<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-66805
Prospectus Supplement
(To Prospectus dated October 25, 2000)
$804,473,831 (APPROXIMATE)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
(FORMERLY KNOWN AS NATIONSLINK FUNDING CORPORATION)
DEPOSITOR
ORIX REAL ESTATE CAPITAL MARKETS, LLC
MASTER SERVICER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2000-2
<TABLE>
<CAPTION>
<S> <C>
---------------------------------
The Series 2000-2 Commercial Mortgage Pass-Through Certificates will consist of the
CONSIDER CAREFULLY THE RISK FACTORS following classes:
BEGINNING ON PAGE S-19 IN THIS
PROSPECTUS SUPPLEMENT AND PAGE 10 IN - senior certificates consisting of the Class A-1, Class A-2 and Class X Certificates;
THE ACCOMPANYING PROSPECTUS.
- junior certificates consisting of the Class B, Class C, Class D, Class E, Class F,
Neither the certificates nor the Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O and Class P
underlying mortgage loans are insured Certificates;
or guaranteed by any governmental
agency. - Class V Certificates representing the right to receive payments of excess interest
received with respect to any ARD Loans; and
The certificates will represent
interests only in the trust and will - the residual certificates consisting of the Class R-I, Class R-II, Class R-IIU and
not represent interests in or Class R-III Certificates.
obligations of Banc of America
Commercial Mortgage Inc. or any of Only the Class A-1, Class A-2, Class X, Class B, Class C, Class D, Class E, Class F,
its affiliates, including Bank of Class G and Class H Certificates are offered hereby.
America Corporation.
The trust's assets will consist primarily of 128 mortgage loans and other property
described in this prospectus supplement and the accompanying prospectus. The mortgage
loans are secured by first liens on commercial and multifamily properties. This
prospectus supplement more fully describes the offered certificates, as well as the
characteristics of the mortgage loans and the related mortgaged properties.
---------------------------------
</TABLE>
Certain characteristics of the offered certificates include:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
CERTIFICATE BALANCE OR ASSUMED FINAL
NOTIONAL AMOUNT AS PASS-THROUGH RATE DISTRIBUTION RATINGS
CLASS OF DELIVERY DATE(1) AS OF DELIVERY DATE DATE(5) MOODY'S/S&P(6)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A-1............... $198,316,225 7.0200% April 15, 2009 Aaa/AAA
Class A-2............... $477,137,063 7.1970%(2) May 15, 2010 Aaa/AAA
Class X................. $889,004,533(8) 1.0940%(9) August 15, 2010 Aaa/AAA
Class B................. $ 37,816,366 7.3780%(2) June 15, 2010 Aa2/AA
Class C................. $ 24,469,413 7.4380%(2) June 15, 2010 A1/A+
Class D................. $ 17,795,938 7.5160%(2) June 15, 2010 A2/A
Class E................. $ 8,897,968 7.6340%(2) June 15, 2010 A3/A-
Class F................. $ 11,122,461 7.9170%(2) July 15, 2010 Baa1/BBB+
Class G................. $ 17,795,937 8.1599%(3) July 15, 2010 Baa2/BBB
Class H................. $ 11,122,460 8.2999%(4) July 15, 2010 Baa3/BBB-
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------ -----------------------
------------------------ -----------------------
RATED FINAL
DISTRIBUTION
CLASS DATE(7)
------------------------ -----------------------
<S> <C>
Class A-1............... September 15, 2032
Class A-2............... September 15, 2032
Class X................. September 15, 2032
Class B................. September 15, 2032
Class C................. September 15, 2032
Class D................. September 15, 2032
Class E................. September 15, 2032
Class F................. September 15, 2032
Class G................. September 15, 2032
Class H................. September 15, 2032
-------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
</TABLE>
(Footnotes to table on page S-4)
The underwriters, Banc of America Securities LLC and HypoVereinsbank
Capital Markets, will purchase the offered certificates from Banc of America
Commercial Mortgage Inc. and will offer them to the public at negotiated prices
determined at the time of sale. The underwriters expect to deliver the offered
certificates to purchasers on or about October 27, 2000. Banc of America
Commercial Mortgage Inc. expects to receive from this offering approximately
106.31% of the initial principal amount of the offered certificates, plus
accrued interest from October 1, 2000, before deducting expenses payable by Banc
of America Commercial Mortgage Inc.
--------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE OFFERED SECURITIES OR DETERMINED
IF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
BANC OF AMERICA SECURITIES LLC HYPOVEREINSBANK CAPITAL MARKETS
October 25, 2000
<PAGE> 2
Banc of America Commercial Mortgage Inc.
--------------------------------------------------------------------------------
Commercial Mortgage Pass-Through Certificates, Series 2000-2
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
PROPERTY LOCATION PROPERTIES BALANCE BALANCE
----------------- ---------- -------------- -------
<S> <C> <C> <C>
CA................... 33 $ 150,635,258 16.9%
FL................... 32 137,247,636 15.4
TX................... 18 118,512,863 13.3
NV................... 6 58,505,938 6.6
NY................... 7 45,166,172 5.1
AZ................... 5 41,922,995 4.7
GA................... 10 40,252,516 4.5
IL................... 6 39,505,172 4.4
VA................... 3 36,482,232 4.1
MD................... 4 33,349,128 3.7
KY................... 2 27,690,623 3.1
TN................... 5 27,643,096 3.1
MI................... 2 17,544,082 2.0
CO................... 1 15,424,978 1.7
NJ................... 2 15,237,598 1.7
NC................... 3 14,117,970 1.6
MN................... 1 13,883,832 1.6
OH................... 2 8,761,247 1.0
MA................... 1 7,807,384 0.9
CT................... 2 7,078,413 0.8
WA................... 1 6,319,586 0.7
AL................... 2 5,595,929 0.6
IA................... 1 4,877,419 0.5
KS................... 2 4,382,863 0.5
DC................... 2 3,541,803 0.4
AK................... 1 2,817,730 0.3
PA................... 1 2,078,361 0.2
WV................... 1 1,835,355 0.2
SC................... 1 1,578,675 0.2
</TABLE>
MORTGAGE POOL BY PROPERTY TYPE
------------------------------
[PIE CHART] [ ] < 1.0% of Initial Pool Balance
-
Multifamily.......... 26.9% [ ] 1.1% - 5.0% of Initial Pool Balance
Retail............... 13.4% [ ] 5.1% - 10.0% of Initial Pool Balance
Anchored........... 11.9% [ ] > 10.0% of Initial Pool Balance
Unanchored......... 1.6%
Industrial........... 2.7%
Office............... 45.3%
Mini Storage......... 1.9%
Special Purpose...... 1.8%
Hotel................ 9.8%
<PAGE> 3
FOR MORE INFORMATION
Banc of America Commercial Mortgage Inc.
(formerly known as NationsLink Funding
Corporation) has filed with the SEC
additional registration materials
relating to the certificates. You may
read and copy any of these materials at
the SEC's Public Reference Room at the
following locations:
- SEC Public Reference Section
450 Fifth Street, N.W.
Room 1204
Washington, D.C. 20549
- SEC Midwest Regional Offices
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
- SEC Northeast Regional Office
7 World Trade Center
Suite 1300
New York, New York 10048
You may obtain information on the
operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The
SEC also maintains an Internet site that
contains reports, proxy and information
statements, and other information that
has been filed electronically with the
SEC. The Internet
address is http://www.sec.gov.
You may also contact Banc of America
Commercial Mortgage Inc. in writing at
Bank of America Corporate Center, 100
North Tryon Street, Charlotte, North
Carolina 28255, or by telephone at (704)
386-2400.
See also the sections captioned
"Available Information" and
"Incorporation of Certain Information by
Reference" appearing at the end of the
accompanying prospectus.
NOTE REGARDING PIE CHART ON OPPOSITE PAGE: NUMBERS MAY NOT TOTAL TO 100% DUE TO
ROUNDING.
TABLE OF CONTENTS
<TABLE>
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS..................................... S-5
EXECUTIVE SUMMARY................................ S-6
SUMMARY OF PROSPECTUS SUPPLEMENT................. S-9
RISK FACTORS..................................... S-19
Risks Related to the Certificates.............. S-19
Lack of Control Over Trust Fund.............. S-19
Potential Conflicts of Interest.............. S-19
Yield Considerations......................... S-20
Prepayments and Repurchases.................. S-20
Borrower Default............................. S-21
Bankruptcy Proceedings....................... S-22
Advance Interest and Other Payments.......... S-22
Limited Liquidity and Market Value........... S-23
Different Timing of Mortgage Loan
Amortization.............................. S-23
Subordination of Subordinate Offered
Certificates.............................. S-23
Risks Related to the Mortgage Loans............ S-23
Nature of the Mortgaged Properties........... S-23
Management................................... S-24
Balloon Payments and ARD Loans............... S-25
Risks Particular to Multifamily Properties... S-25
Risks Particular to Retail Properties........ S-26
Risks Particular to Office Properties........ S-26
Risks Particular to Hotels................... S-27
Risks Particular to Self-Storage
Properties................................ S-27
Risks of Subordinate Financing............... S-28
Limited Recourse............................. S-28
Environmental Considerations................. S-29
Limitations on Enforceability of Cross-
Collateralization......................... S-29
Related Parties.............................. S-30
Geographic Concentration..................... S-30
Other Concentrations......................... S-31
Changes in Concentrations.................... S-31
Prepayment Premiums.......................... S-31
Tax Considerations Related to Foreclosure.... S-32
Leasehold Risks.............................. S-33
Limited Information.......................... S-33
Litigation................................... S-33
Risks Related to Tenant Concentration........ S-33
Certain Additional Risks Relating to
Tenants................................... S-34
Risk Related to Mortgaged Properties Leased
to Multiple Tenants....................... S-34
Risks Related to Tenant Bankruptcy........... S-34
Risks Relating to Affiliation with a
Franchise or Hotel Management Company..... S-35
Risks Related to One Action Rules............ S-35
Property Insurance........................... S-35
Zoning Compliance and Use Restrictions....... S-35
Risk Related to Lack of Skillful Property
Management................................ S-36
</TABLE>
S-1
<PAGE> 4
<TABLE>
<S> <C>
Some Mortgaged Properties May Not Be Readily
Convertible to Alternative Uses.................... S-36
Limitations of Appraisals............................. S-36
No Reunderwriting of the Mortgage Loans............... S-37
Other Risks............................................. S-37
DESCRIPTION OF THE MORTGAGE POOL.......................... S-38
General................................................. S-38
Certain Terms and Conditions of the Mortgage Loans...... S-39
Due Dates............................................. S-39
Mortgage Rates; Calculations of Interest.............. S-39
Hyperamortization..................................... S-39
Amortization of Principal............................. S-40
Prepayment Provisions................................. S-40
Defeasance............................................ S-41
"Due-on-Sale" and "Due-on-Encumbrance" Provisions..... S-41
Significant Mortgage Loans.............................. S-42
Olen Residential Portfolio............................ S-42
The Residence Inn Loan................................ S-45
The SCI Portfolio..................................... S-46
The Interstate Corporate Center Loan.................. S-49
111 West Jackson Loan................................. S-49
Additional Mortgage Loan Information.................... S-50
General............................................... S-50
Delinquencies......................................... S-51
Tenant Matters........................................ S-51
Ground Leases and Other Non-Fee Interests............. S-51
Subordinate Financing................................. S-51
Generally............................................. S-51
Lender/Borrower Relationships......................... S-51
Certain Underwriting Matters............................ S-52
Environmental Assessments............................. S-52
Generally............................................. S-52
Property Condition Assessments........................ S-53
Appraisals and Market Studies......................... S-54
Zoning and Building Code Compliance................... S-54
Hazard, Liability and Other Insurance................. S-55
The Mortgage Loan Sellers............................... S-55
Assignment of the Mortgage Loans; Repurchases........... S-56
Representations and Warranties; Repurchases............. S-58
Changes in Mortgage Pool Characteristics................ S-60
Environmental Policy.................................... S-60
SERVICING OF THE MORTGAGE LOANS........................... S-61
General................................................. S-61
The Master Servicer..................................... S-64
The Special Servicer.................................... S-64
Sub-Servicers........................................... S-65
Servicing and Other Compensation and Payment of
Expenses.............................................. S-65
Evidence as to Compliance............................... S-68
Modifications, Waivers, Amendments and Consents......... S-69
Sale of Defaulted Mortgage Loans........................ S-70
REO Properties.......................................... S-72
Inspections; Collection of Operating Information........ S-72
Termination of the Special Servicer..................... S-73
</TABLE>
S-2
<PAGE> 5
<TABLE>
<S> <C>
DESCRIPTION OF THE CERTIFICATES.................. S-74
General........................................ S-74
Registration and Denominations................. S-74
Certificate Balances and Notional Amount....... S-75
Pass-Through Rates............................. S-76
Distributions.................................. S-77
General...................................... S-77
The Available Distribution Amount............ S-78
Application of the Available Distribution
Amount.................................... S-78
Distributable Certificate Interest........... S-82
Principal Distribution Amount................ S-83
Excess Interest.............................. S-84
Distributions of Prepayment Premiums......... S-84
Treatment of REO Properties.................. S-84
Subordination; Allocation of Losses and Certain
Expenses..................................... S-85
Excess Interest Distribution Account........... S-86
Interest Reserve Account....................... S-86
P&I Advances................................... S-87
Appraisal Reductions........................... S-88
Reports to Certificateholders; Certain
Available Information........................ S-89
Trustee Reports.............................. S-89
Servicer Reports............................. S-90
Other Information............................ S-92
Voting Rights.................................. S-93
Termination.................................... S-93
The Trustee.................................... S-93
YIELD AND MATURITY CONSIDERATIONS................ S-94
Yield Considerations........................... S-94
General...................................... S-94
Class X Certificate Pass-Through Rate........ S-94
Rate and Timing of Principal Payments........ S-94
Losses and Shortfalls........................ S-95
Certain Relevant Factors..................... S-96
Weighted Average Lives......................... S-97
Yield Sensitivity of the Class X
Certificates................................. S-101
USE OF PROCEEDS.................................. S-102
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......... S-102
General........................................ S-102
Discount and Premium; Prepayment Premiums...... S-103
Characterization of Investments in Offered
Certificates................................. S-103
Possible Taxes on Income From Foreclosure
Property and Other Taxes..................... S-104
Reporting and Other Administrative Matters..... S-104
CERTAIN ERISA CONSIDERATIONS..................... S-104
LEGAL INVESTMENT................................. S-107
METHOD OF DISTRIBUTION........................... S-108
LEGAL MATTERS.................................... S-108
RATINGS.......................................... S-109
INDEX OF PRINCIPAL DEFINITIONS................... S-111
ANNEX A.......................................... A-1
ANNEX B.......................................... B-1
ANNEX C.......................................... C-1
</TABLE>
S-3
<PAGE> 6
FOOTNOTES TO TABLE ON COVER OF PROSPECTUS SUPPLEMENT
(1) Subject to a variance of plus or minus 5%.
(2) Approximate Pass-Through Rate as of the Delivery Date. The related
Pass-Through Rate for any Class A-2, Class B, Class C, Class D, Class E and
Class F Certificate for any Distribution Date will not exceed the weighted
average of the interest rates (net of the fee rates payable to the Master
Servicer, the Special Servicer and the Trustee) borne by the mortgage
loans. See "Description of the Certificates -- Pass-Through Rates" in this
prospectus supplement.
(3) Approximate Pass-Through Rate as of Delivery Date. The Pass-Through Rate
for any Class G Certificate for any Distribution Date will be equal to the
weighted average of the interest rates (net of the fee rates payable to the
Master Servicer, the Special Servicer and the Trustee) borne by the
mortgage loans minus 0.14% per annum. See "Description of the
Certificates -- Pass-Through Rates" in this prospectus supplement.
(4) Approximate Pass-Through Rate as of Delivery Date. The Pass-Through Rate
for any Class H Certificate for any Distribution Date will be equal to the
weighted average of the interest rates (net of the fee rates payable to the
Master Servicer, the Special Servicer and the Trustee) borne by the
mortgage loans. See "Description of the Certificates -- Pass-Through Rates"
in this prospectus supplement.
(5) As of the Commencement Date, the "Assumed Final Distribution Date" with
respect to any class of offered certificates (other than the Class X
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
(other than an ARD Loan) is prepaid, in whole or in part, prior to its
stated maturity, any ARD Loan is not prepaid prior to, but is paid in its
entirety on its Anticipated Repayment Date and otherwise based on the
Maturity Assumptions (as described in this prospectus supplement), if any.
As of the Commencement Date, the Assumed Final Distribution Date with
respect to the Class X Certificates is the Distribution Date on which the
final distribution would occur for such class of certificates based on the
assumptions, among others, that there are no prepayments on the Mortgage
Loans through their Lock-Out and Yield Maintenance Periods, as applicable,
and prepayments occur at 100% CPR thereafter. It was also assumed with
respect to the Class X Certificates that the Master Servicer, the Special
Servicer or a holder or holders of Certificates representing a majority
interest in the Controlling Class purchased all of the Mortgage Loans and
REO Properties as described under "Description of the
Certificates -- Termination" in this prospectus supplement. The actual
performance and experience of the mortgage loans will likely differ from
such assumptions. See "Yield and Maturity Considerations" in this
prospectus supplement.
(6) It is a condition to their issuance that the classes of offered
certificates be assigned ratings by Moody's Investors Service, Inc.
("Moody's") and/or Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"; and together with Moody's, 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).
(7) 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" in this prospectus supplement.
(8) The Class X Certificates will not have a Certificate Balance. The Class X
Certificates will accrue interest on a Notional Amount that is equal to the
aggregate of the Certificate Balances of the Class A-1, Class A-2, Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K,
Class L, Class M, Class N, Class O and Class P Certificates outstanding
from time to time.
(9) Approximate Pass-Through Rate as of the Delivery Date. The Pass-Through
Rate for the Class X Certificates will equal the excess, if any, of (a) the
weighted average of the interest rates (net of the fee rates payable to the
Master Servicer, the Special Servicer and the Trustee) borne by the
mortgage loans, over (b) the weighted average of the Pass-Through Rates for
the Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O and
Class P Certificates from time to time. See "Description of the
Certificates -- Pass-Through Rates" in this prospectus supplement.
S-4
<PAGE> 7
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this prospectus supplement, which describes
the specific terms of the offered certificates. If the terms of the offered
certificates vary between this prospectus supplement and the accompanying
prospectus, you should rely on the information in this prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 2000-2 and the trust in abbreviated form:
Executive Summary, which begins on page S-6 of this prospectus
supplement and shows certain characteristics of the offered certificates in
tabular form;
Summary of Prospectus Supplement, which begins on page S-9 of this
prospectus supplement and gives a brief introduction of the key features of
Series 2000-2 and the mortgage loans; and
Risk Factors, which begins on page S-19 of this prospectus supplement
and describes risks that apply to Series 2000-2 which are in addition to
those described in the accompanying prospectus with respect to the
securities issued by the trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
accompanying prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Principal Definitions" beginning on page S-111 in this prospectus
supplement. The capitalized terms used in the accompanying prospectus are
defined on the pages indicated under the caption "Index of Principal
Definitions" beginning on page 101 in the prospectus.
In this prospectus supplement, "we" refers to the Depositor, and "you"
refers to a prospective investor in the offered certificates.
---------------------
Until January 25, 2001 all dealers that buy, sell or trade the offered
certificates, whether or not participating in this offering, may be required to
deliver a prospectus supplement and the accompanying prospectus. This is in
addition to the dealers' obligation to deliver a prospectus supplement and the
accompanying prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
If and to the extent required by applicable law or regulation, this
prospectus supplement and the accompanying prospectus will be used by the
underwriters in connection with offers and sales related to market-making
transactions in the offered certificates with respect to which the underwriters
are a principal. The underwriters may also act as agent in such transactions.
Such sales will be made at negotiated prices at the time of sale.
S-5
<PAGE> 8
EXECUTIVE SUMMARY
The following Executive Summary does not include all relevant information
relating to the offered certificates and the mortgage loans. In particular, the
Executive Summary does not address the risks and special considerations involved
with an investment in the offered certificates, and prospective investors should
carefully review the detailed information appearing elsewhere in this prospectus
supplement and in the accompanying prospectus before making any investment
decision. 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>
-------------------------------------------------------------------------------------------------------------------
APPROXI-
CERTIFICATE MATE APPROXI- PASS-THROUGH WEIGHTED
BALANCE OR PERCENTAGE MATE RATE AS AVERAGE
NOTIONAL OF POOL CREDIT OF DELIVERY LIFE
CLASS RATINGS(1) AMOUNT(2) BALANCE(9) SUPPORT(9) RATE TYPE DATE (YEARS)(6)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
-------------------------------------------------------------------------------------------------------------------
A-1 Aaa/AAA $198,316,225 22.308% 24.021% Fixed 7.0200% 5.75
-------------------------------------------------------------------------------------------------------------------
A-2 Aaa/AAA $477,137,063 53.671% 24.021% Fixed(3) 7.1970%(3) 9.18
-------------------------------------------------------------------------------------------------------------------
X Aaa/AAA $889,004,533(7) N/A N/A Variable Rate(8) 1.0940%(8) 8.36
-------------------------------------------------------------------------------------------------------------------
B Aa2/AA $ 37,816,366 4.254% 19.768% Fixed(3) 7.3780%(3) 9.56
-------------------------------------------------------------------------------------------------------------------
C A1/A+ $ 24,469,413 2.752% 17.015% Fixed(3) 7.4380%(3) 9.63
-------------------------------------------------------------------------------------------------------------------
D A2/A $ 17,795,938 2.002% 15.013% Fixed(3) 7.5160%(3) 9.63
-------------------------------------------------------------------------------------------------------------------
E A3/A- $ 8,897,968 1.001% 14.012% Fixed(3) 7.6340%(3) 9.63
-------------------------------------------------------------------------------------------------------------------
F Baa1/BBB+ $ 11,122,461 1.251% 12.761% Fixed(3) 7.9170%(3) 9.66
-------------------------------------------------------------------------------------------------------------------
G Baa2/BBB $ 17,795,937 2.002% 10.760% WAC(4) 8.1599%(4) 9.71
-------------------------------------------------------------------------------------------------------------------
H Baa3/BBB- $ 11,122,460 1.251% 9.508% WAC(5) 8.2999%(5) 9.71
-------------------------------------------------------------------------------------------------------------------
Private Certificates -- Not Offered Hereby
-------------------------------------------------------------------------------------------------------------------
(Not
J Offered) $ 34,479,629 3.878% 5.630% Fixed 7.0000% 9.73
-------------------------------------------------------------------------------------------------------------------
(Not
K Offered) $ 5,561,230 0.626% 5.004% Fixed(3) 7.0000%(3) 9.79
-------------------------------------------------------------------------------------------------------------------
(Not
L Offered) $ 6,673,476 0.751% 4.254% Fixed(3) 7.0000%(3) 9.79
-------------------------------------------------------------------------------------------------------------------
(Not
M Offered) $ 2,224,492 0.250% 4.004% Fixed(3) 7.0000%(3) 9.79
-------------------------------------------------------------------------------------------------------------------
(Not
N Offered) $ 6,673,477 0.751% 3.253% Fixed(3) 7.0000%(3) 9.79
-------------------------------------------------------------------------------------------------------------------
(Not
O Offered) $ 4,448,984 0.500% 2.752% Fixed(3) 7.0000%(3) 9.82
-------------------------------------------------------------------------------------------------------------------
(Not
P Offered) $ 24,469,414 2.752% N/A Fixed(3) 7.0000%(3) 10.61
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
--------- -------------------
PRINCIPAL
CLASS WINDOW(6)
--------- -------------------
<S> <C>
Offered
Certificates
------------------------------------------------------------------------------------------------------------------- --------------
A-1 11/15/00-04/15/09
------------------------------------------------------------------------------------------------------------------- --------------
A-2 04/15/09-05/15/10
------------------------------------------------------------------------------------------------------------------- --------------
X N/A
------------------------------------------------------------------------------------------------------------------- --------------
B 05/15/10-06/15/10
------------------------------------------------------------------------------------------------------------------- --------------
C 06/15/10-06/15/10
------------------------------------------------------------------------------------------------------------------- --------------
D 06/15/10-06/15/10
------------------------------------------------------------------------------------------------------------------- --------------
E 06/15/10-06/15/10
------------------------------------------------------------------------------------------------------------------- --------------
F 06/15/10-07/15/10
------------------------------------------------------------------------------------------------------------------- --------------
G 07/15/10-07/15/10
------------------------------------------------------------------------------------------------------------------- --------------
H 07/15/10-07/15/10
------------------------------------------------------------------------------------------------------------------- --------------
Private
Certificates --
Not Offered
Hereby
------------------------------------------------------------------------------------------------------------------- --------------
J 07/15/10-08/15/10
------------------------------------------------------------------------------------------------------------------- --------------
K 08/15/10-08/15/10
------------------------------------------------------------------------------------------------------------------- --------------
L 08/15/10-08/15/10
------------------------------------------------------------------------------------------------------------------- --------------
M 08/15/10-08/15/10
------------------------------------------------------------------------------------------------------------------- --------------
N 08/15/10-08/15/10
------------------------------------------------------------------------------------------------------------------- --------------
O 08/15/10-09/15/10
------------------------------------------------------------------------------------------------------------------- --------------
P 09/15/10-03/15/15
------------------------------------------------------------------------------------------------------------------- --------------
</TABLE>
(1) Ratings shown are those of Moody's and S&P, respectively.
(2) As of the Delivery Date (assuming receipt of all scheduled payments through
the Commencement Date and there are no prepayments other than those actually
received prior to the Commencement Date). Subject to a variance of plus or
minus 5%.
(3) The Pass-Through Rate for any Class A-2, Class B, Class C, Class D, Class E,
Class F, Class K, Class L, Class M, Class N, Class O and Class P Certificate
on any Distribution Date will not exceed the weighted average of the
interest rates (net of the fee rates payable to the Master Servicer, the
Special Servicer and the Trustee) borne by the mortgage loans. The rate
shown in the "Pass-Through Rate as of Delivery Date" column is the
approximate Pass-Through Rate as of the Delivery Date for such Classes. See
"Description of the Certificates -- Pass-Through Rates" in this prospectus
supplement.
(4) The Pass-Through Rate for any Class G Certificate on any Distribution Date
will be equal to the weighted average of the interest rates (net of the fee
rates payable to the Master Servicer, the Special Servicer and the Trustee)
borne by the mortgage loans minus 0.14% per annum. The rate shown in the
"Pass-Through Rate as of Delivery Date" column is the approximate
Pass-Through Rate as of the Delivery Date for such Class. See "Description
of the Certificates -- Pass-Through Rates" in this prospectus supplement.
(5) The Pass-Through Rate for any Class H Certificate on any Distribution Date
will be equal to the weighted average of the interest rates (net of the fee
rates payable to the Master Servicer, the Special Servicer and the Trustee)
borne by the mortgage loans. The rate shown in the "Pass-Through Rate as of
Delivery Date" column is the approximate Pass-Through Rate as of the
Delivery Date for such Class. See "Description of the
Certificates -- Pass-Through Rates" in this prospectus supplement.
S-6
<PAGE> 9
(6) Based on the Maturity Assumptions (as defined under "Yield and Maturity
Considerations" in this prospectus supplement). As of the Commencement Date,
calculations for the Certificates (other than the Class X Certificates)
assume no prepayments will be made on the Mortgage Loans prior to their
related maturity dates (or, in the case of ARD Loans, their anticipated
repayment dates). As of the Commencement Date, the calculations for the
Class X Certificates assume that there are no prepayments on the Mortgage
Loans through their Lock-Out and Yield Maintenance Periods, as applicable,
and prepayments occur at 100% CPR thereafter. It was also assumed with
respect to the Class X Certificates that the Master Servicer, the Special
Servicer or a holder or holders of Certificates representing a majority
interest in the Controlling Class purchased all of the Mortgage Loans and
REO Properties as described under "Description of the
Certificates -- Termination" in this prospectus supplement.
(7) Notional Amount.
(8) The Pass-Through Rate for the Class X Certificates for any Distribution Date
will, in general, equal the excess, if any, of (a) the weighted average of
the interest rates (net of the fee rates payable to the Master Servicer, the
Special Servicer and the Trustee) borne by the mortgage loans, over (b) the
weighted average of the Pass-Through Rates for the Class A-1, Class A-2,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J,
Class K, Class L, Class M, Class N, Class O and Class P Certificates for
such Distribution Date. The rate shown in the "Pass-Through Rate as of
Delivery Date" column is the approximate Pass-Through Rate as of the
Delivery Date for the Class X Certificates. See "Description of the
Certificate -- Pass-Through Rates" in this prospectus supplement.
(9) As of the Delivery Date (assuming receipt of all scheduled payments through
the Commencement Date and there are no prepayments other than those actually
received prior to the Commencement Date).
S-7
<PAGE> 10
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 contained, under
"Description of the Mortgage Pool" in this prospectus supplement and in Annex A
to this prospectus supplement.
MORTGAGE POOL CHARACTERISTICS
<TABLE>
<CAPTION>
ENTIRE MORTGAGE POOL
CHARACTERISTICS (APPROXIMATE)
--------------- -----------------------
<S> <C>
Initial Pool Balance(1)................ $889,796,853
Number of Mortgage Loans............... 128
Number of Balloon Mortgage Loans(2).... 102
Number of Mortgage Loans with
Anticipated Repayment Dates.......... 22
Number of Fully Amortizing Mortgage
Loans................................ 4
Number of Mortgaged Properties......... 157
Average Cut-off Date Balance........... $6,951,538
Range of Cut-off Date Balances......... $715,122 to $54,698,161
Weighted Average Mortgage Rate......... 8.157%
Weighted Average Remaining Lock-Out
Period............................... 107 months
Range of Remaining Terms to
Maturity(3).......................... 48 to 174 months
Weighted Average Remaining Term to
Maturity(3).......................... 111 months
Weighted Average Underwriting Debt
Service Coverage Ratio............... 1.39x
Weighted Average Cut-off Date Loan-to-
Value Ratio.......................... 67.5%
</TABLE>
---------------
(1) Subject to a variance of plus or minus 5%.
(2) Not including Mortgage Loans with Anticipated Repayment Dates.
(3) In the case of 22 Mortgage Loans, the Anticipated Repayment Dates.
"Cut-off Date Loan-to-Value Ratio" and "Underwriting Debt Service Coverage
Ratio" are calculated as described in Annex A hereto.
S-8
<PAGE> 11
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary highlights selected information from this prospectus
supplement. It does not contain all of the information you need to consider in
making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING
OF THE OFFERED CERTIFICATES, READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS CAREFULLY.
RELEVANT PARTIES AND DATES
DEPOSITOR
Banc of America Commercial Mortgage Inc. (formerly known as NationsLink
Funding Corporation). The Depositor, a Delaware corporation, is a subsidiary of
Bank of America, N.A. The Depositor maintains its principal office at Bank of
America Corporate Center, 100 North Tryon Street, Charlotte, North Carolina
28255. See "The Depositor" in this prospectus supplement. Neither the Depositor
nor any of its affiliates has insured or guaranteed the Offered Certificates.
TRUSTEE
Wells Fargo Bank Minnesota, N.A. The Trustee will also act as REMIC
Administrator. See "Description of the Certificates -- The Trustee" in this
prospectus supplement.
MASTER SERVICER
ORIX Real Estate Capital Markets, LLC a Delaware limited liability company.
See "Servicing of the Mortgage Loans -- The Master Servicer" in this prospectus
supplement.
SPECIAL SERVICER
Lennar Partners, Inc. See "Servicing of the Mortgage Loans -- The Special
Servicer" in this prospectus supplement.
MORTGAGE LOAN SELLERS
Bank of America, N.A. and HVB Realty Capital Inc. Bank of America, N.A. is
a national banking association. Bank of America, N.A. is the parent of the
Depositor and a wholly-owned subsidiary of NB Holdings Corporation, which in
turn is a wholly-owned subsidiary of Bank of America Corporation. Bank of
America, N.A. maintains its principal office at Bank of America Corporate
Center, 100 North Tryon Street, Charlotte, North Carolina 28255.
HVB Realty Capital Inc. is a New York corporation and is a wholly owned
subsidiary of Bayerische Hypo- und Vereinsbank AG. HVB Realty Capital Inc.
maintains its principal office at 150 East 42nd Street, New York, New York
10017-4679. See "Description of the Mortgage Pool -- The Mortgage Loan Sellers"
in this prospectus supplement.
CUT-OFF DATE
September 1, 2000.
TRUST FORMATION DATE
September 22, 2000.
COMMENCEMENT DATE
October 1, 2000.
S-9
<PAGE> 12
DELIVERY DATE
On or about October 27, 2000.
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 15th day of each month or, if any such 15th day is not a business day,
the next succeeding business day. The first Distribution Date with respect to
the Offered Certificates will occur in November 2000.
DETERMINATION DATE
With respect to any Distribution Date, the fifth business day prior to such
date.
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 and ends on and includes the Determination
Date in the calendar month in which such Distribution Date occurs. The first
Collection Period applicable to the Offered Certificates will begin immediately
following the Determination Date in October 2000 and end on the Determination
Date in November 2000.
MORTGAGE LOANS
THE MORTGAGE POOL
The pool of mortgage loans (the "Mortgage Pool") will consist of 106
conventional, multifamily and commercial mortgage loans originated by Bank of
America, N.A. ("Bank of America") or its conduit participants (such mortgage
loans, the "Bank of America Mortgage Loans") representing approximately 77.7% of
the Initial Pool Balance and 22 multifamily and commercial mortgage loans
originated by HVB Realty Capital Inc. ("HVB") or its origination agents (such
mortgage loans, the "HVB Mortgage Loans"; and together with the Bank of America
Mortgage Loans, the "Mortgage Loans") representing 22.3% of the Initial Pool
Balance. The Mortgage Loans have an aggregate Cut-off Date Balance of
approximately $889,796,853 (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" in this
prospectus supplement.
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 $715,122 to $54,698,161, and the
average Cut-off Date Balance is $6,951,538.
S-10
<PAGE> 13
As of the Cut-off Date, the Mortgage Loans had the following additional
characteristics. While the following numbers were accurate as of the Cut-off
Date, they may have changed if determined as of the Commencement Date. In
particular, any numbers reflecting remaining term would generally be one month
shorter as of the Commencement Date.
SELECTED MORTGAGE LOAN CHARACTERISTICS
<TABLE>
<S> <C>
Range of Mortgage Rates.................. 6.464% per annum to 9.870% per annum
Weighted Average Mortgage Rate........... 8.157% per annum
Range of Remaining Terms to Stated
Maturity(1)............................ 48 months to 174 months
Weighted Average Remaining Term to Stated
Maturity(1)............................ 111 months
Range of Remaining Amortization Terms.... 0 months to 360 months
Weighted Average Remaining Amortization
Term................................... 321 months
Range of Remaining Lock-Out Periods...... 0 to 172 months
Range of Cut-off Date Loan-to-Value
Ratios................................. 21.4% to 80.0%
Weighted Average Cut-off Date
Loan-to-Value Ratio.................... 67.5%
Range of Maturity Date Loan-to-Value
Ratios of Balloon Loans(1)............. 23.5% to 76.6%
Weighted Average Maturity Date Loan-to-
Value Ratio of Balloon Loans(1)........ 59.4%
Range of Underwriting Debt Service
Coverage Ratios........................ 1.16x to 2.38x
Weighted Average Underwriting Debt
Service Coverage Ratio................. 1.39x
</TABLE>
------------------
(1) In the case of ARD Loans the maturity is based on the related anticipated
repayment date.
"Cut-off Date Loan-to-Value Ratio," "Maturity Date Loan-to-Value Ratio" and
"Underwriting Debt Service Coverage Ratio" are also each defined in Annex A to
this prospectus supplement.
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:
GEOGRAPHIC CONCENTRATION
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
STATE PROPERTIES BALANCE
----- ---------- -------------
<S> <C> <C>
California.................................................. 33 16.9%
Florida..................................................... 32 15.4
Texas....................................................... 18 13.3
Nevada...................................................... 6 6.6
New York.................................................... 7 5.1
</TABLE>
The remaining Mortgaged Properties are located throughout 24 other states,
with no more than 4.7% of the Initial Pool Balance secured by Mortgaged
Properties located in any such other jurisdiction.
S-11
<PAGE> 14
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:
PROPERTY TYPE
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
MORTGAGED INITIAL POOL
PROPERTIES BALANCE(1)
---------- -------------
<S> <C> <C>
Office...................................................... 48 45.3%
Multifamily................................................. 49 26.9
Retail...................................................... 29 13.4
Hotel....................................................... 16 9.8
Industrial.................................................. 8 2.7
Mini Storage................................................ 7 1.9
</TABLE>
---------------
(1) The sum of the percentages in this column may not equal 100% due to
rounding.
FOR MORE DETAILED STATISTICAL INFORMATION REGARDING THE MORTGAGE POOL, SEE
ANNEX A HERETO.
On the Trust Formation Date, the Mortgage Loan Sellers, at the direction of
the Depositor, transferred all of the Mortgage Loans, without recourse, to the
Trustee for the benefit of holders of the Certificates (the
"Certificateholders"). In connection with such transfer, Bank of America made
certain representations and warranties regarding the characteristics of the Bank
of America Mortgage Loans only, and HVB made representations and warranties
regarding the characteristics of the HVB Mortgage Loans only. As described in
more detail later in this prospectus supplement, Bank of America will be
obligated to cure any material breach of any such representation or warranty
made by it with respect to the Bank of America Mortgage Loans or repurchase the
affected Bank of America Mortgage Loan, and HVB will be obligated to cure any
material breach of such representation or warranty made by HVB with respect to
the HVB Mortgage Loans or repurchase the affected HVB Mortgage Loan.
Additionally, as more fully described under "Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans -- Defeasance," two
of the HVB Loans (the "Early Defeasance Loans") permit the related borrower to
defease the mortgage loan prior to the second anniversary of the Trust Formation
Date. In the event either such borrower gives notice of its election to defease
on or before the second anniversary of the Trust Formation Date, HVB will be
required to repurchase the mortgage loan. See "Description of the Mortgage
Pool -- Assignment of the Mortgage Loan; Repurchases" and "-- Representations
and Warranties; Repurchases" in this prospectus supplement.
Bank of America and HVB have each sold its respective Mortgage Loans
without recourse and will have no obligations with respect to the Offered
Certificates other than pursuant to such representations, warranties and
repurchase obligations. The Depositor has made 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 -- Risks
Related to the Mortgage Loans" in this prospectus supplement and "Description of
the Trust Funds" and "Certain Legal Aspects of Mortgage Loans" in the
accompanying prospectus.
The Master Servicer and, if circumstances require, the Special Servicer,
will service and administer the Mortgage Loans pursuant to the Pooling Agreement
(as defined below). See "Servicing of the Mortgage Loans" in this prospectus
supplement and "The Pooling and Servicing Agreements" in the accompanying
prospectus. The compensation to be received by the Master Servicer (including
Master Servicing Fees) and the Special Servicer (including Standby Fees, Special
Servicing Fees, Liquidation Fees and Workout Fees) for their services is
described in this prospectus supplement under "Servicing of the Mortgage
Loans -- Servicing and Other Compensation and Payment of Expenses."
S-12
<PAGE> 15
OFFERED SECURITIES
THE OFFERED CERTIFICATES; CERTIFICATE BALANCES AND PASS-THROUGH RATES
We are offering ten classes of Commercial Mortgage Pass-Through
Certificates (collectively, the "Offered Certificates") as part of Series
2000-2, namely the Class A-1, Class A-2, Class X, Class B, Class C, Class D,
Class E, Class F, Class G and Class H Certificates. As of the Delivery Date,
your certificates will have the approximate aggregate principal amount or
notional amount indicated in the chart on the cover of this prospectus
supplement, subject to a variance of plus or minus 5%, and will accrue interest
at an annual rate (the "Pass-Through Rate") indicated in the chart on the cover
of this prospectus supplement and the accompanying footnotes. See "Description
of the Certificates -- Pass-Through Rates" in this prospectus supplement.
Interest on the Offered Certificates will be calculated based on a 360-day year
consisting of twelve 30-day months, or a 30/360 basis.
Series 2000-2 consists of a total of twenty-two classes of Certificates,
the following twelve of which are not being offered through this prospectus
supplement and the accompanying prospectus: Class J, Class K, Class L, Class M,
Class N, Class O, Class P, Class V, Class R-I, Class R-II, Class R-IIU and Class
R-III (collectively, the "Private Certificates"). The Pass-Through Rates
applicable to each of the Class J, Class K, Class L, Class M, Class N, Class O
and Class P Certificates for each Distribution Date are set forth on page S-76
hereof. The Class R-I, Class R-II, Class R-IIU and Class R-III Certificates (the
"REMIC Residual Certificates") and the Class V Certificates will not have a
Certificate Balance, a Notional Amount or a Pass-Through Rate.
The Offered Certificates and the Private Certificates will represent
beneficial ownership interests in a trust created by Banc of America Commercial
Mortgage Inc. The trust's assets will primarily be 128 mortgage loans secured by
first liens on commercial and multifamily properties.
CLASS X CERTIFICATES
The notional amount of the Class X Certificates will generally be equal to
the aggregate of the Certificate Balances of the Class A-1, Class A-2, Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O and Class P Certificates (the "Sequential Pay
Certificates") outstanding from time to time. The notional amount of the Class X
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 Pass-Through Rate applicable to the Class X Certificates for each
Distribution Date will, in general, equal the excess, if any, of (1) the
Weighted Average Net Mortgage Rate, over (2) the weighted average of the
Pass-Through Rates applicable to all the Classes of Sequential Pay Certificates
for such Distribution Date (weighted on the basis of their respective
Certificate Balances immediately prior to such Distribution Date). The
Pass-Through Rate on the Class X Certificates will be calculated without regard
to any modification of the terms of any Mortgage Loan subsequent to the Trust
Formation Date and will not be affected by any step up of the Mortgage Rate on
the Anticipated Repayment Date for an ARD Loan.
See "Description of the Certificates -- Pass-Through Rates" and
"-- Distributions" in this prospectus supplement.
DISTRIBUTIONS
The total of all payments or other collections (or advances in lieu
thereof) on or in respect of the Mortgage Loans (but excluding Prepayment
Premiums and Excess Interest) that are available for distributions of interest
on and 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" in this
prospectus supplement.
S-13
<PAGE> 16
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:
A. Amount and Order of Distributions
First, Class A and Class X: To interest on Class A-1, Class A-2 and Class
X, pro rata, in accordance with their interest entitlements.
Second, Class A: To the extent of funds available for principal, to
principal on Class A-1 and Class A-2, in that order, until each class is reduced
to zero.
Third, Class A: To reimburse Class A-1 and Class A-2, pro rata, for any
previously unreimbursed losses on the mortgage loans allocable to principal that
were previously borne by those classes.
Fourth, Class B: To Class B as follows: (a) to interest on Class B in the
amount of its interest entitlement; (b) to the extent of funds available for
principal, to principal on Class B until reduced to zero; and (c) to reimburse
Class B for any previously unreimbursed losses on the mortgage loans allocable
to principal that were previously borne by that class, together with interest.
Fifth, Class C: To Class C in a manner analogous to the Class B
allocations of the fourth step.
Sixth, Class D: To Class D in a manner analogous to the Class B
allocations of the fourth step.
Seventh, Class E: To Class E in a manner analogous to the Class B
allocations of the fourth step.
Eighth: Class F: To Class F in a manner analogous to the Class B
allocations of the fourth step.
Ninth: Class G: To Class G in a manner analogous to the Class B
allocations of the fourth step.
Tenth: Class H: To Class H in a manner analogous to the Class B
allocations of the fourth step.
Finally, Private Certificates: In the amounts and order of priority
provided for in the Pooling Agreement.
The distributions referred to in priority Second above, will be made pro
rata among the Class A-1 and Class A-2 Certificates when the Certificate
Balances of the Subordinate Certificates have been reduced to zero and in any
event on the final Distribution Date as described under "Description of the
Certificates -- Distributions -- The Available Distribution Amount" in this
prospectus supplement.
B. Interest and Principal Entitlements
A description of each Class's interest entitlement can be found in
"Description of the Certificates -- Distributions -- Distributable Certificate
Interest" in this prospectus supplement. As described in such section, there are
circumstances in which your interest entitlement for a distribution date could
be less than one full month's interest at the Pass-Through Rate on your
certificate's principal amount or notional amount.
The amount of principal required to be distributed to the classes entitled
to principal on a particular distribution date also can be found in "Description
of the Certificates -- Principal Distribution Amount" in this prospectus
supplement. If you invest in the Class X Certificates, you will not be entitled
to distributions of principal on the Class X Certificates.
C. Prepayment Premiums
The manner in which any prepayment consideration and yield maintenance
premiums received during a particular Collection Period will be allocated to one
or more of the classes of Offered Certificates is described in "Description of
the Certificates -- Distributions -- Distributions of Prepayment Premiums" in
this prospectus supplement.
S-14
<PAGE> 17
SUBORDINATION
A. General
The chart below describes the manner in which the rights of various classes
will be senior to the rights of other classes. Entitlement to receive principal
and interest on any Distribution Date is depicted in descending order. The
manner in which mortgage loan losses are allocated is depicted in ascending
order. No principal payments or loan losses will be allocated to the Class X
Certificates. However, the Notional Amount on the Class X Certificates (which is
used to calculate interest due on the Class X Certificates) will effectively be
reduced by the allocation of principal payments and loan losses to the other
classes of Certificates, the principal balances of which correspond to the
Notional Amount of the Class X Certificates.
Class A Certificates, Class X Certificates*
|
Class B Certificates
|
Class C Certificates
|
Class D Certificates
|
Class E Certificates
|
Class F Certificates
|
Class G Certificates
|
Class H Certificates
|
Private Certificates
*The Class X Certificates will only be senior with respect to payments of
interest and will not be entitled to receive any payments in respect of
principal.
No other form of credit enhancement will be available for the benefit of
the holders of the Offered Certificates.
S-15
<PAGE> 18
See "Description of the Certificates -- Subordination; Allocation of Losses
and Certain Expenses" in this prospectus supplement.
B. Shortfalls in Available Funds
The following types of shortfalls in available funds will be allocated in
the same manner as mortgage loan losses:
- shortfalls resulting from additional compensation which the
Master Servicer or Special Servicer is entitled to receive;
- shortfalls resulting from interest on advances of principal
and interest or property expenses made by the Master
Servicer or the Trustee;
- shortfalls resulting from extraordinary expenses of the trust; and
- shortfalls resulting from a reduction of a mortgage loan's
interest rate by a bankruptcy court or from other
unanticipated or default-related expenses of the trust.
See "Description of the Certificates -- Distributions" in this prospectus
supplement.
ADVANCES OF PRINCIPAL AND INTEREST
A. P&I Advances
The Master Servicer is required to advance (each, a "P&I Advance")
delinquent monthly mortgage loan payments if it determines that the advance will
be recoverable. The Master Servicer will not be required to advance balloon
payments due at maturity or interest in excess of a loan's regular interest
rate. The Master Servicer also is not required to advance prepayment or yield
maintenance premiums. If an advance is made, the Master Servicer will not
advance its servicing fee, but will advance the Trustee's fee and the Special
Servicer's standby fee.
B. Property Protection Advances
The Master Servicer may also be required to make advances to pay delinquent
real estate taxes, assessments and hazard insurance premiums and similar
expenses necessary to protect and maintain the mortgaged property, to maintain
the lien on the mortgaged property or enforce the related mortgage loan
documents ("Servicing Advances," and collectively with P&I Advances,
"Advances").
C. Interest on Advances
The Master Servicer and the Trustee, as applicable, will be entitled to
interest as described in this prospectus supplement on any Advances made.
Interest accrued on outstanding Advances may result in reductions in amounts
otherwise payable on the certificates.
See "Description of the Certificates -- P&I Advances" and "Servicing of the
Mortgage Loans -- Servicing and Other Compensation and Payment of Expenses" in
this prospectus supplement and "Description of the Certificates -- Advances in
Respect of Delinquencies" and "The Pooling and Servicing
Agreements -- Certificate Account" in the accompanying prospectus.
