitute
part of the Available Distribution Amount for the final Distribution Date.
THE TRUSTEE
Norwest Bank Minnesota, National Association ("Norwest Bank") will act as
Trustee pursuant to the Pooling Agreement. Norwest Bank, a direct, wholly-owned
subsidiary of Norwest Corporation, is a national banking association originally
chartered in 1872 and is engaged in a wide range of activities typical of a
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national bank. Norwest Bank's principal office is located at Norwest Center,
Sixth and Marquette, Minneapolis, Minnesota 55479-0113. Certificate transfer
services are conducted at Norwest Bank's offices in Minneapolis. Norwest Bank
otherwise conducts its trustee and securities administration services, including
administration of the Trust Fund, at its offices in Columbia, Maryland. Such
office is located at 11000 Broken Land Parkway, Columbia, Maryland 21044-3562.
In addition, Norwest Bank maintains a trust office in New York City located at 3
New York Plaza, New York, New York 10004. Certificateholders and other
interested parties should direct inquiries to Norwest Bank's New York City
office. The telephone number is (212) 509-7900. The Trustee is at all times to
be, and will be required to resign if it fails to be, (i) a corporation, bank or
banking association, organized and doing business under the laws of the United
States of America or any state thereof, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by federal or state
authority and (ii) an institution whose long-term senior unsecured debt is rated
not less than Aa3 by Moody's, AA by Fitch and A by DCR (or such lower rating as
would not result, as confirmed in writing by each Rating Agency, result in a
qualification, downgrade or withdrawal of any of the then current ratings
assigned by such Rating Agency to the Certificates). As of December 31, 1997,
the Trustee had assets of approximately $88.0 billion. See "Description of the
Pooling Agreements -- The Trustee", "-- Duties of the Trustee", "-- Certain
Matters Regarding the Trustee" and "-- Resignation and Removal of the Trustee"
in the Prospectus.
Pursuant to the Pooling Agreement, the Trustee will be entitled to a
monthly fee (the "Trustee Fee"; and, together with the Master Servicing Fee
(including the Standby Fee), the "Administrative Fees") payable out of general
collections on the Mortgage Loans and any REO Properties.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity the "REMIC Administrator"). See "Certain
Federal Income Tax Consequences -- REMICs -- Reporting and Other Administrative
Matters" and "Description of the Pooling Agreements -- Certain Matters Regarding
the Master Servicer, the Special Servicer, the REMIC Administrator and the
Depositor", "-- Events of Default" and "-- Rights Upon Event of Default" in the
Prospectus.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) the rate, timing
and amount of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will in turn depend on, among other
things, (v) the Pass-Through Rate for such Certificate (which is fixed in the
case of each Class of Offered Certificates other than the Class X Certificates),
(w) the rate and timing of principal payments (including principal prepayments)
and other principal collections on or in respect of the Mortgage Loans and the
extent to which such amounts are to be applied or otherwise result in reduction
of the Certificate Balance or Notional Amount of the Class of Certificates to
which such Certificate belongs, (x) the rate, timing and severity of Realized
Losses on or in respect of the Mortgage Loans and of Additional Trust Fund
Expenses and Appraisal Reductions and the extent to which such losses, expenses
and reductions are allocable to or otherwise result in the nonpayment or
deferred payment of interest on, or reduction of the Certificate Balance or
Notional Amount of, the Class of Certificates to which such Certificate belongs,
(y) the timing and severity of any Net Aggregate Prepayment Interest Shortfalls
and the extent to which such shortfalls are allocable in reduction of the
Distributable Certificate Interest payable on the Class of Certificates to which
such Certificate belongs and (z) the extent to which Prepayment Premiums are
collected and, in turn, distributed on the Class of Certificates to which such
Certificate belongs.
Class X Certificate Pass-Through Rates. The Pass-Through Rates applicable
to the Class X Certificates will be variable and will be calculated based in
part on the weighted average of the Net Mortgage Rates on the Mortgage Loans
from time to time. Accordingly, the yield on such Certificates will be sensitive
to changes in the relative composition of the Mortgage Pool as a result of
scheduled amortization, voluntary prepayments and liquidations of Mortgage Loans
following default. The Pass-Through Rates and yield to maturity of the
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Class X Certificates will be adversely affected if Mortgage Loans with
relatively higher Mortgage Rates amortize and/or prepay faster than Mortgage
Loans with relatively lower Mortgage Rates. In addition, the Pass-Through Rate
for the Class X-1 Certificates will vary with changes in the relative sizes of
the Certificate Balances of the Class A Certificates. The Pass-Through Rate for
the Class X-2 Certificates will vary with changes in the relative sizes of the
Certificate Balances of the respective Classes of Sequential Pay Certificates,
other than the Class A Certificates. Furthermore, the Pass-Through Rates and
yield to maturity of the Class X Certificates will be adversely affected if the
Mortgage Rate (and, accordingly, the Net Mortgage Rate) of any Mortgage Loan is
reduced in connection with a modification agreed to by the Special Servicer or
in connection with a bankruptcy or insolvency of the related borrower. See
"Description of the Certificates -- Pass-Through Rates" and "Description of the
Mortgage Pool" herein and "-- Rate and Timing of Principal Payments" below.
Rate and Timing of Principal Payments. The yield to holders of the Class X
Certificates will be extremely sensitive to, and the yield to holders of any
other Class of Offered Certificates purchased at a discount or premium will be
affected by, the rate and timing of reductions of the Certificate Balances or
Notional Amount, as the case may be, of such Class of Certificates. As described
herein, the Principal Distribution Amount for each Distribution Date will be
distributable entirely in respect of the Class A Certificates until the related
Certificate Balances thereof are reduced to zero. Following retirement of the
Class A Certificates, the Principal Distribution Amount for each Distribution
Date will be distributable entirely in respect of the other Classes of
Sequential Pay Certificates, sequentially in alphabetical order of Class
designation, in each such case until the related Certificate Balance is reduced
to zero. The Notional Amount of the Class X-1 Certificate will equal
approximately 99.99% of the aggregate Certificate Balances of the Class A
Certificates from time to time, and the Notional Amount of the Class X-2
Certificates will equal approximately 99.99% of the aggregate of the Certificate
Balances of all the Classes of Sequential Pay Certificates, other than the Class
A Certificates, outstanding from time to time. Consequently, the rate and timing
of reductions of the Certificate Balance or Notional Amount, as the case may be,
of each Class of Offered Certificates will depend on the rate and timing of
principal payments on or in respect of the Mortgage Loans, which will in turn be
affected by the amortization schedules thereof, the dates on which any Balloon
Payments are due and the rate and timing of principal prepayments and other
unscheduled collections thereon (including for this purpose, collections made in
connection with liquidations of Mortgage Loans due to defaults, casualties or
condemnations affecting the Mortgaged Properties, or purchases of Mortgage Loans
out of the Trust Fund). Prepayments and, assuming the respective stated maturity
dates therefor have not occurred, liquidations of the Mortgage Loans will result
in distributions on the Sequential Pay Certificates of amounts that would
otherwise be distributed over the remaining terms of the Mortgage Loans and will
tend to shorten the weighted average lives of those Certificates. Defaults on
the Mortgage Loans, particularly in the case of Balloon Loans at or near their
stated maturity dates, may result in significant delays in payments of principal
on the Mortgage Loans (and, accordingly, on the Sequential Pay Certificates)
while workouts are negotiated or foreclosures are completed, and such delays
will tend to lengthen the weighted average lives of those Certificates. See
"Servicing of the Mortgage Loans -- Modifications, Waivers, Amendments and
Consents" herein and "Description of the Pooling Agreements -- Realization Upon
Defaulted Mortgage Loans" and "Certain Legal Aspects of Mortgage
Loans -- Foreclosure" in the Prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on or in respect of the Mortgage Loans are
distributed or otherwise result in a reduction of the Certificate Balance or
Notional Amount of such Certificates. An investor should consider, in the case
of any Offered Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of a Class X Certificate or any other Offered Certificate purchased at
a premium, the risk that a faster than anticipated rate of principal payments on
the Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield. In general, the earlier a payment of principal
on or in respect of the Mortgage Loans is distributed or otherwise results in
reduction of the notional amount of a Class X Certificate or the principal
balance of any other Offered Certificate purchased at a discount or premium, the
greater will be the effect on
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an investor's yield to maturity. As a result, 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 any particular period may not be fully offset
by a subsequent like reduction (or increase) in the rate of principal payments.
Investors in the Class X Certificates should fully consider the risk that an
extremely rapid rate of principal payments on the Mortgage Loans could result in
the failure of such investors to fully recoup their initial investments. Because
the rate of principal payments on or in respect of the Mortgage Loans will
depend on future events and a variety of factors (as described more fully
below), no assurance can be given as to such rate or the rate of principal
prepayments in particular. The Depositor is not aware of any relevant publicly
available or authoritative statistics with respect to the historical prepayment
experience of a large group of mortgage loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. As and to the extent
described herein, Realized Losses and Additional Trust Fund Expenses will be
allocated to the respective Classes of Sequential Pay Certificates (which
allocation will, in general, reduce the amount of interest distributable thereto
in the case of Additional Trust Fund Expenses and reduce the Certificate Balance
thereof in the case of Realized Losses) in the following order: first, to each
Class of Sequential Pay Certificates (other than the Class A Certificates), in
reverse alphabetical order of Class designation, until the Certificate Balance
thereof has been reduced to zero; then, to the Class A-1, Class A-2 and Class
A-3 Certificates pro rata in accordance with their respective remaining
Certificate Balances, until the remaining Certificate Balance of each such Class
of Certificates has been reduced to zero. Any such reduction in the Certificate
Balance of a Class of Sequential Pay Certificates will cause a corresponding
reduction of the Notional Amount of the Class X Certificates.
The Net Aggregate Prepayment Interest Shortfall, if any, for each
Distribution Date will be allocated to the respective Classes of REMIC Regular
Certificates (in each case, to reduce the amount of interest otherwise payable
thereon on such Distribution Date) as follows: first, to the respective Classes
of REMIC Regular Certificates (other than the Senior Certificates) sequentially
in reverse alphabetical order of Class designation, in each case up to an amount
equal to the lesser of any remaining unallocated portion of such Net Aggregate
Prepayment Interest Shortfall and any Accrued Certificate Interest in respect of
such Class of Certificates for such Distribution Date; and, thereafter, if and
to the extent that any portion of such Net Aggregate Prepayment Interest
Shortfall remains unallocated, among the respective Classes of Senior
Certificates, up to, and pro rata in accordance with, the respective amounts of
Accrued Certificate Interest for each such Class of Senior Certificates for such
Distribution Date.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on or in respect of the Mortgage Loans may
be affected by a number of factors, including, without limitation, prevailing
interest rates, the terms of the Mortgage Loans (for example, Prepayment
Premiums, Lock-out Periods and amortization terms that require Balloon
Payments), the demographics and relative economic vitality of the areas in which
the Mortgaged Properties are located and the general supply and demand for
retail shopping space, rental apartments, hotel rooms, industrial space, health
care facility beds, senior living units or office space, as the case may be, in
such areas, the quality of management of the Mortgaged Properties, the servicing
of the Mortgage Loans, possible changes in tax laws and other opportunities for
investment. See "Risk Factors -- The Mortgage Loans", "Description of the
Mortgage Pool" and "Servicing of the Mortgage Loans" herein and "The Pooling and
Servicing Agreements" and "Yield and Maturity Considerations -- Yield and
Prepayment Considerations" in the Prospectus.
The rate of prepayment on the Mortgage Loans is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below the Mortgage
Rate at which a Mortgage Loan accrues interest, a borrower may have an increased
incentive to refinance such Mortgage Loan. Conversely, to the extent prevailing
market interest rates exceed the applicable Mortgage Rate for any Mortgage Loan,
such Mortgage Loan may be less likely to prepay.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to
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meet cash flow needs or to make other investments. In addition, some borrowers
may be motivated by federal and state tax laws (which are subject to change) to
sell Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
If a Mortgage Loan is not in a Lock-out Period, any Prepayment Premium in
respect of such Mortgage Loan may not be sufficient economic disincentive to
prevent the related borrower from voluntarily prepaying the loan as part of a
refinancing thereof or a sale of the related Mortgaged Property. See
"Description of the Mortgage Pool -- Certain Terms and Conditions of the
Mortgage Loans" herein.
The Depositor makes no representation or warranty as to the particular
factors that will affect the rate and timing of prepayments and defaults on the
Mortgage Loans, as to the relative importance of such factors, as to the
percentage of the principal balance of the Mortgage Loans that will be prepaid
or as to which a default will have occurred as of any date or as to the overall
rate of prepayment or default on the Mortgage Loans.
WEIGHTED AVERAGE LIVES
The weighted average life of any Offered Certificate (other than a Class X
Certificate) refers to the average amount of time that will elapse from the date
of its issuance until each dollar to be applied in reduction of the principal
balance of such Certificate is distributed to the investor. For purposes of this
Prospectus Supplement, the weighted average life of any such Offered Certificate
is determined by (i) multiplying the amount of each principal distribution
thereon by the number of years from the assumed Settlement Date (as defined
below) to the related Distribution Date, (ii) summing the results and (iii)
dividing the sum by the aggregate amount of the reductions in the principal
balance of such Certificate. Accordingly, the weighted average life of any such
Offered Certificate will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid or otherwise collected or advanced and
the extent to which such payments, collections and/or advances of principal are
in turn applied in reduction of the Certificate Balance of the Class of
Certificates to which such Offered Certificate belongs. As described herein, the
Principal Distribution Amount for each Distribution Date will be distributable
entirely in respect of the Class A Certificates until the Certificate Balances
thereof are reduced to zero, and will thereafter be distributable entirely in
respect of the other Classes of Sequential Pay Certificates, sequentially in
alphabetical order of Class designation, in each such case until the related
Certificate Balance is reduced to zero. As a consequence of the foregoing, the
weighted average lives of the Class A Certificates may be shorter, and the
weighted average lives of the other Classes of Sequential Pay Certificates may
be longer, than would otherwise be the case if the Principal Distribution Amount
for each Distribution Date was being distributed on a pro rata basis among the
respective Classes of Sequential Pay Certificates.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the CPR model (as
described in the Prospectus). As used in each of the following tables, the
column headed "0%" assumes that none of the Mortgage Loans is prepaid before
maturity. The columns headed "4%", "8%", "12%" and "16%" assume that no
prepayments are made on any Mortgage Loan during such Mortgage Loan's Lock-out
Period, if any, or during such Mortgage Loan's yield maintenance period, if any,
and are otherwise made on each of the Mortgage Loans at the indicated CPRs.
There is no assurance, however, that prepayments of the Mortgage Loans (whether
or not in a Lock-out Period or a yield maintenance period) will conform to any
particular CPR, and no representation is made that the Mortgage Loans will
prepay in accordance with the assumptions at any of the CPRs shown or at any
other particular prepayment rate, that all the Mortgage Loans will prepay in
accordance with the assumptions at the same rate or that Mortgage Loans that are
in a Lock-out Period or a yield maintenance period will not prepay as a result
of involuntary liquidations upon default or otherwise. A "yield maintenance
period" is any period during which a Mortgage Loan provides that voluntary
prepayments be accompanied by a Prepayment Premium calculated on the basis of a
yield maintenance formula.
The following tables indicate the percentages of the initial Certificate
Balances of the Class A, Class B, Class C, Class D and Class E Certificates that
would be outstanding after each of the dates shown at various CPRs, and the
corresponding weighted average lives of such Classes of Certificates, under the
following
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assumptions (the "Maturity Assumptions"): (i) the Mortgage Loans have the
characteristics set forth on Annex A and the Initial Pool Balance is
approximately $1,020,600,558 (ii) the Pass-Through Rate and the initial
Certificate Balance or Notional Amount, as the case may be, of each Class of
Offered Certificates are as described herein, (iii) the scheduled Monthly
Payments for each Mortgage Loan that accrues interest on the basis of actual
number of days elapsed during the month of accrual in a 360-day year are the
actual contractual Monthly Payments, (iv) there are no delinquencies or losses
in respect of the Mortgage Loans, there are no modifications, extensions,
waivers or amendments affecting the payment by borrowers of principal or
interest on the Mortgage Loans, there are no Appraisal Reduction Amounts with
respect to the Mortgage Loans and there are no casualties or condemnations
affecting the Mortgaged Properties, (v) scheduled Monthly Payments on the
Mortgage Loans are timely received on the first day of each month, (vi) no
voluntary or involuntary prepayments are received as to any Mortgage Loan during
such Mortgage Loan's Lock-out Period ("LOP"), if any, or yield maintenance
period ("YMP"), if any, and, otherwise, prepayments are made on each of the
Mortgage Loans at the indicated CPRs set forth in the tables (without regard to
any limitations in such Mortgage Loans on partial voluntary principal
prepayments), (vii) neither the Master Servicer nor any majority holder(s) of
the Controlling Class exercises its or exercise their right of optional
termination described herein, (viii) no Mortgage Loan is required to be
repurchased by the Mortgage Loan Seller, (ix) no Prepayment Interest Shortfalls
are incurred and no Prepayment Premiums are collected, (x) there are no
Additional Trust Fund Expenses, (xi) distributions on the Offered Certificates
are made on the 20th day of each month, commencing in April 1998, and (xii) the
Offered Certificates are settled on March 30, 1998 (the "Settlement Date"). To
the extent that the Mortgage Loans have characteristics that differ from those
assumed in preparing the tables set forth below, the Class A-1, Class A-2, Class
A-3, Class B, Class C, Class D and/or Class E Certificates may mature earlier or
later than indicated by the tables. It is highly unlikely that the Mortgage
Loans will prepay in accordance with the above assumptions at any of the
specified CPRs until maturity or that all the Mortgage Loans will so prepay at
the same rate. In addition, variations in the actual prepayment experience and
the balance of the Mortgage Loans that prepay may increase or decrease the
percentages of initial Certificate Balances (and weighted average lives) shown
in the following tables. Such variations may occur even if the average
prepayment experience of the Mortgage Loans were to conform to the assumptions
and be equal to any of the specified CPRs. Investors are urged to conduct their
own analyses of the rates at which the Mortgage Loans may be expected to prepay.
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
--------------------------------------------------
DATE 0% 4% 8% 12% 16%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Delivery Date.....................
March 20, 1999....................
March 20, 2000....................
March 20, 2001....................
March 20, 2002....................
March 20, 2003....................
March 20, 2004....................
March 20, 2005....................
March 20, 2006....................
March 20, 2007....................
March 20, 2008....................
Weighted Average Life (years).....
</TABLE>
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PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
--------------------------------------------------
DATE 0% 4% 8% 12% 16%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Delivery Date.....................
March 20, 1999....................
March 20, 2000....................
March 20, 2001....................
March 20, 2002....................
March 20, 2003....................
March 20, 2004....................
March 20, 2005....................
March 20, 2006....................
March 20, 2007....................
March 20, 2008....................
Weighted Average Life (years).....
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-3 CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
--------------------------------------------------
DATE 0% 4% 8% 12% 16%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Delivery Date.....................
March 20, 1999....................
March 20, 2000....................
March 20, 2001....................
March 20, 2002....................
March 20, 2003....................
March 20, 2004....................
March 20, 2005....................
March 20, 2006....................
March 20, 2007....................
March 20, 2008....................
Weighted Average Life (years).....
</TABLE>
S-74
<PAGE> 75
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
--------------------------------------------------
DATE 0% 4% 8% 12% 16%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Delivery Date.....................
March 20, 1999....................
March 20, 2000....................
March 20, 2001....................
March 20, 2002....................
March 20, 2003....................
March 20, 2004....................
March 20, 2005....................
March 20, 2006....................
March 20, 2007....................
March 20, 2008....................
Weighted Average Life (years).....
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
--------------------------------------------------
DATE 0% 4% 8% 12% 16%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Delivery Date.....................
March 20, 1999....................
March 20, 2000....................
March 20, 2001....................
March 20, 2002....................
March 20, 2003....................
March 20, 2004....................
March 20, 2005....................
March 20, 2006....................
March 20, 2007....................
March 20, 2008....................
Weighted Average Life (years).....
</TABLE>
S-75
<PAGE> 76
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
--------------------------------------------------
DATE 0% 4% 8% 12% 16%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Delivery Date.....................
March 20, 1999....................
March 20, 2000....................
March 20, 2001....................
March 20, 2002....................
March 20, 2003....................
March 20, 2004....................
March 20, 2005....................
March 20, 2006....................
March 20, 2007....................
March 20, 2008....................
Weighted Average Life (years).....
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
--------------------------------------------------
DATE 0% 4% 8% 12% 16%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Delivery Date.....................
March 20, 1999....................
March 20, 2000....................
March 20, 2001....................
March 20, 2002....................
March 20, 2003....................
March 20, 2004....................
March 20, 2005....................
March 20, 2006....................
March 20, 2007....................
March 20, 2008....................
Weighted Average Life (years).....
</TABLE>
S-76
<PAGE> 77
YIELD SENSITIVITY OF THE CLASS X CERTIFICATES
The yield to maturity of the Class X Certificates will be highly sensitive
to the rate and timing of principal payments (including by reason of
prepayments, loan extensions, defaults and liquidations) and losses on or in
respect of the Mortgage Loans. The yield to maturity of the Class X-1
Certificates will be particularly sensitive to the rate and timing of
prepayments, and the yield to maturity of the Class X-2 Certificates will be
particularly sensitive to the rate and timing of losses. Investors in the Class
X Certificates should fully consider the associated risks, including the risk
that an extremely rapid rate of amortization, prepayment or other liquidation of
the Mortgage Loans could result in the failure of such investors to recoup fully
their initial investments.
The following tables indicate the approximate pre-tax yield to maturity on
a corporate bond equivalent ("CBE") basis on the Class X-1 and Class X-2
Certificates for the specified CPRs based on the Maturity Assumptions. In
addition, it was assumed, when specifically indicated in a particular table,
that 50% (or, if so specified, 100%) of any Prepayment Premium calculated as a
declining percentage of the amount prepaid (a "Decl. % Premium") is collected in
connection with each prepayment as to which such a Prepayment Premium is
applicable. It was further assumed that the purchase price of each of the Class
X-1 and Class X-2 Certificates is as specified below, expressed in 32nds as a
percentage of the initial Notional Amount of such Certificates, without accrued
interest.
The yields set forth in the following tables were calculated by determining
the monthly discount rates that, when applied to the assumed streams of cash
flows to be paid on the Class X Certificates, would cause the discounted present
value of such assumed stream of cash flows to equal the assumed purchase price
thereof, and by converting such monthly rates to semi-annual corporate bond
equivalent rates. Such calculation does not take into account shortfalls in
collection of interest due to prepayments (or other liquidations) of the
Mortgage Loans or the interest rates at which investors may be able to reinvest
funds received by them as distributions on the Class X Certificates (and,
accordingly, does not purport to reflect the return on any investment in the
Class X Certificates when such reinvestment rates are considered).
The characteristics of the Mortgage Loans may differ from those assumed in
preparing the tables below. In addition, there can be no assurance that the
Mortgage Loans will prepay in accordance with the above assumptions at any of
the rates shown in the tables or at any other particular rate, that the cash
flows on the Class X Certificates will correspond to the cash flows shown herein
or that the aggregate purchase price of the Class X Certificates will be as
assumed. In addition, it is unlikely that the Mortgage Loans will prepay in
accordance with the above assumptions at any of the specified CPRs until
maturity or that all the Mortgage Loans will so prepay at the same rate. Timing
of changes in the rate of prepayments may significantly affect the actual yield
to maturity to investors, even if the average rate of principal prepayments is
consistent with the expectations of investors. Investors must make their own
decisions as to the appropriate prepayment assumption to be used in deciding
whether to purchase Class X Certificates.
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<PAGE> 78
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X-1 CERTIFICATES
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE ------------------------------------------------------------
PRICE 0% 4% 8% 12% 16%
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
</TABLE>
S-78
<PAGE> 79
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X-2 CERTIFICATES
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE ------------------------------------------------------------
PRICE 0% 4% 8% 12% 16%
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
</TABLE>
S-79
<PAGE> 80
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X-1 CERTIFICATES (50% RECOVERY OF DECL. % PREMIUMS)
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE ------------------------------------------------------------
PRICE 0% 4% 8% 12% 16%
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
</TABLE>
S-80
<PAGE> 81
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X-2 CERTIFICATES (50% RECOVERY OF DECL. % PREMIUMS)
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE ------------------------------------------------------------
PRICE 0% 4% 8% 12% 16%
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
........................
</TABLE>
S-81
<PAGE> 82
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X-1 CERTIFICATES (100% RECOVERY OF DECL. % PREMIUMS)
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE ------------------------------------------------------------
PRICE 0% 4% 8% 12% 16%
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
</TABLE>
S-82
<PAGE> 83
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X-2 CERTIFICATES (100% RECOVERY OF DECL. % PREMIUMS)
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE ------------------------------------------------------------
PRICE 0% 4% 8% 12% 16%
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
</TABLE>
S-83
<PAGE> 84
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Depositor to purchase the Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
For federal income tax purposes, two separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to designated
portions of the Trust Fund, the resulting REMICs being herein referred to as
"REMIC I" and "REMIC II", respectively. The assets of REMIC I will include the
Mortgage Loans, any REO Properties acquired on behalf of the Certificateholders
and amounts with respect thereto contained in the Certificate Account, the
Distribution Account and the REO Accounts (each as defined in the Prospectus).
The assets of REMIC II will consist of the separate, uncertificated "regular
interests" in REMIC I and amounts in the Distribution Account with respect
thereto. For federal income tax purposes, (i) the Class R-I Certificates will be
the sole class of "residual interests" in REMIC I, (ii) the REMIC Regular
Certificates will evidence the "regular interests" in, and generally will be
treated as debt obligations of, REMIC II, and (iii) the Class R-II Certificates
will be the sole class of "residual interests" in REMIC II. Upon issuance of the
Offered Certificates, Cadwalader, Wickersham & Taft, special tax counsel to the
Depositor, will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the Pooling Agreement, for federal income tax
purposes, REMIC I and REMIC II will each qualify as a REMIC under the Code. See
"Certain Federal Income Tax Consequences -- REMICs" in the Prospectus.
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
For federal income tax reporting purposes, it is anticipated that the Class
[ ] Certificates will not, and the Class [ ] Certificates
will, be treated as having been issued with original issue discount. The
prepayment assumption that will be used in determining the rate of accrual of
original issue discount, market discount and premium, if any, for federal income
tax purposes will be based on the assumption that subsequent to the date of any
determination the Mortgage Loans will not prepay (that is, a CPR of 0%).
However, no representation is made that the Mortgage Loans will not prepay or
that, if they do, they will prepay at any particular rate. See "Certain Federal
Income Tax Consequences -- REMICs -- Taxation of Owners of REMIC Regular
Certificates" in the Prospectus.
The Internal Revenue Service (the "IRS") has issued regulations (the "OID
Regulations") under Sections 1271 to 1275 of the Internal Revenue Code of 1986
(the "Code") generally addressing the treatment of debt instruments issued with
original issue discount. Purchasers of the Offered Certificates should be aware
that the OID Regulations and Section 1272(a)(6) of the Code do not adequately
address certain issues relevant to, or are not applicable to, prepayable
securities such as the Offered Certificates. Prospective purchasers of the
Offered Certificates are advised to consult their tax advisors concerning the
tax treatment of such Certificates.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a holder
of a Class X Certificate, the amount of original issue discount allocable to
such period would be zero and such Certificateholders will be permitted to
offset such negative amount only against future positive accruals of original
issue discount (if any) attributable to such Certificate. Although the matter is
not free from doubt, a holder of a Class X-1 or Class X-2 Certificate may be
permitted to deduct a loss to the extent that his or her respective remaining
basis in such Certificate exceeds the maximum amount of future payments to which
such Certificateholder is entitled, assuming no further prepayments of the
Mortgage Loans. Any such loss might be treated as a capital loss.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase price
and the distributions
S-84
<PAGE> 85
remaining to be made on such Certificate at the time of its acquisition by such
Certificateholder. Holders of such Classes of Certificates should consult their
own tax advisors regarding the possibility of making an election to amortize
such premium. See "Certain Federal Income Tax Consequences -- REMICs -- Taxation
of Owners of REMIC Regular Certificates -- Premium" in the Prospectus.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Certificates entitled thereto as
described herein. It is not entirely clear under the Code when the amount of a
Prepayment Premium should be taxed to the holder of a Class of Certificates
entitled to a Prepayment Premium. For federal income tax reporting purposes,
Prepayment Premiums will be treated as income to the holders of a Class of
Certificates entitled to Prepayment Premiums only after the Master Servicer's
actual receipt of a Prepayment Premium as to which such Class of Certificates is
entitled under the terms of the Pooling Agreement. The Internal Revenue Service
may nevertheless seek to require that an assumed amount of Prepayment Premiums
be included in distributions projected to be made on the Certificates and that
taxable income be reported based on the projected constant yield to maturity of
the Certificates, including such projected Prepayment Premiums prior to their
actual receipt. In the event that such projected Prepayment Premiums were not
actually received, presumably the holder of a Certificate would be allowed to
claim a deduction or reduction in gross income at the time such unpaid
Prepayment Premiums had been projected to be received. Moreover, it appears that
Prepayment Premiums are to be treated as ordinary income rather than capital
gain. However, the correct characterization of such income is not entirely clear
and Certificateholders should consult their own tax advisors concerning the
treatment of Prepayment Premiums.
CHARACTERIZATION OF INVESTMENTS IN OFFERED CERTIFICATES
Generally, except to the extent noted below, the Offered Certificates will
be "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code
in the same proportion that the assets of the Trust would be so treated. In
addition, interest (including original issue discount, if any) on the Offered
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such Certificates are treated as "real estate assets" within the
meaning of Section 856(c)(4)(A) of the Code. If 95% or more of the Mortgage
Loans are treated as assets described in Section 856(c)(4)(A) of the Code, the
Offered Certificates will be treated as such assets in their entirety. The
Offered Certificates will generally only be considered assets described in
Section 7701(a)(19)(C) of the Code to the extent that the Mortgage Loans are
secured by residential property, including residences for persons under health
care. As of the Cut-off Date, 48.6%, and 4.0% of the Initial Pool Balance was
Mortgage Loans secured by multifamily properties and nursing homes or congregate
care facilities, respectively. Accordingly, an investment in the Offered
Certificates may not be suitable for some thrift institutions. The Offered
Certificates will be treated as "qualified mortgages" for another REMIC under
Section 860G(a)(3)(C) of the Code and as "permitted assets" for a financial
asset securitization investment trust under Section 860L(c) of the Code. See
"Description of the Mortgage Pool" herein and "Certain Federal Income Tax
Consequences -- REMICs -- Characterization of Investments in REMIC Certificates"
in the Prospectus.
POSSIBLE TAXES ON INCOME FROM FORECLOSURE PROPERTY AND OTHER TAXES
In general, the Special Servicer 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's net after-tax proceeds from
such property. After the Special Servicer reviews the operation of such property
and consults with the REMIC Administrator to determine the Trust's federal
income tax reporting position with respect to income it is anticipated that the
Trust would derive from such property, the Special Servicer could determine that
it would not be commercially feasible to manage and operate such property in a
manner that would avoid the imposition of a tax on "net income from foreclosure
property" (generally, income not derived from renting or selling real property)
within the meaning of the REMIC Provisions (an "REO Tax"). To the extent that
income the Trust receives from an REO Property is subject to a tax on "net
income from foreclosure property," such income would be subject to federal tax
at the highest marginal corporate tax rate (currently 35%). The determination as
to whether income from an REO Property would be subject to an
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<PAGE> 86
REO Tax will depend on the specific facts and circumstances relating to the
management and operation of each REO Property. These considerations will be of
particular relevance with respect to any health care facilities or hotels that
become REO Property. Any REO Tax imposed on the Trust's income from an REO
Property would reduce the amount available for distribution to
Certificateholders. Certificateholders are advised to consult their own tax
advisors regarding the possible imposition of REO Taxes in connection with the
operation of commercial REO Properties by REMICs.
REPORTING AND OTHER ADMINISTRATIVE MATTERS
Reporting of interest income, including any original issue discount, if
any, with respect to REMIC Regular Certificates is required annually, and may be
required more frequently under Treasury regulations. These information reports
generally are required to be sent to individual holders of REMIC Regular
Certificates and the IRS; holders of REMIC Regular Certificates that are
corporations, trusts, securities dealers and certain other non-individuals will
be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance with
the requirements of the applicable regulations. The information must be provided
by the later of 30 days after the end of the quarter for which the information
was requested, or two weeks after the receipt of the request. The REMIC must
also comply with rules requiring a REMIC Regular Certificate issued with
original issue discount to disclose on its face the amount of original issue
discount and the issue date, and requiring such information to be reported to
the IRS. Reporting with respect to the REMIC Residual Certificates, including
income, excess inclusions, investment expenses and relevant information
regarding qualification of the REMIC's assets will be made as required under the
Treasury regulations, generally on a quarterly basis.
As applicable, 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 required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC Administrator may not have, such regulations only
require that information pertaining to the appropriate proportionate method of
accruing market discount be provided.
The "tax matters person" for each REMIC created under the Pooling Agreement
will be the holder of REMIC Residual Certificates evidencing the largest
percentage interest in such REMIC's Class of REMIC Residual Certificates. All
holders of REMIC Residual Certificates will irrevocably designate the REMIC
Administrator as agent for such "tax matters persons" in all respects.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences -- REMICs" in the Prospectus.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, including insurance company general
accounts, that is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 4975 of the Code (each, a "Plan")
should carefully review with its legal advisors whether the purchase or holding
of Offered Certificates could give rise to a transaction that is prohibited or
is not otherwise permitted either under ERISA or Section 4975 of the Code or
whether there exists any statutory or administrative exemption applicable
thereto. Certain fiduciary and prohibited transaction issues arise only if the
assets of the Trust constitute "plan assets" for purposes of Part 4 of Title I
of ERISA and Section 4975 of the Code ("Plan Assets"). Whether the assets of the
Trust will constitute Plan Assets at any time will depend on a number of
factors, including the portion of any Class of Certificates that are held by
"benefit plan investors" (as defined in U.S. Department of Labor Regulation
Section 2510.3-101).
S-86
<PAGE> 87
The U.S. Department of Labor issued to NationsBank Corporation an
individual prohibited transaction exemption, Prohibited Transaction Exemption
("PTE") 93-31 (the "Exemption"), which generally exempts from the application of
the prohibited transaction provisions of Sections 406(a) and (b) and 407(a) of
ERISA, and the excise taxes imposed on such prohibited transactions pursuant to
Sections 4975(a) and (b) of the Code, certain transactions, among others,
relating to the servicing and operation of mortgage pools, such as the Mortgage
Pool, and the purchase, sale and holding of mortgage pass-through certificates,
such as the Senior Certificates, underwritten by an Exemption-Favored Party (as
hereinafter defined), provided that certain conditions set forth in the
Exemptions are satisfied. "Exemption-Favored Party" shall include (a)
NationsBank Corporation, (b) any person directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control with
NationsBank Corporation (such as NationsBanc Montgomery Securities LLC), and (c)
any member of the underwriting syndicate or selling group of which a person
described in (a) or (b) is a manager or co-manager with respect to the Senior
Certificates.
The Exemptions set forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of a Senior Certificate
to be eligible for exemptive relief thereunder. First, the acquisition of such
Senior Certificate by a Plan must be on terms that are at least as favorable to
the Plan as they would be in an arm's-length transaction with an unrelated
party. Second, the rights and interests evidenced by such Senior Certificate
must not be subordinated to the rights and interests evidenced by the other
Certificates. Third, such Senior Certificate at the time of acquisition by the
Plan must be rated in one of the three highest generic rating categories by
Fitch, Moody's, DCR or Standard & Poor's Ratings Services, a Division of the
McGraw-Hill Companies, Inc. ("S&P"). Fourth, the Trustee cannot be an affiliate
of any other member of the "Restricted Group", which (in addition to the
Trustee) consists of any Exemption-Favored Party, the Depositor, the Master
Servicer, the Special Servicer, any sub-servicer, the Mortgage Loan Seller, any
borrower with respect to Mortgage Loans constituting more than 5% of the
aggregate unamortized principal balance of the Mortgage Pool as of the date of
initial issuance of the Certificates and any affiliate of any of the
aforementioned persons. Fifth, the sum of all payments made to and retained by
the Exemption-Favored Parties must represent not more than reasonable
compensation for underwriting the Senior Certificates; the sum of all payments
made to and retained by the Depositor pursuant to the assignment of the Mortgage
Loans to the Trust must represent not more than the fair market value of such
obligations; and the sum of all payments made to and retained by the Master
Servicer, the Special Servicer and any sub-servicer must represent not more than
reasonable compensation for such person's services under the Pooling Agreement
and reimbursement of such person's reasonable expenses in connection therewith.
Sixth, the investing Plan must be an accredited investor as defined in Rule
501(a)(1) of Regulation D of the Commission under the Securities Act.
Because the Senior Certificates are not subordinated to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of their issuance that each
Class of Senior Certificates be rated not lower than "Aaa" by Moody's and "AAA"
by DCR. As of the Delivery Date, the fourth general condition set forth above
will be satisfied with respect to the Senior Certificates. A fiduciary of a Plan
contemplating purchasing a Senior Certificate in the secondary market must make
its own determination that, at the time of such purchase, such Certificate
continues to satisfy the third and fourth general conditions set forth above. A
fiduciary of a Plan contemplating purchasing a Senior Certificate, whether in
the initial issuance of such Certificate or in the secondary market, must make
its own determination that the first and fifth general conditions set forth
above will be satisfied with respect to such Certificate as of the date of such
purchase. A Plan's authorizing fiduciary will be deemed to make a representation
regarding satisfaction of the sixth general condition set forth above in
connection with the purchase of a Senior Certificate.
The Exemptions also require that the Trust meet the following requirements:
(i) the Trust Fund must consist solely of assets of the 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
categories of Fitch, Moody's, S&P or DCR for at least one year prior to the
Plan's acquisition of a Senior Certificate; and (iii) certificates evidencing
interests in such other investment pools must have been purchased by investors
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<PAGE> 88
other than Plans for at least one year prior to any Plan's acquisition of a
Senior Certificate. The Depositor has confirmed to its satisfaction that such
requirements have been satisfied as of the date hereof.
If the general conditions of the Exemptions are satisfied, the Exemptions
may provide an exemption from the restrictions imposed by Sections 406(a) and
407(a) of ERISA, as well as the excise taxes imposed by Sections 4975(a) and (b)
of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code, in
connection with (i) the direct or indirect sale, exchange or transfer of Senior
Certificates in the initial issuance of Certificates between the Depositor or an
Exemption-Favored Party and a Plan when the Depositor, an Exemption-Favored
Party, the Trustee, the Master Servicer, the Special Servicer, a sub-servicer,
the Mortgage Loan Seller or a borrower is a party in interest (within the
meaning of Section 3(14) of ERISA) or a disqualified person (within the meaning
of Section 4975(e)(2) of the Code) (a "Party in Interest") with respect to the
investing Plan, (ii) the direct or indirect acquisition or disposition in the
secondary market of Senior Certificates by a Plan and (iii) the continued
holding of Senior Certificates by a Plan. However, no exemption is provided from
the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the
acquisition or holding of a Senior Certificate on behalf of an Excluded Plan (as
defined in the next sentence) by any person who has discretionary authority or
renders investment advice with respect to the assets of such Excluded Plan. For
purposes hereof, an "Excluded Plan" is a Plan sponsored by any member of the
Restricted Group.
Moreover, if the general conditions of the Exemptions, as well as certain
other specific conditions set forth in the Exemptions, are satisfied, the
Exemptions may also provide an exemption from the restrictions imposed by
Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in
connection with (1) the direct or indirect sale, exchange or transfer of Senior
Certificates in the initial issuance of Certificates between the Depositor or an
Exemption-Favored Party and a Plan when the person who has discretionary
authority or renders investment advice with respect to the investment of Plan
assets in such Certificates is (a) a borrower with respect to 5% or less of the
fair market value of the Mortgage Pool or (b) an affiliate of such a person, (2)
the direct or indirect acquisition or disposition in the secondary market of
Senior Certificates by a Plan and (3) the continued holding of Senior
Certificates by a Plan.
Further, if the general conditions of the Exemptions, as well as certain
other conditions set forth in the Exemptions, are satisfied, the Exemptions may
provide an exemption from the restrictions imposed by Sections 406(a), 406(b)
and 407(a) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of
the Code by reason of Section 4975(c) of the Code, for transactions in
connection with the servicing, management and operation of the Mortgage Pool.
Lastly, if the general conditions of the Exemptions are satisfied, the
Exemptions also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of
the Code, if such restrictions are deemed to otherwise apply merely because a
person is deemed to be a Party in Interest with respect to an investing Plan by
virtue of providing services to the Plan (or by virtue of having certain
specified relationships to such a person) solely as a result of the Plan's
ownership of Senior Certificates.
Before purchasing a Senior Certificate, a fiduciary of a Plan should itself
confirm that (i) the Senior Certificates constitute "certificates" for purposes
of the Exemptions and (ii) the specific and general conditions and the other
requirements set forth in the Exemptions would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemptions, the Plan fiduciary should consider the availability
of any other prohibited transaction class exemptions. See "Certain ERISA
Considerations" in the Prospectus. There can be no assurance that any such class
exemptions will apply with respect to any particular Plan investment in the
Offered Certificates or, even if it were deemed to apply, that any exemption
would apply to all transactions that may occur in connection with such
transaction. A purchaser of a Senior Certificate should be aware, however, that
even if the conditions specified in one or more exemptions are satisfied, the
scope of relief provided by an exemption may not cover all acts which might be
construed as prohibited transactions.
S-88
<PAGE> 89
The characteristics of the Class B, Class C, Class D and Class E
Certificates do not meet the requirements of the Exemptions. Accordingly, the
Certificates of those Classes may not be acquired by a Plan, other than an
insurance company general account, which may be able to rely on Section III of
PTCE 95-60 or Section 401(c) of ERISA, as discussed in "Certain ERISA
Considerations -- Insurance Company General Accounts" in the Prospectus.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
Title I of ERISA or Section 4975 of the Code. However, such a governmental plan
may be subject to a federal, state or local law which is, to a material extent,
similar to the foregoing provisions of ERISA or the Code ("Similar Law"). A
fiduciary of a governmental plan should make its own determination as to the
need for and the availability of any exemptive relief under Similar Law.
Any Plan fiduciary considering whether to purchase an Offered Certificate
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 Code to such investment.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by Plans generally
or by any particular Plan, or that this investment is appropriate for Plans
generally or for any particular Plan.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of SMMEA. As a result, the appropriate characterization of the
Offered Certificates under various legal investment restrictions, and thus the
ability of investors subject to these restrictions to purchase the Offered
Certificates, is subject to significant interpretive uncertainties. No
representation is made as to the proper characterization of any class of Offered
Certificates for legal investment, financial institution regulatory or other
purposes, or as to the ability of particular investors to purchase the Offered
Certificates under applicable legal investment or other restrictions. All
institutions whose investment activities are subject to legal investment laws
and regulations, regulatory capital requirements or review by regulatory
authorities should consult with their own legal advisors in determining whether
and to what extent the Offered Certificates constitute legal investments for
them or are subject to investment, capital or other restrictions. See "Legal
Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Depositor and the Underwriter, the Offered Certificates will be
purchased from the Depositor by the Underwriter upon issuance. The Underwriter
is an affiliate of the Depositor. Proceeds to the Depositor from the sale of the
Offered Certificates, before deducting expenses payable by the Depositor, will
be an amount equal to approximately [ ]% of the initial aggregate
Certificate Balance of the Offered Certificates, plus accrued interest on all
the Offered Certificates, before deducting expenses payable by the Depositor.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriter may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Underwriter. In connection with the purchase and 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 and any dealers that participate with the Underwriter in the
distribution of the Offered Certificates may be deemed to be underwriters and
any profit on the resale of the Offered Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection
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<PAGE> 90
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.
The Depositor also has been advised by the Underwriter that the Underwriter
presently intends to make a market in the Offered Certificates; however, the
Underwriter has no obligation to do so, any market making may be discontinued at
any time and there can be no assurance that an active public market for the
Offered Certificates will develop. See "Risk Factors -- The
Certificates -- Limited Liquidity" herein and "Risk Factors -- Limited Liquidity
of Offered Certificates" in the Prospectus.
The Depositor has agreed to indemnify the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to the Underwriter and the such
controlling person with respect to, certain liabilities, including certain
liabilities under the Securities Act. The Mortgage Loan Seller has agreed to
indemnify the Depositor, its officers and directors, the Underwriter, and each
person, if any, who controls the Depositor or the Underwriter within the meaning
of Section 15 of the Securities Act, with respect to certain liabilities,
including certain liabilities under the Securities Act, relating to certain of
the Mortgage Loans.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and the
Underwriter by Cadwalader, Wickersham & Taft, New York, New York.
RATINGS
It is a condition to their issuance that the Offered Certificates receive
the credit ratings indicated below from Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") and/or Fitch Investors
Service, L.P. ("Fitch"; and, together with Moody's and DCR, the "Rating
Agencies"):
<TABLE>
<CAPTION>
CLASS MOODY'S DCR FITCH
- ----- ------- --- -----
<S> <C> <C> <C>
Class A-1................................................... Aaa AAA NR
Class A-2................................................... Aaa AAA NR
Class A-3................................................... Aaa AAA NR
Class X-1................................................... Aaa AAA NR
Class X-2................................................... Aaa AAA AAA
Class B..................................................... Aa2 AA AA
Class C..................................................... A2 A A
Class D..................................................... Baa2 BBB BBB
Class E..................................................... Baa3 NR NR
</TABLE>
The ratings of the Offered Certificates address the likelihood of the
timely receipt by holders thereof of all payments of interest to which they are
entitled on each Distribution Date and, except in the case of the Class X
Certificates, the ultimate receipt by holders thereof of all payments of
principal to which they are entitled by the Distribution Date in March 2030 (the
"Rated Final Distribution Date"). The ratings take into consideration the credit
quality of the Mortgage Pool, structural and legal aspects associated with the
Certificates, and the extent to which the payment stream from the Mortgage Pool
is adequate to make payments of principal and/or interest, as applicable,
required under the Offered Certificates. The ratings of the Offered Certificates
do not, however, represent any assessments of (i) the likelihood or frequency of
voluntary or involuntary principal prepayments on the Mortgage Loans, (ii) the
degree to which such prepayments might differ from those originally anticipated,
or (iii) whether and to what extent Prepayment Premiums will be collected on the
Mortgage Loans in connection with such prepayments or the corresponding effect
on yield to investors. Also, a security rating does not represent any assessment
of the yield to maturity that investors may experience or the possibility that
the Class X Certificateholders might not fully recover their investment in the
event of rapid prepayments and/or other liquidations of the Mortgage Loans
(including both voluntary and involuntary prepayments). In general, the ratings
thus address credit risk and not prepayment risk. As
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<PAGE> 91
described herein, the amounts payable with respect to the Class X Certificates
consist only of interest (and, to the extent described herein, may consist of a
portion of the Prepayment Premiums actually collected on the Mortgage Loans). If
the entire pool were to prepay in the initial month, with the result that the
Class X Certificateholders receive only a single month's interest and thus
suffer a nearly complete loss of their investment, all amounts "due" to such
Certificateholders will nevertheless have been paid, and such result is
consistent with the ratings received on the Class X Certificates. The Notional
Amounts upon which interest is calculated with respect to the Class X
Certificates are subject to reduction in connection with each reduction in the
Certificate Balance of a Class of Sequential Pay Certificates, whether as a
result of principal payments or the allocation of Realized Losses. The ratings
on the Class X Certificates do not address the timing or magnitude of reduction
of such Notional Amounts, but only the obligation to pay interest timely on such
Notional Amounts as so reduced from time to time. Accordingly, the ratings on
the Class X Certificates should be evaluated independently from similar ratings
on other types of securities.
There is no assurance that any rating assigned to the Offered Certificates
by a Rating Agency will not be lowered, qualified or withdrawn by such Rating
Agency, if, in its judgment, circumstances so warrant. There can be no assurance
as to whether any rating agency not requested to rate the Offered Certificates
will nonetheless issue a rating to any Class thereof and, if so, what such
rating would be. A rating assigned to any Class of Offered Certificates by a
rating agency that has not been requested by the Depositor to do so may be lower
than the ratings assigned thereto by DCR, Fitch and/or Moody's.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. See "Risk
Factors -- Limited Nature of Ratings" in the Prospectus.
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<PAGE> 92
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
30/360 Basis.................... S-30
Accrued Certificate Interest.... S-58
ACMs............................ S-26
Actual/360 Basis................ S-10, S-30
Additional Trust Fund
Expenses...................... S-11, S-62
Administrative Fee Rate......... S-12, S-54, A-1
Administrative Fees............. S-12, S-69
Advances........................ S-46
Annual Debt Service............. A-1
Annuity Factor.................. S-60
Applebee's Mortgage Loans....... S-34
Applebee's Restaurants.......... S-34
Appraisal Reduction Amount...... S-64
Appraisal Value................. A-1
Asset Status Report............. S-42
Assumed Monthly Payment......... S-15, S-59
Available Distribution Amount... S-13, S-55
Balloon......................... A-1
Balloon Loans................... S-10
Balloon Payment................. S-10, S-30
Beds............................ A-3
CBE............................. S-77
Certificate Balance............. S-1, S-11, S-53
Certificate Owner............... S-8, S-52
Certificate Registrar........... S-52
Certificateholders.............. S-11
Certificates.................... S-1, S-51
Class........................... S-1, S-7, S-51
Class A Certificates............ S-1, S-7, S-51
Class X Certificates............ S-1, S-7, S-52
CMBS............................ S-43
Code............................ S-84
Collection Period............... S-54
Commercial Loan................. S-29
Commercial Mortgaged Property... S-29
Controlling Class............... S-17, S-21
Controlling Class
Certificateholder............. S-42
Corrected Mortgage Loan......... S-42
Cross-Collateralized Mortgage
Loans......................... S-9, S-29
Cut-off Date.................... S-3, S-29
Cut-off Date Balance............ S-9, S-29
Cut-off Date Loan-to-Value
Ratio......................... S-5, A-1
Cut-off Date LTV................ A-1
Cut-off Date LTV Ratio.......... A-1
Days Suites Borrower............ S-33
Days Suites Mortgage Loan....... S-33
DCR............................. S-3, S-18, S-90
Decl. % Premium................. S-77
Default Interest................ S-46
Definitive Certificate.......... S-8, S-52
Delinquent Loan Status Report... S-66
Depositor....................... S-3
Delivery Date................... S-1, S-51
Determination Date.............. S-54
Directing Certificateholder..... S-42
Distributable Certificate
Interest...................... S-14, S-58
Distribution Date............... S-3, S-54
Distribution Date Statement..... S-65
DTC............................. S-1, S-8, S-52
Due Date........................ S-10, S-30
ERISA........................... S-18, S-86
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Excluded Plan................... S-88
Exemption Favored Party......... S-87
Exemptions...................... S-18, S-87
Expenses........................ A-2
FIRREA.......................... S-36
Fitch........................... S-3, S-18, S-90
Flagler Park Mortgage Loan...... S-32
Form 8-K........................ S-40
FREE............................ A-1
Fully Amortizing................ A-1
GAAP............................ A-2
Grtr............................ A-1
Historical Loan Modification
Report........................ S-66
Historical Loss Report.......... S-66
Holes........................... A-3
Initial Pool Balance............ S-3, S-8, S-29
Interested Person............... S-49
IRS............................. S-84
La Terraza Mortgage Loan........ S-33
Leasable Square Footage......... A-1
Liquidation Fee................. S-45
Liquidation Fee Rate............ S-45
LNR............................. S-43
Lock-out Period................. S-10, S-31
LOP............................. S-73
Lost Coupon Amount.............. S-60
MAI............................. S-36
Major Tenants................... S-34
Master Servicing Fee............ S-44
Master Servicing Fee Rate....... S-44
Maturity........................ A-1
Maturity Assumptions............ S-73
Maturity Date................... A-1
Maturity Date Balance........... A-1
Maturity Date Loan-to-Value
Ratio......................... A-1
Maturity Date LTV............... A-1
Merger and Assignment........... S-51
Midland......................... S-43
Modified Mortgage Loan.......... S-64
Monthly Payments................ S-10, S-14, S-30
Moody's......................... S-3, S-18, S-90
Mortgage........................ S-9, S-29
Mortgage Loan Schedule.......... S-39
Mortgage Loan Seller............ S-7
Mortgage Loans.................. S-3, S-8, S-29
Mortgage Note................... S-9, S-29
Mortgage Pool................... S-3
Mortgage Rate................... S-9, S-30
Mortgaged Property.............. S-9, S-29
Most Recent DSCR................ A-1
Most Recent End Date............ A-1
Most Recent Expenses............ A-2
Most Recent NOI................. A-2
Most Recent Revenues............ A-2
Multifamily Loan................ S-29
Multifamily Mortgaged
Property...................... S-29
NationsBanc Montgomery.......... S-4
NationsBank Mortgage Loans...... S-51
Net Aggregate Prepayment
Interest Shortfall............ S-58
</TABLE>
S-92
<PAGE> 93
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Net Mortgage Rate............... S-12, S-53
Net Rentable Area(SF)........... A-1
NMCC............................ S-7, S-51
NMCC Mortgage Loans............. S-51
NOI............................. A-2
Nonrecoverable Advances......... S-63
Nonrecoverable P&I Advance...... S-63
Nonrecoverable Servicing
Advance....................... S-47
Norwest Bank.................... S-68
Notional Amount................. S-1, S-11, S-53
Occupancy Percent............... A-2
Occupancy %..................... A-2
Offered Certificates............ S-1, S-7, S-52
OID Regulations................. S-84
Open Period..................... S-10, S-31
Operating Statement Analysis.... S-66
Original Trust Agreement........ S-51
Participants.................... S-52
Party in Interest............... S-88
Pass-Through Rate............... S-1
Permitted Encumbrances.......... S-39
Permitted Investments........... S-45
P&I Advance..................... S-15, S-62
Plan............................ S-18, S-86
Plan Assets..................... S-86
PNC............................. S-43
Pooling Agreement............... S-11, S-51
Prepayment Interest Excess...... S-45
Prepayment Interest Shortfall... S-45
Prepayment Premium.............. S-3, S-10, S-31
Prepayment Premium Period....... S-10, S-31
Principal Distribution Amount... S-14, S-59
Private Certificates............ S-7, S-52
PTE............................. S-87
PV Yield Loss Amount............ S-60
Purchase Price.................. S-38
Rated Final Distribution Date... S-3, S-90
Rating Agencies................. S-3, S-18, S-90
Realized Losses................. S-11, S-62
Record Date..................... S-55
Reimbursement Rate.............. S-15, S-63
Reinvestment Yield.............. S-60
Related Loans................... A-3
Related Proceeds................ S-46
REMIC........................... S-4, S-17, S-84
REMIC Administrator............. S-7, S-69
REMIC I......................... S-4, S-17, S-84
REMIC II........................ S-4, S-17, S-84
REMIC Regular Certificates...... S-1, S-7, S-52
REMIC Residual Certificates..... S-1, S-7, S-52
REO Extension................... S-49
REO Property.................... S-15, S-41
REO Status Report............... S-66
REO Tax......................... S-85
Required Appraisal Date......... S-64
Required Appraisal Loan......... S-64
Research North Mortgage Loan.... S-32
Research South Mortgage Loan.... S-32
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Research Tri-Center Mortgage
Loans......................... S-32
Restricted Group................ S-87
Revenues........................ A-2
Rooms........................... A-3
Senior Certificates............. S-4, S-13, S-55
Sequential Pay Certificates..... S-1, S-7 S-51
Service Reports................. S-66
Servicing Advances.............. S-46
Servicing Standard.............. S-41
Servicing Transfer Event........ S-41
Settlement Date................. S-73
Similar Law..................... S-89
Silver Sands Mortgage Loan...... S-32
SMMEA........................... S-19
S&P............................. S-87
Special Servicer Loan Status
Report........................ S-66
Special Servicing Fee........... S-45
Special Servicing Fee Rate...... S-45
Specially Serviced Mortgage
Loan.......................... S-41
Standby Fee..................... S-45
Stated Principal Balance........ S-54
Subordinate Certificates........ S-4, S-13, S-56
Sub-Servicer.................... S-44
Sub-Servicing Agreement......... S-44
Sub-Servicing Fee Rate.......... A-1
Successor Servicer Retained
Fee........................... S-44
Trailing Date................... A-3
Trailing DSCR................... A-3
Trailing Expenses............... A-3
Trailing NOI.................... A-3
Trailing Revenues............... A-3
Tramway Village Mortgaged
Property...................... S-29
Trust........................... S-3, S-11, S-51
Trust Fund...................... S-3, S-11, S-51
Trustee Fee..................... S-69
Underwriter..................... S-1
Underwriting Debt Service
Coverage Ratio................ A-3
Underwriting DSCR............... A-3
Underwriting NOI................ A-3
Units........................... A-3
University Towers Mortgage
Loan.......................... S-33
UPB............................. A-3
U/W DSCR........................ A-3
U/W Expenses.................... A-4
U/W NOI......................... A-3
U/W Reserves.................... A-4
U/W Reserves Per Unit........... A-4
U/W Revenues.................... A-3
Voting Rights................... S-68
Workout Fee..................... S-45
Workout Fee Rate................ S-45
YM.............................. A-4
YMP............................. S-73
</TABLE>
S-93
<PAGE> 94
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
The schedule and tables appearing in this Annex A set forth certain
information with respect to the Mortgage Loans and Mortgaged Properties. Unless
otherwise indicated, such information is presented as of the Cut-off Date. The
statistics in such schedule and tables were derived, in many cases, from
information and operating statements furnished by or on behalf of the respective
borrowers. Such information and operating statements were generally unaudited
and have not been independently verified by the Depositor or the Underwriter or
any of their respective affiliates or any other person.
For purposes of the Prospectus Supplement, including the schedule and
tables in this Annex A, the indicated terms shall have the following meanings:
1. "Administrative Fee Rate" means the sum of the Master Servicing Fee
Rate (including the per annum rates at which the monthly sub-servicing fee
is payable to the related Sub-Servicer (the "Sub-Servicing Fee Rate") and
the Standby Fee is payable to the Special Servicer), plus the per annum
rate applicable to the calculation of the Trustee Fee.
2. "Annual Debt Service" means, for any Mortgage Loan, twelve times
the amount of the Monthly Payment under such Mortgage Loan as of the
Cut-off Date.
3. "Appraisal Value" means, for any Mortgaged Property, the
appraiser's value as stated in the appraisal available to the Depositor as
of the date specified on the schedule.
4. "Balloon" means Balloon Loan.
5. "Cut-off Date Loan-to-Value Ratio", "Cut-off Date LTV Ratio" or
"Cut-off Date LTV" means, with respect to any Mortgage Loan, the Cut-off
Date Balance of such Mortgage Loan divided by the Appraisal Value of the
related Mortgaged Property. "Maturity Date Loan-to-Value Ratio" or
"Maturity Date LTV" means, with respect to any Mortgage Loan, the Maturity
Date Balance, divided by the Appraisal Value of the related Mortgaged
Property.
6. "FREE" means, with respect to any Mortgage Loan, that such Mortgage
Loan may be voluntarily prepaid without a Prepayment Premium.
7. "Fully Amortizing" means fully amortizing Mortgage Loan.
8. "Grtr" means "the greater of".
9. "Leasable Square Footage" or "Net Rentable Area (SF)" means, in the
case of a Mortgaged Property operated as a retail center, franchise
restaurant, office complex or industrial facility, the square footage of
the net leasable area.
10. "Maturity" or "Maturity Date" means, with respect to any Mortgage
Loan, the date specified in the related Mortgage Note as its stated
maturity date.
11. "Maturity Date Balance" means, with respect to any Mortgage Loan,
the balance due at maturity assuming no prepayments, defaults or
extensions.
12. "Most Recent DSCR" means, with respect to any Mortgage Loan, (a)
the Most Recent NOI for the related Mortgaged Property, divided by (b) the
Annual Debt Service for such Mortgage Loan.
13. "Most Recent End Date" means, with respect to each Mortgage Loan,
the date indicated on Annex A as the "Most Recent End Date" with respect to
such Mortgage Loan, which date is generally the end date with respect to
the period covered by the latest available annual operating statement
provided by the related borrower.
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<PAGE> 95
14. "Most Recent NOI" means, with respect to any Mortgaged Property,
the NOI derived therefrom that was available for debt service, calculated
as Most Recent Revenues less Most Recent Expenses. See also "NOI" below.
(i) "Most Recent Revenues" are the Revenues received (or annualized
or estimated in certain cases) in respect of a Mortgaged Property for
the 12-month period ended as of the Most Recent End Date, based upon the
latest available annual operating statement and other information
furnished by the borrower for its most recently ended fiscal year.
(ii) "Most Recent Expenses" are the Expenses incurred (or
annualized or estimated in certain cases) for a Mortgaged Property for
the 12-month period ended as of the Most Recent End Date, based upon the
latest available annual operating statement and other information
furnished by the borrower for its most recently ended fiscal year.
15. "NOI" means with respect to any Mortgaged Property, the total cash
flow available for annual debt service on the related Mortgage Loan,
generally calculated as the excess of Revenues over Expenses.
(i) "Revenues" generally consist of certain revenues received in
respect of a Mortgaged Property, including, for example, (A) for the
Multifamily Mortgaged Properties, rental and other revenues; (B) for the
Commercial Mortgaged Properties (other than the health care related and
hotel Mortgaged Properties), base rent (less mark-to-market adjustments
in some cases), percentage rent, expense reimbursements and other
revenues; (C) for the health care Mortgaged Properties, resident
charges, Medicaid and Medicare payments, and other revenues; (D) for the
hotel and franchise restaurant Mortgaged Properties, guest room rates
(hotels only), food and beverage charges, telephone charges and other
revenues.
(ii) "Expenses" generally consist of all expenses incurred for a
Mortgaged Property, including for example, salaries and wages, the costs
or fees of utilities, repairs and maintenance, marketing, insurance,
management, landscaping, security (if provided at the Mortgaged
Property) and the amount of real estate taxes, general and
administrative expenses, ground lease payments, and other costs but
without any deductions for debt service, depreciation and amortization
or capital expenditures therefor. In the case of hotel and franchise
restaurant Mortgaged Properties, Expenses include, for example, expenses
relating to guest rooms (hotels only), food and beverage costs,
telephone bills, and rental and other expenses, and such operating
expenses as general and administrative, marketing and franchise fees.
Examples of expenses in the case of health care Mortgaged Properties
include routine and ancillary contractual expenses, nursing expenses,
dietary expenses, laundry/housekeeping expenses, activities/social
service expenses, equipment rental expenses and other expenses.
In certain cases, Trailing NOI, Most Recent NOI and/or U/W NOI have been
adjusted by removing certain non-recurring expenses and revenue or by certain
other normalizations. Such NOI does not necessarily reflect accrual of certain
costs such as capital expenditures and leasing commissions and does not reflect
non-cash items such as depreciation or amortization. In some cases, capital
expenditures and non-recurring items may have been treated by a borrower as an
expense but were deducted from Trailing Expenses, Most Recent Expenses or U/W
Expenses to reflect normalized Trailing NOI, Most Recent NOI or U/W NOI, as the
case may be. The Depositor has not made any attempt to verify the accuracy of
any information provided by each borrower or to reflect changes in that may have
occurred since the date of the information provided by each borrower for the
related Mortgaged Property. Such NOI was not necessarily determined in
accordance with generally accepted accounting principles ("GAAP"). Such NOI is
not a substitute for net income determined in accordance with GAAP as a measure
of the results of a Mortgaged Property's operations or a substitute for cash
flows from operating activities determined in accordance with GAAP as a measure
of liquidity. Moreover, in certain cases such NOI may reflect partial-year
annualizations.
16. "Occupancy %" or "Occupancy Percent" means the percentage of
Leasable Square Footage or Total Units/Rooms/Pads, as the case may be, of
the Mortgaged Property that was occupied as of a specified date, as
specified by the borrower or as derived from the Mortgaged Property's rent
rolls, which
A-2
<PAGE> 96
generally are calculated by physical presence or, alternatively, collected
rents as a percentage of potential rental revenues.
17. "Related Loans" means two or more Mortgage Loans with respect to
which the related Mortgaged Properties are either owned by the same entity
or owned by two or more entities controlled by the same key principals.
18. "Units" "Rooms", "Beds" and "Holes" respectively, mean: (i) in the
case of a Mortgaged Property operated as multifamily housing, the number of
apartments, regardless of the size of or number of rooms in such apartment
(referred to in the schedule as "Units"); (ii) in the case of a Mortgaged
Property operated as a hotel, the number of rooms (referred to in the
schedule as "Rooms"); (iii) in the case of a Mortgaged Property operated as
a health care facility, the number of beds (referred to in the schedule as
"Beds"); and (iv) in the case of the Mortgaged Property operated as a golf
course, the number of golf holes (referred to in the schedule as "Holes").
19. "Trailing Date" means, with respect to any Mortgage Loan, the date
indicated on Annex A as the "Trailing Date" with respect to such Mortgage
Loan.
20. "Trailing DSCR" means, with respect to any Mortgage Loan, (a) the
Trailing NOI for the related Mortgaged Property, divided by (b) the Annual
Debt Service for such Mortgage Loan.
21. "Trailing NOI" means, with respect to any Mortgaged Property, the
NOI derived therefrom that was available for debt service, calculated as
Trailing Revenues less Trailing Expenses. See also "NOI" above.
(i) "Trailing Revenues" are the Revenues received (or annualized or
estimated in certain cases) in respect of a Mortgaged Property for the
12-month period ended on the Trailing Date, based upon operating
statements and other information furnished by the related borrower.
(ii) "Trailing Expenses" are the Expenses incurred (or annualized
or estimated in certain cases) for a Mortgaged Property for the 12-month
period ended on the Trailing Date, based upon operating statements and
other information furnished by the related borrower.
22. "UPB" means, with respect to any Mortgage Loan, its unpaid
principal balance.
23. "U/W DSCR", "Underwriting DSCR" or "Underwriting Debt Service
Coverage Ratio" means, with respect to any Mortgage Loan, (a) the U/W NOI
for the related Mortgaged Property divided by (b) the Annual Debt Service
for such Mortgage Loan.
24. "U/W NOI" or "Underwriting NOI" means, with respect of any
Mortgaged Property, the NOI derived therefrom that was available for debt
service, calculated as U/W Revenues less U/W Expenses. See also "NOI"
above.
(i) "U/W Revenues" are the anticipated Revenues in respect of a
Mortgaged Property, generally determined by means of an estimate made at
the origination of such Mortgage Loan. U/W Revenues have generally been
calculated (a) assuming that the occupancy rate for the Mortgaged
Property was consistent with the Mortgaged Property's current or
historical rate, or the relevant market rate, if such rate was less than
the occupancy rate reflected in the most recent rent roll or operating
statements, as the case may be, furnished by the related borrower, and
(b) in the case of retail, office and industrial Mortgaged Properties,
assuming a level of reimbursements from tenants consistent with the
terms of the related leases or historical trends at the Mortgaged
Property, and in certain cases, assuming that a specified percentage of
rent will become defaulted or otherwise uncollectible. In addition, in
the case of retail, office and industrial Mortgaged Properties, upward
adjustments may have been made with respect to such revenues to account
for all or a portion of the rents provided for under any new leases
scheduled to take effect later in the year. Also, in the case of certain
Mortgaged Properties that are operated as franchise restaurant, nursing
home or hotel properties and are subject to an operating lease with a
single operator, U/W Revenues were
A-3
<PAGE> 97
calculated based on revenues received by the operator rather than rental
payments received by the related borrower under the operating lease.
(ii) "U/W Expenses" are the anticipated Expenses in respect of a
Mortgaged Property, generally determined by means of an estimate made at
the origination of such Mortgage Loan. U/W Expenses were generally
assumed to be equal to historical annual expenses reflected in the
operating statements and other information furnished by the borrower,
except that such expenses were generally modified by (a) if there was no
management fee or a below market management fee, assuming that a
management fee was payable with respect to the Mortgaged Property in an
amount approximately equal to a percentage of assumed gross revenues for
the year, (b) adjusting certain historical expense items upwards or
downwards to amounts that reflect industry norms for the particular type
of property and/or taking into consideration material changes in the
operating position of the related Mortgaged Property (such as newly
signed leases and market data) and (c) adjusting for non-recurring items
(such as capital expenditures) and tenant improvement and leasing
commissions, if applicable (in the case of certain retail, office and
industrial Mortgaged Properties, adjustments may have been made to
account for tenant improvements and leasing commissions at costs
consistent with historical trends or prevailing market conditions and,
in other cases, operating expenses did not include such costs).
Actual conditions at the Mortgaged Properties will differ, and may differ
substantially, from the assumed conditions used in calculating U/W NOI. In
particular, the assumptions regarding tenant vacancies, tenant improvements and
leasing commissions, future rental rates, future expenses and other conditions
if and to the extent used in calculating U/W NOI for a Mortgaged Property, may
differ substantially from actual conditions with respect to such Mortgaged
Property. There can be no assurance that the actual costs of reletting and
capital improvements will not exceed those estimated or assumed in connection
with the origination or purchase of the Mortgage Loans.
In some cases, U/W NOI describes the cash flow available before
deductions for capital expenditures such as tenant improvements, leasing
commissions and structural reserves. U/W NOI has been calculated without
including U/W Reserves or any other reserves among Underwriting Expenses.
Had such reserves been so included, U/W NOI would have been lower. Even in
those cases where such "reserves" were so included, no cash may have been
actually escrowed. No representation is made as to the future net cash flow
of the properties, nor is U/W NOI set forth herein intended to represent
such future net cash flow.
25. "U/W Reserves" means, with respect to any Mortgaged Property, the
aggregate amount of on-going reserves (generally for capital improvements
and replacements) assumed to be maintained with respect to such Mortgaged
Property. In each case, actual reserves, if any, may be less than the
amount of U/W Reserves.
26. "U/W Reserves Per Unit" means, with respect to any Mortgaged
Property, (a) the related U/W Reserves, divided by (b) the number of Units,
Leasable Square Feet, Rooms, Beds or Holes, as applicable.
27. "YM" means, with respect to any Mortgage Loan, a yield maintenance
premium.
A-4
<PAGE> 98
<TABLE>
<CAPTION>
LOAN
NUMBER PROPERTY NAME PROPERTY ADDRESS COUNTY
- ------ ------------- ---------------- ------
<C> <S> <C> <C>
50165 La Terraza Apartments 10806-10986 Poblado Rd & 17402-17466 San Diego
Matinal Rd.
50530 University Towers 111 Friendly Drive Wake
50230 Playa Pacifica Apartments 415 Herondo St. Los Angeles
50362 Trinity Towers 888 O'Farrell Street San Francisco
50368 Le Club Apartments 18802 Northwest 57th Ave. Dade
50204 La Palma Apartments 220 West Bell Road Maricopa
50005 Somerset Pointe Apartments 5141 Indian River Drive Clark
50453 Buckingham Station Apts. 1611 South Galena Street Arapahoe
50446 TownPark Crossing Apartments 725 Towne Green Blvd Cobb
50363 Montgomery Park Apartments 4053 & 4057 Montgomery Blvd. NE Bernalillo
50299 Brandywood Park Apartments 5851 Anderson Ave. SE Bernalillo
50305 Briarwood Park Apts. 5021 San Mateo Lane NE Bernalillo
SUBTOTAL -- CROSSED LOANS
50333 Arch View Apartments 4150 Arch Drive Los Angeles
50417 Riverwood Apartments 805 Kuenzli Street Washoe
50048 Hidden Brooks Apartments 463 Wooster Ave. Santa Clara
50555 Loch Raven Apartments 1500-1714 Waverly Way Baltimore
50020 Idlewild Apartments 5723 Cedars East Ct. Mecklenburg
50054 Vista Springs Apartments 21550 Box Springs Rd. Riverside
50056 Crystal Lakes Apartments 2545 NW 207th St. Dade
50606 The Landings at Bivens Arm Apartments 3801 SW 13th Street Alachua
50264 Gables at Mountain Park 2 Jefferson Parkway Clackamas
50494 Biscayne Apartments 5401 Old National Highway Fulton
50338 Bluebonnet Place 9989 Burbank Dr. Baton Rouge
50420 Maison Bocage Apartments 7827 N. Jefferson Circle East Baton Rouge
50546 Heatherton Estates Apartments 6203 Kingsfont Place St. Louis
50416 Sierra Village Apartments 5350 & 5416 Jackson St. Sacramento
50452 Alder Ridge Apartments 4005 Cowell Blvd Yolo
50451 Sutter Ridge Apartments 5800 Woodside Drive Placer
50337 Cimarron Place 637 Broadway Commons Dallas
50465 Harborscape Apartments 5152 Heil Avenue Orange
50334 Gardens at Lakewood Apts. 5551 Auburn Road Duval
50223 Oak Park @ Briar Creek 1425 Eastcrest Dr. Mecklenburg
50432 Lacey Corporate Park Apts. 5001 College Street SE Thurston
50222 Oak Park at Nations Ford 110 Hilary Circle Mecklenburg
50325 Oaks at Timuquana 6017 Roosevelt Blvd. Duval
50304 Markey Meadows Townhomes 414 Markey Terrace Cass
50219 Brighton Vista Apartments 222 North Buena Vista St. Los Angeles
50049 American House-Lakeside 15731 Nineteen Mile Road Macomb
50067 Tramway Village Apartments 557 Tramway Blvd. Bernalillo
50342 Silver Manor Apartments 7301 Florence Ave. Los Angeles
50365 Sandpiper Village Apartments 1820 Pennebaker Way San Joaquin
50373 March West Commons Apartments 4444 Feather River Drive San Joaquin
50120 250 Main Street Apartments 232-308 Main Street Hartford
50209 Mondrian Apartments 1200 N. Street, NW District of Columbia
50597 La Aloma Apartments 3040 Aloma Avenue Orange
50335 The Terraces II at Metairie 2600 Houma Blvd. Jefferson
50220 Cedar Trace Apartments 3201 Knight Street Caddo
50468 Colony Apartments 1750-1768 First Street Ventura
50431 Ezzard Charles Apartments 871 Ezzard Charles Drive Hamilton
50408 Placentia Meadows 140 W. Orangethorpe Ave. Orange
50587 Summerfield Apts. 410-480 Ellesmore Drive Solano
50326 Willow Court Apts. 6901 Delridge Way King
50197 Crescent Woods Apartments 301 Hicksville Road Nassau
50057 American House-Bloomfield 3741 South Adams Rd. Oakland
50006 Dekalb Apartments 3572-3578 Dekalb Ave. Bronx
50340 The Spires of Sherwood Apartments 11888 Old Hammond Highway East Baton Rouge
50087 Parkside Apartments 680 North 500 West Utah
50093 Cedar Ave and Hampden Place Apts. 2254 Cedar Ave. and 2269 Hampden Place Bronx
9, 11-17 Gifford Avenue, 546 Bergen
50242 Hudson Realty Apartments Ave., Hudson
150-154 Belmont Ave.
50250 Bartlett Heights Apartments 6130 Bartlett View Lane Shelby
50392 12th Street Apartments 48, 60, 76, 80 12th Street Fulton
<CAPTION>
LOAN ZIP
NUMBER CITY STATE CODE
- ------ ---- ----- ----
<C> <C> <C> <C>
50165 San Diego CA 92127
50530 Raleigh NC 27607
50230 Hermosa Beach CA 90254
50362 San Francisco CA 94109
50368 Miami Lakes FL 33015
50204 Phoenix AZ 85022
50005 Las Vegas NV 89103
50453 Denver CO 80231
50446 Kennesaw GA 30144
50363 Albuquerque NM 87109
50299 Albuquerque NM 87108
50305 Albuquerque NM 87109
50333 Studio City CA 91604
50417 Reno NV 89502
50048 San Jose CA 95116
50555 Baltimore MD 21239
50020 Charlotte NC 28212
50054 Moreno Valley CA 92557
50056 Miami FL 33169
50606 Gainesville FL 32608
50264 Lake Oswego OR 97035
50494 College Park GA 30349
50338 Baton Rouge LA 70810
50420 Baton Rouge LA 70809
50546 Unincorporated St. Louis MO 63033
50416 North Highlands CA 95660
50452 Davis CA 95616
50451 Rocklin CA 95677
50337 Garland TX 75043
50465 Huntington Beach CA 92649
50334 Jacksonville FL 32207
50223 Charlotte NC 28205
50432 Lacey WA 98509
50222 Charlotte NC 28217
50325 Jacksonville FL 32244
50304 Belton MO 64012
50219 Burbank CA 91505
50049 Clinton Township MI 48038
50067 Albuquerque NM 87123
50342 Downey CA 90240
50365 Manteca CA 95336
50373 Stockton CA 95219
50120 Hartford CT 06106
50209 Washington DC 20005
50597 Winter Park FL 32792
50335 Metairie LA 70001
50220 Shreveport LA 71105
50468 Simi Valley CA 93065
50431 Cincinnati OH 45203
50408 Placentia CA 92870
50587 Dixon CA 95833
50326 Seattle WA 98106
50197 Bethpage NY 11714
50057 Rochester Hills MI 48309
50006 Bronx NY 10467
50340 Baton Rouge LA 70816
50087 Provo UT 84601
50093 Bronx NY 10468
50242 Jersey City NJ 07304
50250 Bartlett TN 38134
50392 Atlanta GA 30309
</TABLE>
<PAGE> 99
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF MATURITY ADMINI- SUB- NET
PROPERTY ORIGINAL DATE DATE LOAN MORTGAGE STRATIVE SERVICING MORTGAGE NOTE
TYPE BALANCE BALANCE BALANCE TYPE RATE FEE RATE FEE RATE RATE DATE
---- ------- ------- ------- ---- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily $28,000,000 $27,916,467 $24,774,052 Balloon 7.515% 0.094% 0.050% 7.421% 10/09/97
Multifamily $26,500,000 $26,500,000 $23,023,599 Balloon 6.770% 0.144% 0.100% 6.626% 02/11/98
Multifamily $18,800,000 $18,739,697 $17,365,976 Balloon 7.150% 0.144% 0.100% 7.006% 10/29/97
Multifamily $18,750,000 $18,714,507 $17,221,277 Balloon 6.815% 0.119% 0.075% 6.696% 12/29/97
Multifamily $18,200,000 $18,145,866 $17,356,713 Balloon 7.530% 0.094% 0.050% 7.436% 10/15/97
Multifamily $17,880,000 $17,806,279 $15,892,549 Balloon 7.700% 0.144% 0.100% 7.556% 08/18/97
Multifamily $17,167,000 $17,030,538 $15,448,687 Balloon 8.240% 0.169% 0.125% 8.071% 01/07/97
Multifamily $17,000,000 $16,969,439 $14,897,169 Balloon 7.135% 0.169% 0.125% 6.966% 12/01/97
Multifamily $13,700,000 $13,663,260 $10,973,978 Balloon 6.965% 0.144% 0.100% 6.821% 12/15/97
Multifamily $ 7,700,000 $ 7,672,939 $ 6,244,695 Balloon 7.360% 0.144% 0.100% 7.216% 11/07/97
Multifamily $ 3,880,000 $ 3,871,078 $ 3,420,833 Balloon 7.360% 0.144% 0.100% 7.216% 11/07/97
Multifamily $ 1,675,000 $ 1,671,148 $ 1,476,777 Balloon 7.360% 0.144% 0.100% 7.216% 11/07/97
$13,255,000 $13,215,165 $11,142,305 7.360% 0.144% 0.100% 7.216%
Multifamily $ 9,840,000 $ 9,816,032 $ 8,611,309 Balloon 7.070% 0.119% 0.075% 6.951% 11/06/97
Multifamily $ 9,300,000 $ 9,283,362 $ 8,155,918 Balloon 7.165% 0.169% 0.125% 6.996% 12/05/97
Multifamily $ 8,355,000 $ 8,314,023 $ 7,562,732 Balloon 8.470% 0.169% 0.125% 8.301% 05/21/97
Multifamily $ 8,225,000 $ 8,212,059 $ 6,668,637 Balloon 7.370% 0.144% 0.100% 7.226% 01/30/98
Multifamily $ 7,393,850 $ 7,338,803 $ 6,729,669 Balloon 8.740% 0.169% 0.125% 8.571% 12/30/96
Multifamily $ 6,783,000 $ 6,753,469 $ 6,130,446 Balloon 8.385% 0.169% 0.125% 8.216% 06/02/97
Multifamily $ 6,750,000 $ 6,717,102 $ 6,113,351 Balloon 8.495% 0.194% 0.150% 8.301% 05/28/97
Multifamily $ 6,710,200 $ 6,702,025 $ 5,844,940 Balloon 6.910% 0.144% 0.100% 6.766% 01/13/98
Multifamily $ 6,650,000 $ 6,630,062 $ 6,339,162 Balloon 7.490% 0.144% 0.100% 7.346% 10/07/97
Multifamily $ 6,400,000 $ 6,400,000 $ 5,880,525 Balloon 6.790% 0.144% 0.100% 6.646% 02/05/98
Multifamily $ 5,920,000 $ 5,902,444 $ 5,241,827 Balloon 7.545% 0.119% 0.075% 7.426% 10/29/97
Multifamily $ 5,850,000 $ 5,839,609 $ 5,136,254 Balloon 7.210% 0.134% 0.090% 7.076% 12/12/97
Multifamily $ 5,700,000 $ 5,693,147 $ 4,984,509 Balloon 7.060% 0.104% 0.060% 6.956% 01/02/98
Multifamily $ 5,300,000 $ 5,287,468 $ 4,656,194 Balloon 7.220% 0.169% 0.125% 7.051% 11/12/97
Multifamily $ 5,265,000 $ 5,255,090 $ 4,579,467 Balloon 6.850% 0.104% 0.060% 6.746% 12/29/97
Multifamily $ 5,265,000 $ 5,255,090 $ 4,579,467 Balloon 6.850% 0.104% 0.060% 6.746% 12/29/97
Multifamily $ 5,240,000 $ 5,224,245 $ 4,631,806 Balloon 7.476% 0.119% 0.075% 7.357% 10/28/97
Multifamily $ 4,900,000 $ 4,891,269 $ 4,299,961 Balloon 7.190% 0.169% 0.125% 7.021% 12/03/97
Multifamily $ 4,800,000 $ 4,785,766 $ 4,250,129 Balloon 7.545% 0.119% 0.075% 7.426% 10/28/97
Multifamily $ 4,700,000 $ 4,686,076 $ 4,162,098 Balloon 7.550% 0.144% 0.100% 7.406% 10/01/97
Multifamily $ 4,600,000 $ 4,594,529 $ 4,035,560 Balloon 7.185% 0.144% 0.100% 7.041% 01/06/98
Multifamily $ 4,600,000 $ 4,586,372 $ 4,073,543 Balloon 7.550% 0.144% 0.100% 7.406% 10/01/97
Multifamily $ 4,600,000 $ 4,583,231 $ 4,056,295 Balloon 7.365% 0.169% 0.125% 7.196% 09/29/97
Multifamily $ 4,600,000 $ 4,581,978 $ 3,179,179 Balloon 7.290% 0.144% 0.100% 7.146% 12/22/97
Multifamily $ 4,500,000 $ 4,487,141 $ 4,002,543 Balloon 7.730% 0.144% 0.100% 7.586% 10/10/97
Multifamily $ 4,500,000 $ 4,464,022 $ 3,834,312 Balloon 9.110% 0.169% 0.125% 8.941% 04/17/97
Multifamily $ 4,400,000 $ 4,346,280 $ 3,693,318 Balloon 8.595% 0.169% 0.125% 8.426% 01/24/97
Multifamily $ 4,340,000 $ 4,330,168 $ 3,833,611 Balloon 7.435% 0.169% 0.125% 7.266% 11/03/97
Multifamily $ 4,300,000 $ 4,292,239 $ 3,765,678 Balloon 7.110% 0.119% 0.075% 6.991% 12/04/97
Multifamily $ 4,200,000 $ 4,192,763 $ 3,705,337 Balloon 7.400% 0.144% 0.100% 7.256% 12/02/97
Multifamily $ 4,200,000 $ 4,187,779 $ 4,010,064 Balloon 7.640% 0.169% 0.125% 7.471% 10/02/97
Multifamily $ 4,150,000 $ 4,136,192 $ 3,697,141 Balloon 7.780% 0.144% 0.100% 7.636% 09/05/97
Multifamily $ 4,100,000 $ 4,092,528 $ 3,584,950 Balloon 7.050% 0.144% 0.100% 6.906% 12/31/97
Multifamily $ 3,920,000 $ 3,910,799 $ 3,447,083 Balloon 7.257% 0.119% 0.075% 7.138% 11/13/97
Multifamily $ 3,920,000 $ 3,907,557 $ 3,509,785 Balloon 7.990% 0.144% 0.100% 7.846% 09/17/97
Multifamily $ 3,850,000 $ 3,842,904 $ 3,360,213 Balloon 6.980% 0.144% 0.100% 6.836% 12/12/97
Multifamily $ 3,400,000 $ 3,392,040 $ 2,990,809 Balloon 7.270% 0.119% 0.075% 7.151% 11/13/97
Multifamily $ 3,400,000 $ 3,388,556 $ 2,779,550 Balloon 7.630% 0.169% 0.125% 7.461% 11/03/97
Multifamily $ 3,300,000 $ 3,294,063 $ 2,891,431 Balloon 7.130% 0.144% 0.100% 6.986% 12/22/97
Multifamily $ 3,300,000 $ 3,289,806 $ 2,907,063 Balloon 7.340% 0.144% 0.100% 7.196% 10/23/97
Multifamily $ 3,250,000 $ 3,239,638 $ 2,908,524 Balloon 7.970% 0.169% 0.125% 7.801% 09/29/97
Multifamily $ 3,256,000 $ 3,232,370 $ 2,776,491 Balloon 9.160% 0.169% 0.125% 8.991% 05/07/97
Multifamily $ 3,110,000 $ 3,084,599 $ 2,954,630 Balloon 9.040% 0.194% 0.150% 8.846% 09/09/96
Multifamily $ 3,040,000 $ 3,032,610 $ 2,661,096 Balloon 7.080% 0.119% 0.075% 6.961% 11/20/97
Multifamily $ 2,975,000 $ 2,961,972 $ 2,660,691 Balloon 7.950% 0.169% 0.125% 7.781% 07/10/97
Multifamily $ 2,952,000 $ 2,939,065 $ 2,666,490 Balloon 8.360% 0.194% 0.150% 8.166% 06/26/97
Multifamily $ 2,900,000 $ 2,890,743 $ 2,594,991 Balloon 7.965% 0.169% 0.125% 7.796% 09/15/97
Multifamily $ 2,864,000 $ 2,852,433 $ 1,959,697 Balloon 7.010% 0.144% 0.100% 6.866% 12/31/97
Multifamily $ 2,850,000 $ 2,843,589 $ 2,519,666 Balloon 7.470% 0.144% 0.100% 7.326% 11/20/97
<CAPTION>
FIRST INTEREST
PAYMENT ACCRUAL
DATE METHOD
---- ------
<S> <C> <C>
12/01/97 ACT/360
04/01/98 ACT/360
12/01/97 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
10/01/97 ACT/360
03/01/97 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
07/01/97 ACT/360
03/01/98 ACT/360
02/01/97 ACT/360
08/01/97 ACT/360
07/01/97 ACT/360
03/01/98 ACT/360
12/01/97 ACT/360
04/01/98 ACT/360
12/01/97 ACT/360
02/01/98 ACT/360
03/01/98 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
03/01/98 ACT/360
12/01/97 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
06/01/97 ACT/360
03/01/97 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
11/01/97 ACT/360
07/01/97 ACT/360
11/01/96 ACT/360
01/01/98 ACT/360
09/01/97 ACT/360
08/01/97 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
</TABLE>
<PAGE> 100
<TABLE>
<CAPTION>
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO CROSS- LOCKOUT
MONTHLY MATURITY TERM SEASONING MATURITY MATURITY COLLATERALIZED RELATED EXPIRATION
PAYMENT (MONTHS) (MONTHS) (MONTHS) (MONTHS) DATE LOANS LOANS DATE
------- -------- -------- -------- -------- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$196,067.74 120 360 4 116 11/01/07 No No 10/31/01
$172,230.95 120 360 0 120 03/01/08 No No 02/28/02
$126,976.47 84 360 4 80 11/01/04 No No 10/31/00
$122,423.38 84 360 2 82 01/01/05 No No 12/31/00
$127,631.12 60 360 4 56 11/01/02 No No 10/31/99
$127,477.28 120 360 6 114 09/01/07 No No 08/31/01
$128,849.27 120 360 13 107 02/01/07 No No 03/01/00
$114,646.91 120 360 2 118 01/01/08 No Yes(A) 12/31/01
$ 96,523.08 120 300 2 118 01/01/08 No No 12/31/01
$ 56,202.98 120 300 3 117 12/01/07 Yes(1) Yes(B) 11/30/01
$ 26,758.54 120 360 3 117 12/01/07 Yes(1) Yes(B) 11/30/01
$ 11,551.69 120 360 3 117 12/01/07 Yes(1) Yes(B) 11/30/01
$ 94,513.21
$ 65,929.01 120 360 3 117 12/01/07 No No 11/30/01
$ 62,907.11 120 360 2 118 01/01/08 No Yes(A) 12/31/01
$ 64,065.17 120 360 9 111 06/01/07 No No 05/31/01
$ 60,088.23 120 300 1 119 02/01/08 No No 01/31/02
$ 58,114.65 120 360 14 106 01/01/07 No No 02/01/00
$ 51,603.59 120 360 8 112 07/01/07 No Yes(C) 06/30/01
$ 51,877.74 120 360 9 111 06/01/07 No No 05/31/01
$ 44,238.28 120 360 1 119 02/01/08 No Yes(D) 01/31/02
$ 46,452.24 60 360 4 56 11/01/02 No No 10/31/99
$ 41,680.59 84 360 0 84 03/01/05 No Yes(E) 02/28/01
$ 41,576.07 120 360 4 116 11/01/07 No Yes(F) 10/31/01
$ 39,748.72 120 360 2 118 01/01/08 No No 12/31/00
$ 38,152.21 120 360 1 119 02/01/08 No No 01/31/02
$ 36,047.56 120 360 3 117 12/01/07 No No 11/30/01
$ 34,499.40 120 360 2 118 01/01/08 No Yes(G) 12/31/01
$ 34,499.40 120 360 2 118 01/01/08 No Yes(G) 12/31/01
$ 36,552.76 120 360 4 116 11/01/07 No Yes(F) 10/31/01
$ 33,227.46 120 360 2 118 01/01/08 No Yes(C) 12/31/01
$ 33,710.33 120 360 4 116 11/01/07 No Yes(F) 10/31/01
$ 33,024.15 120 360 4 116 11/01/07 No Yes(E) 10/31/01
$ 31,177.56 120 360 1 119 02/01/08 No No 01/31/02
$ 32,321.51 120 360 4 116 11/01/07 No Yes(E) 10/31/01
$ 31,739.71 120 360 5 115 10/01/07 No No 09/30/01
$ 36,468.86 120 240 2 118 01/01/08 No No 12/31/01
$ 32,176.38 120 360 4 116 11/01/07 No No 10/31/01
$ 38,103.38 120 300 10 110 05/01/07 No Yes(H) 04/30/01
$ 35,712.12 120 300 13 107 02/01/07 No No 01/31/00
$ 30,152.98 120 360 3 117 12/01/07 No No 11/30/01
$ 28,926.37 120 360 2 118 01/01/08 No Yes(I) 12/31/01
$ 29,079.95 120 360 2 118 01/01/08 No Yes(I) 12/31/01
$ 29,770.69 60 360 4 56 11/01/02 No No 10/31/99
$ 29,817.19 120 360 5 115 10/01/07 No No 09/30/01
$ 27,415.22 120 360 2 118 01/01/08 No No 12/31/01
$ 26,759.93 120 360 3 117 12/01/07 No Yes(F) 11/30/01
$ 28,736.25 120 360 5 115 10/01/07 No Yes(J) 09/30/01
$ 25,562.45 120 360 2 118 01/01/08 No No 12/31/01
$ 23,240.13 120 360 3 117 12/01/07 No Yes(F) 11/30/01
$ 25,413.91 120 300 3 117 12/01/07 No No 11/30/01
$ 22,243.85 120 360 2 118 01/01/08 No No 12/31/01
$ 22,713.61 120 360 4 116 11/01/07 No No 10/31/01
$ 23,779.41 120 360 5 115 10/01/07 No No 09/30/01
$ 27,681.86 120 300 9 111 06/01/07 No Yes(H) 05/31/01
$ 25,113.33 84 360 17 67 10/01/03 No Yes(K) 11/01/98
$ 20,388.79 120 360 3 117 12/01/07 No Yes(F) 11/30/01
$ 21,725.89 120 360 7 113 08/01/07 No No 07/31/01
$ 22,406.08 120 360 8 112 07/01/07 No Yes(K) 06/30/01
$ 21,208.46 120 360 5 115 10/01/07 No Yes(L) 09/30/01
$ 22,221.76 120 240 2 118 01/01/08 No No 12/31/01
$ 19,869.10 120 360 3 117 12/01/07 No No 11/30/01
<CAPTION>
PREPAYMENT PENALTY DESCRIPTION (MONTHS)
---------------------------------------
<S> <C>
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(24)/3%(12)2%/(12)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(37)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(5)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(37)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(5)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(24)/GRTR1%PPMTorYM(30)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(36)/GRTR1%PPMTorYM(78)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(24)/GRTR1%PPMTorYM(30)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(25)/GRTR1%PPMTorYM(36)/2%(12)/1%(5)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
</TABLE>
<PAGE> 101
<TABLE>
<CAPTION>
TOTAL SF/
CUT-OFF YEAR UNITS/ UNIT/ NET
LOAN APPRAISAL APPRAISAL DATE LTV BUILT/ ROOM ROOM/ RENTABLE
NUMBER PROPERTY NAME VALUE DATE RATIO RENOVATED BED BED AREA(SF)
- ------ ------------- ----- ---- ----- --------- --- --- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
50165 La Terraza Apartments $37,900,000 08/31/97 73.7% 1989/1997 402 Units 393,724
50530 University Towers $34,500,000 11/26/97 76.8% 1989 936 Beds 213,767
50230 Playa Pacifica Apartments $26,140,000 06/12/97 71.7% 1972 285 Units 169,996
50362 Trinity Towers $25,000,000 08/05/97 74.9% 1986/1990 262 Units 180,748
50368 Le Club Apartments $22,900,000 10/01/97 79.2% 1995 440 Units 435,584
50204 La Palma Apartments $22,350,000 05/21/97 79.7% 1984 548 Units 459,420
50005 Somerset Pointe Apartments $20,764,957 07/10/97 82.0% 1983 452 Units 379,712
50453 Buckingham Station Apts $21,200,000 09/11/97 80.0% 1988 404 Units 345,280
50446 TownPark Crossing Apartments $19,000,000 11/20/97 71.9% 1996 300 Units 290,680
50363 Montgomery Park Apartments $ 9,625,000 08/26/97 79.7% 1972 260 Units 225,231
50299 Brandywood Park Apartments $ 5,000,000 08/26/97 77.4% 1988 168 Units 68,840
50305 Briarwood Park Apts. $ 2,200,000 08/26/97 76.0% 1987 72 Units 28,512
SUBTOTAL -- CROSSED LOANS $16,825,000 78.5% 500 Units 322,583
50333 Arch View Apartments $12,300,000 07/24/97 79.8% 1991 126 Units 108,664
50417 Riverwood Apartments $12,010,000 09/10/97 77.3% 1980 338 Units 236,486
50048 Hidden Brooks Apartments $11,850,000 03/12/97 70.2% 1974 201 Units 121,070
50555 Loch Raven Apartments $10,760,000 09/24/97 76.3% 1943/1997 515 Units 381,695
50020 Idlewild Apartments $10,500,000 11/23/96 69.9% 1968 362 Units 323,679
50054 Vista Springs Apartments $ 8,850,000 11/04/96 76.3% 1989 212 Units 171,120
50056 Crystal Lakes Apartments $12,200,000 03/20/97 55.1% 1974 465 Units 335,597
50606 The Landings at Bivens Arm Apartments $ 8,900,000 11/06/97 75.3% 1996 92 Units 117,212
50264 Gables at Mountain Park $ 8,540,000 08/20/97 77.6% 1991 129 Units 125,061
50494 Biscayne Apartments $ 9,250,000 10/29/97 69.2% 1973/1996 370 Units 354,804
50338 Bluebonnet Place $ 7,400,000 09/22/97 79.8% 1983 184 Units 188,976
50420 Maison Bocage Apartments $ 7,400,000 10/15/97 78.9% 1993 104 Units 149,312
50546 Heatherton Estates Apartments $ 7,500,000 10/20/97 75.9% 1972 256 Units 258,910
50416 Sierra Village Apartments $ 6,700,000 10/21/97 78.9% 1986 185 Units 137,740
50452 Alder Ridge Apartments $ 7,900,000 10/13/97 66.5% 1988 120 Units 102,560
50451 Sutter Ridge Apartments $ 8,100,000 10/13/97 64.9% 1987 152 Units 129,680
50337 Cimarron Place $ 6,550,000 09/16/97 79.8% 1983 232 Units 189,702
50465 Harborscape Apartments $ 6,500,000 09/22/97 75.3% 1970/1996 88 Units 74,800
50334 Gardens at Lakewood Apts $ 6,000,000 10/02/97 79.8% 1940/1989 198 Units 143,164
50223 Oak Park @ Briar Creek $ 6,315,000 07/14/97 74.2% 1962/1996 276 Units 228,600
50432 Lacey Corporate Park Apts. $ 8,225,000 08/19/97 55.9% 1991 241 Units 162,704
50222 Oak Park at Nations Ford $ 6,148,000 07/11/97 74.6% 1973/1996 202 Units 193,864
50325 Oaks at Timuquana $ 5,850,000 08/27/97 78.3% 1972 228 Units 209,884
50304 Markey Meadows Townhomes $ 5,700,000 07/24/97 80.4% 1997 108 Units 157,500
50219 Brighton Vista Apartments $ 5,700,000 09/30/97 78.7% 1988 66 Units 50,214
50049 American House -- Lakeside $ 6,030,000 01/10/97 74.0% 1987 81 Units 55,850
50067 Tramway Village Apartments $ 5,630,000 10/30/96 77.2% 1972 180 Units 164,998
50342 Silver Manor Apartments $ 5,400,000 08/12/97 80.2% 1973 96 Units 83,001
50365 Sandpiper Village Apartments $ 7,560,000 09/15/97 56.8% 1985/1996 192 Units 185,856
50373 March West Commons Apartments $ 5,250,000 09/16/97 79.9% 1986 128 Units 117,920
50120 250 Main Street Apartments $ 6,440,000 07/11/97 65.0% 1988 214 Units 196,689
50209 Mondrian Apartments $ 5,225,000 07/01/97 79.2% 1980 128 Units 107,048
50597 La Aloma Apartments $ 5,150,000 10/28/97 79.5% 1967 184 Units 176,800
50335 The Terraces II At Metairie $ 4,900,000 09/22/97 79.8% 1962/1997 159 Units 105,600
50220 Cedar Trace Apartments $ 5,000,000 07/20/97 78.2% 1973/1995 200 Units 149,272
50468 Colony Apartments $ 5,900,000 10/08/97 65.1% 1986 88 Units 70,787
50431 Ezzard Charles Apartments $ 4,350,000 09/23/97 78.0% 1962 286 Units 193,200
50408 Placentia Meadows $ 4,250,000 09/12/97 79.7% 1963 80 Units 67,308
50587 Summerfield Apts $ 4,200,000 11/18/97 78.4% 1980 104 Units 85,840
50326 Willow Court Apts. $ 3,975,000 09/08/97 82.8% 1987/1997 105 Units 78,870
50197 Crescent Woods Apartments $ 4,350,000 06/24/97 74.5% 1967/1981 74 Units 53,810
50057 American House -- Bloomfield $ 4,920,000 01/10/97 65.7% 1925/1985 89 Units 63,914
50006 Dekalb Apartments $ 4,045,000 04/17/96 76.3% 1926/1985 140 Units 133,200
50340 The Spires of Sherwood Apartments $ 3,800,000 09/22/97 79.8% 1973 124 Units 127,264
50087 Parkside Apartments $ 3,700,000 05/06/97 80.1% 1996 63 Units 34,902
50093 Cedar Ave and Hampden Place Apts $ 3,640,000 11/11/96 80.7% 1926 112 Units 109,540
50242 Hudson Realty Apartments $ 4,770,000 07/17/97 60.6% 1919/1960 205 Units 139,700
50250 Bartlett Heights Apartments $ 7,350,000 07/14/97 38.8% 1974/1996 173 Units 185,250
50392 12th Street Apartments $ 4,100,000 09/24/97 69.4% 1959 113 Units 56,050
<CAPTION>
LOAN
BALANCE PER
LOAN SF/UNIT OCCUPANCY
NUMBER ROOM/BED PERCENT
- ------ -------- -------
<C> <C> <C>
50165 $69,443.95 98%
50530 $28,311.97 100%
50230 $65,753.32 98%
50362 $71,429.42 97%
50368 $41,240.60 94%
50204 $32,493.21 95%
50005 $37,678.18 97%
50453 $42,003.56 99%
50446 $45,544.20 94%
50363 $29,511.30 92%
50299 $23,042.13 92%
50305 $23,210.39 100%
$26,430.33 %
50333 $77,905.01 98%
50417 $27,465.57 89%
50048 $41,363.30 100%
50555 $15,945.75 93%
50020 $20,272.94 88%
50054 $31,855.99 100%
50056 $14,445.38 85%
50606 $72,848.10 96%
50264 $51,395.83 99%
50494 $17,297.30 97%
50338 $32,078.50 95%
50420 $56,150.09 98%
50546 $22,238.86 93%
50416 $28,580.91 98%
50452 $43,792.42 97%
50451 $34,572.96 97%
50337 $22,518.30 95%
50465 $55,582.60 99%
50334 $24,170.53 95%
50223 $16,978.54 98%
50432 $19,064.43 93%
50222 $22,704.81 96%
50325 $20,101.89 84%
50304 $42,425.72 95%
50219 $67,986.98 97%
50049 $55,111.38 100%
50067 $24,146.00 93%
50342 $45,105.92 99%
50365 $22,355.41 97%
50373 $32,755.96 99%
50120 $19,569.06 97%
50209 $32,314.00 99%
50597 $22,242.00 95%
50335 $24,596.22 96%
50220 $19,537.79 96%
50468 $43,669.36 99%
50431 $11,860.28 95%
50408 $42,356.96 99%
50587 $31,673.68 97%
50326 $31,331.48 100%
50197 $43,778.89 100%
50057 $36,318.77 86%
50006 $22,032.85 91%
50340 $24,456.53 90%
50087 $47,015.43 97%
50093 $26,241.65 98%
50242 $14,101.19 99%
50250 $16,488.05 95%
50392 $25,164.50 98%
</TABLE>
<PAGE> 102
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
OCCUPANCY U/W U/W
AS OF U/W U/W U/W NOI U/W RESERVES TRAILING TRAILING TRAILING
DATE REVENUES EXPENSES NOI DSCR RESERVES PER UNIT REVENUES EXPENSES NOI
---- -------- -------- --- ---- -------- -------- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/97 $4,425,312 $1,531,515 $2,893,797.00 1.23 $ 60,300.00 $150.00 $4,379,745 $1,607,290 $2,772,454.92
10/31/97 $6,118,997 $3,265,150 $2,853,847.00 1.38 $140,400.00 $150.00 $6,411,247 $3,224,029 $3,187,218.00
10/26/97 $2,919,282 $ 906,140 $2,013,142.00 1.32 $ 61,845.00 $217.00 $3,068,279 $ 957,607 $2,110,671.92
12/05/97 $3,507,193 $1,352,969 $2,154,224.00 1.47 $ 70,740.00 $270.00 $3,699,981 $1,443,822 $2,256,159.17
10/14/97 $3,711,299 $1,610,185 $2,101,114.00 1.37 $ 88,000.00 $200.00 $3,684,920 $1,434,156 $2,250,763.67
09/22/97 $3,491,520 $1,450,138 $2,041,382.00 1.33 $132,068.00 $241.00 $3,517,963 $1,553,206 $1,964,756.25
09/20/97 $3,126,378 $1,013,866 $2,112,512.00 1.37 $ 99,440.00 $220.00 $3,075,691 $ 936,661 $2,139,030.00
11/20/97 $2,946,344 $1,032,236 $1,914,108.00 1.39 $ 97,364.00 $241.00 $2,939,978 $ 991,707 $1,948,270.75
11/25/97 $2,488,586 $ 935,763 $1,552,823.00 1.34 $ 52,500.00 $175.00 $2,529,311 $ 944,766 $1,584,545.00
10/20/97 $1,809,585 $ 873,610 $ 935,975.00 1.39 $ 69,420.00 $267.00 $1,777,446 $ 777,324 $1,000,121.25
10/20/97 $ 739,523 $ 294,031 $ 445,492.00 1.39 $ 29,400.00 $175.00 $ 771,816 $ 304,896 $ 466,919.75
10/20/97 $ 333,342 $ 139,902 $ 193,440.00 1.40 $ 14,400.00 $200.00 $ 358,832 $ 98,070 $ 260,762.50
10/31/97 $1,443,355 $ 418,383 $1,024,972.00 1.30 $ 32,508.00 $258.00 $1,430,282 $ 431,005 $ 999,277.25
10/03/97 $2,044,208 $ 970,655 $1,073,553.00 1.42 $ 84,500.00 $250.00 $2,112,955 $ 871,465 $1,241,489.50
09/01/97 $1,567,879 $ 566,298 $1,001,581.00 1.30 $ 40,200.00 $200.00 $1,618,781 $ 588,682 $1,030,098.75
12/01/97 $2,716,375 $1,685,678 $1,030,697.00 1.43 $128,750.00 $250.00 $2,759,978 $1,545,900 $1,214,078.00
09/30/97 $1,813,015 $ 823,641 $ 989,374.00 1.42 $117,650.00 $325.00 $1,763,408 $ 872,986 $ 890,421.75
09/21/97 $1,475,828 $ 658,211 $ 817,617.00 1.32 $ 43,460.00 $205.00 $1,444,708 $ 581,909 $ 862,798.50
11/01/97 $2,216,343 $1,085,803 $1,130,540.00 1.82 $127,410.00 $274.00 $2,047,979 $ 919,010 $1,128,969.50
10/31/97 $1,102,932 $ 383,273 $ 719,659.00 1.36 $ 29,532.00 $321.00 $1,128,906 $ 366,552 $ 762,354.00
10/01/97 $1,227,300 $ 498,715 $ 728,585.00 1.31 $ 21,801.00 $169.00 $1,224,078 $ 434,116 $ 789,962.00
10/29/97 $2,221,127 $1,405,743 $ 815,384.00 1.63 $ 92,500.00 $250.00 $2,194,269 $1,429,975 $ 764,294.17
10/08/97 $1,160,051 $ 473,114 $ 686,937.00 1.38 $ 54,464.00 $296.00 $1,119,282 $ 433,133 $ 686,149.00
12/04/97 $1,054,622 $ 434,834 $ 619,788.00 1.30 $ 18,200.00 $175.00 $1,061,117 $ 457,595 $ 603,522.00
11/03/97 $1,436,594 $ 795,011 $ 641,583.00 1.40 $ 68,096.00 $266.00 $1,437,832 $ 827,926 $ 609,906.00
10/31/97 $1,050,081 $ 452,927 $ 597,154.00 1.38 $ 49,293.00 $266.45 $1,038,476 $ 476,477 $ 561,999.50
10/15/97 $ 987,205 $ 326,872 $ 660,333.00 1.60 $ 24,600.00 $205.00 $1,071,951 $ 333,809 $ 738,142.00
10/15/97 $1,119,203 $ 449,210 $ 669,993.00 1.62 $ 39,216.00 $258.00 $1,119,726 $ 429,700 $ 690,025.25
11/21/97 $1,311,116 $ 702,163 $ 608,953.00 1.39 $ 56,608.00 $244.00 $1,257,881 $ 677,314 $ 580,567.50
10/30/97 $ 808,917 $ 251,274 $ 557,643.00 1.40 $ 15,400.00 $175.00 $ 773,429 $ 256,900 $ 516,529.00
09/01/97 $1,039,351 $ 486,351 $ 553,000.00 1.37 $ 46,728.00 $236.00 $1,034,099 $ 451,646 $ 582,453.25
09/24/97 $1,434,666 $ 837,150 $ 597,516.00 1.51 $ 81,972.00 $297.00 $1,370,224 $ 875,933 $ 494,291.25
10/14/97 $1,200,165 $ 650,800 $ 549,365.00 1.47 $ 48,200.00 $200.00 $1,245,602 $ 510,408 $ 735,194.50
09/25/97 $1,172,061 $ 591,389 $ 580,672.00 1.50 $ 83,022.00 $411.00 $1,160,767 $ 614,787 $ 545,980.25
10/31/97 $1,239,890 $ 695,655 $ 544,235.00 1.43 $ 56,088.00 $246.00 $1,285,054 $ 648,323 $ 636,731.25
12/01/97 $ 847,480 $ 285,057 $ 562,423.00 1.29 $ 21,600.00 $200.00 $ 825,342 $ 257,576 $ 567,765.33
10/01/97 $ 677,302 $ 204,069 $ 473,233.00 1.23 $ 11,550.00 $175.00 $ 684,294 $ 227,230 $ 457,063.75
09/30/97 $1,458,587 $ 821,526 $ 637,061.00 1.39 $ 19,080.00 $235.56 $1,522,075 $ 840,943 $ 681,131.75
09/01/97 $1,161,660 $ 604,650 $ 557,010.00 1.30 $ 34,020.00 $189.00 $1,180,925 $ 632,403 $ 548,521.75
09/01/97 $ 783,522 $ 279,408 $ 504,114.00 1.39 $ 25,440.00 $265.00 $ 790,130 $ 248,840 $ 541,289.75
10/25/97 $1,197,421 $ 504,839 $ 692,582.00 2.00 $ 64,320.00 $335.00 $1,165,582 $ 462,992 $ 702,590.25
10/25/97 $ 866,020 $ 391,229 $ 474,791.00 1.36 $ 38,400.00 $300.00 $ 794,024 $ 346,454 $ 447,570.00
09/19/97 $1,664,419 $1,149,358 $ 515,061.00 1.44 $ 42,800.00 $200.00 $1,714,811 $1,045,261 $ 669,549.50
09/03/97 $1,083,156 $ 593,063 $ 490,093.00 1.37 $ 26,496.00 $207.00 $1,067,993 $ 550,188 $ 517,805.50
12/23/97 $1,100,374 $ 624,900 $ 475,474.00 1.45 $ 50,600.00 $275.00 $1,097,797 $ 607,118 $ 490,679.17
10/02/97 $ 829,262 $ 377,273 $ 451,989.00 1.41 $ 47,064.00 $296.00 $ 801,433 $ 352,809 $ 448,624.00
10/25/97 $1,018,193 $ 510,122 $ 508,071.00 1.47 $ 46,000.00 $230.00 $1,038,147 $ 549,200 $ 488,947.00
10/31/97 $ 808,453 $ 337,668 $ 470,785.00 1.53 $ 22,264.00 $253.00 $ 804,222 $ 246,030 $ 558,192.50
11/20/97 $ 994,871 $ 588,558 $ 406,313.00 1.46 $ 52,624.00 $184.00 $1,095,130 $ 557,297 $ 537,833.25
09/30/97 $ 660,533 $ 252,895 $ 407,638.00 1.34 $ 20,000.00 $250.00 $ 664,089 $ 256,267 $ 407,821.75
10/08/97 $ 639,931 $ 276,331 $ 363,600.00 1.36 $ 22,360.00 $215.00 $ 630,791 $ 268,279 $ 362,512.25
10/21/97 $ 694,228 $ 314,032 $ 380,196.00 1.39 $ 21,000.00 $200.00 $ 690,518 $ 345,812 $ 344,706.00
07/14/97 $ 823,086 $ 413,597 $ 409,489.00 1.44 $ 16,650.00 $225.00 $ 706,878 $ 401,439 $ 305,439.33
09/30/97 $1,563,477 $1,111,020 $ 452,457.00 1.36 $ 16,585.00 $186.35 $1,581,215 $1,099,376 $ 481,839.00
10/01/97 $ 938,149 $ 512,625 $ 425,524.00 1.41 $ 28,980.00 $207.00 $ 857,597 $ 483,445 $ 374,152.00
11/21/97 $ 733,223 $ 354,651 $ 378,572.00 1.55 $ 26,660.00 $215.00 $ 713,282 $ 304,651 $ 408,630.75
11/03/97 $ 475,543 $ 128,818 $ 346,725.00 1.33 $ 11,025.00 $175.00 $ 410,725 $ 46,814 $ 363,911.00
10/01/97 $ 827,383 $ 427,378 $ 400,005.00 1.49 $ 34,832.00 $311.00 $ 821,944 $ 408,784 $ 413,159.25
11/18/97 $1,145,007 $ 788,680 $ 356,327.00 1.40 $ 36,695.00 $179.00 $1,143,837 $ 620,740 $ 523,096.67
12/16/97 $1,062,863 $ 461,149 $ 601,714.00 2.26 $ 39,790.00 $230.00 $1,112,834 $ 409,772 $ 703,062.17
10/30/97 $ 642,180 $ 308,133 $ 334,047.00 1.40 $ 25,425.00 $225.00 $ 630,477 $ 309,926 $ 320,551.25
<CAPTION>
MOST
TRAILING TRAILING RECENT
DSCR DATE REVENUES
---- ---- --------
<S> <C> <C> <C>
1.18 11/30/97 $4,145,408
1.54 12/31/97 $6,411,247
1.39 09/30/97 $3,015,643
1.54 11/30/97 $3,263,435
1.47 11/20/97 $3,615,048
1.28 09/30/97 $3,480,670
1.38 09/20/97 $3,111,674
1.42 09/30/97 $2,832,376
1.37 11/30/97
1.48 09/30/97 $1,745,210
1.45 09/30/97 $ 795,190
1.88 09/30/97 $ 358,764
1.26 09/30/97 $1,403,465
1.64 09/30/97 $2,112,439
1.34 09/30/97 $1,457,451
1.68 12/31/97 $2,759,978
1.28 09/30/97 $1,712,988
1.39 09/30/97 $1,467,227
1.81 09/30/97 $1,947,796
1.44 12/31/97 $1,128,906
1.42 09/30/97 $1,195,891
1.53 10/31/97 $2,065,315
1.38 09/30/97 $1,032,936
1.27 09/30/97 $1,062,755
1.33 10/31/97 $1,391,997
1.30 09/30/97 $1,021,044
1.78 09/30/97 $1,057,882
1.67 09/30/97 $1,092,754
1.32 09/30/97 $1,205,712
1.30 10/31/97
1.44 09/30/97 $ 999,437
1.25 09/30/97 $1,098,516
1.97 09/30/97 $1,281,972
1.41 09/30/97 $1,100,023
1.67 09/30/97 $1,287,069
1.30 10/31/97 $ 811,204
1.18 09/30/97 $ 680,482
1.49 09/30/97 $1,337,100
1.28 09/30/97 $1,183,672
1.50 09/30/97 $ 759,166
2.02 09/30/97 $ 937,008
1.28 09/30/97 $ 846,324
1.87 10/31/97 $1,662,995
1.45 11/30/97 $1,062,520
1.49 10/31/97 $ 956,488
1.40 09/30/97 $ 760,026
1.42 10/31/97 $ 975,611
1.82 09/30/97 $ 798,488
1.93 09/30/97 $1,051,895
1.34 09/30/97 $ 646,387
1.36 09/30/97 $ 592,537
1.26 09/30/97 $ 677,559
1.07 11/30/97 $ 699,171
1.45 09/30/97 $1,646,434
1.24 12/31/97 $ 857,597
1.67 09/30/97 $ 711,472
1.40 12/31/97 $ 410,725
1.54 09/30/97 $ 759,754
2.06 11/30/97 $1,180,571
2.64 11/30/97 $1,081,418
1.34 09/30/97 $ 586,800
</TABLE>
<PAGE> 103
<TABLE>
<CAPTION>
LARGEST
LARGEST TENANT LARGEST
MOST MOST MOST MOST TENANT % OF TENANT
RECENT RECENT RECENT RECENT LEASED TOTAL LEASE SECOND LARGEST
EXPENSES NOI DSCR END DATE LARGEST TENANT SF SF EXPIRATION TENANT
-------- --- ---- -------- -------------- -- -- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1,432,069 $2,713,339.00 1.15 12/31/96
$3,224,029 $3,187,218.00 1.54 12/31/97
$ 851,457 $2,164,186.00 1.42 12/31/96
$1,245,010 $2,018,425.00 1.37 12/31/96
$1,528,942 $2,086,106.00 1.36 12/31/96
$1,439,985 $2,040,685.00 1.33 12/31/96
$1,119,562 $1,992,112.00 1.29 12/31/96
$ 985,280 $1,847,096.00 1.34 12/31/96
$ 718,153 $1,027,057.00 1.52 12/31/96
$ 278,009 $ 517,181.00 1.61 12/31/96
$ 92,223 $ 266,541.00 1.92 12/31/96
$ 381,101 $1,022,364.00 1.29 12/31/96
$ 940,495 $1,171,944.00 1.55 12/31/96
$ 596,299 $ 861,152.00 1.12 12/31/96
$1,545,900 $1,214,078.00 1.68 12/31/97
$ 918,342 $ 794,646.00 1.14 12/31/96
$ 587,813 $ 879,414.00 1.42 12/31/96
$ 866,191 $1,081,605.00 1.74 12/31/96
$ 366,552 $ 762,354.00 1.44 12/31/97
$ 432,666 $ 763,225.00 1.37 12/31/96
$1,384,177 $ 681,138.00 1.36 12/31/96
$ 486,669 $ 546,267.00 1.09 12/31/96
$ 458,804 $ 603,951.00 1.27 3/31/97
$ 800,357 $ 591,640.00 1.29 12/31/96
$ 427,892 $ 593,152.00 1.37 12/31/96
$ 309,442 $ 748,440.00 1.81 12/31/96
$ 423,910 $ 668,844.00 1.62 12/31/96
$ 694,245 $ 511,467.00 1.17 12/31/96
$ 474,782 $ 524,655.00 1.30 12/31/96
$ 843,247 $ 255,269.00 0.64 12/31/96
$ 499,087 $ 782,885.00 2.09 12/31/96
$ 558,104 $ 541,919.00 1.40 12/31/96
$ 671,259 $ 615,810.00 1.62 12/31/96
$ 230,956 $ 580,248.00 1.33 12/31/96
$ 219,179 $ 461,303.00 1.19 12/31/96
$ 706,901 $ 630,199.00 1.38 12/31/96
$ 611,643 $ 572,029.00 1.33 12/31/96
$ 277,099 $ 482,067.00 1.33 12/31/96
$ 483,473 $ 453,535.00 1.31 12/31/96
$ 372,049 $ 474,275 1.48 12/31/96
$1,086,207 $ 576,788.00 1.61 12/31/96 Herb's Sport Shop 5,300 27% 06/30/03 Bayer Odum & Hyde
$ 567,126 $ 495,394.00 1.38 12/31/96
$ 608,100 $ 348,388.00 1.06 12/31/96
$ 389,189 $ 370,837.00 1.15 12/31/96
$ 513,163 $ 462,448.00 1.34 12/31/96
$ 273,330 $ 525,158.00 1.71 12/31/96
$ 565,930 $ 485,965.00 1.74 12/31/96
$ 238,589 $ 407,798.00 1.34 12/31/96
$ 258,067 $ 334,470.00 1.25 12/31/96
$ 319,662 $ 357,897.00 1.31 12/31/96
$ 368,196 $ 330,975.00 1.16 12/31/96
$1,108,292 $ 538,142.00 1.62 12/31/96
$ 483,445 $ 374,152.00 1.24 12/31/97
$ 333,234 $ 378,238.00 1.55 12/31/96
$ 46,814 $ 363,911.00 1.40 12/31/97
$ 373,229 $ 386,525.00 1.44 12/31/96 Chinese Restaurant 840 13% 11/30/06 Audio Equipment
$ 831,619 $ 348,952.00 1.37 12/31/96
$ 412,989 $ 668,429.00 2.51 12/31/96
$ 297,734 $ 289,066.00 1.21 12/31/96
<CAPTION>
SECOND SECOND
SECOND LARGEST LARGEST
LARGEST TENANT TENANT
TENANT % OF LEASE
LEASED SF TOTAL SF EXPIRATION
--------- -------- ----------
<S> <C> <C> <C>
2,800 14% 07/31/99
1,200 18% 02/28/99
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
LOAN
NUMBER PROPERTY NAME PROPERTY ADDRESS COUNTY
- ------ ------------- ---------------- ------
<C> <S> <C> <C>
50410 Spanish Trace 3500 Windmeadows Boulevard Alachua
50249 Moana Apartments 3400 & 3463 Kindred Ave. and 3573 Carlos Lane Washoe
50254 Greenview Apartments 10014 Nob Hill Road Broward
50028 Bella Vista Apartments 685 Roundtree Rd. Clayton
50163 Silver Lake Apartments 937 & 961 Victory Boulevard Richmond
50277 Lakeview Manor Apartments 1270 Sandhill Road Utah
50218 Remington Forest Apartments 1398 Cassidy Court Charleston
50462 Alden Trace Apartments 11815 Alden Road Duval
50091 West 176th Street 601 West 176th Street Bronx
50147 River Island Apartments 8935 River Island Dr. Howard
50140 Karen Gardens Apartments 8605 60th Road Queens
50569 Charlestown Properties 105-107 High Street and 11, 15-16 Summer Street Suffolk
50450 Riverside Apartments 16 Elmer Street Middlesex
50414 Falcon House Apartments 645 James Lee Road Okaloosa
50503 Fremont Court Apts 4464 Fremont Avenue North King
50014 The Chimneys 905 Moss Springs Rd. Stanly
50200 Cedar Ridge Apartments 3386-E Rasmont Road Roanoke
50430 The Wedge Apartments 333 South 1000 East Washington
50306 Oasis Apartments 6821 Nieman Road Johnson
50253 Jefferson Arms Apartments 10390 Jefferson Hwy. East Baton Rouge
50080 Vero Beach Landings South (i) 301 12th Street Indian River
50081 Vero Beach Landings North (i) 1801 Indian River Blvd. Indian River
SUBTOTAL -- CROSSED LOANS
50377 Rolling Hills Apts. 8869 Maya Lane St. Louis
50404 Oak Hill Apartments 3712 East 47th Terrace Jackson
50260 Westview Apartments 5060 SW 64th Avenue Broward
50489 Raintree Apartments 32 South 800 East Washington
50309 Park Regency Apartments 260 Sharp Road East Baton Rouge
50339 Madelaine Manor Townhomes 4314 Marshall Avenue St. Louis
50501 Loma Vista Apts 2575 S. Steele Road San Bernardino
50490 Harborside Apartments 78 Center Street Barnstable
50063 Tremont Manor 2925 Tremont St. El Paso
50399 63-67 West 107th St. Apartments 63-67 W. 107th Street New York
50412 Landings & Marina 515-655 Palomar Drive Escambia
50217 Donaree Village Apartments 6701 Dorchester Charleston
50059 Twins Apartments 3265 Griffin Road, 4717 & 4732 SW 33rd Ave. Broward
50318 Enfield Court Apts. 2600 & 2606 Enfield Road Travis
50469 Southport Apartments 1306 Southport Drive Travis
50060 Lisa Apartments 2150 Madison St. Broward
50215 Lexington Place 2800 Lexington Place NE Bernalillo
50481 Silver Sands Factory Stores 5101 East Highway 98 Walton
50604 Flagler Park Plaza S/C 8221-8361 West Flagler Street Dade
50488 Mall St. Vincent 1133 St. Vincent Ave. Caddo
50021 International Drive Value Center 5498 Touchstone Dr. Orange
50131 Copperwood Shopping Center SH 6 & FM 529 Harris
50243 Towers Shopping Center 2121 Colonial Ave. Southwest Roanoke
50328 East Village Square 3057 & 3061-3065 Peachtree Road Fulton
50464 Flamingo Market Place 12105-12309 Pembroke Road Broward
50132 Fashion Mall Commons 8495 Union Chapel Road Marion
50153 Village at Woodland Hills 6808 South Memorial Drive Tulsa
50699 Parkway Village S/C 2255 North University Parkway Utah
50246 Newberry Crossing 1005-1281 N.W. 76th Blvd. Alachua
50262 Breezewood Center 10697 Courthouse Road Spotsylvania
50301 Foodsco Supermarket 1751 East Shore Boulevard Contra Costa
50293 Jumbo Sports #53 11290 Pines Blvd. Broward
50252 Prosperity Center 701-707 E. Market Street Loudoun
50442 Borders Retail Center 11741 & 11745 Olive Street Rd. St. Louis
50138 Hunt Club Corners Shopping Center 520-620 Hunt Club Boulevard Seminole
50289 Whalley Commons 1475 Whalley Avenue New Haven
50055 Ruisseau Village 221 West Parker Road Collin
50134 Gallery at Rivergate 2021 North Gallatin Pike Davidson
50429 Peachtree Paces 3076-3078 Roswell Rd Fulton
<CAPTION>
LOAN ZIP
NUMBER CITY STATE CODE
- ------ ---- ----- ----
<C> <C> <C> <C>
50410 Gainesville FL 32607
50249 Reno NV 89502
50254 Tamarac FL 33321
50028 Riverdale GA 30274
50163 Staten Island NY 10301
50277 Orem UT 84058
50218 Mt. Pleasant SC 29464
50462 Jacksonville FL 32246
50091 New York NY 10033
50147 Savage MD 20763
50140 Rego Park NY 11373
50569 Boston (Charlestown) MA 02129
50450 Cambridge MA 02138
50414 Fort Walton Beach FL 32547
50503 Seattle WA 98103
50014 Albemarle NC 28001
50200 Roanoke VA 24018
50430 St. George UT 84770
50306 Shawnee KS 66203
50253 Baton Rouge LA 70809
50080 Vero Beach FL 32960
50081 Vero Beach FL 32960
50377 Jennings MO 63136
50404 Kansas City MO 64111
50260 Davie FL 33023
50489 St. George UT 84770
50309 Baton Rouge LA 70815
50339 Berkeley MO 63136
50501 San Bernardino CA 92408
50490 Dennis (Dennisport) MA 02639
50063 Colorado Springs CO 80907
50399 New York NY 10025
50412 Pensacola FL 32507
50217 North Charleston SC 29418
50059 Dania FL 33004
50318 Austin TX 78703
50469 Austin TX 78704
50060 Hollywood FL 33020
50215 Albuquerque NM 87112
50481 Sandestin FL 32541
50604 Miami FL 33126
50488 Shreveport LA 71104
50021 Orlando FL 32819
50131 Houston TX 77095
50243 Roanoke VA 24015
50328 Atlanta GA 30305
50464 Pembroke Pines FL 33024
50132 Indianapolis IN 46240
50153 Tulsa OK 74133
50699 Provo UT 84603
50246 Gainesville FL 32606
50262 Fredericksburg VA 22407
50301 EL Cerrito CA 94530
50293 Pembroke Pines FL 33026
50252 Leesburg VA 20075
50442 Creve Coeur MO 63141
50138 Apopka FL 32703
50289 New Haven CT 06515
50055 Plano TX 75823
50134 Nashville TN 37115
50429 Atlanta GA 30305
</TABLE>
- ---------------
(i) These two Mortgaged Properties, which represent security for separate
Mortgage Loans, are treated as if they are a single Mortgage Loan for the
purpose of determining (among other things) an U/W NOI, an U/W DSCR, a
Trailing NOI, a Trailing DSCR, a Most Recent NOI and a Most Recent DSCR
for each such Mortgaged Property or the related Mortgage Loan, as
applicable.
<PAGE> 105
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF MATURITY ADMINI- SUB- NET
PROPERTY ORIGINAL DATE DATE LOAN MORTGAGE STRATIVE SERVICING MORTGAGE NOTE
TYPE BALANCE BALANCE BALANCE TYPE RATE FEE RATE FEE RATE RATE DATE
---- ------- ------- ------- ---- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily $ 2,807,600 $ 2,802,854 $ 2,484,337 Balloon 7.520% 0.144% 0.100% 7.376% 12/02/97
Multifamily $ 2,800,000 $ 2,791,886 $ 2,486,243 Balloon 7.660% 0.169% 0.125% 7.491% 10/13/97
Multifamily $ 2,700,000 $ 2,685,709 $ 2,217,070 Balloon 7.780% 0.194% 0.150% 7.586% 09/24/97
Multifamily $ 2,600,000 $ 2,588,579 $ 2,375,756 Balloon 8.900% 0.194% 0.150% 8.706% 05/27/97
Multifamily $ 2,500,000 $ 2,495,317 $ 2,176,217 Balloon 6.880% 0.124% 0.080% 6.756% 12/15/97
Multifamily $ 2,500,000 $ 2,492,863 $ 2,223,904 Balloon 7.735% 0.144% 0.100% 7.591% 10/15/97
Multifamily $ 2,360,000 $ 2,352,095 $ 2,100,947 Balloon 7.750% 0.219% 0.175% 7.531% 09/30/97
Multifamily $ 2,340,000 $ 2,334,445 $ 2,054,701 Balloon 7.200% 0.144% 0.100% 7.056% 11/24/97
Multifamily $ 2,224,000 $ 2,214,255 $ 2,008,901 Balloon 8.360% 0.194% 0.150% 8.166% 06/26/97
Multifamily $ 2,125,000 $ 2,115,947 $ 1,753,966 Balloon 7.975% 0.169% 0.125% 7.806% 10/08/97
Multifamily $ 2,110,000 $ 2,102,260 $ 1,899,070 Balloon 8.230% 0.194% 0.150% 8.036% 08/28/97
Multifamily $ 2,100,000 $ 2,096,197 $ 1,838,102 Balloon 7.090% 0.144% 0.100% 6.946% 12/19/97
Multifamily $ 2,090,000 $ 2,086,317 $ 1,837,345 Balloon 7.260% 0.119% 0.075% 7.141% 12/10/97
Multifamily $ 2,080,000 $ 2,075,674 $ 1,856,510 Balloon 7.860% 0.169% 0.125% 7.691% 11/17/97
Multifamily $ 2,050,000 $ 2,047,533 $ 1,792,210 Balloon 7.050% 0.144% 0.100% 6.906% 01/08/98
Multifamily $ 2,021,851 $ 2,011,565 $ 1,854,258 Balloon 9.070% 0.169% 0.125% 8.901% 03/20/97
Multifamily $ 2,000,000 $ 1,995,510 $ 1,768,627 Balloon 7.480% 0.144% 0.100% 7.336% 11/26/97
Multifamily $ 2,000,000 $ 1,995,026 $ 1,629,092 Balloon 7.520% 0.169% 0.125% 7.351% 12/23/97
Multifamily $ 2,000,000 $ 1,994,924 $ 1,621,855 Balloon 7.370% 0.144% 0.100% 7.226% 12/23/97
Multifamily $ 2,000,000 $ 1,992,363 $ 1,792,578 Balloon 8.050% 0.144% 0.100% 7.906% 08/29/97
Multifamily $ 1,057,778 $ 1,053,131 $ 955,254 Balloon 8.350% 0.169% 0.125% 8.181% 06/18/97
Multifamily $ 846,222 $ 842,505 $ 764,204 Balloon 8.350% 0.169% 0.125% 8.181% 06/18/97
$ 1,904,000 $ 1,895,636 $ 1,719,458 8.350% 0.169% 0.125% 8.181%
Multifamily $ 1,800,000 $ 1,794,662 $ 1,593,799 Balloon 7.545% 0.119% 0.075% 7.426% 10/28/97
Multifamily $ 1,761,000 $ 1,757,140 $ 1,561,906 Balloon 7.600% 0.144% 0.100% 7.456% 11/26/97
Multifamily $ 1,680,000 $ 1,674,183 $ 1,490,124 Balloon 7.600% 0.144% 0.100% 7.456% 09/30/97
Multifamily $ 1,625,000 $ 1,620,959 $ 1,323,638 Balloon 7.520% 0.144% 0.100% 7.376% 12/23/97
Multifamily $ 1,600,000 $ 1,595,174 $ 1,413,729 Balloon 7.460% 0.144% 0.100% 7.316% 10/09/97
Multifamily $ 1,560,000 $ 1,555,374 $ 1,381,292 Balloon 7.545% 0.119% 0.075% 7.426% 10/28/97
Multifamily $ 1,432,000 $ 1,429,473 $ 1,258,569 Balloon 7.250% 0.144% 0.100% 7.106% 12/29/97
Multifamily $ 1,300,000 $ 1,297,785 $ 1,148,894 Balloon 7.470% 0.144% 0.100% 7.326% 12/05/97
Multifamily $ 1,300,000 $ 1,294,032 $ 1,183,517 Balloon 8.730% 0.219% 0.175% 8.511% 05/27/97
Multifamily $ 1,260,000 $ 1,257,269 $ 1,119,056 Balloon 7.655% 0.294% 0.250% 7.361% 11/07/97
Multifamily $ 1,225,000 $ 1,222,452 $ 1,093,377 Balloon 7.860% 0.169% 0.125% 7.691% 11/17/97
Multifamily $ 1,200,000 $ 1,197,422 $ 1,066,938 Balloon 7.700% 0.144% 0.100% 7.556% 11/13/97
Multifamily $ 1,080,000 $ 1,074,991 $ 982,368 Balloon 8.690% 0.194% 0.150% 8.496% 05/30/97
Multifamily $ 1,030,000 $ 1,027,711 $ 911,975 Balloon 7.530% 0.294% 0.250% 7.236% 11/19/97
Multifamily $ 1,020,000 $ 1,017,626 $ 897,928 Balloon 7.300% 0.194% 0.150% 7.106% 11/26/97
Multifamily $ 900,000 $ 895,932 $ 820,428 Balloon 8.790% 0.294% 0.250% 8.496% 05/30/97
Multifamily $ 900,000 $ 889,628 $ 0 Fully Amortizing 7.620% 0.164% 0.120% 7.456% 12/10/97
Retail $36,600,000 $36,501,176 $29,272,072 Balloon 6.915% 0.144% 0.100% 6.771% 12/29/97
Retail $30,000,000 $29,963,774 $26,200,179 Balloon 7.010% 0.144% 0.100% 6.866% 01/30/98
Retail $19,325,000 $19,290,136 $16,924,967 Balloon 7.113% 0.144% 0.100% 6.969% 12/29/97
Retail $15,750,000 $15,634,177 $14,350,715 Balloon 8.790% 0.169% 0.125% 8.621% 12/20/96
Retail $15,250,000 $15,198,807 $13,572,748 Balloon 7.740% 0.144% 0.100% 7.596% 09/17/97
Retail $11,000,000 $10,980,803 $ 9,684,946 Balloon 7.320% 0.144% 0.100% 7.176% 12/12/97
Retail $ 8,275,000 $ 8,252,561 $ 7,406,022 Balloon 7.990% 0.144% 0.100% 7.846% 10/31/97
Retail $ 8,100,000 $ 8,080,999 $ 7,497,784 Balloon 7.260% 0.104% 0.060% 7.156% 11/25/97
Retail $ 8,000,000 $ 7,986,238 $ 7,059,551 Balloon 7.410% 0.169% 0.125% 7.241% 12/16/97
Retail $ 8,000,000 $ 7,974,398 $ 7,578,680 Balloon 8.830% 0.274% 0.230% 8.556% 08/07/97
Retail $ 6,662,500 $ 6,651,417 $ 5,295,388 Balloon 6.720% 0.144% 0.100% 6.576% 01/28/98
Retail $ 5,700,000 $ 5,685,997 $ 4,655,210 Balloon 7.610% 0.169% 0.125% 7.441% 12/12/97
Retail $ 5,200,000 $ 5,171,613 $ 4,247,534 Balloon 7.600% 0.144% 0.100% 7.456% 09/30/97
Retail $ 5,000,000 $ 4,984,428 $ 4,144,399 Balloon 8.110% 0.144% 0.100% 7.966% 11/19/97
Retail $ 4,875,000 $ 4,855,282 $ 4,060,143 Balloon 8.295% 0.144% 0.100% 8.151% 10/03/97
Retail $ 4,800,000 $ 4,789,997 $ 4,283,226 Balloon 7.850% 0.144% 0.100% 7.706% 11/04/97
Retail $ 4,550,000 $ 4,550,000 $ 3,711,920 Balloon 7.530% 0.144% 0.100% 7.386% 02/02/98
Retail $ 4,500,000 $ 4,483,455 $ 4,049,221 Balloon 8.220% 0.394% 0.350% 7.826% 08/25/97
Retail $ 4,440,000 $ 4,432,637 $ 3,940,383 Balloon 7.640% 0.144% 0.100% 7.496% 12/12/97
Retail $ 4,387,400 $ 4,355,776 $ 3,744,669 Balloon 9.195% 0.169% 0.125% 9.026% 05/30/97
Retail $ 4,300,000 $ 4,275,686 $ 3,603,190 Balloon 8.515% 0.169% 0.125% 8.346% 08/27/97
Retail $ 4,250,000 $ 4,243,192 $ 3,791,834 Balloon 7.860% 0.144% 0.100% 7.716% 12/12/97
<CAPTION>
FIRST INTEREST
PAYMENT ACCRUAL
DATE METHOD
---- ------
<S> <C> <C>
02/01/98 ACT/360
12/01/97 ACT/360
11/01/97 ACT/360
07/01/97 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
11/01/97 ACT/360
01/01/98 ACT/360
08/01/97 ACT/360
12/01/97 ACT/360
10/01/97 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
03/01/98 ACT/360
05/01/97 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
10/01/97 ACT/360
08/01/97 ACT/360
08/01/97 ACT/360
12/01/97 ACT/360
01/01/98 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
07/01/97 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
07/01/97 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
07/01/97 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
03/01/98 ACT/360
02/01/98 ACT/360
02/01/97 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
12/01/97 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
10/01/97 ACT/360
03/01/98 ACT/360
02/01/98 ACT/360
11/01/97 ACT/360
01/01/98 ACT/360
12/01/97 ACT/360
01/01/98 ACT/360
04/01/98 ACT/360
10/01/97 ACT/360
02/01/98 ACT/360
07/01/97 ACT/360
10/01/97 ACT/360
02/01/98 ACT/360
</TABLE>
<PAGE> 106
<TABLE>
<CAPTION>
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO CROSS- LOCKOUT
MONTHLY MATURITY TERM SEASONING MATURITY MATURITY COLLATERALIZED RELATED EXPIRATION
PAYMENT (MONTHS) (MONTHS) (MONTHS) (MONTHS) DATE LOANS LOANS DATE
------- -------- -------- -------- -------- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 19,669.61 120 360 2 118 01/01/08 No Yes(D) 12/31/01
$ 19,885.68 120 360 4 116 11/01/07 No No 10/31/01
$ 20,447.08 120 300 5 115 10/01/07 No No 09/30/01
$ 20,733.38 120 360 9 111 06/01/07 No No 05/31/01
$ 16,431.57 120 360 2 118 01/01/08 No No 12/31/00
$ 17,884.40 120 360 4 116 11/01/07 No No 10/31/01
$ 16,907.33 120 360 5 115 10/01/07 No No 09/30/01
$ 15,883.64 120 360 3 117 12/01/07 No No 11/30/01
$ 16,880.46 120 360 8 112 07/01/07 No Yes(K) 06/30/01
$ 16,365.92 120 300 4 116 11/01/07 No No 10/31/01
$ 15,822.07 120 360 6 114 09/01/07 No No 08/31/01
$ 14,098.51 120 360 2 118 01/01/08 No No 12/31/01
$ 14,271.66 120 360 2 118 01/01/08 No No 12/31/01
$ 15,059.79 120 360 3 117 12/01/07 No Yes(M) 11/30/01
$ 13,707.61 120 360 1 119 02/01/08 No No 01/31/02
$ 16,370.21 120 360 11 109 04/01/07 No No 03/31/00
$ 13,956.91 120 360 3 117 12/01/07 No No 11/30/01
$ 14,805.85 120 300 2 118 01/01/08 No Yes(N) 12/31/01
$ 14,611.12 120 300 2 118 01/01/08 No No 12/31/01
$ 14,745.06 120 360 6 114 09/01/07 No Yes(O) 08/31/01
$ 8,021.22 120 360 8 112 07/01/07 Yes(2) Yes(P) 06/30/01
$ 6,416.97 120 360 8 112 07/01/07 Yes(2) Yes(P) 06/30/01
$ 14,438.19
$ 12,641.37 120 360 4 116 11/01/07 No Yes(F) 10/31/01
$ 12,433.98 120 360 3 117 12/01/07 No No 11/30/01
$ 11,862.06 120 360 5 115 10/01/07 No No 09/30/01
$ 12,029.75 120 300 2 118 01/01/08 No Yes(N) 12/31/01
$ 11,143.64 120 360 4 116 11/01/07 No Yes(O) 10/31/01
$ 10,955.86 120 360 4 116 11/01/07 No Yes(F) 10/31/01
$ 9,768.76 120 360 2 118 01/01/08 No Yes(L) 12/31/01
$ 9,063.10 120 360 2 118 01/01/08 No No 12/31/01
$ 10,208.54 120 360 9 111 06/01/07 No No 05/31/00
$ 8,944.22 120 360 3 117 12/01/07 No Yes(K) 11/30/01
$ 8,869.35 120 360 3 117 12/01/07 No Yes(M) 11/30/01
$ 8,555.52 120 360 3 117 12/01/07 No No 11/30/01
$ 8,450.13 120 360 9 111 06/01/07 No Yes(Q) 05/31/01
$ 7,223.08 120 360 3 117 12/01/07 No No 11/30/01
$ 6,992.82 120 360 3 117 12/01/07 No No 11/30/01
$ 7,106.03 120 360 9 111 06/01/07 No Yes(Q) 05/31/01
$ 10,791.51 120 120 2 118 01/01/08 No No 12/31/01
$256,699.98 120 300 2 118 01/01/08 No No 12/31/01
$199,792.27 120 360 1 119 02/01/08 No No 01/31/02
$130,039.62 120 360 2 118 01/01/08 No Yes(R) 12/31/01
$124,355.54 120 360 14 106 01/01/07 No No 02/01/00
$109,147.50 120 360 5 115 10/01/07 No No 09/30/01
$ 75,562.37 120 360 2 118 01/01/08 No No 12/31/01
$ 60,661.34 120 360 4 116 11/01/07 No Yes(S) 10/31/01
$ 55,311.23 84 360 3 81 12/01/04 No No 11/30/00
$ 55,444.97 120 360 2 118 01/01/08 No No 12/31/01
$ 63,393.68 84 360 6 78 09/01/04 No No 08/31/00
$ 45,905.85 120 300 1 119 02/01/08 No No 01/31/02
$ 42,531.18 120 300 2 118 01/01/08 No Yes(T) 12/31/01
$ 38,766.42 120 300 5 115 10/01/07 No No 09/30/01
$ 38,955.87 120 300 3 117 12/01/07 No No 11/30/01
$ 38,583.65 120 300 4 116 11/01/07 No Yes(U) 10/31/01
$ 34,720.08 120 360 3 117 12/01/07 No No 11/30/01
$ 33,712.94 120 300 0 120 03/01/08 No No 02/28/02
$ 33,712.14 120 360 6 114 09/01/07 No No 08/31/01
$ 31,471.87 120 360 2 118 01/01/08 No No 12/31/01
$ 37,406.53 120 300 9 111 06/01/07 No No 05/31/00
$ 34,668.24 120 300 6 114 09/01/07 No No 08/31/01
$ 30,771.21 120 360 2 118 01/01/08 No No 12/31/01
<CAPTION>
PREPAYMENT PENALTY DESCRIPTION (MONTHS)
---------------------------------------
<S> <C>
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(78)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(60)/FREE(12)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(37)/GRTR1%PPMTorYM(77)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
</TABLE>
<PAGE> 107
<TABLE>
<CAPTION>
TOTAL SF/
CUT-OFF YEAR UNITS/ UNIT/
LOAN APPRAISAL APPRAISAL DATE LTV BUILT/ ROOM ROOM/
NUMBER PROPERTY NAME VALUE DATE RATIO RENOVATED BED BED
- ------ ------------- ----- ---- ----- --------- --- ---
<C> <S> <C> <C> <C> <C> <C> <C>
50410 Spanish Trace $ 3,700,000 07/01/97 75.8% 1972 104 Units
50249 Moana Apartments $ 3,880,000 09/12/97 72.0% 1981/1981 116 Units
50254 Greenview Apartments $ 3,950,000 07/15/97 68.0% 1988 129 Units
50028 Bella Vista Apartments $ 3,300,000 02/17/97 78.4% 1972/1996 108 Units
50163 Silver Lake Apartments $ 7,500,000 08/05/97 33.3% 1966/1993 222 Units
50277 Lakeview Manor Apartments $ 3,270,000 08/04/97 76.2% 1977/1989 83 Units
50218 Remington Forest Apartments $ 3,370,000 07/01/97 69.8% 1986 62 Units
50462 Alden Trace Apartments $ 3,450,000 09/26/97 67.7% 1985/1995 142 Units
50091 West 176th Street $ 2,780,000 11/21/96 79.6% 1920/1994 52 Units
50147 River Island Apartments $ 3,400,000 04/14/97 62.2% 1975 144 Units
50140 Karen Gardens Apartments $ 3,125,000 05/21/97 67.3% 1964 68 Units
50569 Charlestown Properties $ 2,645,000 11/17/97 79.3% 1900/1985 27 Units
50450 Riverside Apartments $ 2,870,000 09/01/97 72.7% 1990 22 Units
50414 Falcon House Apartments $ 2,700,000 09/04/97 76.9% 1969 82 Units
50503 Fremont Court Apts $ 3,000,000 10/20/97 68.3% 1991 26 Units
50014 The Chimneys $ 3,150,000 01/15/97 63.9% 1989/1994 102 Units
50200 Cedar Ridge Apartments $ 2,505,000 07/16/97 79.7% 1987 72 Units
50430 The Wedge Apartments $ 3,000,000 07/21/97 66.5% 1986 48 Units
50306 Oasis Apartments $ 2,540,000 03/01/98 78.5% 1967 86 Units
50253 Jefferson Arms Apartments $ 2,900,000 07/30/97 68.7% 1973 96 Units
50080 Vero Beach Landings South (i) $ 2,380,000 04/30/97 44.2% 1989 40 Units
50081 Vero Beach Landings North (i) $ 2,380,000 04/30/97 35.4% 1988 32 Units
SUBTOTAL -- CROSSED LOANS $ 4,760,000 39.8% 72
50377 Rolling Hills Apts. $ 2,250,000 09/16/97 79.8% 1965 128 Units
50404 Oak Hill Apartments $ 2,900,000 08/12/97 60.6% 1950/1996 162 Units
50260 Westview Apartments $ 2,100,000 04/29/97 79.7% 1986/1995 42 Units
50489 Raintree Apartments $ 2,090,000 07/21/97 77.6% 1969/1985 37 Units
50309 Park Regency Apartments $ 2,050,000 07/30/97 77.8% 1966 105 Units
50339 Madelaine Manor Townhomes $ 1,950,000 09/16/97 79.8% 1968/1996 68 Units
50501 Loma Vista Apts $ 1,790,000 10/22/97 79.9% 1982 70 Units
50490 Harborside Apartments $ 1,635,000 10/11/97 79.4% 1971 44 Units
50063 Tremont Manor $ 1,670,000 03/26/97 77.5% 1972 66 Units
50399 63-67 West 107th St. Apartments $ 1,575,000 09/05/97 79.8% 1910/1980 58 Units
50412 Landings & Marina $ 1,650,000 09/04/97 74.1% 1979 52 Units
50217 Donaree Village Apartments $ 1,900,000 07/28/97 63.0% 1973/1990 170 Units
50059 Twins Apartments $ 1,350,000 03/12/97 79.6% 1974/1996 35 Units
50318 Enfield Court Apts. $ 1,290,000 09/10/97 79.7% 1960/1991 29 Units
50469 Southport Apartments $ 1,290,000 10/20/97 78.9% 1986 49 Units
50060 Lisa Apartments $ 1,200,000 03/12/97 74.7% 1969/1996 40 Units
50215 Lexington Place $ 3,265,000 07/21/97 27.2% 1969/1993 154 Units
50481 Silver Sands Factory Stores $67,000,000 11/01/97 54.5% 1986/1996 373,737 SF
50604 Flagler Park Plaza S/C $37,925,000 11/01/98 79.0% 1990 348,877 SF
50488 Mall St. Vincent $24,700,000 12/01/97 78.1% 1977/1991 199,532 SF
50021 International Drive Value Center $21,000,000 08/30/96 74.4% 1995 185,953 SF
50131 Copperwood Shopping Center $20,000,000 05/09/97 76.0% 1996 159,455 SF
50243 Towers Shopping Center $14,700,000 07/16/97 74.7% 1962/1989 278,487 SF
50328 East Village Square $11,290,000 07/31/97 73.1% 1989 49,084 SF
50464 Flamingo Market Place $10,800,000 10/10/97 74.8% 1987 137,158 SF
50132 Fashion Mall Commons $10,900,000 12/01/97 73.3% 1997 58,332 SF
50153 Village at Woodland Hills $10,700,000 03/13/97 74.5% 1986 224,461 SF
50699 Parkway Village S/C $ 9,950,000 11/20/97 66.8% 1984 102,357 SF
50246 Newberry Crossing $ 7,600,000 07/10/97 74.8% 1988 111,050 SF
50262 Breezewood Center $ 6,500,000 08/02/97 79.6% 1986/1997 84,343 SF
50301 Foodsco Supermarket $ 6,700,000 08/29/97 74.4% 1990/1994 49,565 SF
50293 Jumbo Sports #53 $ 6,500,000 08/18/97 74.7% 1994 60,853 SF
50252 Prosperity Center $ 6,800,000 07/16/97 70.4% 1986 64,448 SF
50442 Borders Retail Center $ 6,300,000 09/25/97 72.2% 1996 35,000 SF
50138 Hunt Club Corners Shopping Center $ 6,000,000 05/21/97 74.7% 1980 101,576 SF
50289 Whalley Commons $ 5,900,000 07/30/97 75.1% 1996 36,822 SF
50055 Ruisseau Village $ 6,600,000 02/27/97 66.0% 1984 123,058 SF
50134 Gallery at Rivergate $ 5,500,000 04/23/97 77.7% 1985/1996 80,493 SF
50429 Peachtree Paces $ 5,676,000 09/16/97 74.8% 1925/1995 11,736 SF
<CAPTION>
NET LOAN
RENTABLE BALANCE PER
LOAN AREA SF/UNIT/ OCCUPANCY
NUMBER (SF) ROOM/BED PERCENT
- ------ ---- -------- -------
<C> <C> <C> <C>
50410 102,627 $26,950.52 94%
50249 64,392 $24,067.98 98%
50254 77,292 $20,819.45 94%
50028 122,592 $23,968.33 97%
50163 155,786 $11,240.17 97%
50277 54,547 $30,034.50 100%
50218 76,026 $37,937.02 94%
50462 127,160 $16,439.75 94%
50091 56,400 $42,581.83 100%
50147 114,600 $14,694.07 92%
50140 39,937 $30,915.59 99%
50569 25,848 $77,636.94 100%
50450 23,500 $94,832.61 100%
50414 71,220 $25,313.10 95%
50503 25,393 $78,751.28 100%
50014 59,684 $19,721.22 100%
50200 59,510 $27,715.41 100%
50430 49,174 $41,563.05 96%
50306 79,568 $23,196.79 97%
50253 96,000 $20,753.79 98%
50080 37,680 $26,328.28 100%
50081 32,000 $26,328.27 100%
69,680 $26,328.27
50377 76,800 $14,020.80 98%
50404 79,956 $10,846.55 97%
50260 34,020 $39,861.50 100%
50489 35,412 $43,809.70 100%
50309 77,028 $15,192.13 94%
50339 84,240 $22,873.14 100%
50501 35,775 $20,421.04 94%
50490 33,207 $29,495.11 93%
50063 40,032 $19,606.55 99%
50399 37,000 $21,677.05 98%
50412 34,464 $23,508.70 98%
50217 191,824 $ 7,043.66 88%
50059 26,227 $30,714.02 94%
50318 24,785 $35,438.30 97%
50469 30,540 $20,767.88 100%
50060 23,885 $22,398.30 95%
50215 109,184 $ 5,776.80 87%
50481 373,737 $ 97.67 96%
50604 348,877 $ 85.89 95%
50488 198,652 $ 96.68 90%
50021 185,953 $ 84.08 100%
50131 159,257 $ 95.32 96%
50243 278,487 $ 39.43 93%
50328 49,084 $ 168.13 100%
50464 137,158 $ 58.92 99%
50132 58,332 $ 136.91 97%
50153 224,461 $ 35.53 78%
50699 102,357 $ 64.98 96%
50246 111,050 $ 51.20 95%
50262 84,343 $ 61.32 100%
50301 49,565 $ 100.56 100%
50293 60,853 $ 79.79 100%
50252 64,448 $ 74.32 86%
50442 35,000 $ 130.00 100%
50138 101,576 $ 44.14 96%
50289 36,822 $ 120.38 89%
50055 123,058 $ 35.40 89%
50134 80,493 $ 53.12 100%
50429 11,736 $ 361.55 100%
</TABLE>
- ---------------
(i) These two Mortgaged Properties, which represent security for separate
Mortgage Loans, are treated as if they are a single Mortgage Loan for the
purpose of determining (among other things) an U/W NOI, an U/W DSCR, a
Trailing NOI, a Trailing DSCR, a Most Recent NOI and a Most Recent DSCR
for each such Mortgaged Property or the related Mortgage Loan, as
applicable.