OTHER ASPECTS OF THE OFFERED CERTIFICATES
A. Denominations
The Class A Certificates will be offered in minimum denominations of
$10,000 initial principal amount. The Class X Certificates will be offered in
minimum denominations of $1,000,000 initial notional amount. The Class B, Class
C, Class D, Class E, Class F, Class G and Class H Certificates will be offered
in minimum denominations of $100,000 initial principal amount. Investments in
excess of the minimum denominations may be made in multiples of $1.
S-16
<PAGE> 19
B. Registration, Clearance and Settlement
Each class of Offered Certificates will be registered in the name of Cede &
Co., as nominee of The Depository Trust Company ("DTC"). We may elect to
terminate the book-entry system through DTC with respect to all or any portion
of any class of the Offered Certificates.
See "Description of the Certificates -- Registration and Denominations" in
this prospectus supplement and in the accompanying prospectus.
OPTIONAL TERMINATION
At its option, any holder or holders (other than the Depositor or the
Mortgage Loan Sellers) of Certificates representing a majority interest in the
Controlling Class may purchase, and if such holder or holders fail to purchase,
the Master Servicer may purchase, and if the Master Servicer fails to purchase,
the Special Servicer 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% of the
Initial Pool Balance. See "Description of the Certificates -- Termination" in
this prospectus supplement and in the accompanying prospectus.
TAX STATUS
An election will be made to treat portions of the Trust (other than the
Excess Interest) as four separate REMICs -- REMIC I, REMIC II, REMIC IIU and
REMIC III -- for federal income tax purposes. In addition, each of two
individual Mortgage Loans will constitute the sole asset of a separate REMIC and
the "regular interest" in each of these REMICs will be an asset of REMIC I. In
the opinion of counsel, such portions of the Trust will qualify for this
treatment.
Pertinent federal income tax consequences of an investment in the Offered
Certificates include:
- Each class of Offered Certificates will constitute "regular
interests" in one of the REMICs.
- The regular interests will be treated as newly originated
debt instruments for federal income tax purposes.
- Beneficial owners will be required to report income on the
Offered Certificates in accordance with the accrual method
of accounting.
- The Class X Certificates will, and one or more other
classes of Offered Certificates may, be issued with
original issue discount for federal income tax purposes,
which generally requires you to report income in advance of
the related cash distributions.
- The Class V Certificates will represent the right to
receive Excess Interest, which portion of the Trust will be
treated as a grantor trust for federal income tax purposes.
See "Certain Federal Income Tax Consequences" in this prospectus supplement
and in the accompanying prospectus.
ERISA CONSIDERATIONS
Subject to important considerations described under "Certain ERISA
Considerations" in this prospectus supplement and in the accompanying
prospectus, the Depositor expects that the Class A and Class X Certificates are
eligible for purchase by persons investing assets of employee benefit plans or
individual retirement accounts.
UNDER CURRENT LAW, THE CLASS B, CLASS C, CLASS D, CLASS E, CLASS F, CLASS G
AND CLASS H CERTIFICATES MAY NOT BE PURCHASED BY, OR TRANSFERRED TO, A PLAN OR
ANY PERSON INVESTING THE ASSETS OF A PLAN. (THIS PROHIBITION DOES NOT APPLY TO
AN INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL ACCOUNT UNDER
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CIRCUMSTANCES WHICH WOULD QUALIFY FOR AN EXEMPTION UNDER SECTIONS I AND III OF
U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 95-60.)
See "Certain ERISA Considerations" in this prospectus supplement and in the
accompanying prospectus.
LEGAL INVESTMENT
The Class A, Class X and Class B Certificates will constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984, as amended ("SMMEA"), so long as those certificates are rated in
one of the two highest rating categories by one or more rating agencies. The
other classes of Offered Certificates will not constitute "mortgage related
securities" within the meaning of SMMEA.
See "Legal Investment" in this prospectus supplement and in the
accompanying prospectus.
CERTIFICATE RATINGS
It is a requirement for issuance of the Offered Certificates that they
receive credit ratings no lower than the following credit ratings from Moody's
and S&P (together, the "Rating Agencies"):
<TABLE>
<CAPTION>
MOODY'S S&P
------- ----
<S> <C> <C>
Class A-1................................................... Aaa AAA
Class A-2................................................... Aaa AAA
Class X..................................................... Aaa AAA
Class B..................................................... Aa2 AA
Class C..................................................... A1 A+
Class D..................................................... A2 A
Class E..................................................... A3 A-
Class F..................................................... Baa1 BBB+
Class G..................................................... Baa2 BBB
Class H..................................................... Baa3 BBB-
</TABLE>
The Rating Agencies' ratings of the Offered Certificates address the
likelihood of the timely payment of interest and the ultimate repayment of
principal by the Rated Final Distribution Date. A security rating does not
address the frequency of prepayments (either voluntary or involuntary) or the
possibility that certificateholders might suffer a lower than anticipated yield,
nor does a security rating address the likelihood of receipt of Prepayment
Premiums or the collection of Excess Interest. 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.
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. Any such revision, if negative, or withdrawal of a rating could
have a material adverse effect on the affected class of Offered Certificates. In
this regard, we note that S&P considered the claims-paying ratings of the
Environmental Insurer in assigning its ratings to the Offered Certificates;
accordingly, the downgrade, withdrawal or qualification of the ratings
applicable to the Environmental Insurer could have a corresponding effect upon
the ratings assigned to one or more classes of the Offered Certificates. See
"Ratings" in this prospectus supplement and "Rating" in the accompanying
prospectus for a discussion of the basis upon which ratings are assigned, the
limitations and restrictions on ratings, and conclusions that should not be
drawn from a rating.
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RISK FACTORS
You should carefully consider the following risks before making an
investment decision. In particular, distribution on your certificates will
depend on payments received on and other recoveries with respect to the mortgage
loans. Therefore, you should carefully consider the risk factors relating to the
mortgage loans and the mortgaged properties.
The risks and uncertainties described below are not the only ones relating
to your certificates. Additional risks and uncertainties not presently known to
us or that we currently deem immaterial may also impair your investment.
If any of the following risks actually occur, your investment could be
materially and adversely affected.
This prospectus supplement also contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks described below and elsewhere in this prospectus
supplement.
RISKS RELATED TO THE CERTIFICATES
LACK OF CONTROL OVER TRUST FUND
You and other certificateholders generally do not have the right to make
decisions with respect to the administration of the trust. See "Servicing of the
Mortgage Loans -- General" in this prospectus supplement. Such decisions are
generally made, subject to the express terms of the Pooling Agreement, by the
Master Servicer, the Trustee or the Special Servicer, as applicable. Any
decision made by one of those parties in respect of the trust, even if such
decision is determined to be in your best interests by such party, may be
contrary to the decision that you or other certificateholders would have made
and may negatively affect your interests.
POTENTIAL CONFLICTS OF INTEREST
The Special Servicer will have considerable latitude in determining whether
to liquidate or modify defaulted Mortgage Loans. See "Servicing of the Mortgage
Loans -- Modifications, Waivers, Amendments and Consents" in this prospectus
supplement.
The Special Servicer or an affiliate has purchased certain of the Private
Certificates (including the Controlling Class discussed in this prospectus
supplement under "Servicing of the Mortgage Loans -- General"). This could cause
a conflict between the Special Servicer's duties to the Trust under the Pooling
Agreement and its interest as a holder of a certificate. However, the Pooling
Agreement provides that the mortgage loans shall be administered in accordance
with the servicing standards without regard to ownership of any certificate by
the Master Servicer, the Special Servicer or any affiliate of the Special
Servicer. See "Servicing of the Mortgage Loans -- General" in this prospectus
supplement.
In addition, certain of the mortgage loans included in the Trust may have
been refinancings of debt previously held by an affiliate of one of the Mortgage
Loan Sellers.
The related property managers and borrowers may experience conflicts of
interest in the management and/or ownership of the mortgaged real properties
securing the mortgage loans because:
- a substantial number of the mortgaged real properties are managed by
property managers affiliated with the respective borrowers;
- these property managers also may manage and/or franchise additional
properties, including properties that may compete with the mortgaged
real properties; and
- affiliates of the property managers and/or the borrowers, or the
property managers and/or the borrowers themselves also may own other
properties, including competing properties.
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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:
- the Pass-Through Rate for such certificate;
- 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;
- 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;
- 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
- the extent to which Prepayment Premiums are collected and, in turn,
distributed on the class of certificates to which such certificate
belongs.
It is impossible to predict with certainty any of the factors described in
the preceding paragraph. 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" in this prospectus
supplement. See also "Yield and Maturity Considerations" in the accompanying
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. 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 Certificates is equal to the
aggregate of the Certificate Balances of the Sequential Pay 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
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 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 classes 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.
PREPAYMENTS AND REPURCHASES
The yield to maturity on your certificates will depend, in significant
part, upon the rate and timing of principal payments on the mortgage loans. For
this purpose, principal payments include both voluntary
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prepayments, if permitted, and involuntary prepayments, such as prepayments
resulting from casualty or condemnation, defaults and liquidations or
repurchases upon breaches of representations and warranties. Because the
Notional Amount of the Class X Certificates is based upon the Certificate
Balances of the certificates with principal balances, the yield to maturity on
the Class X Certificates will be extremely sensitive to the rate and timing of
prepayments of principal.
The investment performance of your certificates may vary materially and
adversely from your expectations if the actual rate of prepayment on the
mortgage loans is higher or lower than you anticipate.
Voluntary prepayments, if permitted, generally require payment of a
Prepayment Premium. Nevertheless, we cannot assure you that the related
borrowers will refrain from prepaying their mortgage loans due to the existence
of a prepayment premium. Also, we cannot assure you that involuntary prepayments
will not occur.
The rate at which voluntary prepayments occur on the mortgage loans will be
affected by a variety of factors, including:
- the terms of the mortgage loans;
- the length of any prepayment lockout period;
- the level of prevailing interest rates;
- the availability of mortgage credit;
- the applicable yield maintenance charges or prepayment premiums;
- the Master Servicer's or Special Servicer's ability to enforce those
charges or premiums;
- the occurrence of casualties or natural disasters; and
- economic, demographic, tax, legal or other factors.
No yield maintenance charge or prepayment premium will be required for
prepayments in connection with a casualty or condemnation unless, in the case of
most of the mortgage loans, an event of default has occurred and is continuing.
In addition, if Bank of America (as to the Bank of America Mortgage Loans only)
or HVB (as to the HVB Mortgage Loans only) repurchases any mortgage loan from
the trust due to breaches of representations or warranties, the repurchase price
paid will be passed through to the holders of the certificates with the same
effect as if the mortgage loan had been prepaid in part or in full, except that
no prepayment premium or yield maintenance charge would be payable. Such a
repurchase may therefore adversely affect the yield to maturity on your
certificates.
BORROWER DEFAULT
The rate and timing of delinquencies or defaults on the mortgage loans will
affect:
- the aggregate amount of distributions on the offered
certificates;
- their yield to maturity;
- the rate of principal payments; and
- their weighted average life.
If losses on the mortgage loans exceed the aggregate principal amount of
the classes of certificates subordinated to a particular class, such class will
suffer a loss equal to the full amount of such excess (up to the outstanding
principal amount of such certificate).
If you calculate your anticipated yield based on assumed rates of defaults
and losses that are lower than the default rate and losses actually experienced
and such losses are allocable to your certificates, your actual yield to
maturity will be lower than the assumed yield. Under certain extreme scenarios,
such yield could be negative. In general, the earlier a loss borne by you on
your certificates occurs, the greater the effect on your yield to maturity.
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Even if losses on the mortgage loans are not borne by your certificates,
those losses may affect the weighted average life and yield to maturity of your
certificates. This may be so because those losses lead to your certificates
having a higher percentage ownership interest in the trust and related
distributions of principal payments on the mortgage loans than would otherwise
have been the case. The effect on the weighted average life and yield to
maturity of your certificates will depend upon the characteristics of the
remaining mortgage loans.
Additionally, delinquencies and defaults on the mortgage loans may
significantly delay the receipt of distributions by you on your certificates,
unless P&I Advances are made to cover delinquent payments or the subordination
of another class of certificates fully offsets the effects of any such
delinquency or default.
BANKRUPTCY PROCEEDINGS
Under the federal bankruptcy law, the filing of a petition in bankruptcy by
or against a borrower will stay the sale of the real property owned by that
borrower, as well as the commencement or continuation of a foreclosure action.
In addition, even if a court determines that the value of the mortgaged property
is less than the principal balance of the mortgage loan it secures, the court
may prevent a lender from foreclosing on the mortgaged property (subject to
certain protections available to the lender). As part of a restructuring plan, a
court also may reduce the amount of secured indebtedness to the then-value of
the mortgaged property, which action would make the lender a general unsecured
creditor for the difference between the then-current value and the amount of its
outstanding mortgage indebtedness. A bankruptcy court also may: (1) grant a
debtor a reasonable time to cure a payment default on a mortgage loan; (2)
reduce periodic payments due under a mortgage loan; (3) change the rate of
interest due on a mortgage loan; or (4) otherwise alter the mortgage loan's
repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
on the junior lien. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the trustee may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under the federal bankruptcy law, the lender will be stayed from enforcing
a borrower's assignment of rents and leases. The federal bankruptcy law also may
interfere with the master servicer's or special servicer's ability to enforce
lockbox requirements. The legal proceedings necessary to resolve these issues
can be time consuming and may significantly delay or diminish the receipt of
rents. Rents also may escape an assignment to the extent they are used by the
borrower to maintain the mortgaged property or for other court authorized
expenses.
As a result of the foregoing, the Trustee's recovery with respect to
borrowers in bankruptcy proceedings may be significantly delayed, and the
aggregate amount ultimately collected may be substantially less than the amount
owed.
ADVANCE INTEREST AND OTHER PAYMENTS
To the extent described in this prospectus supplement, the Master Servicer,
the Special Servicer or the Trustee, as applicable, will be entitled to receive
interest on unreimbursed Advances. This interest will generally accrue from the
date on which the related Advance is made or the related expense is incurred
through the date of reimbursement. In addition, under certain circumstances,
including delinquencies in the payment of principal and interest, a mortgage
loan will be specially serviced and the Special Servicer will be entitled to
compensation for special servicing activities. The right to receive interest on
Advances or special servicing compensation is senior to the rights of
certificateholders to receive distributions on the offered certificates. The
payment of interest on advances and the payment of compensation to the Special
Servicer may lead to shortfalls in amounts otherwise distributable on your
certificates.
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LIMITED LIQUIDITY AND MARKET VALUE
Your certificates will not be listed on any securities exchange or traded
on the NASDAQ Stock Market, and there is currently no secondary market for your
certificates. While the Underwriters currently intend to make a secondary market
in the offered certificates, they are not obligated to do so. Accordingly, you
may not have an active or liquid secondary market for your certificates. Lack of
liquidity could result in a substantial decrease in the market value of your
certificates. Many other factors may affect the market value of your
certificates including the then-prevailing interest rates.
DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION
As principal payments or prepayments are made on a mortgage loan that is
part of a pool of mortgage loans, the pool will be subject to more concentrated
risks with respect to the diversity of mortgaged properties, types of mortgaged
properties and number of borrowers, as described above. Classes that have a
later sequential designation or a lower payment priority are more likely to be
exposed to this concentration risk than are classes with an earlier sequential
designation or a higher priority. This is so because principal on the offered
certificates is generally payable in sequential order, and no class entitled to
distribution of principal generally receives principal until the principal
amount of the preceding class or classes entitled to receive principal have been
reduced to zero.
SUBORDINATION OF SUBORDINATE OFFERED CERTIFICATES
As described in this prospectus supplement, unless your certificates are
Class A-1, Class A-2 or Class X Certificates, your rights 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 offered certificates
with an earlier alphabetical designation.
RISKS RELATED TO THE MORTGAGE LOANS
NATURE OF THE MORTGAGED PROPERTIES
The Mortgaged Properties consist solely of multifamily rental and
commercial properties. Commercial and multifamily lending is generally viewed as
exposing a lender to a greater risk of loss than residential one to four family
lending because it usually involves larger loans to a single borrower or a group
of related borrowers.
The repayment of a commercial or multifamily loan is typically dependent
upon the ability of the applicable property to produce cash flow through the
collection of rents. Even the liquidation value of a commercial property is
determined, in substantial part, by the capitalization of the property's cash
flow. However, net operating income can be volatile and may be insufficient to
cover debt service on the loan at any given time.
The net operating incomes and property values of the mortgaged properties
may be adversely affected by a large number of factors. Some of these factors
relate to the properties themselves, such as:
- the age, design and construction quality of the properties;
- perceptions regarding the safety, convenience and attractiveness of
the properties;
- the proximity and attractiveness of competing properties;
- the adequacy of the property's management and maintenance;
- increases in operating expenses;
- an increase in the capital expenditures needed to maintain the
properties or make improvements;
- a decline in the financial condition of a major tenant;
- an increase in vacancy rates; and
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- a decline in rental rates as leases are renewed or entered into with
new tenants.
Other factors are more general in nature, such as:
- national, regional or local economic conditions, including plant
closings, military base closings, industry slowdowns and unemployment
rates;
- local real estate conditions, such as an oversupply of retail space,
office space or multifamily housing;
- demographic factors;
- consumer confidence;
- consumer tastes and preferences; and
- retroactive changes in building codes.
The volatility of net operating income will be influenced by many of the
foregoing factors, as well as by:
- the length of tenant leases;
- the creditworthiness of tenants;
- in the case of rental properties, the rate at which new rentals occur;
and
- the property's "operating leverage" which is generally the percentage
of total property expenses in relation to revenue, the ratio of fixed
operating expenses to those that vary with revenues, and the level of
capital expenditures required to maintain the property and to retain
or replace tenants.
A decline in the real estate market or in the financial condition of a
major tenant will tend to have a more immediate effect on the net operating
income of properties with short-term revenue sources, such as short-term or
month-to-month leases, and may lead to higher rates of delinquency or defaults.
Commercial properties represent security for 73.1% of the Initial Pool
Balance. Lending on commercial properties 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 kinds of
risks. See "-- Risks Particular to Retail Properties", "-- Risks Particular to
Hotels", "-- Risks Particular to Office Properties", and "-- Risks Particular to
Self-Storage Facilities" below.
MANAGEMENT
The successful operation of a real estate project depends upon the property
manager's performance and viability. The property manager is responsible for:
- responding to changes in the local market;
- planning and implementing the rental structure;
- operating the property and providing building services;
- managing operating expenses; and
- assuring that maintenance and capital improvements are carried out in
a timely fashion.
Properties deriving revenues primarily from short-term sources, such as
short-term or month-to-month leases, are generally more management intensive
than properties leased to creditworthy tenants under long-term leases.
We make no representation or warranty as to the skills of any present or
future managers. Additionally, we cannot assure you that the property managers
will be in a financial condition to fulfill their management responsibilities
throughout the terms of their respective management agreements.
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There are 13 groups of Mortgaged Properties that have the same or related
management. No such group represents security for more than 11.4% of the Initial
Pool Balance.
BALLOON PAYMENTS AND ARD LOANS
One hundred two of the Mortgage Loans, which represent 77.2% 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. In addition, 22 of the Mortgage Loans, which represent 22.3%
of the Initial Pool Balance, are ARD Loans which have substantial scheduled
principal balances as of their respective Anticipated Repayment Dates, unless
the Mortgage Loans are previously prepaid. One hundred one of the Mortgage
Loans, representing in the aggregate 83.1% of the Initial Pool Balance, will
have Balloon Payments (or, in the case of ARD Loans, substantial scheduled
principal balances) due during the period from August 2009 through August 2010.
Mortgage Loans with Balloon Payments involve a greater risk to the lender
than fully amortizing loans, because the borrower's ability to repay a Mortgage
Loan on its Maturity Date or Anticipated Repayment Date typically will depend
upon its ability either to refinance the loan or to sell the related Mortgaged
Property at a price sufficient to permit repayment. In addition, fully
amortizing mortgage loans which pay interest on an "actual/360" basis but have
fixed monthly payments, may, in fact, have a small balloon payment due at
maturity. Circumstances that will affect the ability of the borrower to
accomplish either of these goals at the time of attempted sale or refinancing
include:
- the prevailing 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;
- the operating history of the property and occupancy levels of the
property;
- tax laws;
- prevailing general and regional economic conditions; and
- the availability of, and competition for, 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" in this
prospectus supplement and "Risk Factors -- Certain Factors Affecting
Delinquency, Foreclosure and Loss of the Mortgage Loans -- Increased Risk of
Default Associated with Balloon Payments" in the accompanying prospectus.
RISKS PARTICULAR TO MULTIFAMILY PROPERTIES
Multifamily properties secure 33 of the Mortgage Loans, representing 26.9%
of the Initial Pool Balance.
Several factors may adversely affect the value and successful operation of
a multifamily property, including:
- the physical attributes of the apartment building (e.g., its age,
appearance and construction quality);
- the location of the property (e.g., a change in the neighborhood over
time);
- the ability and willingness of management to provide adequate
maintenance and insurance;
- the types of services or amenities the property provides;
- the property's reputation;
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- the level of mortgage interest rates (which may encourage tenants to
purchase rather than lease housing);
- the tenant mix, such as the tenant population being predominantly
students or being heavily dependent on workers from a particular
business or personnel from a local military base;
- the presence of competing properties;
- adverse local or national economic conditions which may limit the
amount of rent that may be charged and may result in a reduction of
timely rent payments or a reduction in occupancy levels; and
- state and local regulations which may affect the building owner's
ability to increase rent to market rent for an equivalent apartment.
RISKS PARTICULAR TO RETAIL PROPERTIES
Retail properties secure 26 of the Mortgage Loans, representing 13.4% of
the Initial Pool Balance.
Several factors may adversely affect the value and successful operation of
a retail property, including:
- 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, video shopping
networks and internet web sites which reduce the need for retail space
by retail companies);
- the quality and philosophy of management;
- the safety, convenience and attractiveness of the property to tenants
and their customers or clients;
- the public perception of the safety of customers at shopping malls and
shopping centers;
- the need to make major repairs or improvements to satisfy the needs of
major tenants; and
- traffic patterns and access to major thoroughfares.
The general strength of retail sales also directly affects retail
properties. The retailing industry is currently undergoing consolidation due to
many factors, including growth in discount and alternative forms of retailing.
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 also
decline, and tenants may be unable to pay the fixed portion of their rents or
other occupancy costs. The cessation of business by a significant tenant can
adversely affect a retail property, not only because of rent and other factors
specific to such tenant, but also because 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.
RISKS PARTICULAR TO OFFICE PROPERTIES
Office properties secure 47 of the Mortgage Loans, representing
approximately 45.3% of the Initial Pool Balance.
A large number of factors may adversely affect the value of office
properties, including:
- the number and quality of an office building's tenants;
- the physical attributes of the building in relation to competing
buildings (e.g., age, condition, design, access to transportation and
ability to offer certain amenities, such as sophisticated building
systems);
- the desirability of the area as a business location; and
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- the strength and nature of the local economy (including labor costs
and quality, tax environment and quality of life for employees).
In addition, there may be significant costs associated with tenant
improvements, leasing commissions and concessions in connection with reletting
office space. Moreover, the cost of refitting office space for a new tenant is
often higher than the cost of refitting other types of property.
RISKS PARTICULAR TO HOTELS
Properties operated as hotels secure seven of the Mortgage Loans,
representing approximately 9.8% of the Initial Pool Balance.
Various factors may adversely affect the economic performance of a hotel,
including:
- adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a room
and reduce occupancy levels);
- the construction of competing hotels or resorts;
- continuing expenditures for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated
useful lives;
- a deterioration in the financial strength or managerial capabilities
of the owner and operator of a hotel; and
- changes in travel patterns caused by changes in access, energy prices,
strikes, relocation of highways, the construction of additional
highways or other factors.
Because hotel rooms generally are rented for short periods of time, the
financial performance of hotels tends to be affected by adverse economic
conditions and competition more quickly than other commercial properties.
Moreover, the hotel and lodging industry is generally seasonal in nature and
different seasons affect different hotels depending on type and location. This
seasonality can be expected to cause periodic fluctuations in a hotel property's
room and restaurant revenues, occupancy levels, room rates and operating
expenses. 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, and there can be no assurance that a new
license could be obtained promptly or at all.
RISKS PARTICULAR TO SELF-STORAGE PROPERTIES
Self-storage properties secure seven of the mortgage loans, representing
approximately 1.9% of the aggregate principal balance of the pool of mortgage
loans as of the Cut-off Date. Self-storage properties are considered vulnerable
to competition, because both acquisition costs and break-even occupancy are
relatively low. The conversion of self-storage facilities to alternative uses
would generally require substantial capital expenditures. Thus, if the operation
of any of the self-storage mortgaged properties becomes unprofitable due to
- decreased demand;
- competition;
- age of improvements; or
- other factors so that the borrower becomes unable to meet its
obligations on the related mortgage loan, the liquidation value of
that self-storage mortgaged property may be substantially less,
relative to the amount owing on the mortgage loan, than if the
self-storage mortgaged property were readily adaptable to other uses.
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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 self-storage mortgaged properties are free from hazardous
substances or other pollutants or contaminants or will remain so in the future.
RISKS OF SUBORDINATE FINANCING
The terms of certain mortgage loans permit or require the borrowers to post
letters of credit and/or surety bonds for the benefit of the mortgage loan,
which may constitute a contingent reimbursement obligation of the related
borrower or an affiliate. The issuing bank or surety will not typically agree to
subordination and standstill protection benefiting the mortgagee.
Additionally, although the mortgage loans generally restrict the pledging
of general partnership and managing member equity interests in a borrower
subject to certain exceptions, the terms of the mortgages generally permit,
subject to certain limitations, the pledging of less than a controlling portion
of the limited partnership or non-managing membership equity interest in a
borrower. Moreover, in general, any borrower that does not meet single purpose
entity criteria may not be restricted in any way from incurring unsecured
subordinate debt or mezzanine debt.
We are aware that three of the mortgaged properties relating to the
Mortgage Loans, representing 2.1% of the Initial Pool Balance, were encumbered
by subordinate debt as of the Cut-off Date. Although the Mortgage Loans
generally 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, a violation of such
prohibition may not become evident until the related Mortgage Loan otherwise
defaults. In addition, the related borrower may be permitted to incur additional
indebtedness secured by furniture, fixtures and equipment, and to incur
additional unsecured indebtedness. Five of the mortgage loans, representing
12.4% of the Initial Pool Balance, expressly permit unsecured indebtedness
subject to certain conditions. When a mortgage loan borrower (or its constituent
members) also has one or more other outstanding loans (even if subordinated
loans), the trust is subjected to additional risk. The borrower may have
difficulty servicing and repaying multiple loans. The existence of another loan
generally also will make it more difficult for the borrower to obtain
refinancing of the mortgage loan and may thereby jeopardize repayment of the
mortgage loan. Moreover, the need to service additional debt may reduce the cash
flow available to the borrower to operate and maintain the mortgaged property.
Additionally, if the borrower (or its constituent members) defaults on the
mortgage loan and/or any other loan, actions taken by other lenders such as a
foreclosure or an involuntary petition for bankruptcy against the borrower could
impair the security available to the trust, including the mortgaged property, or
stay the trust's ability to foreclose during the course of the bankruptcy case.
The bankruptcy of another lender also may operate to stay foreclosure by the
trust. The trust may also be subject to the costs and administrative burdens of
involvement in foreclosure or bankruptcy proceedings or related litigation. See
"Certain Legal Aspects of Mortgage Loans -- Subordinate Financing" in the
accompanying prospectus.
LIMITED RECOURSE
The mortgage loans are not insured or guaranteed by any person or entity,
governmental or otherwise.
The mortgage loans are generally non-recourse loans. If a default occurs
under any Mortgage Loan, recourse generally may be had only against the specific
properties and other assets that have been pledged to secure the loan. Payment
prior to maturity is consequently dependent primarily on the sufficiency of the
net operating income of the mortgaged property. Payment at maturity is primarily
dependent upon the market value of the mortgaged property or the borrower's
ability to refinance the property. The Depositor has not undertaken an
evaluation of the financial condition of such person.
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ENVIRONMENTAL CONSIDERATIONS
The trust could become liable for a material adverse environmental
condition at an underlying real property. Any such potential liability could
reduce or delay payments on the offered certificates.
The existence of the environmental insurance policies described under
"Description of the Mortgage Pool -- Environmental Policy" may mitigate this
risk, but we cannot assure you they will do so. All of the mortgaged properties
were subject to environmental site assessments in connection with origination,
including Phase I site assessments or updates of previously performed Phase I
site assessments. In some cases, Phase II site assessments also have been
performed. Although those assessments involved site visits and other types of
review, we cannot assure you that all environmental conditions and risks were
identified.
None of the environmental assessments revealed any material adverse
environmental condition or circumstance at any mortgaged property except for
those which will be remediated by the cut-off date, for which an escrow for the
remediation was established, for which an environmental insurance policy was
obtained from a third party insurer or for which the consultant recommended an
operations and maintenance plan or periodic monitoring of nearby properties,
which recommendations are consistent with industry practice. In certain cases,
the identified condition related to the presence of asbestos-containing
materials, lead-based paint and/or radon. Where these substances were present,
the environmental consultant generally recommended, and the related loan
documents required, the establishment of an operation and maintenance plan to
address the issue or, in the case of asbestos-containing materials and
lead-based paint, an abatement or removal program. Other identified conditions
could, for example, include leaks from storage tanks and on-site spills.
Corrective action, as required by the regulatory agencies, has been or is
currently being undertaken and, in some cases, the related borrowers have made
deposits into environmental reserve accounts. However, we cannot assure you that
any environmental indemnity, insurance or reserve amounts will be sufficient to
remediate the environmental conditions or that all environmental conditions have
been identified or that operation and maintenance plans will be put in place
and/or followed.
LIMITATIONS ON ENFORCEABILITY OF CROSS-COLLATERALIZATION
As described under "Description of the Mortgage Pool -- General" herein,
the Mortgage Pool includes two sets of Cross-Collateralized Mortgage Loans,
which represent 10.0% of the Initial Pool Balance. Cross-collateralization
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 circumstances described under
"Description of the Mortgage Pool -- Certain Terms and Conditions of the
Mortgage Loans" in this prospectus supplement.
Certain related Cross-Collateralized Mortgage Loans have different
borrowers. Cross-collateralization arrangements involving more than one borrower
could be challenged as fraudulent conveyances by creditors of the related
borrower in an action brought outside a bankruptcy case or, if such borrower
were to become a debtor in a bankruptcy case, by the borrower's representative.
A lien granted by such a borrower entity could be avoided if a court were
to determine that:
- such borrower was insolvent when granted the lien, was rendered
insolvent by the granting of the lien or was left with inadequate
capital, or was not able to pay its debts as they matured; and
- such borrower did not receive fair consideration or reasonably
equivalent value when it allowed its mortgaged property or properties
to be encumbered by a lien securing the entire indebtedness.
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Among other things, a legal challenge to the granting of the liens may
focus on the benefits realized by such borrower from the respective mortgage
loan proceeds, as well as the overall cross-collateralization. If a court were
to conclude that the granting of the liens was an avoidable fraudulent
conveyance, that court could:
- subordinate all or part of the pertinent mortgage loan to existing or
future indebtedness of that borrower;
- recover payments made under that mortgage loan; or
- take other actions detrimental to the holders of the certificates,
including, under certain circumstances, invalidating the mortgage loan
or the mortgages securing such cross-collateralization.
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 9.8% 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. There are also 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. It could also 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 accompanying 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
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 polices, 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. In this regard:
- 33 of the Mortgaged Properties, which constitute security for 16.9% of
the Initial Pool Balance, are located in California.
- 32 of the Mortgaged Properties, which constitute security for 15.4% of
the Initial Pool Balance, are located in Florida.
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- 18 of the Mortgaged Properties, which constitute security for 13.3% of
the Initial Pool Balance, are located in Texas.
- 6 of the Mortgaged Properties, which constitute security for 6.6% of
the Initial Pool Balance, are located in Nevada.
- 7 of the Mortgaged Properties, which constitute security for 5.1% of
the Initial Pool Balance, are located in New York.
No more than 4.1% of Initial Pool Balance is secured by Mortgaged
Properties located in any particular county in California.
OTHER CONCENTRATIONS
Concentrations in a pool of mortgage 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. In this regard:
- 43 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 6.1% of the Initial Pool Balance, and the largest group
of Cross-Collateralized Mortgage Loans, by Cut-off Date Balances,
represents in the aggregate approximately 9.8% of the Initial Pool
Balance.
- The ten largest Mortgage Loans, or groups of Cross-Collateralized
Mortgage Loans, have Cut-off Date Balances that represent in the
aggregate approximately 37.5% of the Initial Pool Balance.
CHANGES IN CONCENTRATIONS
As payments in respect of principal (including payments in the form of
voluntary principal prepayments, Liquidation 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, Classes that have a
lower priority with respect to the payment of principal are relatively more
likely to be exposed to any risks associated with changes in concentrations.
PREPAYMENT PREMIUMS
Approximately 99.5% of the Mortgage Loans (by Cut-off Date Balance)
generally permit defeasance only, and prohibit any voluntary principal
prepayment until two to seven months prior to the maturity date of the Mortgage
Loan or the Anticipated Repayment Date with respect to the ARD Loans. The
remaining approximately 0.5% of the Mortgage Loans permit voluntary principal
prepayments during certain periods only upon the payment of a Prepayment
Premium. See "Description of the Mortgage Pool -- Certain Terms and Conditions
of the Mortgage Loans -- Prepayment Provisions" in this prospectus supplement.
Any Prepayment Premiums actually collected on the remaining Mortgage Loans,
which generally permit voluntary prepayments during particular periods and,
depending on the period, require the payment of a Prepayment Premium with such
prepayment, will be distributed among the respective Classes of the REMIC
Regular Certificates in the amounts and in accordance with the priorities
described in this prospectus supplement under "Description of the
Certificates -- Distributions -- Distributions of Prepayment Premiums". The
Depositor, however, makes no representation as to the collectibility of any
Prepayment Premium.
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. See "Description of
the Mortgage Pool -- Assignment of the Mortgage Loans; Repurchases" and
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"-- Representations and Warranties; Repurchases", "Servicing of the Mortgage
Loans -- Sale of Defaulted Mortgage Loans" and "Description of the
Certificates -- Termination" in this prospectus supplement.
Generally. Provisions requiring Prepayment Premiums may not be enforceable
in some states and under federal bankruptcy law. Those provisions also may
constitute interest for usury purposes. Accordingly, we cannot assure you that
the obligation to pay a Prepayment Premium will be enforceable. Also, we cannot
assure you that foreclosure proceeds will be sufficient to pay an enforceable
Prepayment Premium. Additionally, although the collateral substitution
provisions related to defeasance do not have the same effect on the
certificateholders as prepayment, we cannot assure you that a court would not
interpret those provisions as requiring a Prepayment Premium. In certain
jurisdictions those collateral substitution provisions might therefore be deemed
unenforceable under applicable law, or usurious.
We also note the following with respect to Prepayment Premiums:
- Liquidation Proceeds recovered in respect of any defaulted Mortgage
Loan will, in general, be applied to cover outstanding Advances prior
to being applied to cover any Prepayment Premium due in connection
with the liquidation of such Mortgage Loan.
- The Special Servicer may waive a Prepayment Premium in connection with
obtaining a pay-off of a defaulted Mortgage Loan.
- No Prepayment Premium will be payable in connection with any
repurchase of a Mortgage Loan by Bank of America with respect to the
Bank of America Mortgage Loans and/or HVB, with respect to the HVB
Mortgage Loans, for a material breach of representation or warranty on
the part of Bank of America in the case of the Bank of America
Mortgage Loans and/or HVB in the case of the HVB Mortgage Loans or any
failure to deliver documentation relating thereto.
- No Prepayment Premium will 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.
- No Prepayment Premium will be payable 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.
- In general no Prepayment Premium is payable with respect to a
prepayment due to casualty or condemnation.
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 accompanying prospectus. 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" in this prospectus supplement.
TAX CONSIDERATIONS RELATED TO FORECLOSURE
If the trust were to acquire a mortgaged property subsequent to a default
on the related mortgage loan pursuant to a foreclosure or deed in lieu of
foreclosure, the special servicer would be required to retain an independent
contractor to operate and manage the mortgaged property. Among other things, the
independent contractor would not be permitted to perform construction work on
the mortgaged property unless such construction generally was at least 10%
complete at the time default on the related mortgage loan became imminent. In
addition, any net income from such operation and management, other than
qualifying "rents from real property" (as defined in Section 856(d) of the
Internal Revenue Code of 1986, as amended (the "Code")), or any rental income
based on the net profits of a tenant or sub-tenant or allocable to a service
that is non-customary in the area and for the type of building involved, will
subject the Trust Fund to federal (and
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possibly state or local) tax on such income at the highest marginal corporate
tax rate (currently 35%), thereby reducing net proceeds available for
distribution to Certificateholders.
LEASEHOLD RISKS
Seven mortgage loans, representing approximately 15.3% of the Initial Pool
Balance, are secured primarily by a mortgage on a ground lease. Leasehold
mortgages are subject to certain risks not associated with mortgage loans
secured by the fee estate of the mortgagor. The most significant of these risks
is that the ground lease may terminate if, among other reasons, the ground
lessee breaches or defaults in its obligations under the ground lease or there
is a bankruptcy of the ground lessee or the ground lessor. Accordingly, a
leasehold mortgagee may lose the collateral securing its leasehold mortgage. In
addition, although the consent of the ground lessor generally will not be
required for foreclosure, the terms and conditions of a leasehold mortgage are
subject to the terms and conditions of the ground lease, and the rights of a
ground lessee or a leasehold mortgagee with respect to, among other things,
insurance, casualty and condemnation will be governed by the provisions of the
ground lease.
LIMITED INFORMATION
The information set forth in this prospectus supplement with respect to the
Mortgage Loans is derived principally from one or more of the following sources:
- A review of the available credit and legal files relating to the
Mortgage Loans.
- Inspections of the Mortgaged Properties with respect to the Bank of
America Loans undertaken by or on behalf of Bank of America, and by or
on behalf of HVB with respect to the HVB Mortgage Loans.
- Unaudited operating statements for the Mortgaged Properties related to
the Mortgage Loans supplied by the borrowers.
- Appraisals for the Mortgaged Properties related to the Mortgage Loans
that generally were performed at origination (which appraisals were
used in presenting information regarding the values of such Mortgaged
Properties as of the Cut-off Date under "Description of the Mortgage
Pool" and under Annex A for illustrative purposes only).
- Information supplied by entities from which Bank of America or HVB
acquired, or which currently service, certain of the Mortgage Loans.
Also, several Mortgage Loans constitute acquisition financing. Accordingly,
limited or no operating information is available with respect to the related
Mortgaged Property. All of the Mortgage Loans were originated during the
preceding 36 months.
LITIGATION
Certain borrowers and the principals of certain borrowers and/or managers
may have been involved in bankruptcy or similar proceedings or have otherwise
been parties to real estate-related litigation.
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. We cannot assure you that such litigation will not have a material
adverse effect on the distributions to Certificateholders.
RISKS RELATED TO TENANT CONCENTRATION
A deterioration in the financial condition of a tenant can be particularly
significant if a mortgaged property is leased to a single tenant or a small
number of tenants. Mortgaged properties leased to a single tenant or a small
number of tenants also are more susceptible to interruptions of cash flow if a
tenant fails to renew its lease. This is because the financial effect of the
absence of rental income may be severe; more time may be required to re-lease
the space; and substantial capital costs may be incurred to make the space
appropriate for replacement tenants. In this regard, see "-- Risks Related to
Retail Properties" and "-- Risks Related to Office Properties" in this
prospectus supplement.
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Retail and office properties also may be adversely affected if there is a
concentration of particular tenants among the mortgaged properties or of tenants
in a particular business or industry.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS
The income from, and market value of, the mortgaged properties leased to
various tenants would be adversely affected if:
- space in the mortgaged properties could not be leased or re-leased;
- tenants were unable to meet their lease obligations;
- a significant tenant were to become a debtor in a bankruptcy case; or
- rental payments could not be collected for any other reason.
Repayment of the mortgage loans secured by retail and office properties
will be affected by the expiration of leases and the ability of the respective
borrowers to renew the leases or relet the space on comparable terms. Certain of
the mortgaged properties may be leased in whole or in part by
government-sponsored tenants who have the right to cancel their leases at any
time or for lack of appropriations. Additionally, mortgage loans may have
concentrations of leases expiring at varying rates in varying percentages.
Even if vacated space is successfully relet, the costs associated with
reletting, including tenant improvements and leasing commissions, could be
substantial and could reduce cash flow from the mortgaged properties. Moreover,
if a tenant defaults in its obligations to a borrower, the borrower may incur
substantial costs and experience significant delays associated with enforcing
its rights and protecting its investment, including costs incurred in renovating
and reletting the property.
RISK RELATED TO MORTGAGED PROPERTIES LEASED TO MULTIPLE TENANTS
If a mortgaged property has multiple tenants, re-leasing expenditures may
be more frequent than in the case of mortgaged properties with fewer tenants,
thereby reducing the cash flow available for debt service payments.
Multi-tenanted mortgaged properties also may experience higher continuing
vacancy rates and greater volatility in rental expenses.
RISKS RELATED TO TENANT BANKRUPTCY
The bankruptcy or insolvency of a major tenant, or a number of smaller
tenants, in retail, office and industrial properties may adversely affect the
income produced by a mortgaged property. Under the federal bankruptcy code a
tenant has the option of assuming or rejecting any unexpired lease. If the
tenant rejects the lease, the landlord's claim for breach of the lease would be
a general unsecured claim against the tenant (absent collateral securing the
claim). The claim would be limited to the unpaid rent reserved under the lease
for the periods prior to the bankruptcy petition (or earlier surrender of the
leased premises) which are unrelated to the rejection, plus the greater of one
year's rent or 15% of the remaining reserved rent (but not more than three
year's rent).
The Depositor is aware from published reports that Edwards Theaters Circuit
Inc., the tenant with respect to the movie theater representing approximately
12% of the net rentable square feet at the Mortgaged Property securing one of
the Mortgage Loans, representing 2.6% of the Initial Pool Balance, has filed for
bankruptcy protection. Although no payment default has occurred under the
Mortgage Loan as of the Cut-off Date, the Depositor can make no assurance
regarding the tenant's future plans or financial condition.
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RISKS RELATING TO AFFILIATION WITH A FRANCHISE OR HOTEL MANAGEMENT COMPANY
Seven of the mortgage loans secured by hotel properties, representing
approximately 9.8% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, are affiliated with a franchise or hotel
management company through a franchise or management agreement. The performance
of a hotel property affiliated with a franchise or hotel management company
depends in part on:
- the continued existence and financial strength of the franchisor or
hotel management company;
- the public perception of the franchise or hotel chain service mark;
and
- the duration of the franchise licensing or management agreements.
Any provision in a franchise agreement or management agreement providing
for termination because of a bankruptcy of a franchisor or manager generally
will not be enforceable. Replacement franchises may require significantly higher
fees.
The transferability of franchise license agreements is restricted. In the
event of a foreclosure, the lender or its agent would not have the right to use
the franchise license without the franchisor's consent. Conversely, in the case
of certain mortgage loans, the lender may be unable to remove a franchisor or a
hotel management company that it desires to replace following a foreclosure.
RISKS RELATED TO ONE ACTION RULES
Several states (including California) have laws that prohibit more than one
"judicial action" to enforce a mortgage obligation, and some courts have
construed the term "judicial action" broadly. Accordingly, the special servicer
is required to obtain advice of counsel prior to enforcing any of the trust
fund's rights under any of the mortgage loans that include mortgaged properties
where the rule could be applicable.
PROPERTY INSURANCE
All of the mortgage loans require the related borrower to maintain, or
cause to be maintained, property insurance. However, the mortgaged properties
may suffer casualty losses due to risks which were not covered by insurance or
for which insurance coverage is inadequate. In addition, approximately 16.9%,
13.3% and 15.4% of the mortgaged properties, by aggregate principal balance of
the pool of mortgage loans as of the cut-off date, are located in California,
Texas and Florida, respectively, states that have historically been at greater
risk regarding acts of nature (such as earthquakes, floods and hurricanes) than
other states. We cannot assure you that borrowers will be able to maintain
adequate insurance. Moreover, if reconstruction or any major repairs are
required, changes in laws may materially affect the borrower's ability to effect
any reconstruction or major repairs or may materially increase the costs of the
reconstruction or repairs.
As a result of any of the foregoing, the amount available to make
distributions on your certificates could be reduced.
ZONING COMPLIANCE AND USE RESTRICTIONS
Certain of the mortgaged properties may not comply with current zoning
laws, including density, use, parking and set back requirements, due to changes
in zoning requirements after such mortgaged properties were constructed. These
properties, as well as those for which variances or special permits were issued,
are considered to be a "legal non-conforming use" and/or the improvements are
considered to be "legal non-conforming structures". This means that the borrower
is not required to alter its structure to comply with the existing or new law;
however, the borrower may not be able to rebuild the premises "as is" in the
event of a substantial casualty loss. This may adversely affect the cash flow of
the property following the loss. If a substantial casualty were to occur, we
cannot assure you that insurance proceeds would be available to pay the mortgage
loan in full. In addition, if the property were repaired or restored in
conformity with the current law, the value of the property or the
revenue-producing potential of the property may not be equal to that before the
casualty.
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In addition, certain of the mortgaged properties which are non-conforming
may not be "legal non-conforming uses" or "legal non-conforming structures." The
failure of a mortgaged property to comply with zoning laws or to be a "legal
non-conforming use" or "legal non-conforming structure" may adversely affect
market value of the mortgaged property or the borrower's ability to continue to
use it in the manner it is currently being used.
In addition, certain of the mortgaged properties may be subject to certain
use restrictions imposed pursuant to reciprocal easement agreements or operating
agreements. Such use restrictions could include, for example, limitations on the
character of the improvements of the properties, limitations affecting noise and
parking requirements, among other things, and limitations on the borrowers'
right to operate certain types of facilities within a prescribed radius. These
limitations could adversely affect the ability of the related borrower to lease
the mortgaged property of favorable terms, thus adversely affecting the
borrower's ability to fulfill its obligations under the related mortgage loan.
RISK RELATED TO LACK OF SKILLFUL PROPERTY MANAGEMENT
The successful operation of a real estate project depends upon the property
manager's performance and viability. The property manager is responsible for:
- responding to changes in the local market;
- planning and implementing the rental structure;
- operating the property and providing building services;
- managing operating expenses; and
- assuring that maintenance and capital improvements are carried out in
a timely fashion.
Properties deriving revenues primarily from short-term sources, such as
short-term or month-to-month leases, are generally more management intensive
than properties leased to creditworthy tenants under long-term leases.
We make no representation or warranty as to the skills of any present or
future managers. Additionally, we cannot assure you that the property managers
will be in a financial condition to fulfill their management responsibilities
throughout the terms of their respective management agreements.
SOME MORTGAGED PROPERTIES MAY NOT BE READILY CONVERTIBLE TO ALTERNATIVE USES
Some of the mortgaged properties may not be readily convertible to
alternative uses if those properties were to become unprofitable for any reason.
Converting commercial properties to alternate uses generally requires
substantial capital expenditures. The liquidation value of a mortgaged property
consequently may be substantially less than would be the case if the property
were readily adaptable to other uses.
Zoning or other restrictions also may prevent alternative uses. See
"-- Zoning Compliance and Use Restrictions" above.
LIMITATIONS OF APPRAISALS
Appraisals were obtained with respect to each of the mortgaged properties
in connection with the origination of the applicable mortgage loan. In general,
appraisals represent the analysis and opinion of qualified appraisers and are
not guarantees of present or future value. One appraiser may reach a different
conclusion than the conclusion that would be reached if a different appraiser
were appraising that property. Moreover, appraisals seek to establish the amount
a typically motivated buyer would pay a typically motivated seller and, in
certain cases, may have taken into consideration the purchase price paid by the
borrower. That amount could be significantly higher than the amount obtained
from the sale of a mortgaged property under a distress or liquidation sale. We
cannot assure you that the information set forth in this prospectus supplement
regarding appraised values or loan-to-value ratios accurately reflects past,
present or future market values of the mortgaged properties.