<PAGE> 108
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
OCCUPANCY U/W U/W
AS OF U/W U/W U/W NOI U/W RESERVES TRAILING TRAILING TRAILING
DATE REVENUES EXPENSES NOI DSCR RESERVES PER UNIT REVENUES EXPENSES NOI
---- -------- -------- --- ---- -------- -------- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/01/97 $ 608,145 $ 266,934 $ 341,211.00 1.45 $34,357.00 $330.36 $ 619,700 $ 249,558 $ 370,141.33
10/01/97 $ 608,989 $ 264,768 $ 344,221.00 1.44 $26,680.00 $230.00 $ 630,392 $ 251,385 $ 379,007.00
12/09/97 $ 756,099 $ 402,564 $ 353,535.00 1.44 $32,250.00 $250.00 $ 748,398 $ 359,227 $ 389,171.00
09/30/97 $ 679,586 $ 332,177 $ 347,409.00 1.40 $29,700.00 $275.00 $ 681,073 $ 308,764 $ 372,309.75
12/01/97 $1,695,915 $1,123,638 $ 572,277.00 2.90 $55,500.00 $250.00 $1,706,260 $ 870,678 $ 835,581.50
09/30/97 $ 482,672 $ 188,252 $ 294,420.00 1.37 $14,525.00 $175.00 $ 500,754 $ 190,518 $ 310,236.50
10/08/97 $ 473,600 $ 193,999 $ 279,601.00 1.38 $18,600.00 $300.00 $ 477,237 $ 216,717 $ 260,520.00
11/14/97 $ 725,548 $ 425,578 $ 299,970.00 1.57 $35,500.00 $250.00 $ 727,015 $ 400,461 $ 326,554.25
10/01/97 $ 574,791 $ 266,822 $ 307,969.00 1.52 $17,346.00 $333.58 $ 629,541 $ 268,658 $ 360,883.00
09/30/97 $ 789,749 $ 478,192 $ 311,557.00 1.59 $52,260.00 $362.92 $ 808,775 $ 420,595 $ 388,180.25
10/31/97 $ 582,947 $ 304,889 $ 278,058.00 1.46 $10,200.00 $150.00 $ 435,424 $ 298,062 $ 137,362.00
11/30/97 $ 326,029 $ 107,779 $ 218,250.00 1.29 $ 6,372.00 $236.00 $ 351,899 $ 125,552 $ 226,347.00
11/30/97 $ 348,270 $ 102,512 $ 245,758.00 1.44 $ 5,940.00 $270.00 $ 337,761 $ 105,976 $ 231,785.00
10/30/97 $ 488,037 $ 236,191 $ 251,846.00 1.39 $16,400.00 $200.00 $ 501,473 $ 228,812 $ 272,661.00
12/01/97 $ 341,227 $ 112,569 $ 228,658.00 1.39 $ 7,530.00 $289.62 $ 342,490 $ 107,780 $ 234,710.50
11/12/97 $ 400,538 $ 146,448 $ 254,090.00 1.29 $18,360.00 $180.00 $ 406,080 $ 141,760 $ 264,320.00
11/01/97 $ 417,766 $ 192,493 $ 225,273.00 1.35 $14,400.00 $200.00 $ 429,139 $ 195,383 $ 233,756.00
12/18/97 $ 419,465 $ 160,940 $ 258,525.00 1.46 $19,536.00 $407.00 $ 442,367 $ 182,690 $ 259,677.25
11/30/97 $ 456,990 $ 199,722 $ 257,268.00 1.47 $30,100.00 $350.00 $ 457,169 $ 188,027 $ 269,141.25
11/12/97 $ 529,199 $ 282,538 $ 246,661.00 1.39 $24,000.00 $250.00 $ 522,553 $ 251,494 $ 271,058.25
12/12/97 $ 470,598 $ 219,630 $ 250,968.00 1.45 $31,104.00 $432.00 $ 510,911 $ 258,790 $ 252,120.58
12/12/97 $ 470,598 $ 219,630 $ 250,968.00 1.45 $31,104.00 $432.00 $ 510,911 $ 258,790 $ 252,120.58
09/07/97 $ 517,379 $ 285,321 $ 232,058.00 1.53 $32,768.00 $256.00 $ 496,169 $ 258,027 $ 238,142.00
10/31/97 $ 554,751 $ 339,885 $ 214,866.00 1.44 $28,350.00 $175.00 $ 525,661 $ 323,734 $ 201,926.83
12/01/97 $ 343,063 $ 145,703 $ 197,360.00 1.39 $12,180.00 $290.00 $ 340,621 $ 144,644 $ 195,977.25
12/06/97 $ 307,040 $ 104,002 $ 203,038.00 1.41 $12,780.00 $345.41 $ 330,364 $ 87,857 $ 242,507.00
12/09/97 $ 441,451 $ 236,370 $ 205,081.00 1.53 $21,000.00 $200.00 $ 444,515 $ 222,758 $ 221,756.50
10/01/97 $ 374,953 $ 188,556 $ 186,397.00 1.42 $16,048.00 $236.00 $ 378,858 $ 172,143 $ 206,714.50
10/01/97 $ 322,132 $ 155,559 $ 166,573.00 1.42 $16,800.00 $240.00 $ 322,942 $ 154,696 $ 168,245.75
11/30/97 $ 348,233 $ 199,098 $ 149,135.00 1.37 $10,780.00 $245.00 $ 346,424 $ 194,293 $ 152,131.50
09/30/97 $ 328,857 $ 160,962 $ 167,895.00 1.37 $16,500.00 $250.00 $ 327,415 $ 147,627 $ 179,788.00
10/01/97 $ 356,077 $ 206,947 $ 149,130.00 1.39 $10,208.00 $176.00 $ 369,994 $ 199,873 $ 170,120.75
10/30/97 $ 278,809 $ 129,904 $ 148,905.00 1.40 $10,400.00 $200.00 $ 288,591 $ 130,984 $ 157,606.25
10/31/97 $ 655,197 $ 467,390 $ 187,807.00 1.83 $46,750.00 $275.00 $ 620,475 $ 443,000 $ 177,475.00
09/01/97 $ 225,968 $ 84,612 $ 141,356.00 1.39 $ 8,750.00 $250.00 $ 251,952 $ 101,226 $ 150,726.00
10/25/97 $ 238,928 $ 114,107 $ 124,821.00 1.44 $ 7,395.00 $255.00 $ 243,149 $ 96,424 $ 146,724.83
11/20/97 $ 259,989 $ 140,249 $ 119,740.00 1.43 $12,936.00 $264.00 $ 263,674 $ 135,673 $ 128,000.83
09/01/97 $ 203,111 $ 77,046 $ 126,065.00 1.48 $12,000.00 $300.00 $ 220,125 $ 97,526 $ 122,599.75
12/01/97 $ 625,710 $ 359,431 $ 266,279.00 2.06 $48,356.00 $314.00 $ 633,608 $ 371,010 $ 262,598.00
11/14/97 $8,045,893 $2,791,294 $5,254,599.00 1.71 $42,268.00 $ 0.11 $7,551,403 $2,848,377 $4,703,025.75
11/30/97 $4,702,069 $1,560,081 $3,141,988.00 1.31 $55,820.00 $ 0.16 $4,444,026 $1,578,423 $2,865,602.33
11/14/97 $4,757,685 $2,467,259 $2,290,426.00 1.47 $20,075.00 $ 0.10 $4,251,698 $2,429,004 $1,822,694.28
09/30/97 $2,924,016 $ 897,963 $2,026,053.00 1.36 $18,595.00 $ 0.10 $2,580,065 $ 603,664 $1,976,400.75
08/31/97 $2,444,459 $ 655,808 $1,788,651.00 1.37 $23,917.00 $ 0.15
11/30/97 $2,180,649 $ 750,109 $1,430,540.00 1.58 $41,773.00 $ 0.15 $2,521,484 $ 748,655 $1,772,828.50
10/01/97 $1,194,205 $ 244,168 $ 950,037.00 1.31 $11,044.00 $ 0.23 $1,138,808 $ 232,337 $ 906,470.67
10/16/97 $1,397,368 $ 482,303 $ 915,065.00 1.38 $20,574.00 $ 0.15 $1,532,206 $ 508,436 $1,023,770.65
09/30/97 $1,172,807 $ 211,542 $ 961,265.00 1.44 $11,000.00 $ 0.19
08/21/97 $1,608,625 $ 401,726 $1,206,899.00 1.59 $68,959.00 $ 0.31 $1,936,861 $ 422,886 $1,513,975.00
10/31/97 $1,044,555 $ 253,011 $ 791,544.00 1.44 $40,943.00 $ 0.40 $1,139,810 $ 218,294 $ 921,516.00
10/31/97 $1,005,529 $ 279,759 $ 725,770.00 1.42 $34,240.00 $ 0.31 $1,056,127 $ 282,952 $ 773,175.50
06/30/97 $ 794,387 $ 153,711 $ 640,676.00 1.38 $12,651.00 $ 0.15 $ 889,100 $ 182,317 $ 706,782.35
09/22/97 $ 674,754 $ 102,904 $ 571,850.00 1.22 $ 5,948.00 $ 0.12
06/30/97 $ 884,835 $ 264,805 $ 620,030.00 1.34 $ 4,260.00 $ 0.07
10/01/97 $ 868,752 $ 238,866 $ 629,886.00 1.51 $ 9,667.00 $ 0.15 $ 835,007 $ 331,933 $ 503,074.67
10/29/97 $ 658,624 $ 115,722 $ 542,902.00 1.34 $ 4,666.00 $ 0.13 $ 714,106 $ 116,720 $ 597,386.00
10/06/97 $ 834,008 $ 273,365 $ 560,643.00 1.39 $28,441.00 $ 0.28 $ 800,875 $ 248,715 $ 552,159.50
12/04/97 $ 658,312 $ 150,120 $ 508,192.00 1.35 $ 5,523.00 $ 0.15 $ 478,121 $ 148,467 $ 329,654.00
09/30/97 $1,058,195 $ 365,858 $ 692,337.00 1.54 $49,223.00 $ 0.40 $1,071,669 $ 339,701 $ 731,967.71
09/30/97 $ 803,597 $ 203,301 $ 600,296.00 1.44 $20,123.00 $ 0.25 $ 734,702 $ 224,421 $ 510,281.01
12/06/97 $ 591,737 $ 85,043 $ 506,694.00 1.37 $ 3,521.00 $ 0.30 $ 668,778 $ 65,079 $ 603,698.97
<CAPTION>
MOST
TRAILING TRAILING RECENT
DSCR DATE REVENUES
---- ---- --------
<S> <C> <C> <C>
1.57 10/31/97 $ 619,888
1.59 09/30/97 $ 626,961
1.59 08/31/97 $ 757,391
1.50 09/30/97 $ 691,885
4.24 09/30/97 $1,669,638
1.45 09/30/97 $ 479,381
1.28 09/30/97 $ 481,657
1.71 09/30/97 $ 692,240
1.78 09/30/97 $ 597,872
1.98 09/30/97 $ 837,004
0.72 12/31/97 $ 435,424
1.34 12/31/97 $ 351,899
1.35 10/31/97 $ 318,130
1.51 09/30/97 $ 479,867
1.43 11/30/97 $ 332,688
1.35 09/30/97 $ 385,681
1.40 09/30/97 $ 425,618
1.46 09/30/97 $ 393,036
1.54 09/30/97 $ 437,146
1.53 09/30/97 $ 492,506
1.46 09/30/97 $ 474,724
1.46 09/30/97 $ 474,724
1.57 09/30/97 $ 484,190
1.35 10/31/97 $ 406,798
1.38 09/30/97 $ 332,735
1.68 09/30/97 $ 295,820
1.66 09/30/97 $ 481,866
1.57 09/30/97 $ 366,210
1.44 09/30/97 $ 313,684
1.40 09/30/97 $ 339,016
1.47 09/30/97 $ 325,145
1.59 09/30/97 $ 373,083
1.48 09/30/97 $ 273,302
1.73 09/30/97 $ 607,655
1.49 09/30/97 $ 224,542
1.69 10/31/97 $ 229,924
1.53 10/31/97 $ 260,097
1.44 09/30/97 $ 190,921
2.03 12/31/97 $ 633,608
1.53 09/30/97 $6,505,744
1.20 07/31/97 $4,482,640
1.17 11/30/97 $4,368,216
1.32 09/30/97 $2,500,106
1.96 09/30/97 $2,351,468
1.25 08/31/97 $1,098,929
1.54 10/31/97 $1,503,350
1.99 09/30/97 $1,360,644
1.67 10/31/97 $1,139,810
1.51 10/31/97 $1,026,440
1.52 06/30/97 $ 874,470
1.21 08/31/97 $ 773,248
1.48 09/30/97
1.36 09/30/97 $ 756,150
0.87 11/30/97
1.63 09/30/97 $1,022,880
1.23 08/31/97 $ 732,297
1.63 11/30/97 $ 618,819
</TABLE>
<PAGE> 109
<TABLE>
<CAPTION>
LARGEST
LARGEST TENANT LARGEST
MOST MOST MOST MOST TENANT % OF TENANT
RECENT RECENT RECENT RECENT LEASED TOTAL LEASE
EXPENSES NOI DSCR END DATE LARGEST TENANT SF SF EXPIRATION
-------- --- ---- -------- -------------- -- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 235,251 $ 384,637.00 1.63 12/31/96
$ 306,453 $ 320,508.00 1.34 12/31/96
$ 235,346 $ 522,045.00 2.13 12/31/96
$ 268,073 $ 423,812.00 1.70 12/31/96
$ 957,081 $ 712,557.00 3.61 12/31/96
$ 181,741 $ 297,640.00 1.39 12/31/96
$ 191,654 $ 290,003.00 1.43 12/31/96
$ 395,671 $ 296,569.00 1.56 12/31/96
$ 183,113 $ 414,759.00 2.05 12/31/96 Records Store 900 14% 5/31/03
$ 450,804 $ 386,200.00 1.97 12/31/96
$ 298,062 $ 137,362.00 0.72 12/31/97
$ 125,552 $ 226,347.00 1.34 12/31/97
$ 88,205 $ 229,925.00 1.34 12/31/96
$ 226,487 $ 253,380.00 1.40 12/31/96
$ 119,626 $ 213,062.00 1.30 12/31/96
$ 105,112 $ 280,569.00 1.43 12/31/96
$ 190,861 $ 234,757.00 1.40 12/31/96
$ 167,854 $ 225,182.00 1.27 12/31/96
$ 188,802 $ 248,344.00 1.42 12/31/96
$ 257,961 $ 234,545.00 1.33 12/31/96
$ 234,423 $ 240,301.00 1.39 12/31/96
$ 234,423 $ 240,301.00 1.39 12/31/96
$ 235,453 $ 248,737.00 1.64 12/31/96
$ 232,583 $ 174,215.00 1.17 12/31/96
$ 99,500 $ 233,235.00 1.64 12/31/96
$ 57,846 $ 237,974.00 1.65 12/31/96
$ 223,747 $ 258,119.00 1.93 12/31/96
$ 174,201 $ 192,009.00 1.46 12/31/96
$ 156,526 $ 157,158.00 1.34 12/31/96
$ 203,380 $ 135,636.00 1.25 12/31/96
$ 154,191 $ 170,954.00 1.40 12/31/96
$ 176,625 $ 196,458.00 1.83 12/31/96
$ 123,555 $ 149,747.00 1.41 12/31/96
$ 400,564 $ 207,091.00 2.02 12/31/96
$ 78,297 $ 146,245.00 1.44 12/31/96
$ 95,777 $ 134,147.00 1.55 12/31/96
$ 127,420 $ 132,677.00 1.58 12/31/96
$ 63,131 $ 127,790.00 1.50 12/31/96
$ 371,010 $ 262,598.00 2.03 12/31/97
$2,468,495 $4,037,249.00 1.31 12/31/96 Reebok/Rockport 13,157 4% 03/31/02
$1,588,675 $2,893,965.00 1.21 12/31/96 Publix 56,000 16% 03/18/11
$2,295,875 $2,072,341.00 1.33 12/31/96 Stage Inc. 23,140 12% 01/31/99
$ 516,885 $1,983,221.00 1.33 12/31/96 Bed Bath & Beyond 40,000 22% 01/31/11
Palais Royale 21,616 14% 01/31/12
$ 730,792 $1,620,676.00 1.79 12/31/96 S.H. Heirmonimus 60,000 22% 01/31/04
$ 227,806 $ 871,123.00 1.20 12/31/96 Mako's Cantina 7,726 16% 10/31/99
$ 447,598 $1,055,752.00 1.59 12/31/96 Winn Dixie 44,000 32% 08/05/07
Zany Brainy 10,016 17% 05/29/07
$ 365,666 $ 994,978.00 1.31 12/31/96 Sun & Ski Sports 30,498 14% 01/31/02
$ 218,294 $ 921,516.00 1.67 10/31/97 Albertson's 42,055 41% 02/28/08
$ 267,562 $ 758,878.00 1.49 12/31/96 Media Play 43,200 39% 01/31/04
$ 97,420 $ 777,050.00 1.67 12/31/96 Food Lion 32,040 38% 08/14/17
Ralph's Grocery 49,565 100% 08/31/19
Jumbo Sports, Inc. 60,853 100% 08/31/22
$ 210,545 $ 562,703.00 1.35 12/31/96 Blockbuster Video 5,124 8% 12/01/99
Borders Books 27,500 79% 10/31/16
$ 240,232 $ 515,918.00 1.28 12/31/96 Publix 57,000 56% 12/01/05
Walgreens 13,905 38% 11/30/18
$ 401,863 $ 621,017.00 1.38 12/31/96 The Room Store 27,000 22% 08/31/02
$ 208,174 $ 524,123.00 1.26 12/31/96 Claude P Street Piano Company 10,000 12% 11/30/00
$ 79,154 $ 539,665.00 1.46 12/31/96 Waterworks 3,000 26% 05/31/02
<CAPTION>
SECOND SECOND
SECOND LARGEST LARGEST
LARGEST TENANT TENANT
SECOND LARGEST TENANT % OF LEASE
TENANT LEASE SF TOTAL SF EXPIRATION
------ -------- -------- ----------
<S> <C> <C> <C> <C>
Clothing Store 900 14% 11/30/04
The GAP 10,285 3% 07/31/02
Service Merchandise 50,000 14% 02/28/12
AMC Theatres 19,426 10% 01/31/02
Ross Dress For Less 28,220 15% 01/31/11
Michaels Stores-Ba2 20,125 13% 02/28/06
Harris Teeter 33,250 12% 09/30/01
Faye Gold Gallery 6,968 14% 11/30/98
South Florida Xtreme 10,080 7% 12/31/00
Gateway 2000 7,533 13% 05/01/02
Movies 8/Cinemark 26,605 12% 09/30/07
Tony Roma's 7,200 7% 06/30/07
T J Maxx 30,760 28% 04/30/06
CVS Pharmacy 8,352 10% 10/31/01
Central Fidelity Bank 2,111 3% 03/01/00
Sofa & Chair Co. 7,500 21% 02/28/07
Walgreens 12,060 12% 11/30/10
Blockbuster Video 6,000 16% 10/31/01
Thomasville 18,479 15% 02/28/03
Longhorn Steak 8,220 10% 06/30/02
Sciematic Corporation 1,771 15% 12/31/99
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
LOAN
NUMBER PROPERTY NAME PROPERTY ADDRESS COUNTY
- ------ ------------- ---------------- ------
<C> <S> <C> <C>
50314 Sunset and 97th 9600 Sunset Drive Dade
50199 Oyster Point Square Shopping Center 11710 Jefferson Ave. Newport News
50471 Ajax Mountain Building 520 E. Durant Pitkin
50303 Jumbo Sports #57 721 Chestnut Hill Road New Castle
50113 Centre South Shopping Center 1080 Silver Bluff Road Aiken
50513 Macey's Shopping Center 910 South Main Street Cache
50612 Eastchester Market Shopping Center 274 Eastchester Drive Guilford
50271 South Salisbury Plaza Shopping Center 800 South Salisbury Blvd. Wicomico
50161 Putnam County Plaza State Road 240 East (Indianapolis Rd. & Round Barn Rd.)) Putnam
50329 Skillman Audelia Shopping Center 9203 Skillman Street Dallas
50266 The Paler Development 2880-2980 North Federal Hwy & 2001 NW 2nd Ave. Palm Beach
50116 Price Chopper Plaza 444 - 480 Franklin St. Middlesex
50066 East Lake Shopping Center 3301 East Rancier Bell
50128 Chapel Hill Shopping Center 7416 West 10th Street Marion
50051 Marketplace @ Tamarac 6801 West Commercial Blvd. Broward
50168 Rialto Shopping Center 648-676 South Tamiami Trail Sarasota
50186 Princess Jeanne Shopping Center 1400-1522 Eubank Boulevard NE Bernalillo
50144 Pecos-McLeod Plaza 3050 E. Desert Inn Road Clark
50248 Union Park Shopping Center 10505 E. Colonial Drive Orange
50245 Pompano Center 2240 N. Federal Highway Broward
SUBTOTAL -- CROSSED LOANS
50007 Fairmont Village Shopping Center 5233 Fairmont Parkway Harris
50002 Worth Plaza 7099-7203 Lake Worth Road Palm Beach
50158 Norwood Plaza Shopping Center 7360 Skidaway Road Chatham
50443 Westside Plaza Shopping Center 240 Temple Rd. Coweta
50283 Walgreens at Camino Gardens 1001 SW 2nd Avenue Palm Beach
50095 Vaughn's @ East North 3715 East North St. Greenville
50043 Shoppes at Farmville 1808-1828 Peery Drive Prince Edward
50227 University East Shopping Center 9535 East Fowler Avenue Hillsborough
50115 Old National Commons 5495 Old National Highway Fulton
50302 Jumbo Sports #54 2101 West Shephard Road Hamilton
50518 Windsor Locks Retail Center 90-94 Main Street Hartford
50205 Lakewood Shopping Center 1609 W. Brandon Blvd. Hillsborough
50061 Riverdale Square Shopping Center SEQ Highway 85 and Highway 138 Clayton
50201 Richland Crossing Shopping Center 9410 Walnut Street Dallas
50270 Post Plaza Shopping Center 5679-5711 Suitland Rd. Prince Georges
50191 Days Suites Kissimmee Lodge (Main Gate) 5820 West Irlo Bronson Highway Osceola
50027 Holiday Inn Sunspree Resort 2711 South Ocean Dr. Broward
50247 St. Joseph's Holiday Inn & Conference Center 102 South 3rd Street Buchanan
50146 Quality Inn Shenandoah 162 West Old Crossroads Shenandoah
50038 Days Inn - Sellersburg 7618 Old Highway 60 Clark
50397 The Baltic Inn 521 Sixth Avenue San Diego
50079 Days Inn - Emmorton 2116 Emmorton Park Road Harford
50704 Research Tri-Center South A 2512, 2519 and 2520 South Tricenter Blvd. Durham
50727 Research Tri-Center North B 2223 Northeast Creek Parkway Durham
SUBTOTAL -- CROSSED LOANS
50284 River Oaks Medical Office 1030 River Oaks Drive Rankin
50286 101 Rogers Street Office Building 101 Rogers Street Middlesex
50367 10 Park Place 10 Park Place Fulton
50239 Hamilton Square Showroom 101 South Hamilton Street Guilford
50396 8888 LaDue Rd. 8888 LaDue Road St. Louis
50288 Ogden Medical Center 950 East 25th Street Weber
50152 Southern Avenue Office Plaza 1818 East Southern Avenue Maricopa
50405 3-C Office Building 505 Central Ave., NW Bernalillo
50474 Corporate Oaks Office Building 5555 East 71st Street Tulsa
50390 Witchduck Exchange 71-129 Witchduck Road Virginia Beach
50276 Cameron Office and Warehouse 5410-5420 Cameron Street Clark
50185 Shrewsbury Center 604 Main Street Worchester
50023 Emmorton Office Building 2113 Emmorton Park Rd. Harford
50370 All Saints Health Care 11810 Saticoy Street Los Angeles
50241 Palm Gardens Nursing Home 615 Avenue C Kings
50485 Bermuda Village Retirement Community 142 Bermuda Village Drive Davie
50371 Montclair Nursing Center 2525 South 135th Avenue Douglas
50092 St. Andrews Care Center 7617 Southeast Main Street Multnomah
50308 Brooklyn Manor Home for Adults 2830 Pitkin Avenue Kings
50343 Glisan Care Center 9750 NE Glisan Street Multnomah
50022 Belair Residences 412 & 421 Sunset Dr., 420 N. Riverside Dr. Broward
50350 Applebee's Store #100 (East Washington) 7345 E. Washington St. Marion
50356 Applebee's Store #200 (Speedway) 5664 Crawfordsville Rd. Marion
50357 Applebee's Store #1900 (Anderson) 1922 E. 53rd Street Madison
<CAPTION>
LOAN ZIP
NUMBER CITY STATE CODE
- ------ ---- ----- ----
<C> <C> <C> <C>
50314 Miami FL 33173
50199 Newport News VA 23606
50471 Aspen CO 81611
50303 Newark DE 19713
50113 Aiken SC 29803
50513 Logan UT 84321
50612 High Point NC 27262
50271 Salisbury MD 21801
50161 Greencastle IN 46135
50329 Dallas TX 75243
50266 Boca Raton FL 33431
50116 Framingham MA 01701
50066 Killeen TX 76543
50128 Indianapolis IN 46214
50051 Tamarac FL 33319
50168 Venice FL 33595
50186 Albuquerque NM 87112
50144 Las Vegas NV 89121
50248 Orlando FL 32817
50245 Pompano Beach FL 33063
50007 Pasadena TX 77505
50002 Lake Worth FL 33467
50158 Savannah GA 31406
50443 Newnan GA 30263
50283 Boca Raton FL 33432
50095 Greenville SC 29601
50043 Farmville VA 23901
50227 Thonotosassa FL 33592
50115 Atlanta GA 30032
50302 Chattanooga TN 37421
50518 Windsor Locks CT 06096
50205 Brandon FL 33511
50061 Atlanta GA 30274
50201 Dallas TX 75243
50270 Suitland MD 20746
50191 Kissimmee FL 34746
50027 Hollywood Beach FL 33019
50247 St. Joseph MO 64501
50146 New Market VA 22844
50038 Sellersburg IN 47172
50397 San Diego CA 92101
50079 Edgewood MD 21040
50704 Durham NC 27713
50727 Durham NC 27713
50284 Flowood MS 39208
50286 Cambridge MA 02142
50367 Atlanta GA 30303
50239 High Point NC 27260
50396 LaDue MO 63124
50288 Ogden UT 84401
50152 Mesa AZ 85204
50405 Albuquerque NM 87125
50474 Tulsa OK 74136
50390 Virginia Beach VA 23462
50276 Las Vegas NV 89118
50185 Shrewsbury MA 01545
50023 Edgewood MD 21040
50370 North Hollywood CA 91605
50241 Brooklyn NY 11218
50485 Advance NC 27006
50371 Omaha NE 68144
50092 Portland OR 97215
50308 Brooklyn NY 11208
50343 Portland OR 97220
50022 Pompano Beach FL 33062
50350 Indianapolis IN 46219
50356 Speedway IN 46224
50357 Anderson IN 46013
</TABLE>
<PAGE> 111
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF MATURITY ADMINI- SUB- NET
PROPERTY ORIGINAL DATE DATE LOAN MORTGAGE STRATIVE SERVICING MORTGAGE NOTE
TYPE BALANCE BALANCE BALANCE TYPE RATE FEE RATE FEE RATE RATE DATE
---- ------- ------- ------- ---- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retail $ 4,240,000 $ 4,231,146 $ 3,782,611 Balloon 7.840% 0.144% 0.100% 7.696% 11/18/97
Retail $ 4,050,000 $ 4,031,761 $ 3,309,743 Balloon 7.630% 0.144% 0.100% 7.486% 10/30/97
Retail $ 4,000,000 $ 3,985,326 $ 3,217,580 Balloon 7.090% 0.144% 0.100% 6.946% 11/26/97
Retail $ 3,975,000 $ 3,958,922 $ 3,310,577 Balloon 8.295% 0.144% 0.100% 8.151% 10/03/97
Retail $ 3,547,500 $ 3,533,104 $ 3,196,438 Balloon 8.270% 0.169% 0.125% 8.101% 07/31/97
Retail $ 3,500,000 $ 3,490,722 $ 2,810,907 Balloon 7.050% 0.144% 0.100% 6.906% 12/17/97
Retail $ 3,350,000 $ 3,344,069 $ 2,942,776 Balloon 7.230% 0.144% 0.100% 7.086% 12/16/97
Retail $ 3,150,000 $ 3,120,998 $ 1,510,010 Balloon 7.380% 0.144% 0.100% 7.236% 11/06/97
Retail $ 3,125,000 $ 3,117,970 $ 2,762,792 Balloon 7.470% 0.144% 0.100% 7.326% 11/24/97
Retail $ 3,000,000 $ 2,991,782 $ 2,681,797 Balloon 7.940% 0.144% 0.100% 7.796% 10/15/97
Retail $ 3,000,000 $ 2,987,515 $ 2,486,367 Balloon 8.120% 0.144% 0.100% 7.976% 10/09/97
Retail $ 3,000,000 $ 2,986,937 $ 2,466,644 Balloon 7.840% 0.144% 0.100% 7.696% 10/09/97
Retail $ 2,970,000 $ 2,932,136 $ 2,500,675 Balloon 8.700% 0.169% 0.125% 8.531% 12/13/96
Retail $ 2,850,000 $ 2,843,367 $ 2,354,596 Balloon 8.010% 0.169% 0.125% 7.841% 12/22/97
Retail $ 2,800,000 $ 2,779,680 $ 2,387,646 Balloon 9.160% 0.169% 0.125% 8.991% 05/7/97
Retail $ 2,675,000 $ 2,656,462 $ 1,889,241 Balloon 7.910% 0.169% 0.125% 7.741% 10/30/97
Retail $ 2,500,000 $ 2,489,027 $ 2,114,217 Balloon 8.840% 0.169% 0.125% 8.671% 09/16/97
Retail $ 2,450,000 $ 2,438,832 $ 2,060,278 Balloon 8.630% 0.169% 0.125% 8.461% 09/8/97
Retail $ 1,846,000 $ 1,842,894 $ 1,634,664 Balloon 7.550% 0.219% 0.175% 7.331% 12/03/97
Retail $ 570,000 $ 568,681 $ 471,453 Balloon 8.050% 0.169% 0.125% 7.881% 12/03/97
$ 2,416,000 $ 2,411,575 $ 2,106,117 7.668% 0.207% 0.163% 7.460%
Retail $ 2,410,000 $ 2,393,381 $ 2,198,205 Balloon 8.850% 0.169% 0.125% 8.681% 01/17/97
Retail $ 2,400,000 $ 2,383,281 $ 2,211,956 Balloon 9.780% 0.169% 0.125% 9.611% 04/10/97
Retail $ 2,350,000 $ 2,341,885 $ 1,912,112 Balloon 7.470% 0.144% 0.100% 7.326% 11/26/97
Retail $ 2,300,000 $ 2,297,286 $ 2,022,666 Balloon 7.280% 0.144% 0.100% 7.136% 01/13/98
Retail $ 2,256,000 $ 2,250,828 $ 1,989,773 Balloon 7.375% 0.169% 0.125% 7.206% 11/06/97
Retail $ 2,250,000 $ 2,234,761 $ 1,902,389 Balloon 8.820% 0.219% 0.175% 8.601% 06/30/97
Retail $ 1,950,000 $ 1,942,387 $ 1,778,724 Balloon 8.800% 0.169% 0.125% 8.631% 06/10/97
Retail $ 1,925,000 $ 1,916,496 $ 1,578,655 Balloon 7.750% 0.169% 0.125% 7.581% 10/06/97
Retail $ 1,800,000 $ 1,788,943 $ 1,518,303 Balloon 8.750% 0.169% 0.125% 8.581% 07/14/97
Retail $ 1,725,000 $ 1,718,023 $ 1,436,665 Balloon 8.295% 0.144% 0.100% 8.151% 10/03/97
Retail $ 1,700,000 $ 1,695,632 $ 1,374,864 Balloon 7.280% 0.144% 0.100% 7.136% 12/16/97
Retail $ 1,460,000 $ 1,453,060 $ 1,219,894 Balloon 8.395% 0.164% 0.120% 8.231% 09/22/97
Retail $ 1,300,000 $ 1,291,946 $ 1,112,238 Balloon 9.270% 0.169% 0.125% 9.101% 06/4/97
Retail $ 1,010,000 $ 1,007,455 $ 911,480 Balloon 8.350% 0.169% 0.125% 8.181% 10/08/97
Retail $ 850,000 $ 847,565 $ 714,554 Balloon 8.620% 0.294% 0.250% 8.326% 11/06/97
Hotel $29,350,000 $29,190,339 $26,580,931 Balloon 8.735% 0.169% 0.125% 8.566% 08/29/97
Hotel $ 7,435,669 $ 7,379,267 $ 6,378,522 Balloon 9.370% 0.169% 0.125% 9.201% 04/25/97
Hotel $ 5,000,000 $ 4,984,031 $ 4,126,202 Balloon 7.955% 0.144% 0.100% 7.811% 11/03/97
Hotel $ 2,500,000 $ 2,484,313 $ 1,813,633 Balloon 8.710% 0.144% 0.100% 8.566% 10/07/97
Hotel $ 2,500,000 $ 2,470,564 $ 1,876,446 Balloon 9.760% 0.169% 0.125% 9.591% 05/15/97
Hotel $ 2,050,000 $ 2,045,190 $ 1,690,771 Balloon 7.950% 0.144% 0.100% 7.806% 12/09/97
Hotel $ 1,400,500 $ 1,385,487 $ 1,043,232 Balloon 9.500% 0.169% 0.125% 9.331% 06/20/97
Industrial $23,320,000 $23,292,060 $21,520,932 Balloon 7.100% 0.144% 0.100% 6.956% 01/30/98
Industrial $20,600,000 $20,575,319 $19,010,772 Balloon 7.100% 0.144% 0.100% 6.956% 01/30/98
$43,920,000 $43,867,380 $40,531,704 7.100% 0.144% 0.100% 6.956%
Office $10,200,000 $10,156,015 $ 8,401,039 Balloon 7.900% 0.169% 0.125% 7.731% 10/17/97
Office $ 5,260,000 $ 5,249,082 $ 4,695,948 Balloon 7.870% 0.169% 0.125% 7.701% 11/14/97
Office $ 5,200,000 $ 5,187,499 $ 4,266,679 Balloon 7.770% 0.144% 0.100% 7.626% 12/11/97
Office $ 3,850,000 $ 3,838,010 $ 3,191,187 Balloon 8.110% 0.244% 0.200% 7.866% 11/13/97
Office $ 3,700,000 $ 3,692,336 $ 3,304,023 Balloon 7.880% 0.124% 0.080% 7.756% 11/06/97
Office $ 3,100,000 $ 3,091,388 $ 2,813,388 Balloon 7.870% 0.169% 0.125% 7.701% 10/23/97
Office $ 2,400,000 $ 2,386,465 $ 2,011,906 Balloon 8.530% 0.169% 0.125% 8.361% 08/28/97
Office $ 2,100,000 $ 2,093,022 $ 1,720,799 Balloon 7.710% 0.144% 0.100% 7.566% 11/21/97
Office $ 2,013,000 $ 2,009,470 $ 1,771,000 Balloon 7.290% 0.144% 0.100% 7.146% 12/01/97
Office $ 2,000,000 $ 1,995,060 $ 1,773,755 Balloon 7.570% 0.144% 0.100% 7.426% 12/31/97
Office $ 1,400,000 $ 1,395,463 $ 1,152,360 Balloon 7.865% 0.169% 0.125% 7.696% 11/18/97
Office $ 1,120,000 $ 1,115,240 $ 1,001,109 Balloon 7.990% 0.169% 0.125% 7.821% 10/09/97
Office $ 682,150 $ 677,448 $ 591,989 Balloon 9.830% 0.169% 0.125% 9.661% 04/15/97
Health Care $11,000,000 $10,966,624 $ 9,158,672 Balloon 8.270% 0.144% 0.100% 8.126% 11/24/97
Health Care $10,500,000 $10,457,160 $ 8,973,350 Balloon 9.240% 0.394% 0.350% 8.846% 09/12/97
Health Care $ 5,000,000 $ 4,989,236 $ 4,197,805 Balloon 8.590% 0.394% 0.350% 8.196% 12/23/97
Health Care $ 4,500,000 $ 4,484,109 $ 3,646,215 Balloon 7.330% 0.144% 0.100% 7.186% 11/24/97
Health Care $ 3,500,000 $ 3,478,294 $ 2,994,101 Balloon 9.265% 0.244% 0.200% 9.021% 06/24/97
Health Care $ 3,000,000 $ 2,984,635 $ 2,126,209 Balloon 8.000% 0.144% 0.100% 7.856% 11/13/97
Health Care $ 1,750,000 $ 1,745,797 $ 1,436,192 Balloon 7.777% 0.169% 0.125% 7.608% 12/24/97
Health Care $ 1,625,000 $ 1,613,728 $ 1,409,172 Balloon 9.800% 0.294% 0.250% 9.506% 04/10/97
Franchise $ 2,853,000 $ 2,834,507 $ 2,052,020 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 2,775,000 $ 2,753,371 $ 1,827,847 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 2,759,000 $ 2,741,116 $ 1,984,412 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
<CAPTION>
FIRST INTEREST
PAYMENT ACCRUAL
DATE METHOD
---- ------
<S> <C> <C>
01/01/98 ACT/360
12/01/97 ACT/360
01/01/98 ACT/360
12/01/97 ACT/360
09/01/97 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
02/01/97 ACT/360
02/01/98 ACT/360
07/01/97 ACT/360
12/01/97 ACT/360
11/01/97 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
03/01/97 ACT/360
06/01/97 ACT/360
01/01/98 ACT/360
03/01/98 ACT/360
01/01/98 ACT/360
08/01/97 ACT/360
08/01/97 ACT/360
12/01/97 ACT/360
09/01/97 ACT/360
12/01/97 ACT/360
02/01/98 ACT/360
11/01/97 ACT/360
08/01/97 ACT/360
12/01/97 ACT/360
01/01/98 ACT/360
10/01/97 ACT/360
06/01/97 ACT/360
01/01/98 ACT/360
12/01/97 ACT/360
07/01/97 ACT/360
02/01/98 ACT/360
08/01/97 ACT/360
03/01/98 ACT/360
03/01/98 ACT/360
12/01/97 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
01/01/98 ACT/360
12/01/97 ACT/360
10/01/97 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
12/01/97 ACT/360
06/01/97 ACT/360
01/01/98 ACT/360
11/01/97 ACT/360
02/01/98 ACT/360
01/01/98 ACT/360
08/01/97 ACT/360
01/01/98 ACT/360
02/01/98 ACT/360
06/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
</TABLE>
<PAGE> 112
<TABLE>
<CAPTION>
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO CROSS- LOCKOUT
MONTHLY MATURITY TERM SEASONING MATURITY MATURITY COLLATERALIZED RELATED EXPIRATION
PAYMENT (MONTHS) (MONTHS) (MONTHS) (MONTHS) DATE LOANS LOANS DATE
------- -------- -------- -------- -------- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 30,640.00 120 360 3 117 12/01/07 No No 11/30/01
$ 30,272.45 120 300 4 116 11/01/07 No No 10/31/01
$ 28,501.24 120 300 3 117 12/01/07 No No 11/30/01
$ 31,460.52 120 300 4 116 11/01/07 No Yes(U) 10/31/01
$ 26,701.08 120 360 7 113 08/01/07 No No 07/31/01
$ 24,849.02 120 360 2 118 01/01/08 No No 12/31/01
$ 22,807.48 120 360 2 118 01/01/08 No No 12/31/01
$ 28,986.50 120 180 3 117 12/01/07 No No 11/30/01
$ 21,786.29 120 360 3 117 12/01/07 No No 11/30/01
$ 21,887.59 120 360 4 116 11/01/07 No No 10/31/00
$ 23,393.47 120 300 4 116 11/01/07 No No 10/31/01
$ 22,837.41 120 300 4 116 11/01/07 No Yes(V) 10/31/01
$ 24,316.85 120 300 14 106 01/01/07 No Yes(W) 02/01/00
$ 22,015.65 120 300 2 118 01/01/08 No No 12/31/00
$ 23,805.04 120 300 9 111 06/01/07 No Yes(T) 05/31/00
$ 22,225.17 120 240 4 116 11/01/07 No Yes(T) 10/31/01
$ 20,706.68 120 300 5 115 10/01/07 No No 09/30/00
$ 19,943.16 120 300 5 115 10/01/07 No No 09/30/01
$ 12,970.76 120 360 2 118 01/01/08 Yes(3) Yes(T) 12/31/01
$ 4,418.25 120 300 2 118 01/01/08 Yes(3) Yes(T) 12/31/01
$ 17,389.01
$ 19,131.87 120 360 13 107 02/01/07 No No 01/31/00
$ 21,437.73 84 300 10 74 05/01/04 No No 04/30/99
$ 17,320.46 120 300 3 117 12/01/07 No No 11/30/01
$ 15,736.88 120 360 1 119 02/01/08 No No 01/31/02
$ 15,581.63 120 360 3 117 12/01/07 No No 11/30/01
$ 18,605.36 120 300 8 112 07/01/07 No No 06/30/01
$ 15,410.35 120 360 8 112 07/01/07 No No 06/30/01
$ 14,540.08 120 300 4 116 11/01/07 No Yes(D) 10/31/01
$ 14,798.59 120 300 7 113 08/01/07 No Yes(X) 07/31/01
$ 13,652.68 120 300 4 116 11/01/07 No Yes(U) 10/31/01
$ 12,320.59 120 300 2 118 01/01/08 No No 12/31/01
$ 11,653.19 120 300 5 115 10/01/07 No No 09/30/01
$ 11,150.91 120 300 8 112 07/01/07 No Yes(X) 06/30/01
$ 7,658.91 120 360 4 116 11/01/07 No No 10/31/01
$ 6,913.30 120 300 3 117 12/01/07 No No 11/30/01
$241,000.12 84 300 6 78 09/01/04 No No 08/31/00
$ 64,294.52 120 300 10 110 05/01/07 No No 04/30/01
$ 38,441.88 120 300 3 117 12/01/07 No No 11/30/01
$ 22,029.00 120 240 4 116 11/01/07 No No 10/31/01
$ 23,729.37 120 240 9 111 06/01/07 No No 05/31/00
$ 15,754.39 120 300 2 118 01/01/08 No No 12/31/01
$ 13,054.50 120 240 8 112 07/01/07 No No 06/30/01
$156,717.85 84 360 1 83 02/01/05 Yes(4) Yes(Y) 01/31/01
$138,438.58 84 360 1 83 02/01/05 Yes(4) Yes(Y) 01/31/01
$295,156.43
$ 78,050.75 120 300 4 116 11/01/07 No No 10/31/01
$ 38,120.40 120 360 3 117 12/01/07 No No 11/30/01
$ 39,345.40 120 300 2 118 01/01/08 No Yes(S) 12/31/01
$ 29,996.02 120 300 3 117 12/01/07 No No 11/30/01
$ 26,840.41 120 360 3 117 12/01/07 No No 11/30/01
$ 22,466.39 108 360 4 104 11/01/06 No No 10/31/01
$ 19,373.99 120 300 6 114 09/01/07 No No 08/31/00
$ 15,806.80 120 300 3 117 12/01/07 No No 11/30/01
$ 13,786.87 120 360 2 118 01/01/08 No No 12/31/01
$ 14,871.01 84 300 2 82 01/01/05 No No 12/31/00
$ 10,680.52 120 300 3 117 12/01/07 No No 11/30/01
$ 8,636.92 84 300 4 80 11/01/04 No Yes(V) 10/31/00
$ 6,117.14 120 300 10 110 05/01/07 No Yes(Z) 04/30/00
$ 86,876.58 120 300 3 117 12/01/07 No No 11/30/01
$ 89,847.65 120 300 5 115 10/01/07 No No 09/30/01
$ 40,565.06 120 300 2 118 01/01/08 No No 12/31/01
$ 32,758.60 120 300 3 117 12/01/07 No No 11/30/01
$ 30,009.60 120 300 8 112 07/01/07 No No 08/01/00
$ 25,093.20 120 240 3 117 12/01/07 No No 11/30/01
$ 13,249.29 120 300 2 118 01/01/08 No No 12/31/01
$ 14,537.91 120 300 10 110 05/01/07 No No 04/30/00
$ 24,668.79 120 240 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
$ 24,895.22 120 219 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
$ 23,856.00 120 240 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
<CAPTION>
PREPAYMENT PENALTY DESCRIPTION (MONTHS)
---------------------------------------
<S> <C>
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(78)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(37)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(5)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(24)/GRTR1%PPMTorYM(36)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(54)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(42)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(37)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(5)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(36)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(6)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
TOTAL SF/
CUT-OFF YEAR UNITS/ UNIT/ NET
LOAN APPRAISAL APPRAISAL DATE LTV BUILT/ ROOM/ ROOM/ RENTABLE
NUMBER PROPERTY NAME VALUE DATE RATIO RENOVATED BED BED AREA(SF)
- ------ ------------- ----- ---- ----- --------- --- --- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
50314 Sunset and 97th $ 5,400,000 09/05/97 78.4% 1985 46,322 SF 46,322
50199 Oyster Point Square Shopping Center $ 5,410,000 07/16/97 74.5% 1987 75,400 SF 75,400
50471 Ajax Mountain Building $11,000,000 10/06/97 36.2% 1981 21,225 SF 21,225
50303 Jumbo Sports #57 $ 5,300,000 08/18/97 74.7% 1995 49,797 SF 49,797
50113 Centre South Shopping Center $ 4,730,000 04/10/97 74.7% 1988 80,836 SF 80,836
50513 Macey's Shopping Center $ 5,200,000 10/07/97 67.1% 1987 87,072 SF 87,072
50612 Eastchester Market Shopping Center $ 5,000,000 11/07/97 66.9% 1987 61,789 SF 61,789
50271 South Salisbury Plaza Shopping Center $ 5,600,000 07/25/97 55.7% 1965/1993 71,655 SF 71,655
50161 Putnam County Plaza $ 4,150,000 08/12/97 75.1% 1986 93,872 SF 93,872
50329 Skillman Audelia Shopping Center $ 3,780,000 07/11/97 79.1% 1987 31,224 SF 31,224
50266 The Paler Development $ 4,440,000 07/15/97 67.3% 1963 45,085 SF 46,632
50116 Price Chopper Plaza $ 4,400,000 06/04/97 67.9% 1976 52,629 SF 52,629
50066 East Lake Shopping Center $ 4,050,000 10/01/96 72.4% 1966/1992 141,024 SF 141,024
50128 Chapel Hill Shopping Center $ 4,300,000 12/01/97 66.1% 1970 119,426 SF 119,426
50051 Marketplace @ Tamarac $ 4,300,000 01/27/97 64.6% 1989 67,445 SF 67,445
50168 Rialto Shopping Center $ 3,550,000 07/01/97 74.8% 1961/1991 71,917 SF 71,917
50186 Princess Jeanne Shopping Center $ 3,570,000 06/16/97 69.7% 1958/1988 70,538 SF 70,688
50144 Pecos-McLeod Plaza $ 4,195,000 06/17/97 58.1% 1988 44,064 SF 44,064
50248 Union Park Shopping Center $ 3,000,000 07/24/97 61.4% 1964/1988 100,125 SF 100,125
50245 Pompano Center $ 770,000 08/07/97 73.9% 1982 7,990 SF 7,990
SUBTOTAL -- CROSSED LOANS $ 3,770,000 64.0% 108,115 108,115
50007 Fairmont Village Shopping Center $ 3,330,000 11/04/96 71.9% 1996 21,966 SF 21,966
50002 Worth Plaza $ 3,400,000 01/16/97 70.1% 1974/1989 75,664 SF 75,664
50158 Norwood Plaza Shopping Center $ 3,200,000 08/11/97 73.2% 1985 62,270 SF 62,270
50443 Westside Plaza Shopping Center $ 3,400,000 09/17/97 67.6% 1984 52,098 SF 52,098
50283 Walgreens at Camino Gardens $ 2,820,000 08/25/97 79.8% 1990 24,664 SF 24,664
50095 Vaughn's @ East North $ 3,300,000 02/24/97 67.7% 1978 67,905 SF 67,905
50043 Shoppes at Farmville $ 2,740,000 10/09/96 70.9% 1996 29,300 SF 29,300
50227 University East Shopping Center $ 2,575,000 07/18/97 74.4% 1987/1992 82,420 SF 82,420
50115 Old National Commons $ 2,400,000 01/11/97 74.5% 1986 65,673 SF 65,673
50302 Jumbo Sports #54 $ 2,300,000 08/01/97 74.7% 1994 40,000 SF 40,000
50518 Windsor Locks Retail Center $ 2,185,000 10/30/97 77.6% 1986/1997 14,225 SF 14,225
50205 Lakewood Shopping Center $ 2,100,000 07/09/97 69.2% 1978/1994 29,929 SF 29,929
50061 Riverdale Square Shopping Center $ 1,900,000 01/11/97 68.0% 1976 60,629 SF 60,629
50201 Richland Crossing Shopping Center $ 1,420,000 06/09/97 70.9% 1988 16,245 SF 16,245
50270 Post Plaza Shopping Center $ 1,300,000 07/23/97 65.2% 1987 17,760 SF 17,760
50191 Days Suites Kissimmee Lodge (Main Gate) $42,500,000 07/01/97 68.7% 1974/1989 603 Rooms 363,400
50027 Holiday Inn Sunspree Resort $12,650,000 02/24/97 58.3% 1959/1994 201 Rooms 108,448
50247 St. Joseph's Holiday Inn & Conference Center $ 7,000,000 07/24/97 71.2% 1983 170 Rooms 119,490
50146 Quality Inn Shenandoah $ 3,635,000 05/30/97 68.3% 1971/1990 101 Rooms 33,150
50038 Days Inn -- Sellersburg $ 3,525,000 01/20/97 70.1% 1972/1997 111 Rooms 40,920
50397 The Baltic Inn $ 3,950,000 08/20/97 51.8% 1987 206 Rooms 40,752
50079 Days Inn -- Emmorton $ 2,050,000 05/01/97 67.6% 1985/1995 74 Rooms 32,976
50704 Research Tri-Center South A $29,150,000 11/26/97 79.9% 1994 680,200 SF 680,200
50727 Research Tri-Center North B $25,750,000 11/26/97 79.9% 1990 421,500 SF 421,500
SUBTOTAL -- CROSSED LOANS $54,900,000 79.9% 1,101,700 1,101,700
50284 River Oaks Medical Office $14,600,000 09/16/97 69.6% 1993 102,530 SF 102,530
50286 101 Rogers Street Office Building $ 7,100,000 06/10/97 73.9% 1890/1989 59,268 SF 59,268
50367 10 Park Place $ 6,600,000 09/14/97 79.8% 1929/1985 138,625 SF 138,625
50239 Hamilton Square Showroom $ 6,655,000 05/30/97 57.7% 1936/1986 101,914 SF 101,914
50396 8888 LaDue Rd. $ 4,800,000 09/03/97 76.9% 1980 40,398 SF 40,398
50288 Ogden Medical Center $ 4,165,000 10/01/97 74.2% 1962/1997 46,052 SF 46,052
50152 Southern Avenue Office Plaza $ 3,800,000 12/17/96 62.8% 1984 57,922 SF 57,922
50405 3-C Office Building $ 3,200,000 08/21/97 65.4% 1937/1990 55,111 SF 55,111
50474 Corporate Oaks Office Building $ 2,750,000 10/24/97 73.1% 1984 52,261 SF 52,261
50390 Witchduck Exchange $ 3,000,000 09/26/97 66.5% 1977 85,768 SF 85,768
50276 Cameron Office and Warehouse $ 2,750,000 08/07/97 50.7% 1994 49,312 SF 49,312
50185 Shrewsbury Center $ 1,800,000 06/14/97 62.0% 1960/1996 18,464 SF 17,262
50023 Emmorton Office Building $ 1,100,000 03/17/97 61.6% 1986 12,684 SF 12,684
50370 All Saints Health Care $15,200,000 09/24/97 72.1% 1969/1997 128 Beds 29,554
50241 Palm Gardens Nursing Home $15,400,000 01/27/97 67.9% 1970 240 Beds 25,068
50485 Bermuda Village Retirement Community $15,000,000 10/27/97 33.3% 1984/1995 207 Units 12,148
50371 Montclair Nursing Center $11,400,000 10/03/97 39.3% 1975/1997 158 Beds 65,000
50092 St. Andrews Care Center $ 4,835,000 12/27/96 71.9% 1922/1985 75 Beds 40,280
50308 Brooklyn Manor Home for Adults $ 4,700,000 08/01/97 63.5% 1975 216 Beds 50,840
50343 Glisan Care Center $ 3,600,000 07/30/97 48.5% 1977 100 Beds 33,847
50022 Belair Residences $ 2,400,000 01/01/97 67.2% 1959 44 Beds 16,643
50350 Applebee's Store #100 (East Washington) $ 4,560,000 10/01/97 62.2% 1997 5,229 SF 5,229
50356 Applebee's Store #200 (Speedway) $ 4,150,000 10/01/97 66.3% 1995 5,396 SF 5,396
50357 Applebee's Store #1900 (Anderson) $ 4,220,000 10/01/97 65.0% 1995 5,794 SF 5,794
<CAPTION>
LOAN
BALANCE PER
LOAN SF/UNIT OCCUPANCY
NUMBER ROOM/BED PERCENT
- ------ -------- -------
<C> <C> <C>
50314 $ 91.34 97%
50199 $ 53.47 87%
50471 $ 187.77 100%
50303 $ 79.50 100%
50113 $ 43.71 99%
50513 $ 40.09 96%
50612 $ 54.12 100%
50271 $ 43.56 100%
50161 $ 33.22 95%
50329 $ 95.82 82%
50266 $ 66.26 100%
50116 $ 56.75 98%
50066 $ 20.79 80%
50128 $ 23.81 91%
50051 $ 41.21 87%
50168 $ 36.94 87%
50186 $ 35.29 97%
50144 $ 55.35 89%
50248 $ 18.41 82%
50245 $ 71.17 100%
$ 22.31
50007 $ 108.96 100%
50002 $ 31.50 82%
50158 $ 37.61 97%
50443 $ 44.10 97%
50283 $ 91.26 88%
50095 $ 32.91 100%
50043 $ 66.29 100%
50227 $ 23.25 91%
50115 $ 27.24 92%
50302 $ 42.95 100%
50518 $ 119.20 88%
50205 $ 48.55 100%
50061 $ 21.31 100%
50201 $ 62.02 100%
50270 $ 47.72 91%
50191 $48,408.52 85%
50027 $36,712.77 90%
50247 $29,317.83 70%
50146 $24,597.16 64%
50038 $22,257.33 55%
50397 $ 9,928.11 94%
50079 $18,722.80 71%
50704 $ 34.24 93%
50727 $ 48.81 100%
$ 39.82
50284 $ 99.05 99%
50286 $ 88.57 100%
50367 $ 37.42 92%
50239 $ 37.66 97%
50396 $ 91.40 100%
50288 $ 67.13 90%
50152 $ 41.20 93%
50405 $ 37.98 100%
50474 $ 38.45 95%
50390 $ 23.26 90%
50276 $ 28.30 98%
50185 $ 60.40 100%
50023 $ 53.41 100%
50370 $85,676.75 67%
50241 $43,571.50 99%
50485 $24,102.59 92%
50371 $28,380.44 83%
50092 $46,377.25 90%
50308 $13,817.75 100%
50343 $17,457.97 90%
50022 $36,675.63 93%
50350 $ 542.07 100%
50356 $ 510.26 100%
50357 $ 473.10 100%
</TABLE>
<PAGE> 114
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
OCCUPANCY U/W U/W
AS OF U/W U/W U/W NOI U/W RESERVES TRAILING TRAILING
DATE REVENUES EXPENSES NOI DSCR RESERVES PER UNIT REVENUES EXPENSES
---- -------- -------- --- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/31/97 $ 796,114 $ 273,269 $ 522,845.00 1.42 $ 11,581.00 $ 0.25 $ 813,163 $ 303,421
10/31/97 $ 707,236 $ 206,429 $ 500,807.00 1.38 $ 28,652.00 $ 0.38 $ 716,513 $ 146,059
11/01/97 $ 1,245,066 $ 323,899 $ 921,167.00 2.69 $ 5,306.00 $ 0.25 $ 1,311,739 $ 248,560
06/30/97 $ 605,034 $ 133,032 $ 472,002.00 1.25 $ 3,486.00 $ 0.07
09/30/97 $ 558,018 $ 115,354 $ 442,664.00 1.38 $ 8,084.00 $ 0.10 $ 579,863 $ 135,571
11/30/97 $ 601,904 $ 100,953 $ 500,951.00 1.68 $ 13,061.00 $ 0.15 $ 538,326 $ 83,379
12/12/97 $ 587,398 $ 127,222 $ 460,176.00 1.68 $ 12,358.00 $ 0.20 $ 635,253 $ 98,810
10/24/97 $ 652,022 $ 157,034 $ 494,988.00 1.42 $ 14,333.00 $ 0.20 $ 736,634 $ 159,266
09/30/97 $ 484,643 $ 96,039 $ 388,604.00 1.49 $ 22,060.00 $ 0.24 $ 507,420 $ 100,158
10/13/97 $ 523,784 $ 165,153 $ 358,631.00 1.37 $ 8,430.00 $ 0.27 $ 519,758 $ 162,524
09/30/97 $ 612,054 $ 202,378 $ 409,676.00 1.46 $ 9,017.00 $ 0.20 $ 621,810 $ 295,653
12/09/97 $ 570,496 $ 183,380 $ 387,116.00 1.41 $ 16,841.00 $ 0.32 $ 575,484 $ 172,834
09/30/97 $ 621,544 $ 199,205 $ 422,339.00 1.45 $ 21,156.00 $ 0.15 $ 636,254 $ 187,091
12/05/97 $ 805,244 $ 365,647 $ 439,597.00 1.66 $ 23,905.00 $ 0.20 $ 838,409 $ 452,816
10/31/97 $ 647,868 $ 233,069 $ 414,799.00 1.45 $ 20,515.00 $ 0.30 $ 649,491 $ 249,337
10/31/97 $ 542,819 $ 150,293 $ 392,526.00 1.47 $ 28,167.00 $ 0.39 $ 541,951 $ 187,677
09/30/97 $ 508,118 $ 107,591 $ 400,527.00 1.61 $ 26,804.00 $ 0.38 $ 474,790 $ 114,627
07/31/97 $ 439,236 $ 106,351 $ 332,885.00 1.39 $ 4,406.00 $ 0.10 $ 521,413 $ 124,136
10/31/97 $ 372,021 $ 137,671 $ 234,350.00 1.51 $ 22,075.00 $ 0.22 $ 404,346 $ 162,890
10/31/97 $ 105,152 $ 26,489 $ 78,663.00 1.48 $ 2,730.00 $ 0.34
09/30/97 $ 393,541 $ 72,415 $ 321,126.00 1.40 $ 2,197.00 $ 0.10 $ 320,032 $ 58,740
09/30/97 $ 564,781 $ 181,698 $ 383,083.00 1.49 $ 18,916.00 $ 0.25 $ 527,683 $ 200,878
10/31/97 $ 446,378 $ 143,354 $ 303,024.00 1.46 $ 9,341.00 $ 0.15 $ 429,402 $ 109,484
09/04/97 $ 378,925 $ 93,172 $ 285,753.00 1.51 $ 14,248.00 $ 0.27 $ 414,170 $ 91,890
12/01/97 $ 406,497 $ 131,861 $ 274,636.00 1.47 $ 6,166.00 $ 0.25 $ 413,464 $ 158,815
09/30/97 $ 465,168 $ 124,034 $ 341,134.00 1.53 $ 10,865.00 $ 0.16 $ 570,681 $ 219,733
09/30/97 $ 296,696 $ 44,115 $ 252,581.00 1.37 $ 4,380.00 $ 0.15 $ 343,917 $ 66,396
09/30/97 $ 446,466 $ 191,590 $ 254,876.00 1.46 $ 13,668.00 $ 0.17 $ 467,883 $ 198,019
03/01/97 $ 420,030 $ 129,792 $ 290,238.00 1.63 $ 16,423.00 $ 0.25 $ 421,415 $ 136,350
06/30/97 $ 353,700 $ 138,537 $ 215,163.00 1.31 $ 2,800.00 $ 0.07 $ 216,096 $ 109,565
12/01/97 $ 254,532 $ 62,271 $ 192,261.00 1.30 $ 2,134.00 $ 0.15
07/29/97 $ 276,313 $ 78,800 $ 197,512.50 1.41 $ 6,884.00 $ 0.23 $ 282,689 $ 75,228
12/18/97 $ 317,825 $ 76,979 $ 240,846.00 1.80 $ 21,220.00 $ 0.35 $ 322,995 $ 106,806
09/30/97 $ 200,841 $ 54,797 $ 146,044.00 1.59 $ 4,874.00 $ 0.30 $ 292,609 $ 69,142
10/31/97 $ 191,789 $ 58,643 $ 133,146.00 1.60 $ 3,695.00 $ 0.21 $ 208,169 $ 51,487
11/30/97 $12,169,226 $ 7,338,928 $4,830,298.00 1.67 $608,461.00 $1,009.06 $12,082,219 $ 7,219,761
11/30/97 $ 4,631,921 $ 3,389,658 $1,242,263.00 1.61 $162,117.00 $ 806.55 $ 4,864,006 $ 3,607,957
09/30/97 $ 3,539,275 $ 2,750,302 $ 788,973.00 1.71 $141,571.00 $ 832.77 $ 3,546,631 $ 2,794,010
11/30/97 $ 2,304,791 $ 1,843,982 $ 460,809.00 1.74 $103,716.00 $1,026.89 $ 2,311,959 $ 1,781,417
09/30/97 $ 1,218,989 $ 771,337 $ 447,652.00 1.57 $ 48,760.00 $ 439.28 $ 1,162,563 $ 663,560
11/30/97 $ 806,703 $ 439,686 $ 367,017.00 1.94 $ 40,335.00 $ 195.80 $ 875,738 $ 477,058
09/30/97 $ 881,165 $ 626,550 $ 254,615.00 1.63 $ 35,247.00 $ 476.31
12/01/97 $ 3,494,542 $ 907,907 $2,586,635.00 1.38 $ 67,927.00 $ 0.10 $ 3,292,950 $ 999,521
01/01/98 $ 2,726,210 $ 536,935 $2,189,275.00 1.32 $ 43,400.00 $ 0.10 $ 3,379,929 $ 518,889
10/01/97 $ 1,922,907 $ 570,479 $1,352,428.00 1.44 $ 15,380.00 $ 0.15 $ 2,588,806 $ 604,543
11/01/97 $ 1,158,732 $ 439,822 $ 718,910.00 1.57 $ 13,039.00 $ 0.22 $ 1,181,598 $ 430,812
11/10/97 $ 1,569,336 $ 798,967 $ 770,369.00 1.63 $ 52,678.00 $ 0.38 $ 1,459,681 $ 758,867
09/30/97 $ 918,070 $ 356,347 $ 561,723.00 1.56 $ 23,288.00 $ 0.23 $ 1,016,828 $ 314,506
10/01/97 $ 731,184 $ 272,674 $ 458,510.00 1.42 $ 6,060.00 $ 0.15 $ 741,956 $ 277,888
10/01/97 $ 585,673 $ 202,303 $ 383,370.00 1.42 $ 13,793.00 $ 0.30 $ 743,524 $ 281,195
09/30/97 $ 637,948 $ 230,999 $ 406,949.00 1.75 $ 8,696.00 $ 0.15 $ 539,468 $ 233,695
11/05/97 $ 584,444 $ 263,232 $ 321,212.00 1.69 $ 10,471.00 $ 0.19 $ 805,013 $ 234,367
11/21/97 $ 541,602 $ 266,913 $ 274,689.00 1.66 $ 12,543.00 $ 0.24 $ 568,831 $ 290,022
11/30/97 $ 439,723 $ 140,525 $ 299,198.00 1.68 $ 17,154.00 $ 0.20 $ 423,469 $ 124,195
11/10/97 $ 289,968 $ 62,301 $ 227,667.00 1.78 $ 5,040.00 $ 0.10 $ 315,300 $ 54,550
09/30/97 $ 214,825 $ 62,395 $ 152,430.00 1.47 $ 2,421.00 $ 0.13 $ 161,536 $ 18,046
09/30/97 $ 175,512 $ 65,868 $ 109,644.00 1.49 $ 3,171.00 $ 0.25
09/30/97 $ 9,915,668 $ 8,313,701 $1,601,967.00 1.54 $ 32,000.00 $ 250.00 $ 9,906,096 $ 8,204,486
09/30/97 $16,129,758 $14,399,694 $1,730,064.00 1.60 $ 60,000.00 $ 250.00 $17,553,350 $15,657,689
09/30/97 $ 4,599,048 $ 3,835,486 $ 763,562.00 1.57 $ 5,375.00 $ 25.97 $ 4,467,058 $ 3,678,795
11/19/97 $ 7,494,631 $ 5,826,866 $1,667,765.00 4.24 $ 44,750.00 $ 283.23 $ 7,398,437 $ 5,919,976
11/20/97 $ 2,035,197 $ 1,486,660 $ 548,537.00 1.52 $ 18,750.00 $ 250.00 $ 2,055,561 $ 1,429,740
12/04/97 $ 2,079,812 $ 1,503,688 $ 576,124.00 1.91 $ 54,000.00 $ 250.00 $ 1,934,586 $ 1,344,899
10/31/97 $ 3,886,679 $ 3,505,715 $ 380,964.00 2.40 $ 25,000.00 $ 250.00 $ 3,734,952 $ 3,389,057
09/30/97 $ 718,657 $ 453,520 $ 265,137.00 1.52 $ 16,632.00 $ 378.00 $ 746,901 $ 457,539
09/30/97 $ 2,524,435 $ 2,110,533 $ 413,902.00 1.40 $ 1,500.00 $ 0.29 $ 2,886,805 $ 2,436,982
09/30/97 $ 2,745,088 $ 2,240,073 $ 505,015.00 1.69 $ 1,500.00 $ 0.28 2,698,392 $ 2,172,346
09/30/97 $ 2,188,390 $ 1,789,594 $ 398,796.00 1.39 $ 1,500.00 $ 0.26 2,285,295 $ 1,841,026
<CAPTION>
MOST
TRAILING TRAILING TRAILING RECENT
NOI DSCR DATE REVENUES
--- ---- ---- --------
<S> <C> <C> <C> <C>
$ 509,742.75 1.39 09/30/97 $ 768,221
$ 570,454.00 1.57 10/31/97 $ 782,673
$1,063,178.60 3.11 10/30/97 $ 1,145,254
$ 444,292.00 1.39 09/30/97 $ 585,737
$ 454,946.67 1.53 10/31/97 $ 587,136
$ 536,443.00 1.96 03/31/97 $ 635,253
$ 577,368.00 1.66 10/31/97 $ 720,181
$ 407,262.00 1.56 09/30/97 $ 491,289
$ 357,233.67 1.36 08/31/97 $ 576,351
$ 326,157.00 1.16 06/30/97 $ 621,200
$ 402,650.00 1.47 09/30/97 $ 563,230
$ 449,163.25 1.54 09/30/97 $ 624,851
$ 385,593.00 1.46 09/30/97 $ 808,282
$ 400,154.67 1.40 10/31/97 $ 634,375
$ 354,273.75 1.33 09/30/97 $ 516,936
$ 360,162.50 1.45 09/30/97 $ 422,243
$ 397,277.63 1.66 07/31/97 $ 535,080
$ 241,456.00 1.55 10/31/97 $ 353,748
$ 261,292.00 1.14 09/30/97
$ 326,805.00 1.27 09/30/97 $ 506,213
$ 319,918.86 1.54 10/31/97 $ 430,309
$ 322,280.00 1.71 08/31/97 $ 388,056
$ 254,648.92 1.36 09/30/97 $ 408,130
$ 350,948.00 1.57 09/30/97 $ 530,499
$ 277,522.00 1.50 09/30/97
$ 269,864.50 1.55 09/30/97 $ 460,428
$ 285,065.01 1.61 09/30/97 $ 354,334
$ 106,531.00 0.65 08/29/97
$ 59,457
$ 207,461.50 1.48 06/30/97 $ 271,102
$ 216,188.82 1.62 11/30/97 $ 252,672
$ 223,467.25 2.43 09/30/97 $ 160,576
$ 156,682.57 1.89 10/31/97 $ 245,952
$4,862,458.00 1.68 11/30/97 $11,696,989
$1,256,049.00 1.63 11/30/97 $ 5,332,000
$ 752,621.00 1.63 09/30/97 $ 3,634,654
$ 530,542.00 2.01 11/30/97 $ 2,332,176
$ 499,003.00 1.75 09/30/97 $ 1,221,831
$ 398,680.00 2.11 10/31/97 $ 849,103
$ 726,604
$2,293,429.00 1.22 12/31/97 $ 3,726,886
$2,861,040.00 1.72 12/31/97 $ 3,260,465
$1,984,262.75 2.12 11/30/97 $ 2,072,757
$ 750,786.00 1.64 08/31/97 $ 1,146,123
$ 700,813.83 1.48 10/31/97 $ 1,303,883
$ 702,322.71 1.95 09/30/97 $ 962,910
$ 464,067.67 1.44 09/30/97 $ 676,711
$ 462,329.27 1.71 09/30/97 $ 189,325
$ 305,772.88 1.32 09/30/97 $ 530,354
$ 570,646.50 3.01 09/30/97 $ 754,068
$ 278,808.25 1.69 09/30/97 $ 526,134
$ 299,273.99 1.68 11/30/97 $ 420,502
$ 260,749.91 2.03 09/30/97 $ 305,803
$ 143,489.75 1.38 09/30/97 $ 155,720
$ 69,128
$1,701,609.75 1.63 09/30/97 $ 9,915,668
$1,895,660.50 1.76 09/30/97 $16,707,243
$ 788,262.75 1.62 09/30/97 $ 4,071,087
$1,478,460.75 3.76 09/30/97 $ 6,505,291
$ 625,820.42 1.74 11/30/97 $ 1,865,455
$ 589,686.50 1.96 06/30/97 $ 1,900,045
$ 345,895.00 2.18 09/30/97 $ 3,734,952
$ 289,362.25 1.66 09/30/97 $ 718,657
$ 449,823.00 1.52 09/28/97
$ 526,046.38 1.76 09/28/97 $ 2,808,592
$ 444,268.85 1.55 09/28/97 $ 2,378,808
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
LARGEST
LARGEST TENANT LARGEST
MOST MOST MOST MOST TENANT % OF TENANT
RECENT RECENT RECENT RECENT LEASED TOTAL LEASE
EXPENSES NOI DSCR END DATE LARGEST TENANT SF SF EXPIRATION
-------- --- ---- -------- -------------- -- -- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 260,655 $ 507,566.00 1.38 12/31/96 Eckerd Drug 9,750 21% 12/08/05
$ 198,666 $ 584,007.00 1.61 12/31/96 Food Lion 35,384 47% 08/31/06
$ 308,708 $ 836,546.00 2.45 12/31/96 Polo/Ralph Lauren 3,700 17% 09/30/01
Jumbo Sports 49,797 100% 10/31/22
$ 108,512 $ 477,225.00 1.49 12/31/96 Food Lion 29,000 36% 11/14/07
$ 72,597 $ 514,539.00 1.73 12/31/96 Macey's Grocery 48,073 55% 10/31/06
$ 98,810 $ 536,443.00 1.96 03/31/97 Harris Teeter 34,900 56% 09/30/07
$ 119,369 $ 600,812.00 1.73 12/31/96 Super G Drug Store 28,971 40% 12/31/01
$ 97,516 $ 393,773.00 1.51 12/31/96 Wal-Mart 68,872 73% 02/28/06
$ 162,953 $ 413,398.00 1.57 12/31/96 Kinko's Copies 4,569 15% 07/31/98
$ 269,408 $ 351,792.00 1.25 12/31/96 Jo-Jack Classic Furniture 18,608 41% 12/31/00
$ 186,555 $ 376,675.00 1.37 12/31/96 Price Chopper 31,541 60% 11/06/00
$ 198,385 $ 426,466.00 1.46 12/31/96 IGA Foodliner 20,000 14% 01/24/02
$ 404,322 $ 403,960.00 1.53 12/31/96 O'Malia Food Market 23,232 19% 07/31/01
$ 221,164 $ 413,211.00 1.45 12/31/96 Walgreens 13,500 20% 07/31/29
$ 145,334 $ 371,602.00 1.39 12/31/96 Food Lion 29,000 40% 04/30/11
$ 94,919 $ 327,324.00 1.32 12/31/96 Autozone 12,000 17% 02/28/99
$ 142,594 $ 392,486.00 1.64 12/31/96 GJ Rojero/IFN Inc 4,320 10% 06/30/01
$ 128,533 $ 225,215.00 1.45 12/31/96 Winn Dixie 49,980 50% 03/05/02
Mattress Magic 4,800 60% 09/14/01
Religious Bookstore 5,000 23% 12/14/01
$ 179,233 $ 326,980.00 1.27 12/31/96 DuBois Market 19,162 25% 12/31/01
$ 111,950 $ 318,359.00 1.53 12/31/96 Piggly Wiggly 21,573 35% 10/30/05
$ 86,182 $ 301,874.00 1.60 12/31/96 Food Max 25,398 49% 05/31/04
$ 164,236 $ 243,894.00 1.30 12/31/96 Walgreens 11,300 46% 02/28/31
$ 104,982 $ 425,517.00 1.91 12/31/96 Gold's Gym 20,742 31% 03/31/99
Cato's 6,400 22% 01/31/02
$ 189,267 $ 271,161.00 1.55 12/31/96 Winn Dixie 43,750 53% 05/13/07
$ 119,260 $ 235,074.00 1.32 12/31/96 Blockbuster Video 6,400 10% 09/30/99
Jumbo Sports 40,000 100% 08/31/22
$ 30,984 28,472.53 0.19 12/31/97 CVS Pharmacy 10,125 71% 10/01/17
$ 76,677 $ 194,425.00 1.39 12/31/96 Shapes Family Fitness 9,917 33% 10/30/03
$ 84,031 $ 168,641.00 1.26 12/31/96 Salvation Army 20,850 34% 02/28/01
$ 45,403 $ 115,173.00 1.25 12/31/96 Kang Nam 3,740 23% 02/28/00
$ 56,250 $ 189,702.00 2.29 12/31/96 Expectation Bible Church 4,800 27% 10/03/00
$ 7,139,339 $4,557,650.00 1.58 12/31/96
$ 4,260,000 $1,072,000.00 1.39 12/31/96
$ 2,757,031 $ 877,623.00 1.90 12/31/96
$ 1,841,190 $ 490,986.00 1.86 12/31/96
$ 700,162 $ 521,669.00 1.83 12/31/96
$ 433,907 $ 415,196.00 2.20 12/31/96
$ 581,551 $ 145,053.00 0.93 12/31/96
$ 980,525 $2,746,361.00 1.46 12/31/96 Glaxo 170,000 25% 10/14/01
$ 522,371 $2,738,094.00 1.65 12/31/96 IBM Corporation 421,500 100% 06/10/00
$ 550,658 $1,522,099.00 1.63 12/31/96 River Oaks Hospital 39,006 38% 01/31/07
$ 374,583 $ 771,540.00 1.69 12/31/96 Sapers & Wallack 9,562 16% 11/30/04
$ 795,598 $ 508,285.00 1.08 12/31/96 Ga. Dept. of Corrections 50,642 37% 06/30/98
$ 326,338 $ 636,572.00 1.77 12/31/96 J. Royal Furniture, Inc. 11,006 11% 10/31/97
$ 273,980 $ 402,731.00 1.25 12/31/96 ESCO Electronics 21,792 54% 08/31/05
$ 132,743 $ 56,582.00 0.21 12/31/96 State of Utah 37,283 81% 10/01/06
$ 234,519 $ 295,835.00 1.27 12/31/96 TimeMax, Inc. 14,883 26% 08/31/98
$ 233,197 $ 520,871.00 2.75 12/31/96 Public Defender 30,981 56% 12/31/02
$ 268,001 $ 258,133.00 1.56 12/31/96 Frisco Title 4,916 9% 06/30/01
$ 125,814 $ 294,688.00 1.65 12/31/96 Great Atlantic Spa 11,910 14% 01/31/03
$ 47,199 $ 258,604.00 2.02 12/31/96 Universal Flooring 26,000 53% 07/15/98
$ 12,853 $ 142,867.00 1.38 12/31/96 Worcester City Campus Corp. 17,264 100% 06/22/10
$ 65,042 $ 4,086.00 0.06 12/31/96 ICF Kaiser Engineers 12,684 100% 10/31/01
$ 8,363,633 $1,552,035.00 1.49 06/30/97
$15,267,173 $1,440,070.00 1.34 12/31/96
$ 3,507,151 $ 563,936.00 1.16 12/31/96
$ 5,319,546 $1,185,745.00 3.02 12/31/96
$ 1,377,711 $ 487,744.00 1.35 12/31/96
$ 1,330,147 $ 569,898.00 1.89 12/31/96
$ 3,389,057 $ 345,895.00 2.18 09/30/97
$ 453,520 $ 265,137.00 1.52 12/31/96
$ 2,241,651 $ 566,941.00 1.90 12/31/96
$ 1,878,988 $ 499,820.00 1.75 12/31/96
<CAPTION>
SECOND SECOND
SECOND LARGEST LARGEST
LARGEST TENANT TENANT
SECOND LARGEST TENANT % OF LEASE
TENANT LEASE SF TOTAL SF EXPIRATION
------ -------- -------- ----------
<S> <C> <C> <C> <C>
Sunsh. School Unif.& Supp. Co. 7,727 17% 09/30/99
Rite Aid 10,400 14% 11/30/06
D&E Snowboards 3,400 16% 08/31/00
0 0%
United States Postal Service 14,840 18% 07/30/01
Sears 12,750 15% 06/30/99
Rock-Ola Cafe 5,600 9% 08/31/02
Blockbuster Video 8,434 12% 02/01/02
The Glik Company 3,200 3% 08/31/02
IHOP 4,350 14% 11/30/07
Salon Renaissance 6,171 14% 04/30/07
NAMCO 7,638 15% 03/15/02
Powerhouse Gym 15,900 11% 01/31/03
Winona Memorial Hospital 13,000 11% 02/28/01
Georgia Carpet Outlet 10,388 15% 01/31/01
Eckerd Drug 11,359 16% 03/26/00
Showtime USA 7,653 11% 09/30/98
Matkari, Inc. 4,320 10% 06/09/98
Scotty's/Beall's 12,625 13% 08/25/01
Pearle Vision 1,745 22% 01/31/01
Golf USA 3,034 14% 05/31/01
Anthony's 10,800 14% 10/31/00
Revco Discount Drug 8,450 14% 01/01/01
Revco 8,450 16% 05/31/99
Rehab Works 2,421 10% 07/31/98
Frank's Sport Center 12,445 18% 06/30/97
Dollar Tree 4,000 14% 06/30/01
Dollar General 10,500 13% 11/30/99
Diamond Hall 5,600 9% 06/30/01
0 0%
Subway 1,300 9% 02/28/00
Progressive Insurance 9,262 31% 05/30/99
Family Dollar 10,125 17% 06/30/01
Paradise Grill 2,400 15% 06/30/99
Theodore Hadeed 2,960 17% 01/31/98
IBM Corporation 120,000 18% 09/30/98
Lakeland-OB/GYN 11,522 11% 02/28/99
Walt Disney Imagineering 7,751 13% 11/30/02
Ga. Ofc. Of Sch. Readiness 18,580 13% 06/30/98
Excel Leather 9,665 9% 12/31/97
BJC Health System 18,606 46% 08/31/07
Dr. Richard Rizzo 1,228 3% 01/31/98
Southwest Eye Center 7,655 13% 12/31/99
GSA 24,130 44% 12/31/05
A.B.W. Tulsa 4,898 9% 03/14/00
Newton Piano 5,561 6% 01/31/02
Design Center West 4,542 9% 09/05/97
Worcester City Campus Corp. 1,200 7% 06/22/10
</TABLE>
<PAGE> 116
<TABLE>
<CAPTION>
LOAN
NUMBER PROPERTY NAME PROPERTY ADDRESS COUNTY
- ------ ------------- ---------------- ------
<C> <S> <C> <C>
50355 Applebee's Store #500 (Plainfield) 2659 E. Main Street Hendricks
50353 Applebee's Store #700 (Fishers) 8310 E. 96th Street Hamilton
50351 Applebee's Store #800 (Franklin) 700 N. Morton St. Johnson
50359 Applebee's Store #600 (New Castle) 109 South Memorial Dr. Henry
50352 Applebee's Store #400 (Crawfordsville) 1516 S. Washington St. Montgomery
SUBTOTAL -- CROSSED LOANS
50345 Applebee's Store #1000 (Westfield) 14711 US 31 North Hamilton
50347 Applebee's Store #900 (Kokomo) 3720 South Reed Road Howard
50344 Applebee's Store #1100 (Columbus) 1900 25th Street Monroe
50346 Applebee's Store #1600 (Muncie) 1423 West McGalliard Hamilton
SUBTOTAL -- CROSSED LOANS
50012 All Storage Self-Storage Facilities 2927 Blackburn St/2518 Britain Dr/6301 S Western St. Potter
50407 The Gauntlet at Curtis Park 18 Fairway Drive Stafford
<CAPTION>
LOAN ZIP
NUMBER CITY STATE CODE
- ------ ---- ----- ----
<C> <C> <C> <C>
50355 Plainfield IN 46168
50353 Fishers IN 46038
50351 Franklin IN 46131
50359 New Castle IN 47632
50352 Crawfordsville IN 47933
50345 Carmel IN 46032
50347 Kokomo IN 46902
50344 Columbus IN 47201
50346 Muncie IN 47304
50012 Amarillo TX 79109
50407 Hartwood VA 22471
</TABLE>
<PAGE> 117
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF MATURITY ADMINI- SUB- NET
PROPERTY ORIGINAL DATE DATE LOAN MORTGAGE STRATIVE SERVICING MORTGAGE NOTE
TYPE BALANCE BALANCE BALANCE TYPE RATE FEE RATE FEE RATE RATE DATE
---- ------- ------- ------- ---- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Franchise $ 2,639,000 $ 2,621,894 $ 1,898,101 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 2,536,000 $ 2,519,562 $ 1,824,019 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 2,528,000 $ 2,511,614 $ 1,818,264 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 2,504,000 $ 2,487,769 $ 1,801,002 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 2,342,000 $ 2,326,819 $ 1,684,483 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
$20,936,000 $20,796,652 $14,890,149 8.450% 0.204% 0.160% 8.246%
Franchise $ 3,210,000 $ 3,189,193 $ 2,308,793 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 3,195,000 $ 3,174,290 $ 2,298,004 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 3,091,000 $ 3,070,964 $ 2,223,202 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
Franchise $ 3,015,000 $ 2,988,804 $ 1,861,454 Balloon 8.450% 0.204% 0.160% 8.246% 10/10/97
$12,511,000 $12,423,251 $ 8,691,453 8.450% 0.204% 0.160% 8.246%
Mini Storage $ 4,080,000 $ 4,029,207 $ 3,447,205 Balloon 8.830% 0.169% 0.125% 8.661% 12/30/96
Golf Course $ 3,280,000 $ 3,266,894 $ 2,737,419 Balloon 8.370% 0.169% 0.125% 8.201% 10/30/97
<CAPTION>
FIRST INTEREST
PAYMENT ACCRUAL
DATE METHOD
---- ------
<S> <C> <C>
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
12/01/97 ACT/360
02/01/97 ACT/360
12/01/97 ACT/360
</TABLE>
<PAGE> 118
<TABLE>
<CAPTION>
ORIGINAL ORIGINAL REMAINING
TERM TO AMORTIZATION TERM TO CROSS- LOCKOUT
MONTHLY MATURITY TERM SEASONING MATURITY MATURITY COLLATERALIZED RELATED EXPIRATION
PAYMENT (MONTHS) (MONTHS) (MONTHS) (MONTHS) DATE LOANS LOANS DATE
------- -------- -------- -------- -------- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 22,818.41 120 240 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
$ 21,927.81 120 240 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
$ 21,858.64 120 240 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
$ 21,651.12 120 240 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
$ 20,250.37 120 240 4 116 11/01/07 Yes(5) Yes(AA) 10/31/01
$181,926.36
$ 27,755.63 120 240 4 116 11/01/07 Yes(6) Yes(AA) 10/31/01
$ 27,625.93 120 240 4 116 11/01/07 Yes(6) Yes(AA) 10/31/01
$ 26,726.68 120 240 4 116 11/01/07 Yes(6) Yes(AA) 10/31/01
$ 27,715.52 120 207 4 116 11/01/07 Yes(6) Yes(AA) 10/31/01
$109,823.76
$ 33,765.50 120 300 14 106 01/01/07 No Yes(W) 02/01/00
$ 26,124.72 120 300 4 116 11/01/07 No No 10/31/01
<CAPTION>
PREPAYMENT PENALTY DESCRIPTION (MONTHS)
---------------------------------------
<S> <C>
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
LO(37)/GRTR1%PPMTorYM(48)/3%(12)/2%(12)/1%(5)/FREE(6)
LO(48)/GRTR1%PPMTorYM(66)/FREE(6)
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
TOTAL SF/
CUT-OFF YEAR UNITS/ UNIT/ NET
LOAN APPRAISAL APPRAISAL DATE LTV BUILT/ ROOM ROOM/ RENTABLE
NUMBER PROPERTY NAME VALUE DATE RATIO RENOVATED BED BED AREA(SF)
- ------ ------------- ----- ---- ----- --------- --- --- --------
<C> <S> <C> <C> <C> <C> <C> <C> <C>
50355 Applebee's Store #500 (Plainfield) $ 3,980,000 10/01/97 65.9% 1996 5,000 SF 5,000
50353 Applebee's Store #700 (Fishers) $ 4,110,000 10/01/97 61.3% 1996 5,229 SF 5,229
50351 Applebee's Store #800 (Franklin) $ 4,000,000 10/01/97 62.8% 1996 5,000 SF 5,000
50359 Applebee's Store #600 (New Castle) $ 4,110,000 10/01/97 60.5% 1996 5,000 SF 5,000
50352 Applebee's Store #400 (Crawfordsville) $ 3,990,000 10/01/97 58.3% 1996 5,000 SF 5,000
SUBTOTAL -- CROSSED LOANS $33,120,000 62.8% 41,648 41,648
50345 Applebee's Store #1000 (Westfield) $ 5,030,000 10/01/97 63.4% 1994 5,400 SF 5,400
50347 Applebee's Store #900 (Kokomo) $ 4,710,000 10/01/97 67.4% 1995 5,229 SF 5,229
50344 Applebee's Store #1100 (Columbus) $ 4,540,000 10/01/97 67.6% 1993 5,400 SF 5,400
50346 Applebee's Store #1600 (Muncie) $ 4,720,000 10/01/97 63.3% 1994 6,000 SF 6,000
SUBTOTAL -- CROSSED LOANS $19,000,000 65.4% 22,029 22,029
50012 All Storage Self-Storage Facilities $ 5,440,000 11/14/96 74.1% 1995 155,048 SF 155,048
50407 The Gauntlet at Curtis Park $ 5,640,000 10/01/97 57.9% 1995 18 Holes 10,616
<CAPTION>
LOAN
BALANCE PER
LOAN SF/UNIT OCCUPANCY
NUMBER ROOM/BED PERCENT
- ------ -------- -------
<C> <C> <C>
50355 $ 513.59 100%
50353 $ 481.84 100%
50351 $ 429.34 100%
50359 $ 497.55 100%
50352 $ 465.36 100%
$ 499.34
50345 $ 590.59 100%
50347 $ 607.05 100%
50344 $ 568.70 100%
50346 $ 498.13 100%
$ 563.95
50012 $ 25.99 95%
50407 $181,494.13 N/A
</TABLE>
<PAGE> 120
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
OCCUPANCY U/W U/W
AS OF U/W U/W U/W NOI U/W RESERVES TRAILING TRAILING
DATE REVENUES EXPENSES NOI DSCR RESERVES PER UNIT REVENUES EXPENSES
---- -------- -------- --- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/97 $ 2,398,899 $ 1,959,560 $ 439,339.00 1.60 $ 1,500.00 $ 0.29 2,459,956 $ 2,052,873
09/30/97 $ 1,980,645 $ 1,636,904 $ 343,741.00 1.31 $ 1,500.00 $ 0.29 2,012,067 $ 1,666,728
09/30/97 $ 2,227,834 $ 1,780,935 $ 446,899.00 1.70 $ 1,500.00 $ 0.26 $ 2,204,981 $ 1,754,796
09/30/97 $ 2,072,171 $ 1,669,732 $ 402,439.00 1.55 $ 1,500.00 $ 0.30 $ 2,249,716 $ 1,788,386
09/30/97 $ 1,971,300 $ 1,605,883 $ 365,417.00 1.50 $ 1,500.00 $ 0.30 $ 2,044,064 $ 1,676,265
09/30/97 $ 2,530,331 $ 1,984,739 $ 545,592.00 1.64 $ 1,500.00 $ 0.28 $ 2,563,515 $ 1,984,620
09/30/97 $ 2,685,898 $ 2,101,475 $ 584,423.00 1.76 $ 1,500.00 $ 0.29 $ 2,722,433 $ 2,105,237
09/30/97 $ 2,572,040 $ 2,122,207 $ 449,833.00 1.40 $ 1,500.00 $ 0.28 $ 2,541,779 $ 2,085,424
09/30/97 $ 3,071,421 $ 2,484,079 $ 587,342.00 1.77 $ 1,500.00 $ 0.25 $ 3,079,769 $ 2,425,850
06/30/97 $ 809,269 $ 325,382 $ 483,887.00 1.19 $ 12,409.00 $ 0.08 $ 881,016 $ 242,798
$ 1,599,262 $ 1,098,125 $ 501,137.00 1.60 $ 63,970.00 $3,553.89 $ 1,637,199 $ 1,011,915
<CAPTION>
MOST
TRAILING TRAILING TRAILING RECENT
NOI DSCR DATE REVENUES
--- ---- ---- --------
<S> <C> <C> <C> <C>
$ 407,083.00 1.49 09/28/97
$ 345,339.65 1.31 09/28/97 $ 1,909,349
$ 450,184.76 1.72 09/28/97 $ 1,936,308
$ 461,330.00 1.78 09/28/97
$ 367,799.00 1.51 09/28/97
$ 578,895.06 1.74 09/28/97 $ 2,523,495
$ 617,196.51 1.86 09/28/97 $ 2,639,945
$ 456,355.50 1.42 09/28/97 $ 2,602,379
$ 653,918.97 1.97 09/28/97 $ 3,061,173
$ 638,217.83 1.58 10/31/97 $ 853,878
$ 625,284.00 1.99 08/31/97 $ 1,344,988
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
LARGEST
LARGEST TENANT LARGEST
MOST MOST MOST MOST TENANT % OF TENANT
RECENT RECENT RECENT RECENT LEASED TOTAL LEASE
EXPENSES NOI DSCR END DATE LARGEST TENANT SF SF EXPIRATION
-------- --- ---- -------- -------------- -- -- ----------
<C> <C> <C> <C> <S> <C> <C> <C>
$ 1,573,760 $ 335,589.00 1.28 12/31/96
$ 1,614,855 $ 321,453.00 1.23 12/31/96
$ 1,940,360 $ 583,135.00 1.75 12/31/96
$ 2,046,477 $ 593,468.00 1.79 12/31/96
$ 2,150,600 $ 451,779.00 1.41 12/31/96
$ 2,440,296 $ 620,877.00 1.87 12/31/96
$ 243,656 $ 610,222.00 1.51 12/31/96
$ 925,096 $ 419,892.00 1.34 12/31/96
<CAPTION>
SECOND SECOND
SECOND LARGEST LARGEST
MOST LARGEST TENANT TENANT
RECENT SECOND LARGEST TENANT % OF LEASE
EXPENSES TENANT LEASE SF TOTAL SF EXPIRATION
-------- ------ -------- -------- ----------
<C> <C> <C> <C> <C>
$ 1,573,760
$ 1,614,855
$ 1,940,360
$ 2,046,477
$ 2,150,600
$ 2,440,296
$ 243,656
$ 925,096
</TABLE>
<PAGE> 122
THESE ARE THE FOOTNOTES ASSOCIATED WITH TABLE 3 OF ANNEX A
(A) Administrative Fee Rate includes the Sub-Servicer Fee Rate
(B) All of the Mortgage Loans which accrue interest on the basis of actual days
elapsed each calendar month and a 360 day year. Accordingly, the
amortization term is the term over which the mortgage loan amortizes if
interest accrued and was paid on the basis of a 360 day year consisting of
twelve 30-day months. The actual amortization term will be longer.