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NO REUNDERWRITING OF THE MORTGAGE LOANS
We have not reunderwritten the mortgage loans. Instead, we have relied on
the representations and warranties made by the mortgage loan sellers, and the
applicable mortgage loan seller's obligation to repurchase, substitute or cure a
mortgage loan in the event that a representation or warranty was not true when
made. These representations and warranties do not cover all of the matters that
we would review in underwriting a mortgage loan and you should not view them as
a substitute for reunderwriting the mortgage loans. If we had reunderwritten the
mortgage loans, it is possible that the reunderwriting process may have revealed
problems with a mortgage loan not covered by a representation or warranty. In
addition, we can give no assurance that the applicable mortgage loan seller will
be able to repurchase a mortgage loan if a representation or warranty has been
breached. See "-- Description of the Mortgage Pool -- Representations and
Warranties; Repurchases" in this prospectus supplement.
OTHER RISKS
SEE "RISK FACTORS" IN THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF
CERTAIN OTHER RISKS AND SPECIAL CONSIDERATIONS THAT MAY BE APPLICABLE TO YOUR
CERTIFICATES AND THE MORTGAGE LOANS.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool consists of 106 conventional, multifamily and commercial
mortgage loans originated by Bank of America or through an originator
participating in its conduit program (the "Bank of America Mortgage Loans"),
representing approximately 77.7% of the Initial Pool Balance, and 22 multifamily
and commercial loans originated by HVB or its origination agents (the "HVB
Mortgage Loans" and, together with the Bank of America Mortgage Loans, the
"Mortgage Loans"), representing approximately 22.3% of the Initial Pool Balance.
The Mortgage Loans have an aggregate Cut-off Date Balance of $889,796,853 (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 September 1, 2000 (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 of the 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 (a "Multifamily Mortgaged Property"; and any Mortgage Loan
secured thereby, a "Multifamily Loan") (33 Mortgage Loans, representing 26.9% of
the Initial Pool Balance), or (ii) a retail shopping mall or center, an office
building or complex, a hotel, an industrial building or a self storage facility
(a "Commercial Mortgaged Property"; and any Mortgage Loan secured thereby, a
"Commercial Loan") (95 Mortgage Loans, representing 73.1% of the Initial Pool
Balance).
Two sets of Mortgage Loans contain 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. The two sets of related Cross-Collateralized Mortgage Loans represent
10.0% 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 or separate cross-collateralization agreement, as the
case may be, 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 -- Risks Related to
the Mortgage Loans -- Limitations on Enforceability of Cross-Collateralization"
in this prospectus supplement.
The Mortgage Loans generally constitute non-recourse obligations of the
related borrower. 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 the case of certain Mortgage Loans where the loan documents
permit recourse to a borrower or guarantor, the Depositor has generally 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 any person
or entity, governmental or otherwise. See "Risk Factors -- Risks Related to the
Mortgage Loans -- Limited Recourse" in this prospectus supplement.
Thirty-three of the Mortgaged Properties, which constitute security for
approximately 16.9% of the Initial Pool Balance, are located in California; 32
of the Mortgaged Properties, which constitute security for 15.4% of the Initial
Pool Balance, are located in Florida; 18 of the Mortgaged Properties, which
constitute security for 13.3% of the Initial Pool Balance, are located in Texas;
six of the Mortgaged Properties, which constitute security for 6.6% of the
Initial Pool Balance, are located in Nevada; and seven of the Mortgaged
Properties, which constitute security for 5.1% of the Initial Pool Balance, are
located in New York. The remaining
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Mortgaged Properties are located throughout 24 other states, with no more than
4.7% of the Initial Pool Balance secured by Mortgaged Properties located in any
such other jurisdiction.
Bank of America originated (directly or through an originator participating
in its conduit program) 106 of the Mortgage Loans (the "Bank of America Mortgage
Loans"), which represent 77.7% of the Initial Pool Balance, pursuant to its
conduit program. HVB originated (directly or through origination agents) 22 of
the Mortgage Loans (the "HVB Mortgage Loans"), which represent 22.3% of the
Initial Pool Balance, pursuant to its conduit program. On the Trust Formation
Date, Bank of America transferred the Bank of America Loans and HVB transferred
the HVB Mortgage Loans at the direction of the Depositor, without recourse, to
the Trustee for the benefit of the Certificateholders. See "-- The Mortgage Loan
Sellers" and "-- Assignment of the Mortgage Loans; Repurchase" below.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. Each of 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") except that, as described
below, each ARD Loan may require that certain additional amounts be paid each
month following its applicable Anticipated Repayment 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, except that, as described below, each of the ARD
Loans will accrue interest at a higher rate after its respective Anticipated
Repayment Date. As used in this prospectus supplement, the term "Mortgage Rate"
does not include the incremental increase in the rate at which interest may
accrue on the ARD Loans after such date. As of the Cut-off Date, the Mortgage
Rates of the Mortgage Loans ranged from 6.464% per annum to 9.870% per annum,
and the weighted average Mortgage Rate of the Mortgage Loans was 8.157%. No
Mortgage Loan, other than an ARD Loan, permits negative amortization or the
deferral of accrued interest.
One hundred twenty seven Mortgage Loans (the "Actual/360 Mortgage Loans"),
which represent 99.1% of the Initial Pool Balance, 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"). One Mortgage Loan (the "30/360 Mortgage
Loan"), which represents 0.9% of the Initial Pool Balance, accrues interest on
the basis of a 360-day year consisting of twelve 30-day months (a "30/360
Basis"). The total amount of the Monthly Payment for each Actual/360 Mortgage
Loan is determined as though the Mortgage Loan accrued interest on 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 amortized 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.
Hyperamortization. Twenty two of the Mortgage Loans (each an "ARD Loan"),
which represent 22.3% of the Initial Pool Balance, provides for changes in its
payments and its accrual of interest if it is not paid in full by a specified
date (the "Anticipated Repayment Date"). Commencing on the Anticipated Repayment
Date, each ARD Loan generally will bear interest at a fixed per annum rate (the
"Revised Rate") equal to its Mortgage Rate plus 2%, except that with respect to
loan numbers 521564 and 178365, the loans will bear interest at their respective
Mortgage Rates plus 4% and 5%, respectively. The interest accrued at the excess
of the Revised Rate over the Mortgage Rate (such interest, the "Excess
Interest"; and such difference in rate, the "Excess Interest Rate") will be
deferred until the principal of such Mortgage Loan is paid in full and, except
where limited by applicable laws, will itself accrue interest at the Revised
Rate. Non-payment of such Excess Interest will not constitute a default under
such Mortgage Loan prior to the related maturity date. From and after the
Anticipated Repayment Date, in addition to paying interest (at the Mortgage
Rate) and principal (based on the amortization schedule), the borrower generally
will be required to apply all remaining monthly cash flow from the related
Mortgaged Property, if any, after paying all permitted operating expenses and
capital expenditures, to pay principal on the Mortgage Loan until the Mortgage
Loan is paid in full. The
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ARD Loans generally permit the borrower to defease the related loan after the
earlier of (i) 2 years after the Trust Formation Date or (ii) 3 or 4 years after
the closing date of the applicable loan.
Amortization of Principal. One hundred two Mortgage Loans, which represent
77.2% 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 loan, a "Balloon Loan," and each such payment, together with
the corresponding interest payment, a "Balloon Payment") on their respective
maturity dates, unless prepaid prior thereto. Four Mortgage Loans, which
represent 0.5% of the Initial Pool Balance, are fully amortizing loans. The
remaining twenty two Mortgage Loans, which represent 22.3% of the Initial Pool
Balance, are ARD loans.
The original term to stated maturity of each Mortgage Loan, or in the case
of each ARD Loan, to its Anticipated Repayment Date was between 60 and 180
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 0 to 360 months. As of the Cut-off Date,
the remaining terms to stated maturity of the Mortgage Loans, or in the case of
each ARD Loan, to its Anticipated Repayment Date will range from 48 to 174
months, and the weighted average remaining term to stated maturity of the
Mortgage Loan, or in the case of each ARD Loan, to its Anticipated Repayment
Date will be 111 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 0 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 321 months. See "Risk Factors -- Risks
Related to the Mortgage Loans -- Balloon Payments and ARD Loans" in this
prospectus supplement.
Prepayment Provisions. All of the Mortgage Loans provided as of
origination either (a) that voluntary prepayments were prohibited until a period
generally two to seven months before the final payment date of such Mortgage
Loan, during which voluntary prepayments can be made without penalty, or (b) for
a sequence of three periods as follows:
(1) a period (a "Lock-out Period") during which voluntary principal
prepayments are prohibited, followed by
(2) 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
(3) 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 0 months to 172 months, with a
weighted average remaining Lock-out Period of 107 months. As of the Cut-off
Date, the Open Period for each Mortgage Loan ranged from 2 months to 7 months
prior to stated maturity or, in the case of an ARD Loan, the Anticipated
Repayment Date, with a weighted average Open Period of 3 months. 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
to this prospectus supplement.
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 collectibility of any Prepayment Premium. See "Risk Factors -- Risks
Related to the Mortgage Loans -- Prepayment Premiums" in this prospectus
supplement and "Certain Legal Aspects of Mortgage Loans -- Default Interest and
Limitations on Prepayments" in the accompanying prospectus.
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Defeasance. One hundred twenty-seven Mortgage Loans, representing 99.5% of
the Cut-off Date principal balance of the Mortgage Loans, permit the applicable
borrower at any time after a specified period (the "Defeasance Lock-Out
Period"), which (except with respect to the Early Defeasance Loans identified
below) is at least two years from the Trust Formation Date, provided no event of
default exists, to obtain a release of a Mortgaged Property from the lien of the
related Mortgage (a "Defeasance Option"). The borrower must meet certain
conditions in order to exercise its Defeasance Option. Among other conditions
the borrower must pay on any Due Date (the "Release Date"):
(1) all interest accrued and unpaid on the principal balance of the
Note to and including the Release Date
(2) all other sums, excluding scheduled interest or principal
payments, due under the Mortgage Loan and all other loan documents executed
in connection therewith and
(3) an amount (the "Collateral Substitution Deposit") that will be
sufficient to purchase direct non-callable obligations of the United States
of America providing payments (a) on or prior to, but as close as possible
to, all successive scheduled payment dates from the Release Date to the
related maturity date, (b) in amounts equal to the scheduled payments due
on such dates under the Mortgage Loan or the defeased amount thereof in the
case of a partial defeasance and (c) any costs and expenses incurred in
connection with the purchase of such U.S. government obligations.
In addition, the borrower must deliver a security agreement granting the
Trust Fund a first priority lien on the Collateral Substitution Deposit and
generally, an opinion of counsel to such effect. Simultaneously with such
actions, the related Mortgaged Property will be released from the lien of the
Mortgage Loan and the pledged U.S. government obligations (together with any
Mortgaged Property not released, in the case of a partial defeasance) will be
substituted as the collateral securing the Mortgage Loan. In general, a
successor borrower established or designated pursuant to the related loan
documents will assume all of the defeased obligations of a borrower exercising a
Defeasance Option under a Mortgage Loan and the borrower will be relieved of all
of the defeased obligations thereunder. Under the Pooling Agreement, the Master
Servicer will be required to enforce any provisions of the related Mortgage Loan
documents that require, as a condition to the exercise by the Mortgagor of any
defeasance rights, that the Mortgagor pay any costs and expenses associated with
such exercise.
Except with respect to the Early Defeasance Loans, all of the Mortgage
Loans that permit defeasance permit defeasance only after expiration of the
related Defeasance Lock-out Period.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan.
The following Mortgage Loans (the "Early Defeasance Loans") permit the
related borrower to defease the Early Defeasance Loans prior to the second
anniversary of the Trust Formation Date:
<TABLE>
<CAPTION>
EARLIEST
DEFEASANCE
LOAN DATE
---- ----------------
<S> <C>
Summit Loan (Loan No. 510238)......................... February 1, 2002
500 South Sepulveda Loan (Loan No. 540310)............ February 1, 2002
</TABLE>
The respective Early Defeasance Loans identified in the foregoing table are
each the primary asset of a single loan REMIC (the "Loan REMICs"). HVB has
agreed that, if the borrower under either Early Defeasance Loan gives notice of
its election to defease that Early Defeasance Loan on or before the second
anniversary of the Trust Formation Date, HVB will repurchase that Early
Defeasance Loan at par plus accrued interest, if any.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. 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
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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: (1) shall have provided, at least ten
(10) Business Days prior to the granting of such waiver or consent, to the
Directing Certificateholder 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 a request for approval of a waiver of the due-on-
encumbrance clause by the Directing Certificateholder or Special Servicer, as
the case may be, and (2) upon request made within such ten (10) Business Day
period, shall have discussed the matter with the Directing Certificateholder
and/or, in the case of the Master Servicer, with the Special Servicer, and (3)
in the case of the Master Servicer, shall have obtained the prior written
approval of the Special Servicer of a waiver of the due-on-encumbrance clause;
and provided, further, neither the Master Servicer nor the Special Servicer may
waive any right it has, or grant any consent it is otherwise entitled to
withhold, under any related "due-on-encumbrance" clause until it has received
written confirmation from each Rating Agency that such action would not result
in the downgrade, qualification (if applicable) or withdrawal of the rating then
assigned by such Rating Agency to any Class of Certificates. Notwithstanding the
foregoing, the existence of any additional indebtedness may increase the
difficulty of refinancing the related mortgage loan at maturity or the
anticipated repayment date and the possibility that reduced cash flow could
result in deferred maintenance. Also, if the holder of the additional debt has
filed for bankruptcy or been placed in involuntary receivership, foreclosure of
the related mortgage loan could be delayed. 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
accompanying 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. While the following information was accurate as of the Cut-off Date,
it may have changed if determined as of the Commencement Date.
Olen Residential Portfolio
The Loans. The Mortgage Loans (individually, the "Sanctuary Cove
Apartments Loan", the "Weston Place Apartments Loan", the "Durango Canyon North
Apartments Loan", and the "Durango Canyon South Apartments Loan", and
collectively, the "Olen Residential Portfolio Loans") are each secured by a
first deed of trust on apartment complexes located in North Palm Beach, Florida,
Weston, Florida or Las Vegas, Nevada. The Sanctuary Cove Apartments Loan, the
Weston Place Apartments Loan, the Durango Canyon North Apartments Loan and the
Durango Canyon South Apartments Loan were originated on November 22, 1999 and
have Cut-off Date Balances of $29,849,232, $26,165,960, $10,297,269 and
$21,303,408, respectively (representing 3.4%, 2.9%, 1.2% and 2.4% of the Initial
Pool Balance, respectively). The Sanctuary Cove Apartments Loan was made to the
Sanctuary Bay Trust Corp., the Weston Place Apartments Loan was made to Weston
Apartments Corp., the Durango Canyon North Apartments Loan was made to Durango
North Corp. and the Durango Canyon South Apartments Loan was made to the Durango
South Corp. Each borrower is a single purpose corporation and, other than the
borrower with respect to the Sanctuary Cove Apartments Loan, is owned 100% by
Olen Residential Realty Corp. The borrower with respect to the Sanctuary Cove
Apartments Loan is 50% owned by Olen Residential Realty Corp. and 50% owned by
SC Encumbrance Corp. Each Mortgage Loan is cross-collateralized and
cross-defaulted with the others.
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<PAGE> 45
The Olen Residential Portfolio Loans are ARD Loans that have remaining
terms of 111 months to their Anticipated Repayment Date. The Anticipated
Repayment Date is December 1, 2009 with a final maturity of December 1, 2029.
The Olen Residential Portfolio Loans may not be prepaid prior to and including
May 31, 2009. However, the Mortgage Loans are subject to defeasance with United
States Treasury obligations beginning December 1, 2003. Commencing seven months
prior to the Anticipated Repayment Date, the Mortgage Loans may be prepaid in
whole or in part in increments of $100,000 without the payment of a prepayment
penalty.
Additional terms and escrows for the Sanctuary Cove Loan, the Weston Place
Apartments Loan, the Durango Canyon North Apartments Loan and the Durango Canyon
South Apartments Loan are set forth in Annex A.
Partial Release/Defeasance. In the event a borrower with respect to the
Olen Residential Portfolio Loans elects to partially release/defease a mortgage
loan, such borrower will be required to provide direct, non-callable obligations
of the U.S. government in an amount equal to 125% of the allocated loan amount
for one or more of the mortgaged properties to be released. Conditions of
partial defeasance require the borrower to provide (i) appropriate and customary
opinions of independent counsel and (ii) written evidence from rating agencies
that such defeasance will not result in a withdrawal, qualification or downgrade
of the respective ratings of the Certificates.
The Properties. The property securing the Sanctuary Cove Apartments Loan
is a 419 unit apartment complex located in North Palm Beach, Florida. The
complex was built in two phases. Phase One was completed in 1996, while Phase
Two was completed in 1999. The property consists of 43 two and three story
buildings containing 112 one bedroom/one bath units, 190 two bedroom/two bath
units and 117 three bedroom/two bath units. The complex contains 467,382 of net
rentable square feet on 44.21 acres with 821 parking spaces. Project amenities
include two swimming pool/patio areas, a jacuzzi, two lighted tennis courts, a
lakeside gazebo/barbecue area, jogging trail, a man made beach area on the
Intercoastal Waterway, and a clubhouse/fitness/business center providing
entertainment facilities and a men's and women's sauna. The units have a full
amenity package inclusive of full size washers/dryers, built in microwaves,
ceiling fans, security systems, and screened patios or balconies.
The property securing the Weston Place Apartments Loan is a 372 unit
apartment complex on 29.9 acres. It is located in the municipality of Weston,
which is situated in the southwest portion of Broward County, Florida. The
complex was built in 1998 and consists of 35 two and three story buildings
containing 96 one bedroom/one bath units, 184 two bedroom/two bath units and 92
three bedroom/two bath units. There is a total of 437,120 net rentable square
feet with 845 parking spaces. Project amenities include a swimming pool/patio
area with jacuzzi, a clubhouse/fitness/business center with full kitchen,
billiards room, grand salon with fireplace, exercise room and sauna, two lighted
tennis courts, and two indoor racquetball courts. The units have a full amenity
package including full size washer/dryers, built in microwaves, security
systems, ceiling fans and screened patios or balconies.
The property securing the Durango Canyon North Apartments Loan is a 184
unit apartment complex located in the southwest section of Las Vegas, Nevada.
The complex was built in 1998 and consists of 23 two story buildings containing
80 one bedroom/one bath units and 104 two bedroom/two bath units. The complex
contains 185,808 of net rentable square feet on 8.96 acres with 342 parking
spaces. Project amenities include a swimming pool with patio area, a heated spa,
a clubhouse providing a full size kitchen, billiard room, media library, banquet
room, fitness center, recreation room, racquetball court and a volleyball court.
The units have a full amenity package including washers/dryers, oversized Roman
bathtubs, microwaves, ceiling fans, security systems, walk-in closets, exterior
storage rooms and patios or balconies. Security for the complex consists of
keyed electronic gates at access points and monitored alarm systems in each
unit.
The property securing the Durango Canyon South Apartments Loan is a 360
unit apartment complex located in the southwest section of Las Vegas, Nevada.
The complex was built in 1998 and consists of 45 two story buildings containing
56 one bedroom/one bath units, 232 two bedroom/two bath units and 72 three
bedroom/two bath units. The complex contains 390,964 of net rentable square feet
on 17.64 acres with 699 parking spaces of which 360 are covered. Project
amenities include two swimming pools with patio areas, a
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<PAGE> 46
heated spa, a clubhouse providing a full size kitchen, billiards room, media
library, banquet room, fitness center, and recreation room, two racquetball
courts, two lighted tennis courts and a playground area. The units have a full
amenity package including washers/dryers, oversized Roman bathtubs, microwaves,
ceiling fans, security systems, walk-in closets, and patios or balconies.
Property Management. The property is managed by Realty Services Corp., an
entity that is affiliated with the borrowing entity through common ownership.
Owned by Olen Properties and founded by Igor Olenicoff, Realty Services Corp.
manages over 8,000 units in 25 luxury apartment communities located in Nevada,
Florida or California. Other managed properties include 175 office and
industrial properties totaling over 3 million square feet in California. Realty
Services Corp. is not a third-party fee based management company and only exists
to exclusively manage company owned real estate.
Operating History -- Sanctuary Cove Apartments
<TABLE>
<CAPTION>
1999 1/00 - 6/00 2000 ORIGINATOR'S
ACTUAL 6 MOS. ANNUALIZED BUDGETED UNDERWRITTEN
---------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
Effective Gross Income (EGI)................ $2,973,053 $5,106,930 $5,304,990 $5,369,669
Operating Expenses.......................... 1,094,199 1,542,060 1,607,844 1,833,286
---------- ---------- ---------- ----------
Net Operating Income (NOI).................. 1,878,854 3,564,870 3,697,146 3,536,383
Cash Flow................................... 1,852,111 3,484,670 3,661,286 3,442,333
========== ========== ========== ==========
Occupancy................................... 51% 86% 89% 90%
DSCR based on NOI........................... 0.71x 1.35x 1.40x 1.33x
DSCR based on Cash Flow..................... 0.70x 1.32x 1.38x 1.30x
</TABLE>
Minimum lease term is either six or twelve months for both new and renewed
leases.
Operating History -- Weston Place Apartments
<TABLE>
<CAPTION>
1999 1/00 - 6/00 2000 ORIGINATOR'S
ACTUAL 6 MOS. ANNUALIZED BUDGETED UNDERWRITTEN
---------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
Effective Gross Income (EGI)................ $3,238,794 $4,567,100 $4,639,884 $4,522,609
Operating Expenses.......................... 1,424,794 1,663,166 1,586,857 1,671,172
---------- ---------- ---------- ----------
Net Operating Income (NOI).................. 1,814,000 2,903,934 3,053,027 2,851,437
Cash Flow................................... 1,801,694 2,849,704 3,039,677 2,777,037
========== ========== ========== ==========
Occupancy................................... 66% 93% 93% 93%
DSCR based on NOI........................... 0.79x 1.26x 1.32x 1.24x
DSCR based on Cash Flow..................... 0.78x 1.24x 1.32x 1.20x
</TABLE>
Minimum lease term is either six or twelve months for both new and renewed
leases.
Operating History -- Durango Canyon North Apartments
<TABLE>
<CAPTION>
1999 1/00 - 6/00 2000 ORIGINATOR'S
ACTUAL 6 MOS. ANNUALIZED BUDGETED UNDERWRITTEN
---------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
Effective Gross Income (EGI)................ $1,397,409 $1,769,284 $1,850,311 $1,716,731
Operating Expenses.......................... 472,505 521,710 552,330 556,046
---------- ---------- ---------- ----------
Net Operating Income (NOI).................. 924,904 1,247,574 1,297,981 1,160,685
Cash Flow................................... 916,693 1,234,348 1,290,810 1,119,285
========== ========== ========== ==========
Occupancy................................... 68% 92% 92% 91%
DSCR based on NOI........................... 1.02x 1.37x 1.43x 1.28x
DSCR based on Cash Flow..................... 1.01x 1.36x 1.42x 1.23x
</TABLE>
Minimum lease term is either six or twelve months for both new and renewed
leases.
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<PAGE> 47
Operating History -- Durango Canyon South Apartments
<TABLE>
<CAPTION>
1999 1/00 - 6/00 2000 ORIGINATOR'S
ACTUAL 6 MOS. ANNUALIZED BUDGETED UNDERWRITTEN
---------- ----------------- ---------- ------------
<S> <C> <C> <C> <C>
Effective Gross Income (EGI)................ $2,734,057 $3,640,320 $3,620,173 $3,654,353
Operating Expenses.......................... 924,463 946,736 1,080,649 1,116,184
---------- ---------- ---------- ----------
Net Operating Income (NOI).................. 1,809,594 2,693,584 2,539,524 2,538,169
Cash Flow................................... 1,793,618 2,673,820 2,525,495 2,456,809
========== ========== ========== ==========
Occupancy................................... 68% 89% 92% 91%
DSCR based on NOI........................... 0.96x 1.43x 1.35x 1.35x
DSCR based on Cash Flow..................... 0.95x 1.42x 1.34x 1.31x
</TABLE>
Minimum lease term is either six or twelve months for both new and renewed
leases.
The Residence Inn Loan
The Loan. The Mortgage Loan (the "Residence Inn Loan"), which is secured
by a first mortgage lien on ten upper-tier, extended-stay hotels, represents
approximately 6.1% of the Initial Pool Balance. The Residence Inn Loan was
originated on December 29, 1999, and has a principal balance of $54,698,161 as
of the Cut-off Date. The Residence Inn Loan was made to Residence Inn III, LLC,
a Delaware limited liability company. Borrower's counsel has provided a
non-consolidation opinion.
The Residence Inn Loan has a remaining term of 112 months and matures on
January 1, 2010. The Residence Inn Loan may not be prepaid prior to, and
including, November 1, 2009. However, the Residence Inn Loan is subject to
defeasance with United States Treasury obligations beginning two years from the
Trust Formation Date. The Residence Inn loan may be prepaid without payment of a
prepayment penalty during the two months preceding the maturity date.
Additional terms and escrows for the Residence Inn Loan are set forth in
Annex A.
The Properties. The collateral for the Residence Inn Loan consists of ten
upper-tier extended-stay hotels flagged under Residence Inn by Marriott. The
hotels are managed by Residence Inn by Marriott, Inc., one of the largest
lodging companies in the world. The properties are under a long term management
agreement expiring December 2011 with automatic extension options of five
ten-year renewal periods. The related mortgaged properties are located in seven
states for geographic diversity. The hotels have 1,150 rooms in the aggregate.
<TABLE>
<CAPTION>
YR. BUILT/
ROOMS RENOVATED
----- ----------
<S> <C> <C>
Residence Inn -- Montgomery, AL............................. 94 1990
Residence Inn -- Bakersfield, CA............................ 114 1990
Residence Inn -- Pleasant Hill, CA.......................... 126 1990
Residence Inn -- San Ramon, CA.............................. 106 1990
Residence Inn -- Meriden, CT................................ 106 1990
Residence Inn -- Atlanta (Hapeville), GA.................... 126 1990
Residence Inn -- Boston (Tewksbury), MA..................... 130 1989
Residence Inn -- Cincinnati (Blue Ash), OH.................. 118 1990
Residence Inn -- Houston, TX................................ 110 1990/1997
Residence Inn -- Dallas (Irving), TX........................ 120 1989
</TABLE>
Debt Service Coverage Covenant. The loan documents contain a debt service
coverage covenant, which is tested quarterly based on a prior twelve months
actual operations. In the event the aggregate debt service coverage based on
actual revenues and expenses net of appropriate reserves, taxes and insurance
drops below 1.50x, a cash sweep will take effect. The cash sweep will subside
when two full months of debt service have been collected. The two months of debt
service will be held as additional collateral and may be used to pay down the
loan or fund any debt service shortfalls.
S-45
<PAGE> 48
Debt Service Reserve. Two months of debt service will be held in escrow
for the term of the mortgage loan. The escrow account is pledged as additional
collateral for the loan and may be applied to reduce the mortgage loan.
Meriden, Connecticut Ground Lease. The Meriden, CT property is encumbered
by a ground lease. The ground lease expires in October 2013. The ground lease
has ten (10) renewal options of five (5) years each, which are automatically
renewed for a total of 50 years. At ground lease expiration, the borrower must
pre-pay $1,500,000 to exercise the first five (5) year extension option. To
mitigate this risk, the borrower will begin making monthly escrow payments
beginning in year six (6) through the duration of the loan term into a ground
lease payment escrow account.
Partial Release/Defeasance. In the event the borrower elects to partially
release/defease at any permitted time, the borrower will provide direct,
non-callable obligations of the U.S. government in an amount equal to 125% of
the allocated loan amount for one or more of the properties to be released.
Conditions of partial defeasance require the borrower to provide (i) appropriate
and customary opinions of independent counsel and (ii) written evidence from
rating agencies that such defeasance will not result in a withdrawal,
qualification or downgrade of the respective ratings of the Certificates.
Furthermore, as a condition of the borrower's ability to defease less than all
of the properties constituting collateral for the mortgage loan, the borrower
will be required to provide satisfactory evidence, that, after partial
defeasance, the remaining properties will support a debt service coverage at
least equal to the greater of (i) the debt service coverage ratio at the time of
closing of the loan or (ii) the debt service coverage ratio immediately prior to
the partial defeasance.
Sponsorship. In addition to the 77% limited partnership interest in the
subject properties, Crestline Capital leases approximately 119 full service
hotels in the upscale and luxury segments of the lodging industry and subleases
approximately 71 limited service hotels from Host Marriott REIT. In addition,
Crestline Capital owns approximately 31 senior living communities located in 13
states which contain over 7,450 units. The senior living communities are
generally a quality segment of private pay customers. As a spin off from Host
Marriott Corporation, Crestline Capital has significant managerial experience in
the lodging and senior living industries.
Operating History
<TABLE>
<CAPTION>
1998 1999 ORIGINATOR'S
ACTUAL ACTUAL UNDERWRITTEN
----------- ----------- ------------
<S> <C> <C> <C>
Effective Gross Income (EGI)......................... $37,278,961 $38,003,248 $32,742,844
Operating Expenses................................... 21,741,513 21,684,834 20,119,031
----------- ----------- -----------
Net Operating Income (NOI)........................... 15,537,448 16,318,414 12,623,813
Cash Flow............................................ 13,581,306 14,426,938 11,038,118
=========== =========== ===========
Occupancy............................................ 87% 86% 75%
DSCR based on NOI.................................... 2.65x 2.78x 2.15x
DSCR based on Cash Flow.............................. 2.31x 2.46x 1.88x
</TABLE>
The SCI Portfolio
The Loan. The Mortgage Loans (the "1401 Elm Street & 500 West 7th Street
Loan" and the "1025 Elm Street Loan") are each secured by a first mortgage
encumbering several office buildings. The 1401 Elm Street & 500 West 7th Street
Loan is secured by a first mortgage encumbering a condominium interest in a
51-story office building located at 1401 Elm Street in the central business
district of Dallas and a first mortgage encumbering a 21-story office building
located at 500 West 7th Street in the central business district of Ft. Worth.
Both properties are subject to ground leases. For 1401 Elm Street, the ground
lease interest covers the entire property's 1.86 acres. For 500 West 7th Street,
the ground lease interest covers 1.3888 acres out of 2.73 acres. The 1025 Elm
Street Loan is secured by a first mortgage encumbering a 10-story office
building located at 1025 Elm Street in the central business district of Dallas.
The mortgage loans represent approximately 3.8% and 1.0% of the Initial Pool
Balance, respectively. Both mortgage loans were
S-46
<PAGE> 49
originated on November 1, 1999. The 1401 Elm Street & 500 West 7th Street Loan
and 1025 Elm Street Loan have principal balances as of the Cut-off Date of
$34,189,373 and $8,923,623, respectively.
The 1401 Elm Street & 500 West 7th Street Loan was made to Elm Street
Portfolio, L.P., a Texas Limited Partnership and the 1025 Elm Street Loan was
made to 1025 Elm Holdings, L.P. a Texas Limited Partnership. Borrower's counsel
provided a non-consolidation opinion at origination.
Both the 1401 Elm Street & 500 West 7th Street Loan and 1025 Elm Street
Loan have remaining terms of 110 months and mature on November 1, 2009. Both the
1401 Elm Street Loan & 500 West 7th Street Loan and 1025 Elm Street Loan may not
be prepaid prior to, and including, September 1, 2009. However, both loans are
subject to defeasance with United State Treasury obligations beginning two years
after the Trust Formation Date. Both the 1401 Elm Street & 500 West 7th Street
Loan and the 1025 Elm Street Loan may be prepaid without the payment of a
prepayment penalty during the two months preceding the maturity date of the
loans.
The Properties. The 1401 Elm Street and 500 West 7th Street office
buildings were constructed in 1964 and 1961, respectively. The 1401 Elm Street
property is a concrete and steel high-rise with marble cladding on the first
eight floors. Each of the first eight floors have 60,000 square feet floor
plates, while floors nine through fifty-one have floor plates of 30,000 square
feet each. Located in the central business district of Dallas, the property
encompasses an entire city block, and is located next to the new DART rail
system which runs through the heart of downtown Dallas. It contains 1,095,000
square feet of net rentable area and an underground 3-level garage containing
545 parking spaces. The borrower owns a 43% condominium interest in the building
(but a 50% voting interest in the Condominium Regime) covering lower levels 1
and 2, and floors 1st through 9th. The condominium interest covers 428,884
square feet of net rentable area of which Bank of America, N.A. is the sole
office tenant occupying 418,646 square feet. The remaining 10,238 square feet is
retail space of which 7,105 square feet is occupied by 3 tenants.
The 500 West 7th street office building is a concrete and steel high-rise
with the first three floors having 28,000 square feet plates and the floors four
through twenty-one with floor plates of 14,000 square feet each. Located in the
central business district of Ft. Worth it encompasses an entire city block. It
contains 288,971 square feet of net rentable area and a detached 7-level garage
containing 484 parking spaces. Bank of America, N.A. is the largest office
tenant occupying 115,203 square feet or 39.9% of the total 285,198 square feet
of office space.
The 1025 Elm Street property was originally constructed in 1925, added a
parking deck in 1960 and underwent a total rehabilitation in 1989. The ten story
building has 137,534 net rentable square feet which is ninety-nine percent (99%)
occupied by Bank of America, N.A. and one percent (1%) occupied by Barbecue,
Etc. The property is located in the central business district of Dallas.
Escrows. In addition to the normal escrows for taxes & insurance and
capital replacements, two special reserve accounts have been established. The
first is a ground lease escrow into which 36 months of ground lease payments
were deposited. The borrower is required to maintain the 36 month balance in
escrow during the term of the loan, except that, during the three year period
prior to the maturity date of the loan, the borrower may use such funds for the
payment of ground rents only. The second escrow established is for tenant
improvements and leasing commissions. It was originally funded with a combined
deposit for all three properties, and is scheduled to increase through cash
sweeps of the lock box account if the major tenant, Bank of America, N.A., does
not renew its lease within 2 years of lease expiration.
Lock Box Account. A hard lock box was established at closing. All revenue
from the tenants in excess of the amount necessary to pay debt service and
required reserves will accrue for the benefit to the borrower and, provided no
event of default shall have occurred, the excess will be returned to the
borrower at the end of each month. If at any time the debt service coverage
ratio falls below 1.20x over a three month trailing period, a cash sweep of all
cash flow, after debt service, escrow reserves and all related operating
expenses, is required as additional collateral for the loan, up to an amount
equaling nine months of debt service. In the event the debt service falls below
a 1.10x for any month(s), the lender may review and terminate the property
manager.
Property Management. Both buildings are managed by SCI ROEV Realty Group
LP, a management company that is related to borrower through common principals.
SCI ROEV Realty Group LP manages all
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<PAGE> 50
the space owned by the borrower and it is controlled by SCI Real Estate
Development and ROEV General. The principals behind SCI Real Estate Development
and ROEV General have extensive backgrounds in managing large commercial real
estate. SCI ROEV Realty Group L.P. has 1,551,000 square feet under management,
with 1,214,000 square feet of that space being in the Dallas and Fort Worth
markets.
Operating History -- SCI Portfolio - 1401 Elm St. & 500 W. 7th St.
<TABLE>
<CAPTION>
1998 1999 ORIGINATOR'S
ACTUAL ACTUAL UNDERWRITTEN
----------- ----------- ------------
<S> <C> <C> <C>
Effective Gross Income (EGI)......................... $10,850,671 $11,037,109 $11,795,061
Operating Expenses................................... 4,881,116 5,028,247 5,408,953
----------- ----------- -----------
Net Operating Income (NOI)........................... 5,969,555 6,008,861 6,386,108
Cash Flow............................................ 5,969,555 5,938,066 5,195,198
=========== =========== ===========
Occupancy............................................ 94%
DSCR based on NOI.................................... 1.76x 1.78x 1.89x
DSCR based on Cash Flow.............................. 1.76x 1.76x 1.54x
</TABLE>
Operating History -- SCI Portfolio - 1025 Elm Street
<TABLE>
<CAPTION>
1998 1999 ORIGINATOR'S
ACTUAL ACTUAL UNDERWRITTEN
----------- ----------- ------------
<S> <C> <C> <C>
Effective Gross Income (EGI)......................... $ 2,037,345 $ 2,112,208 $ 2,223,330
Operating Expenses................................... 708,724 770,707 823,411
----------- ----------- -----------
Net Operating Income (NOI)........................... 1,328,621 1,341,501 1,399,919
Cash Flow............................................ 1,328,621 1,341,014 1,176,544
=========== =========== ===========
Occupancy............................................ 100%
DSCR based on NOI.................................... 1.51x 1.52x 1.59x
DSCR based on Cash Flow.............................. 1.51x 1.52x 1.33x
</TABLE>
Elevators. The 1401 Elm property contains 25 passenger car elevators
(2,500 lbs to 3,500 lbs) and two freight car elevator (1 at 4,000 lbs and 1 at
6,000). The 500 West 7th property contains 14 passenger car elevators (2,500 lbs
to 3,000 lbs) and two freight car elevator (1 at 3,500 lbs and 1 at 4,000 lbs.).
The 1025 Elm property contains three passenger car elevators (3,000 lbs/500
fpm), and one freight car elevator (2,000 lbs/100 fpm).
HVAC. The 1401 Elm property is heated and cooled by high velocity dual
duct 4-pipe system. The high velocity system is supplied hot and chilled water
from a central boiler/chiller system composed of 5 low pressure steam boilers of
which the newest is 17 years old and 3 chillers ranging from 1,000 to 2,000 tons
of which two are original and one was installed in 1997. The chillers are served
by two roof mounted cooling towers of which one is original and is scheduled to
be replaced and the other was installed in 1980.
The 500 West 7th property is heated and cooled by a central conditioned air
handler located on the 21st floor. The unit supplies all the fresh air for the
building. Heating is supplied by two boilers installed in 1985. Cooling is
supplied by two centrifugal chillers installed in 1984. The chillers are rated
at 600 and 700 tons. The chillers are served by a roof mounted cooling tower
installed in 1983.
In the 1025 Elm property, heating and fresh air conditioning are provided
by two primary fresh air makeup units located at the 5th floor. One unit feeds
floors 1 to 5 and the other feeds floors 6 to 10. There is also one additional
unit for the 2nd floor located on the 1st floor. The units supply conditioned
fresh air to two individual air handlers at each floor which provide conditioned
air to the interior zone at each floor. Air distribution is by duct. The air
handler units are supplied hot and chilled water by a 2-pipe system from a
central boiler and chiller system. There are two roof mounted chillers, one at
100 tons and one at 200 tons. The boilers are of 1960 vintage and are scheduled
to be replaced during the life of the loan.
S-48
<PAGE> 51
Major Tenant. Bank of America, N.A. (A+, S&P) is the largest tenant at the
three buildings, occupying 97.6%, 39.9% and 99.2% of the net rentable area at
1401 Elm Street, 500 West 7th Street and 1025 Elm Street, respectively. The
loans' maturity dates are November 1, 2009 while the Bank of America, N.A.
leases extend beyond the loan term and mature December 31, 2009.
The Interstate Corporate Center Loan
The Loan. The Mortgage Loan ("Interstate Corporate Center Loan") is
secured by a first mortgage encumbering a seventeen-building office park located
in Norfolk, Virginia, and represents approximately 3.0% of the Initial Pool
Balance. Originated on June 29, 2000, the loan has a principal balance as of the
Cut-off Date of $26,580,260. The Interstate Corporate Center Loan was made to
Interstate Office Holdings, L.L.C.
The Interstate Corporate Center Loan has a remaining term of 118 months and
matures on July 1, 2010. The Interstate Corporate Center Loan may not be prepaid
prior to, and including, May 1, 2010. However, the Interstate Corporate Center
Loan is subject to defeasance with United States Treasury obligations beginning
two years from the Trust Formation Date.
Additional terms and escrows for the Interstate Corporate Center Loan are
set forth in Annex A.
The Property. The Interstate Corporate Center is a seventeen-building
office park that was developed as a Koger Center. The buildings are all one- and
two-story, and contain, in the aggregate, net rentable square feet of 430,833.
All of the buildings have reinforced concrete slab-on-grade with low slope roofs
with metal decking and single-ply "rubber" roofing membranes. The exterior wall
construction varies for each building, but is typically brick, stucco and
concrete.
Built in 1968 and first renovated in 1977, the property was purchased by
the current owner in May 1999, who subsequently renovated and re-tenanted. The
property achieved stabilization in early 2000.
Property Management. The property is managed by Harbor Group Management
Company, a related entity to Interstate Office Holdings, L.L.C., who manages
approximately 1.9 million square feet and has over 15 years experience.
Operating History
<TABLE>
<CAPTION>
1998 ORIGINATOR'S
ACTUAL UNDERWRITTEN
---------- ------------
<S> <C> <C>
Effective Gross Income (EGI)................................ $5,350,775 $5,804,142
Operating Expenses.......................................... 2,395,307 2,168,864
---------- ----------
Net Operating Income (NOI).................................. 2,955,468 3,635,278
Cash Flow................................................... 2,246,003 3,080,503
========== ==========
Occupancy................................................... 91%
DSCR based on NOI........................................... 1.20x 1.48x
DSCR based on Cash Flow..................................... 0.92x 1.26x
</TABLE>
Major Tenants. The largest tenant is Harris Publishing, which occupies
9.7% of net rentable area and has a lease maturity date of June 30, 2002.
Bernard C. Harris occupies 6.4% of net rentable area and has a lease maturity
date of June 30, 2001.
111 West Jackson Loan
The Loan. The Mortgage Loan (the "111 West Jackson Loan") is secured by a
first mortgage encumbering an office building in Chicago, Illinois, and
represents approximately 2.9% of the Initial Pool Balance. Originated on
February 9, 2000, the loan has a principal balance as of the Cut-off Date of
$26,057,903. The 111 West Jackson Loan was made to P & S Limited Partners, an
Illinois Limited Partnership.
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<PAGE> 52
The 111 West Jackson Loan has a remaining term of 114 months and matures on
March 1, 2010. The 111 West Jackson Loan may not be prepaid prior to, and
including, December 1, 2009. However, the 111 West Jackson Loan is subject to
Defeasance with United States Treasury obligations beginning two years from the
Trust Formation Date.
Additional terms and escrows for the 111 West Jackson Loan are set forth in
Annex A.
The Property. The 111 West Jackson Street Office Property is a Class B
office building in the south sector of the Chicago Central Business District,
commonly known as the Financial District. Completed in 1960, the subject has
been significantly upgraded during the period of ownership by the Borrower and
converted from a three tenant building to a more flexible facility with
multi-tenant floors and amenities. This 25-story office building comprises two
primary uses: retail and office. The retail component is on the first floor and
encompasses 21,334 square feet, and the office component is housed on floors 3
through 25 and encompasses 519,044 net rentable square feet. The second floor is
the mechanical floor. Combined, the building contains a net rentable area of
540,351 square feet, enveloped by the gross building area that totals 648,649
square feet. In addition to the retail and office mix, the property contains
underground parking for a limited number of "executive parking spaces" of up to
90 cars.
The borrower has been successful in converting the building to a
competitive property in the market. The tenant mix is comprised of large
corporate tenants including Union Tank Car's corporate headquarters comprising
over 100,000-sq. ft., of rentable space, REFCO which comprises in excess of
46,000 sq. ft., and The United States Census Bureau which leases an entire
floor. In addition, several floors are comprised of smaller tenants who have a
high degree of focus and association to the Chicago Board of Trade that is
literally adjacent to the collateral property. In conjunction with the
reorientation of the property in the leasing market, the building has been
upgraded to be competitive including updated common area space and utilities.
As noted above, the property is very well located in the Central Loop and
in the heart of the Financial District of Chicago. The property is conveniently
located to The Chicago CTA "el" transportation system that is two blocks east.
Accessible within walking distance are the Federal Reserve Bank, City Hall, Cook
County Courthouse, and the State of Illinois Building. The Chicago Board of
Trade is contiguous to the building and Bank of America, N.A.'s Chicago
headquarters is across the street from the property. Access to the other parts
of the CBD is good as well as access to Michigan Avenue and Lake Shore Drive.
Property Management. The property is managed by Big Bear Properties, Inc.,
an affiliate of the P & S Limited Partners who manages in excess of one million
square feet of other commercial real estate.
Major Tenant. Union Tank Car (A+, S&P) occupies 18.6% of net rentable area
and has a lease maturity date of December 31, 2001. REFCO occupies 8.7% of net
rentable area and has a lease maturity date of October 31, 2001.
Operating History
<TABLE>
<CAPTION>
1999 ORIGINATOR'S
ACTUAL UNDERWRITTEN
---------- ------------
<S> <C> <C>
Effective Gross Income (EGI)................................ $9,262,200 $9,633,681
Operating Expenses:......................................... $5,734,067 $5,382,605
---------- ----------
Net Operating Income (NOI).................................. $3,528,133 $4,251,076
Cash Flow................................................... $2,704,648 $3,103,778
========== ==========
Occupancy................................................... 90% 87%
DSCR based on NOI........................................... 1.42x 1.71x
DSCR based on Cash Flow:.................................... 1.09x 1.25x
</TABLE>
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
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<PAGE> 53
appear herein are defined in Annex A. See Annex B hereto for certain information
with respect to capital improvement, replacement and tenant improvement reserve
accounts, as well as certain other information with respect to Multifamily
Mortgaged Properties.
Delinquencies. As of the Cut-off Date, no Mortgage Loan will have been 30
days or more delinquent in respect of any Monthly Payment during the past 12
months. All of the Mortgage Loans were originated during the 36 months prior to
the Cut-off Date.
Tenant Matters. Seventy of the retail, office, special purpose and
industrial Mortgaged Properties, which represent security for 43.0% of the
Initial Pool Balance, are leased in large part to one or more Major Tenants. The
three concentrations of Major Tenants with respect to more than one property
(groups of Mortgage Loans where the same company is a Major Tenant of each
Mortgage Loan in the group) represent 4.8% (Bank of America, N.A.), 1.8%
(Publix) and 1.7% (Chubb Computer Services) 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 and Other Non-Fee Interests. Seven Mortgage Loans, which
represent 15.3% of the Initial Pool Balance, are, in each such case, secured
primarily 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
accompanying prospectus. Mortgage Loan No. 180602 (the "Gateway Village Loan"),
which represents 0.9% of the Initial Pool Balance, is secured primarily by a
Mortgage on the borrower's estate for years interest in the related Mortgaged
Property through 2015. In such case, by joinder to the related Mortgage, the
remainderman has subordinated its fee interest in the related Mortgaged Property
to the interest of the holder of the Mortgage Loan.
Subordinate Financing
We are aware that three of the mortgaged properties relating to the
Mortgage Loans, representing 2.1% of the Initial Pool Balance, were encumbered
by subordinate debt as of the Cut-off Date. 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. Five of the Mortgage Loans, representing 12.4% of the
Initial Pool Balance, expressly permit unsecured indebtedness subject to certain
conditions.
Generally. The existence of subordinated indebtedness encumbering a
mortgaged property 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. Regardless of whether
the terms of a mortgage loan prohibit the incurrence of subordinate debt, the
related borrower may be permitted to incur additional indebtedness secured by
furniture, fixtures and equipment, and to incur additional unsecured
indebtedness. See "Certain Legal Aspects of Mortgage Loans -- Subordinate
Financing" in the accompanying prospectus.
Lender/Borrower Relationships. The Mortgage Loan Sellers or the Depositor
or any of 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
Sellers, the Depositor or such other entities.
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CERTAIN UNDERWRITING MATTERS
Environmental Assessments
Each of the Mortgaged Properties was subject to an environmental site
assessment consisting of a "Phase I" or, in the case of certain Mortgage Loans
having an initial principal balance under $1,000,000 a transaction screen or an
update of a previously conducted assessment, which assessment or update was
conducted generally in accordance with industry-wide standards, during or after
June 1997. No such assessment or update otherwise revealed any material adverse
environmental condition or circumstance at any Mortgaged Property, except the
potentially materially adverse conditions or circumstances as set forth below or
in certain other cases in which environmental site assessments recommend
corrective action to address environmental conditions, and which environmental
conditions have been mitigated, or are expected to be addressed in the manner
and within the time frames specified in third-party clean-up agreements or the
related Mortgage Loan documents.
The Mortgage Loan Sellers will not make any representation or warranty with
respect to environmental conditions arising after the Trust Formation Date, and
will not be obligated to repurchase any Mortgage Loan due to any such condition.
Generally. 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, 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.
Owners of residential housing constructed prior to 1978 are required by
federal law to disclose to potential residents or purchasers any known
lead-based paint hazards and violations can incur 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 Environmental Protection Agency has identified certain health risks
associated with elevated radon gas in buildings, and has recommended that
certain mitigating measures be considered.
When recommended by environmental site assessments, operations and
maintenance plans (addressing in some cases ACMs, lead-based paint, and/or
radon) were required, except in the case of certain Mortgaged Properties where
the environmental consultant conducting the assessment also identified the
condition of the ACM as good and non-friable(i.e., not easily crumbled). In a
few instances where related Mortgage Loan documents required the submission of
operations and maintenance plans, these plans have yet to be received. There can
be no assurance that recommended operations and maintenance plans have been or
will continue to be implemented. In many cases, certain potentially adverse
environmental conditions were not tested for. For example, lead based paint and
radon were tested for only 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; however, at several Multifamily
Mortgaged Properties located in geographic areas where radon is prevalent, radon
testing was not conducted.
Certain of the Mortgaged Properties have off-site leaking underground
storage tank ("UST") sites located nearby which the environmental assessments
either have indicated are not likely to contaminate the related Mortgaged
Properties but may require future monitoring or have identified a party not
related to the mortgagor (borrower) as responsible for such condition. Certain
other Mortgaged Properties may contain contaminants in the soil or groundwater
at levels which the environmental consultant has advised are below regulatory
levels or otherwise are indicative of conditions typically not of regulatory
concern and are not likely to require any further action. In some cases, there
was no further investigation of a potentially adverse environmental condition.
In a few instances where related Mortgage Loan documents required ACM repair or
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removal and the submission of a confirmation that this work has been performed,
the confirmations have yet to be received.
In the case of the Mortgage Loan secured by the Meridian Corners
Apartments, the Mortgaged Property is located within a larger area designated as
a superfund site by the United States Environmental Protection Agency. While
studies have revealed areas of soil and groundwater contamination within the
area, a Phase I environmental site assessment conducted in connection with the
origination of the Mortgage Loan did not reveal contamination at the Mortgaged
Property itself. Although groundwater could still potentially become
contaminated, remedial action in such area is expected to commence this year,
reducing the potential for contamination at the Mortgaged Property. The
activities at the Mortgaged Property have not contributed to the contamination
in the area. The parties responsible for the contamination have been identified
and do not include the related Mortgagor. In the event the Mortgaged Property
were to be affected by such contamination, the Trust would have the benefit of a
Subgroup Environmental Policy to the extent described under "-- Environmental
Policy" below.
The environmental assessments revealed other adverse environmental
conditions such as the existence of old or abandoned USTs needing replacement or
removal, possible polychlorinated byphenyl materials 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 or are expected to
be implemented. At certain Mortgaged Properties, a leaking UST has been, or is
in the process of being, removed and cleanup is being undertaken with state
oversight. In at least one such case, response costs are expected to be
reimbursed by a state UST cleanup fund.
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 Sellers, the
Underwriters, the Master Servicer, the Special Servicer, the Trustee, the REMIC
Administrator, or any of their respective affiliates. There can be no assurance
that such environmental assessments or studies, as applicable, identified all
environmental conditions and risks, or that any such environmental conditions
will not have material adverse effect on the value or cash flow of the related
Mortgaged Property.
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. (In the event a Phase I assessment already
exists that is less than 12 months old, a new assessment will not be required
under the Pooling Agreement. In the event a Phase I assessment already exists
that is between 12 and 18 months old, only an updated data base will be
required.) 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 accompanying prospectus.
Property Condition Assessments
Inspections of each 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
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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 independent appraiser that is either a member of the Appraisal Institute
("MAI") or state certified performed an appraisal (or updated an existing
appraisal) of each of the related Mortgaged Properties in connection with or
subsequent to the origination of each Mortgage Loan in order to establish that
the appraised value of the related Mortgaged Property or Properties exceeded the
original principal balance of the Mortgage Loan. Such appraisal or property
valuation was prepared on or about the "Appraisal Date" indicated on Annex A
hereto, and except for certain mortgaged properties involving operating
businesses, 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 Sellers, the Underwriters, 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 (except for appraisals
conducted with respect to some of the Mortgaged Properties at the time of
origination by appraisers then in the employ of Bank of America).
Zoning and Building Code Compliance. Bank of America, with respect to
the Bank of America Mortgage Loans, and HVB, with respect to the HVB Mortgage
Loans, have examined whether the use and operation of the Mortgaged Properties
were in material compliance with all zoning, land-use, ordinances, rules,
regulations and orders applicable to such Mortgaged Properties at the time such
Mortgage Loans were originated. The Mortgage Loan Sellers may have considered
opinions, certifications from government officials and/or representations by the
related borrower contained in the related Mortgage Loan documents information
contained in appraisals and surveys, title insurance endorsements, or property
condition assessments undertaken by independent licensed engineers. Certain
violations may exist, but neither Bank of America, with respect to the Bank of
America Mortgage Loans, nor HVB, with respect to the HVB Mortgage Loans, has
notice of any material existing violations with respect to the Mortgaged
Properties securing such Mortgage Loans.
In some cases, the use, 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, Bank of America, with respect to the Bank
of America Mortgage Loans, and HVB, with respect to the HVB Mortgage Loans, have
determined that in the event of a material casualty affecting the Mortgaged
Property that either:
(1) the extent of the nonconformity is not material,
(2) insurance proceeds together with the value of the remaining
property would be available and sufficient to pay off the related Mortgage
Loan in full,
(3) 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
(4) 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
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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. The Mortgage Loans 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 Federal 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 Loan 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 Loan generally further requires the related borrower to
maintain business interruption insurance in an amount not less than 100% of the
gross rental income from the related Mortgaged Property for not less than six
months.
In general, the Mortgage Loans (including those secured by Mortgaged
Properties located in California) do not require earthquake insurance. Forty of
the Mortgaged Properties, securing 24.2% of the Initial Pool Balance, are
located in areas that are considered a high earthquake risk. These areas include
all or parts of the states of California, Oregon, Washington, Utah and Nevada.
Mortgaged Properties with respect to two of the Mortgage Loans having a
"probable maximum loss" (PML) in excess of 20%, representing 0.9% of the Initial
Pool Balance, do not have earthquake insurance.
THE MORTGAGE LOAN SELLERS
Bank of America is a national banking association. The principal office of
Bank of America is in Charlotte, North Carolina. Bank of America was formed by
the merger on July 23, 1999 of Bank of America, N.A. (known prior to July 5,
1999 as NationsBank, N.A.) and Bank of America NT&SA (the "Merger"). Bank of
America is a wholly-owned subsidiary of NB Holdings Corporation, which in turn
is a wholly-owned subsidiary of Bank of America Corporation.
HVB is a wholly owned subsidiary of Bayerische Hypo-und Vereinsbank AG
("HypoVereinsbank"). HVB was incorporated in New York in 1997 to acquire and
securitize commercial real estate mortgages. The principal office in the United
States, for both HVB and HypoVereinsbank, is 150 East 42nd Street, New York,
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New York 10017-4679. HypoVereinsbank together with its consolidated
subsidiaries, including HVB ("HVB Group"), is the second largest bank in Germany
and one of the largest financial institutions in Europe, as measured by total
assets of Euro539.9 billion as of June 30, 2000. It had a market capitalization
of Euro28.5 billion at the end of June, 2000. HypoVereinsbank is the first "bank
of the regions" in Europe, and the HVB Group is the largest provider of real
estate finance in Europe. HypoVereinsbank's registered address is Am Tucherpark
16, 80538 Munich, Germany.
The information set forth herein concerning Bank of America has been
provided by Bank of America. The information set forth herein concerning HVB has
been provided by HVB. Neither the Depositor nor the Underwriters make any
representation or warranty as to the accuracy or completeness of such
information.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES
On or prior to the Trust Formation Date, by agreement with the Depositor,
the Mortgage Loan Sellers (except as described in the next paragraph) assigned,
sold and transferred the Mortgage Loans, without recourse, to the Trustee for
the benefit of the Certificateholders. In connection with such assignment, Bank
of America was required to deliver the following documents, among others, to the
Trustee (and copies to the Master Servicer) with respect to each Bank of America
Mortgage Loan, and HVB was required to deliver the following documents among
others to the Trustee with respect to each HVB Mortgage Loan:
(1) the original Mortgage Note, endorsed (without recourse) to the
order of the Trustee;
(2) 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;
(3) 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;
(4) 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);
(5) 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);
(6) a title insurance policy (or copy thereof) effective as of the
date of the recordation of the Mortgage Loan, together with all
endorsements or riders thereto (or if the policy has not yet been issued,
an original or copy or a written commitment "marked-up" at the closing of
such Mortgage Loan, interim binder or the pro forma title insurance policy
evidencing a binding commitment to issue such policy);
(7) 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
(8) in those cases where applicable, the original or a copy of the
related ground lease.
Some or all of the Bank of America Mortgage Loans were instead transferred
to the Trustee by a Delaware business trust wholly owned by Bank of America (the
"BOA Owner Trust II"). With respect to such Mortgage Loans, Bank of America has
nevertheless made the representations and warranties described below under
"-- Representations and Warranties; Repurchases" and, at the direction of such
business trust, has been required to deliver the documents listed above.
The Trustee is required to review the documents delivered thereto by Bank
of America (regardless whether so delivered at the direction of the Depositor or
the BOA Owner Trust II) with respect to each Bank of America Mortgage Loan and
by HVB with respect to each HVB 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, where applicable,
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was not delivered with respect to any Mortgage Loan or that any such document is
defective based on the Mortgage Loan review criteria set forth in the Pooling
Agreement, 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 either Bank of America (if, but only if the
affected Mortgage Loan is a Bank of America Mortgage Loan) or HVB (if, but only
if the affected Mortgage Loan is a HVB Mortgage Loan) will be obligated, except
as otherwise described below, within a period of 90 days 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 (other than Excess Interest) 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), any interest on any Advances and any related unreimbursed Additional
Trust Fund Expenses. However, with respect to Non-Specially Serviced Mortgage
Loans only, if such defect or breach is capable of being cured but not within
the 90 day period and Bank of America or HVB, as the case may be, has commenced
and is diligently proceeding with cure of such defect or breach within such 90
day period, then Bank of America or HVB, as the case may be, shall have, with
respect to Non-Specially Serviced Mortgage Loans only, an additional 90 days to
complete such cure or, failing such cure, to repurchase the related Mortgage
Loan (such possible additional cure period shall not apply in the event of a
defect that causes the Mortgage Loan not to constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code or not to meet certain
Code-specified criteria with respect to required loan-to-value ratio, customary
prepayment penalties or permissible defeasance).
With respect to any Cross-Collateralized Mortgage Loan, the repurchase
obligations of Bank of America (with respect to the Bank of America Mortgage
Loans only) and HVB (with respect to the HVB Mortgage Loans only) shall apply to
any other Mortgage Loan with which such Mortgage Loan is cross-collateralized or
cross-defaulted.
Additionally, as more fully described under "Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans -- Defeasance," two
of the HVB Loans permit the related borrower to defease the Mortgage Loan prior
to the second anniversary of the Trust Formation Date. In the event either such
borrower gives notice of its election to defease on or before the second
anniversary of the Trust Formation Date, HVB will be required to repurchase the
Mortgage Loan.
The respective cure/repurchase obligations of Bank of America (in the case
of Bank of America Mortgage Loans only) and HVB (in the case of HVB Mortgage
Loans only) will constitute the sole remedies available to the
Certificateholders for any failure on the part of Bank of America or HVB, as the
case may be, 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 Bank of America or HVB, as the case may be, 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 neither Bank of
America nor HVB will 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 to attempt to obtain such document or such copy.
The Pooling Agreement requires that the assignments in favor of the Trustee
with respect to each Mortgage Loan described in clauses (4) and (5) of the first
paragraph under this heading be submitted for recording in the real property
records of the appropriate jurisdictions within a specified number of days
following the Trust Formation Date at the expense of Bank of America (with
respect to the Bank of America Mortgage Loans only) or HVB (with respect to the
HVB Mortgage Loans only). See "The Pooling and Servicing
Agreements -- Assignment of Mortgage Loans; Repurchases" in the accompanying
prospectus.
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REPRESENTATIONS AND WARRANTIES; REPURCHASES
Mortgage Loans. In the Pooling Agreement, Bank of America represented and
warranted solely with respect to the Bank of America Loans, and HVB represented
and warranted solely with respect to the HVB Mortgage Loans, in each case as of
the Trust Formation Date or as of such earlier date specifically provided in the
related representation or warranty, among other things, substantially as
follows:
(1) 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;
(2) 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"); such Permitted
Encumbrances do not materially affect the value of the Mortgaged Property,
materially interfere with the security intended to be provided by the
related Mortgages, the current use of the related Mortgaged Property or the
ability of the related borrower to timely pay in full the principal and
interest on the Mortgage Loan.
(3) 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;
(4) 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;
(5) there is no valid offset, defense or counterclaim to any Mortgage
Loan;
(6) it has not waived any material default, breach, violation or event
of acceleration existing under any Mortgage or Mortgage Note;
(7) 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;
(8) all insurance coverage required under each Mortgage securing a
Mortgage Loan is in full force and effect with respect to the related
Mortgaged Property;
(9) 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;
(10) 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
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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);
(11) 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);
(12) the proceeds of each Mortgage Loan have been fully disbursed, and
there is no requirement for future advances thereunder;
(13) 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;
(14) 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;
(15) Except in the case of the Gateway Village Loan, the related
borrower's interest in each Mortgaged Property securing a Mortgage Loan
consists of a fee simple and/or leasehold estate or interest in real
property;
(16) no Mortgage Loan contains any equity participation by the lender
(except Loan No. 52134, with respect to which an affiliate of Bank of
America owns a 99.9% limited partnership interest), 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 except for an ARD Loan to the extent described
under "-- Certain Terms and Conditions of the Mortgage
Loans -- Hyperamortization"; and
(17) 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, Bank of America, as to the Bank of America
Mortgage Loans only, and HVB, as to the HVB Mortgage Loans only, has also made
the representations, among other things, concerning the priority and certain
terms of ground leases securing Mortgage Loans. Bank of America has also
represented and warranted, as of the Trust Formation Date, that, immediately
prior to the transfer of the Bank of America Mortgage Loans to the Trustee, Bank
of America or the BOA Owner Trust II had good and marketable title to, and was
the sole owner of, each Bank of America Mortgage Loan and had full right and
authority to sell, assign and transfer such Bank of America Mortgage Loan. HVB
has also represented and warranted as of the Trust Formation Date, that
immediately prior to the transfer of the HVB Mortgage Loans, HVB had good and
marketable title to the HVB Mortgage Loans, and was the sole owner of each such
HVB Mortgage Loan and had the full right and authority to sell, assign and
transfer such HVB Mortgage Loan). Bank of America, as to the Bank of America
Mortgage Loans only, and HVB, as to the HVB Mortgage Loans only, also
represented that the Mortgage File relating to each Mortgage Loan contains an
appraisal of the Mortgaged Property, and that such appraisal and the related
appraisal satisfy the requirements of Title XI of the Federal Financial
Institutions, Reform, Recovery and Enforcement Act of 1989 and the regulations
promulgated thereunder, all as in effect on the date the Mortgage Loan was
originated.
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If Bank of America discovers or is notified of a breach of any of the
foregoing representations and warranties with respect to any Bank of America
Mortgage Loan, or HVB discovers or is notified of a breach of any of the
foregoing representations and warranties with respect to any HVB Mortgage Loan,
and in any case such breach materially and adversely affects the value of such
Mortgage Loan or the interests of Certificateholders therein, then either Bank
of America (if, but only if, the affected Mortgage Loan is a Bank of America
Mortgage Loan) or HVB (if, but only if, the affected Mortgage Loan is a HVB
Mortgage Loan) will be obligated, within a period of 90 days following its
discovery or receipt of notice of such defect or breach to repurchase such
Mortgage Loan at the applicable Purchase Price. However, if such defect or
breach is capable of being cured (but not within the 90 day period) and Bank of
America or HVB, as the case may be, has commenced and is diligently proceeding
with cure of such defect or breach within 90 day period, Bank of America or HVB,
as the case may be, shall have an additional 90 days to complete such cure or,
failing such cure, to repurchase the related Mortgage Loans (such possible
additional cure period shall not apply on the event of a defect that causes the
Mortgage Loan not to constitute a "qualified mortgage" within the meaning of
Section 860G(a)(3) of the Code or not to meet certain Code-specified criteria
with respect to required loan-to-value ratio, customary prepayment penalties or
permissible defeasance).
The foregoing cure/repurchase obligation of Bank of America or HVB, as
applicable, 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 either the Bank of America or HVB, as applicable, defaults on its
obligation to do so. Bank of America and HVB will be the sole Warranting Parties
(as defined in the accompanying prospectus) in respect of the Mortgage Loans,
Bank of America being the sole Warranting Party with respect to the Bank of
America Mortgage Loans and HVB being the sole Warranting Party with respect to
the HVB Mortgage Loans. See "The Pooling and Servicing
Agreements -- Representations and Warranties; Repurchases" in the accompanying
prospectus. In addition, each of the foregoing representations and warranties by
Bank of America or HVB was made as of the Trust Formation Date or such earlier
date specifically provided in the related representation and warranty, and
neither Bank of America nor HVB will be obligated to cure or repurchase any
Mortgage Loan due to any breach arising from events subsequent to the date as of
which such representation or warranty was made.
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 constituted on the
Cut-off Date, 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.
The Depositor believes that the information set forth herein is representative
of the characteristics of the Mortgage Pool as constituted on the Cut-off Date,
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 the Mortgage
Pool as set forth in the preceding paragraph, such removal will be noted in the
Form 8-K.
ENVIRONMENTAL POLICY
Except with respect to the Mortgage Loans identified as the "Loan-Specific
Policy Mortgage Loans" below, in the event of the existence of certain pollution
conditions, the Trust may have the benefit of an environmental insurance policy
(each, a "Subgroup Environmental Policy") issued by AIG Environmental (the
"Environmental Insurer"). Coverage under a Subgroup Environmental Policy will
apply if a pollution condition exists and the Mortgage Loan is in default, and
will be in a maximum amount per occurrence generally equal to 125% of the
outstanding principal balance of such Mortgage Loan, subject to the limits
described below.
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Mortgage Loans having Cut-off Date Balances up to $5,000,000 will be
covered by an Subgroup Environmental Policy that is subject to coverage limits
of $6,250,000 per occurrence and $68,000,000 in the aggregate. Mortgage Loans
having Cut-off Date Balances between $5,000,000 and $10,000,000 will be covered
by a Subgroup Environmental Policy that is subject to coverage limits of
$12,500,000 per occurrence and $63,000,000 in the aggregate. Mortgage Loans
having Cut-off Date Balances between $10,000,000 and $20,000,000 will be covered
by a Subgroup Environmental Policy that is subject to coverage limits of
$22,500,000 per occurrence and $59,000,000 in the aggregate. Mortgage Loans
having Cut-off Date Balances between $20,000,000 and $30,000,000 will be covered
by a Subgroup Environmental Policy that is subject to coverage limits of
$37,500,000 per occurrence and $54,000,000 in the aggregate. In the event a
Mortgage Loan covered by a Subgroup Environmental Policy is repurchased by a
Mortgage Loan Seller for any reason, such Mortgage Loan Seller (or its
transferee) will be entitled to the benefit of such Subgroup Environmental
Policy with respect to such Mortgage Loan, and any claims paid to such Mortgage
Loan Seller (or its transferee) will reduce the remaining coverage available for
claims by the Trustee (or a servicer on its behalf) under such Subgroup
Environmental Policy.
Each of the following Mortgage Loans (each, a "Loan-Specific Policy
Mortgage Loan") is not covered by a Subgroup Environmental Policy, but is
instead covered by an individual environmental insurance policy (each, a
"Loan-Specific Environmental Policy") issued by the Environmental Insurer and
obtained by the original lender in connection with the origination of such
Mortgage Loan: Loan Nos. 51961, 51962, 52323, 52649, 51903 and 51826. Coverage
under each Loan-Specific Environmental Policy will apply if an adverse
environmental condition exists and the related Mortgage Loan is in default, and
is generally limited up to a maximum amount equal to 125% of the outstanding
principal balance of such Mortgage Loan.
The Environmental Insurer is a member of the AIG group of companies, which
has been assigned a rating as of the Trust Formation Date of "AAA" from S&P,
"A++" from A.M. Best and "Aaa" from Moody's.
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 on behalf of the Trust, in the best
interests and for the benefit of the Certificateholders, in accordance with any
and all applicable laws, the terms of the Pooling Agreement, 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
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 (1) 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; (2) the ownership of any Certificate by the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof; (3) the Master
Servicer's obligation to make Advances (as defined herein); (4) the Special
Servicer's obligation to direct the Master Servicer to make Servicing Advances
(as defined herein); and (5) 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; (6) any credit that it has extended to
any mortgagor and (7) the servicing of other mortgage loans by the Master
Servicer or the Special Servicer, as the case may be.
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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: (1) the related borrower has failed to make when due any
Balloon Payment, which failure has continued, and such borrower has not
delivered to the Master Servicer on or before the due date of such Balloon
Payment a written refinancing commitment from an acceptable lender and
reasonably satisfactory in form and substance to the Master Servicer which
provides such refinancing will occur within 60 days after the date of such
Balloon Payment (provided that if such refinancing does not occur during such
time, a Servicing Transfer Event will be deemed to have occurred); (2) 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; (3) 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; (4) there shall
have occurred a default under the related loan documents, other than as
described in clause (1) or (2) above, that may, in the Master Servicer's or the
Special 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); (5) 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; (6) 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; (7) 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 (8) the Master Servicer or the Special
Servicer shall have received notice of the commencement of foreclosure or
similar proceedings with respect to the related Mortgaged Property. The Master
Servicer shall continue to collect information and prepare all reports to the
Trustee required under the Pooling Agreement 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 (1) and (2)
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);
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(x) with respect to the circumstances described in clauses (3), (5),
(6) and (7) 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 (4) of the
preceding paragraph, such default is cured; and
(z) with respect to the circumstances described in clause (8) 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, the Trustee and the
Rating Agencies. The Directing Certificateholder may object to any Asset Status
Report within 10 business days of receipt; provided, however, the Special
Servicer (i) will, following the occurrence of an extraordinary event with
respect to the related Mortgaged Property, take any action set forth in such
Asset Status Report before the expiration of a ten business day period if it has
reasonably determined that failure to take such action would materially and
adversely affect the interests of the Certificateholders and it has made a
reasonable effort to contact the Directing Certificateholder and (ii) in any
case, will determine whether such disapproval is not in the best interest of all
the Certificateholders pursuant to the Servicing Standard. In connection with
making such affirmative determination, the Special Servicer may request a vote
by all Certificateholders, but 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. However, the Special Servicer may not take any action that is contrary
to applicable law or the terms of the applicable Mortgage Loan documents. 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, in accordance with the Servicing Standard makes a
determination that (i) such objection is not in the best interests of the
Certificateholders or (ii) following the occurrence of an extraordinary event
with respect to the related Mortgaged Property, the failure to take any action
set forth in such Asset Status Report before the expiration of a ten business
day period would materially and adversely affect the interests of the
Certificateholders and it has made a reasonable effort to contact the Directing
Certificateholder.
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 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 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 Standard, or the REMIC Provisions.
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 25%
of its initial Certificate Balance (or, if no Class of Sequential Pay
Certificates has a Certificate Balance at least equal to 25% of its initial
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Certificate Balance, then the Controlling Class shall be the outstanding Class
of Sequential Pay Certificates with the then largest outstanding Class principal
balance. The Controlling Class as of the Delivery Date will be the Class P
Certificates.
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 accompanying 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
ORIX Real Estate Capital Markets, LLC ("ORIX") or an affiliate thereof will
act as the master servicer (the "Master Servicer") pursuant to the Pooling
Agreement. ORIX is a Delaware limited liability company. ORIX manages a
servicing portfolio of commercial and multifamily loans encompassing in excess
of 11,000 assets with an aggregate principal balance, as of June 30, 2000, of
approximately $38.5 billion, the collateral for which is located in 50 states,
Puerto Rico, the District of Columbia, Canada, Mexico, the United Kingdom and
the Virgin Islands. ORIX's servicing operations and principal offices of the
Master Servicer are located at 1717 Main Street, 12th Floor, Dallas, Texas
75201. The Master Servicer will be responsible for servicing the Mortgage Loans
(other than Specially Serviced Mortgage Loans and REO Properties). Although the
Master Servicer is authorized to employ agents to directly service certain of
the Mortgage Loans as long as they are not Specially Serviced Mortgage Loans,
the Master Servicer will remain liable for its servicing obligations under the
Pooling Agreement.
The information set forth herein concerning the Master Servicer has been
provided by ORIX and neither the Depositor nor the Underwriters make any
representation or warranty as to the accuracy or completeness of such
information.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation and a subsidiary of LNR
Property Corporation ("LNR"), will initially be appointed as special servicer of
the Mortgage Loans. The principal executive offices of the Special Services are
located at 760 NW 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)
acquiring, developing, managing and repositioning commercial and multi-family
residential real estate properties, (ii) acquiring (often in partnership with
financial institutions or real estate funds) and managing portfolios of mortgage
loans and other real estate related assets, (iii) investing in unrated and
non-investment grade rated commercial mortgage-backed securities ("CMBS") as to
which LNR has the right to be special servicer, and (iv) making high yielding
real estate related loans and equity investments. The Special Servicer has
regional offices located across the country in Florida, Georgia, Oregon and
California. As of September 1, 2000, the Special Servicer and its affiliates
were managing a portfolio which included an original count of over 11,000 assets
in most states with an original face value of over $52 billion, most of which
are commercial real estate assets. Included in this managed portfolio are $47
billion of commercial real estate assets in 63 securitization transactions, for
which the Special Servicer is 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
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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 Lennar Partners, Inc. and neither the Depositor nor the Underwriters
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 (1) assume such
party's rights and obligations under such Sub-Servicing Agreement, (2) 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 (3) terminate such Sub-Servicer without
cause (but only upon payment to the Sub-Servicer of specified compensation);
except that with respect to the HVB Mortgage Loans, the Sub-Servicer may not be
terminated except in the event of default under the Sub-Servicing Agreement or
if it is no longer an approved servicer by the Rating Agencies. The Master
Servicer and Special Servicer will each be required to monitor the performance
of Sub-Servicers retained by it.
The Trust will not be responsible for any fees owed to any Sub-Servicer
retained by the Master Servicer or the Special Servicer. 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 Stated Principal Balance as of
the Due Date in the immediately preceding Collection Period 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, and without giving effect to any Excess Interest that may accrue
on the ARD Loans on or after its Anticipated Repayment Date. The "Master
Servicing Fee Rate" will range from .0808% to .2908% per annum, on a
loan-by-loan basis, with a weighted average Master Servicing Fee Rate of .12052%
per annum as of the Cut-off Date. In the event that ORIX 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 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.
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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 and any Excess Interest)
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 other than a Specially-
Serviced Mortgage Loan (a "Non-Specially Serviced 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 and
any Excess Interest) on such prepayment will constitute a "Prepayment Interest
Shortfall". Prepayment Interest Excesses (to the extent not offset by Prepayment
Interest Shortfalls) 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 Non-Specially Serviced 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 Distribution Date, which
portion is, in the case of each and every Non-Specially Serviced Mortgage Loan,
calculated at .02% 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 or advanced 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 .25% per annum (the "Special Servicing Fee Rate"), on the Stated Principal
Balance as of the Due Date in the immediately preceding Collection Period 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, and without giving effect to any Excess Interest that may accrue
on the ARD Loans on or after its Anticipated Repayment Date. 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 Excess Interest) and principal (including scheduled payments,
prepayments, Balloon Payments, Liquidation Proceeds (other than in connection
with Liquidation Proceeds paid by the holder or holders of Certificates
evidencing a majority interest in the Controlling Class) 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), resigns or is replaced, 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 or unscheduled or partial payments
in lieu thereof 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 Excess Interest or
Default Interest). Notwithstanding anything to the contrary described above, no
Liquidation Fee will be payable based on, or out
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of, Liquidation Proceeds received in connection with (i) the repurchase of any
Mortgage Loan by the Mortgage Loan Sellers, for a breach of representation or
warranty or for defective or deficient Mortgage Loan documentation so long as
such repurchase occurs within the time required under the Pooling Agreement,
(ii) the purchase of any Specially Serviced Mortgage Loan or REO Property by the
Master 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, the Special 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 Master Servicer (except to
the extent the Sub-Servicers are entitled thereto pursuant to the applicable
Sub-Servicing Agreement) 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 (other than Excess
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 Mortgage Loan that is a Specially Serviced Mortgage
Loan (if, but only if, such Default Interest and late payment charges are
allocable to the period such Mortgage Loan was 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 Master Servicer (except to the extent
the Sub-Servicers are entitled thereto pursuant to the applicable Sub-Servicing
Agreement) (or, with respect to accounts held by the Special Servicer, the
Special Servicer) shall be entitled to receive all amounts collected for checks
returned for insufficient funds with respect to the Mortgage Loans as additional
servicing compensation. Additionally, Default Interest and late payment charges
accrued in respect of any Mortgage Loan after it has become a Specially Serviced
Mortgage Loan (and only while it remains 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 (subject to recoverability), 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). The Special Servicer will be
required to direct the Master Servicer to make Servicing Advances (which include
certain Servicing Advances that must be made within five Business Days in order
to
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avoid a material adverse consequence to the Trust Fund (any such Advance, an
"Emergency Advance")); provided that the Special Servicer may, at its option,
make such Servicing Advance itself (including Emergency Advances). The Special
Servicer is, however, obligated to make any Servicing Advance with respect to
Specially Serviced Mortgage Loans and REO Properties which it fails to timely
request the Master Servicer to make. The Special Servicer may from time to time
require the Master Servicer to reimburse it for any Servicing Advance (including
an Emergency Advance) made by the Special Servicer (after reimbursement, such
Servicing Advance will be deemed to have been made by the Master Servicer). The
Special Servicer will be relieved of any obligations with respect to a Servicing
Advance that it timely requests the Master Servicer to make (regardless of
whether or not the Master Servicer makes that Advance). However, if the Trustee
directs the Special Servicer to direct the Master Servicer to make a Servicing
Advance, the Special Servicer is required to give such direction within two (2)
Business Days.
If the Master Servicer is required under the Pooling Agreement to make a
Servicing Advance, but fails to do 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 Master Servicer notice of
such failure and, if such failure continues for five more business days, the
Trustee will be required to make such Servicing Advance.
The Master 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 or the Trustee, as the case may
be, ultimately recoverable from Related Proceeds (any Servicing Advance not so
recoverable, a "Nonrecoverable Servicing Advance"). The Trustee will be
permitted to rely on any nonrecoverability determination made by the Master
Servicer or the Special Servicer.
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 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 (compounded monthly) on Servicing Advances made thereby. See
"The Pooling and Servicing Agreements -- Certificate Account" and "-- Servicing
Compensation and Payment of Expenses" in the accompanying prospectus and
"Description of the Certificates -- P&I Advances" in this prospectus supplement.
EVIDENCE AS TO COMPLIANCE
On or before April 30 of each year, beginning April 30, 2001, 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 on the basis of such examination
conducted substantially in compliance with generally accepted auditing standards
and the Uniform Single Attestation Program for Mortgage Bankers, such servicing
has been conducted in compliance with similar agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
generally accepted auditing standards and the Uniform Single Attestation Program
for Mortgage Bankers require it to report, in which case such exceptions and
errors shall be so reported.
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The Pooling Agreement will also require that, on or before a specified date
in each year, commencing in 2001, 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 (as to Non-Specially Serviced Mortgage Loans) and the
Special Servicer (as to Specially Serviced Mortgage Loans) 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 (including as described below with respect
to Excess Interest), the Master Servicer shall not agree to any
modification, waiver or amendment of any term of, with respect to, any
Mortgage Loan without the consent of the Special Servicer (which shall
decide whether to withhold or grant such consent in accordance with the
Servicing Standard) and neither the Master Servicer nor 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, 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 or the Special
Servicer's good faith and reasonable judgment, would materially alter the
security for such Mortgage Loan or reduce the likelihood of timely payment
of amounts due thereon; provided, 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, or beyond a date
which is 20 years prior to the expiration date of any related Ground Lease
or, in the case of any Mortgage Loan having as of the Cut-off Date a
related Ground Lease that did not have a term extending 20 years or more
beyond the maturity date of such Mortgage Loan, beyond a date which is 10
years or more beyond the maturity date of such Mortgage Loan;
(iii) unless the proviso to clause (i) above applies, 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
constitute a "significant modification" of such Mortgage Loan within the
meaning of Treasury Regulations Section 1.860G-2(b) (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 (A) 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
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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 (B) the Master Servicer or the
Special Servicer, as the case may be, shall have obtained written
confirmation from such Rating Agency that such addition or substitution
will not result in the withdrawal, downgrade or qualification of any rating
then assigned to any Class of Certificates;
(v) with limited exceptions, including a permitted defeasance as
described above under "Description of the Mortgage Pool -- Certain Terms
and Conditions of the Mortgage Loans -- Defeasance" and specific releases
contemplated by the terms of the mortgage loans in effect on the Trust
Formation Date, neither the Master Servicer nor the Special Servicer shall
release any collateral securing an outstanding Mortgage Loan; and
In addition, assumptions of Non-Specially Serviced Mortgage Loans will also
require the consent of the Special Servicer (which consent shall not be
unreasonably withheld). 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.
With respect to any ARD Loan, the Master Servicer shall be permitted, in
its discretion, to waive all or any accrued Excess Interest if, prior to the
related maturity date, the related borrower has requested the right to prepay
such Mortgage Loan in full together with all other payments required by such
Mortgage Loan in connection with such prepayment except for all or a portion of
accrued Excess Interest, provided that the Master Servicer's determination to
waive the right to such accrued Excess Interest is reasonably likely to produce
a greater payment to Certificateholders on a present value basis than a refusal
to waive the right to such Excess Interest. Any such waiver will not be
effective until such prepayment is tendered. The Master Servicer will have no
liability to the Trust, the Certificateholders or any other person so long as
such determination is based on such criteria. Except as permitted by clauses (i)
through (v) of the preceding paragraph, the Special Servicer will have no right
to waive the payment of Excess Interest.
The Master Servicer will not be required to seek the consent of the Special
Servicer or any Certificateholder in order to approve certain minor or routine
modifications, waivers or amendments of the Mortgage Loans, including waivers of
minor covenant defaults, releases of non-material parcels of a Mortgaged
Property, grants of easements that do not materially affect the use or value of
a Mortgaged Property or a borrower's ability to make any payments with respect
to the related Mortgage Loan; provided that any such modification, waiver or
amendment may not affect a payment term of the Certificates, constitute a
"significant modification" of such Mortgage Loan pursuant to Treasury
Regulations Section 1.860G-2(b) or otherwise have an adverse REMIC effect, be
inconsistent with the Servicing Standard, or violate the terms, provisions or
limitations of the Pooling Agreement.
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 business 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
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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.
In the event a defaulted Mortgage Loan is not purchased as described above,
the Special Servicer may offer to sell or otherwise realize upon any such
defaulted Mortgage Loan 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 will 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 will accept the highest cash offer
received from any person that constitutes a fair price for such Mortgage Loan.
In the absence of any offer determined as provided below to be fair, the Special
Servicer will proceed with respect to such defaulted Mortgage Loan in accordance
with the requirements of the Pooling Agreement and, otherwise, in accordance
with the Servicing Standard.
The Special Servicer will use its best efforts to solicit offers for each
REO Property in such manner as will be reasonably likely to realize a fair price
within the time period provided for in the Pooling Agreement. The Special
Servicer will accept the first (and, if multiple offers are received
contemporaneously, highest) cash offer received from any person that constitutes
a fair price (determined pursuant to requirements described below) for such REO
Property. If the Special Servicer reasonably believes that it will be unable to
realize a fair price for any REO Property within the applicable time
constraints, the Special Servicer will dispose of such REO Property upon such
terms and conditions as the Special Servicer deems necessary and desirable to
maximize the recovery thereon under the circumstances and, in connection
therewith, will accept the highest outstanding cash offer, regardless of from
whom received.
Whether any cash offer constitutes a fair price for any defaulted Mortgage
Loan or REO Property, as the case may be, will be determined by the Special
Servicer or, if such cash offer is from the Special Servicer, the Master
Servicer, the Depositor, the Mortgage Loan Sellers, the holder of any
Certificate or any affiliate of any such party (each, an "Interested Person"),
by the Special Servicer (or, if such Interested Person is the Special Servicer,
the Trustee). In determining whether any offer received from an Interested
Person represents a fair price for any such Mortgage Loan or REO Property, the
Special Servicer or the Trustee, as the case may be, will rely on the most
recent appraisal or updated appraisal within the preceding 12-month period or,
in the absence of any such appraisal, on a narrative appraisal prepared by a
qualified appraiser.
When any Interested Person is among those making an offer with respect to a
defaulted Mortgage Loan or REO Property, the Special Servicer will require that
all offers be submitted in writing and be accompanied by a refundable deposit of
cash in an amount equal to 5% of the offered amount. In determining whether any
offer from a Person other than an Interested Person constitutes a fair price for
any such Mortgage Loan or REO Property, the Special Servicer will take into
account (in addition to the results of any appraisal, updated appraisal or
narrative appraisal that it may have obtained pursuant to the Pooling Agreement
within the prior 12 months), and in determining whether any offer from an
Interested Person constitutes a fair price for any such Mortgage Loan or REO
Property, any appraiser or other expert in real estate matters will be
instructed to take into account, as applicable, among other factors, the period
and amount of any delinquency on the affected Mortgage Loan, the occupancy level
and physical condition of the Mortgaged Property or REO Property, the state of
the local economy and the obligation to dispose of any REO Property within the
required time period.
No cash offer from any Interested Person in an amount less than the related
Purchase Price will constitute a fair price for any defaulted Mortgage Loan or
REO Property unless such offer is the highest cash offer received and at least
two additional offers have been received from independent third parties
reflecting prices less than the related Purchase Price. The Purchase Price for
any defaulted Mortgage Loan or REO Property will in all cases be deemed a fair
price.
Notwithstanding any of the foregoing paragraphs, the Special Servicer will
not be obligated to accept the highest cash offer if the Special Servicer
determines, in accordance with the Servicing Standard, that rejection of such
offer would be in the best interests of the Certificateholders, and the Special
Servicer may accept a lower cash offer (other than from itself or an affiliate)
if it determines, in accordance with the Servicing
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Standard, that acceptance of such offer would be in the best interests of the
Certificateholders offered by the prospective buyer making the lower offer are
more favorable). See also "The Pooling and Servicing Agreements--Realization
Upon Defaulted Mortgage Loans" in the accompanying 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 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, REMIC II, REMIC
IIU or REMIC III 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.
In general, the Special Servicer will be obligated to cause any Mortgaged
Property acquired as REO Property to be operated and managed 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, such as 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" in the accompanying prospectus.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
Commencing in 2001, the Master Servicer or, in the case of any inspection
required to be performed 60 days after delinquency, the Special 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) and 60 days after delinquency, provided that at least 50%
of the Mortgaged Properties (by both number and aggregate Stated Principal
Balances of the related Mortgage Loans) will be inspected each year by the
Master Servicer (or an entity
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employed by the Master Servicer for such purpose) or, as described in the
following sentence, the Special Servicer. 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, annual or other periodic 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 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.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Depositor originally issued its Commercial Mortgage Pass-Through
Certificates, Series 2000-2 (the "Certificates") on September 22, 2000 (the
"Trust Formation Date"), pursuant to a Pooling and Servicing Agreement, dated as
of the Cut-off Date, among the Depositor, the Master Servicer, the Special
Servicer, the Trustee, the REMIC Administrator and the Mortgage Loan Sellers
(the "Original Pooling Agreement"). Interests in the trust established by the
Original Pooling Agreement corresponding to the Offered Certificates were issued
to the Mortgage Loan Sellers in partial consideration for the Mortgage Loans. On
and as of October 27, 2000 (the "Delivery Date"), the Mortgage Loan Sellers will
transfer interests corresponding to the Offered Certificates to the Depositor,
the Depositor will transfer such interests to the Trustee in exchange for the
Offered Certificates, and the Original Pooling Agreement will be amended and
restated in accordance with its terms to enable the issuance of the Offered
Certificates. The Original Pooling Agreement, as so amended and restated, is
referred to in this prospectus supplement as the "Pooling Agreement".
The Offered Certificates, together with the Private Certificates, will
represent in the aggregate the entire beneficial 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, the Interest Reserve Account and the Excess Interest
Distribution Account (see "The Pooling and Servicing Agreements -- Certificate
Account" in the accompanying prospectus).
The Certificates will consist of twenty two classes (each, a "Class") to be
designated as: (i) the Class A-1 Certificates and the Class A-2 Certificates
(collectively, the "Class A Certificates" and together with the Class X
Certificates, the "Senior 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, the Class K Certificates, the Class L Certificates, the
Class M Certificates, the Class N Certificates, the Class O Certificates and the
Class P Certificates (collectively with the Class A Certificates, the
"Sequential Pay Certificates"); (iii) the Class X Certificates (the "Class X
Certificates", and collectively with the Sequential Pay Certificates, the "REMIC
Regular Certificates"); (iv) the Class V Certificates; and (v) the Class R-I
Certificates, the Class R-II Certificates, the Class R-IIU Certificates and the
Class R-III Certificates (collectively, the "REMIC Residual Certificates"). Only
the Class X, Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F,
Class G and Class H Certificates (collectively, the "Offered Certificates") are
offered hereby.
The Class J, Class K, Class L, Class M, Class N, Class O, Class P and Class
V 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
accompanying
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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 accompanying 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 of transfers and exchanges of
the Offered Certificates.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
On the Delivery Date, 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>
APPROXIMATE
PERCENT OF APPROXIMATE
CERTIFICATE POOL CREDIT
CLASS BALANCE(1) BALANCE(1) SUPPORT(1)
----- ------------------- ------------ -----------
<S> <C> <C> <C>
Class A-1.................................... $198,316,225 22.308% 24.021%
Class A-2.................................... $477,137,063 53.671% 24.021%
Class X...................................... $889,004,533 N/A N/A
Class B...................................... $ 37,816,366 4.254% 19.768%
Class C...................................... $ 24,469,413 2.752% 17.015%
Class D...................................... $ 17,795,938 2.002% 15.013%
Class E...................................... $ 8,897,968 1.001% 14.012%
Class F...................................... $ 11,122,461 1.251% 12.761%
Class G...................................... $ 17,795,937 2.002% 10.760%
Class H...................................... $ 11,122,460 1.251% 9.508%
Class J...................................... $ 34,479,629 3.878% 5.630%
Class K...................................... $ 5,561,230 0.626% 5.004%
Class L...................................... $ 6,673,476 0.751% 4.254%
Class M...................................... $ 2,224,492 0.250% 4.004%
Class N...................................... $ 6,673,477 0.751% 3.253%
Class O...................................... $ 4,448,984 0.500% 2.752%
Class P...................................... $ 24,469,414 2.752% N/A
</TABLE>
---------------
(1) As of the Delivery Date (assuming receipt of all scheduled payments through
the Commencement Date and there are no prepayments other than those actually
received prior to the Commencement Date).
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 Certificates will not have a Certificate Balance. The Class X
Certificates will represent the right to receive distributions of interest
accrued as described herein on a notional amount ("Notional Amount") equal to
the aggregate of the Certificate Balances of all of the Classes of Sequential
Pay
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Certificates outstanding from time to time. The Notional Amount of the Class X
Certificates as of the Commencement Date will be $889,004,533.
Neither the Class V nor the 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 B,
Class C, Class D, Class E and Class F Certificates will, for any Distribution
Date, at all times, be equal to the rate set forth on the cover of this
prospectus supplement. However, the Pass-Through Rates of the Class A-2, Class
B, Class C, Class D, Class E and Class F Certificates will not exceed the
Weighted Average Net Mortgage Rate on any Distribution Date. The Pass-Through
Rate for the Class G Certificates will, for any Distribution Date, be equal to
the Weighted Average Net Mortgage Rate minus 0.14% per annum. The Pass-Through
Rate for the Class H Certificates will, for any Distribution Date, be equal to
the Weighted Average Net Mortgage Rate.
The Pass-Through Rate applicable to the Class X Certificates for the
November 2000 Distribution Date will equal approximately 1.0940% per annum. The
Pass-Through Rate applicable to the Class X Certificates for each subsequent
Distribution Date will, in general, equal the excess, if any, of (i) the
Weighted Average Net Mortgage Rate, over (ii) the weighted average of the
Pass-Through Rates applicable to the Sequential Pay Certificates for such
Distribution Date (weighted on the basis of their respective Certificate
Balances immediately prior to such Distribution Date), such that the interest
accrued at such Pass-Through Rate on the Notional Amount of the Class X
Certificates will, in general, equal the sum of the amounts by which interest
accrued at the Weighted Average Net Mortgage Rate on an amount equal to the
Certificate Balance of each Class of Sequential Pay Certificates exceeds the
interest accrued at the applicable Pass-Through Rate on such Class. The
Pass-Through Rate on the Class X Certificates will not be affected by any step
up in the Mortgage Rates on the Anticipated Repayment Dates of each of the ARD
Loans.
The Pass-Through Rate applicable to the Class J, Class K, Class L, Class M,
Class N, Class O and Class P Certificates will, for any Distribution Date, each
be equal to 7.000%; provided, however, the Pass-Through Rate for any Class K,
Class L, Class M, Class N, Class O or Class P Certificate on any Distribution
Date will not exceed the Weighted Average Net Mortgage Rate.
The Class V Certificates will only be entitled to receive distributions in
respect of Excess Interest and will not have a Pass-Through Rate or Certificate
Balance.
"Weighted Average Net Mortgage Rate" for any Distribution Date, means 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).
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 is calculated
(such sum, the "Administrative Fee Rate"); provided, however, that for purposes
of calculating the Pass-Through Rate for each Class of REMIC Regular
Certificates from time to time, the Net Mortgage Rate for any Mortgage Loan will
be calculated without regard to any modification, waiver or amendment of the
terms of such Mortgage Loan subsequent to the Trust Formation Date; and provided
further, however, 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
the Net Mortgage Rate of such Mortgage Loan for any one-month period preceding a
related Due Date will be the
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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); provided, however, that with respect to such
Mortgage Loans, the Mortgage Rate for the one month period (1) prior to the due
dates in January and February in any year which is not a leap year or in
February in any year which is a leap year, and (2) prior to the due date in
March, will be the per annum rate stated in the related Mortgage Note. 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 ranged
from 6.381% per annum to 9.727% per annum, with a weighted average Net Mortgage
Rate of 8.034% per annum. See "Servicing of the Mortgage Loans -- Servicing and
Other Compensation and Payment of Expenses" in this prospectus supplement.
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
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 and ending on and
including the Determination Date in the calendar month in which such
Distribution Date occurs. The "Determination Date" for each Distribution Date
will be the 5th business day prior to such Distribution Date.
DISTRIBUTIONS
General. Distributions on or with respect to the Certificates will be made
by the Trustee, to the extent of available funds, on the 15th day of each month
or, if any such 15th day is not a business day, then on the next succeeding
business day (each, a "Distribution Date"). The first Distribution Date with
respect to the Offered Certificates will occur in November 2000. 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 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.
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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) any payments of principal and interest, Liquidation Proceeds and
Insurance and Condemnation Proceeds received after the end of the related
Collection Period;
(iii) Prepayment Premiums (which are separately distributable on the
Certificates as hereinafter described);
(iv) Excess Interest (which is separately distributable to the Class V
Certificates as hereinafter described);
(v) 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, Standby 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);
(vi) amounts deposited in the Certificate Account in error; and
(vii) with respect to each Mortgage Loan which accrues interest on an
Actual/360 Basis and any Distribution Date relating to the one month period
preceding the Distribution Date in each February (and in any January of a
year which is not a leap year), an amount equal to the related Withheld
Amount.