(C) These two Mortgaged Properties, which represent security for separate
Mortgage Loans, are treated as if they are a single Mortgage Loan for the
purpose of determining (among other things) an U/W NOI, an U/W DSCR, a
Trailing NOI, a Trailing DSCR, a Most Recent NOI and a Most Recent DSCR for
each such Mortgaged Property or the related Mortgage Loan, as applicable.
<PAGE> 123
PREPAYMENT PROVISION ANALYSIS
OUTSTANDING PRINCIPAL BALANCE(1)
<TABLE>
<CAPTION>
INITIAL MAR-1999 MAR-2000 MAR-2001 MAR-2002 MAR-2003 MAR-2004 MAR-2005
--------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out............................ 100.00% 99.70% 93.00% 74.85% 3.05% 0.00% 0.00% 0.00%
Yield Maintenance..................... 0.00% 0.30% 5.21% 23.36% 94.85% 99.44% 97.62% 92.35%
3%.................................... 0.00% 0.00% 1.79% 0.00% 0.00% 0.00% 2.14% 5.15%
2%.................................... 0.00% 0.00% 0.00% 1.79% 0.31% 0.24% 0.00% 2.50%
1%.................................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.32% 0.00% 0.00%
No Penalty............................ 0.00% 0.00% 0.00% 0.00% 1.80% 0.00% 0.24% 0.00%
--------- --------- ------- ------- ------- ------- ------- -------
Total................................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
========= ========= ======= ======= ======= ======= ======= =======
Aggregate Outstanding Principal
Balance of Mortgage Loans
($Millions)......................... $1,020.60 $1,010.03 $998.83 $986.50 $973.17 $931.20 $913.23 $769.97
% of Initial Pool Balance............. 100.00% 98.96% 97.87% 96.66% 95.35% 91.24% 89.48% 75.44%
<CAPTION>
MAR-2006 MAR-2007 MAR-2008
-------- -------- --------
<S> <C> <C> <C>
Locked Out............................ 0.00% 0.00% 0.00%
Yield Maintenance..................... 92.34% 84.57% 0.00%
3%.................................... 0.00% 0.00% 0.00%
2%.................................... 5.16% 0.00% 0.00%
1%.................................... 2.50% 0.96% 0.00%
No Penalty............................ 0.00% 14.47% 0.00%
------- ------- -------
Total................................. 100.00% 100.00% 0.00%
======= ======= =======
Aggregate Outstanding Principal
Balance of Mortgage Loans
($Millions)......................... $754.46 $686.72 $ 0.00
% of Initial Pool Balance............. 73.92% 67.29% 0.00%
</TABLE>
- ---------------
(1) Prepayment provisions in effect as a percentage of outstanding loan balances
as of the indicated date assuming no prepayments.
A-5
<PAGE> 124
PREPAYMENT PROVISION ANALYSIS
CUT-OFF DATE BALANCE(1)
<TABLE>
<CAPTION>
INITIAL MAR-1999 MAR-2000 MAR-2001 MAR-2002 MAR-2003 MAR-2004 MAR-2005
--------- --------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out............................ 100.00% 98.66% 91.02% 72.35% 2.91% 0.00% 0.00% 0.00%
Yield Maintenance..................... 0.00% 0.30% 5.10% 22.58% 90.44% 90.73% 87.35% 69.67%
3%.................................... 0.00% 0.00% 1.75% 0.00% 0.00% 0.00% 1.92% 3.89%
2%.................................... 0.00% 0.00% 0.00% 1.73% 0.29% 0.22% 0.00% 1.88%
1%.................................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.29% 0.00% 0.00%
No Penalty............................ 0.00% 0.00% 0.00% 0.00% 1.71% 0.00% 0.22% 0.00%
Paid Down............................. 0.00% 1.04% 2.13% 3.34% 4.65% 8.76% 10.52% 24.56%
--------- --------- ------- ------- ------- ------- ------- -------
Total................................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
========= ========= ======= ======= ======= ======= ======= =======
Aggregate Outstanding Principal
Balance of Mortgage Loans
($Millions)......................... $1,020.60 $1,010.03 $998.83 $986.50 $973.17 $931.20 $913.23 $769.97
% of Initial Pool Balance............. 100.00% 98.96% 97.87% 96.66% 95.35% 91.24% 89.48% 75.44%
<CAPTION>
MAR-2006 MAR-2007 MAR-2008
-------- -------- --------
<S> <C> <C> <C>
Locked Out............................ 0.00% 0.00% 0.00%
Yield Maintenance..................... 68.26% 56.90% 0.00%
3%.................................... 0.00% 0.00% 0.00%
2%.................................... 3.81% 0.00% 0.00%
1%.................................... 1.85% 0.65% 0.00%
No Penalty............................ 0.00% 9.74% 0.00%
Paid Down............................. 26.08% 32.71% 100.00%
------- ------- -------
Total................................. 100.00% 100.00% 100.00%
======= ======= =======
Aggregate Outstanding Principal
Balance of Mortgage Loans
($Millions)......................... $754.46 $686.72 $ 0.00
% of Initial Pool Balance............. 73.92% 67.29% 0.00%
</TABLE>
(1) Prepayment provisions in effect as a percentage of the Initial Pool Balance
assuming no prepayments.
A-6
<PAGE> 125
PROPERTY TYPE
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED
NUMBER OF % OF AGGREGATE INITIAL AVERAGE AVERAGE MIN/MAX
MORTGAGED MORTGAGE CUT-OFF DATE POOL UNDERWRITING MIN/MAX CUT-OFF DATE COD LTV
PROPERTY TYPE PROPERTIES PROPERTIES BALANCE BALANCE DSCR U/W DSCR LTV RATIO RATIO
------------- ---------- ---------- -------------- ------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily.......... 100 49.8% $ 496,435,092 48.6% 1.41x 1.23/2.90 74.5% 27.2/82.8
Retail............... 57 28.4% $ 306,236,809 30.0% 1.47x 1.22/2.69 71.0% 36.2/79.8
Hotel................ 7 3.5% $ 49,939,192 4.9% 1.67x 1.57/1.94 66.7% 51.8/71.2
Industrial........... 2 1.0% $ 43,867,380 4.3% 1.35x 1.32/1.38 79.9% 79.9/79.9
Office............... 13 6.5% $ 42,886,497 4.2% 1.55x 1.42/1.78 69.7% 50.7/79.8
Health Care.......... 8 4.0% $ 40,719,583 4.0% 1.92x 1.52/4.24 60.8% 33.3/72.1
Franchise
Restaurant......... 12 6.0% $ 33,219,904 3.3% 1.56x 1.31/1.77 63.9% 58.3/67.6
Mini Storage......... 1 0.5% $ 4,029,207 0.4% 1.19x 1.19/1.19 74.1% 74.1/74.1
Golf Course.......... 1 0.5% $ 3,266,894 0.3% 1.60x 1.60/1.60 57.9% 57.9/57.9
--- ----- -------------- ----- ----- ---------- ---- ----------
Total/ Wtd Avg....... 201 100.0% $1,020,600,558 100.0% 1.47x 1.19/4.24 72.2% 27.2/82.8
=== ===== ============== ===== ===== ========== ==== ==========
<CAPTION>
WEIGHTED
AVERAGE
MORTGAGE
PROPERTY TYPE RATE
------------- --------
<S> <C>
Multifamily.......... 7.497%
Retail............... 7.693%
Hotel................ 8.790%
Industrial........... 7.100%
Office............... 7.909%
Health Care.......... 8.559%
Franchise
Restaurant......... 8.450%
Mini Storage......... 8.830%
Golf Course.......... 8.370%
-----
Total/ Wtd Avg....... 7.701%
=====
</TABLE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
WEIGHTED
NUMBER % OF WEIGHTED AVERAGE WEIGHTED
RANGE OF OF % OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
CUT-OFF DATE MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
BALANCES LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 568,681 - $ 999,999.... 6 3.0% $ 4,721,758 0.5% 1.61x 55.1% 8.521%
$1,000,000 - $1,999,999.... 36 17.9% $ 55,425,966 5.4% 1.50x 71.3% 7.934%
$2,000,000 - $2,999,999.... 52 25.9% $ 131,047,576 12.8% 1.55x 67.5% 8.121%
$3,000,000 - $3,999,999.... 27 13.4% $ 92,838,498 9.1% 1.53x 70.4% 7.832%
$4,000,000 - $4,999,999.... 31 15.4% $ 138,958,274 13.6% 1.51x 71.4% 7.836%
$5,000,000 - $7,499,999.... 19 9.5% $ 114,323,430 11.2% 1.47x 72.3% 7.622%
$7,500,000 - $9,999,999.... 9 4.5% $ 75,592,611 7.4% 1.39x 75.5% 7.640%
$10,000,000 - $14,999,999.... 5 2.5% $ 56,223,861 5.5% 1.49x 71.3% 7.881%
$15,000,000 - $19,999,999.... 9 4.5% $ 157,529,446 15.4% 1.38x 77.3% 7.548%
$20,000,000 - $29,999,999.... 6 3.0% $ 157,437,960 15.4% 1.39x 76.0% 7.404%
$35,000,000 - $36,501,176.... 1 0.5% $ 36,501,176 3.6% 1.71x 54.5% 6.915%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg................ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
A-7
<PAGE> 126
GEOGRAPHIC DISTRIBUTION(1)
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF % OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGED MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTY LOCATION PROPERTIES PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
----------------- ---------- ---------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Florida.............. 36 17.9% $ 228,146,632 22.4% 1.49x 70.1% 7.791%
Dade County........ 4 2.0% $ 59,057,888 5.8% 1.39x 76.3% 7.398%
Walton County...... 1 0.5% $ 36,501,176 3.6% 1.71x 54.5% 6.915%
Broward County..... 10 5.0% $ 31,608,451 3.1% 1.45x 69.5% 8.377%
Osceola County..... 1 0.5% $ 29,190,339 2.9% 1.67x 68.7% 8.735%
Orange County...... 3 1.5% $ 21,569,600 2.1% 1.39x 74.3% 8.354%
Other FL
Counties......... 17 8.5% $ 50,219,178 4.9% 1.42x 73.5% 7.729%
California........... 21 10.4% $ 158,196,661 15.5% 1.39x 73.3% 7.430%
Los Angeles
County........... 5 2.5% $ 48,339,663 4.7% 1.36x 74.9% 7.467%
San Diego County... 2 1.0% $ 29,961,657 2.9% 1.28x 72.2% 7.545%
San Francisco
County........... 1 0.5% $ 18,714,507 1.8% 1.47x 74.9% 6.815%
San Joaquin
County........... 2 1.0% $ 8,485,002 0.8% 1.68x 68.2% 7.253%
Santa Clara
County........... 1 0.5% $ 8,314,023 0.8% 1.30x 70.2% 8.470%
Other CA Counties.. 10 5.0% $ 44,381,809 4.3% 1.42x 73.3% 7.411%
NC................... 10 5.0% $ 101,161,511 9.9% 1.40x 74.0% 7.329%
GA................... 11 5.5% $ 50,898,740 5.0% 1.44x 72.8% 7.551%
IN................... 16 8.0% $ 49,638,043 4.9% 1.55x 66.5% 8.261%
LA................... 8 4.0% $ 45,470,693 4.5% 1.43x 78.3% 7.320%
TX................... 10 5.0% $ 40,178,127 3.9% 1.39x 75.0% 8.123%
VA................... 9 4.5% $ 36,658,337 3.6% 1.51x 72.5% 7.751%
NV................... 5 2.5% $ 32,940,080 3.2% 1.41x 76.7% 7.901%
NY................... 9 4.5% $ 30,774,197 3.0% 1.67x 68.7% 8.494%
MO................... 8 4.0% $ 28,608,668 2.8% 1.44x 74.9% 7.523%
NM................... 7 3.5% $ 23,033,121 2.3% 1.45x 74.2% 7.795%
UT................... 7 3.5% $ 22,304,347 2.2% 1.45x 71.5% 7.338%
CO................... 3 1.5% $ 22,248,797 2.2% 1.62x 72.0% 7.220%
AZ................... 2 1.0% $ 20,192,744 2.0% 1.38x 77.7% 7.798%
MD................... 6 3.0% $ 16,359,504 1.6% 1.48x 68.6% 7.797%
MA................... 6 3.0% $ 14,831,559 1.5% 1.46x 72.9% 7.642%
OR................... 3 1.5% $ 11,854,152 1.2% 1.53x 71.7% 8.053%
CT................... 3 1.5% $ 10,316,048 1.0% 1.38x 71.4% 7.581%
MS................... 1 0.5% $ 10,156,015 1.0% 1.44x 69.6% 7.900%
OK................... 2 1.0% $ 9,983,868 1.0% 1.60x 74.2% 8.520%
WA................... 3 1.5% $ 9,931,868 1.0% 1.43x 67.3% 7.209%
SC................... 4 2.0% $ 9,317,382 0.9% 1.47x 70.3% 8.197%
TN................... 3 1.5% $ 8,846,141 0.9% 1.68x 64.6% 7.987%
MI................... 2 1.0% $ 7,696,392 0.8% 1.38x 70.5% 9.131%
NE................... 1 0.5% $ 4,484,109 0.4% 4.24x 39.3% 7.330%
DC................... 1 0.5% $ 4,136,192 0.4% 1.37x 79.2% 7.780%
DE................... 1 0.5% $ 3,958,922 0.4% 1.25x 74.7% 8.295%
OH................... 1 0.5% $ 3,392,040 0.3% 1.46x 78.0% 7.270%
NJ................... 1 0.5% $ 2,890,743 0.3% 1.40x 60.6% 7.965%
KS................... 1 0.5% $ 1,994,924 0.2% 1.47x 78.5% 7.370%
--- ----- -------------- ----- ---- ---- -----
Totals/
Wtd Avg............ 201 100% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ==== ==== =====
</TABLE>
- ---------------
(1) States or district, and, for certain California and Florida Mortgaged
Properties, counties in which the respective Mortgaged Properties are
located.
A-8
<PAGE> 127
UNDERWRITING DEBT SERVICE COVERAGE RATIO
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF % OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
UNDERWRITING MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
DSCRS LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
1.19x - 1.29x........ 8 4.0% $ 54,065,904 5.3% 1.24x 74.7% 7.765%
1.30x - 1.34x........ 19 9.5% $ 172,389,392 16.9% 1.32x 76.4% 7.458%
1.35x - 1.39x........ 43 21.4% $ 262,801,414 25.7% 1.38x 77.3% 7.608%
1.40x - 1.49x........ 64 31.8% $ 237,588,077 23.3% 1.44x 73.0% 7.638%
1.50x - 1.59x........ 26 12.9% $ 99,105,940 9.7% 1.55x 68.9% 8.092%
1.60x - 1.69x........ 21 10.4% $ 103,242,530 10.1% 1.64x 67.4% 8.250%
1.70x - 1.79x........ 8 4.0% $ 56,426,156 5.5% 1.72x 58.4% 7.414%
1.80x - 1.89x........ 3 1.5% $ 9,206,470 0.9% 1.82x 57.9% 8.500%
1.90x - 1.99x........ 2 1.0% $ 5,029,825 0.5% 1.92x 58.7% 7.980%
2.00x - 2.99x........ 6 3.0% $ 16,260,739 1.6% 2.40x 42.5% 7.152%
3.00x - 4.24x........ 1 0.5% $ 4,484,109 0.4% 4.24x 39.3% 7.330%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg........ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
CUT-OFF DATE LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF % OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
RANGE OF CUT-OFF MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
DATE LTV RATIO(S) LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
----------------- --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
27.2% - 49.9%........ 9 4.5% $ 23,337,482 2.3% 2.57x 37.1% 7.599%
50.0% - 59.9%........ 12 6.0% $ 77,916,520 7.6% 1.68x 55.5% 7.593%
60.0% - 64.9%........ 18 9.0% $ 43,545,717 4.3% 1.57x 62.7% 8.166%
65.0% - 69.9%........ 40 19.9% $ 159,620,176 15.6% 1.56x 67.8% 8.150%
70.0% - 74.9%........ 48 23.9% $ 273,273,752 26.8% 1.40x 73.4% 7.846%
75.0% - 79.9%........ 67 33.3% $ 390,803,946 38.3% 1.38x 78.4% 7.396%
80.0% - 83.0%........ 7 3.5% $ 52,102,966 5.1% 1.38x 80.9% 7.663%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg........ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
MATURITY DATE LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
WEIGHTED
RANGE OF NUMBER % OF WEIGHTED AVERAGE WEIGHTED
MATURITY OF % OF AGGREGATE INITIAL AVERAGE MATURITY AVERAGE
DATE LTV MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
RATIO(S) LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------- --------- -------- -------------- ------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fully amortizing............ 1 0.5% $ 889,628 0.1% 2.06x 0.0% 7.620%
26.7% - 49.9%............... 31 15.4% $ 122,630,037 12.0% 1.82x 42.2% 7.686%
50.0% - 59.9%............... 46 22.9% $ 159,741,180 15.7% 1.53x 56.1% 7.975%
60.0% - 64.9%............... 35 17.4% $ 163,910,329 16.1% 1.47x 62.7% 8.109%
65.0% - 69.9%............... 50 24.9% $ 350,326,685 34.3% 1.39x 67.4% 7.461%
70.0% - 75.8%............... 38 18.9% $ 223,102,700 21.9% 1.38x 72.2% 7.589%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg............... 201 100.0% $1,020,600,558 100.0% 1.47x 62.9% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
A-9
<PAGE> 128
MORTGAGE RATES
<TABLE>
<CAPTION>
WEIGHTED
NUMBER % OF WEIGHTED AVERAGE WEIGHTED
RANGE OF OF % OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
MORTGAGE MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
RATES LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------- --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
6.720% - 6.999%.............. 11 5.5% $ 131,980,785 12.9% 1.54x 66.9% 6.857%
7.000% - 7.249%.............. 24 11.9% $ 209,098,006 20.5% 1.43x 75.4% 7.106%
7.250% - 7.499%.............. 32 15.9% $ 124,188,933 12.2% 1.52x 75.0% 7.365%
7.500% - 7.749%.............. 32 15.9% $ 163,751,514 16.0% 1.37x 75.3% 7.601%
7.750% - 7.999%.............. 28 13.9% $ 98,318,595 9.6% 1.48x 72.1% 7.887%
8.000% - 8.499%.............. 37 18.4% $ 136,628,070 13.4% 1.48x 69.6% 8.318%
8.500% - 8.999%.............. 22 10.9% $ 105,569,470 10.3% 1.51x 69.7% 8.736%
9.000% - 9.499%.............. 10 5.0% $ 42,534,678 4.2% 1.52x 67.1% 9.213%
9.500% - 9.830%.............. 5 2.5% $ 8,530,508 0.8% 1.54x 68.5% 9.736%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg................ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
ORIGINAL TERM TO MATURITY
<TABLE>
<CAPTION>
WEIGHTED
NUMBER % OF WEIGHTED AVERAGE WEIGHTED
ORIGINAL TERM OF % OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
TO MATURITY MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
(MONTHS) LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------- --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
60.......................... 3 1.5% $ 28,963,707 2.8% 1.37x 76.8% 7.537%
84.......................... 12 6.0% $ 141,545,500 13.9% 1.46x 74.2% 7.600%
108.......................... 1 0.5% $ 3,091,388 0.3% 1.42x 74.2% 7.870%
120.......................... 185 92.0% $ 846,999,963 83.0% 1.48x 71.6% 7.722%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg................ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
ORIGINAL AMORTIZATION TERM (1)
<TABLE>
<CAPTION>
WEIGHTED
ORIGINAL NUMBER % OF WEIGHTED AVERAGE WEIGHTED
AMORTIZATION OF % OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
TERM MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
(MONTHS) LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
120.......................... 1 0.5% $ 889,628 0.1% 2.06x 27.2% 7.620%
180.......................... 1 0.5% $ 3,120,998 0.3% 1.42x 55.7% 7.380%
207.......................... 1 0.5% $ 2,988,804 0.3% 1.77x 63.3% 8.450%
219.......................... 1 0.5% $ 2,753,371 0.3% 1.69x 66.3% 8.450%
240.......................... 17 8.5% $ 46,893,599 4.6% 1.59x 65.1% 8.304%
300.......................... 65 32.3% $ 303,062,022 29.7% 1.58x 66.8% 8.013%
360.......................... 115 57.2% $ 660,892,136 64.8% 1.41x 75.3% 7.510%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg................ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
REMAINING TERM TO MATURITY
<TABLE>
<CAPTION>
RANGE OF WEIGHTED
REMAINING NUMBER % OF WEIGHTED AVERAGE WEIGHTED
TERMS TO OF % OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
MATURITY MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
(MONTHS) LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
--------- --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
40 - 59.................... 3 1.5% $ 28,963,707 2.8% 1.37x 76.8% 7.537%
60 - 83.................... 11 5.5% $ 135,145,500 13.2% 1.46x 74.4% 7.638%
84 - 119.................... 185 92.0% $ 825,441,351 80.9% 1.48x 71.5% 7.747%
120 - 180.................... 2 1.0% $ 31,050,000 3.0% 1.38x 76.1% 6.881%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg................ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
A-10
<PAGE> 129
YEAR OF MORTGAGE ORIGINATION
<TABLE>
<CAPTION>
WEIGHTED
NUMBER % OF WEIGHTED AVERAGE WEIGHTED
OF % OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
YEAR OF MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
ORIGINATION LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
----------- --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
1996......................... 5 2.5% $ 33,018,923 3.2% 1.36x 73.4% 8.799%
1997......................... 183 91.0% $ 840,102,484 82.3% 1.49x 71.4% 7.778%
1998......................... 13 6.5% $ 147,479,151 14.5% 1.38x 76.2% 7.015%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg................ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
YEAR OF MORTGAGE MATURITY
<TABLE>
<CAPTION>
WEIGHTED
NUMBER % OF WEIGHTED AVERAGE WEIGHTED
OF % OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
YEAR OF MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
MATURITY LOANS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------- --------- -------- -------------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
2002......................... 3 1.5% $ 28,963,707 2.8% 1.37x 76.8% 7.537%
2003......................... 1 0.5% $ 3,084,599 0.3% 1.41x 76.3% 9.040%
2004......................... 6 3.0% $ 67,483,955 6.6% 1.52x 70.9% 8.154%
2005......................... 5 2.5% $ 70,976,946 7.0% 1.41x 77.2% 7.010%
2006......................... 1 0.5% $ 3,091,388 0.3% 1.42x 74.2% 7.870%
2007......................... 133 66.2% $ 523,890,949 51.3% 1.47x 72.2% 8.071%
2008......................... 52 25.9% $ 323,109,014 31.7% 1.49x 70.7% 7.157%
--- ----- -------------- ----- ----- ---- -----
Total/Wtd Avg................ 201 100.0% $1,020,600,558 100.0% 1.47x 72.2% 7.701%
=== ===== ============== ===== ===== ==== =====
</TABLE>
A-11
<PAGE> 130
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT AND TENANT IMPROVEMENT RESERVE ACCOUNTS
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE ANNUAL
TO CAPITAL IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT TO REPLACEMENT REPLACEMENT
NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES RESERVES
- ------ --------------------------- ------------- --------------- --------------- --------------- -----------
<C> <S> <C> <C> <C> <C> <C>
50165 La Terraza Apartments Multifamily $ 6,250.00 $ 109,119.62 $ 52,260.00
50530 University Towers Multifamily $ 27,187.50 $ 27,187.50 $140,400.00
50230 Playa Pacifica Apartments Multifamily $ 40,100.00 $ 40,232.52 $ 22,000.00 $ 61,845.00
50362 Trinity Towers Multifamily $141,480.00
50368 Le Club Apartments Multifamily $231,100.00 $2,322,028.11
50204 La Palma Apartments Multifamily $132,068.04
50005 Somerset Pointe Apartments Multifamily $131,722.00 $116,550.00 $ 99,444.00
50453 Buckingham Station Apts Multifamily $ 97,380.00
50446 TownPark Crossing Multifamily $ 30,300.00
Apartments
50363 Montgomery Park Apartments Multifamily $ 75,206.76
50299 Brandywood Park Apartments Multifamily $ 29,400.00
50305 Briarwood Park Apts. Multifamily $ 14,400.00
50333 Arch View Apartments Multifamily $ 28,230.00
50417 Riverwood Apartments Multifamily $ 75,000.00 $ 84,504.00
50048 Hidden Brooks Apartments Multifamily $ 89,775.00 $ 60,000.00 $ 40,200.00
50555 Loch Raven Apartments Multifamily $ 87,552.00
50020 Idlewild Apartments Multifamily $493,756.00 $117,650.04
50054 Vista Springs Apartments Multifamily $ 22,800.00 $ 104.86 $ 43,500.00
50056 Crystal Lakes Apartments Multifamily $417,000.00 $ 174,398.18 $127,410.00
50606 The Landings at Bivens Arm Multifamily $ 29,532.00
Apartments
50264 Gables at Mountain Park Multifamily $ 43,125.00 $ 43,358.12 $ 68,000.00 $ 19,350.00
50494 Biscayne Apartments Multifamily $120,625.00 $ 120,625.00 $ 91,760.04
50338 Bluebonnet Place Multifamily $ 30,000.00 $ 41,400.00
50420 Maison Bocage Apartments Multifamily $ 20,799.96
50546 Heatherton Estates Multifamily $ 30,000.00 $ 68,096.04
Apartments
50416 Sierra Village Apartments Multifamily $ 32,400.00
50452 Alder Ridge Apartments Multifamily $ 22,320.00
50451 Sutter Ridge Apartments Multifamily $ 19,000.00 $ 19,000.00
50337 Cimarron Place Multifamily $ 6,400.00 $ 52,200.00
50465 Harborscape Apartments Multifamily $ 5,000.00 $ 13,200.00
50334 Gardens at Lakewood Apts Multifamily $ 27,875.00 $ 27,961.93 $ 39,996.00
50223 Oak Park @ Briar Creek Multifamily $ 50,375.00 $ 51,203.30 $ 81,972.00
50432 Lacey Corporate Park Apts. Multifamily $200,000.00 $ 48,240.00
50222 Oak Park at Nations Ford Multifamily $ 63,250.00 $ 64,290.00 $ 83,022.00
<CAPTION>
CURRENT ANNUAL CURRENT
BALANCE IN TAX AND INITIAL DEPOSIT DEPOSIT TO BALANCE IN
LOAN REPLACEMENT INSURANCE TO TI/LC TI/LC TI/LC
NUMBER RESERVES ESCROW RESERVES RESERVES RESERVES REPORT DATE
- ------ ------------ --------- --------------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
50165 $ 13,088.61 Yes 02/11/98
50530 Yes 02/20/98
50230 $ 32,388.15 Yes 02/12/98
50362 $141,480.70 Yes 02/17/98
50368 Yes 02/12/98
50204 $ 55,164.30 Yes 02/11/98
50005 $216,874.16 Yes 02/17/98
50453 $ 8,115.00 Yes 02/12/98
50446 $ 2,525.00 Yes 02/11/98
50363 $ 12,560.27 Yes 02/11/98
50299 $ 2,458.79 Yes 02/11/98
50305 $ 2,404.63 Yes 02/11/98
50333 $ 4,705.00 Yes 02/17/98
50417 $ 82,042.00 Yes 02/12/98
50048 $ 88,338.64 Yes 02/12/98
50555 Yes 02/18/98
50020 $ 11,132.49 Yes 02/18/98
50054 $ 11,153.97 Yes 02/12/98
50056 $ 74,780.94 Yes 02/11/98
50606 Yes 02/18/98
50264 $ 73,208.47 Yes 02/11/98
50494 Yes 02/18/98
50338 $ 40,449.72 Yes 02/17/98
50420 Yes 02/11/98
50546 Yes 02/18/98
50416 $ 5,400.00 Yes 02/12/98
50452 Yes 02/17/98
50451 Yes 02/17/98
50337 $ 13,055.72 Yes 02/17/98
50465 $ 1,100.00 Yes 02/12/98
50334 $ 9,904.34 Yes 02/17/98
50223 $ 20,559.34 Yes 02/11/98
50432 $200,000.00 Yes 02/12/98
50222 $ 20,822.69 Yes 02/11/98
</TABLE>
B-1
<PAGE> 131
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT AND TENANT IMPROVEMENT RESERVE ACCOUNTS
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE ANNUAL
TO CAPITAL IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT TO REPLACEMENT REPLACEMENT
NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES RESERVES
- ------ --------------------------- ------------- --------------- --------------- --------------- -----------
<C> <S> <C> <C> <C> <C> <C>
50325 Oaks at Timuquana Multifamily $ 32,250.00 $ 32,458.27 $ 56,088.00
50304 Markey Meadows Townhomes Multifamily $ 3,000.00 $ 3,015.95
50219 Brighton Vista Apartments Multifamily $ 11,556.00
50049 American House -- Lakeside Multifamily $ 37,500.00 $ 18,228.00
50067 Tramway Village Apartments Multifamily $187,653.00 $ 90,000.00 $ 31,500.00
50342 Silver Manor Apartments Multifamily $ 25,440.00
50365 Sandpiper Village Multifamily $ 47,256.96
Apartments
50373 March West Commons Multifamily $ 34,560.00
Apartments
50120 250 Main Street Apartments Multifamily $ 10,750.00 $ 10,801.26 $ 42,800.04
50209 Mondrian Apartments Multifamily $ 32,500.00 $ 32,687.35 $ 10,000.00 $ 25,599.96
50597 La Aloma Apartments Multifamily $ 23,437.50 50,597.64
50335 The Terraces II At Metairie Multifamily $ 35,000.00 $ 35,772.00
50220 Cedar Trace Apartments Multifamily $ 50,000.00 $ 45,000.00
50468 Colony Apartments Multifamily $ 22,272.00
50431 Ezzard Charles Apartments Multifamily $ 64,800.00
50408 Placentia Meadows Multifamily $ 56,763.00 $ 20,040.00
50587 Summerfield Apts Multifamily $ 5,125.00 $ 5,125.00 $ 33,000.00 $ 22,359.96
50326 Willow Court Apts. Multifamily $124,884.00 $ 125,327.79 $ 5,000.00 $ 21,528.00
50197 Crescent Woods Apartments Multifamily $ 10,000.00 $ 18,504.00
50057 American House -- Multifamily $ 31,250.00 $ 31,739.73 $ 15,576.00
Bloomfield
50006 Dekalb Apartments Multifamily $ 33,750.00 $ 29,259.96
50340 The Spires of Sherwood Multifamily $ 20,000.00 $ 27,900.00
Apartments
50087 Parkside Apartments Multifamily $ 11,025.00
50093 Cedar Ave and Hampden Place Multifamily $ 42,125.00 $ 42,584.27 $ 34,832.04
Apts
50242 Hudson Realty Apartments Multifamily $ 28,750.00 $ 30,000.00 $ 41,000.04
50250 Bartlett Heights Apartments Multifamily
50392 12th Street Apartments Multifamily $100,487.50 $ 101,148.32 $ 25,425.00
50410 Spanish Trace Multifamily $ 38,875.00 $ 38,942.10 $ 31,200.00
50249 Moana Apartments Multifamily $ 26,700.00
50254 Greenview Apartments Multifamily $ 50,000.00
50028 Bella Vista Apartments Multifamily $ 19,751.00 $ 20,033.78 $ 15,000.00 $ 29,700.00
50163 Silver Lake Apartments Multifamily $100,000.00
50277 Lakeview Manor Apartments Multifamily $ 14,520.00
<CAPTION>
CURRENT ANNUAL CURRENT
BALANCE IN TAX AND INITIAL DEPOSIT DEPOSIT TO BALANCE IN
LOAN REPLACEMENT INSURANCE TO TI/LC TI/LC TI/LC
NUMBER RESERVES ESCROW RESERVES RESERVES RESERVES REPORT DATE
- ------ ------------ --------- --------------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
50325 $ 18,722.25 Yes 02/11/98
50304 Yes 02/11/98
50219 $ 2,894.08 Yes 02/11/98
50049 $ 13,755.86 Yes 02/12/98
50067 $120,784.89 Yes 02/11/98
50342 $ 4,240.00 Yes 02/12/98
50365 Yes 02/11/98
50373 Yes 02/11/98
50120 $ 10,705.68 Yes 02/17/98
50209 $ 18,600.91 Yes 02/17/98
50597 $ 27,654.17 Yes 02/11/98
50335 $ 41,046.42 Yes 02/17/98
50220 $ 61,839.18 Yes 02/17/98
50468 Yes 02/12/98
50431 $ 10,807.10 Yes 02/17/98
50408 $ 3,340.00 Yes 02/12/98
50587 $ 34,863.33 Yes 02/12/98
50326 $ 10,402.11 Yes 02/17/98
50197 $ 16,236.53 Yes 02/17/98
50057 $ 10,437.47 Yes 02/12/98
50006 $ 15,192.04 Yes 02/11/98
50340 $ 24,689.46 Yes 02/17/98
50087 $ 5,519.97 Yes 02/11/98
50093 $ 17,496.96 Yes 02/11/98
50242 $ 31,294.49 Yes 02/17/98
50250 Yes 02/11/98
50392 $ 4,244.82 Yes 02/11/98
50410 $ 2,600.00 Yes 02/11/98
50249 $ 6,675.00 Yes 02/12/98
50254 $ 50,658.98 Yes 02/11/98
50028 $ 35,118.63 Yes 02/12/98
50163 $ 60,746.80 Yes 02/11/98
50277 $ 4,843.40 Yes 02/12/98
</TABLE>
B-2
<PAGE> 132
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT AND TENANT IMPROVEMENT RESERVE ACCOUNTS
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE ANNUAL
TO CAPITAL IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT TO REPLACEMENT REPLACEMENT
NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES RESERVES
- ------ --------------------------- ------------- --------------- --------------- --------------- -----------
<C> <S> <C> <C> <C> <C> <C>
50218 Remington Forest Apartments Multifamily $ 48,046.25 $ 48,836.26 $ 18,600.00
50462 Alden Trace Apartments Multifamily $ 20,000.00 $ 35,499.96
50091 West 176th Street Multifamily $ 35,375.00 $ 35,760.66 $ 17,346.00
50147 River Island Apartments Multifamily $ 11,187.50 $ 11,356.37 $ 51,840.00
50140 Karen Gardens Apartments Multifamily $136,895.00 $ 117,716.50 $ 25,000.00 $ 13,596.00
50569 Charlestown Properties Multifamily $ 5,925.00 $ 5,927.89 $ 15,000.00
50450 Riverside Apartments Multifamily $ 3,125.00 $ 3,128.41 $ 3,500.00 $ 5,496.00
50414 Falcon House Apartments Multifamily $ 15,000.00 $ 16,404.00
50503 Fremont Court Apts Multifamily $ 44,860.00 $ 6,504.00
50014 The Chimneys Multifamily $ 2,500.00 $ 2,600.09 $ 18,360.00
50200 Cedar Ridge Apartments Multifamily $ 2,500.00 $ 2,521.97 $ 14,400.00
50430 The Wedge Apartments Multifamily $ 19,551.96
50306 Oasis Apartments Multifamily $ 43,718.75 $ 43,945.31 $ 3,600.00 $ 30,099.96
50253 Jefferson Arms Apartments Multifamily $ 13,438.00 $ 75,000.00 $ 24,000.00
50080 Vero Beach Landings South Multifamily
50081 Vero Beach Landings North Multifamily
50377 Rolling Hills Apts. Multifamily $ 38,000.00 $ 38,120.57 $ 10,000.00 $ 28,800.00
50404 Oak Hill Apartments Multifamily $ 16,200.00
50260 Westview Apartments Multifamily $ 22,812.50 $ 23,187.61 $ 12,180.00
50489 Raintree Apartments Multifamily $ 4,392.00
50309 Park Regency Apartments Multifamily $114,313.00 $ 114,852.80 $ 50,000.00 $ 21,000.00
50339 Madelaine Manor Townhomes Multifamily $ 13,596.00
50501 Loma Vista Apts Multifamily $ 16,800.00
50490 Harborside Apartments Multifamily $ 37,500.00 $ 37,546.97 $ 6,500.00 $ 11,000.04
50063 Tremont Manor Multifamily $ 23,875.00 $ 13,200.00
50399 63-67 West 107th St. Apts. Multifamily $ 5,000.00 $ 5,011.92 $ 10,208.04
50412 Landings & Marina Multifamily $ 10,404.00
50217 Donaree Village Apartments Multifamily $ 3,750.00 $ 3,789.47 $ 90,400.00 $ 46,737.96
50059 Twins Apartments Multifamily $ 9,500.00 $ 9.09
50318 Enfield Court Apts. Multifamily $ 7,395.00
50469 Southport Apartments Multifamily $ 14,675.04
50060 Lisa Apartments Multifamily $ 3,625.00
50215 Lexington Place Multifamily
50481 Silver Sands Factory Stores Retail $ 42,984.00
50604 Flagler Park Plaza S/C Retail $ 50,000.00 $ 55,820.28
50488 Mall St. Vincent Retail $ 20,076.00
<CAPTION>
CURRENT ANNUAL CURRENT
BALANCE IN TAX AND INITIAL DEPOSIT DEPOSIT TO BALANCE IN
LOAN REPLACEMENT INSURANCE TO TI/LC TI/LC TI/LC
NUMBER RESERVES ESCROW RESERVES RESERVES RESERVES REPORT DATE
- ------ ------------ --------- --------------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
50218 $ 6,237.77 Yes 02/11/98
50462 $ 25,929.38 Yes 02/12/98
50091 $ 8,713.31 Yes 02/11/98
50147 $ 13,005.40 Yes 02/11/98
50140 $ 30,835.58 Yes 02/17/98
50569 $ 15,007.32 Yes 02/17/98
50450 $ 3,961.81 Yes 02/17/98
50414 $ 17,760.38 Yes 02/12/98
50503 $ 44,906.51 Yes 02/17/98
50014 $ 14,032.31 Yes 02/11/98
50200 $ 1,204.31 Yes 02/11/98
50430 $ 46,046.88 Yes 02/11/98
50306 $ 6,126.99 Yes 02/11/98
50253 $ 59,493.45 Yes 02/12/98
50080 Yes 02/20/98
50081 Yes 02/20/98
50377 $ 17,234.88 Yes 02/17/98
50404 $ 2,702.87 Yes 02/11/98
50260 $ 4,084.60 Yes 02/11/98
50489 $ 50,366.00 Yes 02/11/98
50309 $ 55,489.42 Yes 02/12/98
50339 $ 3,401.48 Yes 02/17/98
50501 $ 1,400.00 Yes 02/18/98
50490 $ 7,424.80 Yes 02/17/98
50063 $ 3,461.49 Yes 02/11/98
50399 $ 850.67 Yes 02/11/98
50412 $ 1,734.00 Yes 02/12/98
50217 $ 95,259.20 Yes 02/11/98
50059 No 02/11/98
50318 $ 1,232.50 Yes 02/11/98
50469 $ 2,245.84 Yes 02/11/98
50060 $ 3.46 No 02/11/98
50215 No 02/18/98
50481 $ 3,582.00 Yes $100,000.00 $100,005.42 02/17/98
50604 $ 50,000.00 Yes 02/18/98
50488 $ 1,673.00 Yes $526,667.00 $526,695.57 02/17/98
</TABLE>
B-3
<PAGE> 133
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT AND TENANT IMPROVEMENT RESERVE ACCOUNTS
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE ANNUAL
TO CAPITAL IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT TO REPLACEMENT REPLACEMENT
NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES RESERVES
- ------ --------------------------- ------------- --------------- --------------- --------------- -----------
<C> <S> <C> <C> <C> <C> <C>
50021 International Drive Value Retail $ 7,500.00 $ 9,297.60
Center
50131 Copperwood Shopping Center Retail $ 290,941.43 $ 7,968.00
50243 Towers Shopping Center Retail $ 41,772.96
50328 East Village Square Retail $ 11,040.00
50464 Flamingo Market Place Retail $ 46,718.75 $ 47,134.67 $ 16,545.00
50132 Fashion Mall Commons Retail $ 11,000.04
50153 Village at Woodland Hills Retail $ 51,188.00 $ 68,964.00
50699 Parkway Village S/C Retail $ 7,512.00 $ 40,941.96
50246 Newberry Crossing Retail $ 27,768.00
50262 Breezewood Center Retail $ 10,116.00
50301 Foodsco Supermarket Retail $ 5,947.80
50293 Jumbo Sports #53 Retail $ 4,260.00
50252 Prosperity Center Retail $ 9,672.00
50442 Borders Retail Center Retail $ 4,665.96
50138 Hunt Club Corners Shopping Retail $ 47,200.00 $ 48,203.93 $137,692.00 $ 28,441.32
Center
50289 Whalley Commons Retail $ 5,523.00
50055 Ruisseau Village Retail $ 30,312.50 $ 30,313.00 $ 49,223.16
50134 Gallery at Rivergate Retail $ 6,250.00 $ 6,381.04 $ 20,123.28
50429 Peachtree Paces Retail $ 4,342.32
50314 Sunset and 97th Retail $ 7,487.50 $ 7,561.30 $ 5,095.44
50199 Oyster Point Square Retail $ 28,652.04
Shopping Center
50471 Ajax Mountain Building Retail $ 16,562.50 $ 5,304.00
50303 Jumbo Sports #57 Retail $ 3,486.00
50113 Centre South Shopping Retail $ 4,848.00
Center
50513 Macey's Shopping Center Retail $ 13,060.80
50612 Eastchester Market Shopping Retail $ 4,944.00
Center
50271 South Salisbury Plaza Retail $ 10,033.08
Shopping Center
50161 Putnam County Plaza Retail
50329 Skillman Audelia Shopping Retail $ 8,436.00
Center
50266 The Paler Development Retail $ 24,125.00 $ 24,489.14 $ 9,017.04
<CAPTION>
CURRENT ANNUAL CURRENT
BALANCE IN TAX AND INITIAL DEPOSIT DEPOSIT TO BALANCE IN
LOAN REPLACEMENT INSURANCE TO TI/LC TI/LC TI/LC
NUMBER RESERVES ESCROW RESERVES RESERVES RESERVES REPORT DATE
- ------ ------------ --------- --------------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
50021 $ 10,307.42 Yes 02/11/98
50131 $ 2,682.18 Yes $441,264.00 02/11/98
50243 $ 3,481.08 Yes 02/11/98
50328 $ 51,945.53 Yes 02/12/98
50464 $ 2,761.16 Yes 02/11/98
50132 $ 916.67 Yes 02/11/98
50153 $ 28,803.16 Yes 02/12/98
50699 Yes 02/11/98
50246 $ 2,314.00 Yes $150,000.00 $ 30,000.00 $152,631.51 02/17/98
50262 $ 3,376.20 Yes 02/12/98
50301 $ 992.55 Yes 02/18/98
50293 $ 1,068.81 Yes 02/11/98
50252 $ 1,612.00 Yes 02/12/98
50442 Yes 02/20/98
50138 $152,630.96 Yes 02/11/98
50289 $ 460.25 Yes 02/11/98
50055 $ 32,821.87 Yes 02/11/98
50134 $ 8,450.52 Yes $100,000.00 02/11/98
50429 $ 361.86 Yes 02/11/98
50314 $ 424.85 Yes 02/11/98
50199 $ 7,170.38 Yes 02/12/98
50471 $ 885.53 Yes 02/20/98
50303 $ 874.63 Yes 02/11/98
50113 $ 2,447.01 Yes 02/20/98
50513 $ 46,401.00 Yes 02/11/98
50612 $ 412.00 Yes 02/12/98
50271 $ 1,675.07 Yes 02/11/98
50161 Yes 02/11/98
50329 $ 2,110.63 Yes 02/12/98
50266 $ 2,261.67 Yes 02/20/98
</TABLE>
B-4
<PAGE> 134
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT AND TENANT IMPROVEMENT RESERVE ACCOUNTS
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE ANNUAL
TO CAPITAL IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT TO REPLACEMENT REPLACEMENT
NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES RESERVES
- ------ --------------------------- ------------- --------------- --------------- --------------- -----------
<C> <S> <C> <C> <C> <C> <C>
50116 Price Chopper Plaza Retail $264,375.00 $ 268,365.41 $ 16,841.04
50066 East Lake Shopping Center Retail $ 3,281.00 $ 21,156.00
50128 Chapel Hill Shopping Center Retail $100,000.00 $ 30,000.00
50051 Marketplace @ Tamarac Retail $ 57,500.00 $ 20,232.00
50168 Rialto Shopping Center Retail $ 60,728.00 $ 60,924.49 $ 17,976.00
50186 Princess Jeanne Shopping Retail $193,238.00 $ 26,808.00
Center
50144 Pecos-McLeod Plaza Retail $ 4,404.00
50248 Union Park Shopping Center Retail $ 42,250.00 $ 42,312.09 $ 22,074.96
50245 Pompano Center Retail $ 2,397.00
50007 Fairmont Village Shopping Retail $ 1,098.36
Center
50002 Worth Plaza Retail $ 73,124.00 $ 16,825.10 $ 18,915.96
50158 Norwood Plaza Shopping Retail $ 14,400.00 $ 14,526.57 $ 9,339.96
Center
50443 Westside Plaza Shopping Retail $ 64,812.50 $ 64,812.50 $ 13,545.00
Center
50283 Walgreens at Camino Gardens Retail $ 6,165.96
50095 Vaughn's @ East North Retail $ 70,581.00 $ 15,646.89 $ 10,865.04
50043 Shoppes at Farmville Retail $ 24,718.00 $ 24,939.12 $ 4,380.00
50227 University East Shopping Retail $ 17,308.20
Center
50115 Old National Commons Retail $ 22,512.00 $ 22,930.39 $ 16,422.96
50302 Jumbo Sports #54 Retail $ 1,062.50 $ 1,078.83 $ 2,799.96
50518 Windsor Locks Retail Center Retail $ 2,844.96
50205 Lakewood Shopping Center Retail $ 14,964.48
50061 Riverdale Square Shopping Retail $ 21,219.96
Center
50201 Richland Crossing Shopping Retail $ 625.00 $ 7,482.60
Center
50270 Post Plaza Shopping Center Retail $ 35,156.00 $ 35,554.18 $ 3,384.00
50191 Days Suites Kissimmee Lodge Hotel $ 1,812.50 $ 1,824.42 $500,000.00 $608,460.00
(Main Gate)
50027 Holiday Inn Sunspree Resort Hotel $ 13,625.00 $162,108.00
50247 St. Joseph's Holiday Inn & Hotel $136,170.00
Conference Center
50146 Quality Inn Shenandoah Hotel $ 98,665.00 $ 85,465.84 $ 81,750.00
<CAPTION>
CURRENT ANNUAL CURRENT
BALANCE IN TAX AND INITIAL DEPOSIT DEPOSIT TO BALANCE IN
LOAN REPLACEMENT INSURANCE TO TI/LC TI/LC TI/LC
NUMBER RESERVES ESCROW RESERVES RESERVES RESERVES REPORT DATE
- ------ ------------ --------- --------------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
50116 $ 4,225.38 Yes $225,000.00 $228,396.11 02/11/98
50066 $ 21,519.97 Yes 02/17/98
50128 $103,031.51 Yes 02/20/98
50051 $ 6,963.27 Yes 02/17/98
50168 $ 4,496.54 Yes $ 25,000.00 $ 30,000.00 $ 32,580.68 02/17/98
50186 $ 8,950.47 Yes 02/11/98
50144 Yes 02/11/98
50248 $ 1,839.58 Yes 02/17/98
50245 $ 199.75 Yes 02/17/98
50007 $ 1,111.67 Yes 02/11/98
50002 $ 14,259.24 Yes 02/17/98
50158 $ 1,559.45 Yes 02/20/98
50443 Yes 02/18/98
50283 $ 1,027.66 Yes 02/17/98
50095 $ 6,411.43 Yes 02/11/98
50043 $ 2,566.04 Yes 02/12/98
50227 $ 4,327.05 Yes 02/11/98
50115 $ 8,268.78 Yes 02/11/98
50302 $ 702.50 Yes 02/11/98
50518 Yes 02/11/98
50205 $ 5,036.16 Yes 02/11/98
50061 $ 12,525.09 Yes 02/11/98
50201 $ 1,870.74 Yes 02/12/98
50270 $ 282.75 Yes 02/11/98
50191 $266,073.34 Yes 02/17/98
50027 $ 70,486.32 Yes 02/17/98
50247 $ 22,695.00 Yes 02/17/98
50146 $ 13,690.31 Yes 02/11/98
</TABLE>
B-5
<PAGE> 135
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT AND TENANT IMPROVEMENT RESERVE ACCOUNTS
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE ANNUAL
TO CAPITAL IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT TO REPLACEMENT REPLACEMENT
NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES RESERVES
- ------ --------------------------- ------------- --------------- --------------- --------------- -----------
<C> <S> <C> <C> <C> <C> <C>
50038 Days Inn -- Sellersburg Hotel $104,313.00 $ 107,992.05 $ 48,756.00
50079 Days Inn -- Emmorton Hotel $ 23,499.96
50397 The Baltic Inn Hotel $ 1,062.50 $ 1,062.50
50704 Research Tri-Center South A Industrial $ 18,071.00 $ 18,071.00 $ 40,756.08
50727 Research Tri-Center North B Industrial $138,600.00 $ 173,250.00 $ 30,380.04
50284 River Oaks Medical Office Office $ 15,379.56
50286 101 Rogers Street Office Office $ 78,219.00 $ 47,410.43 $ 11,856.00
Building
50367 10 Park Place Office $ 20,000.00 $ 52,677.96
50239 Hamilton Square Showroom Office $ 2,500.00 $ 2,526.31 $ 20,960.16
50396 8888 LaDue Rd. Office
50288 Ogden Medical Center Office $ 6,250.00 $ 13,800.00
50152 Southern Avenue Office Office $ 16,875.00 $ 8,700.00
Plaza
50405 3-C Office Building Office $ 5,397.00
50474 Corporate Oaks Office Office $ 6,906.25 $ 6,963.26 $ 12,410.00 $ 12,542.64
Building
50390 Witchduck Exchange Office $ 42,123.75 $ 42,297.27 $ 12,865.20
50276 Cameron Office and Office $ 5,040.00
Warehouse
50185 Shrewsbury Center Office $ 2,105.00 $ 2,136.76 $ 1,845.96
50023 Emmorton Office Building Office $ 3,171.00
50370 All Saints Health Care Health Care $ 1,915.00 $ 1,932.34 $ 2,400.00 $ 28,800.00
50241 Palm Gardens Nursing Home Health Care $177,149.00
50485 Bermuda Village Retirement Health Care $ 16,250.00 $ 16,334.21 $ 896.00 $ 5,376.00
Community
50371 Montclair Nursing Center Health Care $ 5,250.00 $ 31,500.00
50092 St. Andrews Care Center Health Care $ 14,566.00 $ 14,628.00
50308 Brooklyn Manor Home for Health Care $109,125.00 $ 109,340.29 $ 54,000.00
Adults
50343 Glisan Care Center Health Care
50022 Belair Residences Health Care $ 44,282.10 $ 16,632.00
50350 Applebee's Store #100 Franchise $ 1,500.00
(East Washington)
50356 Applebee's Store #200 Franchise $ 1,500.00
(Speedway)
50357 Applebee's Store #1900 Franchise $ 1,500.00
(Anderson)
<CAPTION>
CURRENT ANNUAL CURRENT
BALANCE IN TAX AND INITIAL DEPOSIT DEPOSIT TO BALANCE IN
LOAN REPLACEMENT INSURANCE TO TI/LC TI/LC TI/LC
NUMBER RESERVES ESCROW RESERVES RESERVES RESERVES REPORT DATE
- ------ ------------ --------- --------------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
50038 $ 32,971.37 Yes 02/11/98
50079 $ 13,872.18 Yes 02/11/98
50397 $ 275.00 Yes 02/12/98
50704 Yes 02/18/98
50727 Yes 02/18/98
50284 $ 3,850.58 Yes $300,000.00 $300,640.88 02/17/98
50286 $ 1,977.84 Yes 02/17/98
50367 $ 24,408.46 Yes $ 50,000.00 $105,600.00 $ 58,877.79 02/17/98
50239 $ 3,498.93 Yes 02/11/98
50396 No 02/20/98
50288 $ 3,451.69 Yes 02/12/98
50152 $ 3,634.45 Yes 02/11/98
50405 $ 901.71 Yes $ 72,000.00 $ 12,029.50 02/11/98
50474 $ 13,557.94 Yes 02/11/98
50390 $ 1,072.10 Yes 02/11/98
50276 $ 840.00 Yes 02/11/98
50185 $ 463.16 Yes 02/11/98
50023 $ 3,665.88 Yes $ 23,796.96 02/20/98
50370 $ 7,230.34 Yes 02/11/98
50241 $180,492.00 Yes 02/11/98
50485 $ 1,348.76 Yes 02/20/98
50371 $ 7,931.27 Yes 02/11/98
50092 $ 8,594.22 Yes 02/11/98
50308 $ 9,000.00 Yes 02/17/98
50343 Yes 02/11/98
50022 Yes 02/20/98
50350 $ 1,522.63 Yes 02/11/98
50356 $ 1,522.63 Yes 02/11/98
50357 $ 1,522.63 Yes 02/11/98
</TABLE>
B-6
<PAGE> 136
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT AND TENANT IMPROVEMENT RESERVE ACCOUNTS
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE ANNUAL
TO CAPITAL IN CAPITAL INITIAL DEPOSIT DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT TO REPLACEMENT REPLACEMENT
NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES RESERVES
- ------ --------------------------- ------------- --------------- --------------- --------------- -----------
<C> <S> <C> <C> <C> <C> <C>
50355 Applebee's Store #500 Franchise $ 1,500.00
(Plainfield)
50353 Applebee's Store #700 Franchise $ 1,500.00
(Fishers)
50351 Applebee's Store #800 Franchise $ 1,500.00
(Franklin)
50359 Applebee's Store #600 Franchise $ 1,500.00
(New Castle)
50352 Applebee's Store #400 Franchise $ 1,500.00
(Crawfordsville)
50345 Applebee's Store #1000 Franchise $ 1,500.00
(Westfield)
50347 Applebee's Store #900 Franchise $ 1,500.00
(Kokomo)
50344 Applebee's Store #1100 Franchise $ 1,500.00
(Columbus)
50346 Applebee's Store #1600 Franchise $ 1,500.00
(Muncie)
50012 All Storage Self-Storage Mini Storage $ 12,408.00
Facilities
50407 The Gauntlet at Curtis Park Golf Course $ 24,688.00 $ 24,760.92 $ 80,000.00 $ 63,972.36
<CAPTION>
CURRENT ANNUAL CURRENT
BALANCE IN TAX AND INITIAL DEPOSIT DEPOSIT TO BALANCE IN
LOAN REPLACEMENT INSURANCE TO TI/LC TI/LC TI/LC
NUMBER RESERVES ESCROW RESERVES RESERVES RESERVES REPORT DATE
- ------ ------------ --------- --------------- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
50355 $ 1,522.63 Yes 02/11/98
50353 $ 1,522.63 Yes 02/11/98
50351 $ 1,522.63 Yes 02/11/98
50359 $ 1,522.63 Yes 02/11/98
50352 $ 1,522.63 Yes 02/11/98
50345 $ 1,522.63 Yes 02/11/98
50347 $ 1,522.63 Yes 02/11/98
50344 $ 1,522.63 Yes 02/11/98
50346 $ 1,522.63 Yes 02/11/98
50012 $ 6,558.83 Yes 02/17/98
50407 $ 10,669.51 Yes 02/12/98
</TABLE>
B-7
<PAGE> 137
ANNEX B
MULTIFAMILY SCHEDULE
<TABLE>
<CAPTION>
STUDIO 1 BEDROOM 2 BEDROOM
UTILITIES ----------------- ------------- -------------
LOAN CUT-OFF TENANT # OF AVG # OF AVG # OF AVG
NUMBER PROPERTY NAME BALANCE PAYS UNITS RENT UNITS RENT UNITS RENT
- ------ ---------------------------- -------------- ------------------------- --------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50005 Somerset Pointe Apartments 17,030,538.07 Electric 0 0 196 555 236 646
50006 Dekalb Apartments 3,084,598.97 Electric/Gas 33 489 59 558 23 685
50014 The Chimneys 2,011,564.64 Electric/Gas 20 350 42 340 40 425
50020 Idlewild Apartments 7,338,803.39 Electric/Gas 0 0 173 385 129 470
50028 Bella Vista Apartments 2,588,579.33 Electric 0 0 24 485 60 540
50048 Hidden Brooks Apartments 8,314,023.14 Electric 0 0 200 668 1 1,050
50049 American House -- Lakeside 4,464,021.72 Electric 0 0 47 1,505 34 1,683
50054 Vista Springs Apartments 6,753,468.89 Electric 0 0 108 545 104 690
50056 Crystal Lakes Apartments 6,717,102.42 Electric 98 394 225 459 110 559
50057 American House -- Bloomfield 3,232,370.30 None 60 1,648 29 1,750 0 0
50059 Twins Apartments 1,074,990.81 Electric 0 0 12 497 23 591
50060 Lisa Apartments 895,931.89 Electric 6 358 26 443 8 553
50063 Tremont Manor 1,294,032.14 Electric/Gas 0 0 48 371 18 471
50067 Tramway Village Apartments 4,346,279.59 Sewer/Water 0 0 40 454 80 554
50080 Vero Beach Landings South 1,053,131.18 Electric/Sewer/Water 0 0 0 0 40 590
50081 Vero Beach Landings North 842,504.57 Electric 0 0 0 0 32 580
50087 Parkside Apartments 2,961,972.04 Electric/Gas/Sewer/Water 0 0 63 569 0 0
50091 West 176th Street 2,214,255.05 Electric/Gas 0 0 11 605 21 778
50093 Cedar Ave and Hampden Place
Apts 2,939,065.17 Electric/Gas 4 549 86 551 16 651
50120 250 Main Street Apartments 4,187,779.40 Electric 0 0 43 436 171 662
50140 Karen Gardens Apartments 2,102,259.78 Electric 2 563 66 849 0 0
50147 River Island Apartments 2,115,946.65 Electric 0 0 66 457 66 553
50163 Silver Lake Apartments 2,495,317.08 Electric 28 569 152 631 28 782
50165 La Terraza Apartments 27,916,466.70 Electric 0 0 144 758 144 982
50197 Crescent Woods Apartments 3,239,637.51 Electric 0 0 56 923 18 1,070
50200 Cedar Ridge Apartments 1,995,509.80 Electric 0 0 0 0 72 503
50204 La Palma Apartments 17,806,279.01 Electric 0 0 240 510 276 610
50209 Mondrian Apartments 4,136,192.37 Electric 16 548 60 675 37 936
50215 Lexington Place 889,627.52 Electric 0 0 80 359 74 478
50217 Donaree Village Apartments 1,197,422.28 Electric 0 0 58 344 96 440
50218 Remington Forest Apartments 2,352,095.33 Electric/Sewer/Water 0 0 0 0 10 710
50219 Brighton Vista Apartments 4,487,140.85 Electric/Gas 16 722 30 879 20 1,012
50220 Cedar Trace Apartments 3,907,557.45 Electric 0 0 84 387 76 481
50222 Oak Park at Nations Ford 4,586,372.28 Electric 0 0 41 400 94 510
<CAPTION>
3 BEDROOM 4 BEDROOM
------------- -------------
LOAN # OF AVG # OF AVG
NUMBER UNITS RENT UNITS RENT
- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C>
50005 20 815 0 0
50006 23 782 2 830
50014 0 0 0 0
50020 62 572 0 0
50028 24 653 0 0
50048 0 0 0 0
50049 0 0 0 0
50054 0 0 0 0
50056 32 659 0 0
50057 0 0 0 0
50059 0 0 0 0
50060 0 0 0 0
50063 0 0 0 0
50067 60 655 0 0
50080 0 0 0 0
50081 0 0 0 0
50087 0 0 0 0
50091 10 836 0 0
50093
6 771 0 0
50120 0 0 0 0
50140 0 0 0 0
50147 12 594 0 0
50163 14 941 0 0
50165 114 1,052 0 0
50197 0 0 0 0
50200 0 0 0 0
50204 32 786 0 0
50209 15 1,062 0 0
50215 0 0 0 0
50217 16 535 0 0
50218 52 810 0 0
50219 0 0 0 0
50220 40 592 0 0
50222 67 570 0 0
</TABLE>
B-8
<PAGE> 138
ANNEX B
MULTIFAMILY SCHEDULE
<TABLE>
<CAPTION>
STUDIO 1 BEDROOM 2 BEDROOM
UTILITIES ----------------- ------------- -------------
LOAN CUT-OFF TENANT # OF AVG # OF AVG # OF AVG
NUMBER PROPERTY NAME BALANCE PAYS UNITS RENT UNITS RENT UNITS RENT
- ------ ---------------------------- -------------- ------------------------- --------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50223 Oak Park @ Briar Creek 4,686,076.03 Electric 24 365 114 435 138 495
50230 Playa Pacifica Apartments 18,739,697.43 Electric 85 760 153 897 47 1,245
50242 Hudson Realty Apartments 2,890,743.02 Electric 10 325 92 438 88 522
50249 Moana Apartments 2,791,885.56 Electric/Gas 60 430 55 515 1 575
50250 Bartlett Heights Apartments 2,852,432.97 Electric/Gas 0 0 0 0 125 526
50253 Jefferson Arms Apartments 1,992,363.43 Electric 0 0 24 405 36 451
50254 Greenview Apartments 2,685,709.31 Electric/Gas 0 0 119 515 10 623
50260 Westview Apartments 1,674,182.86 Electric 0 0 0 0 42 748
50264 Gables at Mountain Park 6,630,061.59 Electric 0 0 62 740 67 846
50277 Lakeview Manor Apartments 2,492,863.20 None 0 0 54 463 29 567
50299 Brandywood Park Apartments 3,871,077.75 None 168 410 0 0 0 0
50304 Markey Meadows Townhomes 4,581,977.73 Electric/Sewer/Water 0 0 0 0 62 680
50305 Briarwood Park Apts. 1,671,148.26 None 72 424 0 0 0 0
50306 Oasis Apartments 1,994,923.99 Electric/Gas 16 360 24 434 46 527
50309 Park Regency Apartments 1,595,174.01 Electric 25 294 36 357 36 388
50318 Enfield Court Apts. 1,027,710.58 Electric/Water 0 0 10 563 19 751
50325 Oaks at Timuquana 4,583,230.72 Electric 32 395 64 445 88 547
50326 Willow Court Apts. 3,289,805.89 Electric 1 470 56 504 48 634
50333 Arch View Apartments 9,816,031.87 Electric/Gas 8 717 58 859 60 1,105
50334 Gardens at Lakewood Apts 4,785,765.54 Electric 0 0 92 424 106 514
50335 The Terraces II At Metairie 3,910,799.03 Electric 0 0 103 378 56 557
50337 Cimarron Place 5,224,245.24 Electric 0 0 122 438 110 600
50338 Bluebonnet Place 5,902,444.18 Electric 0 0 32 461 80 539
50339 Madelaine Manor Townhomes 1,555,373.80 Electric/Gas 0 0 0 0 42 485
50340 The Spires of Sherwood Apts. 3,032,609.84 Electric 0 0 0 0 64 470
50342 Silver Manor Apartments 4,330,168.20 Electric 0 0 7 636 89 738
50362 Trinity Towers 18,714,506.84 Electric 73 988 183 1,217 6 1,650
50363 Montgomery Park Apartments 7,672,938.83 None 0 0 3 525 153 575
50365 Sandpiper Village Apartments 4,292,238.63 Electric/Gas 0 0 0 0 192 548
50368 Le Club Apartments 18,145,865.78 Electric 0 0 96 723 344 824
50373 March West Commons Apts. 4,192,763.43 Electric/Gas 0 0 32 543 96 598
50377 Rolling Hills Apts. 1,794,662.09 Electric/Gas 0 0 64 325 64 413
50392 12th Street Apartments 2,843,588.66 Electric/Gas 79 464 34 588 0 0
<CAPTION>
3 BEDROOM 4 BEDROOM
------------- -------------
LOAN # OF AVG # OF AVG
NUMBER UNITS RENT UNITS RENT
- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C>
50223 0 0 0 0
50230 0 0 0 0
50242 15 660 0 0
50249 0 0 0 0
50250 48 630 0 0
50253 24 517 12 559
50254 0 0 0 0
50260 0 0 0 0
50264 0 0 0 0
50277 0 0 0 0
50299 0 0 0 0
50304 46 733 0 0
50305 0 0 0 0
50306 0 0 0 0
50309 8 427 0 0
50318 0 0 0 0
50325 44 645 0 0
50326 0 0 0 0
50333 0 0 0 0
50334 0 0 0 0
50335 0 0 0 0
50337 0 0 0 0
50338 48 693 24 753
50339 26 555 0 0
50340 52 588 8 620
50342 0 0 0 0
50362 0 0 0 0
50363 104 650 0 0
50365 0 0 0 0
50368 0 0 0 0
50373 0 0 0 0
50377 0 0 0 0
50392 0 0 0 0
</TABLE>
B-9
<PAGE> 139
ANNEX B
MULTIFAMILY SCHEDULE
<TABLE>
<CAPTION>
STUDIO 1 BEDROOM 2 BEDROOM
UTILITIES ----------------- ------------- -------------
LOAN CUT-OFF TENANT # OF AVG # OF AVG # OF AVG
NUMBER PROPERTY NAME BALANCE PAYS UNITS RENT UNITS RENT UNITS RENT
- ------ ---------------------------- -------------- ------------------------- --------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50399 63-67 West 107th St. Apts. 1,257,268.76 Electric/Gas 0 0 16 513 36 574
50404 Oak Hill Apartments 1,757,140.33 Electric/Gas 6 245 150 305 6 345
50408 Placentia Meadows 3,388,556.44 Electric 0 0 1 600 79 705
50410 Spanish Trace 2,802,854.18 Electric 0 0 24 450 64 495
50412 Landings & Marina 1,222,452.20 Electric 0 0 28 398 24 438
50414 Falcon House Apartments 2,075,673.94 Electric 1 425 39 466 38 544
50416 Sierra Village Apartments 5,287,468.19 Electric 0 0 42 451 142 524
50417 Riverwood Apartments 9,283,361.52 Electric 78 475 139 577 121 650
50420 Maison Bocage Apartments 5,839,609.21 Electric 0 0 0 0 48 785
50430 The Wedge Apartments 1,995,026.34 Electric 0 0 0 0 0 0
50431 Ezzard Charles Apartments 3,392,040.18 Electric/Gas 0 0 106 275 144 330
50432 Lacey Corporate Park Apts. 4,594,528.77 Electric 8 430 184 505 49 627
50446 TownPark Crossing Apartments 13,663,259.67 Electric 0 0 150 655 150 800
50450 Riverside Apartments 2,086,317.39 Electric/Gas 0 0 0 0 12 1,400
50451 Sutter Ridge Apartments 5,255,089.80 Electric/Gas 0 0 56 575 96 708
50452 Alder Ridge Apartments 5,255,089.80 Electric/Gas 0 0 40 655 80 780
50453 Buckingham Station Apts 16,969,438.61 Electric 0 0 192 561 212 679
50462 Alden Trace Apartments 2,334,445.10 Electric 0 0 40 407 102 489
50465 Harborscape Apartments 4,891,268.62 Electric/Gas 0 0 0 0 88 768
50468 Colony Apartments 3,842,903.81 Electric/Gas 0 0 17 725 71 829
50469 Southport Apartments 1,017,626.27 Electric 0 0 28 446 21 544
50489 Raintree Apartments 1,620,958.91 Electric/Gas/Sewer/Water 1 325 0 0 25 800
50490 Harborside Apartments 1,297,784.98 None 0 0 17 621 27 740
50494 Biscayne Apartments 6,400,000.00 Electric 48 367 114 464 160 538
50501 Loma Vista Apts 1,429,472.76 Electric 0 0 45 396 25 485
50503 Fremont Court Apts 2,047,533.22 Electric/Sewer/Water 0 0 16 686 8 897
50530 University Towers 26,500,000.00 None 936 0 0 0 0 0
50546 Heatherton Estates
Apartments 5,693,147.12 Electric/Gas 0 0 60 381 176 510
50555 Loch Raven Apartments 8,212,059.30 Electric/Gas 3 382 261 430 250 518
50569 Charlestown Properties 2,096,197.35 Electric/Gas 0 0 4 698 23 1,112
50587 Summerfield Apts 3,294,062.72 Electric/Gas 0 0 24 493 80 569
50597 La Aloma Apartments 4,092,527.80 Electric 0 0 40 452 124 525
50606 The Landings at Bivens Arm
Apts. 6,702,025.32 Electric/Gas 0 0 0 0 12 749
<CAPTION>
3 BEDROOM 4 BEDROOM
------------- -------------
LOAN # OF AVG # OF AVG
NUMBER UNITS RENT UNITS RENT
- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C>
50399 6 664 0 0
50404 0 0 0 0
50408 0 0 0 0
50410 16 599 0 0
50412 0 0 0 0
50414 4 615 0 0
50416 1 610 0 0
50417 0 0 0 0
50420 56 1,030 0 0
50430 48 559 0 0
50431 36 405 0 0
50432 0 0 0 0
50446 0 0 0 0
50450 10 1,520 0 0
50451 0 0 0 0
50452 0 0 0 0
50453 0 0 0 0
50462 0 0 0 0
50465 0 0 0 0
50468 0 0 0 0
50469 0 0 0 0
50489 9 1,200 2 1,600
50490 0 0 0 0
50494 48 686 2 730
50501 0 0 0 0
50503 2 1,225 0 0
50530 0 0 0 0
50546
20 659 0 0
50555 1 620 0 0
50569 0 0 0 0
50587 0 0 0 0
50597 20 659 0 0
50606
40 950 40 1,215
</TABLE>
B-10
<PAGE> 140
ANNEX C
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
DISTRIBUTION DATE STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
STATEMENT SECTIONS PAGE(S)
- ------------------ -------
<S> <C>
Certificate Distribution Detail 2
Certificate Factor Detail 3
Other Required Information 4
Ratings Detail 5
Current Mortgage Loan and Property Stratification Tables 6-8
Mortgage Loan Detail 9
Principal Prepayment Detail 10
Historical Detail 11
Reconciliation Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Detail 16
Liquidated Loan Detail 17
</TABLE>
<TABLE>
<CAPTION>
UNDERWRITER SERVICER SPECIAL SERVICER
<S> <C> <C>
NationsBanc Montgomery Securities, LLC Midland Loan Services, L.P. Lennar Partners, Inc.