(b) to the extent not already included in clause (a), any P&I Advances made
with respect to such Distribution Date, any payments made by the Master Servicer
to cover Prepayment Interest Shortfalls incurred during the related Collection
Period and for the Distribution Date occurring in each March, the related
Withheld Amounts remitted to the Trustee for distribution to the
Certificateholders as described under "Description of the
Certificates -- Interest Reserve Account."
See "The Pooling and Servicing Agreements -- Certificate Account" in the
accompanying 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, and
Class X 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 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 and second to the Class A-2 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 Amounts (as defined below) for such Distribution Date;
(3) to reimburse the holders of the Class A-1 and Class A-2
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 such
Classes of Certificates and for which no reimbursement has previously been
paid; and
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(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 or
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 holder 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;
(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;
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(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
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;
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(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;
(28) to pay interest to the holders of the Class L 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;
(29) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J and Class K
Certificates have been reduced to zero, to pay principal to the holders of
the Class L 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;
(30) to reimburse the holders of the Class L 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;
(31) to pay interest to the holders of the Class M 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;
(32) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L
Certificates have been reduced to zero, to pay principal to the holders of
the Class M 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;
(33) to reimburse the holders of the Class M 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;
(34) to pay interest to the holders of the Class N 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;
(35) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L and
Class M Certificates have been reduced to zero, to pay principal to the
holders of the Class N 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;
(36) to reimburse the holders of the Class N 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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(37) to pay interest to the holders of the Class O 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;
(38) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L,
Class M and Class N Certificates have been reduced to zero, to pay
principal to the holders of the Class O 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;
(39) to reimburse the holders of the Class O 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;
(40) to pay interest to the holders of the Class P 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;
(41) if the Certificate Balances of the Class A, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L,
Class M, Class N and Class O Certificates have been reduced to zero, to pay
principal to the holders of the Class P 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;
(42) to reimburse the holders of the Class P 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
(43) 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), (26), (29), (32), (35),
(38) and (41) 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 Non-Specially Serviced Mortgage Loan,
calculated at 0.02% 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 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" in this
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prospectus supplement. The Net Aggregate Prepayment Interest Shortfall, if any,
for each Distribution Date will be allocated on such Distribution Date 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.
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) 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
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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.
Excess Interest. On each Distribution Date, Excess Interest received in
the related Collection Period will be distributed solely to the Class V
Certificates to the extent set forth in the Pooling Agreement, and will not be
available for distribution to holders of the Offered Certificates. The Class V
Certificates are not entitled to any other distributions of interest, principal
or Prepayment Premiums.
Distributions of Prepayment Premiums. On any Distribution Date, Prepayment
Premiums collected during the related Collection Period are required to be
distributed to the holders of the Classes of Offered Certificates as described
below.
On each Distribution Date, Prepayment Premiums collected on the Mortgage
Loans during the related Prepayment Period will be distributed by the Trustee to
the following Classes of Offered Certificates: to the Class A-1, Class A-2,
Class B, Class C, Class D, Class E, Class F, Class G and Class H Certificates,
in an amount equal to the product of (a) a fraction, not greater than 1, whose
numerator is the amount distributed as principal to such Class on such
Distribution Date, and whose denominator is the total amount distributed as
principal to the Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class
F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O and
Class P Certificates on such Distribution Date, (b) the Base Interest Fraction
for the related principal payment on such Class of Certificates, and (c) the
aggregate amount of Prepayment Premiums collected on such principal prepayments
during the related Prepayment Period. Any Prepayment Premiums collected during
the related Prepayment Period remaining after such distributions will be
distributed to the holders of the Class X Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any class of Offered Certificates is a
fraction (a) whose numerator is the amount, if any, by which (i) the
Pass-Through Rate on such Class of Certificates exceeds (ii) the discount rate
used in accordance with the related Mortgage Loan documents in calculating the
Prepayment Premium with respect to such Principal Prepayment and (b) whose
denominator is the amount, if any, by which (i) the Mortgage Rate on such
Mortgage Loan exceeds (ii) the discount rate used in accordance with the related
Mortgage Loan documents in calculating the yield maintenance charge with respect
to such principal prepayment. However, under no circumstances shall the Base
Interest Fraction be greater than one. If such discount rate is greater than or
equal to the lesser of (x) the Mortgage Rate on such Mortgage Loan and (y) the
Pass-Through Rate described in the preceding sentence, then the Base Interest
Fraction will equal zero.
No Prepayment Premiums will be distributed to the holders of the Class J,
Class K, Class L, Class M, Class N, Class O, or Class P Certificates. Instead,
after the Certificate Balances of the Class A-1, Class A-2, Class B, Class C,
Class D, Class E, Class F, Class G and Class H Certificates have been reduced to
zero, all prepayment premiums and yield maintenance charges with respect to the
Mortgage Loans will be distributed to the holders of the Class X Certificates.
Prepayment Premiums will be distributed on any Distribution Date only to
the extent they are received in respect of the Mortgage Loans in the related
Prepayment Period.
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 collectibility of any Prepayment Premium. See "Description of the
Mortgage Pool -- Certain Terms and Conditions of the Mortgage
Loans -- Prepayment Provisions" and "Risk Factors -- Risks Related to the
Mortgage Loans -- Prepayment Premiums" in this prospectus supplement.
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
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taken into account when determining the Pass-Through Rate 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 -- 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 P, Class O, Class N, Class
M, Class L, 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
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 any defaulted Mortgage Loan (or REO Loan) as to which a final recovery
determination has been made is an amount generally equal to (i) the unpaid
principal balance of such Mortgage Loan (or REO Loan) as of the Due Date related
to the Collection Period in which the final recovery determination was made,
plus (ii) all accrued but unpaid interest (excluding Excess Interest) on such
Mortgage Loan (or REO Loan) at the related Mortgage Rate to but not
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including the Due Date related to the Collection Period in which the final
recovery determination was made, plus (iii) any related unreimbursed Servicing
Advances as of the commencement of the Collection Period in which the final
recovery determination was made, together with any new related Servicing
Advances made during such Collection Period, minus (iv) all payments and
proceeds, if any, received in respect of such Collection Period related to the
Mortgage Loan (REO Loan) during the Collection Period in which such final
recovery determination was made (net of any related Liquidation Expenses paid
therefrom). 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 accompanying 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 accompanying 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 --
REMICs -- Prohibited Transactions Tax and Other Taxes" in the accompanying
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
accompanying 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.
EXCESS INTEREST DISTRIBUTION ACCOUNT
The Trustee is required to establish and maintain an "Excess Interest
Distribution Account" in the name of the Trustee for the benefit of the Class V
Certificateholders. Prior to the applicable Distribution Date, the Master
Servicer is required to remit to the Trustee for deposit into the Excess
Interest Distribution Account an amount equal to the Excess Interest received
during the related Collection Period. Amounts on deposit in the Excess Interest
Distribution Account may be invested only in Permitted Investments. The Trustee
will have no obligation to invest the funds on deposit in the Excess Interest
Distribution Account.
INTEREST RESERVE ACCOUNT
The Trustee will be required to establish and maintain an "Interest Reserve
Account" in the name of the Trustee for the benefit of the holders of the
Certificates. On each Master Servicer Remittance Date occurring in February and
in January of any year which is not a leap year, an amount will be required to
be withdrawn from the Certificate Account, in respect of each Mortgage Loan
which accrues interest on an Actual/360 Basis, for deposit into the Interest
Reserve Account, equal to one day's interest at the related Net Mortgage Rate on
the respective Stated Principal Balance, as of the Due Date in the month
preceding the month in which such Master Servicer Remittance Date occurs, of
each such Mortgage Loan, to the extent a Monthly Payment or P&I Advance is made
in respect thereof (all amounts so withdrawn in any consecutive January (if
applicable) and February, the "Withheld Amount"). The "Master Servicer
Remittance Date" for any month is the business day preceding each Distribution
Date. On each Master Servicer Remittance Date occurring in
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March, the Trustee will be required to withdraw from the Interest Reserve
Account an amount equal to the Withheld Amounts from the preceding January (if
applicable) and February, if any, and deposit such amount into the Certificate
Account. Amounts on deposit in the Interest Reserve Account may be invested only
in Permitted Investments. The Trustee will have no obligation to invest the
funds on deposit in the Interest Reserve Account.
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
Excess Interest) and any Assumed Monthly Payments, in each case net of related
Master Servicing Fees (other than the portion thereof corresponding to the
Standby Fee) and 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 Business Day prior to the Master Servicer
Remittance Date. 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 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"). The Trustee will be entitled to rely on any
non-recoverability determination made by the Master Servicer. Neither the Master
Servicer nor the Trustee will be required to make a P&I Advance for Excess
Interest. The Master Servicer and the Trustee, as applicable, will be entitled
to recover any Advance that at any time is determined to be a Nonrecoverable
Advance (and interest thereon) 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 accompanying 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
Mortgage Loan is a Specially Serviced Mortgage Loan (to the extent such items
accrued after such Mortgage Loan became a
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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. To the extent not offset by Default Interest and/or
late payment charges accrued and actually collected on the related Mortgage Loan
as described above, interest accrued on outstanding Advances will result in a
reduction in amounts payable on the Certificates.
APPRAISAL REDUCTIONS
Within 60 days (or within such longer period as the Special Servicer is
diligently and in good faith proceeding to obtain such appraisal) 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
any Mortgage Loan becomes an REO Property (each such Mortgage Loan, a "Required
Appraisal Loan"; and each such date, a "Required Appraisal Date"), the Special
Servicer 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; provided, however,
an appraisal may, in the case of any Mortgage Loan with an outstanding principal
balance of $2,000,000 or less, consist solely of an internal valuation performed
by the Special Servicer. 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 by the Special Servicer and verified by the
Master Servicer 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 and as of each Determination Date following each
anniversary of such loan becoming a Required Appraisal Loan thereafter) 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 accrued and unpaid interest
(other than Excess 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 or other reserves held by the Master Servicer or Special
Servicer to cover any such item and net of any reserves for debt service
coverage, capital expenditures and replacement reserves, including in each case
reserves posted with letters of credit), 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 time 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 25% 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
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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.
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, on each Distribution Date the Trustee will be required to deliver or
make available electronically each month to each Certificateholder and
Certificate Owner (so long as such Certificate Owner provides the Trustee with a
certification which discloses such Certificate Owner's status as a holder), 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
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 Determination 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 Determination Date; (vii) as of the end
of the Collection Period for the immediately preceding Distribution Date,
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
(except with respect to REO Properties); (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
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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 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 Master Servicer is required to deliver to the
Trustee on the second Business Day prior to each Distribution Date (beginning in
November 2000), and the Trustee is to provide or make available, either in
electronic format or by first-class mail (if requested in writing) to each
Certificateholder, and 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 (i) to any interested party
including the Rating Agencies, the Underwriters and any party to the Pooling
Agreement via the Trustee's Website or, (ii) to authorized persons identified by
the Trustee to the Master Servicer and parties to the Pooling Agreement, via the
Master Servicer's Website, with the use of a username and a password provided by
the Master Servicer to such Person upon delivery to the Trustee of a
certification in the form attached to the Pooling Agreement; provided that the
Rating Agencies, the Underwriters and parties to the Pooling Agreement will not
be required to provide such certification:
(1) A "Delinquent Loan Status Report" setting forth, among other
things, those Mortgage Loans which, as of the end of the Collection Period
for the related Distribution Date, were delinquent 30-59 days, delinquent
60-89 days, delinquent 90 days or more, current but specially serviced, or
in foreclosure but not an REO Property, or as to which the related borrower
has filed for bankruptcy.
(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 Liquidation Report" setting forth, among other
things, as of the close of business on the immediately preceding
Determination Date, (i) the aggregate amount of net Liquidation Proceeds
received 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 and (ii) 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
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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; provided however, that such
information may be shown as part of the reports described above and other
Commercial Mortgage Securities Association ("CMSA") form reports in lieu of
in a separate report.
In addition, on the second Business Day prior to each Distribution Date
(beginning in November 2000), the Master Servicer will deliver to the Trustee,
the Special Servicer and the Rating Agencies a list of all Mortgage Loans the
Master Servicer has determined are in jeopardy of becoming Specially Serviced
Mortgage Loans based on criteria described in the Pooling Agreement.
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.
Following the end of each calendar quarter, commencing with the calendar
quarter ending March 31, 2001, but excluding each first calendar quarter
thereafter, within 105 days (or 180 days, in the case of annual year end
operating information, commencing with the year end 2000) of receipt by the
Master Servicer, as to Non-Specially Serviced Mortgage Loans, or within 30 days
after receipt by the Special Servicer, as to Specially Serviced Mortgage Loans,
of any annual, quarterly or other periodic operating statements or rent rolls
with respect to any Mortgaged Property or REO Property, the Master Servicer or
the Special Servicer, as applicable, will deliver to the Trustee, upon its
request, copies (or imaged copies) of such operating statements and rent rolls.
Based upon such operating statements or rent rolls, the Master Servicer (based
upon operating statements, rent rolls, written reports and data fields collected
or prepared by the Special Servicer and furnished to the Master Servicer by the
Special Servicer in the case of Specially Serviced Mortgage Loans) shall prepare
(or, if previously prepared, update, inclusive of trailing 12-month or
year-to-date data) the written analysis of the operations of the Mortgaged
Property or REO Property by completing a report (the "Operating Statement
Analysis Report") and worksheets showing computations made to normalize annual
net operating income and debt service coverage numbers ("NOI Adjustments
Worksheets"). All Operating Statement Analysis Reports and NOI Adjustment
Worksheets will be maintained by the Master Servicer with respect to each
Mortgaged Property and REO Property, and the Master Servicer will forward copies
(or imaged copies) thereof, upon request, to the Trustee, the Directing
Certificateholder, each Rating Agency and, upon written request any
Certificateholder, or to the extent the Trustee or a beneficial owner of an
Offered Certificate (a "Certificate Owner") has confirmed its ownership interest
in the Certificates held thereby, such Certificate Owner, together with the
related operating statement or rent rolls. Each Operating Statement Analysis
Report and NOI Adjustment Worksheet will be prepared using normalized
year-to-date CMSA methodology as in effect from time to time. 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 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 Sellers 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 (and any additional files containing the same
information in an alternative format) via the Trustee's Website. In addition,
the Trustee will make available to any interested party each month the Servicer
Reports on the Trustee's Website. The Trustee's Website will initially be
located at "www.ctslink.com/cmbs". The Trustee's 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 CMSA loan setup file and CMSA 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
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distribution of the accompanying prospectus or the prospectus supplement under
the securities laws), the Pooling Agreement, the accompanying prospectus and the
prospectus supplement via the Trustee's Website. For assistance with the
above-referenced services, interested parties may call (301) 815-6600. 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, 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 accompanying 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 Trust
Formation 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 Trust Formation 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.
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
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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% 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% of the Voting Rights
shall be allocated to the holders of the Class X Certificates in proportion to
their Notional Amounts. No Voting Rights will be assigned to the Class V and
REMIC Residual Certificates. 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 accompanying prospectus. LNR is the initial holder of one or more classes
of the Private Certificates, and as such, is entitled to Voting Rights.
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, Special Servicer
or by any holder or holders (other than the Depositor or Mortgage Loan Sellers)
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, Special 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
Wells Fargo Bank Minnesota, N.A. ("Wells Fargo Bank") will act as Trustee
pursuant to the Pooling Agreement. Wells Fargo Bank, a direct, wholly-owned
subsidiary of Wells Fargo & Company, is a national banking association
originally chartered in 1872 and is engaged in a wide range of activities
typical of a national bank. Wells Fargo Bank's principal office is located at
Sixth and Marquette, Minneapolis, Minnesota 55479-0113. Certificate transfer
services are conducted at Wells Fargo Bank's offices in Minneapolis. Wells Fargo
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, Wells Fargo Bank maintains a trust office in New York City located
at 45 Broadway, 12th Floor, New York, New York 10004. 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
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supervision or examination by federal or state authority and (ii) an institution
whose long-term senior unsecured debt is rated not less than "Aa" by Moody's and
"AA" by S&P (or such lower rating as would not result, as confirmed in writing
by each Rating Agency, 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, 1998, Wells Fargo & Company, of which the Trustee is a direct,
wholly-owned subsidiary, had assets of over $200 billion. See "The Pooling and
Servicing Agreements -- The Trustee", "-- Duties of the Trustee", "-- Certain
Matters Regarding the Trustee" and "-- Resignation and Removal of the Trustee"
in the accompanying 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 "The Pooling and Servicing 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
accompanying 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, (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 Rate. The Pass-Through Rate 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 Rate and yield to maturity of the 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. 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
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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 Certificates will equal the
aggregate Certificate Balances of the Classes of Sequential Pay 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. Failure
of the borrower under each ARD Loan to repay its respective Mortgage Loan by or
shortly after its Anticipated Repayment Date, for whatever reason, will also
tend to lengthen the weighted average lives of the Sequential Pay Certificates.
Although the ARD Loans include incentives for the related borrower to repay the
Mortgage Loan by its Anticipated Repayment Date (e.g., an increase in the
interest rate of the loan above the Mortgage Rate and the application of all
excess cash (net of approved property expenses and any required reserves) from
the related Mortgaged Property to pay down the Mortgage Loan, in each case
following the passage of such date), there can be no assurance that the related
borrower will want, or be able, to repay the Mortgage Loan in full. See
"Servicing of the Mortgage Loans -- Modifications, Waivers, Amendments and
Consents" herein and "The Pooling and Servicing Agreements -- Realization Upon
Defaulted Mortgage Loans" and "Certain Legal Aspects of Mortgage
Loans -- Foreclosure" in the accompanying 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 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
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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 and
Class A-2 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 -- Risks Related to 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 accompanying
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 (or, in the case of the ARD Loan after its Anticipated Repayment Date, the
Revised 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 (or, in the
case of a ARD Loan after its Anticipated Repayment Date, the Revised Rate) for
any Mortgage Loan, such Mortgage Loan may be less likely to prepay (other than,
in the case of the ARD Loan, out of certain net cash flow from the related
Mortgaged Property). In particular, the Revised Rate for a ARD Loan generally is
the Mortgage Rate therefor plus 2%, and the primary incentive to prepay an ARD
Loan on or before its Anticipated Repayment Date, assuming prevailing market
interest rates exceed such Revised Rate, is to give the borrower access to
excess cash flow, all of which (net of approved property expenses and any
required reserves) must be applied to pay down principal of the Mortgage Loan.
Accordingly, there can be no assurance that an ARD Loan will be prepaid on or
before its Anticipated Repayment Date or on any other date prior to maturity.
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 depreciation benefits.
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<PAGE> 99
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" in this prospectus supplement.
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 accompanying 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 "25%", "50%", "75%", "100%" 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-1, Class A-2, Class B, Class C, Class D, Class E, Class
F, Class G and Class H 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 assumptions (the "Maturity
Assumptions"): (i) the Mortgage Loans have the characteristics set forth on
Annex A as of the Cut-off Date but with balances
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adjusted to reflect their actual balances as of the Commencement Date, (ii) the
Pass-Through Rate and the Certificate Balance or Notional Amount as of the
Commencement Date (such Certificate Balance referred to herein for purposes of
the Maturity Assumptions as the "Initial Certificate Balance"), 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 a 360-day year consisting of twelve 30-day months (a "30/360 Basis"),
are based on such Mortgage Loan's Cut-off Date Balance, calculated remaining
amortization term as of the Cut-off Date and Mortgage Rate as of the Cut-off
Date, and 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 (adjusted
to take into account the addition or subtraction of any Withheld Amounts as
described under "Description of the Certificates -- Interest Reserve Account"),
(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, commencing in November 2000, (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, an ARD Loan is paid in full on its Anticipated Repayment Date, 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) none of the Master Servicer, the
Special 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 Bank of America or HVB, (ix) no
Prepayment Interest Shortfalls are incurred and all Prepayment Premiums are
collected, (x) there are no Additional Trust Fund Expenses, (xi) distributions
on the Offered Certificates are made on the 15th day of each month, commencing
in November 2000, (xii) the Offered Certificates are settled on October 30, 2000
(the "Settlement Date") and (xiii) there are no prepayments other than those
actually received prior to the Commencement Date. To the extent that the
Mortgage Loans have characteristics that differ from those assumed in preparing
the tables set forth below, Class A-1, Class A-2, Class B, Class C, Class D,
Class E, Class F, Class G and Class H 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 the
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 UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001................................. 95.50 95.50 95.50 95.50 95.50
October 15, 2002................................. 90.62 90.62 90.62 90.62 90.62
October 15, 2003................................. 85.32 85.32 85.32 85.32 85.32
October 15, 2004................................. 75.50 75.50 75.50 75.50 75.50
October 15, 2005................................. 63.82 63.82 63.82 63.82 63.82
October 15, 2006................................. 48.66 48.66 48.66 48.66 48.66
October 15, 2007................................. 39.53 39.53 39.53 39.53 39.53
October 15, 2008................................. 23.15 21.93 20.36 18.03 2.26
October 15, 2009................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 5.75 5.74 5.72 5.69 5.57
</TABLE>
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<PAGE> 101
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2 CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2009................................. 89.92 87.50 84.49 80.22 55.86
October 15, 2010................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.18 9.17 9.15 9.13 8.98
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2010................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.56 9.56 9.54 9.52 9.39
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2010................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.63 9.63 9.63 9.61 9.49
</TABLE>
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<PAGE> 102
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage............................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2002................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2003................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2004................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2005................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2006................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2007................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2008................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2009................................. 100.00 100.00 100.00 100.00 100.00
October 15, 2010................................. 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years).................... 9.63 9.63 9.63 9.63 9.54
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2002...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2003...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2004...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2005...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2006...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2007...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2008...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2009...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2010...................................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years)......................... 9.63 9.63 9.63 9.63 9.54
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS F CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2002...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2003...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2004...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2005...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2006...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2007...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2008...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2009...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2010...................................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years)......................... 9.66 9.64 9.63 9.63 9.54
</TABLE>
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<PAGE> 103
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS G CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2002...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2003...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2004...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2005...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2006...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2007...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2008...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2009...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2010...................................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years)......................... 9.71 9.71 9.71 9.69 9.61
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS H CERTIFICATES UNDER THE SPECIFIED CPRS
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------
DATE 0% 25% 50% 75% 100%
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Initial Percentage.................................... 100.00% 100.00% 100.00% 100.00% 100.00%
October 15, 2001...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2002...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2003...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2004...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2005...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2006...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2007...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2008...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2009...................................... 100.00 100.00 100.00 100.00 100.00
October 15, 2010...................................... 0.00 0.00 0.00 0.00 0.00
Weighted Average Life (years)......................... 9.71 9.71 9.71 9.71 9.63
</TABLE>
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. 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 Certificates for the
specified CPRs based on the Maturity Assumptions. It was further assumed (i)
that the purchase price of the Class X Certificates is as specified below,
expressed as a percentage of the initial Notional Amount of such Certificates,
without accrued interest and (ii) the Master Servicer, the Special Servicer or a
holder or holders of Certificates representing a majority interest in the
Controlling Class purchased all of the Mortgage Loans and REO Properties as
described under "Description of the Certificates -- Termination" in this
prospectus supplement.
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
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<PAGE> 104
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.
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES
(PREPAYMENTS LOCKED OUT THROUGH LOP AND YMP, THEN THE FOLLOWING CPR)
<TABLE>
<CAPTION>
ASSUMED PREPAYMENT ASSUMPTION (CPR)
PURCHASE -------------------------------------
PRICE 0% 25% 50% 75% 100%
-------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
5.37500% 9.539% 9.520% 9.495% 9.459% 9.194%
</TABLE>
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Depositor to purchase the interests in the Trust from the
Mortgage Loan Sellers as described under "Description of the
Certificates -- General" in this prospectus supplement, and to pay certain
expenses in connection with the issuance of the Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
For federal income tax purposes, four 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," "REMIC II," "REMIC IIU" and "REMIC III", 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 Interest Reserve Account and the REO Accounts (each as
defined in the accompanying prospectus). The assets of REMIC II, REMIC IIU and
REMIC III consist of certain uncertificated "regular interests" in a numerically
preceding REMIC and amounts in the Certificate Account with respect thereto. For
federal income tax purposes, (i) the Offered Certificates evidence the "regular
interests" in, and generally will be treated as debt obligations of, REMIC III
and (ii) the REMIC Residual Certificates represent the sole class of "residual
interests" in the related REMICs. Each of certain individual mortgage loans will
constitute the sole asset of a separate REMIC (each, a "Loan REMIC") and the
"regular interest" in each Loan REMIC (instead of the related Mortgage Loan)
will be an asset of REMIC I. The Class R-I Certificates will also represent the
"residual interest" in each Loan REMIC. 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, each of REMIC I, REMIC II, REMIC IIU and REMIC III will qualify as a
REMIC under the Code. In addition, in the opinion of Cadwalader, Wickersham &
Taft, the portion of the trust fund consisting of the Excess Interest and the
Excess Interest
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Distribution Account will be treated as a grantor trust for federal income tax
purposes under subpart E, part I of subchapter J of the Code. See "Certain
Federal Income Tax Consequences -- REMIC's" in the accompanying prospectus.
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
The Offered Certificates generally will be treated as newly originated debt
instruments originated on the related Startup Day for federal income tax
purposes. The Startup Day of REMIC I and REMIC II is the Trust Formation Date.
The Startup Day of REMIC IIU and REMIC III is the Delivery Date. Beneficial
owners of the Offered Certificates will be required to report income on such
regular interests in accordance with the accrual method of accounting. One or
more of the Classes of Offered Certificates may be issued with original issue
discount for federal income tax purposes. See "Certain Federal Income Tax
Consequences -- REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount" and "-- Premium" in the accompanying
prospectus.
Although unclear for federal income tax purposes, it is anticipated that
the Class X Certificates will be considered to be issued with original issue
discount in an amount equal to the excess of all distributions of interest
expected to be received thereon (assuming the Weighted Average Net Mortgage Rate
changes in accordance with the Prepayment Assumption (as described below)), over
their issue price (including accrued interest, if any). Any "negative" amounts
of original issue discount on the Class X Certificates attributable to rapid
prepayments with respect to the Mortgage Loans will not be deductible currently,
but may be offset against future positive accruals of original issue discount,
if any. Finally, a holder of a Class X Certificate may be entitled to a loss
deduction to the extent it becomes certain that such holder will not recover a
portion of its basis in such Certificate, assuming no further prepayments. In
the alternative, it is possible that rules similar to the "noncontingent bond
method" of the OID Regulations, as amended on June 12, 1996, may be promulgated
with respect to the Certificates. See "Certain Federal Income Tax
Consequences -- REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount" in the accompanying prospectus.
For purposes of accruing original issue discount, determining whether such
original issue discount is de minimis and amortizing any premium on the Offered
Certificates the Prepayment Assumption will be 0% CPR (except that an ARD Loan
will be assumed to be repaid in full on its Anticipated Repayment Date). See
"Yield and Maturity Considerations -- Weighted Average Lives" herein. No
representation is made as to the rate, if any, at which the Mortgage Loans will
prepay.
Although not free from doubt, it is anticipated that any prepayment
premiums will be treated as ordinary income to the extent allocable to
beneficial owners of the Offered Certificates as such amounts become
distributable to such beneficial owners.
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. As of the Cut-off Date, 26.9% of the Initial
Pool Balance represented Mortgage Loans secured by multifamily properties. None
of the foregoing characterizations will apply to the extent of any Mortgage
Loans that have been defeased. 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
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Mortgage Pool" in this prospectus supplement and "Certain Federal Income Tax
Consequences -- REMICs -- Characterization of Investments in REMIC Certificates"
in the accompanying 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 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. 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.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences -- REMICs" in the accompanying prospectus.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of any retirement plan or other employee benefit 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
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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).
The U.S. Department of Labor issued to NationsBank Corporation (predecessor
in interest to Bank of America 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 Exemption are
satisfied. "Exemption-Favored Party" shall include (a) Bank of America
Corporation, (b) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Bank of
America Corporation (such as Banc of America 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 Exemption sets 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, Inc. ("Fitch"), Moody's and 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 Sellers, 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 S&P, and "Aaa" by
Moody's. As of the Delivery Date, the fourth general condition set forth above
was satisfied with respect to the Senior Offered 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
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representation regarding satisfaction of the sixth general condition set forth
above in connection with the purchase of a Senior Certificate.
The Exemption also requires 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 or S&P 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 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 Exemption are satisfied, the Exemption 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 Senior 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 Sellers 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 Offered 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 Exemption, as well as certain
other specific conditions set forth in the Exemption, are satisfied, the
Exemption 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 Senior 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 Exemption, as well as certain
other conditions set forth in the Exemption, are satisfied, the Exemption 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 Exemption are satisfied, the
Exemption 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 Exemption and (ii) the specific and general conditions and the other
requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary
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should consider the availability of any other prohibited transaction class
exemptions. See "Certain ERISA Considerations" in the accompanying prospectus.
There can be no assurance that any such class exemptions will apply with respect
to any particular Plan investment in the Senior Certificates or, even if it were
deemed to apply, that any exemption would apply to all transactions that may
occur in connection with such investment.
The characteristics of the Class B, Class C, Class D, Class E, Class F,
Class G and Class H Certificates do not meet the current requirements of the
Exemption. 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 Sections I and III of PTCE 95-60 or Section 401(c) of ERISA, as
discussed in "Certain ERISA Considerations -- Insurance Company General
Accounts" in the accompanying prospectus.
The Department of Labor has proposed amendments (the "Proposed Amendments")
to the Exemption that, if finalized in current form, generally will be effective
as of August 23, 2000. Among other changes, it is anticipated that the amended
Exemption would permit Plans to purchase subordinated Certificates rated in any
of the four highest ratings categories (provided that all other requirements of
the Exemption are met). It is not certain if and when the Proposed Amendments
will be issued in final form, and it is not certain that the Proposed
Amendments, if finalized, will contain the same relief as is currently proposed.
Plan fiduciaries should, and other potential investors who may be analyzing the
potential liquidity of their investment may wish to, consult with their advisors
regarding the Proposed Amendments.
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 Underwriters 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 Class A, Class X and the Class B Certificates will constitute "mortgage
related securities" for purposes of SMMEA, so long as they are rated in one of
the two highest rating categories by one or more Rating Agencies. None of the
other Offered Certificates will constitute "mortgage related securities" within
the meaning of SMMEA. 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. 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 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 accompanying prospectus.
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METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Depositor, Banc of America Securities
LLC ("Banc of America") and HVB Capital Markets, Inc. (doing business as
HypoVereinsbank Capital Markets) ("HVBCM") (Banc of America and HVBCM each, an
"Underwriter" and collectively, the "Underwriters"), and except with respect to
$106,402,000 of the Class A-2 Certificates (such amount of Class A-2
Certificates, the "HVBCM Allocation"), Banc of America has agreed to purchase
the aggregate principal balance or notional amount, as the case may be, of each
Class of Offered Certificates. HVBCM has agreed in the Underwriting Agreement to
use its best efforts to purchase and sell the HVBCM Allocation. In the event
HVBCM is unable to purchase and sell the HVBCM Allocation, Banc of America will
purchase the HVBCM Allocation.
Banc of America Securities LLC 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
106.31% 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 Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The Underwriters 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 Underwriters. In connection with the purchase and sale of
the Offered Certificates, the Underwriters may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. The
Underwriters and any dealers that participate with the Underwriters 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 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 Underwriters that the
Underwriters presently intend to make a market in the Offered Certificates;
however, the Underwriters have 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 -- Risks
Related to the Certificates -- Limited Liquidity and Market Value" in this
prospectus supplement and "Risk Factors -- Limited Liquidity of Certificates" in
the accompanying prospectus.
The Depositor has agreed to indemnify the Underwriters 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. Each Mortgage Loan Seller has agreed to
indemnify the Depositor, its officers and directors, the Underwriters, and each
person, if any, who controls the Depositor or the Underwriters within the
meaning of Section 15 of the Securities Act, with respect to certain
liabilities, including certain liabilities under the Securities Act, relating to
the Mortgage Loans sold by such Mortgage Loan Seller. HVB has agreed to
indemnify Banc of America with respect to certain liabilities, including certain
liabilities under the Securities Act, relating to the HVB Mortgage Loans, and
Bank of America has agreed to indemnify HVB with respect to certain liabilities
including certain liabilities under the Securities Act, relating to the Bank of
America Mortgage Loans.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and Banc of
America by Cadwalader, Wickersham & Taft, New York, New York. Certain legal
matters will be passed upon for HVBCM by Andrews & Kurth L.L.P., Dallas, Texas.
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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") and Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P"; and, together with Moody's, the "Rating
Agencies"):
<TABLE>
<CAPTION>
CLASS MOODY'S S&P
----- ------- ----
<S> <C> <C>
Class A-1................................................... Aaa AAA
Class A-2................................................... Aaa AAA
Class X..................................................... Aaa AAA
Class B..................................................... Aa2 AA
Class C..................................................... A1 A+
Class D..................................................... A2 A
Class E..................................................... A3 A-
Class F..................................................... Baa1 BBB+
Class G..................................................... Baa2 BBB
Class H..................................................... Baa3 BBB-
</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 September 15,
2032 (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, (iv) whether and to what extent
Default Interest will be received or Net Aggregate Prepayment Interest
Shortfalls will be realized or (v) payments of Excess Interest. 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 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 (if applicable) 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. In this regard, We note that S&P considered
the claims-paying ratings of the Environmental Insurer in assigning its ratings
to the Offered Certificates; accordingly, the downgrade, withdrawal or
qualification of the ratings applicable to the Environmental Insurer could have
a corresponding effect on the ratings assigned to one or more Classes of the
Offered Certificates. A rating assigned to any Class of Offered Certificates by
a rating
S-109
<PAGE> 112
agency that has not been requested by the Depositor to do so may be lower than
the ratings assigned thereto by S&P 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 accompanying prospectus.
S-110
<PAGE> 113
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
111 West Jackson Loan....... S-49
1025 Elm Street Loan........ S-46
1401 Elm Street & West 7th
Street Loan............... S-46
30/360 Basis................ S-39, S-98
30/360 Mortgage Loans....... S-39
Accrued Certificate
Interest.................. S-82
ACMs........................ S-52
Actual/360 Basis............ S-39
Actual/360 Mortgage Loan.... S-39
Additional Trust Fund
Expenses.................. S-86
Administrative Fee Rate..... S-76, A-1
Administrative Fees......... S-94
Advances.................... S-16, S-67
Annual Debt Service......... A-1
Anticipated Repayment
Date...................... S-39
Appraisal Reduction
Amount.................... S-88
Appraisal Value............. A-1
ARD Loan.................... S-39
Asset Status Report......... S-63
Assumed Monthly Payment..... S-83
Available Distribution
Amount.................... S-13, S-78
Balloon..................... A-1
Balloon Loan................ S-40
Balloon Payment............. S-40
Banc of America............. S-108
Bank of America............. S-10
Bank of America Mortgage
Loans..................... S-10, S-38, S-39
Base Interest Fraction...... S-84
Beds........................ A-3
BOA Owner Trust II.......... S-56
Cash Flow................... A-1
CBE......................... S-101
Certificate Balance......... S-75
Certificate Owner........... S-74, S-91
Certificate Registrar....... S-75
Certificateholders.......... S-12
Certificates................ S-74
Class....................... S-74
Class A Certificates........ S-74
Class X Certificates........ S-74
CMBS........................ S-64
CMSA........................ S-91
Code........................ S-32
Collateral Substitution
Deposit................... S-41
Collection Period........... S-10, S-77
Commercial Loan............. S-38
Commencement Date........... S-9
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Commercial Mortgaged
Property.................. S-38
Controlling Class........... S-63
Controlling Class
Certificateholder......... S-63
Corrected Mortgage Loan..... S-62
Cross-Collateralized
Mortgage
Loans..................... S-38
Cut-off Date................ S-8, S-38
Cut-off Date Balance........ S-10, S-38
Cut-off Date Loan-to-Value
Ratio..................... A-2
Cut-off Date LTV............ A-2
Cut-off Date LTV Ratio...... A-2
Default Interest............ S-67
Defeasance.................. A-2
Defeasance Lock-Out
Period.................... S-41
Defeasance Option........... S-41
Definitive Certificate...... S-74
Delinquent Loan Status
Report.................... S-90
Depositor................... S-9
Delivery Date............... S-74
Determination Date.......... S-10, S-77
Directing
Certificateholder......... S-63
Discount Rate............... S-10, A-2
Distributable Certificate
Interest.................. S-82
Distribution Date........... S-10, S-75
Distribution Date
Statement................. S-89
DTC......................... S-17, S-74
Durango Canyon North
Apartments Loan........... S-42
Durango Canyon South
Apartments Loan........... S-42
Due Date.................... S-39
Early Defeasance Loans...... S-12, S-41
Emergency Advance........... S-65
Environmental Insurer....... S-60
Environmental Policy........ S-57
ERISA....................... S-104
Excess Interest............. S-39
Excess Interest Rate........ S-39
Excluded Plan............... S-105
Exemption-Favored Party..... S-105
Exemption................... S-105
Expenses.................... A-1
FIRREA...................... S-54
Fitch....................... S-105
Free........................ A-2
Form 8-K.................... S-60
</TABLE>
S-111
<PAGE> 114
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Fully Amortizing............ A-2
GAAP........................ A-2
Gateway Village Loan........ S-51
Grtr........................ A-2
Historical Liquidation
Report.................... S-90
Historical Loan Modification
Report.................... S-90
Historical Loss Report...... S-86
HVB......................... S-10
HVB Group................... S-56
HVB Mortgage Loans.......... S-10, S-38, S-39
HVBCM....................... S-108
HVBCM Allocation............ S-108
Hyper....................... A-2
Hypo Vereinsbank............ S-55
Initial Certificate
Balance................... S-98
Initial Pool Balance........ S-10, S-38
Interest Reserve Account.... S-86
Interested Person........... S-71
Interstate Corporate Center
Loan...................... S-49
Leasable Square Footage..... A-2
Lease Agreements............ S-42
Liquidation Fee............. S-66
Liquidation Fee Rate........ S-66
LNR......................... S-64
Loan-Specific Environmental
Policy.................... S-61
Loan-Specific Policy
Mortgage Loan............. S-61
Loan REMICS................. S-41, S-102
Lock-out Period............. S-40
LOP......................... S-98
MAI......................... S-54
Major Tenants............... S-51
Master Servicer............. S-9, S-64
Master Servicer Remittance
Date...................... S-86
Master Servicing Fee........ S-65
Master Servicing Fee Rate... S-65
Maturity.................... A-2
Maturity Assumptions........ S-97
Maturity Date............... A-2
Maturity Date Balance....... A-2
Maturity Date Loan-to-Value
Ratio..................... A-2
Maturity Date LTV........... A-2
Merger...................... S-55
Modified Mortgage Loan...... S-89
Money Market Rate........... A-2
Monthly Discount Rate....... A-3
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Monthly Payments............ S-39
Moody's..................... S-4, S-109
Mortgage.................... S-38
Mortgage Loan Schedule...... S-58
Mortgage Loan Sellers....... S-8
Mortgage Loans.............. S-10, S-38
Mortgage Note............... S-38
Mortgage Pool............... S-10
Mortgage Rate............... S-39
Mortgaged Property.......... S-38
Most Recent DSCR............ A-2
Most Recent End Date........ A-2
Most Recent Expenses........ A-3
Most Recent Cash Flow....... A-2
Most Recent Revenues........ A-2
Multifamily Loan............ S-38
Multifamily Mortgaged
Property.................. S-38
Net Aggregate Prepayment
Interest Shortfall........ S-82
Net Mortgage Rate........... S-76
Net Rentable Area(SF)....... A-2
NOI Adjustment Worksheets... S-91
Non-Offered Certificates.... S-12, S-71
Nonrecoverable Advances..... S-87
Nonrecoverable P&I
Advance................... S-87
Nonrecoverable Servicing
Advance................... S-68
Non-Specially Serviced
Mortgage Loan............. S-66
Notional Amount............. S-75
Occupancy Percent........... A-3
Occupancy %................. A-3
Offered Certificates........ S-13, S-74
Olen Residential Portfolio
Loans..................... S-42
Open Period................. S-40
OPEN........................ A-3
Operating Statement Analysis
Report.................... S-91
Original Pooling
Agreement................. S-74
ORIX........................ S-64
Participants................ S-75
Party in Interest........... S-106
Pass-Through Rate........... S-13
Permitted Encumbrances...... S-58
Permitted Investments....... S-65
P&I Advance................. S-16, S-87
Plan........................ S-104
Plan Assets................. S-105
Pooling Agreement........... S-74
Prepayment Interest
Excess.................... S-66
</TABLE>
S-112
<PAGE> 115
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prepayment Interest
Shortfall................. S-66
Prepayment Premium.......... S-40
Prepayment Premium Period... S-40
Principal Distribution
Amount.................... S-83
Private Certificates........ S-13, S-74
Proposed Amendments......... S-107
PTE......................... S-105
Purchase Price.............. S-57
Rated Final Distribution
Date...................... S-109
Rating Agencies............. S-4,
S-18, S-109
Related Loans............... A-3
Realized Losses............. S-85
Required Appraisal Date..... S-88
Required Appraisal Loan..... S-88
Record Date................. S-10, S-77
Reimbursement Rate.......... S-87
Related Loans............... A-3
Related Proceeds............ S-67
Release Date................ S-41
REMIC....................... S-102
REMIC Administrator......... S-94
REMIC I..................... S-102
REMIC II.................... S-102
REMIC IIU................... S-102
REMIC III................... S-102
REMIC Regular
Certificates.............. S-74
REMIC Residual
Certificates.............. S-13, S-74
REO Income.................. S-79
REO Property................ S-62
REO Status Report........... S-90
REO Tax..................... S-104
Required Appraisal Date..... S-88
Required Appraisal Loan..... S-88
Residence Inn Loan.......... S-45
Restricted Group............ S-105
Revenues.................... A-1
Revised Rate................ S-39
Rooms....................... A-3
Sanctuary Cove Apartments
Loan...................... S-42
Senior Certificates......... S-74
Sequential Pay
Certificates.............. S-13, S-74
Servicer Reports............ S-90
Servicing Advances.......... S-16, S-67
Servicing Standard.......... S-61
Servicing Transfer Event.... S-62
Settlement Date............. S-98
Similar Law................. S-107
SMMEA....................... S-18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
S&P......................... S-4, S-105
Special Servicer............ S-8, S-62
Special Servicer Loan Status
Report.................... S-90
Special Servicing Fee....... S-66
Special Servicing Fee
Rate...................... S-66
Specially Serviced Mortgage
Loan...................... S-62
Standby Fee................. S-66
Stated Principal Balance.... S-77
Subordinate Certificates.... S-79
Subgroup Environmental
Policy.................... S-60
Sub-Servicer................ S-65
Sub-Servicing Agreement..... S-65
Sub-Servicing Fee Rate...... A-1
Successor Servicer Retained
Fee....................... S-65
Trust....................... S-74
Trust Formation Date........ S-9, S-74
Trust Fund.................. S-74
Trustee..................... S-9
Trustee Fee................. S-94
Underwriter................. S-108
Underwriters................ S-108
Underwriting Agreement...... S-108
Underwriting Cash Flow...... A-3
Underwriting Debt Service
Coverage Ratio............ A-3
Underwriting DSCR........... A-3
Units....................... A-3
UPB......................... A-3
UST......................... S-52
U/W Cash Flow............... A-3
U/W DSCR.................... A-3
U/W Expenses................ A-3
U/W Reserves................ A-4
U/W Reserves Per Unit....... A-4
U/W Revenues................ A-3
Voting Rights............... S-93
Weighted Average Net
Mortgage Rate............. S-76
Wells Fargo Bank............ S-93
Weston Place Apartments
Loan...................... S-42
Withheld Amount............. S-86
Workout Fee................. S-66
Workout Fee Rate............ S-66
YM.......................... A-4
YMP......................... S-98
</TABLE>
S-113
<PAGE> 116
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 either 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. "Cash Flow" 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, capital
expenditures and tenant improvements and leasing commissions.
(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 Mortgaged Properties, guest room rates, 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 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 Cash Flow, Most Recent Cash Flow and/or U/W
Cash Flow have been adjusted by removing certain non-recurring expenses and
revenue or by certain other normalizations. Such Cash Flow 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
A-1
<PAGE> 117
but were deducted from Trailing Expenses, Most Recent Expenses or U/W
Expenses to reflect normalized Trailing Cash Flow, Most Recent Cash Flow or
U/W Cash Flow, 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 that may have occurred since the date of the information
provided by each borrower for the related Mortgaged Property. Such Cash
Flow was not necessarily determined in accordance with generally accepted
accounting principles ("GAAP"). Such Cash Flow 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 Cash Flow may reflect
partial-year annualizations.
6. "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.
7. "DEFEASANCE" means, with respect to any Mortgage Loan, that such
Mortgage Loan is subject to a Defeasance Option.
8. "Discount Rate" means, with respect to any prepayment premium
calculation, the yield on the U.S. Treasury issue with a maturity date
closest to the date of the end of the related yield maintenance period for
the Mortgage Loan being prepaid, or an interpolation thereof.
9. "Fully Amortizing" means fully amortizing Mortgage Loan.
10. "Hyper" means ARD Loan.
11. "Leasable Square Footage" or "Net Rentable Area (SF)" means, in
the case of a Mortgaged Property operated as a retail center, office
complex or industrial facility, the square footage of the net leasable
area.
12. "Maturity" or "Maturity Date" means, with respect to any Mortgage
Loan, the date specified in the related Mortgage Note as its stated
maturity date or in the case of an ARD Loan, the Anticipated Repayment
Date.
13. "Maturity Date Balance" means, with respect to any Mortgage Loan,
the balance due at maturity or in the case of an ARD Loan, the Anticipated
Repayment Date, assuming no prepayments, defaults or extensions.
14. "Most Recent DSCR" means, with respect to any Mortgage Loan, (a)
the Most Recent Cash Flow for the related Mortgaged Property, divided by
(b) the Annual Debt Service for such Mortgage Loan.
15. "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.
16. "Most Recent Cash Flow" means, with respect to any Mortgaged
Property, the Cash Flow derived therefrom that was available for debt
service, calculated as Most Recent Revenues less Most Recent Expenses, Most
Recent capital expenditures and Most Recent tenant improvements and leasing
commissions. See also "Cash Flow" above.
(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.
A-2
<PAGE> 118
(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.
17. "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 generally are calculated by physical presence or,
alternatively, collected rents as a percentage of potential rental
revenues.
18. "OPEN" means, with respect to any Mortgage Loan that such Mortgage
Loan may be voluntarily prepaid without a Prepayment Premium.
19. "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.
20. "UPB" means, with respect to any Mortgage Loan, its unpaid
principal balance.
21. "Units" "Rooms" and "Beds" 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"); and (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").
22. "U/W DSCR", "Underwriting DSCR" or "Underwriting Debt Service
Coverage Ratio" means, with respect to any Mortgage Loan, (a) the U/W Cash
Flow for the related Mortgaged Property divided by (b) the Annual Debt
Service for such Mortgage Loan.
23. "U/W Cash Flow" or "Underwriting Cash Flow" means, with respect of
any Mortgaged Property, the Cash Flow derived therefrom that was available
for debt service, calculated as U/W Revenues less U/W Expenses, U/W
Reserves and U/W tenant improvements and leasing commissions. See also
"Cash Flow" 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 nursing home or hotel
properties and are subject to an operating lease with a single operator,
U/W Revenues were 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
A-3
<PAGE> 119
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
Cash Flow. 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
Cash Flow 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 most cases, U/W Cash Flow describes the cash flow available after
deductions for capital expenditures such as tenant improvements, leasing
commissions and structural reserves. 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 Cash Flow set forth herein intended to represent such future net
cash flow.
24. "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.
25. "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 or Beds, as applicable.
26. "YM" means, with respect to any Mortgage Loan, a yield maintenance
premium.
Prepayment premiums will be equal to the greater of(1) 1% of the
principal balance being prepaid or (2) the product obtained by multiplying
(a) the amount of principal balance being prepaid, times (b) the difference
obtained by subtracting from the Mortgage Rate the Discount Rate times (c)
the present value factor calculated using the following formula:
-n
1-(1+r)
----------------
r
where r is equal to the Discount Rate, and n is equal to the number of
years (or fraction thereof) remaining between the prepayment date and the
end of the yield maintenance period.
A-4
<PAGE> 120
PREPAYMENT LOCK-OUT/PREPAYMENT ANALYSIS
BASED ON OUTSTANDING PRINCIPAL BALANCE(1)
ALL MORTGAGE LOANS
<TABLE>
<CAPTION>
OCT.-2000 OCT.-2001 OCT.-2002 OCT.-2003 OCT.-2004 OCT.-2005
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Locked Out................................. 99.47% 99.47% 99.47% 99.47% 100.00% 100.00%
Yield Maintenance.......................... 0.53% 0.53% 0.53% 0.53% 0.00% 0.00%
No Penalty................................. 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
------- ------- ------- ------- ------- -------
Total...................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= ======= =======
Total Beginning Balance (in millions) $889.00 $880.08 $870.40 $859.89 $840.42 $817.24
Percent of Initial Balance(2).............. 100.00% 99.00% 97.91% 96.73% 94.54% 91.93%
<CAPTION>
OCT.-2006 OCT.-2007 OCT.-2008 OCT.-2009 OCT.-2010 OCT.-2011
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Locked Out................................. 100.00% 100.00% 93.74% 63.58% 100.00% 100.00%
Yield Maintenance.......................... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
No Penalty................................. 0.00% 0.00% 6.26% 36.42% 0.00% 0.00%
------- ------- ------- ------- ------- -------
Total...................................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= ======= =======
Total Beginning Balance (in millions) $787.20 $769.09 $736.59 $642.58 $ 6.97 $ 6.42
Percent of Initial Balance(2).............. 88.55% 86.51% 82.86% 72.28% 0.78% 0.72%
<CAPTION>
OCT.-2012 OCT.-2013 OCT.-2014
---------- ---------- ----------
<S> <C> <C> <C>
Locked Out................................. 100.00% 85.90% 100.00%
Yield Maintenance.......................... 0.00% 0.00% 0.00%
No Penalty................................. 0.00% 14.10% 0.00%
------- ------- -------
Total...................................... 100.00% 100.00% 100.00%
======= ======= =======
Total Beginning Balance (in millions) $ 5.81 $ 0.23 $ 0.06
Percent of Initial Balance(2).............. 0.65% 0.03% 0.01%
</TABLE>
(1) Prepayment provisions in effect as a percentage of outstanding loan balances
as of the indicated date assuming no prepayments on the Mortgage Loans,
(except that an ARD Loan will be repaid in full on its Anticipated Repayment
Date), if any.
(2) As of the Commencement Date.
A-5
<PAGE> 121
PROPERTY TYPE
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE MIN/MAX AVERAGE MIN/MAX
MORTGAGE CUT-OFF DATE POOL UNDERWRITING UNDERWRITING CUT-OFF DATE CUT-OFF DATE
PROPERTY TYPE PROPERTIES BALANCE BALANCE DSCR DSCR LTV RATIO LTV RATIO
------------- ---------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office.................... 48 $402,787,940 45.3% 1.39x 1.19/2.07x 66.6% 44.8/80.0%
Multifamily............... 49 238,981,263 26.9% 1.26x 1.20/1.83x 75.2% 52.6/79.8%
Retail.................... 29 119,637,286 13.4% 1.37x 1.16/2.38x 67.8% 21.4/79.9%
Anchored.............. 24 105,742,967 11.9% 1.37x 1.16/2.38x 68.0% 21.4/79.9%
Unanchored............ 5 13,894,319 1.6% 1.33x 1.25/1.50x 66.5% 62.4/71.0%
Hotel..................... 16 87,356,899 9.8% 1.72x 1.40/1.88x 55.1% 46.5/74.0%
Industrial................ 8 23,808,575 2.7% 1.38x 1.20/2.00x 62.6% 45.8/72.8%
Self-Storage.............. 7 17,224,890 1.9% 1.68x 1.25/2.30x 51.4% 28.3/71.0%
--- ------------ ----- ---- --------- ---- ---------
Total/Wtd Avg............. 157 $889,796,853 100.0% 1.39x 1.16/2.38x 67.5% 21.4/80.0%
=== ============ ===== ==== ========= ==== =========
<CAPTION>
WEIGHTED
AVERAGE
MORTGAGE
PROPERTY TYPE RATE
------------- --------
<S> <C>
Office.................... 8.114%
Multifamily............... 8.084%
Retail.................... 8.242%
Anchored.............. 8.221%
Unanchored............ 8.396%
Hotel..................... 8.335%
Industrial................ 8.487%
Self-Storage.............. 8.260%
-----
Total/Wtd Avg............. 8.157%
=====
</TABLE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
BALANCES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- ------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
$ 715,122 -- $ 999,999.............. 3 $ 2,524,959 0.3% 1.53x 53.3% 8.148%
$ 1,000,000 -- $ 1,999,999.............. 24 37,777,599 4.2% 1.43x 64.5% 8.244%
$ 2,000,000 -- $ 2,999,999.............. 28 70,217,749 7.9% 1.39x 65.1% 8.369%
$ 3,000,000 -- $ 3,999,999.............. 9 31,205,084 3.5% 1.29x 76.0% 7.840%
$ 4,000,000 -- $ 4,999,999.............. 12 54,524,531 6.1% 1.38x 67.4% 8.164%
$ 5,000,000 -- $ 7,499,999.............. 16 102,555,497 11.5% 1.32x 70.7% 8.155%
$ 7,500,000 -- $ 9,999,999.............. 11 91,329,239 10.3% 1.28x 71.8% 8.026%
$10,000,000 -- $14,999,999.............. 11 145,273,971 16.3% 1.41x 68.6% 8.052%
$15,000,000 -- $19,999,999.............. 4 65,472,934 7.4% 1.33x 70.4% 8.099%
$20,000,000 -- $29,999,999.............. 8 200,027,757 22.5% 1.33x 67.6% 8.203%
$30,000,000 -- $54,698,161.............. 2 88,887,534 10.0% 1.75x 56.1% 8.311%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg........................... 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
A-6
<PAGE> 122
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
SE- LOAN
QUENCE NUMBER PROPERTY NAME PROPERTY ADDRESS
------ ------ --------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C>
B1 51642 Towngate Community Shopping Center 12625 Frederick Street
B2.1 52458 BVT-Publix at Powder Springs Shopping Center 3701-3753 New MacLand Road
B2.2 52458 BVT-Parkway Centre 7600 Schomburg Road
B2.3 52458 BVT-Deltona Landings Shopping Center 915 Doyle Road
B2.4 52458 BVT-Kingwood Glen Shopping Center 19250 W. Lake Houston Parkway
B2 52458 BVT INVESTMENT PORTFOLIO (ROLL-UP)
B3 52314 Epps Village Shopping Center 1720 Epps Bridge Road
B4 51826 Yorba Canyon Center 21430-21580 Yorba Linda Boulevard
H1 180602 Gateway Village Shopping Center 5932, 5940, 5960, 6008, 6020 & 6070 W. Bell Rd
B5 51835 East Lake Woodlands 3400 East Lake Road
B6 52050 Home Base-Spokane, WA 9718 E. Sprague Ave
B7 51903 Fielder Plaza Shopping Center 1701 West Randol Mill Rd and 1112 North Fielder Rd
H2 163162 Clubhouse Plaza 31271-31371 Niguel Road
B8 52070 Arrow Center 412 W. Arrow Highway
B9 51656 Keystone Heights Village Shopping Center 7380 State Road 100 at Sunrise Blvd
B10 51653 Las Flores Plaza 30592 Santa Margarita Parkway
H3 278350 Willowbrook Court Center 7885 FM 1960 West
B11 51591 Perry Crossroads Shopping Center 1011-1033 St. Patricks Dr
B12 51619 Glenoaks Plaza 401 South Glenoaks Blvd.
B13 51305 North Mesa Plaza 454 North Lindsay Road and 2644-2750 E. University Drive
B14 51592 Willow Lake Shopping Center 2907 Watson Blvd.
B15 52649 Sparta Crossing 281 North Spring Street
B16 52130 CVS Pharmacy at Village Marketplace Shopping Center 13180 Midlothian Turnpike
B17 51597 The Groves Restaurant 1330 West 75th Street
B18 51566 Ranson Square Shopping Center Route 9 and Ambrose Drive
H4 281595 Southlake Oaks Shopping Center Phase II 480 West Southlake Boulevard
B19 52347 CVS Pharmacy-Murrells Inlet Store 2736 3710 Highway 17 By-Pass
B20 51852 Baldwin Hills Shopping Center 5060-5080 Rodeo Drive
B21 51393 Fairway Market 520 E. Tulare Ave.
B22 51394 Fairway Center 1845 Dinuba Blvd.
SUB-TOTAL CROSSED LOANS
H5 277025 Sanctuary Cove Apartments 700 & 900 Sanctuary Cove Drive
H6 277035 Weston Place Apartments 16000 South Post Road
H7 277070 Durango Canyon South Apartments 4515 South Durango Drive
H8 277060 Durango Canyon North Apartments 8620 Peace Way
SUB-TOTAL CROSSED LOANS
B23 52027 Meridian Corners Apartments 1440 East Broadway Rd
B24 52542 Silverado Apartments 3750 S. Arville Street
B25 52370 Rio Apartments 8801-8871 Fontainebleau Boulevard
B26 51963 Sonnet Cove Apartments 495 Laketower Drive
B27 52097 Verona Senior Citizens' Apartments 100 Hillwood Terrace
B28 52096 Duval Villa Apartments 4305 Duval Street
B29 51836 Pinewood Apartments 1855 East Rose Ave
B30 52024 Forest Hills Apartments 1817 West Call Street
B31 51580 Oakview Terrace Apartments SEC Urbandale Avenue/30th Street
B32 50221 Brookside Village 1902 Brady Dr
H9 513561 Edgecliff Village & Chapel Creek Various
B33 52257 Woodbridge Manor Apartments 3140 East Paris Avenue, SE
B34 51823 Tanglewood North Apartments 1020 East 45th Street
B35 51641 Hickory Hills Townhomes Phase II 22507 Iverson Drive
B36 51920 Art Museum Apartments 1706 Art Museum Drive
B37.1 52149 B & V Apartment Portfolio-155 NW 10th St. 155 NW 10th St.
B37.2 52149 B & V Apartment Portfolio-1223 NE 1st Ave. 1223 NE 1st Ave.
B37.3 52149 B & V Apartment Portfolio-929 NW 2nd St. 929 NW 2nd St.
B37.4 52149 B & V Apartment Portfolio-67 NE 9th Court 67 NE 9th Court
B37.5 52149 B & V Apartment Portfolio-930 NW 1st Ave. 930 NW 1st Ave.
B37.6 52149 B & V Apartment Portfolio-938 NW 1st Ave. 938 NW 1st Ave.
B37.7 52149 B & V Apartment Portfolio-55 NE 9th Court 55 NE 9th Court
B37.8 52149 B & V Apartment Portfolio-960 NE 1st Ave. 960 NE 1st Ave.
B37.9 52149 B & V Apartment Portfolio-110 NE 10th Ave. 110 NE 10th Ave.
B37.10 52149 B & V Apartment Portfolio-186 NW 2nd St. 186 NW 2nd St.
B37.11 52149 B & V Apartment Portfolio-194 NW 2nd St. 194 NW 2nd St.
B37.12 52149 B & V Apartment Portfolio-460 NW 6th St. 460 NW 6th St.
B37.13 52149 B & V Apartment Portfolio-480 NW 6th St. 480 NW 6th St.
B37.14 52149 B & V Apartment Portfolio-521 NW 5th St. 521 NW 5th St.
<CAPTION>
CUT-OFF
ZIP PROPERTY ORIGINAL DATE
COUNTY CITY STATE CODE TYPE BALANCE BALANCE
------------ ---------------------- ----- ----- ----------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C>
Riverside Moreno Valley CA 92553 Retail $23,095,000 $22,990,591
Cobb Powder Springs GA 30127 Retail
Muscogee Columbus GA 31909 Retail
Volusia Deltona FL 32725 Retail
Harris Humble (Houston) TX 77346 Retail
Retail 14,200,000 14,200,000
Oconee Athens GA 30606 Retail 8,600,000 8,593,327
Orange Yorba Linda CA 92887 Retail 8,200,000 8,180,134
Maricopa Glendale AZ 85308 Retail 7,850,000 7,835,883
Pinellas Palm Harbor FL 34677 Retail 7,127,500 7,102,309
Spokane Spokane WA 92204 Retail 6,350,000 6,319,586
Tarrant Arlington TX 76012 Retail 5,850,000 5,836,205
Orange Laguna Niguel CA 92677 Retail 4,500,000 4,429,748
Los Angeles Covina CA 91722 Retail 3,450,000 3,445,117
Clay Keystone Heights FL 32656 Retail 2,688,744 2,675,853
Orange Rancho Santa Margarita CA 92688 Retail 2,650,000 2,633,987
Harris Houston TX 77070 Retail 2,600,000 2,593,034
Houston Perry GA 31069 Retail 2,500,000 2,486,226
Los Angeles Burbank CA 91502 Retail 2,401,600 2,377,749
Maricopa Mesa AZ 85213 Retail 2,164,500 2,125,831
Houston Warner Robins GA 31093 Retail 2,078,148 2,069,148
White Sparta TN 38583 Retail 1,950,000 1,948,244
Chesterfield Midlothian VA 23113 Retail 1,950,000 1,946,159
Du Page Downers Grove IL 60516 Retail 1,853,000 1,843,090
Jefferson Ranson WV 25438 Retail 1,850,000 1,835,355
Tarrant Southlake TX 76092 Retail 1,800,000 1,798,615
Georgetown Murrells Inlet SC 29576 Retail 1,581,000 1,578,675
Los Angeles Los Angeles CA 90016 Retail 1,250,000 1,229,246
Tulare Visalia CA 93292 Retail 904,500 848,054
Tulare Visalia CA 93291 Retail 762,200 715,122
----------- -----------
1,666,700 1,563,175
Palm Beach North Palm Beach FL 33410 Multifamily 30,000,000 29,849,232
Broward Weston FL 33331 Multifamily 27,300,000 26,165,960
Clark Las Vegas NV 89147 Multifamily 21,412,500 21,303,408
Clark Las Vegas NV 89147 Multifamily 10,350,000 10,297,269
----------- -----------
89,062,500 87,615,869
Maricopa Tempe AZ 85282 Multifamily 25,541,730 25,480,402
Clark Las Vegas NV 89103 Multifamily 15,250,000 15,242,981
Dade Miami FL 33172 Multifamily 12,960,000 12,927,440
Fayette Lexington KY 40502 Multifamily 10,800,000 10,769,638
Essex Verona NJ 07044 Multifamily 9,500,000 9,457,921
Travis Austin TX 78751 Multifamily 6,750,000 6,723,690
Orange Orange CA 92867 Multifamily 5,056,000 5,018,058
Leon Tallahassee FL 32304 Multifamily 4,920,000 4,910,031
Polk Des Moines IA 50310 Multifamily 4,900,000 4,877,419
Whitfield Dalton GA 30720 Multifamily 4,887,000 4,760,039
Tarrant Fort Worth TX 76133 Multifamily 4,760,000 4,667,578
Kent Kentwood MI 49512 Multifamily 4,650,000 4,642,562
Travis Austin TX 78751 Multifamily 3,900,000 3,874,378
St. Mary's Great Mills MD 20634 Multifamily 3,840,000 3,813,962
Duval Jacksonville FL 32207 Multifamily 3,600,000 3,581,609
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
Miami-Dade Homestead FL 33030 Multifamily
<CAPTION>
MATURITY OR
ANTICIPATED ADMINI- SUB NET
REPAYMENT MORTGAGE STRATIVE SERVICING MORTGAGE
DATE BALANCE LOAN TYPE RATE FEE RATE(I) FEE RATE RATE
------------ ------------------ -------- ----------- --------- --------
<C> <C> <C> <C> <C> <C>
$20,711,427 Balloon 8.060% 0.143% 0.100% 7.917%
14,200,000 Balloon 7.770% 0.143% 0.100% 7.627%
7,772,972 Balloon 8.390% 0.093% 0.050% 8.297%
7,412,235 Balloon 8.410% 0.113% 0.070% 8.297%
7,095,750 Hyper Amortization 8.392% 0.083% 0.040% 8.309%
6,468,103 Balloon 8.590% 0.143% 0.100% 8.447%
5,348,582 Balloon 8.660% 0.143% 0.100% 8.517%
5,298,697 Balloon 8.500% 0.143% 0.100% 8.357%
3,720,929 Hyper Amortization 7.997% 0.083% 0.040% 7.914%
2,903,422 Balloon 8.650% 0.143% 0.100% 8.507%
2,420,125 Balloon 8.200% 0.143% 0.100% 8.057%
2,363,670 Balloon 7.830% 0.143% 0.100% 7.687%
2,408,127 Hyper Amortization 9.562% 0.083% 0.040% 9.479%
2,248,344 Balloon 8.180% 0.143% 0.100% 8.037%
2,031,114 Balloon 8.840% 0.143% 0.100% 8.697%
1,891,322 Balloon 7.000% 0.143% 0.100% 6.857%
1,870,605 Balloon 8.220% 0.143% 0.100% 8.077%
1,746,642 Balloon 8.000% 0.143% 0.100% 7.857%
1,751,237 Balloon 8.110% 0.143% 0.100% 7.967%
1,670,693 Balloon 8.290% 0.143% 0.100% 8.147%
1,658,623 Balloon 8.020% 0.143% 0.100% 7.877%
1,627,675 Hyper Amortization 8.411% 0.083% 0.040% 8.328%
1,121,070 Balloon 8.020% 0.143% 0.100% 7.877%
Fully Amortizing 8.350% 0.143% 0.100% 8.207%
Fully Amortizing 8.335% 0.143% 0.100% 8.192%
Fully Amortizing 8.460% 0.143% 0.100% 8.317%
26,895,851 Hyper Amortization 8.030% 0.083% 0.040% 7.947%
23,624,538 Hyper Amortization 7.980% 0.083% 0.040% 7.897%
19,174,249 Hyper Amortization 7.980% 0.083% 0.040% 7.897%
9,268,113 Hyper Amortization 7.980% 0.083% 0.040% 7.897%
-----------
78,962,750
23,103,578 Balloon 8.440% 0.093% 0.050% 8.347%
13,631,500 Balloon 7.930% 0.143% 0.100% 7.787%
11,682,267 Balloon 8.287% 0.143% 0.100% 8.144%
9,773,492 Balloon 8.420% 0.143% 0.100% 8.277%
8,398,796 Balloon 8.570% 0.143% 0.100% 8.427%
6,507,958 Balloon 8.600% 0.098% 0.055% 8.502%
4,194,395 Balloon 8.140% 0.143% 0.100% 7.997%
4,409,182 Balloon 8.020% 0.113% 0.070% 7.907%
4,424,676 Balloon 8.340% 0.143% 0.100% 8.197%
4,542,997 Balloon 7.540% 0.118% 0.075% 7.422%
3,882,579 Hyper Amortization 7.514% 0.083% 0.040% 7.431%
4,159,620 Balloon 7.960% 0.143% 0.100% 7.817%
3,732,697 Balloon 7.820% 0.143% 0.100% 7.677%
3,415,659 Balloon 7.700% 0.143% 0.100% 7.557%
3,222,928 Balloon 7.970% 0.143% 0.100% 7.827%
<CAPTION>
ORIGINAL ORIGINAL REMAINING
TERM TO AMORITI- TERM TO MATURITY OR
FIRST INTEREST MATURITY/ ZATION SEA- MATURITY/ ANTICIPATED
PAYMENT ACCRUAL MONTHLY ARD TERM SONING ARD REPAYMENT
NOTE DATE DATE METHOD PAYMENT (MONTHS) (MONTHS)(II) (MONTHS) (MONTHS) DATE
--------- ------- -------- -------- --------- ------------ -------- --------- -----------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
12/20/99 02/01/00 ACT/360 $170,430 120 360 8 112 01/01/10
05/16/00 07/01/00 ACT/360 120 3 117 06/01/10
06/26/00 08/01/00 ACT/360 65,457 120 360 2 118 07/01/10
03/22/00 05/01/00 ACT/360 62,529 120 360 5 115 04/01/10
03/31/00 06/01/00 ACT/360 59,760 120 360 4 116 05/01/10
01/19/00 03/01/00 ACT/360 55,260 120 360 7 113 02/01/10
02/07/00 04/01/00 ACT/360 51,818 120 300 6 114 03/01/10
03/13/00 05/01/00 ACT/360 44,981 120 360 5 115 04/01/10
04/08/99 06/01/99 ACT/360 34,723 120 300 16 104 05/01/09
06/20/00 08/01/00 ACT/360 28,130 120 300 2 118 07/01/10
11/08/99 01/01/00 ACT/360 20,105 120 360 9 111 12/01/09
10/15/99 12/01/99 ACT/360 19,132 120 360 10 110 11/01/09
01/14/00 03/01/00 ACT/360 21,980 120 360 7 113 02/01/10
10/27/99 12/01/99 ACT/360 18,659 120 360 10 110 11/01/09
08/13/99 10/01/99 ACT/360 19,892 120 300 12 108 09/01/09
09/15/98 11/01/98 ACT/360 14,400 120 360 23 97 10/01/08
12/17/99 02/01/00 ACT/360 15,569 120 360 8 112 01/01/10
06/16/00 08/01/00 ACT/360 14,308 120 360 2 118 07/01/10
04/27/00 06/01/00 ACT/360 14,458 120 360 4 116 05/01/10
10/29/99 12/01/99 ACT/360 13,973 120 360 10 110 11/01/09
06/24/99 08/01/99 ACT/360 13,600 120 360 14 106 07/01/09
06/30/00 08/01/00 ACT/360 13,727 120 360 2 118 07/01/10
07/11/00 09/01/00 ACT/360 13,244 120 240 1 119 08/01/10
02/08/00 04/01/00 ACT/360 12,289 180 180 6 174 03/01/15
11/18/98 01/01/99 ACT/360 8,884 180 180 21 159 12/01/13
11/18/98 01/01/99 ACT/360 7,543 180 180 21 159 12/01/13
11/22/99 01/01/00 ACT/360 220,757 120 360 9 111 12/01/09
11/22/99 01/01/00 ACT/360 192,159 120 360 9 111 12/01/09
11/22/99 01/01/00 ACT/360 156,819 120 360 9 111 12/01/09
11/22/99 01/01/00 ACT/360 75,800 120 360 9 111 12/01/09
03/10/00 05/01/00 ACT/360 195,309 120 360 5 115 04/01/10
07/31/00 09/01/00 ACT/360 111,156 120 360 1 119 08/01/10
03/28/00 05/01/00 ACT/360 97,701 120 360 5 115 04/01/10
02/09/00 04/01/00 ACT/360 82,431 120 360 6 114 03/01/10
01/11/00 03/01/00 ACT/360 74,682 120 336 7 113 02/01/10
12/30/99 02/01/00 ACT/360 52,381 60 360 8 52 01/01/05
12/14/99 02/01/00 ACT/360 39,493 120 300 8 112 01/01/10
04/13/00 06/01/00 ACT/360 36,170 120 360 4 116 05/01/10
11/24/99 01/01/00 ACT/360 37,123 120 360 9 111 12/01/09
08/29/97 10/01/97 ACT/360 34,305 84 360 36 48 09/01/04
02/03/99 04/01/99 ACT/360 35,219 120 300 18 102 03/01/09
05/01/00 07/01/00 ACT/360 33,990 120 360 3 117 06/01/10
09/29/99 11/01/99 ACT/360 28,129 60 360 11 49 10/01/04
09/22/99 11/01/99 ACT/360 27,378 120 360 11 109 10/01/09
11/22/99 01/01/00 ACT/360 26,340 120 360 9 111 12/01/09
<CAPTION>
CROSS- LOCKOUT PREPAYMENT
COLLATERALIZED RELATED EXPIRATION PENALTY DESCRIPTION
LOANS LOANS DATE (MONTHS)
-------------- ----------- ---------- --------------------------------
<C> <C> <C> <C>
No No 10/01/09 LO(117)/OPEN(3)/DEFEASANCE
No No 04/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 02/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 10/31/09 LO(113)/OPEN(7)/DEFEASANCE
No No 12/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 09/01/09 LO(114)/OPEN(6)/DEFEASANCE
No No 01/01/10 LO(117)/OPEN(3)/DEFEASANCE
No No 10/31/08 LO(113)/OPEN(7)/DEFEASANCE
No Yes(00-2-B) 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 09/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 07/31/09 LO(113)/OPEN(7)/DEFEASANCE
No No 08/01/09 LO(117)/OPEN(3)/DEFEASANCE
No Yes(00-2-B) 07/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 06/02/08 LO(116)/OPEN(4)/DEFEASANCE
No No 11/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 03/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 09/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 04/01/09 LO(117)/OPEN(3)/DEFEASANCE
No No 12/30/09 LO(113)/OPEN(7)/DEFEASANCE
No No 06/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 01/01/15 LO(178)/OPEN(2)/DEFEASANCE
Yes(00-2-A) Yes(00-2-A) 10/01/13 LO(178)/OPEN(2)/DEFEASANCE
Yes(00-2-A) Yes(00-2-A) 10/01/13 LO(178)/OPEN(2)/DEFEASANCE
Yes(00-2-J) Yes(00-2-J) 05/31/09 LO(113)/OPEN(7)/DEFEASANCE
Yes(00-2-J) Yes(00-2-J) 05/31/09 LO(113)/OPEN(7)/DEFEASANCE
Yes(00-2-J) Yes(00-2-J) 05/31/09 LO(113)/OPEN(7)/DEFEASANCE
Yes(00-2-J) Yes(00-2-J) 05/31/09 LO(113)/OPEN(7)/DEFEASANCE
No No 02/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 06/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 02/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 01/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 12/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 11/01/04 LO(58)/OPEN(2)/DEFEASANCE
No No 10/01/09 LO(117)/OPEN(3)/DEFEASANCE
No No 02/01/10 LO(117)/OPEN(3)/DEFEASANCE
No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 08/31/00 LO(35)/GRTR1%PPMTorYM(42)/OPEN(7)
No No 08/31/08 LO(113)/OPEN(7)/DEFEASANCE
No No 04/01/10 LO(118)/OPEN(2)/DEFEASANCE
No No 08/01/04 LO(58)/OPEN(2)/DEFEASANCE
No No 08/01/09 LO(118)/OPEN(2)/DEFEASANCE
No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
</TABLE>
<PAGE> 123
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF
DATE
SE- LOAN APPRAISAL APPRAISAL LTV YEAR BUILT/
QUENCE NUMBER PROPERTY NAME VALUE DATE RATIO RENOVATED
------ ------ ------------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
B1 51642 Towngate Community Shopping Center $29,500,000 08/01/99 78% 1989/1992
B2.1 52458 BVT-Publix at Powder Springs Shopping Center 1999
B2.2 52458 BVT-Parkway Centre 1999
B2.3 52458 BVT-Deltona Landings Shopping Center 1998/1999
B2.4 52458 BVT-Kingwood Glen Shopping Center 1996
B2 52458 BVT Investment Portfolio (Roll-Up) 34,025,000 04/14/00 42%
B3 52314 Epps Village Shopping Center 10,750,000 03/08/00 80% 2000
B4 51826 Yorba Canyon Center 12,800,000 09/25/99 64% 1989
H1 180602 Gateway Village Shopping Center 10,600,000 02/17/00 74% 1988
B5 51835 East Lake Woodlands 11,400,000 10/06/99 62% 1982/1984
B6 52050 Home Base-Spokane, WA 8,750,000 12/15/99 72% 1988
B7 51903 Fielder Plaza Shopping Center 7,600,000 01/21/00 77% 1978
H2 163162 Clubhouse Plaza 7,100,000 03/18/99 62% 1990/1998
B8 52070 Arrow Center 4,850,000 02/11/00 71% 1958/1993
B9 51656 Keystone Heights Village Shopping Center 3,600,000 09/12/99 74% 1989
B10 51653 Las Flores Plaza 4,200,000 08/30/99 63% 1999
H3 278350 Willowbrook Court Center 3,700,000 12/02/99 70% 1997
B11 51591 Perry Crossroads Shopping Center 3,150,000 10/01/99 79% 1999
B12 51619 Glenoaks Plaza 3,400,000 06/15/99 70% 1991
B13 51305 North Mesa Plaza 3,000,000 08/01/98 71% 1985/1997
B14 51592 Willow Lake Shopping Center 3,200,000 09/01/99 65% 1999
B15 52649 Sparta Crossing 2,600,000 04/20/00 75% 1989/1997
B16 52130 CVS Pharmacy at Village Marketplace Shopping Center 2,590,000 04/03/00 75% 1999
B17 51597 The Groves Restaurant 2,950,000 07/16/99 62% 1986
B18 51566 Ranson Square Shopping Center 2,490,000 04/23/99 74% 1987/1998
H4 281595 Southlake Oaks Shopping Center Phase II 2,650,000 11/01/00 68% 1999
B19 52347 CVS Pharmacy- Murrells Inlet Store 2736 2,635,000 04/25/00 60% 2000
B20 51852 Baldwin Hills Shopping Center 5,750,000 11/12/99 21% 1960/1980
B21 51393 Fairway Market 1,525,000 08/27/98 56% 1986
B22 51394 Fairway Center 1,180,000 08/27/98 61% 1972/1981
-----------
SUB-TOTAL CROSSED LOANS 2,705,000
H5 277025 Sanctuary Cove Apartments 40,400,000 11/01/00 74% 1999
H6 277035 Weston Place Apartments 36,400,000 04/01/00 72% 1998
H7 277070 Durango Canyon South Apartments 28,550,000 02/10/00 75% 1998
H8 277060 Durango Canyon North Apartments 13,800,000 08/10/99 75% 1998
-----------
SUB-TOTAL CROSSED LOANS 119,150,000
B23 52027 Meridian Corners Apartments 32,050,000 01/11/00 80% 1985
B24 52542 Silverado Apartments 20,100,000 04/28/00 76% 1981
B25 52370 Rio Apartments 17,625,000 12/02/99 73% 1971
B26 51963 Sonnet Cove Apartments 13,800,000 12/13/99 78% 1972/1974
B27 52097 Verona Senior Citizens' Apartments 12,300,000 11/09/99 77% 1981
B28 52096 Duval Villa Apartments 8,500,000 12/03/99 79% 1969
B29 51836 Pinewood Apartments 7,000,000 09/23/99 72% 1963
B30 52024 Forest Hills Apartments 6,150,000 01/31/00 80% 1974
B31 51580 Oakview Terrace Apartments 6,625,000 08/10/99 74% 1963/1974
B32 50221 Brookside Village 6,175,000 05/30/97 77% 1986
H9 513561 Edgecliff Village & Chapel Creek 6,770,000 07/14/00 69% 1984
B33 52257 Woodbridge Manor Apartments 6,213,000 03/20/00 75% 1981
B34 51823 Tanglewood North Apartments 5,400,000 08/21/99 72% 1964
B35 51641 Hickory Hills Townhomes Phase II 4,800,000 08/05/99 79% 1999
B36 51920 Art Museum Apartments 4,500,000 09/09/99 80% 1974
B37.1 52149 B & V Apartment Portfolio-155 NW 10th St. 1973
B37.2 52149 B & V Apartment Portfolio-1223 NE 1st Ave. 1969
B37.3 52149 B & V Apartment Portfolio-929 NW 2nd St. 1972
B37.4 52149 B & V Apartment Portfolio-67 NE 9th Court 1947
B37.5 52149 B & V Apartment Portfolio-930 NW 1st Ave. 1970
B37.6 52149 B & V Apartment Portfolio-938 NW 1st Ave. 1971
B37.7 52149 B & V Apartment Portfolio-55 NE 9th Court 1967
B37.8 52149 B & V Apartment Portfolio-960 NE 1st Ave. 1963
B37.9 52149 B & V Apartment Portfolio-110 NE 10th Ave. 1963
B37.10 52149 B & V Apartment Portfolio-186 NW 2nd St. 1956
B37.11 52149 B & V Apartment Portfolio-194 NW 2nd St. 1956
B37.12 52149 B & V Apartment Portfolio-460 NW 6th St. 1956
B37.13 52149 B & V Apartment Portfolio-480 NW 6th St. 1956
B37.14 52149 B & V Apartment Portfolio-521 NW 5th St. 1956
</TABLE>
<TABLE>
<CAPTION>
TOTAL SF/
UNITS/ UNIT/ NET
SE- LOAN ROOM/ ROOM/ RENTABLE
QUENCE NUMBER PROPERTY NAME BED BED AREA (SF)
------ ------ ------------- ------ ----- ---------
<S> <C> <C> <C> <C> <C>
B1 51642 Towngate Community Shopping Center 286,729 SF 286,729
B2.1 52458 BVT-Publix at Powder Springs Shopping Center 77,853 SF 77,853
B2.2 52458 BVT-Parkway Centre 53,088 SF 53,088
B2.3 52458 BVT-Deltona Landings Shopping Center 59,966 SF 59,966
B2.4 52458 BVT-Kingwood Glen Shopping Center 105,308 SF 105,308
B2 52458 BVT INVESTMENT PORTFOLIO (ROLL-UP) 296,215 SF 296,215
B3 52314 Epps Village Shopping Center 90,346 SF 90,346
B4 51826 Yorba Canyon Center 57,999 SF 57,999
H1 180602 Gateway Village Shopping Center 126,285 SF 126,285
B5 51835 East Lake Woodlands 136,051 SF 136,051
B6 52050 Home Base-Spokane, WA 100,100 SF 100,100
B7 51903 Fielder Plaza Shopping Center 157,155 SF 157,155
H2 163162 Clubhouse Plaza 48,273 SF 48,273
B8 52070 Arrow Center 80,600 SF 80,600
B9 51656 Keystone Heights Village Shopping Center 61,216 SF 61,216
B10 51653 Las Flores Plaza 15,049 SF 15,049
H3 278350 Willowbrook Court Center 27,371 SF 27,371
B11 51591 Perry Crossroads Shopping Center 32,200 SF 32,200
B12 51619 Glenoaks Plaza 32,804 SF 32,804
B13 51305 North Mesa Plaza 35,130 SF 35,130
B14 51592 Willow Lake Shopping Center 24,200 SF 24,200
B15 52649 Sparta Crossing 31,400 SF 31,400
B16 52130 CVS Pharmacy at Village Marketplace Shopping Center 10,125 SF 10,125
B17 51597 The Groves Restaurant 14,442 SF 14,442
B18 51566 Ranson Square Shopping Center 44,735 SF 44,735
H4 281595 Southlake Oaks Shopping Center Phase II 16,865 SF 16,865
B19 52347 CVS Pharmacy- Murrells Inlet Store 2736 10,125 SF 10,125
B20 51852 Baldwin Hills Shopping Center 87,760 SF 87,760
B21 51393 Fairway Market 36,717 SF 36,717
B22 51394 Fairway Center 44,533 SF 44,533
SUB-TOTAL CROSSED LOANS
H5 277025 Sanctuary Cove Apartments 419 Units 467,382
H6 277035 Weston Place Apartments 372 Units 437,120
H7 277070 Durango Canyon South Apartments 360 Units 390,964
H8 277060 Durango Canyon North Apartments 184 Units 185,808
SUB-TOTAL CROSSED LOANS
B23 52027 Meridian Corners Apartments 660 Units 472,040
B24 52542 Silverado Apartments 440 Units 364,752
B25 52370 Rio Apartments 294 Units 261,400
B26 51963 Sonnet Cove Apartments 332 Units 345,932
B27 52097 Verona Senior Citizens' Apartments 160 Units 89,325
B28 52096 Duval Villa Apartments 111 Units 106,126
B29 51836 Pinewood Apartments 112 Units 128,800
B30 52024 Forest Hills Apartments 190 Units 104,240
B31 51580 Oakview Terrace Apartments 232 Units 158,700
B32 50221 Brookside Village 155 Units 176,545
H9 513561 Edgecliff Village & Chapel Creek 197 Units 226,335
B33 52257 Woodbridge Manor Apartments 168 Units 150,600
B34 51823 Tanglewood North Apartments 127 Units 89,320
B35 51641 Hickory Hills Townhomes Phase II 64 Units 75,774
B36 51920 Art Museum Apartments 176 Units 131,936
B37.1 52149 B & V Apartment Portfolio-155 NW 10th St.
B37.2 52149 B & V Apartment Portfolio-1223 NE 1st Ave.
B37.3 52149 B & V Apartment Portfolio-929 NW 2nd St.
B37.4 52149 B & V Apartment Portfolio-67 NE 9th Court
B37.5 52149 B & V Apartment Portfolio-930 NW 1st Ave.
B37.6 52149 B & V Apartment Portfolio-938 NW 1st Ave.
B37.7 52149 B & V Apartment Portfolio-55 NE 9th Court
B37.8 52149 B & V Apartment Portfolio-960 NE 1st Ave.
B37.9 52149 B & V Apartment Portfolio-110 NE 10th Ave.
B37.10 52149 B & V Apartment Portfolio-186 NW 2nd St.
B37.11 52149 B & V Apartment Portfolio-194 NW 2nd St.
B37.12 52149 B & V Apartment Portfolio-460 NW 6th St.
B37.13 52149 B & V Apartment Portfolio-480 NW 6th St.
B37.14 52149 B & V Apartment Portfolio-521 NW 5th St.
</TABLE>
<TABLE>
<CAPTION>
LOAN U/W
BALANCE PER OCCUPANCY CASH U/W
SF/UNIT/ OCCUPANCY AS OF U/W U/W U/W FLOW U/W RESERVES
ROOM/BED PERCENT DATE REVENUES EXPENSES CASH FLOW DSCR RESERVES PER UNIT
----------- --------- --------- -------- -------- --------- ---- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
80 89% 05/01/00 $3,732,764 $1,097,941 $2,454,285 1.20 $ 65,718 $ 0.23
96% 04/24/00
95% 04/24/00
97% 04/24/00
97% 05/02/00
48 3,781,289 1,011,120 2,628,150 2.00 44,146 0.15
95 94% 06/15/00 1,209,160 222,388 946,116 1.20 9,035 0.10
141 99% 03/02/00 1,395,874 383,673 942,760 1.26 10,680 0.18
62 98% 04/01/00 1,688,923 724,431 886,362 1.24 18,943 0.15
52 98% 03/31/00 1,646,562 645,288 862,060 1.30 46,201 0.34
63 100% 02/01/00 909,909 32,302 852,582 1.37 25,025 0.25
37 93% 06/02/00 1,226,505 431,600 677,616 1.26 43,197 0.27
92 93% 12/22/99 815,717 222,877 559,816 1.34 7,798 0.16
43 96% 06/01/00 622,834 128,408 440,961 1.31 16,926 0.21
44 97% 05/23/00 413,453 97,894 289,514 1.20 9,795 0.16
175 100% 04/24/00 479,973 136,240 323,787 1.41 1,505 0.10
95 100% 12/28/99 471,577 145,599 305,180 1.16 4,106 0.15
77 97% 06/09/00 364,988 62,546 282,366 1.26 3,220 0.10
72 83% 03/31/00 461,852 115,995 298,813 1.25 4,921 0.15
61 94% 03/31/00 525,583 228,471 263,779 1.53 16,148 0.46
86 100% 03/31/00 351,714 73,730 261,553 1.40 3,630 0.15
62 100% 05/31/00 306,252 56,377 242,334 1.41 6,280 0.20
192 100% 03/31/00 244,621 26,272 216,830 1.25 1,519 0.15
128 100% 06/30/00 343,908 79,611 251,583 1.50 2,888 0.20
41 96% 05/04/00 303,911 83,713 204,349 1.25 6,710 0.15
107 88% 06/01/00 343,586 112,279 213,750 1.30 2,530 0.15
156 100% 05/01/00 231,743 12,093 218,637 1.38 1,013 0.10
14 100% 06/01/00 901,182 456,937 350,610 2.38 57,044 0.65
23 100% 03/31/00 177,874 37,624 132,882 1.25 3,672 0.10
16 100% 03/31/00 154,992 32,762 112,936 1.25 4,453 0.10
71,239 93% 04/01/00 5,369,669 1,833,286 3,442,333 1.30 94,050 224.46
70,339 96% 04/01/00 4,522,609 1,671,172 2,777,037 1.20 74,400 200.00
59,176 94% 04/01/00 3,654,353 1,116,184 2,456,809 1.31 81,360 226.00
55,963 96% 04/01/00 1,716,731 556,046 1,119,285 1.23 41,400 225.00
38,607 93% 02/16/00 4,681,356 1,698,629 2,812,447 1.20 170,280 258.00
34,643 96% 06/15/00 3,044,498 1,187,648 1,711,650 1.28 145,200 330.00
43,971 98% 03/23/00 2,316,658 821,497 1,421,661 1.21 73,500 250.00
32,439 89% 03/21/00 2,330,629 1,048,549 1,199,080 1.21 83,000 250.00
59,112 99% 05/31/00 1,866,946 714,208 1,120,738 1.25 32,000 200.00
60,574 99% 03/31/00 1,238,175 443,150 761,725 1.21 33,300 300.00
44,804 95% 03/31/00 1,241,144 626,334 592,410 1.25 22,400 200.00
25,842 99% 03/25/00 936,511 363,407 521,725 1.20 51,379 270.42
21,023 100% 04/30/00 1,402,896 792,765 546,331 1.23 63,800 275.00
30,710 89% 05/31/00 954,940 366,416 558,324 1.36 30,200 194.84
23,693 100% 12/31/99 1,382,949 715,889 568,560 1.35 98,500 500.00
27,634 95% 04/18/00 1,126,802 594,447 490,355 1.20 42,000 250.00
30,507 72% 05/31/00 960,955 478,976 443,879 1.32 38,100 300.00
59,593 88% 03/31/00 658,320 218,723 425,581 1.30 14,016 219.00
20,350 90% 03/31/00 889,328 437,303 407,673 1.29 44,352 252.00
</TABLE>
<TABLE>
<CAPTION>
MOST 2ND
MOST RECENT MOST
RECENT MOST MOST MOST CASH RECENT
END RECENT RECENT RECENT FLOW END
DATE REVENUES EXPENSES CASH FLOW DSCR DATE
------ -------- -------- --------- ------ ------
<C> <C> <C> <C> <C> <C>
12/31/99 $3,513,561 $ 870,146 $2,643,415 1.29 12/31/98
12/31/99 1,347,746 309,185 974,126 1.30 12/31/98
12/31/99 1,764,804 724,947 1,034,075 1.44 12/31/98
12/31/99 1,813,695 673,423 1,039,658 1.57 12/31/98
12/31/99 864,864 864,864 1.39 12/31/98
12/31/99 1,204,242 413,697 524,092 0.97 12/31/98
12/31/99 808,654 190,335 525,993 1.26 12/31/98
12/31/99 632,156 105,808 526,348 1.56 12/31/98
12/31/99 423,934 78,798 341,507 1.42 12/30/98
12/31/99 522,653 146,964 375,689 1.42 12/31/98
12/31/98 245,203 103,741 141,462 0.59 12/31/97
12/31/99 541,299 224,021 266,156 1.54 12/31/98
12/31/99 304,478 34,677 211,554 1.23 12/31/98
12/31/99 393,831 72,869 320,962 1.91 12/31/98
12/31/99 315,115 113,159 201,956 1.24 12/31/98
12/31/99 968,385 420,072 533,623 3.62 12/31/98
12/31/99 186,000 10,945 175,055 1.64 12/31/98
12/31/99 224,891 12,842 212,049 2.34 12/31/98
12/31/99 2,973,053 1,094,199 1,852,111 0.70
12/31/99 3,238,794 1,424,794 1,801,694 0.78
12/31/99 2,734,057 924,463 1,793,618 0.95
12/31/99 1,397,409 472,505 916,693 1.01
12/31/99 4,522,813 1,624,504 2,587,634 1.10 12/31/98
12/31/99 3,004,242 1,119,079 1,715,508 1.29 12/31/98
12/31/99 2,321,516 690,644 1,630,872 1.39 12/31/98
12/31/98 2,284,346 1,082,420 707,344 0.72 12/31/97
12/31/98 2,101,579 733,278 1,368,301 1.53 12/31/97
12/31/99 1,161,118 439,156 721,962 1.15 12/31/98
12/31/99 1,250,066 661,208 563,415 1.19 12/31/98
12/31/99 922,660 362,858 522,718 1.20
12/31/99 1,360,462 792,669 567,793 1.27 12/31/98
12/31/99 899,709 374,635 488,770 1.19 12/31/98
12/31/99 1,342,046 660,994 564,243 1.34 12/31/98
12/31/99 1,127,110 598,794 505,062 1.24 12/31/98
12/31/99 969,484 456,280 467,182 1.38 12/31/98
12/31/99 485,250 273,020 212,230 0.65
12/31/98 879,300 416,802 445,663 1.41 12/31/97
</TABLE>
<TABLE>
<CAPTION>
2ND
MOST LARGEST
2ND 2ND 2ND RECENT LARGEST TENANT
MOST MOST MOST CASH TENANT % OF
RECENT RECENT RECENT FLOW LEASED TOTAL
REVENUES EXPENSES CASH FLOW DSCR LARGEST TENANT SF SF
--------- -------- --------- ------ -------------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
$3,560,503 $ 792,522 $2,767,981 1.35 Edwards Cinemas 33,120 12%
Publix 44,270 57%
Publix 37,888 71%
Publix 37,866 63%
Kroger 61,889 59%
Kroger 61,889 59%
Kroger 55,696 62%
1,226,179 298,433 907,225 1.21 American Drug Stores, Inc. 8,930 15%
1,579,493 683,292 889,612 1.24 Steinmart 46,920 37%
1,712,778 602,164 1,092,178 1.65 Publix 46,454 34%
812,145 812,145 1.31 Home Base 100,100 100%
1,112,137 343,128 633,275 1.17 Winn Dixie 52,000 33%
617,500 211,422 177,892 0.43 Fitness Elite 10,448 22%
603,977 89,992 513,985 1.52 Covina Mini Mall 34,000 42%
369,460 98,637 225,029 0.93 SuperValu Foods 29,236 48%
Barbeques Galore 8,019 53%
371,864 122,900 90,802 0.34 Cost Plus 19,371 71%
Fashion Bug 7,000 22%
168,860 76,791 92,069 0.39 Inter-Coast Intl Training 8,015 24%
79,170 82,715 (101,641) 0.59 Greenbacks One Dollar Store 13,000 37%
Stevi B's Pizza 5,400 22%
340,078 31,545 268,837 1.57 Food Lion 29,000 92%
CVS 10,125 100%
391,516 64,691 326,825 1.95 Chili's Restaurant 6,117 42%
310,588 76,392 233,982 1.43 Barnhardts 17,760 40%
Uni-Foods Inc. (dba Blue Bambo Chinese Bistro) 3,496 21%
CVS 10,125 100%
738,753 397,149 341,604 2.32 Ralphs Grocery 41,200 47%
99,500 26,807 72,693 0.68 Wingco Foods 36,717 100%
147,441 29,128 118,313 1.31 Fairway Supermarket 30,621 69%
4,640,119 1,626,118 2,786,511 1.19
2,932,123 1,027,195 1,715,605 1.29
2,267,062 713,236 1,553,826 1.33
2,273,892 1,075,716 931,199 0.94
2,064,400 744,238 1,320,162 1.47
1,072,704 400,216 672,488 1.07
1,133,252 566,599 566,653 1.20
1,353,382 770,020 553,791 1.24
882,967 459,930 383,266 0.93
1,362,813 654,596 708,217 1.68
1,021,869 603,352 378,224 0.93
914,864 461,088 453,776 1.34
829,566 402,395 411,842 1.30
</TABLE>
<TABLE>
<CAPTION>
SECOND SECOND
LARGEST SECOND LARGEST LARGEST
TENANT LARGEST TENANT TENANT
LEASE TENANT % OF LEASE
EXPIRA- SECOND LARGEST LEASED TOTAL EXPIRA-
TION TENANT SF SF TION
-------- -------------- ------- ------- --------
<C> <C> <C> <C> <C>
05/11/09 Circuit City 28,201 10% 01/31/07
05/01/19 Hollywood Video 5,760 7% 06/08/09
02/01/19 Hallmark 4,200 8% 02/28/04
03/31/19 Dollar Tree 5,220 9% 09/30/04
11/01/19 Hollywood Video 7,500 7% 07/01/07
11/01/19 Publix 44,270 57% 05/01/19
02/28/20 Petland 5,000 6% 03/31/05
01/30/01 MedPartners Services 4,953 9% 03/30/04
10/31/06 Big Sur Waterbeds, Inc. 13,260 11% 09/03/08
03/31/14 Walgreen 13,000 10% 12/31/11
01/28/13
08/16/10 Abbey Party Rents 10,000 6% 10/31/02
10/31/08 Pacific Preschool 5,275 11% 04/30/08
03/31/09 LA Fitness 24,000 30% 12/31/04
07/23/09 Eckerd Drug 8,450 14% 07/31/04
08/31/11 ReMax 4,026 27% 08/31/04
01/31/07 Gateway 2000 8,000 29% 04/30/03
05/31/09 WD Sullivan 5,500 17% 02/28/04
02/28/03 Foundation Health 3,690 11% 10/31/02
01/31/03 Blockbuster Video 4,550 13% 07/01/03
08/31/09 Mattress Depot 3,600 15% 05/31/04
07/31/17 Whats Cooking 2,400 8% 12/31/02
01/31/20
09/30/06 Gong Ho 3,150 22% 05/31/07
01/16/02 CVS 11,200 25% 07/31/07
01/31/06 Cook Children's Physician Network 3,319 20% 04/30/04
06/30/20
09/26/01 Sav-On Drugs 27,785 32% 12/31/19
11/30/13
06/30/13 Family Bargain Center 8,000 18% 10/28/03
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
SE- LOAN
QUENCE NUMBER PROPERTY NAME PROPERTY ADDRESS
------ ------ ------------- ----------------
<S> <C> <C> <C>
B37.15 52149 B & V Apartment Portfolio-906 NW 1st Ave. 906 NW 1st Ave.