NationsBanc Corporate Center 210 West 10th Street 700 N.W. 107th Avenue
100 North Tryon Street Kansas City, Missouri 64105 Miami, Florida 33172
Charlotte, North Carolina 28255
Contact: Contact: Brad Hauger Contact: Steve Engel
Phone Number: Phone Number: (816) 435-5175 Phone Number: (305) 229-6407
</TABLE>
This report has been compiled from information provided to Norwest by various
third parties, which may include the Servicer, Master Servicer, Special
Servicer and others. Norwest has not independently confirmed the accuracy of
information received from these third parties and assumes no duty to do so.
Norwest expressly disclaims any responsiblity for the accuracy or completeness
of information furnished by third parties.
C-1
<PAGE> 141
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
Realized Loss/
Pass-Through Original Beginning Principal Interest Prepayment Additional Trust Total
Class CUSIP Rate Balance Balance Distribution Distribution Penalties Fund Expenses Distribution
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-3 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00
<CAPTION>
Current
Ending Subordination
Class Balance Level(1)
<S> <C> <C>
A-1 0.00 0.00%
A-2 0.00 0.00%
A-3 0.00 0.00%
B 0.00 0.00%
C 0.00 0.00%
D 0.00 0.00%
E 0.00 0.00%
F 0.00 0.00%
G 0.00 0.00%
H 0.00 0.00%
J 0.00 0.00%
K 0.00 0.00%
R-I 0.00 0.00%
R-II 0.00 0.00%
Totals 0.00
</TABLE>
<TABLE>
<CAPTION>
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Penalties Distribution Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
X-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
X-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending certificate balance of the
designated class and (ii) the ending certificate balance of all classes which
are not subordinate to the designated class and dividing the result by (A).
C-2
<PAGE> 142
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
Realized Loss/
Beginning Principal Interest Prepayment Additional Trust Ending
Class CUSIP Balance Distribution Distribution Penalties Fund Expenses Balance
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-3 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
</TABLE>
<TABLE>
<CAPTION>
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Penalties Amount
<S> <C> <C> <C> <C> <C>
X-1 0.00000000 0.00000000 0.00000000 0.00000000
X-2 0.00000000 0.00000000 0.00000000 0.00000000
</TABLE>
C-3
<PAGE> 143
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
OTHER REQUIRED INFORMATION
<TABLE>
<S> <C> <C>
Sec 4.02(a)(iii)
Available Distribution Amount 0.00
Sec 4.02(a)(xiii)
Principal Distribution Amount 0.00
(a) Principal portion of Monthly Payments 0.00
and any Assumed Monthly Payments
(b) Principal Prepayments 0.00
(c) Collection of Principal on a Balloon 0.00
Loan after its Stated Maturity Date
(d) Liquidation Proceeds and Insurance 0.00
Proceeds received on a Mortgage Loan
(e) Liquidation Proceeds, Insurance Proceeds, 0.00
or REO Revenues received on an REO
Plus the excess of the prior Principal Distribution 0.00
Amount over the principal paid to the Sequential
Pay Certificates
Sec 4.02(a)(v) and (vi)
Aggregate Number of Outstanding Loans 0
Aggregate Stated Principal Balance of the Mortgage Pool
before distribution 0.00
Aggregate Stated Principal Balance of the Mortgage Pool
after distribution 0.00
Sec 4.02(a)(xiii)
Total Servicing and Special Servicing Fee paid 0.00
Servicing Fee paid 0.00
Special Servicing Fee paid 0.00
Trustee Fee paid 0.00
Sec 4.02(a)(xiv)
Additional Trust Fund Expenses 0.00
(i) Fees paid to Special Servicer 0.00
(ii) Interest on Advances 0.00
(iii) Cost of opinions of counsel 0.00
(iv) Unanticipated expenses of the Trust 0.00
(v) Cost to remedy adverse environmental 0.00
conditions of a defaulted Mortgage Loan
(vi) Other expenses of the Trust Fund not 0.00
included in the calculation of "Realized Loss"
</TABLE>
Appraisal Reduction Amount
<TABLE>
<CAPTION>
Appraisal Date Appraisal
Loan Reduction Reduction
Number Amount Effected
<S> <C> <C>
Total
</TABLE>
C-4
<PAGE> 144
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
Ratings Detail
<TABLE>
<CAPTION>
Original Ratings Current Ratings (1)
Class CUSIP DCR Fitch Moody's S&P DCR Fitch Moody's S&P
<S> <C> <C> <C>
A-1
A-2
A-3
X-1
X-2
B
C
D
E
F
G
H
J
K
</TABLE>
NR - Designates that the class was not rated by the above agency
at the time of original issuance.
X - Designates that the above rating agency did not rate any
classes in this transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any
particular rating agency, no request has been made subsequent to issuance to
obtain rating information, if any, from such rating agency. The current
ratings were obtained directly from the applicable rating agency within 30
days of the payment date listed above. The ratings may have changed since
they were obtained. Because the ratings may have changed, you may want to
obtain current ratings directly from the rating agencies.
<TABLE>
<S> <C> <C> <C>
Duff & Phelps Credit Rating Co. Fitch IBCA, Inc. Moody's Investors Service Standard & Poor's Rating Services
55 East Monroe Street One State Street Plaza 99 Church Street 26 Broadway
Chicago, Illinois 60603 New York, New York 10004 New York, New York 10007 New York, New York 10004
(312) 368-3100 (212) 908-0500 (212) 553-0300 (212) 208-8000
</TABLE>
C-5
<PAGE> 145
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
<TABLE>
<CAPTION>
SCHEDULED BALANCE STATE (3)
Scheduled # of Scheduled % of WAM Weighted State # of Scheduled % of WAM Weighted
Balance Loans Balance Agg. (2) WAC Avg DSCR(1) Props. Balance Agg. (2) WAC Avg DSCR(1)
Bal. Bal.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Totals Totals
</TABLE>
See footnotes on last page of this section.
C-6
<PAGE> 146
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
<TABLE>
<CAPTION>
Debt Service Coverage Ratio Property Type (3)
Debt Service # of Scheduled % of WAM Weighted Property # of Scheduled % of WAM Weighted
Coverage Ratio Loans Balance Agg. (2) WAC Avg DSCR (1) Type Props. Balance Agg. (2) WAC Avg DSCR (1)
Bal. Bal.
<S> <C> <C> <C> <C> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Totals Totals
Note Rate Seasoning
Note # of Scheduled % of WAM Weighted Seasoning # of Scheduled % of WAM Weighted
Rate Loans Balance Agg. (2) WAC Avg DSCR (1) Loans Balance Agg. (2) WAC Avg DSCR (1)
Bal. Bal.
<S> <C> <C> <C> <C> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Totals Totals
</TABLE>
See footnotes on last page of this section.
C-7
<PAGE> 147
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
<TABLE>
<CAPTION>
Anticipated Remaining Term (ARD and Balloon Loans)
Anticipating Remaining # of Scheduled % of WAM Weighted
Term (2) Loans Balance Agg. (2) WAC Avg DSCR (1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
<CAPTION>
Remaining Amortization Term (ARD and Balloon Loans)
Remaining Amortization # of Scheduled % of WAM Weighted
Tern Loans Balance Agg. (2) WAC Avg DSCR (1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Remaining Stated Term (Fully Amortizing Loans)
Remaining Stated # of Scheduled % of WAM WAC Weighted
Team Loans Balance Agg. (2) Avg DSCR (1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
<CAPTION>
Age of Most Recent NOI
Age of Most Seasoning # of Scheduled % of WAM Weighted
Recent NIOI Loans Balance Agg. (2) WAC Avg DSCR (1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
(1) Debt Service Coverage Ratios are calculated as described in the
prospectus, values are updated periodically as new NOI figures become
available from borrowers on an asset level. The Trustee makes no
representations as to the accuracy of the data provided by the borrower for
this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term
from the current month to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current loan
information to the properties based upon the Cut-off Date balance of each
property as disclosed in the offering document.
Note: There are no ARD Loans included in the Mortgage Pool.
C-8
<PAGE> 148
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
MORTGAGE LOAN DETAIL
<TABLE>
<CAPTION>
Anticipated Neg. Beginning Ending
Loan Property Interest Principal Gross Repayment Maturity Amort Scheduled Scheduled
Number ODCR Type(1) City State Payment Payment Coupon Date Date (Y/N) Balance Balance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Totals
<CAPTION>
Paid Appraisal Appraisal Res. Mod.
Loan Thru Reduction Reduction Strat. Code
Number Date Date Amount (2) (3)
<S> <C> <C> <C> <C> <C>
Totals
</TABLE>
(1) Property Type Code
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Sell Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
(2) Resolution Strategy Code
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed in Lieu of
6 - DPO Foreclosure
(3) Modification Code
1 - Maturity Date Extension
2 - Amortization Change
3 - Principal Write-Off
4 - Combination
C-9
<PAGE> 149
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
HISTORICAL DETAIL
<TABLE>
<CAPTION>
Delinquencies Prepayments Rate and Maturities
Distri- Next
bution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications Curtailments Payoff Weigted Avg.
Date # Balance # Balance # Balance # Balance # Balance # Balance # Amount # Amount Coupon Remit WAM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
C-10
<PAGE> 150
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
PRINCIPAL PREPAYMENT DETAIL
<TABLE>
<CAPTION>
Offering Document Principal Prepayment Amount Prepayment Penalties
Loan Number Cross-Reference Payoff Amount Curtailment Amount Prepayment Premium Yield Maintenance Premium
<S> <C> <C> <C> <C> <C>
Totals
</TABLE>
C-11
<PAGE> 151
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
RECONCILIATION DETAIL
<TABLE>
<CAPTION>
ADVANCE SUMMARY SERVICING FEE BREAKDOWNS
<S> <C> <C> <C>
P & I Advances Outstanding 0.00 Current Period Accrued Servicing Fees 0.00
Servicing Advances Outstanding 0.00 Less Delinquent Servicing Fees 0.00
Less Reductions to Servicing Fees 0.00
Reimursement for Interest on Advances 0.00 Plus Servicng Fees for Delinquent Payments Received 0.00
paid from general collections Plus Adjustments for Prior Servicing Calculation 0.00
Total Servicing Fees Collected 0.00
</TABLE>
CERTIFICATE INTEREST RECONCILIATION
<TABLE>
<CAPTION>
Accrued Net Aggregate Distributable Distributable Additional Remaining Unpaid
Certificate Prepayment Certificate Certificate Interest Trust Fund Interest Distributable
Class Interest Interest Shortfall Interest Adjustment Expenses Distribution Certificate Interest
<S> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
A-3
X-1
X-2
B
C
D
E
F
G
H
J
K
Total
</TABLE>
C-12
<PAGE> 152
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
DELINQUENCY LOAN DETAIL
<TABLE>
<CAPTION>
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P&I P&I Mortgage Strategy Servicing Foreclosure
Loan Number Cross-Reference Delinq. Date Advances Advances** Loan(1) Code(2) Transfer Date Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Totals
<CAPTION>
Current Outstanding
Servicing Servicing REO
Loan Number Advances Advances Bankruptcy Date Date
<S> <C> <C> <C> <C>
Totals
</TABLE>
(1) Status of Mortgage Loan
A - Payment Not Received 2 - Two Months Delinquent
But Still in Grace Period 3 - Three Or More Months Delinquent
B - Late Payment But Less 4 - Assumed Scheduled Payment
Than 1 Month Delinquent (Performing Matured Balloon)
0 - Current 7 - Foreclosure
1 - One Month Delinquent 9 - REO
(2) Resolution Strategy Code
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed in Lieu of
6 - DPO Foreclosure
** Outstanding P & I Advances include the current period advance
C-13
<PAGE> 153
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
Offering Servicing Resolution Net
Distribution Loan Document Transfer Strategy Scheduled Property Interest Actual Operating NOI
Date Number Cross-Reference Date Code(1) Balance Type(2) State Rate Balance Income Date DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Remaining
Distribution Loan Note Maturity Amortization
Date Number Date Date Team
<S> <C> <C> <C> <C>
</TABLE>
(1) Resolution Strategy Code
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed in Lieu of
6 - DPO Foreclosure
(2) Property Type Code
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Sell Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
C-14
<PAGE> 154
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
SPECIALLY SERVICED LOAN DETAIL - PART 2
<TABLE>
<CAPTION>
Offering Resolution Site
Distribution Loan Document Strategy Inspection Phase 1 Date Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Date Value Property Revenue Comment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(1) Resolution Strategy Code
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed In Lieu Of
6 - DPO Foreclosure
C-15
<PAGE> 155
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
MODIFIED LOAN DETAIL
<TABLE>
<CAPTION>
Offering
Loan Document Pre-Modification Modification Date Modification Description
Number Cross-Reference Balance
<S> <C> <C> <C> <C>
Total
</TABLE>
C-16
<PAGE> 156
<TABLE>
<S> <C> <C>
For Additional Information, please contact
Leslie Gaskill
[NORWEST BANKS LOGO] NATIONSLINK FUNDING CORPORATION (212) 509-1630
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES Reports Available on the World Wide Web
NORWEST BANK MINNESOTA, N.A. SERIES 1998-1 @ www.securitieslink.net/cmbs
CORPORATE TRUST SERVICES
3 NEW YORK PLAZA, 15TH FLOOR PAYMENT DATE: 4/20/98
NEW YORK, NY 10004 RECORD DATE: 3/31/98
</TABLE>
LIQUIDATED LOAN DETAIL
<TABLE>
<CAPTION>
Final Recovery Offering Gross Proceeds Aggregate
Determination Document Appraisal Appraisal Actual Gross as a % of Liquidation
Loan Number Date Cross-Reference Date Value Balance Proceeds Actual Balance Expenses*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Net Proceeds Repurchased
Loan Liquidation as a % of Realized by Seller
Number Proceeds Actual Balance Loss (Y/N)
<C> <C> <C> <C> <C>
</TABLE>
Current Total
Cumulative Total
*Aggregate liquidation expenses also include outstanding P&I advances and unpaid
fees (servicing, trustee, etc.).
C-17
<PAGE> 157
PROSPECTUS
NATIONSLINK FUNDING CORPORATION
MORTGAGE PASS-THROUGH CERTIFICATES
The mortgage pass-through certificates offered hereby (the "Offered
Certificates") and by the supplements hereto (each, a "Prospectus Supplement")
will be offered from time to time in series. The Offered Certificates of any
series, together with any other mortgage pass-through certificates of such
series, are collectively referred to herein as the "Certificates".
Each series of Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (with respect to any series, the
"Trust Fund" to be formed by NationsLink(SM) Funding Corporation (the
"Depositor") and consisting primarily of a segregated pool (a "Mortgage Asset
Pool") of various types of multifamily and commercial mortgage loans ("Mortgage
Loans"), mortgage-backed securities ("MBS") that evidence interests in, or that
are secured by pledges of, one or more of various types of multifamily or
commercial mortgage loans, or a combination of Mortgage Loans and MBS
(collectively, "Mortgage Assets"). If so specified in the related Prospectus
Supplement, the Trust Fund for a series of Certificates may include letters of
credit, insurance policies, guarantees, reserve funds or other types of credit
support, or any combination thereof, and also interest rate exchange agreements
and other financial assets, or any combination thereof. See "Description of the
Trust Funds", "Description of the Certificates" and "Description of Credit
Support".
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments) on
the Mortgage Assets in the related Trust Fund and the timing of receipt of such
payments as described herein and in the related Prospectus Supplement. See
"Yield and Maturity Considerations". A Trust Fund may be subject to early
termination under the circumstances described herein and in the related
Prospectus Supplement. See "Description of the Certificates -- Termination".
(cover continued on next page)
------------------------
PROCEEDS OF THE ASSETS IN THE RELATED TRUST FUND WILL BE THE SOLE SOURCE OF
PAYMENTS ON THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES WILL NOT
REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR OR ANY OF ITS
AFFILIATES, INCLUDING NATIONSBANK CORPORATION, THE DEPOSITOR'S ULTIMATE PARENT.
NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE ASSETS WILL BE GUARANTEED OR
INSURED BY THE DEPOSITOR OR ANY OF ITS AFFILIATES OR, UNLESS OTHERWISE SPECIFIED
IN THE RELATED PROSPECTUS SUPPLEMENT, BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING ON PAGE 15
HEREIN UNDER THE CAPTION "RISK FACTORS" AND SUCH INFORMATION AS MAY BE SET FORTH
UNDER THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS SUPPLEMENT BEFORE
PURCHASING ANY OFFERED CERTIFICATE.
The Offered Certificates of any series may be offered through one or more
different methods, including offerings through underwriters, which may include
NationsBanc Montgomery Securities LLC, an affiliate of the Depositor, as
described under "Method of Distribution" and in the related Prospectus
Supplement.
There will be no secondary market for the Offered Certificates of any
series prior to the offering thereof. There can be no assurance that a secondary
market for any Offered Certificates will develop or, if it does develop, that it
will continue. Unless otherwise provided in the related Prospectus Supplement,
the Certificates will not be listed on any securities exchange.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Offered Certificates of any series unless
accompanied by the Prospectus Supplement for such series.
The date of this Prospectus is February 23, 1998
<PAGE> 158
(cover continued)
As described in the related Prospectus Supplement, the Certificates of each
series, including the Offered Certificates of such series, may consist of one or
more classes of Certificates that: (i) provide for the accrual of interest
thereon based on a fixed, variable or adjustable interest rate; (ii) are senior
or subordinate to one or more other classes of Certificates in entitlement to
certain distributions on the Certificates; (iii) are entitled to distributions
of principal, with disproportionate, nominal or no distributions of interest;
(iv) are entitled to distributions of interest, with disproportionate, nominal
or no distributions of principal; (v) provide for distributions of interest
thereon or principal thereof that commence only following the occurrence of
certain events, such as the retirement of one or more other classes of
Certificates of such series; (vi) provide for distributions of principal thereof
to be made, from time to time or for designated periods, at a rate that is
faster (and, in some cases, substantially faster) or slower (and, in some cases,
substantially slower) than the rate at which payments or other collections of
principal are received on the Mortgage Assets in the related Trust Fund; or
(vii) provide for distributions of principal thereof to be made, subject to
available funds, based on a specified principal payment schedule or other
methodology. Distributions in respect of the Certificates of each series will be
made on a monthly, quarterly, semi-annual, annual or other periodic basis as
specified in the related Prospectus Supplement. See "Description of the
Certificates".
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
"real estate mortgage investment conduit" (each, a "REMIC") for federal income
tax purposes. If applicable, the Prospectus Supplement for a series of
Certificates will specify which class or classes of such series of Certificates
will be considered to be regular interests in the related REMIC and which class
of Certificates or other interests will be designated as the residual interest
in the related REMIC. See "Certain Federal Income Tax Consequences".
2
<PAGE> 159
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to each series of Offered Certificates will, among other things, set forth, as
and to the extent appropriate: (i) a description of the class or classes of such
Offered Certificates, including the payment provisions with respect to each such
class, the aggregate principal amount, if any, of each such class, the rate at
which interest accrues from time to time, if at all, with respect to each such
class or the method of determining such rate, and whether interest with respect
to each such class will accrue from time to time on its aggregate principal
amount, if any, or on a specified notional amount, if at all; (ii) information
with respect to any other classes of Certificates of the same series; (iii) the
respective dates on which distributions are to be made; (iv) information as to
the assets, including the Mortgage Assets, constituting the related Trust Fund
(all such assets, with respect to the Certificates of any series, the "Trust
Assets"); (v) the circumstances, if any, under which the related Trust Fund may
be subject to early termination; (vi) additional information with respect to the
method of distribution of such Offered Certificates; (vii) whether one or more
REMIC elections will be made and the designation of the "regular interests" and
"residual interests" in each REMIC to be created and the identity of the person
(the "REMIC Administrator") responsible for the various tax-related duties in
respect of each REMIC to be created; (viii) the initial percentage ownership
interest in the related Trust Fund to be evidenced by each class of Certificates
of such series; (ix) information concerning the Trustee (as defined herein) of
the related Trust Fund; (x) if the related Trust Fund includes Mortgage Loans,
information concerning the Master Servicer and any Special Servicer (each as
defined herein) of such Mortgage Loans and the circumstances under which all or
a portion, as specified, of the servicing of a Mortgage Loan would transfer from
the Master Servicer to the Special Servicer; (xi) information as to the nature
and extent of subordination of any class of Certificates of such series,
including a class of Offered Certificates; and (xii) whether such Offered
Certificates will be initially issued in definitive or book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended, with respect to the Offered
Certificates. This Prospectus and the Prospectus Supplement relating to each
series of Offered Certificates contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its Midwest
Regional Offices located as follows: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and Northeast Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048.
No dealer, salesman, or other person has been authorized to give any
information, or to make any representations, other than those contained in this
Prospectus or any related Prospectus Supplement, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Depositor or any other person. Neither the delivery of this Prospectus or
any related Prospectus Supplement nor any sale made hereunder or thereunder
shall under any circumstances create an implication that there has been no
change in the information herein since the date hereof or therein since the date
thereof. This Prospectus and any related Prospectus Supplement are not an offer
to sell or a solicitation of an offer to buy any security in any jurisdiction in
which it is unlawful to make such offer or solicitation.
The Master Servicer, the Trustee or another specified person will cause to
be provided to registered holders of the Offered Certificates of each series
periodic unaudited reports concerning the related Trust Fund. If beneficial
interests in a class or series of Offered Certificates are being held and
transferred in book-entry format through the facilities of The Depository Trust
Company ("DTC") as described herein, then unless otherwise provided in the
related Prospectus Supplement, such reports will be sent on behalf of the
related Trust Fund to a nominee of DTC as the registered holder of the Offered
Certificates. Conveyance of notices
3
<PAGE> 160
and other communications by DTC to its participating organizations, and directly
or indirectly through such participating organizations to the beneficial owners
of the applicable Offered Certificates, will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time. See "Description of the Certificates -- Reports to
Certificateholders" and "-- Book-Entry Registration and Definitive
Certificates".
The Depositor will file or cause to be filed with the Commission such
periodic reports with respect to each Trust Fund as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder. The Depositor intends to make a
written request to the staff of the Commission that the staff either (i) issue
an order pursuant to Section 12(h) of the Exchange Act exempting the Depositor
from certain reporting requirements under the Exchange Act with respect to each
Trust Fund or (ii) state that the staff will not recommend that the Commission
take enforcement action if the Depositor fulfills its reporting obligations as
described in its written request. If such request is granted, the Depositor will
file or cause to be filed with the Commission as to each Trust Fund the periodic
unaudited reports to holders of the Offered Certificates referenced in the
preceding paragraph; however, because of the nature of the Trust Funds, it is
unlikely that any significant additional information will be filed. In addition,
because of the limited number of Certificateholders expected for each series,
the Depositor anticipates that a significant portion of such reporting
requirements will be permanently suspended following the first fiscal year for
the related Trust Fund.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended, prior
to the termination of an offering of Offered Certificates evidencing interests
therein. The Depositor will provide or cause to be provided without charge to
each person to whom this Prospectus is delivered in connection with the offering
of one or more classes of Offered Certificates, upon written or oral request of
such person, a copy of any or all documents or reports incorporated herein by
reference, in each case to the extent such documents or reports relate to one or
more of such classes of such Offered Certificates, other than the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). Such requests to the Depositor should be directed in writing
to its principal executive offices at the NationsBank Corporate Center,
Charlotte, North Carolina 28255, or by telephone at (704) 386-2400.
4
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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PROSPECTUS SUPPLEMENT....................................... 3
AVAILABLE INFORMATION....................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... 4
SUMMARY OF PROSPECTUS....................................... 8
RISK FACTORS................................................ 15
Limited Liquidity of Offered Certificates................. 15
Limited Assets............................................ 15
Credit Support Limitations................................ 16
Effect of Prepayments on Average Life of Certificates..... 16
Effect of Prepayments on Yield of Certificates............ 18
Limited Nature of Ratings................................. 18
Certain Factors Affecting Delinquency, Foreclosure and
Loss of the Mortgage Loans............................. 18
Inclusion of Delinquent and Nonperforming Mortgage Loans
in a Mortgage Asset Pool............................... 21
DESCRIPTION OF THE TRUST FUNDS.............................. 22
General................................................... 22
Mortgage Loans............................................ 22
MBS....................................................... 26
Certificate Accounts...................................... 27
Credit Support............................................ 27
Cash Flow Agreements...................................... 27
YIELD AND MATURITY CONSIDERATIONS........................... 27
General................................................... 27
Pass-Through Rate......................................... 27
Payment Delays............................................ 28
Certain Shortfalls in Collections of Interest............. 28
Yield and Prepayment Considerations....................... 28
Weighted Average Life and Maturity........................ 30
Other Factors Affecting Yield, Weighted Average Life and
Maturity............................................... 30
THE DEPOSITOR............................................... 32
DESCRIPTION OF THE CERTIFICATES............................. 32
General................................................... 32
Distributions............................................. 33
Distributions of Interest on the Certificates............. 34
Distributions of Principal of the Certificates............ 35
Distributions on the Certificates in Respect of Prepayment
Premiums or in Respect
of Equity Participations............................... 35
Allocation of Losses and Shortfalls....................... 36
Advances in Respect of Delinquencies...................... 36
Reports to Certificateholders............................. 37
Voting Rights............................................. 38
Termination............................................... 38
Book-Entry Registration and Definitive Certificates....... 39
THE POOLING AND SERVICING AGREEMENTS........................ 40
General................................................... 40
Assignment of Mortgage Loans; Repurchases................. 41
Representations and Warranties; Repurchases............... 42
</TABLE>
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<TABLE>
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PAGE
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<S> <C>
Collection and Other Servicing Procedures................. 43
Sub-Servicers............................................. 45
Certificate Account....................................... 45
Modifications, Waivers and Amendments of Mortgage Loans... 48
Realization Upon Defaulted Mortgage Loans................. 48
Hazard Insurance Policies................................. 50
Due-on-Sale and Due-on-Encumbrance Provisions............. 50
Servicing Compensation and Payment of Expenses............ 51
Evidence as to Compliance................................. 51
Certain Matters Regarding the Master Servicer, the Special
Servicer, the REMIC Administrator
and the Depositor...................................... 52
Events of Default......................................... 53
Rights Upon Event of Default.............................. 54
Amendment................................................. 54
List of Certificateholders................................ 55
The Trustee............................................... 55
Duties of the Trustee..................................... 55
Certain Matters Regarding the Trustee..................... 56
Resignation and Removal of the Trustee.................... 56
DESCRIPTION OF CREDIT SUPPORT............................... 56
General................................................... 56
Subordinate Certificates.................................. 57
Insurance or Guarantees with Respect to Mortgage Loans.... 57
Letter of Credit.......................................... 57
Certificate Insurance and Surety Bonds.................... 58
Reserve Funds............................................. 58
Credit Support with respect to MBS........................ 58
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS..................... 58
General................................................... 59
Types of Mortgage Instruments............................. 59
Leases and Rents.......................................... 59
Personalty................................................ 60
Foreclosure............................................... 60
Bankruptcy Laws........................................... 63
Environmental Considerations.............................. 64
Due-on-Sale and Due-on-Encumbrance Provisions............. 66
Junior Liens; Rights of Holders of Senior Liens........... 66
Subordinate Financing..................................... 67
Default Interest and Limitations on Prepayments........... 68
Applicability of Usury Laws............................... 68
Certain Laws and Regulations.............................. 68
Americans with Disabilities Act........................... 69
Soldiers' and Sailors' Civil Relief Act of 1940........... 69
Forfeitures in Drug and RICO Proceedings.................. 69
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 70
General................................................... 70
REMICs.................................................... 71
Grantor Trust Funds....................................... 86
</TABLE>
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<TABLE>
<CAPTION>
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STATE AND OTHER TAX CONSEQUENCES............................ 94
CERTAIN ERISA CONSIDERATIONS................................ 95
General................................................... 95
Plan Asset Regulations.................................... 95
Insurance Company General Accounts........................ 96
Consultation With Counsel................................. 97
Tax Exempt Investors...................................... 97
LEGAL INVESTMENT............................................ 97
USE OF PROCEEDS............................................. 99
METHOD OF DISTRIBUTION...................................... 99
LEGAL MATTERS............................................... 100
FINANCIAL INFORMATION....................................... 100
RATING...................................................... 101
INDEX OF PRINCIPAL DEFINITIONS.............................. 102
</TABLE>
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SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of Offered Certificates of such
series. An Index of Principal Definitions is included at the end of this
Prospectus.
SECURITIES OFFERED......... Mortgage pass-through certificates.
DEPOSITOR.................. NationsLink(SM) Funding Corporation, a Delaware
corporation and a wholly-owned subsidiary of
NationsBanc Mortgage Capital Corporation, a Texas
corporation. See "The Depositor".
TRUSTEE.................... The trustee (the "Trustee") for each series of
Certificates will be named in the related
Prospectus Supplement. See "The Pooling and
Servicing Agreements -- The Trustee".
MASTER SERVICER............ If a Trust Fund includes Mortgage Loans, then the
master servicer (the "Master Servicer") for the
corresponding series of Certificates will be named
in the related Prospectus Supplement. The Master
Servicer for any series of Certificates may be an
affiliate of the Depositor. See "The Pooling and
Servicing Agreements -- Certain Matters Regarding
the Master Servicer, the Special Servicer, the
REMIC Administrator and the Depositor".
SPECIAL SERVICER........... If a Trust Fund includes Mortgage Loans, then the
special servicer (the "Special Servicer") for the
corresponding series of Certificates will be named,
or the circumstances under which a Special Servicer
may be appointed will be described, in the related
Prospectus Supplement. The Special Servicer for any
series of Certificates may be the Master Servicer
or an affiliate of the Depositor. See "The Pooling
and Servicing Agreements -- Collection and Other
Servicing Procedures".
MBS ADMINISTRATOR.......... If a Trust Fund includes MBS, then the entity
responsible for administering such MBS (the "MBS
Administrator") will be named in the related
Prospectus Supplement. If an entity other than the
Trustee and the Master Servicer is the MBS
Administrator, such entity will be herein referred
to as the "Manager". The Manager for any series of
Certificates may be an affiliate of the Depositor.
REMIC ADMINISTRATOR........ The person (the "REMIC Administrator") responsible
for the various tax-related administration duties
for a series of Certificates as to which one or
more REMIC elections have been made, will be named
in the related Prospectus Supplement. Any REMIC
Administrator may be an affiliate of the Depositor
and/or may also be acting as Master Servicer,
Special Servicer, Trustee or MBS Administrator. See
"Certain Federal Income Tax
Consequences -- REMICs -- Reporting and Other
Administrative Matters."
THE MORTGAGE ASSETS........ The Mortgage Assets will be the primary assets of
any Trust Fund. The Mortgage Assets with respect to
each series of Certificates will, in general,
consist of a pool of mortgage loans ("Mortgage
Loans") secured by first or junior liens on, or
security interests in, without limitation, (i)
residential properties consisting of five or more
rental or cooperatively-owned dwelling units in
high-rise, mid-rise or garden apartment buildings
or other residential structures ("Multifamily
Properties") or
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<PAGE> 165
(ii) office buildings, retail stores and
establishments, hotels or motels, nursing homes,
hospitals or other health care-related facilities,
recreational vehicle and mobile home parks,
warehouse facilities, mini-warehouse facilities,
self-storage facilities, industrial plants, parking
lots, entertainment or sports arenas, restaurants,
marinas, mixed use or various other types of
income-producing properties or unimproved land
("Commercial Properties"). However, no one of the
following types of Commercial Properties will
represent security for a material concentration of
the Mortgage Loans in any Trust Fund, based on
principal balance at the time such Trust Fund is
formed: (i) restaurants; (ii) entertainment or
sports arenas; or (iii) marinas. The Mortgage Loans
will not be guaranteed or insured by the Depositor
or any of its affiliates or, unless otherwise
provided in the related Prospectus Supplement, by
any governmental agency or instrumentality or by
any other person. If so specified in the related
Prospectus Supplement, some Mortgage Loans may be
delinquent or nonperforming as of the date the
related Trust Fund is formed.
As and to the extent described in the related
Prospectus Supplement, a Mortgage Loan (i) may
provide for no accrual of interest or for accrual
of interest thereon at an interest rate (a
"Mortgage Rate") that is fixed over its term or
that adjusts from time to time, or that may be
converted at the borrower's election from an
adjustable to a fixed Mortgage Rate, or from a
fixed to an adjustable Mortgage Rate, (ii) may
provide for level payments to maturity or for
payments that adjust from time to time to
accommodate changes in the Mortgage Rate or to
reflect the occurrence of certain events, and may
permit negative amortization, (iii) may be fully
amortizing or may be partially amortizing or
nonamortizing, with a balloon payment due on its
stated maturity date, (iv) may prohibit over its
term or for a certain period prepayments and/or
require payment of a premium or a yield maintenance
payment in connection with certain prepayments and
(v) may provide for payments of principal, interest
or both, on due dates that occur monthly,
quarterly, semi-annually or at such other interval
as is specified in the related Prospectus
Supplement. Each Mortgage Loan will have had an
original term to maturity of not more than 40
years. No Mortgage Loan will have been originated
by the Depositor; however, some or all of the
Mortgage Loans in any Trust Fund may have been
originated by an affiliate of the Depositor. See
"Description of the Trust Funds -- Mortgage Loans".
If any Mortgage Loan, or group of related Mortgage
Loans, constitutes a concentration of credit risk,
financial statements or other financial information
with respect to the related Mortgaged Property or
Mortgaged Properties will be included in the
related Prospectus Supplement. See "Description of
the Trust Funds -- Mortgage Loans -- Mortgage Loan
Information in Prospectus Supplements".
If and to the extent specified in the related
Prospectus Supplement, the Mortgage Assets with
respect to a series of Certificates may also
include, or consist of, mortgage participations,
mortgage pass-through certificates and/or other
mortgage-backed securities (collectively, "MBS"),
that evidence an interest in, or are secured by a
pledge of, one or more mortgage loans that conform
to the descriptions of the Mortgage Loans contained
herein and which may or may not be issued, insured
or
9
<PAGE> 166
guaranteed by the United States or an agency or
instrumentality thereof. See "Description of the
Trust Funds -- MBS".
THE CERTIFICATES........... Each series of Certificates will be issued in one
or more classes pursuant to a pooling and servicing
agreement or other agreement specified in the
related Prospectus Supplement (in any case, a
"Pooling and Servicing Agreement") and will
represent in the aggregate the entire beneficial
ownership interest in the related Trust Fund.
As described in the related Prospectus Supplement,
the Certificates of each series, including the
Offered Certificates of such series, may consist of
one or more classes of Certificates that, among
other things: (i) are senior (collectively, "Senior
Certificates") or subordinate (collectively,
"Subordinate Certificates") to one or more other
classes of Certificates in entitlement to certain
distributions on the Certificates; (ii) are
entitled to distributions of principal, with
disproportionate, nominal or no distributions of
interest (collectively, "Stripped Principal
Certificates"); (iii) are entitled to distributions
of interest, with disproportionate, nominal or no
distributions of principal (collectively, "Stripped
Interest Certificates"); (iv) provide for
distributions of interest thereon or principal
thereof that commence only after the occurrence of
certain events, such as the retirement of one or
more other classes of Certificates of such series;
(v) provide for distributions of principal thereof
to be made, from time to time or for designated
periods, at a rate that is faster (and, in some
cases, substantially faster) or slower (and, in
some cases, substantially slower) than the rate at
which payments or other collections of principal
are received on the Mortgage Assets in the related
Trust Fund; (vi) provide for distributions of
principal thereof to be made, subject to available
funds, based on a specified principal payment
schedule or other methodology; or (vii) provide for
distribution based on collections on the Mortgage
Assets in the related Trust Fund attributable to
prepayment premiums, yield maintenance payments or
equity participations.
If so specified in the related Prospectus
Supplement, a series of Certificates may include
one or more "Controlled Amortization Classes",
which will entitle the holders thereof to receive
principal distributions according to a specified
principal payment schedule. Although prepayment
risk cannot be eliminated entirely for any class of
Certificates, a Controlled Amortization Class will
generally provide a relatively stable cash flow so
long as the actual rate of prepayment on the
Mortgage Loans in the related Trust Fund remains
relatively constant at the rate, or within the
range of rates, of prepayment used to establish the
specific principal payment schedule for such
Certificates. Prepayment risk with respect to a
given Mortgage Asset Pool does not disappear,
however, and the stability afforded to a Controlled
Amortization Class comes at the expense of one or
more other classes of the same series, any of which
other classes may also be a class of Offered
Certificates. See "Risk Factors -- Effect of
Prepayments on Average Life of Certificates" and
"-- Effect of Prepayments on Yield of
Certificates".
Each class of Certificates, other than certain
classes of Stripped Interest Certificates and
certain classes of REMIC Residual Certificates (as
defined herein), will have an initial stated
principal amount (a "Certificate Balance"); and
each class of Certificates, other than certain
classes of Stripped Principal Certificates and
certain classes of REMIC
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<PAGE> 167
Residual Certificates, will accrue interest on its
Certificate Balance or, in the case of certain
classes of Stripped Interest Certificates, on a
notional amount (a "Notional Amount"), based on a
fixed, variable or adjustable interest rate (a
"Pass-Through Rate"). The related Prospectus
Supplement will specify the Certificate Balance,
Notional Amount and/or Pass-Through Rate (or, in
the case of a variable or adjustable Pass-Through
Rate, the method for determining such rate), as
applicable, for each class of Offered Certificates.
If so specified in the related Prospectus
Supplement, a class of Certificates may have two or
more component parts, each having characteristics
that are otherwise described herein as being
attributable to separate and distinct classes.
The Certificates will not be guaranteed or insured
by the Depositor or any of its affiliates, by any
governmental agency or instrumentality or by any
other person or entity, unless otherwise provided
in the related Prospectus Supplement. See "Risk
Factors -- Limited Assets".
DISTRIBUTIONS OF INTEREST
ON THE CERTIFICATES........ Interest on each class of Offered Certificates
(other than certain classes of Stripped Principal
Certificates and certain classes of REMIC Residual
Certificates) of each series will accrue at the
applicable Pass-Through Rate on the Certificate
Balance or, in the case of certain classes of
Stripped Interest Certificates, the Notional Amount
thereof outstanding from time to time and will be
distributed to Certificateholders as provided in
the related Prospectus Supplement (each of the
specified dates on which distributions are to be
made, a "Distribution Date"). Distributions of
interest with respect to one or more classes of
Certificates (collectively, "Accrual Certificates")
may not commence until the occurrence of certain
events, such as the retirement of one or more other
classes of Certificates, and interest accrued with
respect to a class of Accrual Certificates prior to
the occurrence of such an event will either be
added to the Certificate Balance thereof or
otherwise deferred as described in the related
Prospectus Supplement. Distributions of interest
with respect to one or more classes of Certificates
may be reduced to the extent of certain
delinquencies, losses and other contingencies
described herein and in the related Prospectus
Supplement. See "Risk Factors -- Effect of
Prepayments on Average Life of Certificates" and
"-- Effect of Prepayments on Yield of
Certificates", "Yield and Maturity
Considerations -- Certain Shortfalls in Collections
of Interest" and "Description of the
Certificates -- Distributions of Interest on the
Certificates".
DISTRIBUTIONS OF PRINCIPAL
OF THE CERTIFICATES........ Each class of Certificates of each series (other
than certain classes of Stripped Interest
Certificates and certain classes of REMIC Residual
Certificates) will have a Certificate Balance. The
Certificate Balance of a class of Certificates
outstanding from time to time will represent the
maximum amount that the holders thereof are then
entitled to receive in respect of principal from
future cash flow on the assets in the related Trust
Fund. The initial aggregate Certificate Balance of
all classes of a series of Certificates will not be
greater than the outstanding principal balance of
the related Mortgage Assets as of a specified date
(the "Cut-off Date"), after application of
scheduled payments due on or before such date,
whether or not received. As and to the extent
described in
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<PAGE> 168
each Prospectus Supplement, distributions of
principal with respect to the related series of
Certificates will be made on each Distribution Date
to the holders of the class or classes of
Certificates of such series then entitled thereto
until the Certificate Balances of such Certificates
have been reduced to zero. Distributions of
principal with respect to one or more classes of
Certificates: (i) may be made at a rate that is
faster (and, in some cases, substantially faster)
or slower (and, in some cases, substantially
slower) than the rate at which payments or other
collections of principal are received on the
Mortgage Assets in the related Trust Fund; (ii) may
not commence until the occurrence of certain
events, such as the retirement of one or more other
classes of Certificates of the same series; (iii)
may be made, subject to certain limitations, based
on a specified principal payment schedule; or (iv)
may be contingent on the specified principal
payment schedule for another class of the same
series and the rate at which payments and other
collections of principal on the Mortgage Assets in
the related Trust Fund are received. Unless
otherwise specified in the related Prospectus
Supplement, distributions of principal of any class
of Offered Certificates will be made on a pro rata
basis among all of the Certificates of such class.
See "Description of the Certificates --
Distributions of Principal of the Certificates".
CREDIT SUPPORT AND CASH
FLOW AGREEMENTS............ If so provided in the related Prospectus
Supplement, partial or full protection against
certain defaults and losses on the Mortgage Assets
in the related Trust Fund may be provided to one or
more classes of Certificates of the related series
in the form of subordination of one or more other
classes of Certificates of such series, which other
classes may include one or more classes of Offered
Certificates, or 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 (any such coverage with respect to the
Certificates of any series, "Credit Support"). If
so provided in the related Prospectus Supplement, a
Trust Fund may include: (i) 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; or
(ii) certain other agreements, such as interest
rate exchange agreements, interest rate cap or
floor agreements, or other agreements designed to
reduce the effects of interest rate fluctuations on
the Mortgage Assets or on one or more classes of
Certificates (any such agreement, in the case of
clause (i) or (ii), a "Cash Flow Agreement").
Certain relevant information regarding any
applicable Credit Support or Cash Flow Agreement
will be set forth in the Prospectus Supplement for
a series of Offered Certificates. See "Risk
Factors -- Credit Support Limitations",
"Description of the Trust Funds -- Credit Support"
and "-- Cash Flow Agreements" and "Description of
Credit Support".
ADVANCES................... If and to the extent provided in the related
Prospectus Supplement, if a Trust Fund includes
Mortgage Loans, the Master Servicer, the Special
Servicer, the Trustee, any provider of Credit
Support and/or any other specified person may be
obligated to make, or have the option of making,
certain advances with respect to delinquent
scheduled payments of principal and/or interest on
such Mortgage Loans. Any such advances made with
respect to a particular Mortgage Loan will be
reimbursable
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<PAGE> 169
from subsequent recoveries in respect of such
Mortgage Loan and otherwise to the extent described
herein and in the related Prospectus Supplement.
See "Description of the Certificates -- Advances in
Respect of Delinquencies". If and to the extent
provided in the Prospectus Supplement for a series
of Certificates, any entity making such advances
may be entitled to receive interest thereon for a
specified period during which certain or all of
such advances are outstanding, payable from amounts
in the related Trust Fund. See "Description of the
Certificates -- Advances in Respect of
Delinquencies". If a Trust Fund includes MBS, any
comparable advancing obligation of a party to the
related Pooling and Servicing Agreement, or of a
party to the related MBS Agreement, will be
described in the related Prospectus Supplement.
OPTIONAL 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 Mortgage Assets in the related
Trust Fund by the party or parties specified
therein, under the circumstances and in the manner
set forth therein. 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
or upon a specified date, a party specified therein
may be authorized or required to solicit bids for
the purchase of all of the Mortgage Assets of the
related Trust Fund, or of a sufficient portion of
such Mortgage Assets to retire such class or
classes, under the circumstances and in the manner
set forth therein. See "Description of the
Certificates -- Termination".
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............. The Certificates of each series will constitute or
evidence ownership of either (i) "regular
interests" ("REMIC Regular Certificates") and
"residual interests" ("REMIC Residual
Certificates") in a Trust Fund, or a designated
portion thereof, treated as a REMIC under Sections
860A through 860G of the Internal Revenue Code of
1986 (the "Code"), or (ii) interests ("Grantor
Trust Certificates") in a Trust Fund treated as a
grantor trust (or a partnership) under applicable
provisions of the Code.
Investors are advised to consult their tax advisors
and to review "Certain Federal Income Tax
Consequences" herein and in the related Prospectus
Supplement.
CERTAIN ERISA
CONSIDERATIONS............. Fiduciaries of employee benefit plans and certain
other retirement plans and arrangements, including
individual retirement accounts, annuities, Keogh
plans, and collective investment funds and separate
accounts in which such plans, accounts, annuities
or arrangements are invested, that are subject to
the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the
Code, should review with their legal advisors
whether the purchase or holding of Offered
Certificates could give rise to a transaction that
is prohibited or is not otherwise permissible
either under ERISA or Section 4975 of the Code. See
"Certain ERISA Considerations" herein and in the
related Prospectus Supplement.
LEGAL INVESTMENT........... The Offered Certificates will constitute "mortgage
related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984,
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<PAGE> 170
as amended ("SMMEA"), only if so specified in the
related Prospectus Supplement. Investors whose
investment authority is subject to legal
restrictions should consult their legal advisors to
determine whether and to what extent the Offered
Certificates constitute legal investments for them.
See "Legal Investment" herein and in the related
Prospectus Supplement.
RATING..................... At their respective dates of issuance, each class
of Offered Certificates will be rated not lower
than investment grade by one or more nationally
recognized statistical rating agencies (each, a
"Rating Agency"). See "Rating" herein and in the
related Prospectus Supplement.
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<PAGE> 171
RISK FACTORS
In considering an investment in the Offered Certificates of any series,
investors should consider, among other things, the following risk factors and
any other factors set forth under the heading "Risk Factors" in the related
Prospectus Supplement. In general, to the extent that the factors discussed
below pertain to or are influenced by the characteristics or behavior of
Mortgage Loans included in a particular Trust Fund, they would similarly pertain
to and be influenced by the characteristics or behavior of the mortgage loans
underlying any MBS included in such Trust Fund.
LIMITED LIQUIDITY OF OFFERED CERTIFICATES
General. The Offered Certificates of any series may have limited or no
liquidity. Accordingly, an investor may be forced to bear the risk of its
investment in any Offered Certificates for an indefinite period of time.
Furthermore, except to the extent described herein and in the related Prospectus
Supplement, Certificateholders will have no redemption rights, and the Offered
Certificates of each series are subject to early retirement only under certain
specified circumstances described herein and in the related Prospectus
Supplement. See "Description of the Certificates -- Termination".
Lack of a Secondary Market. There can be no assurance that a secondary
market for the Offered Certificates of any series will develop or, if it does
develop, that it will provide holders with liquidity of investment or that it
will continue for as long as such Certificates remain outstanding. The
Prospectus Supplement for any series of Offered Certificates may indicate that
an underwriter specified therein intends to establish a secondary market in such
Offered Certificates; however, no underwriter will be obligated to do so. Any
such secondary market may provide less liquidity to investors than any
comparable market for securities that evidence interests in single-family
mortgage loans. Unless otherwise provided in the related Prospectus Supplement,
the Certificates will not be listed on any securities exchange.
Limited Nature of Ongoing Information. The primary source of ongoing
information regarding the Offered Certificates of any series, including
information regarding the status of the related Mortgage Assets and any Credit
Support for such Certificates, will be the periodic reports to
Certificateholders to be delivered pursuant to the related Pooling and Servicing
Agreement as described herein under the heading "Description of the
Certificates -- Reports to Certificateholders". There can be no assurance that
any additional ongoing information regarding the Offered Certificates of any
series will be available through any other source. The limited nature of such
information in respect of a series of Offered Certificates may adversely affect
the liquidity thereof, even if a secondary market for such Certificates does
develop.
Sensitivity to Fluctuations in Prevailing Interest Rates. Insofar as a
secondary market does develop with respect to any series of Offered Certificates
or class thereof, the market value of such Certificates will be affected by
several factors, including the perceived liquidity thereof, the anticipated cash
flow thereon (which may vary widely depending upon the prepayment and default
assumptions applied in respect of the underlying Mortgage Loans) and prevailing
interest rates. The price payable at any given time in respect of certain
classes of Offered Certificates (in particular, a class with a relatively long
average life, a Companion Class (as defined herein) or a class of Stripped
Interest Certificates or Stripped Principal Certificates) may be extremely
sensitive to small fluctuations in prevailing interest rates; and the relative
change in price for an Offered Certificate in response to an upward or downward
movement in prevailing interest rates may not necessarily equal the relative
change in price for such Offered Certificate in response to an equal but
opposite movement in such rates. Accordingly, the sale of Offered Certificates
by a holder in any secondary market that may develop may be at a discount from
the price paid by such holder. The Depositor is not aware of any source through
which price information about the Offered Certificates will be generally
available on an ongoing basis.
LIMITED ASSETS
Unless otherwise specified in the related Prospectus Supplement, neither
the Offered Certificates of any series nor the Mortgage Assets in the related
Trust Fund will be guaranteed or insured by the Depositor or any of its
affiliates, by any governmental agency or instrumentality or by any other person
or entity; and no Offered Certificate of any series will represent a claim
against or security interest in the Trust Funds for any other
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series. Accordingly, if the related Trust Fund has insufficient assets to make
payments on a series of Offered Certificates, no other assets will be available
for payment of the deficiency, and the holders of one or more classes of such
Offered Certificates will be required to bear the consequent loss. Furthermore,
certain amounts on deposit from time to time in certain funds or accounts
constituting part of a Trust Fund, including the Certificate Account and any
accounts maintained as Credit Support, may be withdrawn under certain
conditions, if and to the extent described in the related Prospectus Supplement,
for purposes other than the payment of principal of or interest on the related
series of Certificates. If and to the extent 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 Assets have been incurred, all or a
portion of the amount of such losses or shortfalls will be borne first by one or
more classes of the Subordinate Certificates, and, thereafter, by the remaining
classes of Certificates in the priority and manner and subject to the
limitations specified in such Prospectus Supplement.
CREDIT SUPPORT LIMITATIONS
Limitations Regarding Types of Losses Covered. The Prospectus Supplement
for a series of Certificates will describe any Credit Support provided with
respect thereto. Use of Credit Support will be subject to the conditions and
limitations described herein and in the related Prospectus Supplement. Moreover,
such Credit Support may not cover all potential losses; for example, Credit
Support may or may not cover loss by reason of fraud or negligence by a mortgage
loan originator or other parties. Any such losses not covered by Credit Support
may, at least in part, be allocated to one or more classes of Offered
Certificates.
Disproportionate Benefits to Certain Classes and Series. A series of
Certificates may include one or more classes of Subordinate Certificates (which
may include Offered Certificates), if so provided in the related Prospectus
Supplement. Although subordination is intended to reduce the likelihood of
temporary shortfalls and ultimate losses to holders of Senior Certificates, the
amount of subordination will be limited and may decline under certain
circumstances. In addition, if principal payments on one or more classes of
Offered Certificates of a series are made in a specified order of priority, any
related Credit Support may be exhausted before the principal of the later paid
classes of Offered Certificates of such series has been repaid in full. As a
result, the impact of losses and shortfalls experienced with respect to the
Mortgage Assets may fall primarily upon those classes of Offered Certificates
having a later right of payment. Moreover, if a form of Credit Support covers
the Offered Certificates of more than one series and losses on the related
Mortgage Assets exceed the amount of such Credit Support, it is possible that
the holders of Offered Certificates of one (or more) such series will be
disproportionately benefited by such Credit Support to the detriment of the
holders of Offered Certificates of one (or more) other such series.
Limitations Regarding the Amount of Credit Support. The amount of any
applicable Credit Support supporting one or more classes of Offered
Certificates, including the subordination of one or more other classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies and losses on the underlying Mortgage Assets and certain
other factors. There can, however, be no assurance that the loss experience on
the related Mortgage Assets will not exceed such assumed levels. See
"Description of the Certificates -- Allocation of Losses and Shortfalls" and
"Description of Credit Support". If the losses on the related Mortgage Assets do
exceed such assumed levels, the holders of one or more classes of Offered
Certificates will be required to bear such additional losses.
EFFECT OF PREPAYMENTS ON AVERAGE LIFE OF CERTIFICATES
As a result of prepayments on the Mortgage Loans in any Trust Fund, the
amount and timing of distributions of principal and/or interest on the Offered
Certificates of the related series may be highly unpredictable. Prepayments on
the Mortgage Loans in any Trust Fund will result in a faster rate of principal
payments on one or more classes of the related series of Certificates than if
payments on such Mortgage Loans were made as scheduled. Thus, the prepayment
experience on the Mortgage Loans in a Trust Fund may affect the average life of
one or more classes of Certificates of the related series, including a class of
Offered Certificates. The rate of principal payments on pools of mortgage loans
varies among pools and from time to
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time is influenced by a variety of economic, demographic, geographic, social,
tax and legal factors. For example, if prevailing interest rates fall
significantly below the Mortgage Rates borne by the Mortgage Loans included in a
Trust Fund, then, subject to the particular terms of the Mortgage Loans (e.g.,
provisions that prohibit voluntary prepayments during specified periods or
impose penalties in connection therewith) and the ability of borrowers to obtain
new financing, principal prepayments on such Mortgage Loans are likely to be
higher than if prevailing interest rates remain at or above the rates borne by
those Mortgage Loans. Conversely, if prevailing interest rates rise
significantly above the Mortgage Rates borne by the Mortgage Loans included in a
Trust Fund, then principal prepayments on such Mortgage Loans are likely to be
lower than if prevailing interest rates remain at or below the mortgage rates
borne by those Mortgage Loans. There can be no assurance as to the actual rate
of prepayment on the Mortgage Loans in any Trust Fund or that such rate of
prepayment will conform to any model described herein or in any Prospectus
Supplement. As a result, depending on the anticipated rate of prepayment for the
Mortgage Loans in any Trust Fund, the retirement of any class of Certificates of
the related series could occur significantly earlier or later, and the average
life thereof could be significantly shorter or longer, than expected.
The extent to which prepayments on the Mortgage Loans in any Trust Fund
ultimately affect the average life of any class of Certificates of the related
series will depend on the terms and provisions of such Certificates. A class of
Certificates, including a class of Offered Certificates, may provide that on any
Distribution Date the holders of such Certificates are entitled to a pro rata
share of the prepayments on the Mortgage Loans in the related Trust Fund that
are distributable on such date, to a disproportionately large share (which, in
some cases, may be all) of such prepayments, or to a disproportionately small
share (which, in some cases, may be none) of such prepayments. A class of
Certificates that entitles the holders thereof to a disproportionately large
share of the prepayments on the Mortgage Loans in the related Trust Fund
increases the likelihood of early retirement of such class ("Call Risk") if the
rate of prepayment is relatively fast; while a class of Certificates that
entitles the holders thereof to a disproportionately small share of the
prepayments on the Mortgage Loans in the related Trust Fund increases the
likelihood of an extended average life of such class ("Extension Risk") if the
rate of prepayment is relatively slow. As and to the extent described in the
related Prospectus Supplement, the respective entitlements of the various
classes of Certificateholders of any series to receive payments (and, in
particular, prepayments) of principal of the Mortgage Loans in the related Trust
Fund may vary based on the occurrence of certain events (e.g., the retirement of
one or more classes of Certificates of such series) or subject to certain
contingencies (e.g., prepayment and default rates with respect to such Mortgage
Loans).
A series of Certificates may include one or more Controlled Amortization
Classes, which will entitle the holders thereof to receive principal
distributions according to a specified principal payment schedule. Although
prepayment risk cannot be eliminated entirely for any class of Certificates, a
Controlled Amortization Class will generally provide a relatively stable cash
flow so long as the actual rate of prepayment on the Mortgage Loans in the
related Trust Fund remains relatively constant at the rate, or within the range
of rates, of prepayment used to establish the specific principal payment
schedule for such Certificates. Prepayment risk with respect to a given Mortgage
Asset Pool does not disappear, however, and the stability afforded to a
Controlled Amortization Class comes at the expense of one or more Companion
Classes of the same series, any of which Companion Classes may also be a class
of Offered Certificates. In general, and as more specifically described in the
related Prospectus Supplement, a Companion Class may entitle the holders thereof
to a disproportionately large share of prepayments on the Mortgage Loans in the
related Trust Fund when the rate of prepayment is relatively fast, and/or may
entitle the holders thereof to a disproportionately small share of prepayments
on the Mortgage Loans in the related Trust Fund when the rate of prepayment is
relatively slow. As and to the extent described in the related Prospectus
Supplement, a Companion Class absorbs some (but not all) of the Call Risk and/or
Extension Risk that would otherwise belong to the related Controlled
Amortization Class if all payments of principal of the Mortgage Loans in the
related Trust Fund were allocated on a pro rata basis.
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EFFECT OF PREPAYMENTS ON YIELD OF CERTIFICATES
A series of Certificates may include one or more classes of Offered
Certificates offered at a premium or discount. Yields on such classes of
Certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the Mortgage Loans in the related Trust Fund and, where the
amount of interest payable with respect to a class is disproportionately large,
as compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might fail to recover its original investment
under some prepayment scenarios. The extent to which the yield to maturity of
any class of Offered Certificates may vary from the anticipated yield will
depend upon the degree to which such Certificates are purchased at a discount or
premium and the amount and timing of distributions thereon. An investor should
consider, in the case of any Offered Certificate purchased at a discount, the
risk that a slower than anticipated rate of principal payments on the Mortgage
Loans could result in an actual yield to such investor that is lower than the
anticipated yield and, in the case of any Offered Certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments
could result in an actual yield to such investor that is lower than the
anticipated yield. See "Yield and Maturity Considerations". See also "Certain
Legal Aspects of the Mortgage Loans -- Default Interest and Limitations on
Prepayments" herein regarding the enforceability of Prepayment Premiums.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Offered Certificates
will reflect only its assessment of the likelihood that holders of such Offered
Certificates will receive payments to which such Certificateholders are entitled
under the related Pooling and Servicing Agreement. Such rating will not
constitute an assessment of the likelihood that principal prepayments on the
related Mortgage Loans 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 related Trust Fund. Furthermore, such rating
will not address the possibility that prepayment of the related Mortgage Loans
at a higher or lower rate than anticipated by an investor may cause such
investor to experience a lower than anticipated yield or that an investor that
purchases an Offered Certificate at a significant premium might fail to recover
its initial investment under certain prepayment scenarios. Hence, a rating
assigned by a Rating Agency does not guarantee or ensure the realization of any
anticipated yield on a class of Offered Certificates.
The amount, type and nature of Credit Support, if any, provided with
respect to a series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of the Certificates of such
series. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, there can be no assurance
that the historical data supporting any such actuarial analysis will accurately
reflect future experience, or that the data derived from a large pool of
mortgage loans will accurately predict the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. In other cases, such
criteria may be based upon determinations of the values of the Mortgaged
Properties that provide security for the Mortgage Loans. However, no assurance
can be given that those values will not decline in the future. As a result, the
Credit Support required in respect of the Offered Certificates of any series may
be insufficient to fully protect the holders thereof from losses on the related
Mortgage Asset Pool. See "Description of Credit Support" and "Rating".
CERTAIN FACTORS AFFECTING DELINQUENCY, FORECLOSURE AND LOSS OF THE MORTGAGE
LOANS
General. The payment performance of the Offered Certificates of any series
will be directly related to the payment performance of the underlying Mortgage
Loans. Set forth below is a discussion of certain factors that will affect the
full and timely payment of the Mortgage Loans in any Trust Fund. In addition, a
description of certain material considerations associated with investments in
mortgage loans is included herein under "Certain Legal Aspects of Mortgage
Loans".
The Offered Certificates will be directly or indirectly backed by mortgage
loans secured by Multifamily Properties and/or Commercial Properties. Mortgage
loans made on the security of Multifamily or Commercial Property may have a
greater likelihood of delinquency and foreclosure, and a greater likelihood of
loss in the event thereof, than loans made on the security of an owner-occupied
single-family property. See
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"Description of the Trust Funds -- Mortgage Loans -- Default and Loss
Considerations with Respect to the Mortgage Loans". The ability of a borrower to
repay a loan secured by an income-producing property typically is dependent
primarily upon the successful operation of such property rather than upon the
existence of independent income or assets of the borrower; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. If the net operating income of the property is
reduced (for example, if rental or occupancy rates decline or real estate tax
rates or other operating expenses increase), the borrower's ability to repay the
loan may be impaired. A number of the Mortgage Loans may be secured by liens on
owner-occupied Mortgaged Properties or on Mortgaged Properties leased to a
single tenant or in which only a few tenants produce a material amount of the
rental income. As the primary component of Net Operating Income, rental income
(and maintenance payments from tenant stockholders of a Cooperative) and the
value of any Mortgaged Property are subject to the vagaries of the applicable
real estate market and/or business climate. Properties typically leased,
occupied or used on a short-term basis, such as health care-related facilities,
hotels and motels, and mini-warehouse and self-storage facilities, tend to be
affected more rapidly by changes in market or business conditions than do
properties leased, occupied or used for longer periods, such as (typically)
warehouses, retail stores, office buildings and industrial plants. Commercial
Loans may be secured by owner-occupied Mortgaged Properties or Mortgaged
Properties leased to a single tenant. Accordingly, a decline in the financial
condition of the mortgagor or single tenant, as applicable, may have a
disproportionately greater effect on the Net Operating Income from such
Mortgaged Properties than would be the case with respect to Mortgaged Properties
with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the Net Operating Income and the
value of the Mortgaged Property and the risk of default on the related Mortgage
Loan. As may be further described in the related Prospectus Supplement, in some
cases leases of Mortgaged Properties may provide that the lessee, rather than
the mortgagor, is responsible for payment of certain of these expenses ("Net
Leases"); however, because leases are subject to default risks as well when a
tenant's income is insufficient to cover its rent and operating expenses, the
existence of such "net of expense" provisions will only temper, not eliminate,
the impact of expense increases on the performance of the related Mortgage Loan.
Additional considerations may be presented by the type and use of a
particular Mortgaged Property. For instance, Mortgaged Properties that operate
as hospitals and nursing homes are subject to significant governmental
regulation of the ownership, operation, maintenance and financing of health care
institutions. Hotel, motel and restaurant properties are often operated pursuant
to franchise, management or operating agreements that may be terminable by the
franchisor or operator, and the transferability of a hotel's or restaurant's
operating, liquor and other licenses upon a transfer of the hotel, or the
restaurant, as the case may be, whether through purchase or foreclosure, is
subject to local law requirements.
In addition, the concentration of default, foreclosure and loss risks in
individual Mortgage Loans in a particular Trust Fund will generally be greater
than for pools of single-family loans because Mortgage Loans in a Trust Fund
will generally consist of a smaller number of higher balance loans than would a
pool of single-family loans of comparable aggregate unpaid principal balance.
Limited Recourse Nature of the Mortgage Loans. It is anticipated that some
or all of the Mortgage Loans included in any Trust Fund will be nonrecourse
loans or loans for which recourse may be restricted or unenforceable. As to any
such Mortgage Loan, recourse in the event of borrower default will be limited to
the specific real property and other assets, if any, that were pledged to secure
the Mortgage Loan. However, even with respect to those Mortgage Loans that
provide for recourse against the borrower and its assets generally, there can be
no assurance that enforcement of such recourse provisions will be practicable,
or that the assets of the borrower will be sufficient to permit a recovery in
respect of a defaulted Mortgage Loan in excess of the liquidation value of the
related Mortgaged Property. See "Certain Legal Aspects of Mortgage Loans --
Foreclosure -- Anti-Deficiency Legislation".
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Limitations on Enforceability of Cross-Collateralization. A Mortgage Pool
may include groups of Mortgage Loans which are cross-collateralized and
cross-defaulted. These arrangements are designed primarily to ensure that all of
the collateral pledged to secure the respective Mortgage Loans in a cross-
collateralized group, and the cash flows generated thereby, are available to
support debt service on, and ultimate repayment of, the aggregate indebtedness
evidenced by those Mortgage Loans. These arrangements thus seek to reduce the
risk that the inability of one or more of the Mortgaged Properties securing any
such group of Mortgage Loans to generate net operating income sufficient to pay
debt service will result in defaults and ultimate losses.
If the Mortgaged Properties securing a group of cross-collateralized
Mortgage Loans are not all owned by the same entity, creditors of one or more of
the related borrowers could challenge the cross-collateralization arrangement as
a fraudulent conveyance. Generally, under federal and state fraudulent
conveyance statutes, the incurring of an obligation or the transfer of property
by a person will be subject to avoidance under certain circumstances if the
person did not receive fair consideration or reasonably equivalent value in
exchange for such obligation or transfer and was then insolvent, was rendered
insolvent by such obligation or transfer or had unreasonably small capital for
its business. Accordingly, a creditor seeking to enforce remedies against a
Mortgaged Property subject to such cross-collateralization to repay such
creditor's claim against the related borrower could assert (i) that such
borrower was insolvent at the time the cross-collateralized Mortgage Loans were
made and (ii) that such borrower did not, when it allowed its property to be
encumbered by a lien securing the indebtedness represented by the other Mortgage
Loans in the group of cross-collateralized Mortgage Loans, receive fair
consideration or reasonably equivalent value for, in effect, "guaranteeing" the
performance of the other borrowers. Although the borrower making such
"guarantee" may be receiving "guarantees" from each of the other borrowers in
return, there can be no assurance that such exchanged "guarantees" would be
found to constitute fair consideration or be of reasonably equivalent value.
The cross-collateralized Mortgage Loans may be secured by mortgage liens on
Mortgaged Properties located in different states. Because of various state laws
governing foreclosure or the exercise of a power of sale and because, in
general, foreclosure actions are brought in state court, and the courts of one
state cannot exercise jurisdiction over property in another state, it may be
necessary upon a default under any such Mortgage Loan to foreclose on the
related Mortgaged Properties in a particular order rather than simultaneously in
order to ensure that the lien of the related Mortgages is not impaired or
released.
Increased Risk of Default Associated With Balloon Payments. Certain of the
Mortgage Loans included in a Trust Fund may be nonamortizing or only partially
amortizing over their terms to maturity and, thus, will require substantial
payments of principal and interest (that is, balloon payments) at their stated
maturity. Mortgage Loans of this type involve a greater likelihood of default
than self-amortizing loans 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. The ability of a borrower to accomplish
either of these goals will be affected by a number of factors, including the
value of the related Mortgaged Property, the level of available mortgage rates
at the time of sale or refinancing, the borrower's equity in the related
Mortgaged Property, the financial condition and operating history of the
borrower and the related Mortgaged Property, tax laws, rent control laws (with
respect to certain residential properties), Medicaid and Medicare reimbursement
rates (with respect to hospitals and nursing homes), prevailing general economic
conditions and the availability of credit for loans secured by multifamily or
commercial, as the case may be, real properties generally. Neither the Depositor
nor any of its affiliates will be required to refinance any Mortgage Loan.
If and to the extent described herein and in the related Prospectus
Supplement, in order to maximize recoveries on defaulted Mortgage Loans, the
Master Servicer or the Special Servicer will be permitted (within prescribed
limits) to extend and modify Mortgage Loans that are in default or as to which a
payment default is imminent. See "The Pooling and Servicing
Agreements -- Realization Upon Defaulted Mortgage Loans". While the Master
Servicer or the Special Servicer generally will be required to determine that
any such extension or modification is reasonably likely to produce a greater
recovery than liquidation, taking into account the time value of money, there
can be no assurance that any such extension or modification will in fact
increase the present value of receipts from or proceeds of the affected Mortgage
Loans.
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Lender Difficulty in Collecting Rents Upon the Default and/or Bankruptcy of
Borrower. Each Mortgage Loan included in any Trust Fund secured by Mortgaged
Property that is subject to leases typically will be secured by an assignment of
leases and rents pursuant to which the mortgagor assigns to the mortgagee its
right, title and interest as lessor under the leases of the related Mortgaged
Property, and the income derived therefrom, as further security for the related
Mortgage Loan, while retaining a license to collect rents for so long as there
is no default. If the borrower defaults, the license terminates and the lender
is entitled to collect rents. Some state laws may require that the lender take
possession of the Mortgaged Property and obtain a judicial appointment of a
receiver before becoming entitled to collect the rents. In addition, if
bankruptcy or similar proceedings are commenced by or in respect of the
borrower, the lender's ability to collect the rents may be adversely affected.
See "Certain Legal Aspects of Mortgage Loans -- Leases and Rents".
Limitations on Enforceability of Due-on-Sale and Debt-Acceleration
Clauses. 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 also may include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or nonmonetary default of the
mortgagor. 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.
Risk of Liability Arising From Environmental Conditions. Under the laws of
certain states, contamination of real property may give rise to a lien on the
property to assure the costs of cleanup. In several states, such a lien has
priority over an existing mortgage lien on such property. In addition, under the
laws of some states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, a lender may be liable, as
an "owner" or "operator", for costs of addressing releases or threatened
releases of hazardous substances at a property, if agents or employees of the
lender have become sufficiently involved in the operations of the borrower,
regardless of whether the environmental damage or threat was caused by the
borrower or a prior owner. A lender also risks such liability on foreclosure of
the mortgage. See "Certain Legal Aspects of Mortgage Loans -- Environmental
Considerations".
Lack of Insurance Coverage for Certain Special Hazard Losses. Unless
otherwise specified in a Prospectus Supplement, the Master Servicer and Special
Servicer for the related Trust Fund will be required to cause the borrower on
each Mortgage Loan in such Trust Fund to maintain such insurance coverage in
respect of the related Mortgaged Property as is required under the related
Mortgage, including hazard insurance; provided that, as and to the extent
described herein and in the related Prospectus Supplement, each of the Master
Servicer and the Special Servicer may satisfy its obligation to cause hazard
insurance to be maintained with respect to any Mortgaged Property through
acquisition of a blanket policy. 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 covering the
Mortgaged Properties 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, most such 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 mudflows), wet or dry rot, vermin, domestic animals
and certain other kinds of risks. Unless the related Mortgage specifically
requires the mortgagor to insure against physical damage arising from such
causes, then, to the extent any consequent losses are not covered by Credit
Support, such losses may be borne, at least in part, by the holders of one or
more classes of Offered Certificates of the related series. See "The Pooling and
Servicing Agreements -- Hazard Insurance Policies".
INCLUSION OF DELINQUENT AND NONPERFORMING MORTGAGE LOANS IN A MORTGAGE ASSET
POOL
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular series of Certificates may include Mortgage Loans that are past due
or are nonperforming. If so specified in the related Prospectus
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Supplement, the servicing of such Mortgage Loans will be performed by the
Special Servicer; however, the same entity may act as both Master Servicer and
Special Servicer. Credit Support provided with respect to a particular series of
Certificates may not cover all losses related to such delinquent or
nonperforming Mortgage Loans, and investors should consider the risk that the
inclusion of such Mortgage Loans in the Trust Fund may adversely affect the rate
of defaults and prepayments in respect of the subject Mortgage Asset Pool and
the yield on the Offered Certificates of such series. See "Description of the
Trust Funds -- Mortgage Loans -- General".
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each Trust Fund will consist of (i) various types of
multifamily or commercial mortgage loans ("Mortgage Loans"), (ii) mortgage
participations, pass-through certificates or other mortgage-backed securities
("MBS") that evidence interests in, or that are secured by pledges of, one or
more of various types of multifamily or commercial mortgage loans or (iii) a
combination of Mortgage Loans and MBS (collectively, "Mortgage Assets"). Each
Trust Fund will be established by the Depositor. Each Mortgage Asset will be
selected by the Depositor for inclusion in a Trust Fund from among those
purchased, either directly or indirectly, from a prior holder thereof (a
"Mortgage Asset Seller"), which prior holder may or may not be the originator of
such Mortgage Loan or the issuer of such MBS and may be an affiliate of the
Depositor. The Mortgage Assets will not be guaranteed or insured by the
Depositor or any of its affiliates or, unless otherwise provided in the related
Prospectus Supplement, by any governmental agency or instrumentality or by any
other person. The discussion below under the heading "-- Mortgage Loans", unless
otherwise noted, applies equally to mortgage loans underlying any MBS included
in a particular Trust Fund.
MORTGAGE LOANS
General. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") that create first or junior liens on fee or
leasehold estates in properties (the "Mortgaged Properties") consisting of (i)
residential properties consisting of five or more rental or cooperatively-owned
dwelling units in high-rise, mid-rise or garden apartment buildings or other
residential structures ("Multifamily Properties") or (ii) office buildings,
retail stores and establishments, hotels or motels, nursing homes, hospitals or
other health care-related facilities, recreational vehicle and mobile home
parks, warehouse facilities, mini-warehouse facilities, self-storage facilities,
industrial plants, parking lots, entertainment or sports arenas, restaurants,
marinas, mixed use or various other types of income-producing properties or
unimproved land ("Commercial Properties"). The Multifamily Properties may
include mixed commercial and residential structures and apartment buildings
owned by private cooperative housing corporations ("Cooperatives"). However, no
one of the following types of Commercial Properties will represent security for
a material concentration of the Mortgage Loans in any Trust Fund, based on
principal balance at the time such Trust Fund is formed: (i) restaurants; (ii)
entertainment or sports arenas; (iii) marinas; or (iv) nursing homes, hospitals
or other health care-related facilities. Unless otherwise specified in the
related Prospectus Supplement, each Mortgage will create a first priority
mortgage lien on a borrower's fee estate in a Mortgaged Property. If a Mortgage
creates a lien on a borrower's leasehold estate in a property, then, unless
otherwise specified in the related Prospectus Supplement, the term of any such
leasehold will exceed the term of the Mortgage Note by at least ten years.
Unless otherwise specified in the related Prospectus Supplement, each Mortgage
Loan will have been originated by a person (the "Originator") other than the
Depositor; however, the Originator may be or may have been an affiliate of the
Depositor.