B37.16 52149 B & V Apartment Portfolio-925 N. Krome Ave. 925 N. Krome Ave.
B37.17 52149 B & V Apartment Portfolio-30100 Old Dixie Highway 30100 Old Dixie Highway
B37 52149 B & V Apartment Portfolio (Roll-Up)
B38 51315 Arbor Pointe Apartments 6710, 6720 and 6740 Hayvenhurst Ave
B39 51575 Emerald Estates 22, 24, 26 W. Jamestown St
H10 283360 Paige East Apartments 10857 Sharondale Road
B40 51676 Cedar Pointe Apartments-Tampa 5409 Temple Palms Ave
B41 51829 Woodley Apartments 7045 Woodley Avenue
B42 51658 Cedar Park Apartments 831 Cedar Avenue
B43 52249 Lake D'Ville North Apartments 168 Hickory Heights Drive
B44 51921 Villa North Apartments 601-605 Labrador Blvd & 606 Long Blvd
B45 50598 1710-1730 Popham Ave 1710-1730 Popham Ave
B46 600006 Westview Terrace Apartments 8021 Calmont Ave
B47 51531 Sunshine Village Apartments 2220 Chanticleer Avenue
B48 51659 Glenn Terrace Apartments 5301, 5309 and 5317 East Glenn Street
B49 51059 L11 - Goldfarb Apartments 701-703 Hollycrest Dr, 702 Crescent Dr & 2003 W.
John St.
B50.1 51961 SCI Portfolio-1401 Elm Street 1401 Elm Street
B50.2 51961 SCI Portfolio-500 W 7th Street 500 W. 7th Street
B50 51961 SCI Portfolio-1401 Elm St. & 500 W 7th St. (Roll-Up)
B51 52804 Interstate Corporate Center 6387 Center Drive
B52 51647 111 W. Jackson 111 W. Jackson Blvd.
B53 52323 West*Quest Office Buildings 1580A and 1580B West Nursery Road
H11 176225 11 East 44th Street 11 East 44th Street
B54 51834 Bank One Plaza 201 East Main St
B55 51830 Diamond Hill Office Complex 2420-2460 West 26th Avenue
B56 52134 Toyota Office Building 50 South Third Street
H12 510238 Summit at Southpoint 6410-6440 Southpoint Parkway
B57 52721 Household Finance Building 636 Grand Regency Blvd
B58 51552 Metro Square 121 7th Place E
B59 52644 Maritz Office Building 20285 South Western Avenue
B60 51962 SCI Portfolio-1025 Elm Street 1025 Elm St.
B61 50957 Birkdale Medical Village 16605 Birkdale Commons Parkway
B62 50945 The Paramount Building 301 N. Market Street
B63 52286 Woodcreek I & II 3010 and 3020 Woodcreek Drive
H13 281300 Stanford Financial Group Building 5050 Westheimer Road
B64 51504 Chubb Office Building-Reston, VA 1741 Business Center Drive
H14 513597 100 South Bedford Road 100 South Bedford Road
H15 162160 52 Duane Street 52 Duane Street
B65 51880 Collom and Carney Clinic 4800 Texas Blvd.
B66 51873 U.S. Sprint Building 3075 Prospect Park Drive
B67 51528 Chubb Office Building-Alpharetta, GA 4100 Old Milton Parkway
B68 52463 USinternetworking Plaza Building 175 Admiral Cochrane Drive
B69 52258 Oilwell Supply Building 2001 North Lamar Street
H16 521564 The Kirby Building 6555 Quince Road
H17 540310 500 South Sepulveda Boulevard 500 South Sepulveda Boulevard
H18 178365 One and Two Aspen Corporate Park 1460 and 1480 Route 9 North
B70 51849 Thunderbird Medical Plaza II 5310 West Thunderbird Road
B71 52308 Wake County Board of Education Building 4401 Atlantic Ave.
B72 52342 180 Townsend Street 180 Townsend Street
B73 52049 Coral Ridge Financial Center 2419 E. Commercial Blvd
H19 513596 146 & 146A Manetto Hill Road 146 & 146A Manetto Hill Road
B74 51817 Eden Medical Plaza 20126 Stanton Avenue
B75 52572 Pike Place Office Park 316, 318, 320 and 324 West Pike St.
B76 51839 Roseville Health Care Center 3100 Douglas Blvd
B77 51574 Cohasset Village 250, 254, 270, 274 and 280 Cohasset Road
B78 51657 Jefferson Park Medical Plaza 41715 Winchester Rd
B79 52364 Jordan Creek Center 8800 Glacier Highway
H20 280630 GTEC Center 201 Technacenter Drive
B80 51922 Quail Medical Park I 6630-A South McCarran Blvd
B81 51650 OHA/SSA Office Building 2401 Southgate Drive
B82 51929 Aptos Ridge Office Building 9565 Soquel Drive
B83 51833 Greater Northeast Medical Center 1647 Benning Road, NE
B84 52186 3850 South Capitol Street 3850 South Capitol Street, SE
B85 52083 Verre Centre 1835 Savoy Drive
B86 51571 Riverside Building 1045 Riverside Avenue
B87.1 51673 Residence Inn - Boston (Tewksbury) 1775 Andover St.
B87.2 51673 Residence Inn - Meriden 390 Bee St.
B87.3 51673 Residence Inn - Atlanta (Hapeville) 3401 International Boulevard
B87.4 51673 Residence Inn - Montgomery 1200 Hilmar Ct.
B87.5 51673 Residence Inn - Cincinnati (Blue Ash) 11401 Reed Hartman Highway
<CAPTION>
COUNTY CITY STATE
------ ---- -----
<C> <C> <C>
Miami-Dade Homestead FL
Miami-Dade Homestead FL
Miami-Dade Homestead FL
Los Angeles Van Nuys CA
San Joaquin Stockton CA
Hamilton Cincinnati OH
Hillsborough Tampa FL
Los Angeles Van Nuys CA
Bucks Bensalem PA
Sumner Hendersonville TN
Finney Garden City KS
Bronx Bronx NY
Tarrant Fort Worth TX
Santa Cruz Santa Cruz CA
Pima Tucson AZ
Champaign Champaign IL
Dallas Dallas TX
Tarrant Fort Worth TX
Norfolk City Norfolk VA
Cook Chicago IL
Anne Arundel Linthicum Heights MD
New York New York NY
Fayette Lexington KY
Denver Denver CO
Shelby Memphis TN
Duval Jacksonville FL
Hillsborough Brandon FL
Ramsey St. Paul MN
Los Angeles Torrance CA
Dallas Dallas TX
Mecklenburg Huntersville NC
Dallas Dallas TX
Du Page Downers Grove IL
Harris Houston TX
Fairfax Reston VA
Westchester Mount Kisco NY
New York New York NY
Bowie Texarkana TX
Sacramento Rancho Cordova CA
Fulton Alpharetta GA
Anne Arundel Annapolis MD
Dallas Dallas TX
Shelby Memphis TN
Los Angeles Los Angeles CA
Middlesex Woodbridge NJ
Maricopa Glendale AZ
Wake Raleigh NC
San Francisco San Francisco CA
Broward Fort Lauderdale FL
Nassau Plainview NY
Alameda Castro Valley CA
Gwinnett Lawrenceville GA
Placer Roseville CA
Butte Chico CA
Riverside Temecula CA
Juneau Juneau AK
Montgomery Montgomery AL
Washoe Reno NV
Sullivan Kingsport TN
Santa Cruz Aptos CA
DC Washington DC
District of Columbia Washington DC
DeKalb Chamblee GA
Duval Jacksonville FL
Middlesex Tewksbury MA
New Haven Meriden CT
Fulton Hapeville GA
Montgomery Montgomery AL
Hamilton Blue Ash OH
</TABLE>
<TABLE>
<CAPTION>
MATURITY OR
ANTICIPATED
CUT-OFF REPAYMENT ADMINI-
ZIP PROPERTY ORIGINAL DATE DATE LOAN MORTGAGE STRATIVE
CODE TYPE BALANCE BALANCE BALANCE TYPE RATE FEE RATE(I)
---- ---- ------- ------- ------- ---- ---- -----------
<C> <C> <C> <C> <C> <C> <C> <C>
33030 Multifamily
33030 Multifamily
33033 Multifamily
Multifamily 3,584,000 3,576,442 3,201,995 Balloon 7.890% 0.143%
91406 Multifamily 3,280,000 3,221,402 2,866,036 Balloon 7.000% 0.143%
95207 Multifamily 3,070,000 3,054,721 2,784,237 Balloon 8.550% 0.143%
45241 Multifamily 3,000,000 2,998,654 2,686,045 Hyper Amortization 8.000% 0.083%
33617 Multifamily 2,720,000 2,708,189 2,447,792 Balloon 8.210% 0.143%
91406 Multifamily 2,155,000 2,145,049 1,928,956 Balloon 7.980% 0.143%
19020 Multifamily 2,090,000 2,078,361 1,877,874 Balloon 8.140% 0.143%
37075 Multifamily 2,000,000 1,997,900 1,772,475 Balloon 7.560% 0.143%
67846 Multifamily 1,973,722 1,968,498 1,793,761 Balloon 8.610% 0.143%
10453 Multifamily 1,863,993 1,848,873 1,668,258 Balloon 7.530% 0.293%
76116 Multifamily 1,480,000 1,477,020 1,326,965 Balloon 8.040% 0.243%
95062 Multifamily 1,456,589 1,442,918 1,295,759 Balloon 7.710% 0.143%
85712 Multifamily 1,085,600 1,080,144 973,272 Balloon 8.030% 0.143%
61821 Multifamily 1,040,000 1,019,518 898,303 Balloon 6.570% 0.143%
75202 Office
76102 Office
Office 34,482,000 34,189,373 29,036,190 Balloon 8.680% 0.143%
23502 Office 26,600,000 26,580,260 24,101,663 Balloon 8.500% 0.143%
60604 Office 26,122,000 26,057,903 23,860,513 Balloon 8.840% 0.143%
21090 Office 21,600,000 21,600,000 19,183,894 Balloon 7.670% 0.118%
10017 Office 18,000,000 17,883,990 16,928,420 Hyper Amortization 8.300% 0.083%
40507 Office 17,000,000 16,920,985 15,340,401 Balloon 8.310% 0.143%
80211 Office 15,500,000 15,424,978 13,814,749 Balloon 7.800% 0.143%
38103 Office 15,000,000 14,928,674 10,591,573 Balloon 7.895% 0.143%
32216 Office 14,900,000 14,675,680 12,989,282 Hyper Amortization 6.931% 0.083%
33510 Office 14,300,000 14,279,027 12,878,656 Balloon 8.250% 0.093%
55101 Office 14,000,000 13,883,832 12,420,233 Balloon 7.600% 0.143%
90501 Office 13,760,000 13,754,888 12,458,720 Balloon 8.488% 0.143%
75202 Office 9,000,000 8,923,623 7,578,613 Balloon 8.680% 0.143%
28078 Office 8,500,000 8,339,219 7,377,976 Balloon 6.750% 0.143%
75202 Office 8,320,000 8,157,741 7,196,638 Balloon 7.005% 0.143%
60515 Office 8,000,000 7,983,991 7,176,152 Balloon 8.060% 0.143%
77056 Office 7,990,000 7,979,083 7,233,119 Hyper Amortization 8.478% 0.083%
20190 Office 7,997,400 7,955,813 6,665,998 Balloon 8.280% 0.143%
10549 Office 8,200,000 7,922,504 5,052,136 Hyper Amortization 7.140% 0.083%
10007 Office 7,500,000 7,361,523 6,108,211 Hyper Amortization 7.490% 0.083%
75503 Office 7,360,000 7,349,727 6,652,623 Balloon 8.410% 0.143%
95670 Office 7,007,000 6,994,432 6,334,898 Balloon 8.400% 0.143%
30005 Office 6,800,000 6,762,029 5,613,563 Balloon 7.940% 0.143%
21401 Office 6,750,000 6,734,498 5,701,091 Balloon 8.800% 0.143%
75202 Office 6,500,000 6,482,860 5,836,637 Balloon 8.120% 0.143%
38119 Office 6,500,000 6,380,933 5,597,825 Hyper Amortization 6.464% 0.083%
90049 Office 6,100,000 6,019,446 5,395,645 Hyper Amortization 7.500% 0.083%
07095 Office 5,800,000 5,779,677 5,267,130 Hyper Amortization 8.622% 0.083%
85306 Office 5,425,000 5,400,735 4,869,650 Balloon 8.100% 0.143%
27604 Office 4,500,000 4,489,572 4,076,707 Balloon 8.760% 0.143%
94107 Office 4,400,000 4,395,892 3,931,796 Balloon 7.900% 0.143%
33308 Office 4,100,000 4,097,069 3,722,383 Balloon 8.590% 0.143%
11803 Office 3,550,000 3,450,579 2,849,480 Hyper Amortization 7.010% 0.083%
94546 Office 3,200,000 3,186,873 2,866,505 Balloon 8.020% 0.143%
30045 Office 3,000,000 2,997,681 2,712,116 Balloon 8.400% 0.143%
95661 Office 3,014,000 2,995,221 2,524,186 Balloon 8.490% 0.143%
95926 Office 3,000,000 2,985,897 2,704,648 Balloon 8.270% 0.143%
92590 Office 2,866,000 2,852,027 2,576,081 Balloon 8.140% 0.143%
99801 Office 2,825,000 2,817,730 2,352,426 Balloon 8.280% 0.143%
36117 Office 2,718,000 2,714,632 2,474,194 Hyper Amortization 8.779% 0.083%
89509 Office 2,604,000 2,597,822 2,357,544 Balloon 8.480% 0.143%
37660 Office 2,398,000 2,387,344 1,994,175 Balloon 8.230% 0.143%
95003 Office 2,100,000 2,099,236 1,903,610 Balloon 8.540% 0.143%
20002 Office 1,938,000 1,928,260 1,737,472 Balloon 8.030% 0.143%
20032 Office 1,650,000 1,613,543 Fully Amortizing 7.660% 0.143%
30341 Office 1,309,000 1,303,017 1,108,818 Balloon 8.870% 0.143%
32202 Office 1,177,089 1,168,117 989,199 Balloon 8.590% 0.143%
01876 Hotel
06450 Hotel
30354 Hotel
36117 Hotel
45241 Hotel
<CAPTION>
SUB- NET FIRST INTEREST
SERVICING MORTGAGE NOTE PAYMENT ACCRUAL MONTHLY
FEE RATE RATE DATE DATE METHOD PAYMENT
-------- ---- ---- ---- ------ -------
<C> <C> <C> <C> <C> <C>
0.100% 7.747% 04/26/00 06/01/00 ACT/360 26,024
0.100% 6.857% 09/14/98 11/01/98 ACT/360 21,822
0.100% 8.407% 10/28/99 12/01/99 ACT/360 23,715
0.040% 7.917% 07/27/00 09/01/00 ACT/360 22,013
0.100% 8.067% 12/03/99 02/01/00 ACT/360 20,358
0.100% 7.837% 12/16/99 02/01/00 ACT/360 15,783
0.100% 7.997% 10/22/99 12/01/99 ACT/360 15,540
0.100% 7.417% 06/12/00 08/01/00 ACT/360 14,067
0.100% 8.467% 02/22/00 04/01/00 ACT/360 15,330
0.250% 7.237% 10/29/99 11/01/99 ACT/360 13,257
0.200% 7.797% 04/24/00 06/01/00 ACT/360 10,901
0.100% 7.567% 05/17/99 07/01/99 ACT/360 10,395
0.100% 7.887% 11/16/99 01/01/00 ACT/360 7,988
0.100% 6.427% 09/09/98 11/01/98 ACT/360 6,621
0.100% 8.537% 11/01/99 12/01/99 ACT/360 281,854
0.100% 8.357% 06/29/00 08/01/00 ACT/360 204,531
0.100% 8.697% 02/09/00 04/01/00 ACT/360 207,183
0.075% 7.552% 08/08/00 10/01/00 ACT/360 153,553
0.040% 8.217% 09/01/99 10/01/99 ACT/360 135,861
0.100% 8.167% 11/18/99 01/01/00 ACT/360 128,433
0.100% 7.657% 12/13/99 02/01/00 ACT/360 111,580
0.100% 7.752% 05/18/00 07/01/00 ACT/360 124,488
0.040% 6.848% 01/25/99 03/01/99 ACT/360 98,441
0.050% 8.157% 05/16/00 07/01/00 ACT/360 107,431
0.100% 7.457% 07/19/99 09/01/99 ACT/360 98,850
0.100% 8.345% 07/10/00 09/01/00 ACT/360 105,686
0.100% 8.537% 11/01/99 12/01/99 ACT/360 73,565
0.100% 6.607% 09/14/98 11/01/98 ACT/360 55,131
0.100% 6.862% 07/02/98 09/01/98 ACT/360 55,381
0.100% 7.917% 04/06/00 06/01/00 ACT/360 59,036
0.040% 8.395% 05/30/00 07/01/00 ACT/360 61,312
0.100% 8.137% 02/08/00 04/01/00 ACT/360 63,216
0.040% 7.057% 06/25/98 08/01/98 30/360 58,690
0.040% 7.407% 03/31/99 05/01/99 ACT/360 55,376
0.100% 8.267% 05/01/00 07/01/00 ACT/360 56,123
0.100% 8.257% 04/13/00 06/01/00 ACT/360 53,382
0.100% 7.797% 02/29/00 04/01/00 ACT/360 52,214
0.100% 8.657% 05/04/00 07/01/00 ACT/360 55,724
0.100% 7.977% 03/24/00 05/01/00 ACT/360 48,240
0.040% 6.381% 11/10/98 01/01/99 ACT/360 40,931
0.040% 7.417% 01/25/99 03/01/99 ACT/360 42,652
0.040% 8.539% 01/11/00 03/01/00 ACT/360 45,099
0.100% 7.957% 12/16/99 02/01/00 ACT/360 40,186
0.100% 8.617% 05/09/00 07/01/00 ACT/360 37,027
0.100% 7.757% 06/26/00 08/01/00 ACT/360 31,979
0.100% 8.447% 06/07/00 08/01/00 ACT/360 31,787
0.040% 6.927% 09/17/98 11/01/98 ACT/360 25,113
0.100% 7.877% 01/19/00 03/01/00 ACT/360 23,525
0.100% 8.257% 06/14/00 08/01/00 ACT/360 22,855
0.100% 8.347% 01/24/00 03/01/00 ACT/360 24,249
0.100% 8.127% 11/10/99 01/01/00 ACT/360 22,580
0.100% 7.997% 11/18/99 01/01/00 ACT/360 21,310
0.100% 8.137% 05/12/00 07/01/00 ACT/360 22,330
0.040% 8.696% 05/22/00 07/01/00 ACT/360 21,439
0.100% 8.337% 03/10/00 05/01/00 ACT/360 19,986
0.100% 8.087% 03/27/00 05/01/00 ACT/360 18,875
0.100% 8.397% 07/10/00 09/01/00 ACT/360 16,207
0.100% 7.887% 11/03/99 01/01/00 ACT/360 14,261
0.100% 7.517% 04/28/00 06/01/00 ACT/360 19,821
0.100% 8.727% 02/07/00 04/01/00 ACT/360 10,869
0.100% 8.447% 11/24/99 01/01/00 ACT/360 9,550
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL REMAINING
TERM TO ORIGINAL TERM TO MATURITY OR CREST
MATURITY/ AMORTIZATION MATURITY/ ANTICIPATED COLLATER- LOCKOUT
ARD TERM SEASONING ARD REPAYMENT ALIZED RELATED EXPIRATION PREPAYMENT PENALTY
(MONTHS) MONTHS)(II) MONTHS (MONTHS) DATE LOANS LOANS DATE DESCRIPTION (MONTHS)
-------- ----------- --------- ---------- ------------ -------- ------- ---------- --------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
120 360 4 116 05/01/10 No No 03/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 23 97 10/01/08 No No 08/01/08 LO(118)/OPEN(2)/DEFEASANCE
120 360 10 110 11/01/09 No No 08/01/09 LO(117)/OPEN(3)/DEFEASANCE
120 360 1 119 08/01/10 No No 01/30/10 LO(113)/OPEN(7)/DEFEASANCE
120 360 8 112 01/01/10 No No 11/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 8 112 01/01/10 No No 11/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 10 110 11/01/09 No No 09/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 2 118 07/01/10 No No 04/01/10 LO(117)/OPEN(3)/DEFEASANCE
120 360 6 114 03/01/10 No No 01/01/10 LO(118)/OPEN(2)/DEFEASANCE
102 342 11 91 04/01/08 No No 01/01/08 LO(99)/OPEN(3)/DEFEASANCE
120 360 4 116 05/01/10 No No 03/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 15 105 06/01/09 No No 04/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 23 97 10/01/08 No No 06/01/08 LO(116)/OPEN(4)/DEFEASANCE
120 300 10 110 11/01/09 No Yes(00-2-E) 09/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 2 118 07/01/10 No Yes(00-2-I) 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 6 114 03/01/10 No No 12/01/09 LO(117)/OPEN(3)/DEFEASANCE
120 360 120 09/01/10 No No 07/01/10 LO(118)/OPEN(2)/DEFEASANCE
84 360 12 72 09/01/06 No No 02/28/06 LO(77)/OPEN(7)/DEFEASANCE
120 360 9 111 12/01/09 No Yes(00-2-I) 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 8 112 01/01/10 No Yes(00-2-C) 11/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 240 3 117 06/01/10 No No 04/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 19 101 02/01/09 No No 07/31/08 LO(113)/OPEN(7)/DEFEASANCE
120 360 3 117 06/01/10 No No 04/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 13 107 08/01/09 No Yes(00-2-C) 06/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 1 119 08/01/10 No No 06/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 10 110 11/01/09 No Yes(00-2-E) 09/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 23 97 10/01/08 No No 06/01/08 LO(116)/OPEN(4)/DEFEASANCE
126 360 25 101 02/01/09 No Yes(00-2-G) 09/30/08 LO(121)/OPEN(5)/DEFEASANCE
120 360 4 116 05/01/10 No No 02/01/10 LO(117)/OPEN(3)/DEFEASANCE
120 360 3 117 06/01/10 No No 11/30/09 LO(113)/OPEN(7)/DEFEASANCE
120 300 6 114 03/01/10 No Yes(00-2-F) 11/01/09 LO(116)/OPEN(4)/DEFEASANCE
180 300 26 154 07/01/13 No No 12/31/12 LO(173)/OPEN(7)/DEFEASANCE
120 300 17 103 04/01/09 No No 09/30/08 LO(113)/OPEN(7)/DEFEASANCE
120 360 3 117 06/01/10 No No 03/01/10 LO(117)/OPEN(3)/DEFEASANCE
120 360 4 116 05/01/10 No No 03/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 6 114 03/01/10 No Yes(00-2-F) 11/01/09 LO(116)/OPEN(4)/DEFEASANCE
120 300 3 117 06/01/10 No No 04/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 5 115 04/01/10 No Yes(00-2-G) 02/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 21 99 12/01/08 No No 05/31/08 LO(113)/OPEN(7)/DEFEASANCE
120 360 19 101 02/01/09 No No 07/31/08 LO(113)/OPEN(7)/DEFEASANCE
120 360 7 113 02/01/10 No No 07/31/09 LO(113)/OPEN(7)/DEFEASANCE
120 360 8 112 01/01/10 No No 11/01/09 LO(118)/OPEN(2)/DEFEASANCE
84 300 3 81 06/01/07 No No 04/01/07 LO(82)/OPEN(2)/DEFEASANCE
120 360 2 118 07/01/10 No No 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 2 118 07/01/10 No No 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 23 97 10/01/08 No No 03/31/08 LO(113)/OPEN(7)/DEFEASANCE
120 360 7 113 02/01/10 No No 12/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 2 118 07/01/10 No No 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 7 113 02/01/10 No No 12/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 300 3 117 06/01/10 No No 04/01/10 LO(118)/OPEN(2)/DEFEASANCE
121 360 3 118 07/01/10 No No 12/30/09 LO(114)/OPEN(7)/DEFEASANCE
120 360 5 115 04/01/10 No No 02/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 5 115 04/01/10 No No 02/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 1 119 08/01/10 No No 06/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 360 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 120 4 116 05/01/10 No No 03/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 6 114 03/01/10 No No 01/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
CUT-OFF TOTAL SF/
DATE UNITS/ UNIT/ NET
SE- LOAN APPRAISAL APPRAISAL LTV YEAR BUILT/ ROOM/ ROOM/ RENTABLE
QUENCE NUMBER PROPERTY NAME VALUE DATE RATIO RENOVATED BED BED AREA (SF)
------ ------ ------------- --------- --------- ------- ----------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B37.15 52149 B & V Apartment Portfolio-906 NW 1st Ave. 1969
B37.16 52149 B & V Apartment Portfolio-925 N. Krome Ave. 1972
B37.17 52149 B & V Apartment Portfolio-30100 Old Dixie 1969
Highway
B37 52149 B & V Apartment Portfolio (Roll-Up) 4,480,000 03/22/00 80% 193 Units 116,116
B38 51315 Arbor Pointe Apartments 4,100,000 07/22/98 79% 1965/1997 91 Units 69,730
B39 51575 Emerald Estates 3,840,000 07/09/99 80% 1961/1998 120 Units 89,450
H10 283360 Paige East Apartments 4,000,000 05/23/00 75% 1980 153 Units 114,000
B40 51676 Cedar Pointe Apartments-Tampa 3,400,000 10/28/99 80% 1986/1999 75 Units 69,900
B41 51829 Woodley Apartments 3,100,000 10/04/99 69% 1991 50 Units 42,785
B42 51658 Cedar Park Apartments 2,700,000 08/18/99 77% 1966 77 Units 52,360
B43 52249 Lake D'Ville North Apartments 3,800,000 04/04/00 53% 1985 96 Units 83,072
B44 51921 Villa North Apartments 2,575,000 11/12/99 76% 1977/1994 92 Units 88,060
B45 50598 1710-1730 Popham Ave 2,383,400 07/07/99 78% 1930/1998 73 Units 44,850
B46 600006 Westview Terrace Apartments 1,850,000 04/01/00 80% 1968 96 Units 81,860
B47 51531 Sunshine Village Apartments 2,550,000 04/02/99 57% 1999 16 Units 17,920
B48 51659 Glenn Terrace Apartments 1,425,000 09/08/99 76% 1973 29 Units 91,171
B49 51059 L11 - Goldfarb Apartments 1,300,000 06/02/98 78% 1971 40 Units 29,544
B50.1 51961 SCI Portfolio-1401 Elm Street 1964 428,884 SF 428,884
B50.2 51961 SCI Portfolio-500 W 7th Street 1961 288,971 SF 288,971
B50 51961 SCI Portfolio-1401 Elm St.
& 500 W 7th St. (Roll-Up) 47,750,000 08/20/99 72% 717,855 SF 717,855
B51 52804 Interstate Corporate Center 37,500,000 06/02/00 71% 1968/1977 430,833 SF 430,833
B52 51647 111 W. Jackson 58,200,000 09/01/99 45% 1960/1992 540,351 SF 540,351
B53 52323 West*Quest Office Buildings 47,800,000 02/10/00 45% 1992 315,350 SF 315,350
H11 176225 11 East 44th Street 24,500,000 04/27/99 73% 1927/1999 123,000 SF 123,000
B54 51834 Bank One Plaza 22,700,000 09/22/99 75% 1973/1998 236,243 SF 236,243
B55 51830 Diamond Hill Office Complex 26,750,000 09/30/99 58% 1972/1973 374,137 SF 374,137
B56 52134 Toyota Office Building 23,000,000 05/01/00 65% 1911/2000 174,700 SF 174,700
H12 510238 Summit at Southpoint 27,300,000 07/11/00 54% 1988 254,437 SF 254,437
B57 52721 Household Finance Building 18,000,000 04/20/01 79% 2000 120,543 SF 120,543
B58 51552 Metro Square 19,000,000 04/01/99 73% 1910/1993 335,920 SF 335,920
B59 52644 Maritz Office Building 17,200,000 06/15/00 80% 2000 77,201 SF 77,201
B60 51962 SCI Portfolio-1025 Elm Street 12,500,000 08/18/99 71% 1925/1960 137,534 SF 137,534
B61 50957 Birkdale Medical Village 11,100,000 08/01/98 75% 1997 62,950 SF 62,950
B62 50945 The Paramount Building 10,400,000 06/01/98 78% 1924/1997 113,768 SF 113,768
B63 52286 Woodcreek I & II 11,700,000 02/01/00 68% 1985/1987 126,911 SF 126,911
H13 281300 Stanford Financial Group Building 11,200,000 01/29/01 71% 1965/1998 71,014 SF 71,014
B64 51504 Chubb Office Building-Reston, VA 11,000,000 01/08/00 72% 2000 40,970 SF 40,970
H14 513597 100 South Bedford Road 14,000,000 07/11/00 57% 1981/2000 91,798 SF 91,798
H15 162160 52 Duane Street 12,400,000 01/01/99 59% 1898/1996 101,400 SF 101,400
B65 51880 Collom and Carney Clinic 9,200,000 04/01/00 80% 1965/1978 77,732 SF 77,732
B66 51873 U.S. Sprint Building 9,000,000 02/11/00 78% 1983 97,935 SF 97,935
B67 51528 Chubb Office Building-Alpharetta, GA 8,600,000 03/01/00 79% 2000 41,358 SF 41,358
B68 52463 USinternetworking Plaza Building 10,500,000 05/01/00 64% 1986 58,180 SF 58,180
B69 52258 Oilwell Supply Building 8,200,000 03/01/00 79% 1922/1999 65,353 SF 65,353
H16 521564 The Kirby Building 11,300,000 07/11/00 56% 1989 99,000 SF 99,000
H17 540310 500 South Sepulveda Boulevard 9,000,000 07/13/00 67% 1982 43,722 SF 43,722
H18 178365 One and Two Aspen Corporate Park 8,000,000 11/23/99 72% 1984/1999 90,979 SF 90,979
B70 51849 Thunderbird Medical Plaza II 8,300,000 11/03/99 65% 1984/1993 58,665 SF 58,665
B71 52308 Wake County Board of Education Building 6,400,000 03/01/00 70% 2000 58,075 SF 58,075
B72 52342 180 Townsend Street 8,800,000 03/06/00 50% 1903/2000 37,647 SF 37,647
B73 52049 Coral Ridge Financial Center 5,475,000 02/01/00 75% 1987 42,257 SF 42,257
H19 513596 146 & 146A Manetto Hill Road 4,900,000 07/17/00 70% 1987 31,444 SF 31,444
B74 51817 Eden Medical Plaza 4,300,000 01/07/00 74% 1998 18,453 SF 18,453
B75 52572 Pike Place Office Park 4,250,000 04/13/00 71% 1987 50,400 SF 50,400
B76 51839 Roseville Health Care Center 6,165,000 10/14/99 49% 1995 41,190 SF 41,190
B77 51574 Cohasset Village 5,200,000 07/28/99 57% 1993/1997 45,074 SF 45,074
B78 51657 Jefferson Park Medical Plaza 4,400,000 08/24/99 65% 1990 23,752 SF 23,752
B79 52364 Jordan Creek Center 5,000,000 03/29/00 56% 1984 51,060 SF 51,060
H20 280630 GTEC Center 3,900,000 01/06/00 70% 1992 46,880 SF 46,880
B80 51922 Quail Medical Park I 3,600,000 11/09/99 72% 1996 23,140 SF 23,140
B81 51650 OHA/SSA Office Building 3,200,000 12/09/99 75% 1999 20,539 SF 20,539
B82 51929 Aptos Ridge Office Building 3,200,000 05/08/00 66% 1999 18,750 SF 18,750
B83 51833 Greater Northeast Medical Center 2,800,000 09/15/99 69% 1979/1981 18,197 SF 18,197
B84 52186 3850 South Capitol Street 2,790,000 03/01/00 58% 1953/1994 14,400 SF 14,400
B85 52083 Verre Centre 2,300,000 01/21/00 57% 1974 42,718 SF 42,718
B86 51571 Riverside Building 1,700,000 05/12/99 69% 1910/1972 23,297 SF 23,297
B87.1 51673 Residence Inn - Boston (Tewksbury) 1989 130 Rooms 72,104
B87.2 51673 Residence Inn - Meriden 1990 106 Rooms 104,616
B87.3 51673 Residence Inn - Atlanta (Hapeville) 1990 126 Rooms 126,000
B87.4 51673 Residence Inn - Montgomery 1990 94 Rooms 56,107
B87.5 51673 Residence Inn - Cincinnati (Blue Ash) 1990 118 Rooms 85,788
<CAPTION>
LOAN U/W
BALANCE PER OCCUPANCY CASH U/W
SF/UNIT/ OCCUPANCY AS OF U/W U/W U/W FLOW U/W RESERVES
ROOM/BRD PERCENT DATE REVENUES EXPENSES CASH FLOW DSCR RESERVES PER UNIT
----------- --------- --------- -------- -------- --------- ---- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
18,531 94% 04/14/00 996,243 554,862 393,131 1.26 48,250 250.00
35,400 89% 03/31/00 640,764 288,824 333,740 1.27 18,200 200.00
25,456 98% 05/16/00 692,725 290,886 361,519 1.27 40,320 336.00
19,599 95% 04/30/00 892,869 452,528 391,687 1.48 48,654 318.00
36,109 91% 03/31/00 487,857 168,114 296,493 1.21 23,250 310.00
42,901 90% 12/31/99 409,171 133,834 265,337 1.40 10,000 200.00
26,992 91% 04/04/00 509,762 259,231 233,206 1.25 17,325 225.00
20,811 96% 05/31/00 622,870 280,761 308,509 1.83 33,600 350.00
21,397 100% 03/31/00 463,665 219,908 220,757 1.20 23,000 250.00
25,327 99% 03/31/00 462,465 248,268 198,861 1.25 15,336 210.08
15,386 98% 03/01/00 532,413 344,841 163,572 1.25 24,000 250.00
90,182 100% 04/01/00 268,333 64,751 199,582 1.60 4,000 250.00
37,246 97% 03/01/00 198,997 67,045 122,701 1.28 9,251 319.00
25,488 93% 04/28/00 193,392 82,012 101,180 1.27 10,200 255.00
99% 05/15/00
87% 05/15/00
48 11,795,061 5,408,953 5,195,198 1.54 179,464 0.25
62 88% 06/14/00 5,804,142 2,168,864 3,080,503 1.26 84,314 0.20
48 91% 05/31/00 9,633,681 5,382,605 3,103,778 1.25 108,076 0.20
68 100% 02/01/00 5,526,560 1,107,872 3,822,395 2.07 47,303 0.15
145 100% 02/01/00 3,947,377 1,669,252 2,085,868 1.28 27,930 0.23
72 94% 03/31/00 3,720,779 1,467,678 1,953,611 1.27 35,436 0.15
41 97% 04/01/00 4,382,374 1,821,779 2,017,440 1.51 74,151 0.20
85 100% 04/30/00 3,214,479 870,802 2,285,103 1.53 26,205 0.15
58 90% 12/01/99 3,911,995 1,660,139 1,873,861 1.59 50,900 0.20
118 100% 04/24/00 2,313,220 709,986 1,550,045 1.20 12,054 0.10
41 99% 04/01/00 4,703,721 2,572,205 1,621,797 1.37 67,184 0.20
178 100% 06/30/00 2,244,740 664,463 1,522,040 1.20 11,580 0.15
65 100% 05/12/00 2,223,330 823,411 1,176,544 1.33 36,905 0.27
132 100% 05/03/00 1,179,434 261,355 880,309 1.33 12,679 0.20
72 100% 06/07/00 1,611,331 661,310 856,150 1.29 11,377 0.10
63 90% 06/13/00 1,524,365 360,517 937,369 1.32 48,873 0.39
112 100% 06/01/00 1,652,942 671,237 902,279 1.23 10,652 0.15
194 100% 06/30/00 1,259,567 343,051 910,312 1.20 6,204 0.15
86 100% 05/17/00 2,175,273 996,872 999,411 1.42 23,725 0.26
73 100% 01/01/00 1,901,287 678,000 1,032,505 1.55 21,294 0.21
95 100% 03/23/00 1,509,059 586,626 887,216 1.32 19,433 0.25
71 100% 04/10/00 1,674,390 775,032 800,842 1.25 24,484 0.25
163 100% 06/30/00 1,021,957 263,464 752,289 1.20 6,204 0.15
116 100% 05/01/00 1,433,936 447,004 923,748 1.38 14,545 0.25
99 100% 04/05/00 1,132,007 352,448 729,114 1.26 9,812 0.15
64 98% 12/31/99 1,642,092 721,154 766,202 1.56 28,200 0.28
138 97% 02/19/00 1,119,930 446,551 609,943 1.19 9,420 0.22
64 98% 06/08/00 1,434,037 666,223 644,816 1.19 19,207 0.21
92 98% 05/01/00 1,316,235 547,446 651,024 1.35 11,733 0.20
77 100% 03/31/00 741,500 151,616 538,297 1.21 8,711 0.15
117 100% 06/14/00 1,208,283 363,755 777,624 2.03 5,847 0.16
97 93% 05/19/00 855,114 302,579 489,791 1.28 16,894 0.40
110 100% 06/30/00 856,945 422,200 378,202 1.25 4,717 0.15
173 100% 12/31/99 579,064 171,705 387,592 1.37 2,768 0.15
59 92% 06/30/00 642,981 188,116 372,407 1.36 10,080 0.20
73 85% 03/31/00 777,029 244,718 465,684 1.60 9,473 0.23
66 96% 05/30/00 553,342 115,771 366,995 1.35 9,015 0.20
120 100% 05/01/00 488,384 119,067 332,445 1.30 8,076 0.34
55 100% 04/06/00 935,489 443,062 407,557 1.52 18,877 0.37
58 100% 02/17/00 608,038 238,129 336,012 1.31 7,166 0.15
112 100% 03/31/00 477,791 137,277 299,838 1.25 4,165 0.18
116 100% 03/08/00 390,208 95,387 271,900 1.20 3,081 0.15
112 100% 06/30/00 409,202 118,648 254,911 1.31 2,813 0.15
106 92% 04/01/00 398,440 125,109 239,687 1.40 4,913 0.27
112 100% 04/17/00 355,403 45,689 308,994 1.30 720 0.05
31 94% 04/04/00 529,982 294,499 163,648 1.25 10,812 0.25
50 94% 06/04/00 282,889 108,445 145,002 1.27 6,562 0.28
90% 05 19/00
89% 05/19/00
84% 05/19/00
77% 05/19/00
83% 05/19/00
<CAPTION>
MOST 2ND
MOST RECENT MOST
RECENT MOST MOST MOST CASH RECENT
END RECENT RECENT RECENT FLOW END
DATE REVENUES EXPENSES CASH FLOW DSCR DATE
-------- --------- -------- --------- ------ ------
<C> <C> <C> <C> <C> <C>
12/31/99 1,245,309 519,644 616,476 1.97
12/31/99 639,099 272,052 303,834 1.16 06/30/99
12/31/99 674,930 154,320 520,610 1.83
12/31/99 867,165 435,260 431,905 1.64 12/31/98
12/31/99 298,789 106,710 192,079 1.01 12/31/98
12/31/99 468,126 207,711 260,415 1.40 12/31/98
12/31/99 621,289 237,031 345,792 2.05 12/31/98
12/31/99 570,070 265,768 304,302 1.65 12/31/98
12/31/99 469,539 245,740 223,799 1.41 12/31/98
12/31/99 511,337 301,135 180,202 1.38 12/31/98
12/31/99 232,474 14,543 217,931 1.75
12/31/98 188,044 47,200 135,344 1.41 12/31/97
12/31/99 188,632 65,734 109,264 1.38 12/31/97
12/31/99 11,037,109 5,028,247 5,938,066 1.76 12/31/98
12/31/98 5,350,775 2,395,307 2,246,003 0.92 12/31/97
12/31/99 9,262,200 5,734,067 2,704,648 1.09 12/31/98
12/31/99 5,727,035 942,075 4,672,505 2.54 12/31/98
12/31/99 3,808,172 1,486,083 2,322,088 1.42 12/31/98
12/31/98 2,937,701 1,204,700 1,733,001 1.12 12/31/97
12/31/99 4,664,648 1,610,241 3,016,731 2.25 12/31/98
12/31/99 4,305,106 1,517,520 2,787,586 2.36 12/31/98
12/31/98 4,005,015 2,180,904 1,824,111 1.54 12/31/97
12/31/99 2,112,208 770,707 1,341,014 1.52 12/31/98
12/31/99 1,234,344 269,570 964,774 1.46 12/31/98
12/31/99 1,861,165 877,535 983,630 1.48 12/31/98
12/31/99 1,474,106 333,598 864,102 1.22 12/31/98
12/31/99 2,094,386 976,062 1,118,324 1.59 12/31/98
12/31/99 1,994,372 583,378 1,410,994 2.12 12/31/98
12/31/99 1,627,473 672,757 954,716 1.49 12/31/98
12/31/99 1,077,631 539,050 538,581 0.81 12/31/98
12/31/99 1,794,206 692,531 1,101,675 2.24 12/31/98
12/31/99 1,073,730 423,601 640,873 1.25 12/31/98
12/31/99 1,202,352 617,140 585,212 1.08
12/31/98 1,169,411 512,617 656,794 1.36
12/31/99 857,758 406,577 451,181 1.50 12/31/98
12/31/99 488,241 198,505 289,737 1.03 12/31/98
12/31/99 492,276 150,070 236,395 0.86 12/31/98
12/31/99 519,510 169,811 273,322 0.94
12/31/98 628,239 105,116 419,127 1.55 12/31/97
12/31/99 530,653 124,424 405,155 1.58 12/31/98
12/31/99 939,793 412,217 492,496 1.84 12/31/98
12/31/99 536,349 178,473 342,333 1.33 12/31/98
12/31/99 505,970 155,691 334,271 1.39 12/31/98
12/31/99 157,514 51,770 (247,001) (1.27)
12/31/98 437,854 124,588 279,381 1.63 12/31/97
12/31/99 561,363 272,820 165,596 1.27 12/31/98
12/31/99 290,764 135,587 112,308 0.98 12/31/98
<CAPTION>
2ND
MOST
2ND 2ND 2ND RECENT LARGEST
MOST MOST MOST CASH TENANT
RECENT RECENT RECENT FLOW LEASED
REVENUES EXPENSES CASH FLOW DSCR LARGEST TENANT SF
-------- -------- --------- ------ -------------- -------
<C> <C> <C> <C> <C> <C>
634,828 217,523 417,305 1.59
842,718 427,872 414,846 1.57
399,153 113,200 281,082 1.48
476,232 258,545 204,815 1.10
626,331 233,827 322,418 1.91
523,798 173,582 350,216 1.90
417,471 231,214 186,257 1.17
451,264 288,677 92,732 0.71
191,690 43,174 144,026 1.50
177,012 58,569 118,443 1.49
Bank of America 418,646
Bank of America 115,203
10,850,671 4,881,116 5,969,555 1.77 Bank of America 418,646
4,980,860 2,384,708 2,122,935 0.87 Harris Publishing 41,771
8,353,837 5,017,778 209,880 0.08 Union Tank Car 100,278
5,835,698 921,706 4,913,992 2.67 Northrop Grumman 315,350
3,511,318 1,432,531 1,827,985 1.12 J. Press 14,000
2,782,835 1,234,879 1,547,956 1.00 Bank One 163,501
4,254,404 1,780,379 2,470,953 1.85 Centra Health 24,442
SUSA 91,200
3,765,391 1,419,342 2,334,571 1.98 InTuition, Inc. 87,417
Household Corp. 120,543
4,358,394 2,010,759 2,347,635 1.98 St. Trade & Econ. Dev. 53,754
Maritz, Inc. 77,201
2,037,345 708,724 1,328,621 1.51 Bank of America 136,480
1,030,269 181,911 848,358 1.28 Northeast Medical 40,000
1,297,723 830,896 466,827 0.70 UPN 21-Paramount Comm. 27,738
1,553,508 328,967 1,039,657 1.47 Stralfors 20,702
Stanford Financial Group 34,787
Chubb Computer Services 40,970
1,689,603 976,867 712,736 1.01 Bedford Oak Advisors 16,665
1,954,845 605,159 941,505 1.42 NYC Criminal Justice 20,000
Christus St. Michael 61,004
1,585,251 681,570 903,681 1.41 US Sprint 97,935
Chubb Computer Services 41,358
1,052,247 319,687 663,202 0.99 Admiral Management Company 58,180
American Museum of Miniatures 17,887
1,572,163 669,855 742,761 1.51 Time Warner Communications 30,779
974,933 421,043 548,580 1.07 Oberman, Tivoli & Miller 27,150
The Sawtooth Group 29,956
Cactus Children 6,889
Wake County Board of Ed. 58,075
Perkins Coie, LLP 19,890
Pinnacle Resort 16,350
821,472 445,081 376,391 1.25 Dr. Paul Grappell, MD & Dr. James Walker, MD, PC 9,000
365,895 85,207 280,688 0.99 Tri Valley Oncology 8,110
360,963 110,291 180,365 0.66 Gwinnett County 15,840
Sutter Health 24,609
502,122 68,265 19,526 0.07 UC Davis 12,854
505,491 106,980 380,684 1.49 Rancho Family Medical 15,096
926,805 411,820 441,863 1.65 Key Bank 10,315
599,346 201,898 384,453 1.49 Bergen Brunswig Drug Company 27,786
497,287 146,077 351,210 1.46 Sierra Regional 8,673
U.S. Government 20,539
RangeStar 13,870
432,511 124,631 296,922 1.74 Metro Eye Care 1,818
US Government 14,400
499,985 262,786 102,341 0.78 Marketeer 4,020
313,997 91,276 197,296 1.72 SmithKline Labs 5,785
<CAPTION>
SECOND SECOND
LARGEST LARGEST SECOND LARGEST LARGEST
TENANT TENANT LARGEST TENANT TENANT
% OF LEASE TENANT % OF LEASE
TOTAL EXPIRA- SECOND LARGEST LEASED TOTAL EXPIRA-
SF TION TENANT SF SF TION
------- -------- -------------- ------- ------- --------
<C> <C> <C> <C> <C> <C>
98% 12/31/09 Elm Place Market 2,756 1% 12/31/03
40% 12/31/09 Huitt-Zollars 17,062 6% 05/31/05
98% 12/31/09 Bank of America 115,203 40% 12/31/09
10% 06/30/02 Bernard C. Harris 27,717 6% 06/30/01
19% 12/31/01 REFCO 47,272 9% 10/31/01
100% 06/30/09
11% 12/31/08 Leavy Rosenweig 13,333 11% 04/30/05
69% 11/30/09 Stoll Keenan Park 36,693 16% 06/30/02
7% 08/24/02 Denver Reg. Gov. Council 24,436 7% 10/31/02
52% 04/30/15 SUSA (Looney) 43,000 25% 05/31/15
34% 01/31/07 Lucent Technologies 46,648 18% 06/30/05
100% 04/14/15
16% 11/30/02 Dept. of Human Serv. 53,144 16% 03/31/05
100% 12/31/12
99% 12/31/09 Barbeque, Etc. 1,054 1%
64% 09/14/12 Northeast Medical 15,443 25% 11/02/12
24% 01/31/09 Marketing Continuum 24,816 22% 09/30/04
16% 01/22/01 Marriott 16,607 13% 07/31/04
49% 06/01/05 Stanford Group Company 31,910 45% 06/01/05
100% 06/30/14
18% 03/31/01 Visiting Nurses Association 15,106 16% 03/31/08
20% 09/30/08 Legal Aid Society 20,000 20% 04/30/09
78% 04/30/15 Collom & Carney 16,728 22% 04/30/15
100% 05/31/04
100% 01/01/15
100% 04/30/15
27% 07/08/14 Omelas & Associates 13,388 20% 01/31/05
31% 09/30/05 Terra International, Inc. 10,812 11% 12/31/02
62% 06/30/05 Weiss, Block, Karp, & Caskey 4,087 9% 06/05/03
33% 12/31/07 Epix III, Inc. 18,972 21% 06/30/04
12% 01/31/06 Lutheran Health 5,012 9% 04/30/01
100% 04/30/05
53% 11/18/09 Exactly Vertical, Inc. 18,075 48% 01/06/10
39% 12/01/14 Paramount 6,991 17% 12/01/14
29% 06/30/02 Dr. Maury Marmor, M.D. 2,811 9% 02/28/02
44% 01/16/18 Primary Pediatrics 2,699 15% 03/01/08
31% 06/30/01 Dr. Sam Deutsch 4,600 9% 06/30/02
60% 02/28/05 Cardoso 4,526 11% 11/30/06
29% 07/31/02 UC Davis 10,440 23% 12/08/01
64% 05/31/19 Rancho Physical Therapy 2,016 8% 08/31/02
20% 07/31/04 State of Alaska 8,175 16% 08/31/02
59% 03/01/05 Computer Sciences Corporation 11,814 25% 01/07/01
37% 06/30/06 Nevada Center 4,547 20% 07/31/06
100% 09/30/14
74% 06/30/04 Integrated Systems 4,880 26% 10/31/02
10% 09/30/02 Dr. Rhodes 1,715 9% 12/31/01
100% 12/02/09
9% 05/31/02 The Eagle Research Group 3,960 9% 09/30/02
25% 10/14/02 State of Florida 5,086 22% 11/30/03
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
SE- LOAN
QUENCE NUMBER PROPERTY NAME PROPERTY ADDRESS COUNTY CITY STATE
------ ------ ------------- ---------------- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C>
B87.6 51673 Residence Inn - Dallas (Irving) 950 Walnut Hill Lane Dallas Irving TX
B87.7 51673 Residence Inn - Houston 525 Bay Area Blvd. Harris Houston TX
B87.8 51673 Residence Inn - Bakersfield 4241 Chester Lane Kern Bakersfield CA
B87.9 51673 Residence Inn - Pleasant Hill 700 Ellinwood Way Contra Costa Pleasant Hill CA
B87.10 51673 Residence Inn - San Ramon 1071 Market Place Contra Costa San Ramon CA
B87 51673 Residence Inn Portfolio (Roll-Up)
B88 51651 East Lansing Marriott 300 M.A.C. Avenue Ingham East Lansing MI
B89 51540 Marriott Courtyard Solana Beach 717 South Highway 101 San Diego Solana Beach CA
B90 51821 Holiday Inn Express-Garden City, KS 2502 E. Kansas Ave Finney Garden City KS
B91 51586 Days Inn - Chula Vista 699 E Street San Diego Chula Vista CA
B92 51926 Comfort Inn-Ottawa, IL 510 East Etna Road LaSalle Ottawa IL
B93 51925 Comfort Inn-Princeton, IL 2200 North Main Street Bureau Princeton IL
B94 52751 4900 Ampere Drive 4900 Ampere Drive Washoe Reno NV
B95 51672 Safdi Plaza 10 Jay Street Kings Brooklyn NY
H21 280970 Federal Express Building - El Segundo 645 Allied Way Los Angeles El Segundo CA
H22 279320 270 & 300-330 John Downey Drive 270 & 300-330 John Downey Drive Hartford New Britain CT
B96 52477 Water's Ridge Office/ Warehouse Facility 1301-A Ridgeview Drive Denton Lewisville TX
B97 51598 Vatrano Commercial Park 1895 Central Avenue Albany Albany NY
B98 51643 Putty Hill Flex/Warehouse Facility 8019 Belair Road Baltimore Baltimore MD
B99 51374 123 East Alma Avenue 123 East Alma Ave. Santa Clara San Jose CA
B100 51609 Handy Storage 12 8910 Cleary Blvd Broward Plantation FL
B101 51631 Ace Self Storage 3290 North Rancho Drive Clark Las Vegas NV
B102 51652 Morena Self Storage 908 Sherman Street San Diego San Diego CA
B103 52071 American International Storage 2100 NE 162nd St Miami-Dade North Miami Beach FL
B104 51628 AIM All Storage III 11215 Indiana Avenue Riverside Riverside CA
B105 51832 Capistrano A+ Storage 34190 Camino Capistrano Orange Capistrano Beach CA
B106 51633 American Store & Lock #3 9833 Newell-Hickory Grove Road Mecklenburg Charlotte NC
-----------------------------------------------------------------------------------------------------------------------------
Totals/Weighted Average 128 Loans
=============================================================================================================================
(i) Administrative Fee Rate includes the Sub-Servicing Fee Rate.