If so provided in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans secured by junior liens, and
the loans secured by the related senior liens ("Senior Liens") may not be
included in the Mortgage Pool. The primary risk to holders of Mortgage Loans
secured by junior liens is the possibility that adequate funds will not be
received in connection with a foreclosure of the related Senior Liens to satisfy
fully both the Senior Liens and the Mortgage Loan. In the event that a holder of
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a Senior Lien forecloses on a Mortgaged Property, the proceeds of the
foreclosure or similar sale will be applied first to the payment of court costs
and fees in connection with the foreclosure, second to real estate taxes, third
in satisfaction of all principal, interest, prepayment or acceleration
penalties, if any, and any other sums due and owing to the holder of the Senior
Liens. The claims of the holders of the Senior Liens will be satisfied in full
out of proceeds of the liquidation of the related Mortgage Property, if such
proceeds are sufficient, before the Trust Fund as holder of the junior lien
receives any payments in respect of the Mortgage Loan. If the Master Servicer
were to foreclose on any Mortgage Loan, it would do so subject to any related
Senior Liens. In order for the debt related to such Mortgage Loan to be paid in
full at such sale, a bidder at the foreclosure sale of such Mortgage Loan would
have to bid an amount sufficient to pay off all sums due under the Mortgage Loan
and any Senior Liens or purchase the Mortgaged Property subject to such Senior
Liens. In the event that such proceeds from a foreclosure or similar sale of the
related Mortgaged Property are insufficient to satisfy all Senior Liens and the
Mortgage Loan in the aggregate, the Trust Fund, as the holder of the junior
lien, and, accordingly, holders of one or more classes of the Certificates of
the related series bear (i) the risk of delay in distributions while a
deficiency judgment against the borrower is obtained and (ii) the risk of loss
if the deficiency judgment is not obtained and satisfied. Moreover, deficiency
judgments may not be available in certain jurisdictions, or the particular
Mortgage Loan may be a nonrecourse loan, which means that, absent special facts,
recourse in the case of default will be limited to the Mortgaged Property and
such other assets, if any, that were pledged to secure repayment of the Mortgage
Loan.
If so specified in the related Prospectus Supplement, the Mortgage Assets
for a particular series of Certificates may include Mortgage Loans that are
delinquent or nonperforming as of the date such Certificates are issued. In that
case, the related Prospectus Supplement will set forth, as to each such Mortgage
Loan, available information as to the period of such delinquency or
nonperformance, any forbearance arrangement then in effect, the condition of the
related Mortgaged Property and the ability of the Mortgaged Property to generate
income to service the mortgage debt.
Default and Loss Considerations with Respect to the Mortgage
Loans. Mortgage loans secured by liens on income-producing properties are
substantially different from loans made on the security of owner-occupied
single-family homes. The repayment of a loan secured by a lien on an
income-producing property is typically dependent upon the successful operation
of such property (that is, its ability to generate income). Moreover, as noted
above, some or all of the Mortgage Loans included in a particular Trust Fund may
be nonrecourse loans.
Lenders typically look to the Debt Service Coverage Ratio of a loan secured
by income-producing property as an important factor in evaluating the likelihood
of default on such a loan. Unless otherwise defined in the related Prospectus
Supplement, the "Debt Service Coverage Ratio" of a Mortgage Loan at any given
time is the ratio of (i) the Net Operating Income derived from the related
Mortgaged Property for a twelve-month period to (ii) the annualized scheduled
payments of principal and/or interest on the Mortgage Loan and any other loans
senior thereto that are secured by the related Mortgaged Property. Unless
otherwise defined in the related Prospectus Supplement, "Net Operating Income"
means, for any given period, the total operating revenues derived from a
Mortgaged Property during such period, minus the total operating expenses
incurred in respect of such Mortgaged Property during such period other than (i)
noncash items such as depreciation and amortization, (ii) capital expenditures
and (iii) debt service on the related Mortgage Loan or on any other loans that
are secured by such Mortgaged Property. The Net Operating Income of a Mortgaged
Property will generally fluctuate over time and may or may not be sufficient to
cover debt service on the related Mortgage Loan at any given time. As the
primary source of the operating revenues of a nonowner occupied,
income-producing property, rental income (and, with respect to a Mortgage Loan
secured by a Cooperative apartment building, maintenance payments from
tenant-stockholders of a Cooperative) may be affected by the condition of the
applicable real estate market and/or area economy. In addition, properties
typically leased, occupied or used on a short-term basis, such as certain health
care-related facilities, hotels and motels, and mini-warehouse and self-storage
facilities, tend to be affected more rapidly by changes in market or business
conditions than do properties typically leased for longer periods, such as
warehouses, retail stores, office buildings and industrial plants. Commercial
Properties may be owner-occupied or leased to a small number of tenants. Thus,
the Net Operating Income of such a Mortgaged Property may depend
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substantially on the financial condition of the borrower or a tenant, and
Mortgage Loans secured by liens on such properties may pose a greater likelihood
of default and loss than loans secured by liens on Multifamily Properties or on
multi-tenant Commercial Properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or to changes in governmental rules, regulations and
fiscal policies, may also affect the likelihood of default on a Mortgage Loan.
As may be further described in the related Prospectus Supplement, in some cases
leases of Mortgaged Properties may provide that the lessee, rather than the
borrower/landlord, is responsible for payment of operating expenses ("Net
Leases"). However, the existence of such "net of expense" provisions will result
in stable Net Operating Income to the borrower/landlord only to the extent that
the lessee is able to absorb operating expense increases while continuing to
make rent payments.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a factor
in evaluating the likelihood of loss if a property must be liquidated following
a default. Unless otherwise defined in the related Prospectus Supplement, the
"Loan-to-Value Ratio" of a Mortgage Loan at any given time is the ratio
(expressed as a percentage) of (i) the then outstanding principal balance of the
Mortgage Loan and any other loans senior thereto that are secured by the related
Mortgaged Property to (ii) the Value of the related Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, the "Value" of a
Mortgaged Property will be its fair market value as determined by an appraisal
of such property conducted by or on behalf of the Originator in connection with
the origination of such loan. The lower the Loan-to-Value Ratio, the greater the
percentage of the borrower's equity in a Mortgaged Property, and thus (a) the
greater the incentive of the borrower to perform under the terms of the related
Mortgage Loan (in order to protect such equity) and (b) the greater the cushion
provided to the lender against loss on liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure of
the likelihood of liquidation loss in a pool of Mortgage Loans. For example, the
value of a Mortgaged Property as of the date of initial issuance of the related
series of Certificates may be less than the Value determined at loan
origination, and will likely continue to fluctuate from time to time based upon
certain factors including changes in economic conditions and the real estate
market. Moreover, even when current, an appraisal is not necessarily a reliable
estimate of value. Appraised values of income-producing properties are generally
based on the market comparison method (recent resale value of comparable
properties at the date of the appraisal), the cost replacement method (the cost
of replacing the property at such date), the income capitalization method (a
projection of value based upon the property's projected net cash flow), or upon
a selection from or interpolation of the values derived from such methods. Each
of these appraisal methods can present analytical difficulties. It is often
difficult to find truly comparable properties that have recently been sold; the
replacement cost of a property may have little to do with its current market
value; and income capitalization is inherently based on inexact projections of
income and expense and the selection of an appropriate capitalization rate and
discount rate. Where more than one of these appraisal methods are used and
provide significantly different results, an accurate determination of value and,
correspondingly, a reliable analysis of the likelihood of default and loss, is
even more difficult.
Although there may be multiple methods for determining the value of a
Mortgaged Property, value will in all cases be affected by property performance.
As a result, if a Mortgage Loan defaults because the income generated by the
related Mortgaged Property is insufficient to cover operating costs and expenses
and pay debt service, then the value of the Mortgaged Property will reflect such
and a liquidation loss may occur.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish loans secured by liens on
income-producing real estate from single-family mortgage loans, there can be no
assurance that all of such factors will in fact have been prudently considered
by the Originators of the Mortgage Loans, or that, for a particular Mortgage
Loan, they are complete or relevant. See "Risk Factors -- Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans -- General"
and "-- Certain Factors Affecting Delinquency, Foreclosure and Loss of the
Mortgage Loans -- Increased Risk of Default Associated With Balloon Payments".
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Payment Provisions of the Mortgage Loans. All of the Mortgage Loans will
(i) have had original terms to maturity of not more than 40 years and (ii)
provide for scheduled payments of principal, interest or both, to be made on
specified dates ("Due Dates") that occur monthly, quarterly, semi-annually or
annually. A Mortgage Loan (i) may provide for no accrual of interest or for
accrual of interest thereon at a Mortgage Rate that is fixed over its term or
that adjusts from time to time, or that may be converted at the borrower's
election from an adjustable to a fixed Mortgage Rate, or from a fixed to an
adjustable Mortgage Rate, (ii) may provide for level payments to maturity or for
payments that adjust from time to time to accommodate changes in the Mortgage
Rate or to reflect the occurrence of certain events, and may permit negative
amortization, (iii) may be fully amortizing or may be partially amortizing or
nonamortizing, with a balloon payment due on its stated maturity date, and (iv)
may prohibit over its term or for a certain period prepayments (the period of
such prohibition, a "Lock-out Period" and its date of expiration, a "Lock-out
Date") and/or require payment of a premium or a yield maintenance payment (a
"Prepayment Premium") in connection with certain prepayments, in each case as
described in the related Prospectus Supplement. A Mortgage Loan may also contain
a provision that entitles the lender to a share of appreciation of the related
Mortgaged Property, or profits realized from the operation or disposition of
such Mortgaged Property or the benefit, if any, resulting from the refinancing
of the Mortgage Loan (any such provision, an "Equity Participation"), as
described in the related Prospectus Supplement. See "Certain Legal Aspects of
the Mortgage Loans -- Default Interest and Limitations on Prepayments" in the
Prospectus regarding the enforceability of Prepayment Premiums.
Mortgage Loan Information in Prospectus Supplements. Each Prospectus
Supplement will contain certain information pertaining to the Mortgage Loans in
the related Trust Fund, which, to the extent then applicable, will generally
include the following: (i) the aggregate outstanding principal balance and the
largest, smallest and average outstanding principal balance of the Mortgage
Loans, (ii) the type or types of property that provide security for repayment of
the Mortgage Loans, (iii) the earliest and latest origination date and maturity
date of the Mortgage Loans, (iv) the original and remaining terms to maturity of
the Mortgage Loans, or the respective ranges thereof, and the weighted average
original and remaining terms to maturity of the Mortgage Loans, (v) the
Loan-to-Value Ratios of the Mortgage Loans (either at origination or as of a
more recent date), or the range thereof, and the weighted average of such
Loan-to-Value Ratios, (vi) the Mortgage Rates borne by the Mortgage Loans, or
the range thereof, and the weighted average Mortgage Rate borne by the Mortgage
Loans, (vii) with respect to Mortgage Loans with adjustable Mortgage Rates ("ARM
Loans"), the index or indices upon which such adjustments are based, the
adjustment dates, the range of gross margins and the weighted average gross
margin, and any limits on Mortgage Rate adjustments at the time of any
adjustment and over the life of the ARM Loan, (viii) information regarding the
payment characteristics of the Mortgage Loans, including, without limitation,
balloon payment and other amortization provisions, Lock-out Periods and
Prepayment Premiums, (ix) the Debt Service Coverage Ratios of the Mortgage Loans
(either at origination or as of a more recent date), or the range thereof, and
the weighted average of such Debt Service Coverage Ratios, and (x) the
geographic distribution of the Mortgaged Properties on a state-by-state basis.
In appropriate cases, the related Prospectus Supplement will also contain
certain information available to the Depositor that pertains to the provisions
of leases and the nature of tenants of the Mortgaged Properties. If the
Depositor is unable to provide the specific information described above at the
time Offered Certificates of a series are initially offered, more general
information of the nature described above will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report
which will be available to purchasers of those Certificates at or before the
initial issuance thereof and will be filed as part of a Current Report on Form
8-K with the Commission within fifteen days following such issuance.
If any Mortgage Loan, or group of related Mortgage Loans, constitutes a
concentration of credit risk, financial statements or other financial
information with respect to the related Mortgaged Property or Mortgaged
Properties will be included in the related Prospectus Supplement.
If and to the extent available and relevant to an investment decision in
the Offered Certificates of the related series, information regarding the
prepayment experience of a Master Servicer's multifamily and/or commercial
mortgage loan servicing portfolio will be included in the related Prospectus
Supplement. However, many servicers do not maintain records regarding such
matters or, at least, not in a format that can be readily aggregated. In
addition, the relevant characteristics of a Master Servicer's servicing
portfolio may
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be so materially different from those of the related Mortgage Asset Pool that
such prepayment experience would not be meaningful to an investor. For example,
differences in geographic dispersion, property type and/or loan terms (e.g.,
mortgage rates, terms to maturity and/or prepayment restrictions) between the
two pools of loans could render the Master Servicer's prepayment experience
irrelevant. Because of the nature of the assets to be serviced and administered
by a Special Servicer, no comparable prepayment information will be presented
with respect to the Special Servicer's multifamily and/or commercial mortgage
loan servicing portfolio.
MBS
MBS may include (i) private-label (that is, not issued, insured or
guaranteed by the United States or any agency or instrumentality thereof)
mortgage participations, mortgage pass-through certificates or other
mortgage-backed securities or (ii) certificates issued and/or insured or
guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal
National Mortgage Association ("FNMA"), the Governmental National Mortgage
Association ("GNMA") or the Federal Agricultural Mortgage Corporation ("FAMC"),
provided that, unless otherwise specified in the related Prospectus Supplement,
each MBS will evidence an interest in, or will be secured by a pledge of,
mortgage loans that conform to the descriptions of the Mortgage Loans contained
herein.
Except in the case of a pro rata mortgage participation in a single
mortgage loan or a pool of mortgage loans, each MBS included in a Mortgage Asset
Pool: (a) either will (i) have been previously registered under the Securities
Act of 1933, as amended, (ii) be exempt from such registration requirements or
(iii) have been held for at least the holding period specified in Rule 144(k)
under the Securities Act of 1933, as amended; and (b) will have been acquired
(other than from the Depositor or an affiliate thereof) in bona fide secondary
market transactions.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an "MBS Agreement"). The issuer of the MBS (the "MBS Issuer") and/or the
servicer of the underlying mortgage loans (the "MBS Servicer") will be parties
to the MBS Agreement, generally together with a trustee (the "MBS Trustee") or,
in the alternative, with the original purchaser or purchasers of the MBS.
The MBS may have been issued in one or more classes with characteristics
similar to the classes of Certificates described herein. Distributions in
respect of the MBS will be made by the MBS Issuer, the MBS Servicer or the MBS
Trustee on the dates specified in the related Prospectus Supplement. The MBS
Issuer or the MBS Servicer or another person specified in the related Prospectus
Supplement may have the right or obligation to repurchase or substitute assets
underlying the MBS after a certain date or under other circumstances specified
in the related Prospectus Supplement.
Reserve funds, subordination or other credit support similar to that
described for the Certificates under "Description of Credit Support" may have
been provided with respect to the MBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and other factors and generally will have been
established on the basis of the requirements of any rating agency that may have
assigned a rating to the MBS, or by the initial purchasers of the MBS.
The Prospectus Supplement for a series of Certificates that evidence
interests in MBS will specify, to the extent available, (i) the aggregate
approximate initial and outstanding principal amount(s) and type of the MBS to
be included in the Trust Fund, (ii) the original and remaining term(s) to stated
maturity of the MBS, if applicable, (iii) the pass-through or bond rate(s) of
the MBS or the formula for determining such rate(s), (iv) the payment
characteristics of the MBS, (v) the MBS Issuer, MBS Servicer and MBS Trustee, as
applicable, of each of the MBS, (vi) a description of the related credit
support, if any, (vii) the circumstances under which the related underlying
mortgage loans, or the MBS themselves, may be purchased prior to their maturity,
(viii) the terms on which mortgage loans may be substituted for those originally
underlying the MBS, (ix) the type of mortgage loans underlying the MBS and, to
the extent available to the Depositor and appropriate under the circumstances,
such other information in respect of the underlying mortgage loans
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described under "-- Mortgage Loans -- Mortgage Loan Information in Prospectus
Supplements", and (x) the characteristics of any cash flow agreements that
relate to the MBS.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Certificate Account") established and maintained on behalf of the
Certificateholders into which all payments and collections received or advanced
with respect to the Mortgage Assets and other assets in the Trust Fund will be
deposited to the extent described herein and in the related Prospectus
Supplement. See "The Pooling and Servicing Agreements -- Certificate Account".
CREDIT SUPPORT
If so provided in the Prospectus Supplement for a series of Certificates,
partial or full protection against certain defaults and losses on the Mortgage
Assets in the related Trust Fund may be provided to one or more classes of
Certificates of such series in the form of subordination of one or more other
classes of Certificates of such series or by one or more other types of Credit
Support, such as a letter of credit, insurance policy, guarantee or reserve
fund, among others, or a combination thereof. The amount and types of Credit
Support, the identity of the entity providing it (if applicable) and related
information with respect to each type of Credit Support, if any, will be set
forth in the Prospectus Supplement for a series of Certificates. See "Risk
Factors -- Credit Support Limitations" and "Description of Credit Support".
CASH FLOW AGREEMENTS
If so provided in the Prospectus Supplement for a series of Certificates,
the related Trust Fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for such series will be
invested at a specified rate. The Trust Fund may also include certain other
agreements, such as interest rate exchange agreements, interest rate cap or
floor agreements, or other agreements designed to reduce the effects of interest
rate fluctuations on the Mortgage Assets on one or more classes of Certificates.
The principal terms of any such Cash Flow Agreement, including, without
limitation, provisions relating to the timing, manner and amount of payments
thereunder and provisions relating to the termination thereof, will be described
in the related Prospectus Supplement. The related Prospectus Supplement will
also identify the obligor under the Cash Flow Agreement.
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate and the amount and
timing of distributions on the Certificate. See "Risk Factors -- Effect of
Prepayments on Average Life of Certificates". The following discussion
contemplates a Trust Fund that consists solely of Mortgage Loans. While the
characteristics and behavior of mortgage loans underlying an MBS can generally
be expected to have the same effect on the yield to maturity and/or weighted
average life of a class of Certificates as will the characteristics and behavior
of comparable Mortgage Loans, the effect may differ due to the payment
characteristics of the MBS. If a Trust Fund includes MBS, the related Prospectus
Supplement will discuss the effect, if any, that the payment characteristics of
the MBS may have on the yield to maturity and weighted average lives of the
Offered Certificates of the related series.
PASS-THROUGH RATE
The Certificates of any class within a series may have a fixed, variable or
adjustable Pass-Through Rate, which may or may not be based upon the interest
rates borne by the Mortgage Loans in the related Trust Fund. The Prospectus
Supplement with respect to any series of Certificates will specify the
Pass-Through Rate for each class of Offered Certificates of such series or, in
the case of a class of Offered Certificates with a variable or adjustable
Pass-Through Rate, the method of determining the Pass-Through Rate; the effect,
if
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any, of the prepayment of any Mortgage Loan on the Pass-Through Rate of one or
more classes of Offered Certificates; and whether the distributions of interest
on the Offered Certificates of any class will be dependent, in whole or in part,
on the performance of any obligor under a Cash Flow Agreement.
PAYMENT DELAYS
With respect to any series of Certificates, a period of time will elapse
between the date upon which payments on the Mortgage Loans in the related Trust
Fund are due and the Distribution Date on which such payments are passed through
to Certificateholders. That delay will effectively reduce the yield that would
otherwise be produced if payments on such Mortgage Loans were distributed to
Certificateholders on the date they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a Mortgage Loan,
the borrower is generally charged interest on the amount of such prepayment only
through the date of such prepayment, instead of through the Due Date for the
next succeeding scheduled payment. However, interest accrued on any series of
Certificates and distributable thereon on any Distribution Date will generally
correspond to interest accrued on the Mortgage Loans to their respective Due
Dates during the related Due Period. A "Due Period" will be a specified time
period (generally corresponding in length to the period between Distribution
Dates) and all scheduled payments on the Mortgage Loans in the related Trust
Fund that are due during a given Due Period will, to the extent received by a
specified date (the "Determination Date") or otherwise advanced by the related
Master Servicer, Special Servicer or other specified person, be distributed to
the holders of the Certificates of such series on the next succeeding
Distribution Date. Consequently, if a prepayment on any Mortgage Loan is
distributable to Certificateholders on a particular Distribution Date, but such
prepayment is not accompanied by interest thereon to the Due Date for such
Mortgage Loan in the related Due Period, then the interest charged to the
borrower (net of servicing and administrative fees) may be less (such shortfall,
a "Prepayment Interest Shortfall") than the corresponding amount of interest
accrued and otherwise payable on the Certificates of the related series. If and
to the extent that any such shortfall is allocated to a class of Offered
Certificates, the yield thereon will be adversely affected. The Prospectus
Supplement for each series of Certificates will describe the manner in which any
such shortfalls will be allocated among the classes of such Certificates. The
related Prospectus Supplement will also describe any amounts available to offset
such shortfalls.
YIELD AND PREPAYMENT CONSIDERATIONS
A Certificate's yield to maturity will be affected by the rate of principal
payments on the Mortgage Loans in the related Trust Fund and the allocation
thereof to reduce the principal balance (or notional amount, if applicable) of
such Certificate. The rate of principal payments on the Mortgage Loans in any
Trust Fund will in turn be affected by the amortization schedules thereof
(which, in the case of ARM Loans, may change periodically to accommodate
adjustments to the Mortgage Rates thereon), the dates on which any balloon
payments are due, and the rate of principal prepayments thereon (including for
this purpose, voluntary prepayments by borrowers and also prepayments resulting
from liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the related Mortgaged Properties, or purchases of Mortgage Loans out
of the related Trust Fund). Because the rate of principal prepayments on the
Mortgage Loans in any Trust Fund will depend on future events and a variety of
factors (as described below), no assurance can be given as to such rate.
The extent to which the yield to maturity of a class of Offered
Certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in the related Trust
Fund are in turn distributed on such Certificates (or, in the case of a class of
Stripped Interest Certificates, result in the reduction of the Notional Amount
thereof). An investor should consider, in the case of any Offered Certificate
purchased at a discount, the risk that a slower than anticipated rate of
principal payments on the Mortgage Loans in the related Trust Fund could result
in an actual yield to such investor that is lower than the
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anticipated yield and, in the case of any Offered Certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments on
such Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield. In addition, if an investor purchases an
Offered Certificate at a discount (or premium), and principal payments are made
in reduction of the principal balance or notional amount of such investor's
Offered Certificates at a rate slower (or faster) than the rate anticipated by
the investor during any particular period, any consequent adverse effects on
such investor's yield would not be fully offset by a subsequent like increase
(or decrease) in the rate of principal payments.
In general, the Notional Amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (ii) equal the Certificate
Balances of one or more of the other classes of Certificates of the same series.
Accordingly, the yield on such Stripped Interest Certificates will be inversely
related to the rate at which payments and other collections of principal are
received on such Mortgage Assets or distributions are made in reduction of the
Certificate Balances of such classes of Certificates, as the case may be.
Consistent with the foregoing, if a class of Certificates of any series
consists of Stripped Interest Certificates or Stripped Principal Certificates, a
lower than anticipated rate of principal prepayments on the Mortgage Loans in
the related Trust Fund will negatively affect the yield to investors in Stripped
Principal Certificates, and a higher than anticipated rate of principal
prepayments on such Mortgage Loans will negatively affect the yield to investors
in Stripped Interest Certificates. If the Offered Certificates of a series
include any such Certificates, the related Prospectus Supplement will include a
table showing the effect of various constant assumed levels of prepayment on
yields on such Certificates. Such tables will be intended to illustrate the
sensitivity of yields to various constant assumed prepayment rates and will not
be intended to predict, or to provide information that will enable investors to
predict, yields or prepayment rates.
The extent of prepayments of principal of the Mortgage Loans in any Trust
Fund may be affected by a number of factors, including, without limitation, the
availability of mortgage credit, the relative economic vitality of the area in
which the Mortgaged Properties are located, the quality of management of the
Mortgaged Properties, the servicing of the Mortgage Loans, possible changes in
tax laws and other opportunities for investment. In general, those factors which
increase the attractiveness of selling a Mortgaged Property or refinancing a
Mortgage Loan or which enhance a borrower's ability to do so, as well as those
factors which increase the likelihood of default under a Mortgage Loan, would be
expected to cause the rate of prepayment in respect of any Mortgage Asset Pool
to accelerate. In contrast, those factors having an opposite effect would be
expected to cause the rate of prepayment of any Mortgage Asset Pool to slow.
The rate of principal payments on the Mortgage Loans in any Trust Fund may
also be affected by the existence of Lock-out Periods and requirements that
principal prepayments be accompanied by Prepayment Premiums, and by the extent
to which such provisions may be practicably enforced. To the extent enforceable,
such provisions could constitute either an absolute prohibition (in the case of
a Lock-out Period) or a disincentive (in the case of a Prepayment Premium) to a
borrower's voluntarily prepaying its Mortgage Loan, thereby slowing the rate of
prepayments.
The rate of prepayment on a pool of mortgage loans is likely to be affected
by prevailing market interest rates for mortgage loans of a comparable type,
term and risk level. When the prevailing market interest rate is below a
mortgage coupon, a borrower may have an increased incentive to refinance its
mortgage loan. Even in the case of ARM Loans, as prevailing market interest
rates decline, and without regard to whether the Mortgage Rates on such ARM
Loans decline in a manner consistent therewith, the related borrowers may have
an increased incentive to refinance for purposes of either (i) converting to a
fixed rate loan and thereby "locking in" such rate or (ii) taking advantage of a
different index, margin or rate cap or floor on another adjustable rate mortgage
loan. Therefore, as prevailing market interest rates decline, prepayment speeds
would be expected to accelerate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash flow
needs or to make other investments. In addition, some borrowers may be motivated
by federal and state tax laws (which are subject to change) to sell Mortgaged
Properties prior to the exhaustion of tax
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depreciation benefits. The Depositor makes no representation as to the
particular factors that will affect the prepayment of the Mortgage Loans in any
Trust Fund, as to the relative importance of such factors, as to the percentage
of the principal balance of such Mortgage Loans that will be paid as of any date
or as to the overall rate of prepayment on such Mortgage Loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Unless otherwise
specified in the related Prospectus Supplement, weighted average life refers to
the average amount of time that will elapse from the date of issuance of an
instrument until each dollar allocable as principal of such instrument is repaid
to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related Mortgage
Loans, whether in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes voluntary prepayments by borrowers and
also prepayments resulting from liquidations of Mortgage Loans due to default,
casualties or condemnations affecting the related Mortgaged Properties and
purchases of Mortgage Loans out of the related Trust Fund), is paid to such
class. Prepayment rates on loans are commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment model
or the Standard Prepayment Assumption ("SPA") prepayment model. CPR represents
an assumed constant rate of prepayment each month (expressed as an annual
percentage) relative to the then outstanding principal balance of a pool of
mortgage loans for the life of such loans. SPA represents an assumed variable
rate of prepayment each month (expressed as an annual percentage) relative to
the then outstanding principal balance of a pool of mortgage loans, with
different prepayment assumptions often expressed as percentages of SPA. For
example, a prepayment assumption of 100% of SPA assumes prepayment rates of 0.2%
per annum of the then outstanding principal balance of such 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 particular pool of mortgage loans.
Moreover, the CPR and SPA models were developed based upon historical prepayment
experience for single-family mortgage loans. Thus, it is unlikely that the
prepayment experience of the Mortgage Loans included in any Trust Fund will
conform to any particular level of CPR or SPA.
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 such series with a Certificate Balance,
and the percentage of the initial Certificate Balance of each such class that
would be outstanding on specified Distribution Dates, based on the assumptions
stated in such Prospectus Supplement, including assumptions that prepayments on
the related Mortgage Loans are made at rates corresponding to various
percentages of CPR or SPA, or at such other rates specified in such Prospectus
Supplement. Such tables and assumptions will illustrate the sensitivity of the
weighted average lives of the Certificates to various assumed prepayment rates
and will not be intended to predict, or to provide information that will enable
investors to predict, the actual weighted average lives of the Certificates.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the Mortgage
Loans included in a particular Trust Fund may require that balloon payments be
made 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 possibility that Mortgage Loans that
require balloon payments may default at maturity, or that the maturity of such a
Mortgage Loan may be extended in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the borrower or
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adverse conditions in the market where the property is located. In order to
minimize losses on defaulted Mortgage Loans, the Master Servicer or the Special
Servicer, to the extent and under the circumstances set forth herein and in the
related Prospectus Supplement, may be authorized 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 may
delay distributions of principal on a class of Offered Certificates and thereby
extend the weighted average life of such Certificates and, if such Certificates
were purchased at a discount, reduce the yield thereon.
Negative Amortization. The weighted average life of a class of
Certificates can be affected by Mortgage Loans that permit negative amortization
to occur (that is, Mortgage Loans that provide for the current payment of
interest calculated at a rate lower than the rate at which interest accrues
thereon, with the unpaid portion of such interest being added to the related
principal balance). Negative amortization on one or more Mortgage Loans in any
Trust Fund may result in negative amortization on the Offered Certificates of
the related series. The related Prospectus Supplement will describe, if
applicable, the manner in which negative amortization in respect of the Mortgage
Loans in any Trust Fund is allocated among the respective classes of
Certificates of the related series. The portion of any Mortgage Loan negative
amortization allocated to a class of Certificates may result in a deferral of
some or all of the interest payable thereon, which deferred interest may be
added to the Certificate Balance thereof. In addition, an ARM Loan that permits
negative amortization would be expected during a period of increasing interest
rates to amortize at a slower rate (and perhaps not at all) than if interest
rates were declining or were remaining constant. Such slower rate of Mortgage
Loan amortization would correspondingly be reflected in a slower rate of
amortization for one or more classes of Certificates of the related series.
Accordingly, the weighted average lives of Mortgage Loans that permit negative
amortization (and that of the classes of Certificates to which any such negative
amortization would be allocated or that would bear the effects of a slower rate
of amortization on such Mortgage Loans) may increase as a result of such
feature.
Negative amortization may occur in respect of an ARM Loan that (i) limits
the amount by which its scheduled payment may adjust in response to a change in
its Mortgage Rate, (ii) provides that its scheduled payment will adjust less
frequently than its Mortgage Rate or (iii) provides for constant scheduled
payments notwithstanding adjustments to its Mortgage Rate. Accordingly, during a
period of declining interest rates, the scheduled payment on such a Mortgage
Loan may exceed the amount necessary to amortize the loan fully over its
remaining amortization schedule and pay interest at the then applicable Mortgage
Rate, thereby resulting in the accelerated amortization of such Mortgage Loan.
Any such acceleration in amortization of its principal balance will shorten the
weighted average life of such Mortgage Loan and, correspondingly, the weighted
average lives of those classes of Certificates entitled to a portion of the
principal payments on such Mortgage Loan.
The extent to which the yield on any Offered Certificate will be affected
by the inclusion in the related Trust Fund of Mortgage Loans that permit
negative amortization, will depend upon (i) whether such Offered Certificate was
purchased at a premium or a discount and (ii) the extent to which the payment
characteristics of such Mortgage Loans delay or accelerate the distributions of
principal on such Certificate (or, in the case of a Stripped Interest
Certificate, delay or accelerate the reduction of the notional amount thereof).
See "-- Yield and Prepayment Considerations" above.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the Mortgage Loans 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 lives of those Mortgage Loans and,
accordingly, the weighted average lives of and yields on the Certificates of the
related series. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings or otherwise, may also
have an effect upon the payment patterns of particular Mortgage Loans and thus
the weighted average lives of and yields on the Certificates of the related
series.
Losses and Shortfalls on the Mortgage Assets. The yield to holders of the
Offered Certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or
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shortfalls in collections arising out of defaults on the Mortgage Loans in the
related Trust Fund and the timing of such losses and shortfalls. In general, the
earlier that any such loss or shortfall occurs, the greater will be the negative
effect on yield for any class of Certificates that is required to bear the
effects thereof.
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may be effected by (i) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of Certificates and/or (ii)
establishing a priority of payments among such classes of Certificates.
The yield to maturity on a class of Subordinate Certificates may be
extremely sensitive to losses and shortfalls in collections on the Mortgage
Loans in the related Trust Fund.
Additional Certificate Amortization. In addition to entitling the holders
thereof to a specified portion (which may during specified periods range from
none to all) of the principal payments received on the Mortgage Assets in the
related Trust Fund, one or more classes of Certificates of any series, including
one or more classes of Offered Certificates of such series, may provide for
distributions of principal thereof from (i) amounts attributable to interest
accrued but not currently distributable on one or more classes of Accrual
Certificates, (ii) Excess Funds or (iii) any other amounts described in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, "Excess Funds" will, in general, represent that portion
of the amounts distributable in respect of the Certificates of any series on any
Distribution Date that represent (i) interest received or advanced on the
Mortgage Assets in the related Trust Fund that is in excess of the interest
currently accrued on the Certificates of such series, or (ii) Prepayment
Premiums, payments from Equity Participations or any other amounts received on
the Mortgage Assets in the related Trust Fund that do not constitute interest
thereon or principal thereof.
The amortization of any class of Certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of such
Certificates and, if such Certificates were purchased at a premium, reduce the
yield thereon. The related Prospectus Supplement will discuss the relevant
factors to be considered in determining whether distributions of principal of
any class of Certificates out of such sources is likely to have any material
effect on the rate at which such Certificates are amortized and the consequent
yield with respect thereto.
THE DEPOSITOR
NationsLinkSM Funding Corporation, a Delaware corporation (the
"Depositor"), was organized on December 13, 1995 for the limited purpose of
acquiring, owning and transferring Mortgage Assets and selling interests therein
or bonds secured thereby. The Depositor is a subsidiary of NationsBanc Mortgage
Capital Corporation, a Texas corporation. The Depositor maintains its principal
office at NationsBank Corporate Center, Charlotte, North Carolina 28255. Its
telephone number is (704) 386-2400.
Unless otherwise noted in the related Prospectus Supplement, neither the
Depositor nor any of the Depositor's affiliates will insure or guarantee
distributions on the Certificates of any series.
DESCRIPTION OF THE CERTIFICATES
GENERAL
Each series of Certificates will represent the entire beneficial ownership
interest in the Trust Fund created pursuant to the related Pooling and Servicing
Agreement. As described in the related Prospectus Supplement, the Certificates
of each series, including the Offered Certificates of such series, may consist
of one or more classes of Certificates that, among other things: (i) provide for
the accrual of interest on the Certificate Balance or Notional Amount thereof at
a fixed, variable or adjustable rate; (ii) constitute Senior Certificates
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or Subordinate Certificates; (iii) constitute Stripped Interest Certificates or
Stripped Principal Certificates; (iv) provide for distributions of interest
thereon or principal thereof that commence only after the occurrence of certain
events, such as the retirement of one or more other classes of Certificates of
such series; (v) provide for distributions of principal thereof to be made, from
time to time or for designated periods, at a rate that is faster (and, in some
cases, substantially faster) or slower (and, in some cases, substantially
slower) than the rate at which payments or other collections of principal are
received on the Mortgage Assets in the related Trust Fund; (vi) provide for
distributions of principal thereof to be made, subject to available funds, based
on a specified principal payment schedule or other methodology; or (vii) provide
for distributions based on collections on the Mortgage Assets in the related
Trust Fund attributable to Prepayment Premiums and Equity Participations.
If so specified in the related Prospectus Supplement, a class of
Certificates may have two or more component parts, each having characteristics
that are otherwise described herein as being attributable to separate and
distinct classes. For example, a class of Certificates may have a Certificate
Balance on which it accrues interest at a fixed, variable or adjustable rate.
Such class of Certificates may also have certain characteristics attributable to
Stripped Interest Certificates insofar as it may also entitle the holders
thereof to distributions of interest accrued on a Notional Amount at a different
fixed, variable or adjustable rate. In addition, a class of Certificates may
accrue interest on one portion of its Certificate Balance at one fixed, variable
or adjustable rate and on another portion of its Certificate Balance at a
different fixed, variable or adjustable rate.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the principal balances or, in case of certain
classes of Stripped Interest Certificates or REMIC Residual Certificates,
notional amounts or percentage interests, specified in the related Prospectus
Supplement. As provided in the related Prospectus Supplement, one or more
classes of Offered Certificates of any series may be issued in fully registered,
definitive form (such Certificates, "Definitive Certificates") or may be offered
in book-entry format (such Certificates, "Book-Entry Certificates") through the
facilities of DTC. The Offered Certificates of each series (if issued as
Definitive Certificates) may be transferred or exchanged, subject to any
restrictions on transfer described in the related Prospectus Supplement, at the
location specified in the related Prospectus Supplement, without the payment of
any service charges, other than any tax or other governmental charge payable in
connection therewith. Interests in a class of Book-Entry Certificates will be
transferred on the book-entry records of DTC and its participating
organizations. If so specified in the related Prospectus Supplement,
arrangements may be made for clearance and settlement through CEDEL Bank,
Societe Anonyme, or the Euroclear System (in Europe) if they are participants in
DTC.
DISTRIBUTIONS
Distributions on the Certificates of each series will be made on each
Distribution Date from the Available Distribution Amount for such series and
such Distribution Date. Unless otherwise provided in the related Prospectus
Supplement, the "Available Distribution Amount" for any series of Certificates
and any Distribution Date will refer to the total of all payments or other
collections (or advances in lieu thereof) on, under or in respect of the
Mortgage Assets and any other assets included in the related Trust Fund that are
available for distribution to the holders of Certificates of such series on such
date. The particular components of the Available Distribution Amount for any
series and Distribution Date will be more specifically described in the related
Prospectus Supplement. In general, the Distribution Date for a series of
Certificates will be the 25th day of each month (or, if any such 25th day is not
a business day, the next succeeding business day), commencing in the month
immediately following the month in which such series of Certificates is issued.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Certificates of each series (other than the final
distribution in retirement of any such Certificate) will be made to the persons
in whose names such Certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date (the
"Determination 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 such class
in
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proportion to the respective Percentage Interests evidenced thereby unless
otherwise specified in the related Prospectus Supplement. Payments will be made
either by wire transfer in immediately available funds to the account of a
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has provided the person required to make
such payments with wiring instructions no later than the related Record Date or
such other date specified in the related Prospectus Supplement (and, if so
provided in the related Prospectus Supplement, such Certificateholder holds
Certificates in the requisite amount or denomination specified therein), or by
check mailed to the address of such Certificateholder as it appears on the
Certificate Register; provided, however, that the final distribution in
retirement of any class of Certificates (whether Definitive Certificates or
Book-Entry Certificates) will be made only upon presentation and surrender of
such Certificates at the location specified in the notice to Certificateholders
of such final distribution. The undivided percentage interest (the "Percentage
Interest") represented by an Offered Certificate of a particular class will be
equal to the percentage obtained by dividing the initial principal balance or
notional amount of such Certificate by the initial Certificate Balance or
Notional Amount of such class.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain classes of REMIC Residual
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which in each case may be fixed, variable or adjustable. The related
Prospectus Supplement will specify the Pass-Through Rate or, in the case of a
variable or adjustable Pass-Through Rate, the method for determining the
Pass-Through Rate, for each class of Offered Certificates. Unless otherwise
specified in the related Prospectus Supplement, interest on the Certificates of
each series will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Distributions of interest in respect of any class of Certificates (other
than a 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 other than any
class of Stripped Principal Certificates or REMIC Residual Certificates that is
not entitled to any distributions of interest) will be made on each Distribution
Date based on the Accrued Certificate Interest for such class and such
Distribution Date, subject to the sufficiency of that portion, if any, of the
Available Distribution Amount allocable to such class on such Distribution Date.
Prior to the time interest is distributable on any class of Accrual
Certificates, the amount of Accrued Certificate Interest otherwise distributable
on such class will be added to the Certificate Balance thereof on each
Distribution Date or otherwise deferred as described in the related Prospectus
Supplement. With respect to each class of Certificates (other than certain
classes of Stripped Interest Certificates and certain classes of REMIC Residual
Certificates), the "Accrued Certificate Interest" for each Distribution Date
will be equal to interest at the applicable Pass-Through Rate accrued for a
specified period (generally the most recently ended calendar month) on the
outstanding Certificate Balance of such class of Certificates immediately prior
to such Distribution Date. Unless otherwise provided in the related Prospectus
Supplement, the Accrued Certificate Interest for each Distribution Date on a
class of Stripped Interest Certificates will be similarly calculated except that
it will accrue on a Notional Amount that is either (i) based on the principal
balances of some or all of the Mortgage Assets in the related Trust Fund or (ii)
equal to the Certificate Balances of one or more other classes of Certificates
of the same series. Reference to a Notional Amount with respect to a class of
Stripped Interest Certificates is solely for convenience in making certain
calculations and does not represent the right to receive any distributions of
principal. If so specified in the related Prospectus Supplement, 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) one or more classes of the Certificates of a series may be reduced to the
extent that any Prepayment Interest Shortfalls, as described under "Yield and
Maturity Considerations -- Certain Shortfalls in Collections of Interest",
exceed the amount of any sums that are applied to offset the amount of such
shortfalls. The particular manner in which such shortfalls will 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
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delinquencies, losses and deferred interest on or in respect of the Mortgage
Assets in the related Trust Fund. Unless otherwise provided 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 such class of a portion of any deferred interest on or in respect
of the Mortgage Assets in the related Trust Fund will result in a corresponding
increase in the Certificate Balance of such class. See "Risk Factors -- Effect
of Prepayments on Average Life of Certificates" and "-- Effect of Prepayments on
Yield of Certificates" and "Yield and Maturity Considerations -- Certain
Shortfalls in Collections of Interest".
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates and certain classes of REMIC Residual
Certificates) will have a Certificate Balance, which, at any time, will equal
the then maximum amount that the holders of Certificates of such class will be
entitled to receive as principal out of the future cash flow on the Mortgage
Assets and other assets included in the related Trust Fund. The outstanding
Certificate Balance of a class of Certificates will be reduced by distributions
of principal made thereon from time to time and, if and to the extent so
provided in the related Prospectus Supplement, further by any losses incurred in
respect of the related Mortgage Assets allocated thereto from time to time. In
turn, the outstanding Certificate Balance of a class of Certificates may be
increased as a result of any deferred interest on or in respect of the related
Mortgage Assets being allocated thereto from time to time, and will be
increased, in the case of a class of Accrual Certificates prior to the
Distribution Date on which distributions of interest thereon are required to
commence, by the amount of any Accrued Certificate Interest in respect thereof
(reduced as described above). The initial aggregate Certificate Balance of all
classes of a series of Certificates will not be greater than the aggregate
outstanding principal balance of the related Mortgage Assets as of a specified
date (the "Cut-off Date"), after application of scheduled payments due on or
before such date, whether or not received. The initial Certificate Balance of
each class of a series of Certificates will be specified in the related
Prospectus Supplement. As and to the extent described in the related Prospectus
Supplement, distributions of principal with respect to a series of Certificates
will be made on each Distribution Date to the holders of the class or classes of
Certificates of such series entitled thereto until the Certificate Balances of
such Certificates have been reduced to zero. Distributions of principal with
respect to one or more classes of Certificates may be made at a rate that is
faster (and, in some cases, substantially faster) than the rate at which
payments or other collections of principal are received on the Mortgage Assets
in the related Trust Fund. Distributions of principal with respect to one or
more classes of Certificates may not commence until the occurrence of certain
events, such as the retirement of one or more other classes of Certificates of
the same series, or may be made at a rate that is slower (and, in some cases,
substantially slower) than the rate at which payments or other collections of
principal are received on the Mortgage Assets in the related Trust Fund.
Distributions of principal with respect to one or more classes of Certificates
(each such class, a "Controlled Amortization Class") may be made, subject to
available funds, based on a specified principal payment schedule. Distributions
of principal with respect to one or more other classes of Certificates (each
such class, a "Companion Class") may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the Mortgage Assets
in the related Trust Fund are received. Unless otherwise specified in the
related Prospectus Supplement, distributions of principal of any class of
Offered Certificates will be made on a pro rata basis among all of the
Certificates of such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums or
payments in respect of Equity Participations received on or in connection with
the Mortgage Assets in any Trust Fund will be distributed on each Distribution
Date to the holders of the class of Certificates of the related series entitled
thereto in accordance with the provisions described in such Prospectus
Supplement. Alternatively, such items may be retained by the Depositor or any of
its affiliates or by any other specified person and/or may be excluded as Trust
Assets.
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ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may be effected by (i) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of Certificates and/or (ii)
establishing a priority of payments among such classes of Certificates. See
"Description of Credit Support".
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, if a
Trust Fund includes Mortgage Loans, the Master Servicer, the Special Servicer,
the Trustee, any provider of Credit Support and/or any other specified person
may be obligated to advance, or have the option of advancing, on or before each
Distribution Date, from its or their own funds or from excess funds held in the
related Certificate Account that are not part of the Available Distribution
Amount for the related series of Certificates for such Distribution Date, an
amount up to the aggregate of any payments of principal (other than the
principal portion of any balloon payments) and interest that were due on or in
respect of such Mortgage Loans during the related Due Period and were delinquent
on the related Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made out of a specific entity's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts drawn under any fund
or instrument constituting Credit Support) respecting which such advances were
made (as to any Mortgage Loan, "Related Proceeds") and such other specific
sources as may be identified in the related Prospectus Supplement, including, in
the case of a series that includes one or more classes of Subordinate
Certificates, if so identified, collections on other Mortgage Assets in the
related Trust Fund that would otherwise be distributable to the holders of one
or more classes of such Subordinate Certificates. No advance will be required to
be made by a Master Servicer, Special Servicer or Trustee if, in the judgment of
the Master Servicer, Special Servicer or Trustee, as the case may be, such
advance would not be recoverable from Related Proceeds or another specifically
identified source (any such advance, a "Nonrecoverable Advance"); and, if
previously made by a Master Servicer, Special Servicer or Trustee, a
Nonrecoverable Advance will be reimbursable thereto from any amounts in the
related Certificate Account prior to any distributions being made to the related
series of Certificateholders.
If advances have been made by a Master Servicer, Special Servicer, Trustee
or other entity from excess funds in a Certificate Account, such Master
Servicer, Special Servicer, Trustee or other entity, as the case may be, will be
required to replace such funds in such Certificate Account on or prior to any
future Distribution Date to the extent that funds in such Certificate Account on
such Distribution Date are less than payments required to be made to the related
series of Certificateholders on such date. If so specified in the related
Prospectus Supplement, the obligation of a Master Servicer, Special Servicer,
Trustee or other entity to make advances may be secured by a cash advance
reserve fund or a surety bond. If applicable, information regarding the
characteristics of, and the identity of any obligor on, any such surety bond,
will be set forth in the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, any
entity making advances will be entitled to receive interest on certain or all of
such advances for a specified period during which such advances are outstanding
at the rate specified in such Prospectus Supplement, and such entity will be
entitled to payment of such interest periodically from general collections on
the Mortgage Loans in the related Trust Fund prior to any payment to the related
series of Certificateholders or as otherwise provided in the related Pooling and
Servicing Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS will describe any comparable
advancing obligation of a party to the related Pooling and Servicing Agreement
or of a party to the related MBS Agreement.
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REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders of
each class of the Offered Certificates of a series, a Master Servicer, Manager
or Trustee, as provided in the related Prospectus Supplement, will forward to
each such holder, a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of such class of
Offered Certificates that was applied to reduce the Certificate Balance
thereof;
(ii) the amount of such distribution to holders of such class of
Offered Certificates that was applied to pay Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of such
class of Offered Certificates that was allocable to (A) Prepayment Premiums
and (B) payments on account of Equity Participations;
(iv) the amount, if any, by which such distribution is less than the
amounts to which holders of such class of Offered Certificates are
entitled;
(v) if the related Trust Fund includes Mortgage Loans, the aggregate
amount of advances included in such distribution;
(vi) if the related Trust Fund includes Mortgage Loans, the amount of
servicing compensation received by the related Master Servicer (and, if
payable directly out of the related Trust Fund, by any Special Servicer and
any Sub-Servicer) and, if the related Trust Fund includes MBS, the amount
of administrative compensation received by the MBS Administrator;
(vii) information regarding the aggregate principal balance of the
related Mortgage Assets on or about such Distribution Date;
(viii) if the related Trust Fund includes Mortgage Loans, information
regarding the number and aggregate principal balance of such Mortgage Loans
that are delinquent;
(ix) if the related Trust Fund includes Mortgage Loans, information
regarding the aggregate amount of losses incurred and principal prepayments
made with respect to such Mortgage Loans during the related "Prepayment
Period", which is the specified period, generally corresponding in length
to the period between Distribution Dates, during which prepayments and
other unscheduled collections on the Mortgage Loans in the related Trust
Fund must be received in order to be distributed on a particular
Distribution Date;
(x) the Certificate Balance or Notional Amount, as the case may be, of
such class of Certificates at the close of business on such Distribution
Date, separately identifying any reduction in such Certificate Balance or
Notional Amount due to the allocation of any losses in respect of the
related Mortgage Assets, any increase in such Certificate Balance or
Notional Amount due to the allocation of any negative amortization in
respect of the related Mortgage Assets and any increase in the Certificate
Balance of a class of Accrual Certificates, if any, in the event that
Accrued Certificate Interest has been added to such balance;
(xi) if such class of Offered Certificates has a variable Pass-Through
Rate or an adjustable Pass-Through Rate, the Pass-Through Rate applicable
thereto for such Distribution Date and, if determinable, for the next
succeeding Distribution Date;
(xii) the amount deposited in or withdrawn from any reserve fund on
such Distribution Date, and the amount remaining on deposit in such reserve
fund as of the close of business on such Distribution Date;
(xiii) if the related Trust Fund includes one or more instruments of
Credit Support, such as a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under each such instrument as of the
close of business on such Distribution Date; and
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(xiv) the amount of Credit Support being afforded by any classes of
Subordinate Certificates.
In the case of information furnished pursuant to subclauses (i)-(iii)
above, the amounts will be expressed as a dollar amount per specified
denomination of the relevant class of Offered Certificates or as a percentage.
The Prospectus Supplement for each series of Certificates may describe
additional information to be included in reports to the holders of the Offered
Certificates of such series.
Within a reasonable period of time after the end of each calendar year, the
Master Servicer, Manager or Trustee for a series of Certificates, as the case
may be, will be required to furnish to each person who at any time during the
calendar year was a holder of an Offered Certificate of such series a statement
containing the information set forth in subclauses (i)-(iii) above, aggregated
for such calendar year or the applicable portion thereof during which such
person was a Certificateholder. Such obligation will be deemed to have been
satisfied to the extent that substantially comparable information is provided
pursuant to any requirements of the Code as are from time to time in force. See,
however, "-- Book-Entry Registration and Definitive Certificates" below.
If the Trust Fund for a series of Certificates includes MBS, the ability of
the related Master Servicer, Manager or Trustee, as the case may be, to include
in any Distribution Date Statement information regarding the mortgage loans
underlying such MBS will depend on the reports received with respect to such
MBS. In such cases, the related Prospectus Supplement will describe the
loan-specific information to be included in the Distribution Date Statements
that will be forwarded to the holders of the Offered Certificates of that series
in connection with distributions made to them.
VOTING RIGHTS
The voting rights evidenced by each series of Certificates (as to such
series, the "Voting Rights") will be allocated among the respective classes of
such series in the manner described in the related Prospectus Supplement.
Certificateholders will generally not have a right to vote, except with
respect to required consents to certain amendments to the related Pooling and
Servicing Agreement and as otherwise specified in the related Prospectus
Supplement. See "The Pooling and Servicing Agreements -- Amendment". The holders
of specified amounts of Certificates of a particular series will have the right
to act as a group to remove the related Trustee and also upon the occurrence of
certain events which if continuing would constitute an Event of Default on the
part of the related Master Servicer, Special Servicer or REMIC Administrator.
See "The Pooling and Servicing Agreements -- Events of Default", "-- Rights Upon
Event of Default" and "-- Resignation and Removal of the Trustee".
TERMINATION
The obligations created by the Pooling and Servicing Agreement for each
series of Certificates will terminate following (i) the final payment or other
liquidation of the last Mortgage Asset subject thereto or the disposition of all
property acquired upon foreclosure of any Mortgage Loan subject thereto and (ii)
the payment (or provision for payment) to the Certificateholders of that series
of all amounts required to be paid to them pursuant to such Pooling and
Servicing Agreement. Written notice of termination of a Pooling and Servicing
Agreement will be given to each Certificateholder of the related series, and the
final distribution will be made only upon presentation and surrender of the
Certificates of such series 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 Mortgage Assets in the related Trust Fund by the party or parties
specified therein, under the circumstances and in the manner set forth therein.
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 or upon a specified date, a party designated
therein may be authorized or required to solicit bids for the purchase of all
the Mortgage Assets of the related Trust Fund, or
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of a sufficient portion of such Mortgage Assets to retire such class or classes,
under the circumstances and in the manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the Prospectus Supplement for a series of Certificates,
one or more classes of the Offered Certificates of such series will be offered
in book-entry format through the facilities of DTC, and each such class will be
represented by one or more global Certificates registered in the name of DTC or
its nominee.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking corporation" 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 Exchange Act. DTC
was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants", which maintain accounts with
DTC, include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a "Certificate Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate Owners
are expected to receive written confirmations providing details of such
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner 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 acting on behalf
of Certificate Owners. Certificate Owners 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 of
any series is discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the Book-Entry
Certificates; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Certificates are credited, which may or may not be the
Certificate Owners. The Participants will remain responsible for keeping account
of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by Participants to Certificate Owners 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 each such Participant (and not
of DTC, the Depositor or any Trustee, Master Servicer, Special Servicer or
Manager), subject to any statutory or regulatory requirements as may be in
effect from time to time. Accordingly, under a book-entry system, Certificate
Owners may receive payments after the related Distribution Date.
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Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder" (as such term is used in the related Pooling and Servicing
Agreement) of Book-Entry Certificates will be the nominee of DTC, and the
Certificate Owners will not be recognized as Certificateholders under the
Pooling and Servicing Agreement. Certificate Owners will be permitted to
exercise the rights of Certificateholders under the related Pooling and
Servicing Agreement only indirectly through the Participants who in turn will
exercise their rights through DTC. The Depositor has been informed that DTC will
take action permitted to be taken by a Certificateholder under a Pooling and
Servicing Agreement only at the direction of one or more Direct Participants to
whose account with DTC interests in the Book-Entry Certificates are credited.
Because DTC can act only on behalf of Direct Participants, who in turn act
on behalf of Indirect Participants and certain Certificate Owners, the ability
of a Certificate Owner to pledge its interest in Book-Entry Certificates to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of its interest in Book-Entry Certificates, may be limited
due to the lack of a physical certificate evidencing such interest.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued as Definitive
Certificates to Certificate Owners or their nominees, rather than to DTC or its
nominee, only if (i) the Depositor advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to such Certificates and the Depositor is unable to locate a
qualified successor or (ii) the Depositor, at its option, elects to terminate
the book-entry system through DTC with respect to such Certificates. Upon the
occurrence of either of the events described in the preceding sentence, DTC will
be required to notify all Direct Participants of the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the certificate or
certificates representing a class of Book-Entry Certificates, together with
instructions for registration, the Trustee for the related series or other
designated party will be required to issue to the Certificate Owners identified
in such instructions the Definitive Certificates to which they are entitled, and
thereafter the holders of such Definitive Certificates will be recognized as
"Certificateholders" under and within the meaning of the related Pooling and
Servicing Agreement.
THE POOLING AND SERVICING AGREEMENTS
GENERAL
The Certificates of each series will be issued pursuant to a Pooling and
Servicing Agreement. In general, the parties to a Pooling and Servicing
Agreement will include the Depositor, the Trustee, the Master Servicer, the
Special Servicer and, if one or more REMIC elections have been made with respect
to the Trust Fund, the REMIC Administrator. However, a Pooling and Servicing
Agreement that relates to a Trust Fund that includes MBS may include a Manager
as a party, but may not include a Master Servicer, Special Servicer or other
servicer as a party. All parties to each Pooling and Servicing Agreement under
which Certificates of a series are issued will be identified in the related
Prospectus Supplement. If so specified in the related Prospectus Supplement, an
affiliate of the Depositor, or the Mortgage Asset Seller or an affiliate
thereof, may perform the functions of Master Servicer, Special Servicer, Manager
or REMIC Administrator. If so specified in the related Prospectus Supplement,
the Master Servicer may also perform the duties of Special Servicer, and the
Master Servicer, the Special Servicer or the Trustee may also perform the duties
of REMIC Administrator. Any party to a Pooling and Servicing Agreement or any
affiliate thereof may own Certificates issued thereunder; however, unless other
specified in the related Prospectus Supplement, except with respect to required
consents to certain amendments to a Pooling and Servicing Agreement,
Certificates issued thereunder that are held by the Master Servicer or Special
Servicer for the related Series will not be allocated Voting Rights.
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. However, the
provisions of each Pooling and Servicing Agreement will vary depending upon the
nature of the Certificates to be issued thereunder and the nature of the related
Trust Fund. The following summaries describe certain provisions that may appear
in a Pooling and Servicing
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Agreement under which Certificates that evidence interests in Mortgage Loans
will be issued. The Prospectus Supplement for a series of Certificates will
describe any provision of the related Pooling and Servicing Agreement that
materially differs from the description thereof contained in this Prospectus
and, if the related Trust Fund includes MBS, will summarize all of the material
provisions of the related Pooling and Servicing Agreement. The summaries herein
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 Pooling and Servicing
Agreement for each series of Certificates and the description of such provisions
in the related Prospectus Supplement. The Depositor will provide a copy of the
Pooling and Servicing Agreement (without exhibits) that relates to any series of
Certificates without charge upon written request of a holder of a Certificate of
such series addressed to it at its principal executive offices specified herein
under "The Depositor".
ASSIGNMENT OF MORTGAGE LOANS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Mortgage Loans to
be included in the related Trust Fund, together with, unless otherwise specified
in the related Prospectus Supplement, all principal and interest to be received
on or with respect to such Mortgage Loans after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, deliver the Certificates to or at the
direction of the Depositor in exchange for the Mortgage Loans and the other
assets to be included in the Trust Fund for such series. Each Mortgage Loan will
be identified in a schedule appearing as an exhibit to the related Pooling and
Servicing Agreement. Such schedule generally will include detailed information
that pertains to each Mortgage Loan included in the related Trust Fund, which
information will typically include the address of the related Mortgaged Property
and type of such property; the Mortgage Rate and, if applicable, the applicable
index, gross margin, adjustment date and any rate cap information; the original
and remaining term to maturity; the amortization term; and the original and
outstanding principal balance.
In addition, unless otherwise specified in the related Prospectus
Supplement, the Depositor will, as to each Mortgage Loan to be included in a
Trust Fund, deliver, or cause to be delivered, to the related Trustee (or to a
custodian appointed by the Trustee as described below) the Mortgage Note
endorsed, without recourse, either in blank or to the order of such Trustee (or
its nominee), the Mortgage with evidence of recording indicated thereon (except
for any Mortgage not returned from the public recording office), an assignment
of the Mortgage in blank or to the Trustee (or its nominee) in recordable form,
together with any intervening assignments of the Mortgage with evidence of
recording thereon (except for any such assignment not returned from the public
recording office), and, if applicable, any riders or modifications to such
Mortgage Note and Mortgage, together with certain other documents at such times
as set forth in the related Pooling and Servicing Agreement. Such assignments
may be blanket assignments covering Mortgages on Mortgaged Properties located in
the same county, if permitted by law. Notwithstanding the foregoing, a Trust
Fund may include Mortgage Loans where the original Mortgage Note is not
delivered to the Trustee if the Depositor delivers, or causes to be delivered,
to the related Trustee (or such custodian) a copy or a duplicate original of the
Mortgage Note, together with an affidavit certifying that the original thereof
has been lost or destroyed. In addition, if the Depositor cannot deliver, with
respect to any Mortgage Loan, the Mortgage or any intervening assignment with
evidence of recording thereon concurrently with the execution and delivery of
the related Pooling and Servicing Agreement because of a delay caused by the
public recording office, the Depositor will deliver, or cause to be delivered,
to the related Trustee (or such custodian) a true and correct photocopy of such
Mortgage or assignment as submitted for recording. The Depositor will deliver,
or cause to be delivered, to the related Trustee (or such custodian) such
Mortgage or assignment with evidence of recording indicated thereon after
receipt thereof from the public recording office. If the Depositor cannot
deliver, with respect to any Mortgage Loan, the Mortgage or any intervening
assignment with evidence of recording thereon concurrently with the execution
and delivery of the related Pooling and Servicing Agreement because such
Mortgage or assignment has been lost, the Depositor will deliver, or cause to be
delivered, to the related Trustee (or such custodian) a true and correct
photocopy of such Mortgage or assignment with evidence of recording thereon.
Unless otherwise specified in the related Prospectus Supplement, assignments of
Mortgage to the Trustee (or its nominee) will be recorded in the appropriate
public recording office, except in states where, in the opinion of counsel
acceptable to the Trustee, such recording is not required to protect the
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Trustee's interests in the Mortgage Loan against the claim of any subsequent
transferee or any successor to or creditor of the Depositor or the originator of
such Mortgage Loan.
The Trustee (or a custodian appointed by the Trustee) for a series of
Certificates will be required to review the Mortgage Loan documents delivered to
it within a specified period of days after receipt thereof, and the Trustee (or
such custodian) will hold such documents in trust for the benefit of the
Certificateholders of such series. Unless otherwise specified in the related
Prospectus Supplement, if any such document is found to be missing or defective,
and such omission or defect, as the case may be, materially and adversely
affects the interests of the Certificateholders of the related series, the
Trustee (or such custodian) will be required to notify the Master Servicer, the
Special Servicer and the Depositor, and one of such persons will be required to
notify the relevant Mortgage Asset Seller. In that case, and if the Mortgage
Asset Seller cannot deliver the document or cure the defect within a specified
number of days after receipt of such notice, then, except as otherwise specified
below or in the related Prospectus Supplement, the Mortgage Asset Seller will be
obligated to repurchase the related Mortgage Loan from the Trustee at a price
generally equal to the unpaid principal balance thereof, together with accrued
but unpaid interest through a date on or about the date of purchase, or at such
other price as will be specified in the related Prospectus Supplement (in any
event, the "Purchase Price"). If so provided in the Prospectus Supplement for a
series of Certificates, a Mortgage Asset Seller, in lieu of repurchasing a
Mortgage Loan as to which there is missing or defective loan documentation, will
have the option, exercisable upon certain conditions and/or within a specified
period after initial issuance of such series of Certificates, to replace such
Mortgage Loan with one or more other mortgage loans, in accordance with
standards that will be described in the Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation will constitute the sole remedy to holders of the Certificates of any
series or to the related Trustee on their behalf for missing or defective
Mortgage Loan documentation, and neither the Depositor nor, unless it is the
Mortgage Asset Seller, the Master Servicer or the Special Servicer will be
obligated to purchase or replace a Mortgage Loan if a Mortgage Asset Seller
defaults on its obligation to do so.
The Trustee will be authorized at any time to appoint one or more
custodians pursuant to a custodial agreement to hold title to the Mortgage Loans
in any Trust Fund and to maintain possession of and, if applicable, to review
the documents relating to such Mortgage Loans, in any case as the agent of the
Trustee. The identity of any such custodian to be appointed on the date of
initial issuance of the Certificates will be set forth in the related Prospectus
Supplement. Any such custodian may be an affiliate of the Depositor.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the Prospectus Supplement for a series of
Certificates, the Depositor will, with respect to each Mortgage Loan in the
related Trust Fund, make or assign, or cause to be made or assigned, certain
representations and warranties (the person making such representations and
warranties, the "Warranting Party") covering, by way of example: (i) the
accuracy of the information set forth for such Mortgage Loan on the schedule of
Mortgage Loans appearing as an exhibit to the related Pooling and Servicing
Agreement; (ii) the enforceability of the related Mortgage Note and Mortgage and
the existence of title insurance insuring the lien priority of the related
Mortgage; (iii) the Warranting Party's title to the Mortgage Loan and the
authority of the Warranting Party to sell the Mortgage Loan; and (iv) the
payment status of the Mortgage Loan. It is expected that in most cases the
Warranting Party will be the Mortgage Asset Seller; however, the Warranting
Party may also be an affiliate of the Mortgage Asset Seller, the Depositor or an
affiliate of the Depositor, the Master Servicer, the Special Servicer or another
person acceptable to the Depositor. The Warranting Party, if other than the
Mortgage Asset Seller, will be identified in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, each
Pooling and Servicing Agreement will provide that the Master Servicer and/or
Trustee will be required to notify promptly any Warranting Party of any breach
of any representation or warranty made by it in respect of a Mortgage Loan that
materially and adversely affects the interests of the Certificateholders of the
related series. If such Warranting Party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related Prospectus Supplement, it will be
obligated to repurchase such
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Mortgage Loan from the Trustee at the applicable Purchase Price. If so provided
in the Prospectus Supplement for a series of Certificates, a Warranting Party,
in lieu of repurchasing a Mortgage Loan as to which a breach has occurred, will
have the option, exercisable upon certain conditions and/or within a specified
period after initial issuance of such series of Certificates, to replace such
Mortgage Loan with one or more other mortgage loans, in accordance with
standards that will be described in the Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation will constitute the sole remedy available to holders of the
Certificates of any series or to the related Trustee on their behalf for a
breach of representation and warranty by a Warranting Party, and neither the
Depositor nor the Master Servicer, in either case unless it is the Warranting
Party, will be obligated to purchase or replace a Mortgage Loan if a Warranting
Party defaults on its obligation to do so.
In some cases, representations and warranties will have been made in
respect of a Mortgage Loan as of a date prior to the date upon which the related
series of Certificates is issued, and thus may not address events that may occur
following the date as of which they were made. However, the Depositor will not
include any Mortgage Loan in the Trust Fund for any series of Certificates if
anything has come to the Depositor's attention that would cause it to believe
that the representations and warranties made in respect of such Mortgage Loan
will not be accurate in all material respects as of the date of issuance. The
date as of which the representations and warranties regarding the Mortgage Loans
in any Trust Fund were made will be specified in the related Prospectus
Supplement.
COLLECTION AND OTHER SERVICING PROCEDURES
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer and the Special Servicer for any Mortgage Pool, directly or through
Sub-Servicers, will each be obligated under the related Pooling and Servicing
Agreement to service and administer the Mortgage Loans in such Mortgage Pool for
the benefit of the related Certificateholders, in accordance with applicable law
and further in accordance with the terms of such Pooling and Servicing
Agreement, such Mortgage Loans and any instrument of Credit Support included in
the related Trust Fund. Subject to the foregoing, the Master Servicer and the
Special Servicer will each have full power and authority to do any and all
things in connection with such servicing and administration that it may deem
necessary and desirable.
As part of its servicing duties, each of the Master Servicer and the
Special Servicer will be required to make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans that it
services and will be obligated to follow such collection procedures as it would
follow with respect to mortgage loans that are comparable to such Mortgage Loans
and held for its own account, provided (i) such procedures are consistent with
the terms of the related Pooling and Servicing Agreement and (ii) do not impair
recovery under any instrument of Credit Support included in the related Trust
Fund. Consistent with the foregoing, the Master Servicer and the Special
Servicer will each be permitted, in its discretion, unless otherwise specified
in the related Prospectus Supplement, to waive any Prepayment Premium, late
payment charge or other charge in connection with any Mortgage Loan.
The Master Servicer and the Special Servicer for any Trust Fund, either
separately or jointly, directly or through Sub-Servicers, will also be required
to perform as to the Mortgage Loans in such Trust Fund various other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts, if required under the related Pooling and Servicing Agreement,
for payment of taxes, insurance premiums, ground rents and similar items, or
otherwise monitoring the timely payment of those items; attempting to collect
delinquent payments; supervising foreclosures; negotiating modifications;
conducting property inspections on a periodic or other basis; managing (or
overseeing the management of) Mortgaged Properties acquired on behalf of such
Trust Fund through foreclosure, deed-in-lieu of foreclosure or otherwise (each,
an "REO Property"); and maintaining servicing records relating to such Mortgage
Loans. The related Prospectus Supplement will specify when and the extent to
which servicing of a Mortgage Loan is to be transferred from the Master Servicer
to the Special Servicer. In general, and subject to the discussion in the
related Prospectus Supplement, a Special Servicer will be responsible for the
servicing and administration of: (i) Mortgage Loans that are delinquent in
respect of a specified number of scheduled payments; (ii) Mortgage Loans as to
which the related borrower has entered into or consented to bankruptcy,
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appointment of a receiver or conservator or similar insolvency proceeding, or
the related borrower has become the subject of a decree or order for such a
proceeding which shall have remained in force undischarged or unstayed for a
specified number of days; and (iii) REO Properties. If so specified in the
related Prospectus Supplement, a Pooling and Servicing Agreement also may
provide that if a default on a Mortgage Loan has occurred or, in the judgment of
the related Master Servicer, a payment default is reasonably foreseeable, the
related Master Servicer may elect to transfer the servicing thereof, in whole or
in part, to the related Special Servicer. Unless otherwise provided in the
related Prospectus Supplement, when the circumstances no longer warrant a
Special Servicer's continuing to service a particular Mortgage Loan (e.g., the
related borrower is paying in accordance with the forbearance arrangement
entered into between the Special Servicer and such borrower), the Master
Servicer will resume the servicing duties with respect thereto. If and to the
extent provided in the related Pooling and Servicing Agreement and described in
the related Prospectus Supplement, a Special Servicer may perform certain
limited duties in respect of Mortgage Loans for which the Master Servicer is
primarily responsible (including, if so specified, performing property
inspections and evaluating financial statements); and a Master Servicer may
perform certain limited duties in respect of any Mortgage Loan for which the
Special Servicer is primarily responsible (including, if so specified,
continuing to receive payments on such Mortgage Loan (including amounts
collected by the Special Servicer)), making certain calculations with respect to
such Mortgage Loan and making remittances and preparing certain reports to the
Trustee and/or Certificateholders with respect to such Mortgage Loan. Unless
otherwise 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".
A mortgagor's failure to make required Mortgage Loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a mortgagor that is unable to make Mortgage Loan payments may also be
unable to make timely payment of taxes and otherwise to maintain and insure the
related Mortgaged Property. In general, the related Special Servicer will be
required to monitor any Mortgage Loan that is in default, evaluate whether the
causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related Mortgaged Property, initiate
corrective action in cooperation with the Mortgagor if cure is likely, inspect
the related Mortgaged Property and take such other actions as it deems necessary
and appropriate. A significant period of time may elapse before the Special
Servicer is able to assess the success of any such corrective action or the need
for additional initiatives. The time within which the Special Servicer can make
the initial determination of appropriate action, evaluate the success of
corrective action, develop additional initiatives, institute foreclosure
proceedings and actually foreclose (or accept a deed to a Mortgaged Property in
lieu of foreclosure) on behalf of the Certificateholders of the related series
may vary considerably depending on the particular Mortgage Loan, the Mortgaged
Property, the mortgagor, the presence of an acceptable party to assume the
Mortgage Loan and the laws of the jurisdiction in which the Mortgaged Property
is located. If a mortgagor files a bankruptcy petition, the Special Servicer may
not be permitted to accelerate the maturity of the Mortgage Loan or to foreclose
on the related Mortgaged Property for a considerable period of time. See
"Certain Legal Aspects of Mortgage Loans -- Bankruptcy Laws."
Mortgagors may, from time to time, request partial releases of the
Mortgaged Properties, easements, consents to alteration or demolition and other
similar matters. In general, the Master Servicer may approve such a request if
it has determined, exercising its business judgment in accordance with the
applicable servicing standard, that such approval will not adversely affect the
security for, or the timely and full collectability of, the related Mortgage
Loan. Any fee collected by the Master Servicer for processing such request will
be retained by the Master Servicer as additional servicing compensation.
In the case of Mortgage Loans secured by junior liens on the related
Mortgaged Properties, unless otherwise provided in the related Prospectus
Supplement, the Master Servicer will be required to file (or cause to be filed)
of record a request for notice of any action by a superior lienholder under the
Senior Lien for the protection of the related Trustee's interest, where
permitted by local law and whenever applicable state law does not require that a
junior lienholder be named as a party defendant in foreclosure proceedings in
order to foreclose such junior lienholder's equity of redemption. Unless
otherwise specified in the related Prospectus
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Supplement, the Master Servicer also will be required to notify any superior
lienholder in writing of the existence of the Mortgage Loan and request
notification of any action (as described below) to be taken against the
mortgagor or the Mortgaged Property by the superior lienholder. If the Master
Servicer is notified that any superior lienholder has accelerated or intends to
accelerate the obligations secured by the related Senior Lien, or has declared
or intends to declare a default under the mortgage or the promissory note
secured thereby, or has filed or intends to file an election to have the related
Mortgaged Property sold or foreclosed, then, unless otherwise specified in the
related Prospectus Supplement, the Master Servicer and the Special Servicer will
each be required to take, on behalf of the related Trust Fund, whatever actions
are necessary to protect the interests of the related Certificateholders and/or
to preserve the security of the related Mortgage Loan, subject to the
application of the REMIC Provisions. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer or Special Servicer, as applicable,
will be required to advance the necessary funds to cure the default or reinstate
the Senior Lien, if such advance is in the best interests of the related
Certificateholders and the Master Servicer or Special Servicer, as applicable,
determines such advances are recoverable out of payments on or proceeds of the
related Mortgage Loan.
SUB-SERVICERS
A Master Servicer or Special Servicer may delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that, unless otherwise
specified in the related Prospectus Supplement, such Master Servicer or Special
Servicer will remain obligated under the related Pooling and Servicing
Agreement. A Sub-Servicer for any series of Certificates may be an affiliate of
the Depositor. Unless otherwise provided in the related Prospectus Supplement,
each sub-servicing agreement between a Master Servicer and a Sub-Servicer (a
"Sub-Servicing Agreement") must provide for servicing of the applicable Mortgage
Loans consistent with the related Pooling and Servicing Agreement. The Master
Servicer and Special Servicer in respect of any Mortgage Asset Pool will each be
required to monitor the performance of Sub-Servicers retained by it and will
have the right to remove a Sub-Servicer retained by it at any time it considers
such removal to be in the best interests of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer or Special Servicer will be solely liable for all fees owed by it to
any Sub-Servicer, irrespective of whether the Master Servicer's or Special
Servicer's compensation pursuant to the related Pooling and Servicing Agreement
is sufficient to pay such fees. Each Sub-Servicer will be reimbursed by the
Master Servicer or Special Servicer, as the case may be, that retained it for
certain expenditures which it makes, generally to the same extent such Master
Servicer or Special Servicer would be reimbursed under a Pooling and Servicing
Agreement. See "-- Certificate Account" and "-- Servicing Compensation and
Payment of Expenses".
CERTIFICATE ACCOUNT
General. The Master Servicer, the Trustee and/or the Special Servicer
will, as to each Trust Fund that includes Mortgage Loans, establish and maintain
or cause to be established and maintained the corresponding Certificate Account,
which will be established so as to comply with the standards of each Rating
Agency that has rated any one or more classes of Certificates of the related
series. A Certificate Account may be maintained as an interest-bearing or a
noninterest-bearing account and the funds held therein may be invested pending
each succeeding Distribution Date in United States government securities and
other obligations that are acceptable to each Rating Agency that has rated any
one or more classes of Certificates of the related series ("Permitted
Investments"). Unless otherwise provided in the related Prospectus Supplement,
any interest or other income earned on funds in a Certificate Account will be
paid to the related Master Servicer, Trustee or Special Servicer as additional
compensation. A Certificate Account may be maintained with the related Master
Servicer, Special Servicer, Trustee or Mortgage Asset Seller or with a
depository institution that is an affiliate of any of the foregoing or of the
Depositor, provided that it complies with applicable Rating Agency standards. If
permitted by the applicable Rating Agency or Agencies, a Certificate Account may
contain funds relating to more than one series of mortgage pass-through
certificates and may contain other
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funds representing payments on mortgage loans owned by the related Master
Servicer or Special Servicer or serviced by either on behalf of others.
Deposits. Unless otherwise provided in the related Pooling and Servicing
Agreement and described in the related Prospectus Supplement, the following
payments and collections received or made by the Master Servicer, the Trustee or
the Special Servicer subsequent to the Cut-off Date (other than payments due on
or before the Cut-off Date) are to be deposited in the Certificate Account for
each Trust Fund that includes Mortgage Loans, within a certain period following
receipt (in the case of collections on or in respect of the Mortgage Loans) or
otherwise as provided in the related Pooling and Servicing Agreement:
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans,
including any default interest collected, in each case net of any portion
thereof retained by the Master Servicer or the Special Servicer as its
servicing compensation or as compensation to the Trustee;
(iii) all proceeds received under any hazard, title or other insurance
policy that provides coverage with respect to a Mortgaged Property or the
related Mortgage Loan or in connection with the full or partial
condemnation of a Mortgaged Property (other than proceeds applied to the
restoration of the property or released to the related borrower)
(collectively, "Insurance and Condemnation Proceeds") and all other amounts
received and retained in connection with the liquidation of defaulted
Mortgage Loans or property acquired in respect thereof, by foreclosure or
otherwise (such amounts, together with those amounts listed in clause (vii)
below, "Liquidation Proceeds"), together with the net operating income
(less reasonable reserves for future expenses) derived from the operation
of any Mortgaged Properties acquired by the Trust Fund through foreclosure
or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates;
(v) any advances made with respect to delinquent scheduled payments of
principal and interest on the Mortgage Loans;
(vi) any amounts paid under any Cash Flow Agreement;
(vii) all proceeds of the purchase of any Mortgage Loan, or property
acquired in respect thereof, by the Depositor, any Mortgage Asset Seller or
any other specified person as described under "-- Assignment of Mortgage
Loans; Repurchases" and "-- Representations and Warranties; Repurchases",
all proceeds of the purchase of any defaulted Mortgage Loan as described
under "-- Realization Upon Defaulted Mortgage Loans", and all proceeds of
any Mortgage Asset purchased as described under "Description of the
Certificates -- Termination";
(viii) to the extent that any such item does not constitute additional
servicing compensation to the Master Servicer or the Special Servicer and
is not otherwise retained by the Depositor or another specified person, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations with respect to the
Mortgage Loans;
(ix) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy as
described under "-- Hazard Insurance Policies";
(x) any amount required to be deposited by the Master Servicer, the
Special Servicer or the Trustee in connection with losses realized on
investments for the benefit of the Master Servicer, the Special Servicer or
the Trustee, as the case may be, of funds held in the Certificate Account;
and
(xi) any other amounts required to be deposited in the Certificate
Account as provided in the related Pooling and Servicing Agreement and
described in the related Prospectus Supplement.
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Withdrawals. Unless otherwise provided in the related Pooling and
Servicing Agreement and described in the related Prospectus Supplement, a Master
Servicer, Trustee or Special Servicer may make withdrawals from the Certificate
Account for each Trust Fund that includes Mortgage Loans for any of the
following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to pay the Master Servicer or the Special Servicer any servicing
fees not previously retained thereby, such payment to be made out of
payments and other collections of interest on the particular Mortgage Loans
as to which such fees were earned;
(iii) to reimburse the Master Servicer, the Special Servicer or any
other specified person for unreimbursed advances of delinquent scheduled
payments of principal and interest made by it, and certain unreimbursed
servicing expenses incurred by it, with respect to Mortgage Loans in the
Trust Fund and properties acquired in respect thereof, such reimbursement
to be made out of amounts that represent late payments collected on the
particular Mortgage Loans, Liquidation Proceeds and Insurance and
Condemnation Proceeds collected on the particular Mortgage Loans and
properties, and net income collected on the particular properties, with
respect to which such advances were made or such expenses were incurred or
out of amounts drawn under any form of Credit Support with respect to such
Mortgage Loans and properties, or if in the judgment of the Master
Servicer, the Special Servicer or such other person, as applicable, such
advances and/or expenses will not be recoverable from such amounts, such
reimbursement to be made from amounts collected on other Mortgage Loans in
the same Trust Fund or, if and to the extent so provided by the related
Pooling and Servicing Agreement and described in the related Prospectus
Supplement, only from that portion of amounts collected on such other
Mortgage Loans that is otherwise distributable on one or more classes of
Subordinate Certificates of the related series;
(iv) if and to the extent described in the related Prospectus
Supplement, to pay the Master Servicer, the Special Servicer or any other
specified person interest accrued on the advances and servicing expenses
described in clause (iii) above incurred by it while such remain
outstanding and unreimbursed;
(v) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted Mortgage Loans, and for
any containment, clean-up or remediation of hazardous wastes and materials
present on such Mortgaged Properties, as described under "-- Realization
Upon Defaulted Mortgage Loans";
(vi) to reimburse the Master Servicer, the Special Servicer, the REMIC
Administrator, the Depositor, the Trustee, 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 "-- Certain Matters Regarding the Master Servicer, the
Special Servicer, the REMIC Administrator and the Depositor" and
"-- Certain Matters Regarding the Trustee";
(vii) if and to the extent described in the related Prospectus
Supplement, to pay the fees of the Trustee, the REMIC Administrator and any
provider of Credit Support;
(viii) if and to the extent described in the related Prospectus
Supplement, to reimburse prior draws on any form of Credit Support;
(ix) to pay the Master Servicer, the Special Servicer or the Trustee,
as appropriate, interest and investment income earned in respect of amounts
held in the Certificate Account as additional compensation;
(x) to pay any servicing expenses not otherwise required to be
advanced by the Master Servicer, the Special Servicer or any other
specified person;
(xi) 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
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transactions, as and to the extent described under "Certain Federal Income
Tax Consequences -- REMICs -- Prohibited Transactions Tax and Other Taxes";
(xii) to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling and Servicing Agreement for the benefit of
Certificateholders;
(xiii) to make any other withdrawals permitted by the related Pooling
and Servicing Agreement and described in the related Prospectus Supplement;
and
(xiv) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
The Master Servicer and the Special Servicer may each agree to modify,
waive or amend any term of any Mortgage Loan serviced by it in a manner
consistent with the applicable Servicing Standard; provided that, unless
otherwise set forth in the related Prospectus Supplement, the modification,
waiver or amendment (i) will not affect the amount or timing of any scheduled
payments of principal or interest on the Mortgage Loan, (ii) will not, in the
judgment of the Master Servicer or the Special Servicer, as the case may be,
materially impair the security for the Mortgage Loan or reduce the likelihood of
timely payment of amounts due thereon and (iii) will not adversely affect the
coverage under any applicable instrument of Credit Support. Unless otherwise
provided in the related Prospectus Supplement, the Special Servicer also may
agree to any other modification, waiver or amendment if, in its judgment, (i) a
material default on the Mortgage Loan has occurred or a payment default is
imminent, (ii) such modification, waiver or amendment is reasonably likely to
produce a greater recovery with respect to the Mortgage Loan, taking into
account the time value of money, than would liquidation and (iii) such
modification, waiver or amendment will not adversely affect the coverage under
any applicable instrument of Credit Support.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
If a default on a Mortgage Loan has occurred, the Special Servicer, on
behalf of the Trustee, may at any time institute foreclosure proceedings,
exercise any power of sale contained in the related Mortgage, obtain a deed in
lieu of foreclosure, or otherwise acquire title to the related Mortgaged
Property, by operation of law or otherwise. Unless otherwise specified in the
related Prospectus Supplement, the Special Servicer may not, however, acquire
title to any Mortgaged Property, have a receiver of rents appointed with respect
to any Mortgaged Property or take any other action with respect to any Mortgaged
Property that would cause the Trustee, for the benefit of the related series of
Certificateholders, or any other specified person to be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator"
of such Mortgaged Property within the meaning of certain federal environmental
laws, unless the Special Servicer has previously received a report prepared by a
person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund) and either:
(i) such report indicates that (a) the Mortgaged Property is in
compliance with applicable environmental laws and regulations and (b) there
are no circumstances or conditions present at the Mortgaged Property that
have resulted in any contamination for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under
any applicable environmental laws and regulations; or
(ii) the Special Servicer, based solely (as to environmental matters
and related costs) on the information set forth in such report, determines
that taking such actions as are necessary to bring the Mortgaged Property
into compliance with applicable environmental laws and regulations and/or
taking the actions contemplated by clause (i)(b) above, is reasonably
likely to produce a greater recovery, taking into account the time value of
money, than not taking such actions. See "Certain Legal Aspects of Mortgage
Loans -- Environmental Considerations".
A Pooling and Servicing Agreement may grant to the Master Servicer, the
Special Servicer, a provider of Credit Support and/or the holder or holders of
certain classes of the related series of Certificates a right of first refusal
to purchase from the Trust Fund, at a predetermined price (which, if less than
the Purchase Price, will
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be specified in the related Prospectus Supplement), any Mortgage Loan as to
which a specified number of scheduled payments are delinquent. In addition,
unless otherwise specified in the related Prospectus Supplement, the Special
Servicer may offer to sell any defaulted Mortgage Loan if and when the Special
Servicer determines, consistent with its normal servicing procedures, that such
a sale would produce a greater recovery, taking into account the time value of
money, than would liquidation of the related Mortgaged Property. In the absence
of any such sale, the Special Servicer will generally be required to proceed
against the related Mortgaged Property, subject to the discussion above.
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 Special Servicer, on behalf of the Trust Fund, will be
required to sell the Mortgaged Property before the close of the third calendar
year following the year of acquisition, unless (i) the Internal Revenue Service
(the "IRS") grants an extension of time to sell such property or (ii) the
Trustee receives an opinion of independent counsel to the effect that the
holding of the property by the Trust Fund for longer than such period will not
result in the imposition of a tax on the Trust Fund or cause the Trust Fund (or
any designated portion thereof) to fail to qualify as a REMIC under the Code at
any time that any Certificate is outstanding. Subject to the foregoing and any
other tax-related limitations, the Special Servicer will generally be required
to attempt to sell any Mortgaged Property so acquired on the same terms and
conditions it would if it were the owner. 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 Special Servicer
will also be required to ensure that the Mortgaged Property is administered so
that it constitutes "foreclosure property" within the meaning of Code Section
860G(a)(8) at all times, that the sale of such property does not result in the
receipt by the Trust Fund of any income from nonpermitted assets as described in
Code Section 860F(a)(2)(B), and that the Trust Fund does not derive any "net
income from foreclosure property" within the meaning of Code Section 860G(c)(2),
with respect to such property unless the method of operation that produces such
income would produce a greater after-tax return than a different method of
operation of such property. If the Trust Fund acquires title to any Mortgaged
Property, the Special Servicer, on behalf of the Trust Fund, may retain an
independent contractor to manage and operate such property. The retention of an
independent contractor, however, will not relieve the Special Servicer of its
obligation to manage such Mortgaged Property as required under the related
Pooling and Servicing Agreement.
If Liquidation Proceeds collected with respect to a defaulted Mortgage Loan
are less than the outstanding principal balance of the defaulted Mortgage Loan
plus interest accrued thereon plus the aggregate amount of reimbursable expenses
incurred by the Special Servicer and/or the Master Servicer in connection with
such Mortgage Loan, then, to the extent that such shortfall is not covered by
any instrument or fund constituting Credit Support, the Trust Fund will realize
a loss in the amount of such shortfall. The Special Servicer and/or the Master
Servicer will be entitled to reimbursement out of the Liquidation Proceeds
recovered on any defaulted Mortgage Loan, prior to the distribution of such
Liquidation Proceeds to Certificateholders, any and all amounts that represent
unpaid servicing compensation in respect of the Mortgage Loan, unreimbursed
servicing expenses incurred with respect to the Mortgage Loan and any
unreimbursed advances of delinquent payments made with respect to the Mortgage
Loan. In addition, if and to the extent set forth in the related Prospectus
Supplement, amounts otherwise distributable on the Certificates may be further
reduced by interest payable to the Master Servicer and/or Special Servicer on
such servicing expenses and advances.
If any Mortgaged Property suffers damage such that the proceeds, if any, of
the related hazard insurance policy are insufficient to restore fully the
damaged property, neither the Special Servicer nor the Master Servicer will be
required to expend its own funds to effect such restoration unless (and to the
extent not otherwise provided in the related Prospectus Supplement) it
determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Mortgage Loan after reimbursement of
the Special Servicer or the Master Servicer, as the case may be, for its
expenses and (ii) that such expenses will be recoverable by it from related
Insurance and Condemnation Proceeds, Liquidation Proceeds and/or amounts drawn
on any instrument or fund constituting Credit Support.
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HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Pooling and Servicing Agreement will require the Master Servicer (or the Special
Servicer with respect to Mortgage Loans serviced thereby) to use reasonable
efforts to cause each Mortgage Loan borrower to maintain a hazard insurance
policy that provides for such coverage as is required under the related Mortgage
or, if the Mortgage permits the holder thereof to dictate to the borrower the
insurance coverage to be maintained on the related Mortgaged Property, such
coverage as is consistent with the Master Servicer's (or Special Servicer's)
normal servicing procedures. Unless otherwise specified in the related
Prospectus Supplement, such coverage generally will be in an amount equal to the
lesser of the principal balance owing on such Mortgage Loan and the replacement
cost of the related Mortgaged Property. The ability of a Master Servicer (or
Special 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 concerning covered losses is furnished
by borrowers. All amounts collected by a Master Servicer (or Special Servicer)
under any such policy (except for amounts to be applied to the restoration or
repair of the Mortgaged Property or released to the borrower in accordance with
the Master Servicer's (or Special Servicer's) normal servicing procedures and/or
to the terms and conditions of the related Mortgage and Mortgage Note) will be
deposited in the related Certificate Account. The Pooling and Servicing
Agreement may provide that the Master Servicer (or Special Servicer) may satisfy
its obligation to cause each borrower to maintain such a hazard insurance policy
by maintaining a blanket policy insuring against hazard losses on the Mortgage
Loans in a Trust Fund. If such blanket policy contains a deductible clause, the
Master Servicer (or Special Servicer) will be required, in the event of a
casualty covered by such blanket policy, to deposit in the related Certificate
Account all additional sums that would have been deposited therein under an
individual policy but were not because of such deductible 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 covering the Mortgaged Properties 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, most such 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
mudflows), wet or dry rot, vermin and domestic animals. Accordingly, a Mortgaged
Property may not be insured for losses arising from any such cause unless the
related Mortgage specifically requires, or permits the holder thereof to
require, such coverage.
The hazard insurance policies covering the Mortgaged Properties will
typically contain co-insurance clauses that in effect require an 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, such clauses generally provide that the insurer's
liability in the event of partial loss does not exceed the lesser of (i) the
replacement cost of the improvements less physical depreciation and (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the Mortgage Loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the Mortgage Loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the Mortgage Loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer (or Special Servicer) will determine whether to exercise any right the
Trustee may have under any such provision in a manner consistent with the Master
Servicer's (or Special Servicer's) normal servicing procedures. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer or Special
Servicer, as applicable, will be entitled to retain as additional servicing
compensation any fee collected
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in connection with the permitted transfer of a Mortgaged Property. See "Certain
Legal Aspects of Mortgage Loans -- Due-on-Sale and Due-on-Encumbrance".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a specified portion of
the interest payments on each Mortgage Loan in the related Trust Fund, including
Mortgage Loans serviced by the related Special Servicer. If and to the extent
described in the related Prospectus Supplement, a Special Servicer's primary
compensation with respect to a series of Certificates may consist of any or all
of the following components: (i) a specified portion of the interest payments on
each Mortgage Loan in the related Trust Fund, whether or not serviced by it;
(ii) an additional specified portion of the interest payments on each Mortgage
Loan then currently serviced by it; and (iii) subject to any specified
limitations, a fixed percentage of some or all of the collections and proceeds
received with respect to each Mortgage Loan which was at any time serviced by
it, including Mortgage Loans for which servicing was returned to the Master
Servicer. Insofar as any portion of the Master Servicer's or Special Servicer's
compensation consists of a specified portion of the interest payments on a
Mortgage Loan, such compensation will generally be based on a percentage of the
principal balance of such Mortgage Loan outstanding from time to time and,
accordingly, will decrease with the amortization of the Mortgage Loan. As
additional compensation, a Master Servicer or Special Servicer may be entitled
to retain all or a portion of late payment charges, Prepayment Premiums,
modification fees and other fees collected from borrowers and any interest or
other income that may be earned on funds held in the related Certificate
Account. A more detailed description of each Master Servicer's and Special
Servicer's compensation will be provided in the related Prospectus Supplement.
Any Sub-Servicer will receive as its sub-servicing compensation a portion of the
servicing compensation to be paid to the Master Servicer or Special Servicer
that retained such Sub-Servicer.
In addition to amounts payable to any Sub-Servicer, a Master Servicer or
Special Servicer may be required, to the extent provided in the related
Prospectus Supplement, to pay from amounts that represent its servicing
compensation certain expenses incurred in connection with the administration of
the related Trust Fund, including, without limitation, payment of the fees and
disbursements of independent accountants, payment of fees and disbursements of
the Trustee and any custodians appointed thereby and payment of expenses
incurred in connection with distributions and reports to Certificateholders.
Certain other expenses, including certain expenses related to Mortgage Loan
defaults and liquidations and, to the extent so provided in the related
Prospectus Supplement, interest on such expenses at the rate specified therein,
may be required to be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
Unless otherwise specified in the related Prospectus Supplement, each
Pooling and Servicing Agreement will provide that on or before a specified date
in each year, beginning the first such date that is at least a specified number
of months after the Cut-off Date, there will be furnished to the related Trustee
a report of a firm of independent certified public accountants stating that (i)
it has obtained a letter of representation regarding certain matters from the
management of the Master Servicer which includes an assertion that the Master
Servicer has complied with certain minimum mortgage loan servicing standards (to
the extent applicable to commercial and multifamily mortgage loans), identified
in the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America, with respect to the Master
Servicer's servicing of commercial and multifamily mortgage loans during the
most recently completed calendar year and (ii) on the basis of an examination
conducted by such firm in accordance with standards established by the American
Institute of Certified Public Accountants, such representation is fairly stated
in all material respects, subject to such exceptions and other qualifications
that, in the opinion of such firm, such standards require it to report. In
rendering its report such firm may rely, as to the matters relating to the
direct servicing of commercial and multifamily mortgage loans by Sub-Servicers,
upon comparable reports of firms of independent public accountants rendered on
the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
The
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Prospectus Supplement may provide that additional reports of independent
certified public accountants relating to the servicing of mortgage loans may be
required to be delivered to the Trustee.
Each Pooling and Servicing Agreement will also provide that, on or before a
specified date in each year, beginning the first such date that is at least a
specified number of months after the Cut-off Date, the Master Servicer and
Special Servicer shall each deliver to the related Trustee an annual statement
signed by one or more officers of the Master Servicer or the Special Servicer,
as the case may be, to the effect that, to the best knowledge of each such
officer, the Master Servicer or the Special Servicer, as the case may be, has
fulfilled in all material respects its obligations under the Pooling and
Servicing Agreement throughout the preceding year or, if there has been a
material default in the fulfillment of any such obligation, such statement shall
specify each such known default and the nature and status thereof. Such
statement may be provided as a single form making the required statements as to
more than one Pooling and Servicing Agreement.
Unless otherwise specified in the related Prospectus Supplement, copies of
the annual accountants' statement and the annual statement of officers of a
Master Servicer or Special Servicer may be obtained by Certificateholders upon
written request to the Trustee.
CERTAIN MATTERS REGARDING THE MASTER SERVICER, THE SPECIAL SERVICER, THE REMIC
ADMINISTRATOR AND THE DEPOSITOR
Any entity serving as Master Servicer, Special Servicer or REMIC
Administrator under a Pooling and Servicing Agreement may be an affiliate of the
Depositor and may have other normal business relationships with the Depositor or
the Depositor's affiliates. Unless otherwise specified in the Prospectus
Supplement for a series of Certificates, the related Pooling and Servicing
Agreement will permit the Master Servicer, the Special Servicer and any REMIC
Administrator to resign from its obligations thereunder only upon a
determination that such obligations 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. No such resignation will become effective until the
Trustee or other successor has assumed the obligations and duties of the
resigning Master Servicer, Special Servicer or REMIC Administrator, as the case
may be, under the Pooling and Servicing Agreement. The Master Servicer and
Special Servicer for each Trust Fund will be required to maintain a fidelity
bond and errors and omissions policy or their equivalent that provides coverage
against losses that may be sustained as a result of an officer's or employee's
misappropriation of funds or errors and omissions, subject to certain
limitations as to amount of coverage, deductible amounts, conditions, exclusions
and exceptions permitted by the related Pooling and Servicing Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Pooling and Servicing Agreement will further provide that none of the Master
Servicer, the Special Servicer, the REMIC Administrator, the Depositor, any
extension adviser or any director, officer, employee or agent of any of them
will be under any liability to the related Trust Fund or Certificateholders for
any action taken, or not taken, in good faith pursuant to the Pooling and
Servicing Agreement or for errors in judgment; provided, however, that none of
the Master Servicer, the Special Servicer, the REMIC Administrator, the
Depositor, any extension adviser or any such person will be protected against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of such obligations and duties. Unless
otherwise specified in the related Prospectus Supplement, each Pooling and
Servicing Agreement will further provide that the Master Servicer, the Special
Servicer, the REMIC Administrator, the Depositor, any extension adviser and any
director, officer, employee or agent of any of them will be entitled to
indemnification by the related Trust Fund against any loss, liability or expense
incurred in connection with any legal action that relates to such Pooling and
Servicing Agreement or the related series of Certificates; provided, however,
that such indemnification will not extend to any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of obligations or duties under such Pooling and Servicing Agreement,
or by reason of reckless disregard of such obligations or duties. In addition,
each Pooling and Servicing Agreement will provide that none of the Master
Servicer, the Special Servicer, the REMIC Administrator, any extension adviser
or the Depositor will be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to its respective responsibilities under
the Pooling and Servicing Agreement and that in its opinion may involve it in
any
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expense or liability. However, each of the Master Servicer, the Special
Servicer, the REMIC Administrator, any extension adviser and the Depositor will
be permitted, in the exercise of its discretion, to undertake any such action
that it may deem necessary or desirable with respect to the enforcement and/or
protection of the rights and duties of the parties to the Pooling and Servicing
Agreement and the interests of the related series of Certificateholders
thereunder. In such event, the legal expenses and costs of such action, and any
liability resulting therefrom, will be expenses, costs and liabilities of the
related series of Certificateholders, and the Master Servicer, the Special
Servicer, the REMIC Administrator, any extension adviser or the Depositor, as
the case may be, will be entitled to charge the related Certificate Account
therefor.
Any person into which the Master Servicer, the Special Servicer, the REMIC
Administrator or the Depositor may be merged or consolidated, or any person
resulting from any merger or consolidation to which the Master Servicer, the
Special Servicer, the REMIC Administrator or the Depositor is a party, or any
person succeeding to the business of the Master Servicer, the Special Servicer,
the REMIC Administrator or the Depositor, will be the successor of the Master
Servicer, the Special Servicer, the REMIC Administrator or the Depositor, as the
case may be, under the related Pooling and Servicing Agreement.
Unless otherwise specified in the related Prospectus Supplement, a REMIC
Administrator will be entitled to perform any of its duties under the related
Pooling and Servicing Agreement either directly or by or through agents or
attorneys, and the REMIC Administrator will not be responsible for any willful
misconduct or negligence on the part of any such agent or attorney appointed by
it with due care.
EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement for a series of
Certificates, "Events of Default" under the related Pooling and Servicing
Agreement will include, without limitation, (i) any failure by the Master
Servicer to distribute or cause to be distributed to the Certificateholders of
such series, or to remit to the Trustee for distribution to such
Certificateholders, any amount required to be so distributed or remitted,
pursuant to, and at the time specified by, the terms of the Pooling and
Servicing Agreement, (ii) any failure by the Special Servicer to remit to the
Master Servicer or the Trustee, as applicable, any amount required to be so
remitted, pursuant to, and at the time specified by, the terms of the Pooling
and Servicing Agreement; (iii) any failure by the Master Servicer or the Special
Servicer duly to observe or perform in any material respect any of its other
covenants or obligations under the related Pooling and Servicing Agreement,
which failure continues unremedied for thirty days (fifteen days in the case of
a failure to pay the premium for any insurance policy required to be maintained
under the Pooling and Servicing Agreement) after written notice thereof has been
given to the Master Servicer or the Special Servicer, as the case may be, by any
other party to the related Pooling and Servicing Agreement, or to the Master
Servicer or the Special Servicer, as the case may be, with a copy to each other
party to the related Pooling and Servicing Agreement, by Certificateholders
entitled to not less than 25% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for such series; (iv) any failure by
a REMIC Administrator (if other than the Trustee) duly to observe or perform in
any material respect any of its covenants or obligations under the related
Pooling and Servicing Agreement, which failure continues unremedied for thirty
days after written notice thereof has been given to the REMIC Administrator by
any other party to the related Pooling and Servicing Agreement, or to the REMIC
Administrator, with a copy to each other party to the related Pooling and
Servicing Agreement, by Certificateholders entitled to not less than 25% (or
such other percentage specified in the related Prospectus Supplement) of the
Voting Rights for such series; and (v) certain events of insolvency,
readjustment of debt, marshaling of assets and liabilities, or similar
proceedings in respect of or relating to the Master Servicer, the Special
Servicer or the REMIC Administrator (if other than the Trustee), and certain
actions by or on behalf of the Master Servicer, the Special Servicer or the
REMIC Administrator (if other than the Trustee) indicating its insolvency or
inability to pay its obligations. Material variations to the foregoing Events of
Default (other than to add thereto or shorten cure periods or eliminate notice
requirements) will be specified in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, when a single entity
acts as Master Servicer, Special Servicer and REMIC Administrator, or in any two
of the foregoing capacities, for any Trust Fund, an Event of Default in one
capacity will constitute an Event of Default in each capacity.
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RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Master Servicer, the
Special Servicer or a REMIC Administrator under a Pooling and Servicing
Agreement, then, in each and every such case, so long as the Event of Default
remains unremedied, the Depositor or the Trustee will be authorized, and at the
direction of Certificateholders of the related series entitled to not less than
51% (or such other percentage specified in the related Prospectus Supplement) of
the Voting Rights for such series, the Trustee will be required, to terminate
all of the rights and obligations of the defaulting party as Master Servicer,
Special Servicer or REMIC Administrator, as applicable, under the Pooling and
Servicing Agreement, whereupon the Trustee will succeed to all of the
responsibilities, duties and liabilities of the defaulting party as Master
Servicer, Special Servicer or REMIC Administrator, as applicable, under the
Pooling and Servicing Agreement (except that if the defaulting party is required
to make advances thereunder regarding delinquent Mortgage Loans, but the Trustee
is prohibited by law from obligating itself to make such advances, or if the
related Prospectus Supplement so specifies, the Trustee will not be obligated to
make such advances) and will be entitled to similar compensation arrangements.
Unless otherwise specified in the related Prospectus Supplement, if the Trustee
is unwilling or unable so to act, it may (or, at the written request of
Certificateholders of the related series entitled to not less than 51% (or such
other percentage specified in the related Prospectus Supplement) of the Voting
Rights for such series, it will be required to) appoint, or petition a court of
competent jurisdiction to appoint, a loan servicing institution or other entity
that (unless otherwise provided in the related Prospectus Supplement) is
acceptable to each applicable Rating Agency to act as successor to the Master
Servicer, Special Servicer or REMIC Administrator, as the case may be, under the
Pooling and Servicing Agreement. Pending such appointment, the Trustee will be
obligated to act in such capacity.
If the same entity is acting as both Trustee and REMIC Administrator, it
may be removed in both such capacities as described under "-- Resignation and
Removal of the Trustee" below.
No Certificateholder will have any right under a Pooling and Servicing
Agreement to institute any proceeding with respect to such Pooling and Servicing
Agreement unless such holder previously has given to the Trustee written notice
of default and the continuance thereof and unless the holders of Certificates of
any class evidencing not less than 25% of the aggregate Percentage Interests
constituting such class have made written request upon the Trustee to institute
such proceeding in its own name as Trustee thereunder and have offered to the
Trustee reasonable indemnity and the Trustee for sixty days after receipt of
such request and indemnity has neglected or refused to institute any such
proceeding. However, the Trustee will be under no obligation to exercise any of
the trusts or powers vested in it by the Pooling and Servicing Agreement 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
such Pooling and Servicing Agreement, unless such Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
AMENDMENT
Except as otherwise specified in the related Prospectus Supplement, each
Pooling and Servicing Agreement may be amended by the parties thereto, without
the consent of any of the holders of Certificates covered by such Pooling and
Servicing Agreement, (i) to cure any ambiguity, (ii) to correct or supplement
any provision therein which may be inconsistent with any other provision therein
or to correct any error, (iii) to change the timing and/or nature of deposits in
the Certificate Account, provided that (A) such change would not adversely
affect in any material respect the interests of any Certificateholder, as
evidenced by an opinion of counsel, and (B) such change would not result in the
withdrawal, downgrade or qualification of any of the then-current ratings on the
Certificates, as evidenced by a letter from each applicable Rating Agency, (iv)
if a REMIC election has been made with respect to the related Trust Fund, to
modify, eliminate or add to any of its provisions (A) to such extent as shall be
necessary to maintain the qualification of the Trust Fund (or any designated
portion thereof) as a REMIC or to avoid or minimize the risk of imposition of
any tax on the related Trust Fund, provided that the Trustee has received an
opinion of counsel to the effect that (1) such action is necessary or desirable
to maintain such qualification or to avoid or minimize such risk, and (2) such
action will not adversely affect in any material respect the interests of any
holder of Certificates covered by the
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Pooling and Servicing Agreement, or (B) to restrict the transfer of the REMIC
Residual Certificates, provided that the Depositor has determined that the
then-current ratings of the classes of the Certificates that have been rated
will not be withdrawn, downgraded or qualified, as evidenced by a letter from
each applicable Rating Agency, and that any such amendment will not give rise to
any tax with respect to the transfer of the REMIC Residual Certificates to a
non-permitted transferee (See "Certain Federal Income Tax
Consequences -- REMICs -- Tax and Restrictions on Transfers of REMIC Residual
Certificates to Certain Organizations" herein), (v) to make any other provisions
with respect to matters or questions arising under such Pooling and Servicing
Agreement or any other change, provided that such action will not adversely
affect in any material respect the interests of any Certificateholder, or (vi)
to amend specified provisions that are not material to holders of any class of
Certificates offered hereunder.
The Pooling and Servicing Agreement may also be amended by the parties
thereto with the consent of the holders of Certificates of each class affected
thereby evidencing, in each case, not less than 66 2/3% (or such other
percentage specified in the related Prospectus Supplement) of the aggregate
Percentage Interests constituting such class for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Pooling and Servicing Agreement or of modifying in any manner the rights of
the holders of Certificates covered by such Pooling and Servicing Agreement,
except that no such amendment may (i) reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on a Certificate of any class without the consent of the holder
of such Certificate or (ii) reduce the aforesaid percentage of Certificates of
any class the holders of which are required to consent to any such amendment
without the consent of the holders of all Certificates of such class covered by
such Pooling and Servicing Agreement then outstanding.
Notwithstanding the foregoing, if one or more REMIC elections have been
made with respect to the related Trust Fund, the Trustee will not be required to
consent to any amendment to a Pooling and Servicing Agreement without having
first received an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Master Servicer, the Special Servicer, the
Depositor, the Trustee or any other specified person in accordance with such
amendment will not result in the imposition of a tax on the related Trust Fund
or cause such Trust Fund (or any designated portion thereof) to fail to qualify
as a REMIC.
LIST OF CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, upon
written request of three or more Certificateholders of record made for purposes
of communicating with other holders of Certificates of the same series with
respect to their rights under the related Pooling and Servicing Agreement, the
Trustee or other specified person will afford such Certificateholders access
during normal business hours to the most recent list of Certificateholders of
that series held by such person. If such list is as of a date more than 90 days
prior to the date of receipt of such Certificateholders' request, then such
person, if not the registrar for such series of Certificates, will be required
to request from such registrar a current list and to afford such requesting
Certificateholders access thereto promptly upon receipt.
THE TRUSTEE
The Trustee under each Pooling and Servicing Agreement will be named in the
related Prospectus Supplement. The commercial bank, national banking
association, banking corporation or trust company that serves as Trustee may
have typical banking relationships with the Depositor and its affiliates and
with any Master Servicer, Special Servicer or REMIC Administrator and its
affiliates.
DUTIES OF THE TRUSTEE
The Trustee for each series of Certificates will make no representation as
to the validity or sufficiency of the related Pooling and Servicing Agreement,
such Certificates or any underlying Mortgage Asset or related document and will
not be accountable for the use or application by or on behalf of any Master
Servicer or Special Servicer of any funds paid to the Master Servicer or Special
Servicer in respect of the Certificates or
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the underlying Mortgage Assets. If no Event of Default has occurred and is
continuing, the Trustee for each series of Certificates will be required to
perform only those duties specifically required under the related Pooling and
Servicing Agreement. However, upon receipt of any of the various certificates,
reports or other instruments required to be furnished to it pursuant to the
related Pooling and Servicing Agreement, a Trustee will be required to examine
such documents and to determine whether they conform to the requirements of such
agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
As and to the extent described in the related Prospectus Supplement, the
fees and normal disbursements of any Trustee may be the expense of the related
Master Servicer or other specified person or may be required to be borne by the
related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each series of Certificates will be entitled to indemnification,
from amounts held in the Certificate Account for such series, for any loss,
liability or expense incurred by the Trustee in connection with the Trustee's
acceptance or administration of its trusts under the related Pooling and
Servicing Agreement; provided, however, that such indemnification will not
extend 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 thereunder, or by reason of its
reckless disregard of such obligations or duties.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each series of Certificates will be entitled to execute any of its
trusts or powers under the related Pooling and Servicing Agreement or perform
any of its duties thereunder either directly or by or through agents or
attorneys, and the Trustee will not be responsible for any willful misconduct or
negligence on the part of any such agent or attorney appointed by it with due
care.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may resign at any time, in which event the Depositor will be
obligated to appoint a successor Trustee. The Depositor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. Upon
becoming aware of such circumstances, the Depositor will be obligated to appoint
a successor Trustee. The Trustee may also be removed at any time by the holders
of Certificates of the applicable series evidencing not less than 51% (or such
other percentage specified in the related Prospectus Supplement) of the Voting
Rights for such series. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance of
the appointment by the successor Trustee. Notwithstanding anything herein to the
contrary, if any entity is acting as both Trustee and REMIC Administrator, then
any resignation or removal of such entity as the Trustee will also constitute
the resignation or removal of such entity as REMIC Administrator, and the
successor trustee will serve as successor to the REMIC Administrator as well.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit Support may be provided with respect to one or more classes of the
Certificates of any series or with respect to the related Mortgage Assets.
Credit Support may be in the form of a letter of credit, the subordination of
one or more classes of Certificates, the use of a pool insurance policy or
guarantee insurance, 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 and to the extent so provided in the related
Prospectus Supplement, any of the foregoing forms of Credit Support may provide
credit enhancement for more than one series of Certificates.
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 payment to Certificate-
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holders of all amounts to which they are entitled under the related Pooling and
Servicing Agreement. If losses or shortfalls occur that exceed the amount
covered by the related Credit Support or that are of a type not covered by such
Credit Support, Certificateholders will bear their allocable share of
deficiencies. Moreover, if a form of Credit Support covers the Offered
Certificates of more than one series and losses on the related Mortgage Assets
exceed the amount of such Credit Support, it is possible that the holders of
Offered Certificates of one (or more) such series will be disproportionately
benefited by such Credit Support to the detriment of the holders of Offered
Certificates of one (or more) other such series.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or with respect to the related Mortgage Assets, the
related Prospectus Supplement will include a description of (i) the nature and
amount of coverage under such Credit Support, (ii) any conditions to payment
thereunder not otherwise described herein, (iii) the conditions (if any) under
which the amount of coverage under such Credit Support may be reduced and under
which such Credit Support may be terminated or replaced and (iv) the material
provisions relating to such Credit Support. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the obligor, if
any, under any instrument of Credit Support. See "Risk Factors -- Credit Support
Limitations".
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 from the Certificate Account
on any Distribution Date will be subordinated to the corresponding 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 certain
types of losses or shortfalls. The related Prospectus Supplement will set forth
information concerning the method and amount of subordination provided by a
class or classes of Subordinate Certificates in a series and the circumstances
under which such subordination will be available.
If the Mortgage Assets in any Trust Fund are divided into separate groups,
each supporting a separate class or classes of Certificates of the related
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 Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a series that includes a cross-support
provision will describe the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the Prospectus Supplement for a series of Certificates,
Mortgage Loans included in the related Trust Fund will be covered for certain
default risks by insurance policies or guarantees. The related Prospectus
Supplement will describe the nature of such default risks and the extent of such
coverage.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or other financial institution (which may be an affiliate of the Depositor)
specified in such Prospectus Supplement (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 some or all of the related
Mortgage Assets 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 only in
the event of 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
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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.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies or surety bonds provided
by one or more insurance companies or sureties. Such instruments may cover, with
respect to one or more classes of Certificates of the related series, timely
distributions of interest or 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. The related Prospectus
Supplement will describe any limitations on the draws that may be made under any
such instrument.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered (to the extent of available funds) 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 specified
in such Prospectus Supplement. If so specified in the related Prospectus
Supplement, the reserve fund for a series may also be funded over time by a
specified amount of certain collections received on the related Mortgage Assets.
Amounts on deposit in any reserve fund for a series will be applied for the
purposes, in the manner, and to the extent specified in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, reserve funds
may be established to provide protection only against certain types of losses
and shortfalls. Following each Distribution Date, amounts in a reserve fund in
excess of any amount required to be maintained therein may be released from the
reserve fund under the conditions and to the extent specified in the related
Prospectus Supplement.
If so specified in the related Prospectus Supplement, amounts deposited in
any reserve fund will be invested in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, any reinvestment income or other
gain from such investments will be credited to the related reserve fund for such
series, and any loss resulting from such investments will be charged to such
reserve fund. However, such income may be payable to any related Master Servicer
or another service provider as additional compensation for its services. The
reserve fund, if any, for a series will not be a part of the Trust Fund unless
otherwise specified in the related Prospectus Supplement.
CREDIT SUPPORT WITH RESPECT TO MBS
If so provided in the Prospectus Supplement for a series of Certificates,
any MBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement will specify, as to each
such form of Credit Support, the information indicated above with respect
thereto, to the extent such information is material and available.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of mortgage loans secured by commercial and multifamily residential
properties. Because such legal aspects are governed by applicable state law
(which laws may differ substantially), the summaries do not purport to be
complete, to reflect the laws of any particular state, or to encompass the laws
of all states in which the security for the Mortgage Loans (or mortgage loans
underlying any MBS) is situated. Accordingly, the summaries are qualified in
their entirety by reference to the applicable laws of those states. See
"Description of the Trust Funds -- Mortgage Loans". For purposes of the
following discussion, "Mortgage Loan" includes a mortgage loan underlying an
MBS.
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GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgages". A mortgage creates a lien upon, or
grants a title interest in, the real property covered thereby, and represents
the security for the repayment of the indebtedness customarily evidenced by a
promissory note. The priority of the lien created or interest granted will
depend on the terms of the mortgage and, in some cases, on the terms of separate
subordination agreements or intercreditor agreements with others that hold
interests in the real property, the knowledge of the parties to the mortgage
and, generally, the order of recordation of the mortgage in the appropriate
public recording office. However, the lien of a recorded mortgage will generally
be subordinate to later-arising liens for real estate taxes and assessments and
other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property, irrevocably until the debt is paid, in trust
and generally with a power of sale, to the trustee to secure repayment of the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties, pursuant to which the borrower, or grantor, conveys title to the
real property to the grantee, or lender, generally with a power of sale, until
such time as the debt is repaid. In a case where the borrower 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 may
execute a separate undertaking to make payments on the mortgage note. In no
event is the land trustee personally liable for the mortgage note obligation.
The mortgagee'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
the express provisions of the related instrument, the law of the state in which
the real property is located, certain federal laws and, in some deed of trust
transactions, the directions of the beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases and/or may be accompanied by a separate
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease and
the income derived therefrom, while (unless rents are to be paid directly to the
lender) retaining a revocable license to collect the rents for so long as there
is no default. If the borrower defaults, the license terminates and the lender
is entitled to collect the rents. Local law may require that the lender take
possession of the property and/or obtain a court-appointed receiver before
becoming entitled to collect the rents.
In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code ("UCC"); in cases where hotels or
motels constitute loan security, the rates are generally pledged by the borrower
as additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the room rates and must
file continuation statements, generally every five years, to maintain perfection
of such security interest. In certain cases, Mortgage Loans secured by hotels or
motels may be included in a Trust Fund even if the security interest in the room
rates was not perfected or the requisite UCC filings were allowed to lapse. Even
if the lender's security interest in room rates is perfected under applicable
nonbankruptcy law, it will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to enforce its
rights to collect the room rates following a default. In the bankruptcy setting,
however, the lender will be stayed from enforcing its rights to collect room
rates, but those room rates (in light of certain revisions to the Bankruptcy
Code which are effective for all bankruptcy cases commenced on or after October
22, 1994) constitute "cash collateral" and
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therefore cannot be used by the bankruptcy debtor without lender's consent or a
hearing at which the lender's interest in the room rates is given adequate
protection (e.g., the lender receives cash payments from otherwise unencumbered
funds or a replacement lien on unencumbered property, in either case equal in
value to the amount of room rates that the debtor proposes to use, or other
similar relief). See "-- Bankruptcy Laws".
In the case of office and retail properties, the bankruptcy or insolvency
of a major tenant or a number of smaller tenants may have an adverse impact on
the Mortgaged Properties affected and the income produced by such Mortgaged
Properties. Under bankruptcy law, a tenant has the option of assuming
(continuing), or rejecting (terminating) or, subject to certain conditions,
assigning to a third party any unexpired lease. If the tenant assumes its lease,
the tenant must cure all defaults under the lease and provide the landlord with
adequate assurance of its future performance under the lease. If the tenant
rejects the lease, the landlord's claim for breach of the lease would (absent
collateral securing the claim) be treated as a general unsecured claim. The
amount of the claim would be limited to the amount owed for unpaid pre-petition
lease payments unrelated to the rejection, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but not
to exceed three years' lease payments). If the tenant assigns its lease, the
tenant must cure all defaults under the lease and the proposed assignee must
demonstrate adequate assurance of future performance under the lease.
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the borrower
and not previously pledged) may constitute a significant portion of the
property's value as security. The creation and enforcement of liens on personal
property are governed by the UCC. Accordingly, if a borrower pledges personal
property as security for a mortgage loan, the lender generally must file UCC
financing statements in order to perfect its security interest therein, and must
file continuation statements, generally every five years, to maintain that
perfection. In certain cases, Mortgage Loans secured in part by personal
property may be included in a Trust Fund even if the security interest in such
personal property was not perfected or the requisite UCC filings were allowed to
lapse.
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 real property at public auction to satisfy
the indebtedness.
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage
instrument. Other foreclosure procedures are available in some states, but they
are either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses are raised or counterclaims are interposed, and sometimes
requires several years to complete.
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 a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. 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. Such sales are made in accordance with
procedures that vary from state to state.
Equitable and Other Limitations on Enforceability of Certain
Provisions. United States courts have traditionally imposed general equitable
principles to limit the remedies available to lenders in foreclosure
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actions. These principles are generally designed to relieve borrowers from the
effects of mortgage defaults perceived as harsh or unfair. Relying on such
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 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 in the case of a nonmonetary
default, such as a failure to adequately maintain the mortgaged property or an
impermissible further encumbrance of the mortgaged property. Finally, some
courts have addressed 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 trigger constitutional
protections.
In addition, some states may have statutory protection such as the right of
the borrower to reinstate mortgage loans after commencement of foreclosure
proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale. In states permitting nonjudicial
foreclosure proceedings, foreclosure of a deed of trust is generally
accomplished by a nonjudicial trustee's sale pursuant to a power of sale
typically granted in the deed of trust. A power of sale may also be contained in
any other type of mortgage instrument if applicable law so permits. A power of
sale under a deed of trust allows a nonjudicial public sale to be conducted
generally following a request from the beneficiary/lender to the trustee to sell
the property upon default by the borrower and after notice of sale is given in
accordance with the terms of the mortgage and applicable state law. In some
states, prior to such sale, the trustee under the 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 regard to the acceleration of the
indebtedness), plus the lender's 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, state law governs the procedure for
public sale, the parties entitled to notice, the method of giving notice and the
applicable time periods.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale because of the difficulty in determining the exact
status of title to the property (due to, among other things, redemption rights
that may exist) and because of the possibility that physical deterioration of
the property may have occurred during the foreclosure proceedings. Therefore, it
is common for the lender to purchase the mortgaged property for an amount equal
to the secured indebtedness and accrued and unpaid interest plus the expenses of
foreclosure, in which event the borrower's debt will be extinguished, or for a
lesser amount in order to preserve its right to seek a deficiency judgment if
such is available under state law and under the terms of the Mortgage Loan
documents. (The Mortgage Loans, however, may be nonrecourse. See "Risk
Factors -- Certain Factors Affecting Delinquency, Foreclosure and Loss of the
Mortgage Loans -- Limited Recourse Nature of the Mortgage Loans".) Thereafter,
subject to the borrower's right in some states to remain in possession during a
redemption period, the lender will become the owner of the property and have
both the benefits and burdens of ownership, including the obligation to pay debt
service on any senior mortgages, to pay taxes, to obtain casualty insurance and
to make such repairs as are necessary to render the property suitable for sale.
The costs of operating and maintaining a commercial or multifamily residential
property may be significant and may be greater than the income derived from that
property. The lender also will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale or lease 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, because of the expenses associated with acquiring, owning and
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selling a mortgaged property, a lender could realize an overall loss on a
mortgage loan even if the mortgaged property is sold at foreclosure, or resold
after it is acquired through foreclosure, for an amount equal to the full
outstanding principal amount of the loan plus accrued interest.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
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 interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their "equity of redemption". The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
The equity of redemption is a common-law (nonstatutory) right which should
be distinguished from post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted if the former borrower pays only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the ability of the lender to
sell the foreclosed property because the exercise of a right of redemption would
defeat the title of any purchaser through a foreclosure. Consequently, the
practical effect of the redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.
Anti-Deficiency Legislation. Some or all of the Mortgage Loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and such other assets, if any, that were pledged to
secure the Mortgage Loan. However, even if a mortgage loan by its terms provides
for recourse to the borrower's other assets, a lender's ability to realize upon
those assets may be limited by state law. For example, in some states a lender
cannot obtain a deficiency judgment against the borrower following foreclosure
or sale under a deed of trust. A deficiency judgment is 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. Other statutes may require the lender to exhaust the security afforded
under a mortgage 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 such security;
however, in some of those states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and thus may be
precluded from foreclosing upon the security. Consequently, lenders in those
states where such an election of remedy provision exists will usually proceed
first against the security. Finally, other statutory provisions, designed to
protect borrowers from exposure to large deficiency judgments that might result
from bidding at below-market values at the foreclosure sale, limit any
deficiency judgment to the excess of the outstanding debt over the fair market
value of the property at the time of the sale.
Leasehold Considerations. Mortgage Loans may be secured by a mortgage on
the borrower's leasehold interest in a ground lease. Leasehold mortgage loans
are subject to certain risks not associated with mortgage loans secured by a
lien on the fee estate of the borrower. The most significant of these risks is
that if the borrower's leasehold were to be terminated upon a lease default, the
leasehold mortgagee could lose its security. This risk may be lessened if the
ground lease requires the lessor to give the leasehold mortgagee notices of
lessee defaults and an opportunity to cure them, requires the lessor to grant
the mortgagee a new lease if the existing lease is rejected in a bankruptcy
proceeding, permits the leasehold estate to be assigned to
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and by the leasehold mortgagee or the purchaser at a foreclosure sale, and
contains certain other protective provisions typically included in a
"mortgageable" ground lease. Certain Mortgage Loans, however, may be secured by
ground leases which do not contain these provisions.
Cooperative Shares. Mortgage Loans may be secured by a security interest
on the borrower's ownership interest in shares, and the proprietary leases
appurtenant thereto, allocable to cooperative dwelling units that may be vacant
or occupied by nonowner tenants. Such loans are subject to certain risks not
associated with mortgage loans secured by a lien on the fee estate of a borrower
in real property. Such a loan typically is subordinate to the mortgage, if any,
on the Cooperative's building which, if foreclosed, could extinguish the equity
in the building and the proprietary leases of the dwelling units derived from
ownership of the shares of the Cooperative. Further, transfer of shares in a
Cooperative are subject to various regulations as well as to restrictions under
the governing documents of the Cooperative, and the shares may be canceled in
the event that associated maintenance charges due under the related proprietary
leases are not paid. Typically, a recognition agreement between the lender and
the Cooperative provides, among other things, the lender with an opportunity to
cure a default under a proprietary lease.
Under the laws applicable in many states, "foreclosure" on Cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the UCC and the security agreement relating to the shares. Article 9 of the
UCC requires that a sale be conducted in a "commercially reasonable" manner,
which may be dependent upon, among other things, the notice given the debtor and
the method, manner, time, place and terms of the sale. Article 9 of the UCC
provides that the proceeds of the sale will be applied first to pay the costs
and expenses of the sale and then to satisfy the indebtedness secured by the
lender's security interest. A recognition agreement, however, generally provides
that the lender's right to reimbursement is subject to the right of the
Cooperative to receive sums due under the proprietary leases.
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) to
collect a debt are automatically stayed upon the filing of the bankruptcy
petition and, often, no interest or principal payments are made during the
course of the bankruptcy case. The delay and the consequences thereof caused by
such automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may stay
the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a mortgage
loan secured by a lien on property of the debtor may be modified under certain
circumstances. For example, the outstanding amount of the loan may be reduced to
the then-current value of the property (with a corresponding partial reduction
of the amount of lender's security interest) pursuant to a confirmed plan or
lien avoidance proceeding, thus leaving the lender a general unsecured creditor
for the difference between such value and the outstanding balance of the loan.
Other modifications may include the reduction in the amount of each scheduled
payment, by means of a reduction in the rate of interest and/or an alteration of
the repayment schedule (with or without affecting the unpaid principal balance
of the loan), and/or by an extension (or shortening) of the term to maturity.
Some bankruptcy courts have approved plans, based on the particular facts of the
reorganization case, that effected the cure of a mortgage loan default by paying
arrearages over a number of years. Also, a bankruptcy court may permit a debtor,
through its rehabilitative plan, to reinstate a loan mortgage payment schedule
even if the lender has obtained a final judgment of foreclosure prior to the
filing of the debtor's petition.
Federal bankruptcy law may also have the effect of interfering with or
affecting the ability of a secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property. Under the Bankruptcy
Code, a lender may be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue could be time-consuming, with
resulting delays in the lender's receipt of the rents. Recent amendments to the
Bankruptcy code, however, may minimize the impairment of the lender's ability to
enforce
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the borrower's assignment of rents and leases. In addition to the inclusion of
hotel revenues within the definition of "cash collateral" as noted previously in
the section entitled "-- Leases and Rents", the amendments provide that a
pre-petition security interest in rents or hotel revenues extends (unless the
bankruptcy court orders otherwise based on the equities of the case) to such
post-petition rents or revenues and is intended to overrule those cases that
held that a security interest in rents is unperfected under the laws of certain
states until the lender has taken some further action, such as commencing
foreclosure or obtaining a receiver prior to activation of the assignment of
rents.
If a borrower's ability to make payment on a mortgage loan is dependent on
its receipt of rent payments under a lease of the related property, that ability
may be impaired by the commencement of a bankruptcy case relating to a lessee
under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
lessee's petition. In addition, the Bankruptcy Code generally provides that a
trustee or debtor-in-possession may, subject to approval of the court, (i)
assume the lease and retain it or assign it to a third party or (ii) reject the
lease. If the lease is assumed, the trustee or debtor-in-possession (or
assignee, if applicable) must cure any defaults under the lease, compensate the
lessor for its losses and provide the lessor with "adequate assurance" of future
performance. Such remedies may be insufficient, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, the lessor
will be treated as an unsecured creditor with respect to its claim for damages
for termination of the lease. The Bankruptcy Code also limits a lessor's damages
for lease rejection to the rent reserved by the lease (without regard to
acceleration) for the greater of one year, or 15%, not to exceed three years, of
the remaining term of the lease.
Pursuant to the federal doctrine of "substantive consolidation" or to the
(predominantly state law) doctrine of "piercing the corporate veil", a
bankruptcy court, in the exercise of its equitable powers, also has the
authority to order that the assets and liabilities of a related entity be
consolidated with those of an entity before it. Thus, property ostensibly the
property of one entity may be determined to be the property of a different
entity in bankruptcy, the automatic stay applicable to the second entity
extended to the first and the rights of creditors of the first entity impaired
in the fashion set forth above in the discussion of ordinary bankruptcy
principles. Depending on facts and circumstances not wholly in existence at the
time a loan is originated or transferred to the Trust Fund, the application of
any of these doctrines to one or more of the mortgagors in the context of the
bankruptcy of one or more of their affiliates could result in material
impairment of the rights of the Certificateholders.
For each mortgagor that is described as a "special purpose entity", "single
purpose entity" or bankruptcy remote entity" in the Prospectus Supplement, the
activities that may be conducted by such mortgagor and its ability to incur debt
are restricted by the applicable Mortgage or the organizational documents of
such mortgagor in such manner as is intended to make the likelihood of a
bankruptcy proceeding being commenced by or against such mortgagor remote, and
such mortgagor has been organized and is designed to operate in a manner such
that its separate existence should be respected notwithstanding a bankruptcy
proceeding in respect of one or more affiliated entities of such mortgagor.
However, the Depositor makes no representation as to the likelihood of the
institution of a bankruptcy proceeding by or in respect of any mortgagor or the
likelihood that the separate existence of any mortgagor would be respected if
there were to be a bankruptcy proceeding in respect of any affiliated entity of
a mortgagor.
ENVIRONMENTAL CONSIDERATIONS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties that
are or have been used for industrial, manufacturing, military or disposal
activity. Such environmental risks include the possible diminution of the value
of a contaminated property or, as discussed below, potential liability for
clean-up costs or other remedial actions that could exceed the value of the
property or the amount of the lender's loan. In certain circumstances, a lender
may decide to abandon a contaminated mortgaged property as collateral for its
loan rather than foreclose and risk liability for clean-up costs.
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Superlien Laws. Under the laws of many states, contamination on a property
may give rise to a lien on the property for clean-up costs. In several states,
such a lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to such
a "superlien".
CERCLA. The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), imposes strict liability on
present and past "owners" and "operators" of contaminated real property for the
costs of clean-up. A secured lender may be liable as an "owner" or "operator" of
a contaminated mortgaged property if agents or employees of the lender have
become sufficiently involved in the management of such mortgaged property or the
operations of the borrower. Such liability may exist even if the lender did not
cause or contribute to the contamination and regardless of whether or not the
lender has actually taken possession of a mortgaged property through
foreclosure, deed in lieu of foreclosure or otherwise. Moreover, such liability
is not limited to the original or unamortized principal balance of a loan or to
the value of the property securing a loan. Excluded from CERCLA's definition of
"owner" or "operator", however, is a person "who without participating in the
management of the facility, holds indicia of ownership primarily to protect his
security interest". This is the so-called "secured creditor exemption."
The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996
(the "Act") amended, among other things, the provisions of CERCLA with respect
to lender liability and the secured creditor exemption. The Act offers
substantial protection of lenders by defining the activities in which a lender
can engage and still have the benefit of the secured creditor exemption. In
order for a lender to be deemed to have participated in the management of a
mortgaged property, the lender must actually participate in the operational
affairs of the property of the borrower. The Act provides that "merely having
the capacity to influence, or unexercised right to control" operations does not
constitute participation in management. A lender will lose the protection of the
secured creditor exemption only if it exercises decision making control over the
borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of operational functions of
the mortgaged property. The Act also provides that a lender will continue to
have the benefit of the secured-creditor exemption even if it forecloses on a
mortgaged property, purchases it at a foreclosure sale or accepts a deed-in-lieu
of foreclosure provided that the lender seeks to sell the mortgaged property at
the earliest practicable commercially reasonable time on commercially reasonable
terms.
Certain Other Federal and State Laws. Many states have statutes similar to
CERCLA, and not all those statutes provide for a secured creditor exemption. In
addition, under federal law, there is potential liability relating to hazardous
wastes and underground storage tanks under the federal Resource Conservation and
Recovery Act ("RCRA").
In addition, the definition of "hazardous substances" under CERCLA
specifically excludes petroleum products. Subtitle I of RCRA governs underground
petroleum storage tanks. Under the Act, the protections accorded to lenders
under CERCLA are also accorded to the holders of security interests in
underground storage tanks. It should be noted, however, that liability for
cleanup of petroleum contamination may be governed by state law, which may not
provide for specific protection of secured creditors.
In a few states, transfers of some types of properties are conditioned upon
cleanup of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of foreclosure
or otherwise, may be required to clean up the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury or damage to property) related to hazardous environmental
conditions on a property. While it may be more difficult to hold a lender liable
in such cases, unanticipated or uninsured liabilities of the borrower may
jeopardize the borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against the owner or
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operator who created the environmental hazard, but that individual or entity may
be without substantial assets. Accordingly, it is possible that such costs could
become a liability of the Trust Fund and occasion a loss to the
Certificateholders of the related series.
To reduce the likelihood of such a loss, unless otherwise specified in the
related Prospectus Supplement, the Pooling and Servicing Agreement will provide
that neither the Master Servicer nor the Special Servicer, acting on behalf of
the Trustee, may acquire title to a Mortgaged Property or take over its
operation unless the Special Servicer, based solely (as to environmental
matters) on a report prepared by a person who regularly conducts environmental
audits, has made the determination that it is appropriate to do so, as described
under "The Pooling and Servicing Agreements -- Realization Upon Defaulted
Mortgage Loans".
If a lender forecloses on a mortgage secured by a property, the operations
on which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Such compliance may entail substantial expense, especially in the case of
industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental conditions
on a property to government entities and/or to prospective buyers (including
prospective buyers at a foreclosure sale or following foreclosure). Such
disclosure may decrease the amount that prospective buyers are willing to pay
for the affected property, sometimes substantially, and thereby decrease the
ability of the lender to recoup its investment in a loan upon foreclosure.
Environmental Site Assessments. In most cases, an environmental site
assessment of each Mortgaged Property will have been performed in connection
with the origination of the related Mortgage Loan or at some time prior to the
issuance of the related Certificates. Environmental site assessments, however,
vary considerably in their content, quality and cost. Even when adhering to good
professional practices, environmental consultants will sometimes not detect
significant environmental problems because to do an exhaustive environmental
assessment would be far too costly and time-consuming to be practical.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate the
maturity of the loan if the borrower transfers or encumbers the related
Mortgaged Property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such clauses
in many states. However, the Garn-St Germain Depository Institutions Act of 1982
(the "Garn Act") generally preempts state laws that prohibit the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limitations as set forth in the Garn Act
and the regulations promulgated thereunder. Accordingly, a Master Servicer may
nevertheless have the right to accelerate the maturity of a Mortgage Loan that
contains a "due-on-sale" provision upon transfer of an interest in the property,
without regard to the Master Servicer's ability to demonstrate that a sale
threatens its legitimate security interest.
JUNIOR LIENS; RIGHTS OF HOLDERS OF SENIOR LIENS
If so provided in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans secured by junior liens, and
the loans secured by the related Senior Liens may not be included in the
Mortgage Pool. In addition to the risks faced by the holder of a first lien,
holders of Mortgage Loans secured by junior liens also face the risk that
adequate funds will not be received in connection with a foreclosure on the
related Mortgaged Property to satisfy fully both the Senior Liens and the
Mortgage Loan. In the event that a holder of a Senior Lien forecloses on a
Mortgaged Property, the proceeds of the foreclosure or similar sale will be
applied first to the payment of court costs and fees in connection with the
foreclosure, second to real estate taxes, third in satisfaction of all
principal, interest, prepayment or acceleration penalties, if any, and any other
sums due and owing to the holder of the Senior Liens. The claims of the holders
of the Senior Liens will be satisfied in full out of proceeds of the liquidation
of the related Mortgaged Property, if 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
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Mortgaged Property are insufficient to satisfy all Senior Liens and the Mortgage
Loan in the aggregate, the Trust Fund, as the holder of the junior lien, and,
accordingly, holders of one or more classes of the Certificates of the related
series bear (i) the risk of delay in distributions while a deficiency judgment
against the borrower is obtained and (ii) the risk of loss if the deficiency
judgment is not realized upon. Moreover, deficiency judgments may not be
available in certain jurisdictions or the Mortgage Loan may be nonrecourse.
The rights of the Trust Fund (and therefore the Certificateholders), as
beneficiary under a junior deed of trust or as mortgagee under a junior
mortgage, are subordinate to those of the mortgagee or beneficiary under the
senior mortgage or deed of trust, including the prior rights of the senior
mortgagee or beneficiary to receive rents, hazard insurance and condemnation
proceeds and to cause the property securing the Mortgage Loan to be sold upon
default of the mortgagor or trustor, thereby extinguishing the junior
mortgagee's or junior beneficiary's lien unless the Master Servicer asserts its
subordinate interest in a property in foreclosure litigation or satisfies the
defaulted senior loan. As discussed more fully below, in many states a junior
mortgagee or beneficiary may satisfy a defaulted senior loan in full, adding the
amounts expended to the balance due on the junior loan. Absent a provision in
the senior mortgage, no notice of default is required to be given to the junior
mortgagee.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgage or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other casualty,
or in the event the property is taken by condemnation, the mortgagee or
beneficiary under the senior mortgage or deed of trust will have the prior right
to collect any insurance proceeds payable under a hazard insurance policy and
any award of damages in connection with the condemnation and to apply the same
to the indebtedness secured by the senior mortgage or deed of trust. Proceeds in
excess of the amount of senior mortgage indebtedness will, in most cases, be
applied to the indebtedness of a junior mortgage or trust deed to the extent the
junior mortgage or deed of trust so provides. The laws of certain states may
limit the ability of mortgagees or beneficiaries to apply the proceeds of hazard
insurance and partial condemnation awards to the secured indebtedness. In such
states, the mortgagor or trustor must be allowed to use the proceeds of hazard
insurance to repair the damage unless the security of the mortgagee or
beneficiary has been impaired. Similarly, in certain states, the mortgagee or
beneficiary is entitled to the award for a partial condemnation of the real
property security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage or deed of trust.
While such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or "optional" advance. If the mortgagee or beneficiary is
obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage or deed
of trust, notwithstanding that there may be intervening junior mortgages or
deeds of trust and other liens between the date of recording of the mortgage or
deed of trust and the date of the future advance, and notwithstanding that the
mortgagee or beneficiary had actual knowledge of such intervening junior
mortgages or deeds of trust and other liens at the time of the advance. Where
the mortgagee or beneficiary is not obligated to advance the additional amounts
and has actual knowledge of the intervening junior mortgages or deeds of trust
and other liens, the advance may be subordinate to such intervening junior
mortgages or deeds of trust and other liens. Priority of advances under a
"future advance" clause rests, in many other states, on state law giving
priority to all advances made under the loan agreement up to a "credit limit"
amount stated in the recorded mortgage.
SUBORDINATE FINANCING
The terms of certain of the Mortgage Loans may not restrict the ability of
the borrower to use the Mortgaged Property as security for one or more
additional loans, or such restrictions may be unenforceable. Where a borrower
encumbers a mortgaged property with one or more junior liens, the senior lender
is
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subjected to additional risk. First, the borrower may have difficulty servicing
and repaying multiple loans. Moreover, if the subordinate financing permits
recourse to the borrower (as is frequently the case) and the senior loan does
not, a borrower may have more incentive to repay sums due on the subordinate
loan. Second, acts of the senior lender that prejudice the junior lender or
impair the junior lender's security may create a superior equity in favor of the
junior lender. For example, if the 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. Third, if the
borrower defaults on the senior loan and/or any junior loan or loans, the
existence of junior loans and actions taken by junior lenders can impair the
security available to the senior lender and can interfere with or delay the
taking of action by the senior lender. Moreover, the bankruptcy of a junior
lender may operate to stay foreclosure or similar proceedings by the senior
lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Forms of notes and mortgages used by lenders may contain provisions
obligating the mortgagor to pay a late charge or additional interest if payments
are not timely made, and in some circumstances may provide for prepayment fees
or yield maintenance penalties if the obligation is paid prior to maturity or
prohibit such prepayment for a specified period. In certain states, there are or
may be specific limitations upon the late charges which a lender may collect
from a mortgagor for delinquent payments. Certain states also limit the amounts
that a lender may collect from a mortgagor as an additional charge if the loan
is prepaid. The enforceability under the laws of a number of states and the
Bankruptcy Code of provisions providing for prepayment fees of penalties upon,
or prohibition of, an involuntary prepayment is unclear, and no assurance can be
given that, at the time a prepayment premium is required to be made on a
Mortgage Loan in connection with an involuntary prepayment, the obligation to
make such payment, or the provisions of any such prohibition, will be
enforceable under applicable state law. The absence of a restraint on
prepayment, particularly with respect to Mortgage Loans having higher Mortgage
Rates, may increase the likelihood of refinancing or other early retirements of
the Mortgage Loans.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply to
certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any state
to reimpose interest 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 and/or to limit discount points or other charges.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan provides
for such interest rate, discount points and charges as are permitted in such
state or (ii) such Mortgage Loan provides that the terms thereof are to be
construed in accordance with the laws of another state under which such interest
rate, discount points and charges would not be usurious and the borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgaged Property which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(i.e., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related Mortgage Loan.
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AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
"readily achievable." In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The "readily achievable" standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord. Furthermore, since the "readily
achievable" standard may vary depending on the financial condition of the owner
or landlord, a foreclosing lender who is financially more capable than the
borrower of complying with the requirements of the ADA may be subject to more
stringent requirements than those to which the borrower is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's 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 such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals 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 Relief Act applies to
individuals 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 with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of a Master Servicer or
Special Servicer to collect full amounts of interest on certain of the Mortgage
Loans. Any shortfalls in interest collections resulting from the application of
the Relief Act 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, unless otherwise specified in the related Prospectus Supplement,
any form of Credit Support provided in connection with such Certificates. In
addition, the Relief Act imposes limitations that would impair the ability of
the Master Servicer or Special 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.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the comprehensive Crime Control Act of 1984 (the "Crime
Control Act"), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties "known to have an alleged interest in the property", including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following general discussion of the anticipated material federal income
tax consequences of the purchase, ownership and disposition of Offered
Certificates of any series thereof, to the extent it relates to matters of law
or legal conclusions with respect thereto, represents the opinion of counsel to
the Depositor with respect to that series on the material matters associated
with such consequences, subject to any qualifications set forth herein. Counsel
to the Depositor for each series will be Cadwalader, Wickersham & Taft, and a
copy of the legal opinion of such counsel rendered in connection with any series
of Certificates will be filed by the Depositor with the Commission on a Current
Report on Form 8-K within 15 days after the Closing Date for such series of
Certificates. This discussion is directed primarily to Certificateholders that
hold the Certificates as "capital assets" within the meaning of Section 1221 of
the Code (although portions thereof may also apply to Certificateholders who do
not hold Certificates as "capital assets") and it does not purport to discuss
all federal income tax consequences that may be applicable to the individual
circumstances of particular investors, some of which (such as banks, insurance
companies and foreign investors) may be subject to special treatment under the
Code. Further, the authorities on which this discussion, and the opinion
referred to below, are based are subject to change or differing interpretations,
which could apply retroactively. Prospective investors should note that no
rulings have been or will be sought from the Internal Revenue Service (the
"IRS") with respect to any of the federal income tax consequences discussed
below, and no assurance can be given the IRS will not take contrary positions.
Taxpayers and preparers of tax returns (including those filed by any REMIC or
other issuer) should be aware that under applicable Treasury regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice (i) is given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should consult
their tax advisors and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax treatment has been
discussed herein. In addition to the federal income tax consequences described
herein, potential investors are advised to consider the state and local tax
consequences, if any, of the purchase, ownership and disposition of Offered
Certificates. See "State and Other Tax Consequences". Certificateholders are
advised to consult their tax advisors concerning the federal, state, local or
other tax consequences to them of the purchase, ownership and disposition of
Offered Certificates.
The following discussion addresses securities of two general types: (i)
certificates ("REMIC Certificates") representing interests in a Trust Fund, or a
portion thereof, that the REMIC Administrator will elect to have treated as a
real estate mortgage investment conduit ("REMIC") under Sections 860A through
860G (the "REMIC Provisions") of the Code, and (ii) Grantor Trust Certificates
representing interests in a Trust Fund ("Grantor Trust Fund") as to which no
such election will be made. The Prospectus Supplement for each series of
Certificates will indicate whether a REMIC election (or elections) will be made
for the related Trust Fund and, if such an election is to be made, will identify
all "regular interests" and "residual interests" in the REMIC. For purposes of
this tax discussion, references to a "Certificateholder" or a "holder" are to
the beneficial owner of a Certificate.
The following discussion is limited in applicability to Offered
Certificates. Moreover, this discussion applies only to the extent that Mortgage
Assets held by a Trust Fund consist solely of Mortgage Loans. To the extent that
other Mortgage Assets, including REMIC certificates and mortgage pass-through
certificates, are to be held by a Trust Fund, the tax consequences associated
with the inclusion of such assets will be disclosed in the related Prospectus
Supplement. In addition, if Cash Flow Agreements other than guaranteed
investment contracts are included in a Trust Fund, the anticipated material tax
consequences associated with such Cash Flow Agreements also will be discussed in
the related Prospectus Supplement. See "Description of the Trust Funds -- Cash
Flow Agreements".
Furthermore, the following discussion is based in part upon the rules
governing original issue discount that are set forth in Sections 1271-1273 and
1275 of the Code and in the Treasury regulations issued thereunder (the "OID
Regulations"), and in part upon the REMIC Provisions and the Treasury
regulations
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issued thereunder (the "REMIC Regulations"). The OID Regulations do not
adequately address certain issues relevant to, and in some instances provide
that they are not applicable to, securities such as the Certificates.
REMICS
Classification of REMICs. Upon the issuance of each series of REMIC
Certificate, counsel to the Depositor will give its opinion generally to the
effect that, assuming compliance with all provisions of the related Pooling and
Servicing Agreement, the related Trust Fund (or each applicable portion thereof)
will qualify as a REMIC and the REMIC Certificates offered with respect thereto
will be considered to evidence ownership of REMIC Regular Certificates or REMIC
Residual Certificates in that REMIC within the meaning of the REMIC Provisions.
The following general discussion of the anticipated federal income tax
consequences of the purchase, ownership and disposition of REMIC Certificates,
to the extent it relates to matters of law or legal conclusions with respect
thereto, represents the opinion of counsel to the Depositor for the applicable
series as specified in the related Prospectus Supplement, subject to any
qualifications set forth herein. In addition, counsel to the Depositor have
prepared or reviewed the statements in this Prospectus under the heading
"Certain Federal Income Tax Consequences -- REMICs," and are of the opinion that
such statements are correct in all material respects. Such statements are
intended as an explanatory discussion of the possible effects of the
classification of any Trust Fund (or applicable portion thereof) as a REMIC for
federal income tax purposes on investors generally and of related tax matters
affecting investors generally, but do not purport to furnish information in the
level of detail or with the attention to an investor's specific tax
circumstances that would be provided by an investor's own tax advisor.
Accordingly, each investor is advised to consult its own tax advisors with
regard to the tax consequences to it of investing in REMIC Certificates.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The Pooling and Servicing Agreement with respect to each REMIC will
include provisions designed to maintain the Trust Fund's status as a REMIC under
the REMIC Provisions. It is not anticipated that the status of any Trust Fund as
a REMIC will be inadvertently terminated.
Characterization of Investments in REMIC Certificates. In general, unless
otherwise provided in the related Prospectus Supplement, the REMIC Certificates
will be "real estate assets" within the meaning of Section 856(c)(4)(A) of the
Code and assets described in Section 7701(a)(19)(C) of the Code in the same
proportion that the assets of the REMIC underlying such Certificates would be so
treated. However, to the extent that the REMIC assets constitute mortgages on
property not used for residential or certain other prescribed purposes, the
REMIC Certificates will not be treated as assets qualifying under Section
7701(a)(19)(C). Moreover, if 95% or more of the assets of the REMIC qualify for
any of the foregoing characterizations at all times during a calendar year, the
REMIC Certificates will qualify for the corresponding status in their entirety
for that calendar year. Interest (including original issue discount) on the
REMIC Regular Certificates and income allocated to the REMIC Residual
Certificates will be interest described in Section 856(c)(3)(B) of the Code to
the extent that such Certificates are treated as "real estate assets" within the
meaning of Section 856(c)(4)(A) of the Code. In addition, the REMIC Regular
Certificates will be "qualified mortgages" for a REMIC within the meaning of
Section 860G(a)(3) of the Code and "permitted assets" for a financial asset
securitization investment trust within the meaning of Section 860L(c) of the
Code. The determination as to the percentage of the REMIC's assets that
constitute assets described in the foregoing sections of the Code will be made
with respect to each calendar quarter based on the average adjusted basis of
each category of the assets held by the REMIC during such calendar quarter. The
REMIC
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Administrator will report those determinations to Certificateholders in the
manner and at the times required by applicable Treasury regulations.
The assets of the REMIC will include, in addition to Mortgage Loans,
payments on Mortgage Loans held pending distribution on the REMIC Certificates
and any property acquired by foreclosure held pending sale, and may include
amounts in reserve accounts. It is unclear whether property acquired by
foreclosure held pending sale, and amounts in reserve accounts would be
considered to be part of the Mortgage Loans, or whether such assets (to the
extent not invested in assets described in the foregoing sections of the Code)
otherwise would receive the same treatment as the Mortgage Loans for purposes of
all of the foregoing sections of the Code. In addition, in some instances
Mortgage Loans may not be treated entirely as assets described in the foregoing
sections of the Code. If so, the related Prospectus Supplement will describe the
Mortgage Loans that may not be so treated. The REMIC Regulations do provide,
however, that cash received from payments on Mortgage Loans held pending
distribution is considered part of the Mortgage Loans for purposes of Section
856(c)(4)(A) of the Code.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as REMICs ("Tiered REMICs") for federal income tax purposes. As to
each such series of REMIC Certificates, in the opinion of counsel to the
Depositor, assuming compliance with all provisions of the related Pooling and
Servicing Agreement, the Tiered REMICs will each qualify as a REMIC and the
REMIC Certificates issued by the Tiered REMICs, will be considered to evidence
ownership of REMIC Regular Certificates or REMIC Residual Certificates in the
related REMIC within the meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
"real estate assets" within the meaning of Section 856(c)(4)(A) of the Code and
"loans secured by an interest in real property" under Section 7701(a)(19)(C) of
the Code, and whether the income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
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 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. Certain REMIC Regular Certificates may be issued
with "original issue discount" within the meaning of Section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in income
as it accrues, in accordance with the "constant yield" method described below,
in advance of the receipt of the cash attributable to such income. In addition,
Section 1272(a)(6) of the Code provides special rules applicable to REMIC
Regular Certificates and certain other debt instruments issued with original
issue discount. Regulations have not been issued under that section.
The Code requires that a reasonable prepayment assumption be used with
respect to Mortgage Loans held by a REMIC in computing the accrual of original
issue discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The Conference Committee Report accompanying the Tax Reform Act of 1986 (the
"Committee Report") indicates that the regulations will provide that the
prepayment assumption used with respect to a REMIC Regular Certificate must be
the same as that used in pricing the initial offering of such REMIC Regular
Certificate. The prepayment assumption (the "Prepayment Assumption") used in
reporting original issue discount for each series of REMIC Regular Certificates
will be consistent with this standard and will be disclosed in the related
Prospectus Supplement. However, neither the Depositor nor any other person will
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make any representation that the Mortgage Loans will in fact prepay at a rate
conforming to the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will be
the excess of its stated redemption price at maturity over its issue price. The
issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial issuance
(the "Closing Date"), the issue price for such class will be the fair market
value of such class on the Closing Date. Under the OID Regulations, the stated
redemption price of a REMIC Regular Certificate is equal to the total of all
payments to be made on such Certificate other than "qualified stated interest".
"Qualified stated interest" is interest that is unconditionally payable at least
annually (during the entire term of the instrument) at a single fixed rate, or
at a "qualified floating rate", an "objective rate", a combination of a single
fixed rate and one or more "qualified floating rates" or one "qualified inverse
floating rate", or a combination of "qualified floating rates" that does not
operate in a manner that accelerates or defers interest payments on such REMIC
Regular Certificate.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such Certificates, the related Prospectus Supplement will describe the manner in
which such rules will be applied with respect to those Certificates in preparing
information returns to the Certificateholders and the IRS.
Certain classes of the REMIC Regular Certificates may provide for the first
interest payment with respect to such Certificates to be made more than one
month after the date of issuance, a period which is longer than the subsequent
monthly intervals between interest payments. Assuming the "accrual period" (as
defined below) for original issue discount is each monthly period that ends on
the day prior to a Distribution Date, in some cases, as a consequence of this
"long first accrual period", some or all interest payments may be required to be
included in the stated redemption price of the REMIC Regular Certificate and
accounted for as original issue discount. Because interest on REMIC Regular
Certificates must in any event be accounted for under an accrual method,
applying this analysis would result in only a slight difference in the timing of
the inclusion in income of the yield on the REMIC Regular Certificates.
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated as part of the overall cost of such
REMIC Regular Certificate (and not as a separate asset the cost of which is
recovered entirely out of interest received on the next Distribution Date) and
that portion of the interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to the number of days from
the Closing Date to the first Distribution Date should be included in the stated
redemption price of such REMIC Regular Certificate. However, the OID Regulations
state that all or some portion of such accrued interest may be treated as a
separate asset the cost of which is recovered entirely out of interest paid on
the first Distribution Date. It is unclear how an election to do so would be
made under the OID Regulations and whether such an election could be made
unilaterally by a Certificateholder.
Notwithstanding the general definition of original issue discount, original
issue discount on a REMIC Regular Certificate will be considered to be de
minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average maturity. For this
purpose, the weighted average maturity of the REMIC Regular Certificate is
computed as the sum of the amounts determined, as to each payment included in
the stated redemption price of such REMIC Regular Certificate, by multiplying
(i) the number of complete years (rounding down for partial years) from the
issue date until such payment is expected to be made (presumably taking into
account the Prepayment Assumption) by (ii) a fraction, the numerator of which is
the amount of the payment, and the denominator of which is the stated redemption
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price at maturity of such REMIC Regular Certificate. Under the OID Regulations,
original issue discount of only a de minimis amount (other than de minimis
original issue discount attributable to a so-called "teaser" interest rate or an
initial interest holiday) will be included in income as each payment of stated
principal is made, based on the product of the total amount of such de minimis
original issue discount and a fraction, the numerator of which is the amount of
such principal payment and the denominator of which is the outstanding stated
principal amount of the REMIC Regular Certificate. The OID Regulations also
would permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See
"-- Taxation of Owners of REMIC Regular Certificates -- Market Discount" below
for a description of such election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of a
de minimis amount, the holder of such Certificate must include in ordinary gross
income the sum of the "daily portions" of original issue discount for each day
during its taxable year on which it held such REMIC Regular Certificate,
including the purchase date but excluding the disposition date. In the case of
an original holder of a REMIC Regular Certificate, the daily portions of
original issue discount will be determined as follows.
As to each "accrual period", that is, unless otherwise stated in the
related Prospectus Supplement, each period that begins on a date that
corresponds to a Distribution Date (or in the case of the first such period,
begins on the Closing Date) and ends on the day preceding the immediately
following Distribution Date, a calculation will be made of the portion of the
original issue discount that accrued during such accrual period. The portion of
original issue discount that accrues in any accrual period will equal the
excess, if any, of (i) the sum of (a) the present value, as of the end of the
accrual period, of all of the distributions remaining to be made on the REMIC
Regular Certificate, if any, in future periods and (b) the distributions made on
such REMIC Regular Certificate during the accrual period of amounts included in
the stated redemption price, over (ii) the adjusted issue price of such REMIC
Regular Certificate at the beginning of the accrual period. The present value of
the remaining distributions referred to in the preceding sentence will be
calculated (i) assuming that distributions on the REMIC Regular Certificate will
be received in future periods based on the Mortgage Loans being prepaid at a
rate equal to the Prepayment Assumption, (ii) using a discount rate equal to the
original yield to maturity of the Certificate and (iii) taking into account
events (including actual prepayments) that have occurred before the close of the
accrual period. For these purposes, the original yield to maturity of the
Certificate will be calculated based on its issue price and assuming that
distributions on the Certificate will be made in all accrual periods based on
the Mortgage Loans being prepaid at a rate equal to the Prepayment Assumption.
The adjusted issue price of a REMIC Regular Certificate at the beginning of any
accrual period will equal the issue price of such Certificate, increased by the
aggregate amount of original issue discount that accrued with respect to such
Certificate in prior accrual periods, and reduced by the amount of any
distributions made on such REMIC Regular Certificate in prior accrual periods of
amounts included in the stated redemption price. The original issue discount
accruing during any accrual period, computed as described above, will be
allocated ratably to each day during the accrual period to determine the daily
portion of original issue discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its "adjusted issue
price", in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the case of a REMIC Regular
Certificate issued with original issue discount, at a purchase price less than
its adjusted issue price will recognize gain
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upon receipt of each distribution representing stated redemption price. In
particular, under Section 1276 of the Code such a Certificateholder generally
will be required to allocate the portion of each such distribution representing
stated redemption price 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,
such election will apply to all market discount bonds acquired by such
Certificateholder on or after the first day of the first taxable year to which
such election applies. In addition, the OID Regulations permit a
Certificateholder to elect to accrue all interest and discount (including de
minimis market or original issue discount) in income as interest, and to
amortize premium, based on a constant yield method. If such an election were
made with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include currently
market discount in income with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election or thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate that is
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires. See "-- Taxation of Owners of
REMIC Regular Certificates -- Premium" below. Each of these elections to accrue
interest, discount and premium with respect to a Certificate on a constant yield
method or as interest would be irrevocable except with the approval of the IRS.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the Prepayment Assumption. If
market discount is treated as de minimis under this rule, it appears that the
actual discount would be treated in a manner similar to original issue discount
of a de minimis amount. See "-- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount" above. Such treatment would result in
discount being included in income at a slower rate than discount would be
required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a REMIC Regular Certificate issued without original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period, or (iii) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the original
issue discount accrued in the accrual period bears to the total original issue
discount remaining on the REMIC Regular Certificate at the beginning of the
accrual period. Moreover, the Prepayment Assumption used in calculating the
accrual of original issue discount is also used in calculating the accrual of
market discount. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a REMIC Regular Certificate purchased at a discount
in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the
sale or exchange of such Certificate as ordinary income to the extent of the
market
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discount accrued to the date of disposition under one of the foregoing methods,
less any accrued market discount previously reported as ordinary income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular 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 REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased at
a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield method
over the life of the Certificate. If made, such an election will apply to all
debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID Regulations also permit Certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the Certificateholder as having made the election
to amortize premium generally. See "-- Taxation of Owners of REMIC Regular
Certificates -- Market Discount" above. Although final Treasury regulations
issued under Section 171 of the Code do not by their terms apply to prepayable
obligations such as REMIC Regular Certificates, the Committee Report states that
the same rules that apply to accrual of market discount (which rules will
require use of a Prepayment Assumption in accruing market discount with respect
to REMIC Regular Certificates without regard to whether such Certificates have
original issue discount) will also apply in amortizing bond premium.
Realized Losses. Under Section 166 of the Code, both corporate holders of
the REMIC Regular Certificates and noncorporate holders of the REMIC Regular
Certificates that acquire such Certificates in connection with a trade or
business should be allowed to deduct, as ordinary losses, any losses sustained
during a taxable year in which their Certificates become wholly or partially
worthless as the result of one or more realized losses on the Mortgage Loans.
However, it appears that a noncorporate holder that does not acquire a REMIC
Regular Certificate in connection with a trade or business will not be entitled
to deduct a loss under Section 166 of the Code until such holder's Certificate
becomes wholly worthless (i.e., until its Certificate Balance has been reduced
to zero) and that the loss will be characterized as a short-term capital loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue discount with respect to such Certificate, without
giving effect to any reductions in distributions attributable to defaults or
delinquencies on the Mortgage Loans or the Underlying Certificates until it can
be established that any such reduction ultimately will not be recoverable. As a
result, the amount of taxable income reported in any period by the holder of a
REMIC Regular Certificate could exceed the amount of economic income actually
realized by the holder in such period. Although the holder of a REMIC Regular
Certificate eventually will recognize a loss or reduction in income attributable
to previously accrued and included income that, as the result of a realized
loss, ultimately will not be realized, the law is unclear with respect to the
timing and character of such loss or reduction in income.
Taxation of Owners of REMIC Residual Certificates.
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC generally is not subject to entity-level taxation, except with
regard to prohibited transactions and certain other transactions. See
"-- Prohibited Transactions Tax and Other Taxes" below. Rather, the taxable
income or net loss of a REMIC is generally taken into account by the holder of
the REMIC Residual Certificates. Accordingly, the REMIC Residual Certificates
will be subject to tax rules that differ significantly from those
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that would apply if the REMIC Residual Certificates were treated for federal
income tax purposes as direct ownership interests in the Mortgage Loans or as
debt instruments issued by the REMIC.
A holder of a REMIC Residual Certificate generally will be required to
report its daily portion of the taxable income or, subject to the limitations
noted in this discussion, the net loss of the REMIC for each day during a
calendar quarter that such holder owned such REMIC Residual Certificate. For
this purpose, the taxable income or net loss of the REMIC will be allocated to
each day in the calendar quarter ratably using a "30 days per month/90 days per
quarter/360 days per year" convention unless otherwise disclosed in the related
Prospectus Supplement. The daily amounts so allocated will then be allocated
among the REMIC Residual Certificateholders in proportion to their respective
ownership interests on such day. Any amount included in the gross income or
allowed as a loss of any REMIC Residual Certificateholder by virtue of this
paragraph will be treated as ordinary income or loss. The taxable income of the
REMIC will be determined under the rules described below in "-- Taxable Income
of the REMIC" and will be taxable to the REMIC Residual Certificateholders
without regard to the timing or amount of cash distributions by the REMIC until
the REMIC's termination. Ordinary income derived from REMIC Residual
Certificates will be "portfolio income" for purposes of the taxation of
taxpayers subject to limitations under Section 469 of the Code on the
deductibility of "passive losses".
A holder of a REMIC Residual Certificate that purchased such Certificate
from a prior holder of such Certificate also will be required to report on its
federal income tax return amounts representing its daily share of the taxable
income (or net loss) of the REMIC for each day that it holds such REMIC Residual
Certificate. Those daily amounts generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report indicates
that certain modifications of the general rules may be made, by regulations,
legislation or otherwise to reduce (or increase) the income of a REMIC Residual
Certificateholder that purchased such REMIC Residual Certificate from a prior
holder of such Certificate at a price greater than (or less than) the adjusted
basis (as defined below) such REMIC Residual Certificate would have had in the
hands of an original holder of such Certificate. The REMIC Regulations, however,
do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate from the
seller of such Certificate in connection with the acquisition of such REMIC
Residual Certificate will be taken into account in determining the income of
such holder for federal income tax purposes. Although it appears likely that any
such payment would be includible in income immediately upon its receipt, the IRS
might assert that such payment should be included in income over time according
to an amortization schedule or according to some other method. Because of the
uncertainty concerning the treatment of such payments, holders of REMIC Residual
Certificates should consult their tax advisors concerning the treatment of such
payments for income tax purposes.
The amount of income REMIC Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes due as a result of their
ownership of REMIC Residual Certificates or unrelated deductions against which
income may be offset, subject to the rules relating to "excess inclusions" and
"noneconomic" residual interests discussed below. The fact that the tax
liability associated with the income allocated to REMIC Residual
Certificateholders may exceed the cash distributions received by such REMIC
Residual Certificateholders for the corresponding period may significantly
adversely affect such REMIC Residual Certificateholders' after-tax rate of
return. Such disparity between income and distributions may not be offset by
corresponding losses or reductions of income attributable to the REMIC Residual
Certificateholder until subsequent tax years and, then, may not be completely
offset due to changes in the Code, tax rates or character of the income or loss.
Taxable Income of the REMIC. The taxable income of the REMIC will equal
the income from the Mortgage Loans (including interest, market discount and, if
applicable, original issue discount and less premium) and other assets of the
REMIC plus any cancellation of indebtedness income due to the allocation of
realized losses to REMIC Regular Certificates, less the deductions allowed to
the REMIC for interest
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(including original issue discount and reduced by any premium on issuance) on
the REMIC Regular Certificates (and any other class of REMIC Certificates
constituting "regular interests" in the REMIC not offered hereby), amortization
of any premium on the Mortgage Loans, bad debt losses with respect to the
Mortgage Loans and, except as described below, for servicing, administrative and
other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC Certificates (or, if a class of REMIC Certificates is not sold
initially, their fair market values). Such aggregate basis will be allocated
among the Mortgage Loans and the other assets of the REMIC in proportion to
their respective fair market values. The issue price of any REMIC Certificates
offered hereby will be determined in the manner described above under
"-- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount". The issue price of a REMIC Certificate received in exchange for an
interest in the Mortgage Loans or other property will equal the fair market
value of such interests in the Mortgage Loans or other property. Accordingly, if
one or more classes of REMIC Certificates are retained initially rather than
sold, the REMIC Administrator may be required to estimate the fair market value
of such interests in order to determine the basis of the REMIC in the Mortgage
Loans and other property held by the REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to Mortgage Loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates (that is, under the constant yield method taking into account the
Prepayment Assumption). However, a REMIC that acquires loans at a market
discount must include such market discount in income currently, as it accrues,
on a constant yield basis. See "-- Taxation of Owners of REMIC Regular
Certificates" above, which describes a method for accruing such discount income
that is analogous to that required to be used by a REMIC as to Mortgage Loans
with market discount that it holds.
A Mortgage Loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis therein, determined as described
in the preceding paragraph, is less than (or greater than) its stated redemption
price. Any such discount will be includible in the income of the REMIC as it
accrues, in advance of receipt of the cash attributable to such income, under a
method similar to the method described above for accruing original issue
discount on the REMIC Regular Certificates. It is anticipated that each REMIC
will elect under Section 171 of the Code to amortize any premium on the Mortgage
Loans. Premium on any Mortgage Loan to which such election applies may be
amortized under a constant yield method, presumably taking into account a
Prepayment Assumption. Further, such an election would not apply to any Mortgage
Loan originated on or before September 27, 1985. Instead, premium on such a
Mortgage Loan should be allocated among the principal payments thereon and be
deductible by the REMIC as those payments become due or upon the prepayment of
such Mortgage Loan.
A REMIC will be allowed deductions for interest (including original issue
discount) on the REMIC Regular Certificates (including any other class of REMIC
Certificates constituting "regular interests" in the REMIC not offered hereby)
equal to the deductions that would be allowed if the REMIC Regular Certificates
(including any other class of REMIC Certificates constituting "regular
interests" in the REMIC not offered hereby) were indebtedness of the REMIC.
Original issue discount will be considered to accrue for this purpose as
described above under "-- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount", except that the de minimis rule and
the adjustments for subsequent holders of REMIC Regular Certificates (including
any other class of REMIC Certificates constituting "regular interests" in the
REMIC not offered hereby) described therein will not apply.
If a class of REMIC Regular Certificates is issued at a price in excess of
the stated redemption price of such class (such excess "Issue Premium"), the
REMIC will have additional income in each taxable year in an amount equal to the
portion of the Issue Premium that is considered to be amortized or repaid in
that year. Although the matter is not entirely certain, it is likely that Issue
Premium would be amortized under a constant yield method in a manner analogous
to the method of accruing original issue discount described above under
"-- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount".
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As a general rule, the taxable income of a REMIC will be determined in the
same manner as if the REMIC were an individual having the calendar year as its
taxable year and using the accrual method of accounting. However, no item of
income, gain, loss or deduction allocable to a prohibited transaction will be
taken into account. See "-- Prohibited Transactions Tax and Other Taxes" below.
Further, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code (which allows such deductions only to the
extent they exceed in the aggregate two percent of the taxpayer's adjusted gross
income) will not be applied at the REMIC level so that the REMIC will be allowed
deductions for servicing, administrative and other noninterest expenses in
determining its taxable income. All such expenses will be allocated as a
separate item to the holders of REMIC Certificates, subject to the limitation of
Section 67 of the Code. See "-- Possible Pass-Through of Miscellaneous Itemized
Deductions" below. If the deductions allowed to the REMIC exceed its gross
income for a calendar quarter, such excess will be the net loss for the REMIC
for that calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the REMIC Residual
Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such REMIC Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such REMIC
Residual Certificateholder's adjusted basis in its REMIC Residual Certificate as
of the close of such calendar quarter (determined without regard to such net
loss). Any loss that is not currently deductible by reason of this limitation
may be carried forward indefinitely to future calendar quarters and, subject to
the same limitation, may be used only to offset income from the REMIC Residual
Certificate. The ability of REMIC Residual Certificateholders to deduct net
losses may be subject to additional limitations under the Code, as to which
REMIC Residual Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
nontaxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the REMIC. However, such bases increases may not occur until the end
of the calendar quarter, or perhaps the end of the calendar year, with respect
to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such REMIC Residual
Certificateholders, and increases in such initial bases either occur after such
distributions or (together with their initial bases) are less than the amount of
such distributions, gain will be recognized to such REMIC Residual
Certificateholders on such distributions and will be treated as gain from the
sale of their REMIC Residual Certificates.
The effect of these rules is that a REMIC Residual Certificateholder may
not amortize its basis in a REMIC Residual Certificate, but may only recover its
basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See "-- Sales of REMIC
Certificates" below. For a discussion of possible modifications of these rules
that may require adjustments to income of a holder of a REMIC Residual
Certificate other than an original holder in order to reflect any difference
between the cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder and the adjusted basis such REMIC Residual Certificate would
have in the hands of an original holder see "--Taxation of Owners of REMIC
Residual Certificates -- General" above.
Excess Inclusions. Any "excess inclusions" with respect to a REMIC
Residual Certificate will be subject to federal income tax in all events.
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In general, the "excess inclusions" with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of (i) the
daily portions of REMIC taxable income allocable to such REMIC Residual
Certificate over (ii) the sum of the "daily accruals" (as defined below) for
each day during such quarter that such REMIC Residual Certificate was held by
such REMIC Residual Certificateholder. The daily accruals of a REMIC Residual
Certificateholder will be determined by allocating to each day during a 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% of
the "long-term Federal rate" in effect on the Closing Date. For this purpose,
the adjusted issue price of a REMIC Residual Certificate as of the beginning of
any calendar quarter will be equal to the issue price of the REMIC Residual
Certificate, increased by the sum of the daily accruals for all prior quarters
and decreased (but not below zero) by any distributions made with respect to
such REMIC Residual Certificate before the beginning of such quarter. The issue
price of a REMIC Residual Certificate is the initial offering price to the
public (excluding bond houses and brokers) at which a substantial amount of the
REMIC Residual Certificates were sold. The "long-term Federal 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 IRS.
For REMIC Residual Certificateholders, an excess inclusion (i) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (ii) will be treated as "unrelated business taxable income" to an
otherwise tax-exempt organization and (iii) will not be eligible for any rate
reduction or exemption under any applicable tax treaty with respect to the 30%
United States withholding tax imposed on distributions to REMIC Residual
Certificateholders that are foreign investors. See, however, "-- Foreign
Investors in REMIC Certificates" below.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such 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 such
shareholder. Treasury regulations yet to be issued could apply a similar rule to
regulated investment companies, common trust funds and certain cooperatives; the
REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations,
transfers of "noneconomic" REMIC Residual Certificates will be disregarded for
all federal income tax purposes if "a significant purpose of the transfer was to
enable the transferor to impede the assessment or collection of tax". If such
transfer is disregarded, the purported transferor will continue to remain liable
for any taxes due with respect to the income on such "noneconomic" REMIC
Residual Certificate. The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the Prepayment Assumption and on any
required or permitted clean up calls, or required liquidation provided for in
the REMIC's organizational documents, (1) the present value of the expected
future distributions (discounted using the "applicable Federal rate" for
obligations whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the REMIC Residual
Certificate, which rate is computed and published monthly by the IRS) on the
REMIC Residual Certificate equals at least the present value of the expected tax
on the anticipated excess inclusions, and (2) the transferor reasonably expects
that the transferee will receive distributions with respect to the REMIC
Residual Certificate at or after the time the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes.
Accordingly, all transfers of REMIC Residual Certificates that may constitute
noneconomic residual interests will be subject to certain restrictions under the
terms of the related Pooling and Servicing Agreement that are intended to reduce
the possibility of any such transfer being disregarded. Such restrictions will
require each party to a transfer to provide an affidavit that no purpose of such
transfer is to impede the assessment or collection of tax, including certain
representations as to the financial condition of the prospective transferee, as
to which the transferor is also required to make a reasonable investigation to
determine such transferee's historic payment of its debts and ability to
continue to pay its debts as they come due in the future. Prior to purchasing a
REMIC Residual Certificate, prospective purchasers should consider the
possibility that a purported transfer of such REMIC
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Residual Certificate by such a purchaser to another purchaser at some future
date may be disregarded in accordance with the above-described rules which would
result in the retention of tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered "noneconomic" residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered "noneconomic" will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will not be considered "noneconomic" for purposes of the
above-described rules. See "-- Foreign Investors in REMIC Certificates" below
for additional restrictions applicable to transfers of certain REMIC Residual
Certificates to foreign persons.
Mark-to-Market Rules. On January 4, 1995, the IRS issued final regulations
(the "Mark-to-Market Regulations") relating to the requirement that a securities
dealer mark to market securities held for sale to customers. This mark-to-market
requirement applies to all securities owned by a dealer, except to the extent
that the dealer has specifically identified a security as held for investment.
The Mark-to-Market Regulations provide that for purposes of this mark-to-market
requirement, any REMIC Residual Certificate is not treated as a security and
thus generally may not be marked to market.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to certain types of holders of
the related REMIC Residual Certificates. The applicable Treasury regulations
indicate, however, that in the case of a REMIC that is similar to a single class
grantor trust, all or a portion of such fees and expenses should be allocated to
such types of holders of the related REMIC Regular Certificates. Unless
otherwise stated in the related Prospectus Supplement, such fees and expenses
will be allocated to the related REMIC Residual Certificates in their entirety
and not to the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, (i) an amount equal to such individual's, estate's or trust's
share of such fees and expenses will be added to the gross income of such holder
and (ii) such individual's, estate's or trust's share of such fees and expenses
will be treated as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to the
extent they exceed in the aggregate 2% of a taxpayer's adjusted gross income. In
addition, Section 68 of the Code provides that the amount of itemized deductions
otherwise allowable for an individual whose adjusted gross income exceeds a
specified amount will be reduced by the lesser of (i) 3% of the excess of the
individual's adjusted gross income over such amount or (ii) 80% of the amount of
itemized deductions otherwise allowable for the taxable year. The amount of
additional taxable income reportable by REMIC Certificateholders that are
subject to the limitations of either Section 67 or Section 68 of the Code may be
substantial. Furthermore, in determining the alternative minimum taxable income
of such a holder of a REMIC Certificate that is an individual, estate or trust,
or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, no deduction will be allowed for such holder's allocable
portion of servicing fees and other miscellaneous itemized deductions of the
REMIC, even though an amount equal to the amount of such fees and other
deductions will be included in such holder's gross income. Accordingly, such
REMIC Certificates may not be appropriate investments for individuals, estates,
or trusts, or pass-through entities beneficially owned by one or more
individuals, estates or trusts. Such prospective investors should consult with
their tax advisors prior to making an investment in such Certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Certificate.
The adjusted basis of a REMIC Regular Certificate generally will equal the cost
of such REMIC Regular Certificate to such Certificateholder, increased by income
reported by such Certificateholder with respect to such REMIC Regular
Certificate (including original issue discount and market discount income) and
reduced (but not below zero) by distributions on such REMIC Regular Certificate
received by
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such Certificateholder and by any amortized premium. The adjusted basis of a
REMIC Residual Certificate will be determined as described above under
"-- Taxation of Owners of REMIC Residual Certificates -- Basis Rules, Net Losses
and Distributions". Except as provided in the following four paragraphs, any
such gain or loss will be capital gain or loss, provided such REMIC Certificate
is held as a capital asset (generally, property held for investment) within the
meaning of Section 1221 of the Code. The Code as of the date of this Prospectus
provides for a top marginal tax rate of 39.6% for individuals and a maximum
marginal rate for long-term capital gains of individuals of 28% for property
held for more than one year but less than 18 months and 20% for property held
for more than 18 months. No such rate differential exists for corporations. In
addition, the distinction between a capital gain or loss and ordinary income or
loss remains relevant for other purposes.
Gain from the sale of a REMIC Regular Certificate that might otherwise be a
capital gain will be treated as ordinary income to the extent such gain does not
exceed the excess, if any, of (i) the amount that would have been includible in
the seller's income with respect to such REMIC Regular Certificate assuming that
income had accrued thereon at a rate equal to 110% of the "applicable Federal
rate" (generally, a rate based on an average of current yields on Treasury
securities having a maturity comparable to that of the Certificate based on the
application of the Prepayment Assumption to such Certificate), determined as of
the date of purchase of such REMIC Regular Certificate, over (ii) the amount of
ordinary income actually includible in the seller's income prior to such sale.
In addition, gain recognized on the sale of a REMIC Regular Certificate by a
seller who purchased such REMIC Regular Certificate at a market discount will be
taxable as ordinary income in an amount not exceeding the portion of such
discount that accrued during the period such REMIC Certificate was held by such
holder, reduced by any market discount included in income under the rules
described above under "-- Taxation of Owners of REMIC Regular
Certificates -- Market Discount" and "-- Premium".
REMIC Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" at the time the taxpayer
enters into the conversion transaction, subject to appropriate reduction for
prior inclusion of interest and other ordinary income items from the
transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be 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 residual interest in a REMIC or any similar
interest in a "taxable mortgage pool" (as defined in Section 7701(i) of the
Code) 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 Section 1091 of the Code. In that event, any loss realized by the REMIC
Residual Certificateholder on the sale will not be deductible, but instead will
be added to such REMIC Residual Certificateholder's adjusted basis in the
newly-acquired asset.
Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from "prohibited transactions" (a
"Prohibited Transactions Tax"). In general, subject to certain specified
exceptions a prohibited transaction means the disposition of a Mortgage Loan,
the receipt
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of income from a source other than a Mortgage Loan or certain other permitted
investments, the receipt of compensation for services, or gain from the
disposition of an asset purchased with the payments on the Mortgage Loans for
temporary investment pending distribution on the REMIC Certificates. It is not
anticipated that any REMIC will engage in any prohibited transactions in which
it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
"Contributions Tax"). Each Pooling and Servicing Agreement will include
provisions designed to prevent the acceptance of any contributions that would be
subject to such tax.
REMICs also are 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 gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
As provided in each Pooling and Servicing Agreement, a REMIC may recognize "net
income from foreclosure property" subject to federal income tax to the extent
that the REMIC Administrator determines that such method of operation will
result in a greater after-tax return to the Trust Fund than any other method of
operation.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any Prohibited Transactions Tax or
Contributions Tax will be borne by the related REMIC Administrator, Master
Servicer, Special Servicer, Manager or Trustee, in any case out of its own
funds, provided that such person has sufficient assets to do so, and provided
further that such tax arises out of a breach of such person's obligations under
the related Pooling and Servicing Agreement and in respect of compliance with
applicable laws and regulations. Any such tax not borne by a REMIC
Administrator, a Master Servicer, Special Servicer, Manager or Trustee will be
charged against the related Trust Fund resulting in a reduction in amounts
payable to holders of the related REMIC Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations. If a REMIC Residual Certificate is transferred to a
"disqualified organization" (as defined below), a tax would be imposed in an
amount (determined under the REMIC Regulations) equal to the product of (i) the
present value (discounted using the "applicable Federal rate" for obligations
whose term ends on the close of the last quarter in which excess inclusions are
expected to accrue with respect to the REMIC Residual Certificate) of the total
anticipated excess inclusions with respect to such REMIC Residual Certificate
for periods after the transfer and (ii) the highest marginal federal income tax
rate applicable to corporations. The anticipated excess inclusions must be
determined as of the date that the REMIC Residual Certificate is transferred and
must be based on events that have occurred up to the time of such transfer, the
Prepayment Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents. Such a tax
generally would be imposed on the transferor of the REMIC Residual Certificate,
except that where such transfer is through an agent for a disqualified
organization, the tax would instead be imposed on such agent. However, a
transferor of a REMIC Residual Certificate would in no event be liable for such
tax with respect to a transfer if the transferee furnishes to the transferor an
affidavit that the transferee is not a disqualified organization and, as of the
time of the transfer, the transferor does not have actual knowledge that such
affidavit is false. Moreover, an entity will not qualify as a REMIC unless there
are reasonable arrangements designed to ensure that (i) residual interests in
such entity are not held by disqualified organizations and (ii) information
necessary for the application of the tax described herein will be made
available. Restrictions on the transfer of REMIC Residual Certificates and
certain other provisions that are intended to meet this requirement will be
included in each Pooling and Servicing Agreement, and will be discussed in any
Prospectus Supplement relating to the offering of any REMIC Residual
Certificate.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in
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such entity, then a tax will be imposed on such entity equal to the product of
(i) the amount of excess inclusions on the REMIC Residual Certificate that are
allocable to the interest in the pass-through entity held by such disqualified
organization and (ii) the highest marginal federal income tax rate imposed on
corporations. A pass-through entity will not be subject to this tax for any
period, however, if each record holder of an interest in such pass-through
entity furnishes to such pass-through entity (i) such holder's social security
number and a statement under penalties of perjury that such social security
number is that of the record holder or (ii) a statement under penalties of
perjury that such record holder is not a disqualified organization.
For taxable years beginning on or after January 1, 1998, if an "electing
large partnership" holds a REMIC Residual Certificate, all interests in the
electing large partnership are treated as held by disqualified organizations for
purposes of the tax imposed upon a pass-through entity by Section 860E(c) of the
Code. An exception to this tax, otherwise available to a pass-through entity
that is furnished certain affidavits by record holders of interests in the
entity and that does not know such affidavits are false, is not available to an
electing large partnership.
For these purposes, a "disqualified organization" means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (ii) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (iii) any organization described in Section 1381(a)(2)(C) of the
Code. In addition, a "pass-through entity" means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
will, with respect to such interest, be treated as a pass-through entity. For
these purposes, an "electing large partnership" means a partnership (other than
a service partnership or certain commodity pools) having more than 100 members
that has elected to apply certain simplified reporting provisions under the
Code.
Termination. A REMIC will terminate immediately after the Distribution
Date following receipt by the REMIC of the final payment in respect of the
Mortgage Loans or upon a sale of the REMIC's assets following the adoption by
the REMIC of a plan of complete liquidation. The last distribution on a REMIC
Regular Certificate will be treated as a payment in retirement of a debt
instrument. In the case of a REMIC Residual Certificate, if the last
distribution on such REMIC Residual Certificate is less than the REMIC Residual
Certificateholder's adjusted basis in such Certificate, such REMIC Residual
Certificateholder should (but may not) be treated as realizing a loss equal to
the amount of such difference, and such loss may be treated as a capital loss.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and REMIC Residual Certificateholders will be treated as partners.
Unless otherwise stated in the related Prospectus Supplement, the holder of the
largest percentage interest in a class of REMIC Residual Certificates will be
the "tax matters person" with respect to the related REMIC, and the REMIC
Administrator will file REMIC federal income tax returns on behalf of the
related REMIC, and will be designated as and will act as agent of, and
attorney-in-fact for, the tax matters person with respect to the REMIC in all
respects.
As the tax matters person, the REMIC Administrator, subject to certain
notice requirements and various restrictions and limitations, generally will
have the authority to act on behalf of the REMIC and the REMIC Residual
Certificateholders in connection with the administrative and judicial review of
items of income, deduction, gain or loss of the REMIC, as well as the REMIC's
classification. REMIC Residual Certificateholders generally will be required to
report such REMIC items consistently with their treatment on the related REMIC's
tax return and may in some circumstances be bound by a settlement agreement
between the REMIC Administrator, as tax matters person, and the IRS concerning
any such REMIC item. Adjustments made to the REMIC tax return may require a
REMIC Residual Certificateholder to make corresponding adjustments on its
return, and an audit of the REMIC's tax return, or the adjustments resulting
from such an
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audit, could result in an audit of a REMIC Residual Certificateholder's return.
No REMIC will be registered as a tax shelter pursuant to Section 6111 of the
Code because it is not anticipated that any 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
to the related REMIC, in a manner to be provided in Treasury regulations, the
name and address of such person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other nonindividuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30 days
after the end of the quarter for which the information was requested, or two
weeks after the receipt of the request. The REMIC must also comply with rules
requiring a REMIC Regular Certificate issued with original issue discount to
disclose on its face the amount of original issue discount and the issue date,
and requiring such information to be reported to the IRS. Reporting with respect
to REMIC Residual Certificates, including income, excess inclusions, investment
expenses and relevant information regarding qualification of the REMIC's assets
will be made as required under the Treasury regulations, generally on a
quarterly basis.
As applicable, 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 required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See "-- Taxation of Owners of REMIC Regular
Certificates -- Market Discount".
Unless otherwise specified in the related Prospectus Supplement, the
responsibility for complying with the foregoing reporting rules will be borne by
the REMIC Administrator.
Backup Withholding with Respect to REMIC Certificates. Payments of
interest and principal, as well as payments of proceeds from the sale of REMIC
Certificates, may be subject to the "backup withholding tax" under Section 3406
of the Code at a rate of 31% if recipients of such payments fail to furnish to
the payor certain information, including their taxpayer identification numbers,
or otherwise fail to establish an exemption from such tax. Any amounts deducted
and withheld from a distribution to a recipient would be allowed as a credit
against such recipient's federal income tax. Furthermore, certain penalties may
be imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a U.S. Person (as defined below) and is not subject to federal
income tax as a result of any direct or indirect connection to the United States
in addition to its ownership of a REMIC Regular Certificate will not, unless
otherwise disclosed in the related Prospectus Supplement, be subject to United
States federal income or withholding tax in respect of a distribution on a REMIC
Regular Certificate, provided that the holder complies to the extent necessary
with certain identification requirements (including delivery of a statement,
signed by the Certificateholder under penalties of perjury, certifying that such
Certificateholder is not a U.S. Person and providing the name and address of
such Certificateholder). For these purposes, "U.S. Person" means a citizen or
resident of the United States, a corporation, partnership (except to the extent
provided in applicable Treasury regulations) or other entity created or
organized in, or under the laws of, the United States or any political
subdivision thereof, an estate the income of which is subject to United States
federal income tax regardless of its source, or a trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust, and one or more such U.S. Persons have the authority to control all
substantial decisions of such trust (or, to the extent provided in applicable
Treasury regulations, certain trusts in existence
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on August 20, 1996 which are eligible to elect to be treated as U.S. Persons).
It is possible that the IRS may assert that the foregoing tax exemption should
not apply with respect to a REMIC Regular Certificate held by a REMIC Residual
Certificateholder that owns directly or indirectly a 10% or greater interest in
the REMIC Residual Certificates. If the holder does not qualify for exemption,
distributions of interest, including distributions in respect of accrued
original issue discount, to such holder may be subject to a tax rate of 30%,
subject to reduction under any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a nonresident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are nonresident
alien individuals should consult their tax advisors concerning this question.
Unless otherwise stated in the related Prospectus Supplement, transfers of
REMIC Residual Certificates to investors that are not United States Persons will
be prohibited under the related Pooling and Servicing Agreement.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
Grantor Trust Certificates, in the opinion of counsel to the Depositor for such
series, assuming compliance with all provisions of the related Pooling and
Servicing Agreement, the related Grantor Trust Fund will be classified as a
grantor trust under subpart E, part I of subchapter J of the Code and not as a
partnership or an association taxable as a corporation. The following general
discussion of the anticipated federal income tax consequences of the purchase,
ownership and disposition of Grantor Trust Certificates, to the extent it
relates to matters of law or legal conclusions with respect thereto, represents
the opinion of counsel to the Depositor for the applicable series as specified
in the related Prospectus Supplement, subject to any qualifications set forth
herein. In addition, counsel to the Depositor have prepared or reviewed the
statements in this Prospectus under the heading "Certain Federal Income Tax
Consequences -- Grantor Trust Funds," and are of the opinion that such
statements are correct in all material respects. Such statements are intended as
an explanatory discussion of the possible effects of the classification of the
Grantor Trust Fund as a grantor trust for federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to an investor's specific tax circumstances that would be provided by
an investor's own tax advisor. Accordingly, each investor is advised to consult
its own tax advisors with regard to the tax consequences to it of investing in
Grantor Trust Certificates.
For purposes of the following discussion, a Grantor Trust Certificate
representing an undivided equitable ownership interest in the principal of the
Mortgage Loans constituting the related Grantor Trust Fund, together with
interest thereon at a pass-through rate, will be referred to as a "Grantor Trust
Fractional Interest Certificate". A Grantor Trust Certificate representing
ownership of all or a portion of the difference between interest paid on the
Mortgage Loans constituting the related Grantor Trust Fund (net of normal
administration fees) and interest paid to the holders of Grantor Trust
Fractional Interest Certificates issued with respect to such Grantor Trust Fund
will be referred to as a "Grantor Trust Strip Certificate". A Grantor Trust
Strip Certificate may also evidence a nominal ownership interest in the
principal of the Mortgage Loans constituting the related Grantor Trust Fund.
Characterization of Investments in Grantor Trust Certificates.
Grantor Trust Fractional Interest Certificates. In the case of Grantor
Trust Fractional Interest Certificates, unless otherwise disclosed in the
related Prospectus Supplement, counsel to the Depositor will deliver an opinion
that, in general, Grantor Trust Fractional Interest Certificates will represent
interests in (i) "loans . . . secured by an interest in real property" within
the meaning of Section 7701(a)(19)(C)(v) of the Code; (ii) "obligation[s]
(including any participation or Certificate of beneficial ownership therein)
which . . . [are] principally secured by an interest in real property" within
the meaning of Section 860G(a)(3)
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of the Code; and (iii) "real estate assets" within the meaning of Section
856(c)(4)(A) of the Code. In addition, counsel to the Depositor will deliver an
opinion that interest on Grantor Trust Fractional Interest Certificates will to
the same extent be considered "interest on obligations secured by mortgages on
real property or on interests in real property" within the meaning of Section
856(c)(3)(B) of the Code.
Grantor Trust Strip Certificates. Even if Grantor Trust Strip Certificates
evidence an interest in a Grantor Trust Fund consisting of Mortgage Loans that
are "loans . . . secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code and "real estate assets" within the
meaning of Section 856(c)(4)(A) of the Code, and the interest on which is
"interest on obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(A) of the Code, it is unclear whether the Grantor
Trust Strip Certificates, and the income therefrom, will be so characterized.
However, the policies underlying such sections (namely, to encourage or require
investments in mortgage loans by thrift institutions and real estate investment
trusts) may suggest that such characterization is appropriate. Counsel to the
Depositor will not deliver any opinion on these questions. Prospective
purchasers to which such characterization of an investment in Grantor Trust
Strip Certificates is material should consult their tax advisors regarding
whether the Grantor Trust Strip Certificates, and the income therefrom, will be
so characterized.
The Grantor Trust Strip Certificates will be "obligation[s] (including any
participation or Certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code.
Taxation of Owners of Grantor Trust Fractional Interest Certificates.
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the Mortgage Loans
(including amounts used to pay reasonable servicing fees and other expenses) and
will be entitled to deduct their shares of any such reasonable servicing fees
and other expenses. Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on account of a Grantor
Trust Fractional Interest Certificate may differ significantly from the amount
distributable thereon representing interest on the Mortgage Loans. Under Section
67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through certain pass-through
entities will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by holders of Grantor Trust
Fractional Interest Certificates who are subject to the limitations of either
Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining such
holder's alternative minimum taxable income. Although it is not entirely clear,
it appears that in transactions in which multiple classes of Grantor Trust
Certificates (including Grantor Trust Strip Certificates) are issued, such fees
and expenses should be allocated among the classes of Grantor Trust Certificates
using a method that recognizes that each such class benefits from the related
services. In the absence of statutory or administrative clarification as to the
method to be used, it currently is intended to base information returns or
reports to the IRS and Certificateholders on a method that allocates such
expenses among classes of Grantor Trust Certificates with respect to each period
based on the distributions made to each such class during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (i) a class of Grantor
Trust Strip Certificates is issued as part of the same series of Certificates or
(ii) the Depositor or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on a Mortgage Asset. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. The
related
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Prospectus Supplement will include information regarding servicing fees paid to
a Master Servicer, a Special Servicer, any Sub-Servicer or their respective
affiliates.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each
Grantor Trust Fractional Interest Certificate will be treated as having been
issued with "original issue discount" within the meaning of Section 1273(a) of
the Code, subject, however, to the discussion below regarding the treatment of
certain stripped bonds as market discount bonds and the discussion regarding de
minimis market discount. See "-- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- Market Discount" below. Under the stripped bond rules,
the holder of a Grantor Trust Fractional Interest Certificate (whether a cash or
accrual method taxpayer) will be required to report interest income from its
Grantor Trust Fractional Interest Certificate for each month in an amount equal
to the income that accrues on such Certificate in that month calculated under a
constant yield method, in accordance with the rules of the Code relating to
original issue discount.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser of the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, other than "qualified stated
interest", if any, as well as such Certificate's share of reasonable servicing
fees and other expenses. See "-- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- If Stripped Bond Rules Do Not Apply" for a definition
of "qualified stated interest". In general, the amount of such income that
accrues in any month would equal the product of such holder's adjusted basis in
such Grantor Trust Fractional Interest Certificate at the beginning of such
month (see "-- Sales of Grantor Trust Certificates" below) and the yield of such
Grantor Trust Fractional Interest Certificate to such holder. Such yield would
be computed as the rate (compounded based on the regular interval between
payment dates) that, if used to discount the holder's share of future payments
on the Mortgage Loans, would cause the present value of those future payments to
equal the price at which the holder purchased such Certificate. In computing
yield under the stripped bond rules, a Certificateholder's share of future
payments on the Mortgage Loans will not include any payments made in respect of
any ownership interest in the Mortgage Loans retained by the Depositor, the
Master Servicer, the Special Servicer, any Sub-Servicer or their respective
affiliates, but will include such Certificateholder's share of any reasonable
servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (i) the use of a reasonable
prepayment assumption in accruing original issue discount and (ii) adjustments
in the accrual of original issue discount when prepayments do not conform to the
prepayment assumption, with respect to certain categories of debt instruments,
and regulations could be adopted applying those provisions to the Grantor Trust
Fractional Interest Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Fractional Interest Certificates or whether
use of a reasonable prepayment assumption may be required or permitted without
reliance on these rules. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Fractional
Interest Certificate or, with respect to any holder, at the time of purchase of
the Grantor Trust Fractional Interest Certificate by that holder.
Certificateholders are advised to consult their tax advisors concerning
reporting original issue discount in general and, in particular, whether a
prepayment assumption should be used in reporting original issue discount with
respect to Grantor Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the Mortgage Loans allocable to such
Certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease such yield, and thus accelerate or
decelerate, respectively, the reporting of income.
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If a prepayment assumption is not used, then when a Mortgage Loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the Mortgage Loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such Certificateholder's
interest in the Mortgage Loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See
"-- REMICs -- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount" above. It is unclear whether any other adjustments would be required
to reflect differences between an assumed prepayment rate and the actual rate of
prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders in transactions subject to the stripped bond rules on a
Prepayment Assumption that will be disclosed in the related Prospectus
Supplement and on a constant yield computed using a representative initial
offering price for each class of Certificates. However, neither the Depositor
nor any other person will make any representation that the Mortgage Loans will
in fact prepay at a rate conforming to such Prepayment Assumption or any other
rate and Certificateholders should bear in mind that the use of a representative
initial offering price will mean that such information returns or reports, even
if otherwise accepted as accurate by the IRS, will in any event be accurate only
as to the initial Certificateholders of each series who bought at that price.
Under Treasury regulation Section 1.1286-1T, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (i) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (ii) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the Mortgage Loans, the related Prospectus Supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than 0.25%
of the stated redemption price multiplied by the weighted average maturity of
the Mortgage Loans, then such original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only
a de minimis amount will be included in income in the same manner as de minimis
original issue and market discount described in "-- Taxation of Owners of
Grantor Trust Fractional Interest Certificates -- If Stripped Bond Rules Do Not
Apply" and "-- Market Discount" below.
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the Certificateholder will be required to
report its share of the interest income on the Mortgage Loans in accordance with
such Certificateholder's normal method of accounting. The original issue
discount rules will apply, even if the stripped bond rules do not apply, to a
Grantor Trust Fractional Interest Certificate to the extent it evidences an
interest in Mortgage Loans issued with original issue discount.
The original issue discount, if any, on the Mortgage Loans will equal the
difference between the stated redemption price of such Mortgage Loans and their
issue price. For a definition of "stated redemption price," see "-- Taxation of
Owners of REMIC Regular Certificates -- Original Issue Discount" above. In
general, the issue price of a Mortgage Loan will be the amount received by the
borrower from the lender under the terms of the Mortgage Loan, less any "points"
paid by the borrower, and the stated redemption price of a Mortgage Loan will
equal its principal amount, unless the Mortgage Loan provides for an initial
"teaser," or below-market interest rate. The determination as to whether
original issue discount will be considered to be de
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minimis will be calculated using the same test as in the REMIC discussion. See
"-- Taxation of Owners of REMIC Regular Certificates -- Original Issue Discount"
above.
In the case of Mortgage Loans bearing adjustable or variable interest
rates, the related Prospectus Supplement will describe the manner in which such
rules will be applied with respect to those Mortgage Loans by the Trustee or
Master Servicer, as applicable, in preparing information returns to the
Certificateholders and the IRS.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a Mortgage Loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
Interest Certificates. Certificateholders should refer to the related Prospectus
Supplement with respect to each series to determine whether and in what manner
the original issue discount rules will apply to Mortgage Loans in such series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less than
such Certificate's allocable portion of the aggregate remaining stated
redemption price of the Mortgage Loans held in the related Trust Fund will also
be required to include in gross income such Certificate's daily portions of any
original issue discount with respect to such Mortgage Loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate "adjusted issue prices" of the Mortgage Loans
held in the related Trust Fund, approximately in proportion to the ratio such
excess bears to such Certificate's allocable portion of the aggregate original
issue discount remaining to be accrued on such Mortgage Loans. The adjusted
issue price of a Mortgage Loan on any given day equals the sum of (i) the
adjusted issue price (or, in the case of the first accrual period, the issue
price) of such Mortgage Loan at the beginning of the accrual period that
includes such day and (ii) the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issue price of a
Mortgage Loan at the beginning of any accrual period will equal the issue price
of such Mortgage Loan, increased by the aggregate amount of original issue
discount with respect to such Mortgage Loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such Mortgage Loan in
prior accrual periods of amounts included in its stated redemption price.
Unless otherwise provided in the related Prospectus Supplement, the Trustee
or Master Servicer, as applicable, will provide to any holder of a Grantor Trust
Fractional Interest Certificate such information as such holder may reasonably
request from time to time with respect to original issue discount accruing on
Grantor Trust Fractional Interest Certificates. See "-- Grantor Trust Reporting"
below.
Market Discount. If the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, a Certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of the Code to the extent an
interest in a Mortgage Loan is considered to have been purchased at a "market
discount", that is, in the case of a Mortgage Loan issued without original issue
discount, at a purchase price less than its remaining stated redemption price
(as defined above), or in the case of a Mortgage Loan issued with original issue
discount, at a purchase price less than its adjusted issue price (as defined
above). If market discount is in excess of a de minimis amount (as described
below), the holder generally will be required to include in income in each month
the amount of such discount that has accrued (under the rules described in the
next paragraph) through such month that has not previously been included in
income, but limited, in the case of the portion of such discount that is
allocable to any Mortgage Loan, to the payment of stated redemption price on
such Mortgage Loan that is received by (or, in the case of accrual basis
Certificateholders, due to) the Trust Fund in that month. A Certificateholder
may elect to include market discount in
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income currently as it accrues (under a constant yield method based on the yield
of the Certificate to such holder) rather than including it on a deferred basis
in accordance with the foregoing under rules similar to those described in
"-- Taxation of Owners of REMIC Regular Interests -- Market Discount" above.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under those rules, in each
accrual period market discount on the Mortgage Loans should accrue, at the
holder's option: (i) on the basis of a constant yield method, (ii) in the case
of a Mortgage Loan issued without original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the stated
interest paid in the accrual period bears to the total stated interest remaining
to be paid on the Mortgage Loan as of the beginning of the accrual period, or
(iii) in the case of a Mortgage Loan issued with original issue discount, in an
amount that bears the same ratio to the total remaining market discount as the
original issue discount accrued in the accrual period bears to the total
original issue discount remaining at the beginning of the accrual period. The
prepayment assumption, if any, used in calculating the accrual of original issue
discount is to be used in calculating the accrual of market discount. The effect
of using a prepayment assumption could be to accelerate the reporting of such
discount income. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a Mortgage Loan purchased at a discount in the
secondary market.
Because the Mortgage Loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount would
be included in income if it were original issue discount.
Market discount with respect to Mortgage Loans may be considered to be de
minimis and, if so, will be includible in income under de minimis rules similar
to those described above in "-- REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount" above within the exception that it is
less likely that a prepayment assumption will be used for purposes of such rules
with respect to the Mortgage Loans.
Further, under the rules described above in "-- REMICs -- Taxation of
Owners of REMIC Regular Certificates -- Market Discount", any discount that is
not original issue discount and exceeds a de minimis amount may require the
deferral of interest expense deductions attributable to accrued market discount
not yet includible in income, unless an election has been made to report market
discount currently as it accrues. This rule applies without regard to the
origination dates of the Mortgage Loans.
Premium. If a Certificateholder is treated as acquiring the underlying
Mortgage Loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of such premium
allocable to Mortgage Loans originated after September 27, 1985. Amortizable
premium is treated as an offset to interest income on the related debt
instrument, rather than as a separate interest deduction. However, premium
allocable to Mortgage Loans originated before September 28, 1985 or to Mortgage
Loans for which an amortization election is not made, should be allocated among
the payments of stated redemption price on the Mortgage Loan and be allowed as a
deduction as such payments are made (or, for a Certificateholder using the
accrual method of accounting, when such payments of stated redemption price are
due).
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Mortgage Loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss equal to the difference between
the portion of the prepaid principal amount of the Mortgage Loan that is
allocable to the Certificate and the portion of the adjusted basis of the
Certificate that is allocable to the Mortgage Loan. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should be
treated as a partial payment of the stated redemption price of the Grantor Trust
Fractional Interest Certificate and accounted for under a method similar to that
described for taking account
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of original issue discount on REMIC Regular Certificates. See
"-- REMICs -- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount" above. It is unclear whether any other adjustments would be required
to reflect differences between the prepayment assumption and the actual rate of
prepayments.
Taxation of Owners of Grantor Trust Strip Certificates. The "stripped
coupon" rules of Section 1286 of the Code will apply to the Grantor Trust Strip
Certificates. Except as described above in "-- Taxation of Owners of Grantor
Trust Fractional Interest Certificates -- If Stripped Bond Rules Apply", no
regulations or published rulings under Section 1286 of the Code have been issued
and some uncertainty exists as to how it will be applied to securities such as
the Grantor Trust Strip Certificates. Accordingly, holders of Grantor Trust
Strip Certificates should consult their tax advisors concerning the method to be
used in reporting income or loss with respect to such Certificates.
The OID Regulations do not apply to "stripped coupons", although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under "-- Possible Application of Proposed Contingent Payment Rules"
below and assumes that the holder of a Grantor Trust Strip Certificate will not
own any Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of Grantor
Trust Strip Certificates would include as interest income in each month an
amount equal to the product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month and the yield of such
Grantor Trust Strip Certificate to such holder. Such yield would be calculated
based on the price paid for that Grantor Trust Strip Certificate by its holder
and the payments remaining to be made thereon at the time of the purchase, plus
an allocable portion of the servicing fees and expenses to be paid with respect
to the Mortgage Loans. See "-- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- If Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. Regulations could be adopted applying
those provisions to the Grantor Trust Strip Certificates. It is unclear whether
those provisions would be applicable to the Grantor Trust Strip Certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Strip Certificate
or, with respect to any subsequent holder, at the time of purchase of the
Grantor Trust Strip Certificate by that holder.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Prepayment
Assumption disclosed in the related Prospectus Supplement and on a constant
yield computed using a representative initial offering price for each class of
Certificates. However, neither the Depositor nor any other person will make any
representation that the Mortgage Loans will in fact prepay at a rate conforming
to the Prepayment Assumption or at any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as accurate
by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price. Prospective
purchasers of the Grantor Trust Strip Certificates should consult their tax
advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a
Mortgage Loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into
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account in computing yield with respect to such Grantor Trust Strip Certificate,
it appears that no loss may be available as a result of any particular
prepayment unless prepayments occur at a rate faster than the Prepayment
Assumption. However, if a Grantor Trust Strip Certificate is treated as an
interest in discrete Mortgage Loans, or if the Prepayment Assumption is not
used, then when a Mortgage Loan is prepaid, the holder of a Grantor Trust Strip
Certificate should be able to recognize a loss equal to the portion of the
adjusted issue price of the Grantor Trust Strip Certificate that is allocable to
such Mortgage Loan.
Possible Application of Contingent Payment Rules. The coupon stripping
rules' general treatment of stripped coupons is to regard them as newly issued
debt instruments in the hands of each purchaser. To the extent that payments on
the Grantor Trust Strip Certificates would cease if the Mortgage Loans were
prepaid in full, the Grantor Trust Strip Certificates could be considered to be
debt instruments providing for contingent payments. Under the OID Regulations,
debt instruments providing for contingent payments are not subject to the same
rules as debt instruments providing for noncontingent payments. Regulations have
been promulgated regarding contingent payment debt instruments (the "Contingent
Payment Regulations"), but it appears that Grantor Trust Strip Certificates, due
to their similarity to other mortgage-backed securities (such as REMIC regular
interests and debt interests subject to Section 1272(a)(6) of the Code) that are
expressly excepted from the application of the Contingent Payment Regulations,
may be excepted from such regulations. Like the OID regulations, the Contingent
Payment Regulations do not specifically address securities, such as the Grantor
Trust Strip Certificates, that are subject to the stripped bond rules of Section
1286 of the Code.
If the contingent payment rules similar to those under the OID regulations
were to apply, the holder of a Grantor Trust Strip Certificate would be required
to apply a "noncontingent bond method." Under the "noncontingent bond method,"
the issuer of a Grantor Trust Strip Certificate determines a projected payment
schedule. Holders of Grantor Trust Strip Certificates are bound by the issuer's
projected payment schedule. The projected payment schedule consists of all
noncontingent payments and a projected amount for each contingent payment based
on the comparable yield (as described below) of the Grantor Trust Strip
Certificate. The projected amount of each payment is determined so that the
projected payment schedule reflects the comparable yield. The projected amount
of each payment must reasonably reflect the relative expected values of the
payments to be received by the holders of a Grantor Trust Strip Certificate. The
comparable yield referred to above is a rate that, as of the issue date,
reflects the yield at which the issuer would issue a fixed rate debt instrument
with terms and conditions similar to the contingent payment debt instrument,
including general market conditions, the credit quality of the issuer, and the
terms and conditions of the Mortgage Loans. The holder of a Grantor Trust Strip
Certificate would be required to include as interest income in each month the
adjusted issue price of the Grantor Trust Strip Certificate at the beginning of
the period multiplied by the comparable yield.
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange of
a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any income
reported by the seller (including original issue discount and market discount
income) and reduced (but not below zero) by any previously reported losses, any
amortized premium and by any distributions with respect to such Grantor Trust
Certificate. The Code as of the date of this Prospectus generally provides for
maximum tax rates of noncorporate taxpayers of 39.6% on ordinary income, 28% on
mid-term capital gains (generally, property held for more than one year but not
more than 18 months), and 20% on long-term capital gains (generally, property
held for more than 18 months). No such rate differential exists for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes.
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Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to Section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the Grantor Trust Certificate is held as part of a "conversion transaction"
within the meaning of Section 1258 of the Code. A conversion transaction
generally is one in which the taxpayer has taken two or more positions in the
same or similar property that reduce or eliminate market risk, if substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for that taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Grantor Trust Reporting. Unless otherwise provided in the related
Prospectus Supplement, the Trustee or Master Servicer, as applicable, will
furnish to each holder of a Grantor Trust Certificate with each distribution a
statement setting forth the amount of such distribution allocable to principal
on the underlying Mortgage Loans and to interest thereon at the related
Pass-Through Rate. In addition, the Trustee or Master Servicer, as applicable,
will furnish, within a reasonable time after the end of each calendar year, to
each holder of a Grantor Trust Certificate who was such a holder at any time
during such year, information regarding the amount of servicing compensation
received by the Master Servicer, the Special Servicer or any Sub-Servicer, and
such other customary factual information as the Depositor or the reporting party
deems necessary or desirable to enable holders of Grantor Trust Certificates to
prepare their tax returns and will furnish comparable information to the IRS as
and when required by law to do so. Because the rules for accruing discount and
amortizing premium with respect to the Grantor Trust Certificates are uncertain
in various respects, there is no assurance the IRS will agree with the Trustee's
or Master Servicer's, as the case may be, information reports of such items of
income and expense. Moreover, such information reports, even if otherwise
accepted as accurate by the IRS, will in any event be accurate only as to the
initial Certificateholders that bought their Certificates at the representative
initial offering price used in preparing such reports.
Backup Withholding. In general, the rules described above in
"-- REMICs -- Backup Withholding with Respect to REMIC Certificates" will also
apply to Grantor Trust Certificates.
Foreign Investors. In general, the discussion with respect to REMIC
Regular Certificates in "-- REMICs -- Foreign Investors in REMIC Certificates"
above applies to Grantor Trust Certificates except that Grantor Trust
Certificates will, unless otherwise disclosed in the related Prospectus
Supplement, be eligible for exemption from U.S. withholding tax, subject to the
conditions described in such discussion, only to the extent the related Mortgage
Loans were originated after July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to United States estate taxes in the estate of a
nonresident alien individual.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the state
and local tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to describe
any aspect of the tax laws of
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any state or other jurisdiction. Therefore, prospective investors should consult
their tax advisors with respect to the various tax consequences of investments
in the Offered Certificates.
CERTAIN ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on 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 (and as applicable, insurance company general accounts) in which such
plans, accounts or arrangements are invested that are subject to the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code ("Plans"), and
on persons who are fiduciaries with respect to such Plans, in connection with
the investment of Plan assets. Certain employee benefit plans, such as
governmental plans (as defined in ERISA Section 3(32)), and, if no election has
been made under Section 410(d) of the Code, church plans (as defined in Section
3(33) of ERISA) are not subject to ERISA requirements. Accordingly, assets of
such plans may be invested in Offered Certificates without regard to the ERISA
considerations described below, 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, however, is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, Section 406 of ERISA and Section 4975 of the
Code prohibit a broad range of transactions involving assets of a Plan and
persons ("parties in interest" within the meaning of ERISA and "disqualified
persons" within the meaning of the Code; collectively, "Parties in Interest")
who have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. Certain Parties in Interest that
participate in a prohibited transaction may be subject to an excise tax imposed
pursuant to Section 4975 of the Code or a penalty imposed pursuant to Section
502(i) of ERISA, unless a statutory or administrative exemption is available.
These prohibited transactions generally are set forth in Section 406 of ERISA
and Section 4975 of the Code.
PLAN ASSET REGULATIONS
A Plan's investment in Offered Certificates may cause the underlying
Mortgage Assets and other assets included in a related Trust Fund to be deemed
assets of such Plan. Section 2510.3-101 of the regulations (the "Plan Asset
Regulations") of the United States Department of Labor (the "DOL") provides that
when a Plan acquires an equity interest in an entity, the Plan's assets include
both such equity interest and an undivided interest in each of the underlying
assets of the entity, unless certain exceptions not applicable here apply, or
unless the equity participation in the entity by "benefit plan investors" (i.e.,
Plans and certain employee benefit plans not subject to ERISA) is not
"significant", both as defined therein. For this purpose, in general, equity
participation by benefit plan investors will be "significant" on any date if 25%
or more of the value of any class of equity interests in the entity is held by
benefit plan investors. Equity participation in a Trust Fund will be significant
on any date if immediately after the most recent acquisition of any Certificate,
25% or more of any class of Certificates is held by benefit plan investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary of the investing
Plan. If the Mortgage Assets and other assets included in a Trust Fund
constitute Plan assets, then any party exercising management or discretionary
control regarding those assets, such as the Master Servicer, any Special
Servicer, any Sub-Servicer, the Trustee, the obligor under any credit
enhancement mechanism, or certain affiliates thereof may be deemed to be a Plan
"fiduciary" and thus subject to the fiduciary responsibility provisions and
prohibited transaction provisions of ERISA and the Code with respect to the
investing Plan. In addition, if the Mortgage Assets and other assets included in
a Trust Fund constitute Plan
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assets, the purchase of Certificates by a Plan, as well as the operation of the
Trust Fund, may constitute or involve a prohibited transaction under ERISA or
the Code.
The Plan Asset Regulations provide that where a Plan acquires a "guaranteed
governmental mortgage pool certificate", the Plan's assets include such
certificate but do not solely by reason of the Plan's holdings of such
certificate include any of the mortgages underlying such certificate. The Plan
Asset Regulations include in the definition of a "guaranteed governmental
mortgage pool certificate" FHLMC Certificates, GNMA Certificates and FNMA
Certificates, but, on their face, do not include FAMC Certificates. Accordingly,
even if such MBS (other than, perhaps, FAMC Certificates) included in a Trust
Fund were deemed to be assets of Plan investors, the mortgages underlying such
MBS (other than, perhaps, FAMC Certificates) would not be treated as assets of
such Plans. Private label mortgage participations, mortgage pass-through
certificates or other mortgage-backed securities are not "guaranteed
governmental mortgage pool certificates" within the meaning of the Plan Asset
Regulations. Potential Plan investors should consult their counsel and review
the ERISA discussion in the related Prospectus Supplement before purchasing any
such Certificates.
In considering an investment in the Offered Certificates, a Plan fiduciary
should consider the availability of prohibited transaction exemptions
promulgated by the DOL including, among others, Prohibited Transaction Class
Exemption ("PTCE") 75-1, which exempts certain transactions involving Plans and
certain broker-dealers, reporting dealers and banks; PTCE 90-1, which exempts
certain transactions between insurance company separate accounts and Parties in
Interest; PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties in Interest; PTCE 84-14, which exempts certain
transactions effected on behalf of a Plan by a "qualified professional asset
manager"; PTCE 95-60, which exempts certain transactions between insurance
company general accounts and Parties in Interest; and PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager." There can be no assurance that any of these class exemptions will
apply with respect to any particular Plan investment in the Certificates or,
even if it were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment. The
Prospectus Supplement with respect to a series of Certificates may contain
additional information regarding the availability of other exemptions with
respect to the Certificates offered thereby.
INSURANCE COMPANY GENERAL ACCOUNTS
Section III of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust) in which an insurance company general account has an
interest as a result of its acquisition of certificates issued by the trust,
provided that certain conditions are satisfied. If these conditions are met,
insurance company general accounts would be allowed to purchase certain Classes
of Certificates which do not meet the requirements of the Exemptions solely
because they (i) are subordinated to other Classes of Certificates in the Trust
and/or (ii) have not received a rating at the time of the acquisition in one of
the three highest rating categories from S&P, Moody's, DCR or Fitch. All other
conditions of the Exemptions would have to be satisfied in order for PTCE 95-60
to be available. Before purchasing such Class of Certificates, an insurance
company general account seeking to rely on Section III of PTCE 95-60 should
itself confirm that all applicable conditions and other requirements have been
satisfied.
The Small Business Job Protection Act of 1996 added a new Section 401(c) to
ERISA, which provides certain exemptive relief from the provisions of Part 4 of
Title I of ERISA and Section 4975 of the Code, including the prohibited
transaction restrictions imposed by ERISA and the related excise taxes imposed
by the Code, for transactions involving an insurance company general account.
Pursuant to Section 401(c) of ERISA, the DOL is required to issue final
regulations ("401(c) Regulations") no later than December 31, 1997 which are to
provide guidance for the purpose of determining, in cases where insurance
policies supported by an insurer's general account are issued to or for the
benefit of a Plan on or before December 31, 1998, which general account assets
constitute Plan Assets. On December 22, 1977, the DOL proposed such regulations.
Section 401(c) of ERISA generally provides that, until the date which is 18
months after the 401(c) Regulations become final, no person shall be subject to
liability under Part 4 of Title I of ERISA and
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Section 4975 of the Code on the basis of a claim that the assets of an insurance
company general account constitute Plan Assets, unless (i) as otherwise provided
by the Secretary of Labor in the 401(c) Regulations to prevent avoidance of the
regulations or (ii) an action is brought by the Secretary of Labor for certain
breaches of fiduciary duty which would also constitute a violation of federal or
state criminal law. Any assets of an insurance company general account which
support insurance policies issued to a Plan after December 31, 1998 or issued to
Plans on or before December 31, 1998 for which the insurance company does not
comply with the 401(c) Regulations may be treated as Plan Assets. In addition,
because Section 401(c) does not relate to insurance company separate accounts,
separate account assets are still treated as Plan Assets of any Plan invested in
such separate account. Insurance companies contemplating the investment of
general account assets in the Offered Certificates should consult with their
legal counsel with respect to the applicability of Section 401(c) of ERISA,
including the general account's ability to continue to hold the Offered
Certificates after the date which is 18 months after the date the 401(c)
Regulations become final.
CONSULTATION WITH COUNSEL
Any Plan fiduciary which proposes to purchase Offered Certificates on
behalf of or with assets of a Plan should consider its general fiduciary
obligations under ERISA and should consult with its counsel with respect to the
potential applicability of ERISA and the Code to such investment and the
availability of any prohibited transaction exemption in connection therewith.
TAX EXEMPT INVESTORS
A Plan that is exempt from federal income taxation pursuant to Section 501
of the Code (a "Tax Exempt Investor") nonetheless will be subject to federal
income taxation to the extent that its income is "unrelated business taxable
income" ("UBTI") within the meaning of Section 512 of the Code. All "excess
inclusions" of a REMIC allocated to a REMIC Residual Certificate held by a
Tax-Exempt Investor will be considered UBTI and thus will be subject to federal
income tax. See "Certain Federal Income Tax Consequences -- REMICs -- Taxation
of Owners of REMIC Residual Certificates -- Excess Inclusions".
LEGAL INVESTMENT
If so specified in the related Prospectus Supplement, the Offered
Certificates will constitute "mortgage related securities" for purposes of
SMMEA. Generally, only classes of Offered Certificates that (i) are rated in one
of the two highest rating categories by one or more Rating Agencies and (ii) are
part of a series evidencing interests in a Trust Fund consisting of loans
secured by first liens on real property and originated by certain types of
Originators specified in SMMEA, will be "mortgage related securities" for
purposes of SMMEA. As "mortgage related securities," such classes will
constitute legal investments for persons, trusts, corporations, partnerships,
associations, business trusts and business entities (including depository
institutions, insurance companies and pension funds) created pursuant to or
existing under the laws of the United States or of any state (including the
District of Columbia and Puerto Rico) whose authorized investments are subject
to state regulation, to the same extent that, under applicable law, obligations
issued by or guaranteed as to principal and interest by the United States or any
agency or instrumentality thereof constitute legal investments for such
entities. Pursuant to SMMEA, a number of states enacted legislation, on or
before the October 3, 1991 cutoff for such 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, Offered 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 such types of Offered Certificates. Accordingly, the investors affected by
any such state legislation, when and if enacted, will
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<PAGE> 254
be authorized to invest in Offered Certificates qualifying as "mortgage related
securities" only to the extent provided in such 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 such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
sec. 24 (Seventh), subject in each case to such 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 concerning "safety and soundness" and
retention of credit information in 12 C.F.R. sec. 1.5), certain "Type IV
securities," defined in 12 C.F.R. sec. 1.2(1) to include certain "commercial
mortgage-related securities" and "residential mortgage-related securities." As
so defined, "commercial mortgage-related security" and "residential
mortgage-related security" mean, in relevant part, "mortgage related security"
within the meaning of SMMEA, provided that, in the case of a "commercial
mortgage-related security," it "represents ownership of a promissory note or
certificate of interest or participation that is directly secured by a first
lien on one or more parcels of real estate upon which one or more commercial
structures are located and that is fully secured by interests in a pool of loans
to numerous obligors." In the absence of any rule or administrative
interpretation by the OCC defining the term "numerous obligors," no
representation is made as to whether any class of Offered Certificates will
qualify as "commercial mortgage-related securities," and thus as "Type IV
securities," for investment by national banks. Federal credit unions should
review National Credit Union Administration ("NCUA") Letter to Credit Unions No.
96, as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage related
securities. The NCUA has adopted rules, codified at 12 C.F.R. Part 703, which
permit federal credit unions to invest in "mortgage related securities" under
certain limited circumstances, other than stripped mortgage related securities,
residual interests in mortgage related securities, and commercial mortgage
related securities, unless the credit union has obtained written approval from
the NCUA to participate in the "investment pilot program" described in 12 C.F.R.
sec. 703.140.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Securities
Activities" dated January 28, 1992, as revised April 15, 1994 (the "Policy
Statement") of the Federal Financial Institutions Examination Council (the
"FFIEC"). The Policy Statement, which has been adopted by the Board of Governors
of the Federal Reserve System, the Federal Deposit Insurance Corporation, the
OCC and the Office of Thrift Supervision, and by the NCUA (with certain
modifications), prohibits depository institutions from investing in certain
"high-risk mortgage securities" (including securities such as certain series or
classes of the Offered Certificates), except under limited circumstances, and
sets forth certain investment practices deemed to be unsuitable for regulated
institutions. On September 29, 1997, the FFIEC released for public comment a
proposed "Supervisory Policy Statement on Investment Securities and End-User
Derivatives Activities" (the "1997 Statement"), which would replace the Policy
Statement. As proposed, the 1997 Statement would delete the specific "high-risk
mortgage securities" tests, and substitute general guidelines which depository
institutions should follow in managing risks (including market, credit,
liquidity, operational (transactional), and legal risks) applicable to all
securities (including mortgage pass-through securities and mortgage-derivative
products) used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain series or classes may be deemed unsuitable investments,
or may otherwise be restricted, under such 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
98
<PAGE> 255
investment in securities which are not "interest bearing" or "income paying,"
and, with regard to any Offered 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 Offered Certificates as
"mortgage related securities," no representation is made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institution regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase Offered 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 Offered Certificates) may
adversely affect the liquidity of the Offered 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 legal advisors in determining
whether and to what extent the Offered Certificates of any class 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 such investor.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates of any
series will be applied by the Depositor to the purchase of Trust Assets or will
be used by the Depositor to cover expenses related thereto. The Depositor
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 Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
METHOD OF DISTRIBUTION
The Certificates offered hereby and by the related Prospectus Supplements
will be offered in series through one or more of the methods described below.
The Prospectus Supplement prepared for each series will describe the method of
offering being utilized for that series and will state the net proceeds to the
Depositor from such sale.
The Depositor intends that Offered Certificates will be offered through the
following methods from time to time and that offerings may be made concurrently
through more than one of these methods or that an offering of the Offered
Certificates of a particular series may be made through a combination of two or
more of these methods. Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting and
public re-offering by underwriters, which may include NationsBanc
Montgomery Securities LLC ("NationsBanc"), an affiliate of the Depositor;
2. By placements by the Depositor with institutional investors through
dealers; and
3. By direct placements by the Depositor with institutional investors.
In addition, if specified in the related Prospectus Supplement, the Offered
Certificates of a series may be offered in whole or in part to the seller of the
related Mortgage Assets that would comprise the Trust Fund for such
Certificates.
If underwriters are used in a sale of any Offered Certificates (other than
in connection with an underwriting on a best efforts basis), such Certificates
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. Such
underwriters may be broker-dealers affiliated with the Depositor whose
identities and relationships to the Depositor will be as set forth in the
related Prospectus Supplement. The managing underwriter or underwriters with
respect to the offer and sale of Offered Certificates of a particular series
will
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<PAGE> 256
be set forth on the cover of the Prospectus Supplement relating to such series
and the members of the underwriting syndicate, if any, will be named in such
Prospectus Supplement.
In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of the Offered
Certificates in the form of discounts, concessions or commissions. Underwriters
and dealers participating in the distribution of the Offered Certificates may be
deemed to be underwriters in connection with such Certificates, and any
discounts or commissions received by them from the Depositor and any profit on
the resale of Offered Certificates by them may be deemed to be underwriting
discounts and commissions under the Securities Act of 1933, as amended.
It is anticipated that the underwriting agreement pertaining to the sale of
the Offered Certificates of any series will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that, in limited circumstances, the Depositor will indemnify the
several underwriters and the underwriters will indemnify the Depositor against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or will contribute to payments required to be made in respect
thereof.
The Prospectus Supplement with respect to any series offered by placements
through dealers will contain information regarding the nature of such offering
and any agreements to be entered into between the Depositor and purchasers of
Offered Certificates of such series.
The Depositor anticipates that the Offered Certificates will be sold
primarily to institutional investors. Purchasers of Offered Certificates,
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended, in connection with reoffers and sales by them of
Offered Certificates. Holders of Offered Certificates should consult with their
legal advisors in this regard prior to any such reoffer or sale.
If and to the extent required by applicable law or regulation, this
Prospectus will be used by NationsBanc in connection with offers and sales
related to market-making transactions in Offered Certificates previously offered
hereunder in transactions with respect to which NationsBanc acts as principal.
NationsBanc may also act as agent in such transactions. Sales may be made a
negotiated prices determined at the time of sale.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor by Robert W. Long, Jr., Assistant General Counsel of NationsBank
Corporation. Certain legal matters relating to the Certificates will be passed
upon for the underwriter or underwriters by Cadwalader, Wickersham & Taft.
Certain federal income tax matters and other matters will be passed upon for the
Depositor by Cadwalader, Wickersham & Taft.
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. The Depositor has determined that its financial statements will not
be material to the offering of any Offered Certificates.
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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 at least one Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by the holders thereof of all collections on the underlying mortgage
assets to which such holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with such certificates, the nature
of the underlying mortgage assets 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 might, in extreme
cases fail to recoup their initial investments. Furthermore, ratings on mortgage
pass-through certificates do not address the price of such certificates or the
suitability of such certificates to the investor.
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.
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INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<S> <C>
1997 Statement................ 98
401(c) Regulations............ 96
Accrual Certificates.......... 11
Accrued Certificate
Interest.................... 34
Act........................... 65
ADA........................... 69
ARM Loans..................... 25
Available Distribution
Amount...................... 33
Book-Entry Certificates....... 33
Call Risk..................... 17
Cash Flow Agreement........... 12
CERCLA........................ 65
Certificate Account........... 27
Certificate Balance........... 10
Certificate Owner............. 39
Certificateholder............. 40
Closing Date.................. 73
Code.......................... 13
Commercial Properties......... 9, 22
Commission.................... 3
Committee Report.............. 72
Companion Class............... 35
Contingent Payment
Regulations................. 93
Contributions Tax............. 83
Controlled Amortization
Class....................... 10, 35
Cooperatives.................. 22
CPR........................... 30
Credit Support................ 12
Crime Control Act............. 69
Cut-off Date.................. 11, 35
Debt Service Coverage Ratio... 23
Definitive Certificates....... 33
Depositor..................... cover, 32
Determination Date............ 28, 33
Direct Participants........... 39
Distribution Date............. 11
Distribution Date Statement... 37
DOL........................... 95
DTC........................... 3
Due Dates..................... 25
Due Period.................... 28
Equity Participation.......... 25
ERISA......................... 13, 95
Events of Default............. 53
Excess Funds.................. 32
Exchange Act.................. 4
Extension Risk................ 17
FAMC.......................... 26
FFIEC......................... 98
FHLMC......................... 26
FNMA.......................... 26
GNMA.......................... 26
Garn Act...................... 66
Grantor Trust Certificates.... 13
Grantor Trust Fractional
Interest Certificate........ 86
Grantor Trust Fund............ 70
Grantor Trust Strip
Certificate................. 86
Indirect Participants......... 39
Insurance and Condemnation
Proceeds.................... 46
IRS........................... 49
Issue Premium................. 78
Letter of Credit Bank......... 57
Liquidation Proceeds.......... 46
Loan-to-Value Ratio........... 24
Lock-out Date................. 25
Lock-out Period............... 25
Manager....................... 8
Mark-to-Market Regulations.... 81
Master Servicer............... 8
MBS........................... 9, 22
MBS Administrator............. 8
MBS Agreement................. 26
MBS Issuer.................... 26
MBS Servicer.................. 26
MBS Trustee................... 26
Mortgage...................... 22
Mortgage Asset Seller......... 22
Mortgage Asset Pool........... cover
Mortgage Assets............... cover, 22
Mortgage Loans................ cover, 8, 22
Mortgage Notes................ 22
Mortgage Rate................. 9
Mortgaged Properties.......... 22
Multifamily Properties........ 8, 22
NationsBanc................... 99
NCUA.......................... 98
Net Leases.................... 24
Net Operating Income.......... 23
Nonrecoverable Advance........ 36
Notional Amount............... 11
OCC........................... 98
OID Regulations............... 70
</TABLE>
102
<PAGE> 259
<TABLE>
<S> <C>
Offered Certificates.......... cover
Originator.................... 22
OTS........................... 97
Participants.................. 39
Parties in Interest........... 95
Pass-Through Rate............. 11
Percentage Interest........... 34
Permitted Investments......... 45
Plan Asset Regulations........ 95
Plans......................... 95
Policy Statement.............. 98
Pooling and Servicing
Agreement................... 10
Prepayment Assumption......... 72
Prepayment Interest
Shortfall................... 28
Prepayment Period............. 37
Prepayment Premium............ 25
Prohibited Transactions Tax... 83
Prospectus Supplement......... cover
PTCE.......................... 96
PTCE 95-60.................... 96
Purchase Price................ 42
Rating Agency................. 14
RCRA.......................... 65
Record Date................... 33
Related Proceeds.............. 36
Relief Act.................... 69
REMIC......................... 2, 70
REMIC Administrator........... 8
REMIC Certificates............ 70
REMIC Provisions.............. 70
REMIC Regular Certificates.... 13
REMIC Regulations............. 71
REMIC Residual Certificates... 13
REO Property.................. 43
Residual Owner................ 96
RICO.......................... 69
Senior Certificates........... 10
Senior Liens.................. 22
SMMEA......................... 14
SPA........................... 30
Special Servicer.............. 8
Stripped Interest
Certificates................ 10
Stripped Principal
Certificates................ 10
Subordinate Certificates...... 10
Sub-Servicer.................. 45
Sub-Servicing Agreement....... 45
Tax Exempt Investor........... 97
Tiered REMICs................. 72
Title V....................... 68
Trust Assets.................. 3
Trustee....................... 8
UBTI.......................... 97
UCC........................... 59
United States Person.......... 86
Value......................... 24
Voting Rights................. 38
Warranting Party.............. 42
</TABLE>
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This diskette contains a spreadsheet file that can be put on a
user-specified hard drive or network drive. The file is "NL9801.xls" The file
"NL9801.xls" is a Microsoft Excel(1), Version 5.0 spreadsheet. The file
provides, in electronic format, certain loan level information shown in ANNEX A
of the Prospectus Supplement.
Open the file as you would normally open any spreadsheet in Microsoft
Excel. After the file is opened, a securities law legend will be displayed. READ
THE LEGEND CAREFULLY. To view the ANNEX A data, "click" on the worksheet labeled
"ANNEX A."
- ---------------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE> 261
======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE DEPOSITOR OR BY THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Prospectus Supplement........... S-7
Risk Factors............................... S-20
Description of the Mortgage Pool........... S-29
Servicing of the Mortgage Loans............ S-40
Description of the Certificates............ S-51
Yield and Maturity Considerations.......... S-69
Use of Proceeds............................ S-84
Certain Federal Income Tax Consequences.... S-84
Certain ERISA Considerations............... S-86
Legal Investment........................... S-89
Method of Distribution..................... S-89
Legal Matters.............................. S-90
Ratings.................................... S-90
Index of Principal Definitions............. S-92
Annex A.................................... A-1
Annex B.................................... B-1
Annex C.................................... C-1
PROSPECTUS
Prospectus Supplement...................... 3
Available Information...................... 3
Incorporation of Certain Information by
Reference................................ 4
Summary of Prospectus...................... 8
Risk Factors............................... 15
Description of the Trust Funds............. 22
Yield and Maturity Considerations.......... 27
The Depositor.............................. 32
Description of the Certificates............ 32
The Pooling and Servicing Agreements....... 40
Description of Credit Support.............. 56
Certain Legal Aspects of Mortgage Loans.... 58
Certain Federal Income Tax Consequences.... 70
State and Other Tax Considerations......... 95
Certain ERISA Considerations............... 95
Legal Investment........................... 96
Use of Proceeds............................ 98
Method of Distribution..................... 98
Financial Information...................... 99
Rating..................................... 99
Index of Principal Terms................... 101
</TABLE>
------------------------
THROUGH AND INCLUDING , 1998, ALL DEALERS EFFECTING TRANSACTIONS
IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
$898,128,487
(APPROXIMATE)
NATIONSLINK
FUNDING
CORPORATION
DEPOSITOR
CLASS A-1, CLASS A-2, CLASS A-3,
CLASS X-1, CLASS X-2, CLASS B
CLASS C, CLASS D AND CLASS E
NATIONSLINK FUNDING CORPORATION
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 1998-1
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PROSPECTUS SUPPLEMENT
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NATIONSBANC MONTGOMERY
SECURITIES LLC
March , 1998
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