(ii) For Mortgage Loans which accrue interest on the basis of actual days elapsed each calendar month and a 360-day yr.
or a 365-day yr., the amortization term is the term over which the Mortgage Loans would amortize if interest accrued
and was paid on the basis of a 360-day yr. consisting of twelve 30-day months. The actual amortization would be
longer.
</TABLE>
<TABLE>
<CAPTION>
MATURITY OR
ANTICIPATED
CUT-OFF REPAYMENT ADMINI- SUB NET
ZIP PROPERTY ORIGINAL DATE DATE LOAN MORTGAGE STRATIVE SERVICING MORTGAGE
CODE TYPE BALANCE BALANCE BALANCE TYPE RATE FEE RATE(I) FEE RATE RATE
---- -------- ------- ------- ----------- ---- -------- ----------- -------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
75038 Hotel
77058 Hotel
93309 Hotel
94523 Hotel
94583 Hotel
Hotel 55,588,000 54,698,161 35,606,256 Balloon 8.080% 0.093% 0.050% 7.987%
48823 Hotel 13,000,000 12,901,520 10,933,838 Balloon 8.620% 0.143% 0.100% 8.477%
92075 Hotel 12,800,000 12,656,004 10,752,460 Balloon 8.580% 0.143% 0.100% 8.437%
67846 Hotel 2,450,000 2,414,365 1,785,946 Balloon 8.840% 0.143% 0.100% 8.697%
91910 Hotel 2,100,000 2,086,180 1,797,384 Balloon 9.280% 0.143% 0.100% 9.137%
61350 Hotel 1,430,789 1,424,061 1,241,833 Balloon 9.870% 0.143% 0.100% 9.727%
61356 Hotel 1,182,168 1,176,609 1,026,046 Balloon 9.870% 0.143% 0.100% 9.727%
89502 Industrial 6,300,000 6,289,789 5,223,243 Balloon 8.110% 0.143% 0.100% 7.967%
11201 Industrial 4,800,000 4,781,334 4,513,683 Balloon 8.860% 0.143% 0.100% 8.717%
90245 Industrial 4,300,000 4,294,106 3,891,795 Hyper Amortization 8.468% 0.083% 0.040% 8.385%
06051 Industrial 2,300,000 2,291,743 2,101,141 Hyper Amortization 8.885% 0.083% 0.040% 8.802%
75057 Industrial 2,075,000 2,071,782 1,729,070 Balloon 8.290% 0.143% 0.100% 8.147%
12205 Industrial 1,940,000 1,917,368 1,621,636 Balloon 8.400% 0.143% 0.100% 8.257%
21236 Industrial 1,207,000 1,200,668 1,034,066 Balloon 9.350% 0.143% 0.100% 9.207%
95112 Industrial 975,000 961,783 868,198 Balloon 7.750% 0.143% 0.100% 7.607%
33324 Mini Storage 4,200,000 4,179,181 3,769,846 Balloon 8.080% 0.143% 0.100% 7.937%
89130 Mini Storage 2,800,000 2,774,669 2,337,264 Balloon 8.360% 0.143% 0.100% 8.217%
92110 Mini Storage 2,600,000 2,576,694 2,135,754 Balloon 7.780% 0.143% 0.100% 7.637%
33162 Mini Storage 2,560,600 2,555,320 2,341,192 Balloon 8.930% 0.143% 0.100% 8.787%
92503 Mini Storage 2,125,000 2,107,324 1,764,651 Balloon 8.160% 0.143% 0.100% 8.017%
92624 Mini Storage 1,750,000 1,742,524 1,577,038 Balloon 8.270% 0.143% 0.100% 8.127%
28213 Mini Storage 1,299,467 1,289,179 1,086,514 Balloon 8.405% 0.143% 0.100% 8.262%
------------------------------------------------------------------------------------------------------------------------------------
$896,527,839 $889,796,853 $772,590,555 8.157% 8.034%
====================================================================================================================================
<CAPTION>
FIRST INTEREST
NOTE PAYMENT ACCRUAL MONTHLY
DATE DATE METHOD PAYMENT
---- ------- -------- -------
<C> <C> <C> <C>
12/29/99 02/01/00 ACT/360 489,068
11/08/99 01/01/00 ACT/360 105,733
07/07/99 09/01/99 ACT/360 103,760
10/29/99 12/01/99 ACT/360 21,792
11/29/99 01/01/00 ACT/360 18,028
01/18/00 03/01/00 ACT/360 12,871
01/18/00 03/01/00 ACT/360 10,634
06/15/00 08/01/00 ACT/360 49,084
03/28/00 05/01/00 ACT/360 39,822
05/18/00 07/01/00 ACT/360 32,966
12/22/99 02/01/00 ACT/360 18,316
06/30/00 08/01/00 ACT/360 16,416
07/27/99 09/01/99 ACT/360 15,491
01/31/00 03/01/00 ACT/360 10,420
11/04/98 01/01/99 ACT/360 6,985
11/03/99 01/01/00 ACT/360 31,053
10/14/99 12/01/99 ACT/360 22,283
11/18/99 01/01/00 ACT/360 19,690
03/13/00 05/01/00 ACT/360 20,474
11/09/99 01/01/00 ACT/360 16,627
12/02/99 02/01/00 ACT/360 13,172
11/12/99 01/01/00 ACT/360 10,381
-------------------------------------------------------------------------------
$6,748,982
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
ORIGINAL REMAINING
TERM TO ORIGINAL TERM TO MATURITY OR
MATURITY/ AMORTIZATION MATURITY/ ANTICIPATED CROSS- LOCKOUT
ARD TERM SEASONING ARD REPAYMENT COLLATERALIZED RELATED EXPIRATION PREPAYMENT PENALTY
(MONTHS) (MONTHS)(II) (MONTHS) (MONTHS) DATE LOANS LOANS DATE DESCRIPTION (MONTHS)
-------- ------------ -------- -------- ---- ----- ----- ---- --------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
120 216 8 112 01/01/10 No No 11/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 300 9 111 12/01/09 No No 09/01/09 LO(117)/OPEN(3)/DEFEASANCE
120 300 13 107 08/01/09 No No 05/01/09 LO(117)/OPEN(3)/DEFEASANCE
120 240 10 110 11/01/09 No No 09/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 300 9 111 12/01/09 No No 09/01/09 LO(117)/OPEN(3)/DEFEASANCE
120 300 7 113 02/01/10 No Yes(00-2-D) 12/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 300 7 113 02/01/10 No Yes(00-2-D) 12/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 300 2 118 07/01/10 No No 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
60 300 5 55 04/01/05 No No 02/01/05 LO(58)/OPEN(2)/DEFEASANCE
120 360 3 117 06/01/10 No No 11/30/09 LO(113)/OPEN(7)/DEFEASANCE
120 360 8 112 01/01/10 No No 06/30/09 LO(113)/OPEN(7)/DEFEASANCE
120 300 2 118 07/01/10 No No 05/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 13 107 08/01/09 No No 05/01/09 LO(117)/OPEN(3)/DEFEASANCE
120 300 7 113 02/01/10 No No 12/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 21 99 12/01/08 No No 10/01/08 LO(118)/OPEN(2)/DEFEASANCE
120 360 9 111 12/01/09 No No 09/01/09 LO(117)/OPEN(3)/DEFEASANCE
120 300 10 110 11/01/09 No No 09/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 300 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 5 115 04/01/10 No No 02/01/10 LO(118)/OPEN(2)/DEFEASANCE
120 300 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 360 8 112 01/01/10 No No 11/01/09 LO(118)/OPEN(2)/DEFEASANCE
120 300 9 111 12/01/09 No No 10/01/09 LO(118)/OPEN(2)/DEFEASANCE
-----------------------------------------------------------------------------------------------------------------------------------
119 329 8 111
===================================================================================================================================
</TABLE>
<PAGE> 127
<PAGE> 128
<PAGE> 129
<TABLE>
<CAPTION>
SE- LOAN APPRAISAL APPRAISAL
QUENCE NUMBER PROPERTY NAME VALUE DATE
------ ------- ---------------------------------------- ----------- ----------
<S> <C> <C> <C> <C>
B87.6 51673 Residence Inn - Dallas (Irving)
B87.7 51673 Residence Inn - Houston
B87.8 51673 Residence Inn - Bakersfield
B87.9 51673 Residence Inn - Pleasant Hill
B87.10 51673 Residence Inn - San Ramon
B87 51673 Residence Inn Portfolio (Roll-Up) 117,700,000 10/18/99
B88 51651 East Lansing Marriott 18,900,000 08/17/99
B89 51540 Marriott Courtyard Solana Beach 17,100,000 05/21/99
B90 51821 Holiday Inn Express-Garden City, KS 4,140,000 09/17/99
B91 51586 Days Inn - Chula Vista 3,100,000 07/31/99
B92 51926 Comfort Inn-Ottawa, IL 2,100,000 11/22/99
B93 51925 Comfort Inn-Princeton, IL 1,840,000 11/23/99
B94 52751 4900 Ampere Drive 9,100,000 05/01/00
B95 51672 Safdi Plaza 9,800,000 11/08/99
H21 280970 Federal Express Building - El Segundo 5,900,000 03/09/00
H22 279320 270 & 300-330 John Downey Drive 3,250,000 09/14/99
B96 52477 Water's Ridge Office/ Warehouse Facility 3,500,000 04/11/00
B97 51598 Vatrano Commercial Park 3,500,000 03/08/99
B98 51643 Putty Hill Flex/Warehouse Facility 1,875,000 08/25/99
B99 51374 123 East Alma Avenue 2,100,000 08/01/98
B100 51609 Handy Storage 12 7,700,000 07/01/99
B101 51631 Ace Self Storage 4,650,000 08/12/99
B102 51652 Morena Self Storage 9,100,000 08/26/99
B103 52071 American International Storage 3,600,000 01/07/00
B104 51628 AIM All Storage III 5,500,000 08/23/99
B105 51832 Capistrano A+ Storage 3,660,000 09/23/99
B106 51633 American Store & Lock #3 2,200,000 08/11/99
-----------------------------------------------------------------------------------------------------------------------
TOTALS/WEIGHTED AVERAGE
=======================================================================================================================
<CAPTION>
CUT-
OFF TOTAL SF/ LOAN
DATE UNITS/ UNIT/ NET BALANCE PER OCCUPANCY
LTV YEAR BUILT/ ROOMS/ ROOM/ RENTABLE SF/UNIT/ OCCUPANCY AS OF
RATIO RENOVATED BED BED AREA (SF) ROOM/BED PERCENT DATE
----- ----------- ------ ----- --------- ----------- --------- ---------
<C> <C> <C> <C> <C> <C> <C> <C>
1989 120 Rooms 80,636 82% 05/19/00
1990/1997 110 Rooms 73,916 85% 05/19/00
1990 114 Rooms 73,400 83% 05/19/00
1990 126 Rooms 104,616 90% 05/19/00
1990 106 Rooms 73,136 93% 05/19/00
46% 1,150 Rooms 850,319 47,564
68% 1989/1994 180 Rooms 298,965 71,675 72% 03/31/00
74% 1990/1997 115 Rooms 71,116 110,052 78% 04/30/00
58% 1996 69 Rooms 39,461 34,991 71% 03/31/00
67% 1983 102 Rooms 30,904 20,453 68% 07/31/99
68% 1993 55 Rooms 20,684 25,892 61% 10/31/99
64% 1992 43 Rooms 17,224 27,363 68% 10/31/99
69% 1966/1989 212,620 SF 212,620 30 100% 06/30/00
49% 1890/1993 145,950 SF 145,950 33 87% 03/31/00
73% 1990 50,433 SF 50,433 85 100% 03/09/00
71% 1969/1998 82,500 SF 82,500 28 100% 01/01/00
59% 1980 102,820 SF 102,820 20 100% 06/21/00
55% 1925/1989 157,651 SF 157,651 12 93% 03/31/00
64% 1979 33,000 SF 33,000 36 91% 06/05/00
46% 1980 23,579 SF 23,579 41 100% 03/31/00
54% 1995/1998 95,704 SF 95,704 44 84% 03/31/00
60% 1996 86,655 SF 86,655 32 82% 03/31/00
28% 1955/1999 104,248 SF 104,248 25 94% 04/01/00
71% 1973/1998 48,531 SF 48,531 53 86% 03/10/00
38% 1998 143,508 SF 143,508 15 99% 03/31/00
48% 1988 34,807 SF 34,807 50 95% 03/31/00
59% 1986 46,100 SF 46,100 28 71% 02/07/00
----------------------------------------------------------------------------------------------------------------------
68%
======================================================================================================================
<CAPTION>
U/W MOST
CASH U/W RECENT MOST
U/W U/W U/W FLOW U/W RESERVES END RECENT
REVENUES EXPENSES CASH FLOW DSCR RESERVES PER UNIT DATE REVENUES
---------- ---------- ---------- ---- --------- -------- ------- ----------
<C> <C> <C> <C> <C> <C> <C> <C>
32,742,844 20,119,032 11,038,118 1.88 1,585,694 1378.86 12/31/99 38,003,248
7,173,420 5,093,527 1,792,956 1.41 286,937 1594.09 12/31/99 7,652,110
3,576,497 1,632,320 1,794,989 1.44 143,060 1244.00 12/31/99 3,942,874
1,195,265 768,119 367,383 1.40 59,763 866.13 12/31/99 1,302,630
1,262,337 841,571 357,649 1.65 63,117 618.79 12/31/99 1,635,620
678,391 428,244 216,227 1.40 33,920 616.73 12/31/98 717,360
593,393 385,068 178,655 1.40 29,670 690.00 12/31/98 618,175
1,051,019 133,541 836,062 1.42 29,767 0.14 12/31/99 1,005,255
977,779 224,052 665,401 1.39 21,893 0.15 12/31/99 791,664
528,336 15,850 502,724 1.27 9,762 0.19 12/31/99 544,676
528,915 230,067 263,711 1.20 17,510 0.21 12/31/99 220,030
399,554 90,652 260,183 1.32 25,191 0.25 12/31/99 389,772
630,246 273,182 285,011 1.53 19,198 0.12 12/31/99 645,569
230,887 48,175 162,640 1.30 7,700 0.23 12/31/99 224,602
211,861 32,825 167,335 2.00 5,895 0.25 12/31/99 152,184
1,037,268 377,692 645,164 1.73 14,412 0.15 12/31/99 1,023,136
586,537 224,535 348,998 1.31 13,004 0.15 12/31/99 661,575
1,283,666 725,400 542,832 2.30 15,434 0.15 12/31/99 1,448,369
481,745 164,046 307,115 1.25 10,584 0.22 12/31/99 460,973
640,449 262,326 356,411 1.79 21,712 0.15 12/31/99 795,359
524,402 208,163 310,995 1.97 5,244 0.15 12/31/99 564,808
302,940 121,631 174,394 1.40 6,915 0.15 12/31/99 298,813
--------------------------------------------------------------------------------------------------------------
1.39
==============================================================================================================
<CAPTION>
MOST 2ND 2ND
RECENT MOST 2ND 2ND 2ND MOST
MOST MOST CASH RECENT MOST MOST MOST RECENT
RECENT RECENT FLOW END RECENT RECENT RECENT CASH FLOW
EXPENSES CASH FLOW DSCR DATE REVENUES EXPENSES CASH FLOW DSCR
---------- ---------- ------ -------- ---------- ---------- ----------- -----------
<C> <C> <C> <C> <C> <C> <C> <C>
21,684,834 14,426,938 2.46 12/31/98 37,278,961 21,741,513 13,581,306 2.31
4,913,253 2,738,857 2.16 12/31/98 6,927,353 4,649,713 2,277,640 1.80
1,790,549 2,148,412 1.73 12/31/98 3,679,127 1,594,775 2,078,650 1.67
842,376 408,149 1.56 12/31/98 1,142,505 759,335 337,470 1.29
938,847 687,138 3.18 12/31/98 1,062,505 660,393 303,734 1.40
450,453 266,907 1.73 12/31/97 625,588 410,374 215,214 1.39
391,366 226,809 1.78 12/31/97 580,689 359,545 221,144 1.73
77,240 904,137 1.54 12/31/98 997,341 79,973 917,368 1.56
172,438 619,226 1.30 12/31/98 716,680 87,265 629,415 1.32
9,740 534,936 1.35 12/31/98 544,678 10,734 533,944 1.35
203,225 16,805 0.08
78,168 304,568 1.55 12/31/98 336,892 64,730 266,671 1.35
295,917 299,452 1.61 12/31/98 626,677 240,063 386,614 2.08
34,543 190,059 1.52 12/31/98 194,738 29,101 157,671 1.26
152,184 1.82 12/31/98 130,972 130,972 1.56
339,684 683,452 1.83 12/31/98 876,249 338,460 537,789 1.44
260,969 400,606 1.50 12/31/98 482,371 175,753 306,618 1.15
747,548 700,821 2.97 12/31/98 1,283,316 677,175 606,141 2.57
141,535 319,438 1.30 12/31/98 427,111 120,557 306,554 1.25
237,299 558,060 2.80 12/31/98 421,812 185,235 236,577 1.19
208,923 330,964 2.09 12/31/98 537,376 175,099 350,777 2.22
116,205 174,464 1.40 12/31/98 311,407 108,398 194,092 1.56
------------------------------------------------------------------------------------------------------------------------
========================================================================================================================
<CAPTION>
SECOND SECOND
LARGEST LARGEST SECOND LARGEST LARGEST
LARGEST TENANT TENANT LARGEST TENANT TENANT
TENANT % OF LEASE TENANT % OF LEASE
LEASED TOTAL EXPIRA- SECOND LARGEST LEASED TOTAL EXPIRA-
LARGEST TENANT SF SF TION TENANT SF SF TION
---------------------------------- ------- ------- ------- ------------------------------ ------- ------- -------
<C> <C> <C> <C> <C> <C> <C> <C>
Sherwin Williams 139,520 66% 03/31/05 Evco 54,800 26% 03/31/01
Safdi USA, Inc. 18,000 12% 06/01/10 Y&M Cameras 15,000 10% 10/31/01
Federal Express 50,433 100% 02/28/05
New Weathervane Retail Corporation 48,150 58% 11/30/09 Connecticut Lottery Corporation 34,350 42% 08/31/03
Steins Bakery 47,065 46% 08/14/04 Prime Deli Corp. 31,829 31% 11/14/03
Yorkstone Casket 11,500 7% 07/31/02 Amarr 11,500 7% 09/30/02
Building Contractors 3,733 11% 12/31/01 US Transportation 3,300 10% 09/30/01
Peplinski Electronics 23,579 100% 10/31/07
-----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
</TABLE>
<PAGE> 130
GEOGRAPHIC DISTRIBUTION(1)
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
PROPERTY LOCATION PROPERTIES BALANCE BALANCE DSCR LTV RATIO RATE
----------------- ---------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
CA................................... 33 $150,635,258 16.9% 1.43x 66.3% 8.210%
Los Angeles County................. 8 36,487,003 4.1% 1.28x 72.7% 8.195%
Riverside County................... 3 27,949,943 3.1% 1.25x 73.6% 8.076%
Orange County...................... 5 22,004,450 2.5% 1.35x 63.9% 8.185%
San Diego County................... 3 17,318,878 1.9% 1.59x 66.4% 8.545%
Contra Costa County................ 2 13,105,252 1.5% 1.88x 46.5% 8.080%
Sacramento County.................. 1 6,994,432 0.8% 1.25x 77.7% 8.400%
San Francisco County............... 1 4,395,892 0.5% 2.03x 50.0% 7.900%
Kern County........................ 1 4,089,582 0.5% 1.88x 46.5% 8,080%
Santa Cruz County.................. 2 3,542,154 0.4% 1.43x 61.9% 8.202%
Alameda County..................... 1 3,186,873 0.4% 1.37x 74.1% 8.020%
Other Counties..................... 6 11,560,798 1.3% 1.43x 60.1% 8.374%
FL................................... 32 137,247,636 15.4% 1.31x 70.6% 8.015%
TX................................... 18 118,512,863 13.3% 1.44x 69.7% 8.321%
NV................................... 6 58,505,938 6.6% 1.30x 73.5% 8.021%
NY................................... 7 45,166,172 5.1% 1.37x 64.6% 7.898%
AZ................................... 5 41,922,995 4.7% 1.24x 76.1% 8.304%
GA................................... 10 40,252,516 4.5% 1.46x 66.9% 8.072%
IL................................... 6 39,505,172 4.4% 1.29x 52.6% 8.666%
VA................................... 3 36,482,232 4.1% 1.24x 71.4% 8.431%
MD................................... 4 33,349,128 3.7% 1.82x 53.6% 7.962%
KY................................... 2 27,690,623 3.1% 1.25x 75.9% 8.353%
TN................................... 5 27,643,096 3.1% 1.52x 63.6% 7.577%
MI................................... 2 17,544,082 2.0% 1.36x 70.0% 8.445%
CO................................... 1 15,424,978 1.7% 1.51x 57.7% 7.800%
NJ................................... 2 15,237,598 1.7% 1.23x 75.1% 8.590%
NC................................... 3 14,117,970 1.6% 1.30x 72.0% 7.540%
MN................................... 1 13,883,832 1.6% 1.37x 73.1% 7.600%
OH................................... 2 8,761,247 1.0% 1.74x 56.2% 8.053%
MA................................... 1 7,807,384 0.9% 1.88x 46.5% 8.080%
CT................................... 2 7,078,413 0.8% 1.66x 54.3% 8.341%
WA................................... 1 6,319,586 0.7% 1.37x 72.2% 8.660%
AL................................... 2 5,595,929 0.6% 1.60x 57.7% 8.419%
IA................................... 1 4,877,419 0.5% 1.23x 73.6% 8.340%
KS................................... 2 4,382,863 0.5% 1.31x 66.5% 8.737%
DC................................... 2 3,541,803 0.4% 1.35x 63.8% 7.861%
AK................................... 1 2,817,730 0.3% 1.52x 56.4% 8.280%
PA................................... 1 2,078,361 0.2% 1.25x 77.0% 8.140%
WV................................... 1 1,835,355 0.2% 1.25x 73.7% 8.020%
SC................................... 1 1,578,675 0.2% 1.38x 59.9% 8.020%
--- ------------ ----- ---- ---- -----
Total/Weighted Average............... 157 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
---------------
(1) States or counties in which the respective Mortgaged Properties are located.
For Mortgage Loans secured by multiple properties, the Cut-Off Date Balance
is allocated.
A-7
<PAGE> 131
UNDERWRITING DEBT SERVICE COVERAGE RATIO
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
UNDERWRITING MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
DSCRS LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
1.16x -- 1.19x................. 3 $ 14,392,157 1.6% 1.19x 69.6% 8.322%
1.20x -- 1.24x................. 23 213,466,252 24.0% 1.21x 76.3% 8.264%
1.25x -- 1.29x................. 34 203,426,253 22.9% 1.26x 70.3% 8.287%
1.30x -- 1.34x................. 19 123,539,888 13.9% 1.31x 71.5% 8.091%
1.35x -- 1.39x................. 11 57,296,728 6.4% 1.37x 67.9% 8.110%
1.40x -- 1.49x................. 14 59,797,372 6.7% 1.42x 67.6% 8.279%
1.50x -- 1.59x................. 10 101,665,179 11.4% 1.54x 63.2% 7.895%
1.60x -- 1.69x................. 3 6,524,319 0.7% 1.62x 56.3% 8.570%
1.70x -- 1.79x................. 2 6,286,505 0.7% 1.75x 48.9% 8.107%
1.80x -- 1.89x................. 2 56,696,061 6.4% 1.88x 46.7% 8.062%
1.90x -- 1.99x................. 1 1,742,524 0.2% 1.97x 47.6% 8.270%
2.00x -- 2.38x................. 6 44,963,615 5.1% 2.07x 43.0% 7.751%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
CUT-OFF DATE LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
CUT-OFF DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
21.4% -- 29.9%................. 2 $ 3,805,940 0.4% 2.32x 26.1% 7.964%
30.0% -- 49.9%................. 9 129,144,250 14.5% 1.77x 45.4% 8.170%
50.0% -- 59.9%................. 20 85,395,788 9.6% 1.53x 56.3% 7.612%
60.0% -- 64.9%................. 12 53,866,014 6.1% 1.39x 63.8% 8.305%
65.0% -- 69.9%................. 15 61,004,958 6.9% 1.36x 68.0% 8.270%
70.0% -- 74.9%................. 37 332,835,380 37.4% 1.30x 72.7% 8.281%
75.0% -- 79.9%................. 32 209,989,635 23.6% 1.24x 78.2% 8.086%
80.0%.......................... 1 13,754,888 1.5% 1.20x 80.0% 8.488%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
MATURITY DATE LOAN-TO-VALUE RATIO(1)
<TABLE>
<CAPTION>
WEIGHTED
% OF WEIGHTED AVERAGE WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE MATURITY AVERAGE
MATURITY DATE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
LTV RATIO(S) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
0.00% -- 24.9%................. 5 $ 6,982,658 0.8% 1.85x 8.7% 7.990%
25.0% -- 49.9%................. 24 204,378,652 23.0% 1.70x 40.0% 7.948%
50.0% -- 59.9%................. 26 111,179,401 12.5% 1.37x 56.2% 8.284%
60.0% -- 64.9%................. 19 167,651,867 18.8% 1.33x 62.6% 8.388%
65.0% -- 69.9%................. 34 243,968,583 27.4% 1.28x 67.2% 8.060%
70.0% -- 74.9%................. 19 148,912,003 16.7% 1.23x 71.5% 8.238%
75.0% -- 76.6%................. 1 6,723,690 0.8% 1.21x 76.6% 8.600%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 128 $889,796,853 100.0% 1.39x 59.1% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
---------------
(1) With respect to the ARD Loans, the Maturity Date Loan-to-Value Ratio was
calculated as of the related Anticipated Repayment Date.
A-8
<PAGE> 132
MORTGAGE RATES
<TABLE>
<CAPTION>
WEIGHTED
% OF WEIGHTED AVERAGE WEIGHTED
RANGE OF NUMBER OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
MORTGAGE MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
RATES LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
6.464% -- 6.499%..................... 1 $ 6,380,933 0.7% 1.56x 56.5% 6.464%
6.500% -- 6.999%..................... 3 24,034,417 2.7% 1.48x 62.2% 6.853%
7.000% -- 7.249%..................... 5 24,878,057 2.8% 1.34x 69.7% 7.048%
7.250% -- 7.499%..................... 1 7,361,523 0.8% 1.55x 59.4% 7.490%
7.500% -- 7.749%..................... 10 61,648,091 6.9% 1.61x 61.8% 7.611%
7.750% -- 7.999%..................... 18 157,143,443 17.7% 1.42x 66.8% 7.913%
8.000% -- 8.499%..................... 58 391,846,779 44.0% 1.37x 69.3% 8.233%
8.500% -- 8.999%..................... 27 208,023,060 23.4% 1.34x 67.5% 8.664%
9.000% -- 9.499%..................... 2 3,286,848 0.4% 1.52x 66.1% 9.306%
9.500% -- 9.870%..................... 3 5,193,703 0.6% 1.28x 68.1% 9.716%
--- ------------ ----- ---- ---- -----
Total/Wtg Avg........................ 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
ORIGINAL TERM TO MATURITY (1)
<TABLE>
<CAPTION>
WEIGHTED
% OF WEIGHTED AVERAGE WEIGHTED
ORIGINAL TERM NUMBER OF AGGREGATE INITIAL AVERAGE CUT-OFF AVERAGE
TO MATURITY MORTGAGE CUT-OFF DATE POOL UNDERWRITING DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
60 -- 83............................. 3 $ 15,379,402 1.7% 1.29x 67.8% 8.484%
84 -- 99............................. 3 27,133,601 3.0% 1.28x 73.2% 8.243%
100 -- 119........................... 1 1,848,873 0.2% 1.25x 77.6% 7.530%
120.................................. 115 823,847,679 92.6% 1.40x 67.4% 8.168%
121 --179 ........................... 2 10,872,373 1.2% 1.29x 76.2% 7.448%
180.................................. 4 10,714,926 1.2% 1.50x 52.7% 7.461%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg........................ 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
---------------
(1) With respect to the ARD Loans, the Original Term to Maturity was calculated
as of the Anticipated Repayment Date.
ORIGINAL AMORTIZATION TERM (1)
<TABLE>
<CAPTION>
ORIGINAL % OF WEIGHTED WEIGHTED WEIGHTED
AMORTIZATION NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
TERM MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
------------ --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
0.................................... 1 $ 14,200,000 1.6% 2.00x 41.7% 7.770%
120.................................. 1 1,613,543 0.2% 1.30x 57.8% 7.660%
180.................................. 3 2,792,421 0.3% 1.74x 41.8% 8.374%
181 -- 239........................... 1 54,698,161 6.1% 1.88x 46.5% 8.080%
240.................................. 3 18,921,713 2.1% 1.50x 63.6% 8.026%
300.................................. 34 179,971,960 20.2% 1.42x 66.8% 8.385%
301 -- 359........................... 2 11,306,794 1.3% 1.25x 77.0% 8.400%
360.................................. 83 606,292,260 68.1% 1.32x 70.3% 8.106%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg........................ 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
---------------
(1) For Mortgage Loans which accrue interest on the basis of actual days elapsed
during each calendar month and a 360-day year, the amortization term is the
term in which the loan would amortize if interest paid on the basis of a
30-day month and a 360-day year. The actual amortization term would be
longer.
A-9
<PAGE> 133
REMAINING TERM TO MATURITY(1)
<TABLE>
<CAPTION>
RANGE OF
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
TERMS TO NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
MATURITY MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
--------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
48 -- 59....................... 4 $ 20,139,441 2.3% 1.31x 70.0% 8.261%
60 -- 79....................... 1 17,883,990 2.0% 1.28x 73.0% 8.300%
80 -- 99....................... 9 31,837,711 3.6% 1.37x 69.6% 7.116%
100 -- 109..................... 13 83,238,903 9.4% 1.41x 67.4% 7.642%
110 -- 119..................... 96 704,381,883 79.2% 1.37x 68.2% 8.284%
120 -- 139..................... 1 21,600,000 2.4% 2.07x 45.2% 7.670%
140 -- 159..................... 3 9,485,680 1.1% 1.39x 56.8% 7.346%
160 -- 174..................... 1 1,229,246 0.1% 2.38x 21.4% 8.350%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
---------------
(1) With respect to the ARD Loans, the Remaining Term to Maturity was calculated
as of the related Anticipated Repayment Date.
REMAINING STATED AMORTIZATION TERMS
<TABLE>
<CAPTION>
REMAINING % OF WEIGHTED WEIGHTED WEIGHTED
STATED NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
AMORTIZATION MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
TERMS (MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
0 -- 149....................... 2 $ 15,813,543 1.8% 1.93x 43.4% 7.759%
150 -- 174..................... 3 2,792,421 0.3% 1.74x 41.8% 8.374%
200 -- 224..................... 1 54,698,161 6.1% 1.88x 46.5% 8.080%
225 -- 249..................... 3 18,921,713 2.1% 1.50x 63.6% 8.026%
250 -- 274..................... 1 7,922,504 0.9% 1.42x 56.6% 7.140%
275 -- 299..................... 33 172,049,455 19.3% 1.42x 67.3% 8.443%
300 -- 324..................... 1 4,760,039 0.5% 1.36x 77.1% 7.540%
325 -- 349..................... 17 104,942,782 11.8% 1.36x 69.9% 7.505%
350 -- 360..................... 67 507,896,234 57.1% 1.31x 70.5% 8.241%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
SEASONING
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
SEASONING MORTGAGED CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
(MONTHS) LOANS BALANCE BALANCE DSCR LTV RATIO RATE
--------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
0 -- 12........................ 106 $773,004,678 86.9% 1.39x 67.6% 8.271%
13 -- 24....................... 19 95,951,892 10.8% 1.43x 66.2% 7.451%
25 -- 36....................... 3 20,840,284 2.3% 1.35x 69.8% 7.179%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg.................. 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
A-10
<PAGE> 134
YEAR OF MORTGAGE ORIGINATION
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF-DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
ORIGINATION LOANS BALANCE BALANCE DSCR LTV RATIO RATE
----------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
1997......................... 1 $ 4,760,039 0.5% 1.36x 77.1% 7.540%
1998......................... 11 43,142,686 4.8% 1.38x 68.1% 6.957%
1999......................... 54 431,125,942 48.5% 1.43x 66.9% 8.113%
2000......................... 62 410,768,187 46.2% 1.35x 68.0% 8.337%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg................ 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
YEAR OF MORTGAGE MATURITY(1)
<TABLE>
<CAPTION>
% OF WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE INITIAL AVERAGE AVERAGE AVERAGE
YEAR OF MORTGAGE CUT-OFF DATE POOL UNDERWRITING CUT-OFF DATE MORTGAGE
MATURITY LOANS BALANCE BALANCE DSCR LTV RATIO RATE
-------- --------- ------------ ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
2004......................... 2 $ 8,634,417 1.0% 1.34x 74.7% 7.666%
2005......................... 2 11,505,024 1.3% 1.29x 66.5% 8.708%
2006......................... 1 17,883,990 2.0% 1.28x 73.0% 8.300%
2007......................... 1 4,489,572 0.5% 1.21x 70.1% 8.760%
2008......................... 8 27,348,138 3.1% 1.40x 69.5% 6.846%
2009......................... 41 294,463,575 33.1% 1.37x 69.8% 8.086%
2010......................... 69 514,757,211 57.9% 1.41x 66.1% 8.268%
2013......................... 3 9,485,680 1.1% 1.39x 56.8% 7.346%
2015......................... 1 1,229,246 0.1% 2.38x 21.4% 8.350%
--- ------------ ----- ---- ---- -----
Total/Wtd Avg................ 128 $889,796,853 100.0% 1.39x 67.5% 8.157%
=== ============ ===== ==== ==== =====
</TABLE>
---------------
(1) With respect to the ARD Loans, the Year of Mortgage Maturity was calculated
as of the year of the Anticipated Repayment Date.
A-11
<PAGE> 135
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
<TABLE>
<CAPTION>
INITIAL CURRENT INITIAL ANNUAL
DEPOSIT BALANCE DEPOSIT DEPOSIT
TO CAPITAL IN CAPITAL TO TO
LOAN PROPERTY IMPROVEMENT IMPROVEMENT REPLACEMENT REPLACEMENT
SEQUENCE NUMBER PROPERTY NAME TYPE RESERVES RESERVES RESERVES RESERVES
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
B1 51642 Towngate Community Shopping Center Retail
B2 52458 BVT Investment Portfolio Retail 46,079 46,901 30,465
B3 52314 Epps Village Shopping Center Retail 9,035
B4 51826 Yorba Canyon Center Retail 500 10,680
H1 180602 Gateway Village Shopping Center Retail 18,943
B5 51835 East Lake Woodlands Retail 560,000 346,364 46,201
B6 52050 Home Base-Spokane, WA Retail 21,024
B7 51903 Fielder Plaza Shopping Center Retail 18,750 19,208 43,200
H2 163162 Clubhouse Plaza Retail 1,875 650 7,800
B8 52070 Arrow Center Retail 31,758 32,080 16,926
B9 51656 Keystone Heights Village Shopping Center Retail 9,500 9,795
B10 51653 Las Flores Plaza Retail 1,505
H3 278350 Willowbrook Court Center Retail 342 4,106
B11 51591 Perry Crossroads Shopping Center Retail 3,220
B12 51619 Glenoaks Plaza Retail 2,125 3,674
B13 51305 North Mesa Plaza Retail 9,525 16,104
B14 51592 Willow Lake Shopping Center Retail 2,420
B15 52649 Sparta Crossing Retail 6,280
B16 52130 CVS Pharmacy at Village Marketplace
Shopping Center Retail 1,013
B17 51597 The Groves Restaurant Retail 11,181 11,654 2,166
B18 51566 Ranson Square Shopping Center Retail 7,605
H4 281595 Southlake Oaks Shopping Center Phase II Retail 211 2,530
B19 52347 CVS Pharmacy- Murrells Inlet Store 2736 Retail 1,013
B20 51852 Baldwin Hills Shopping Center Retail
B21 51393 Fairway Market Retail 3,672
B22 51394 Fairway Center Retail 4,453
H5 277025 Sanctuary Cove Apartments Multifamily 13,100 94,050
H6 277035 Weston Place Apartments Multifamily 8,030 74,400
H7 277070 Durango Canyon South Apartments Multifamily 7,563 81,000
H8 277060 Durango Canyon North Apartments Multifamily 6,125 41,400
B23 52027 Meridian Corners Apartments Multifamily 170,280
B24 52542 Silverado Apartments Multifamily 15,938 16,007 145,380
B25 52370 Rio Apartments Multifamily 73,500
B26 51963 Sonnet Cove Apartments Multifamily 435,063 362,523 89,308
B27 52097 Verona Senior Citizens' Apartments Multifamily
B28 52096 Duval Villa Apartments Multifamily 99,675 101,290 33,300
B29 51836 Pinewood Apartments Multifamily 22,500 22,500 16,800
B30 52024 Forest Hills Apartments Multifamily 49,768 49,768 55,008
B31 51580 Oakview Terrace Apartments Multifamily 16,120 16,750 59,624
</TABLE>
<TABLE>
<CAPTION>
CURRENT
BALANCE INITIAL ANNUAL CURRENT
IN TAX AND DEPOSIT DEPOSIT BALANCE
LOAN REPLACEMENT INSURANCE TO TI/LC TO TI/LC IN TI/LC REPORT
SEQUENCE NUMBER PROPERTY NAME RESERVES ESCROW ESCROW ESCROW ESCROW DATE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B1 51642 Towngate Community Shopping Center No 09/07/00
B2 52458 BVT Investment Portfolio 7,650 No 09/07/00
B3 52314 Epps Village Shopping Center 1,506 Yes 09/07/00
B4 51826 Yorba Canyon Center 3,564 Yes 09/08/00
H1 180602 Gateway Village Shopping Center 6,347 Yes 150,000 30,000 162,160 09/11/00
B5 51835 East Lake Woodlands 15,558 Yes 09/07/00
B6 52050 Home Base-Spokane, WA 10,623 No 09/07/00
B7 51903 Fielder Plaza Shopping Center 18,163 Yes 09/07/00
H2 163162 Clubhouse Plaza 11,881 Yes 140,000 09/11/00
B8 52070 Arrow Center 1,416 Yes 09/07/00
B9 51656 Keystone Heights Village Shopping Center 17,359 Yes 09/07/00
B10 51653 Las Flores Plaza Yes 09/08/00
H3 278350 Willowbrook Court Center 2,770 Yes 1,432 17,184 11,592 09/11/00
B11 51591 Perry Crossroads Shopping Center 2,734 Yes 09/07/00
B12 51619 Glenoaks Plaza 5,684 Yes 09/07/00
B13 51305 North Mesa Plaza 32,134 Yes 49,525 09/07/00
B14 51592 Willow Lake Shopping Center 1,436 Yes 09/07/00
B15 52649 Sparta Crossing 1,049 Yes 09/07/00
B16 52130 CVS Pharmacy at Village Marketplace
Shopping Center 340 No 09/07/00
B17 51597 The Groves Restaurant 1,839 Yes 09/07/00
B18 51566 Ranson Square Shopping Center 62,206 Yes 50,000 9,313 09/12/00
H4 281595 Southlake Oaks Shopping Center Phase II 423 Yes 65,887 9,144 929 09/11/00
B19 52347 CVS Pharmacy- Murrells Inlet Store 2736 84 No 09/07/00
B20 51852 Baldwin Hills Shopping Center Yes 09/07/00
B21 51393 Fairway Market 6,366 Yes 3,696 6,407 09/07/00
B22 51394 Fairway Center 7,720 Yes 10,000 4,841 19,104 09/07/00
H5 277025 Sanctuary Cove Apartments 71,377 Yes 09/11/00
H6 277035 Weston Place Apartments 56,455 Yes 09/11/00
H7 277070 Durango Canyon South Apartments 61,475 Yes 09/11/00
H8 277060 Durango Canyon North Apartments 31,416 Yes 09/11/00
B23 52027 Meridian Corners Apartments 56,760 Yes 09/07/00
B24 52542 Silverado Apartments 12,115 Yes 09/07/00
B25 52370 Rio Apartments 12,250 Yes 09/12/00
B26 51963 Sonnet Cove Apartments 24,764 Yes 09/07/00
B27 52097 Verona Senior Citizens' Apartments No 09/07/00
B28 52096 Duval Villa Apartments 22,649 Yes 09/11/00
B29 51836 Pinewood Apartments 11,200 Yes 09/07/00
B30 52024 Forest Hills Apartments 18,336 Yes 09/07/00
B31 51580 Oakview Terrace Apartments 40,471 Yes 09/07/00
</TABLE>
B-1
<PAGE> 136
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
<TABLE>
<CAPTION>
INITIAL CURRENT INITIAL INITIAL
DEPOSIT BALANCE DEPOSIT DEPOSIT
TO CAPITAL IN CAPITAL TO TO
LOAN PROPERTY IMPROVEMENT IMPROVEMENT REPLACEMENT REPLACEMENT
SEQUENCE NUMBER PROPERTY NAME TYPE RESERVES RESERVES RESERVES RESERVES
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
B32 50221 Brookside Village Multifamily 22,438 10,000 31,000
H9 513561 Edgecliff Village & Chapel Creek Multifamily 100,000 115,200
B33 52257 Woodbridge Manor Apartments Multifamily 60,465 61,517 40,992
B34 51823 Tanglewood North Apartments Multifamily 66,188 62,846 35,306
B35 51641 Hickory Hills Townhomes Phase II Multifamily 14,016
B36 51920 Art Museum Apartments Multifamily 26,625 27,571 100,000 44,352
B37 52149 B & V Apartment Portfolio-Summary Multifamily 16,075 76,075 60,000 48,250
B38 51315 Arbor Pointe Apartments Multifamily 18,200
B39 51575 Emerald Estates Multifamily 40,320
H10 283360 Paige East Apartments Multifamily 14,625 4,055 48,672
B40 51676 Cedar Pointe Apartments-Tampa Multifamily 12,965 13,452 23,250
B41 51829 Woodley Apartments Multifamily 23,125 23,946 9,150
B42 51658 Cedar Park Apartments Multifamily 17,325
B43 52249 Lake D'Ville North Apartments Multifamily 43,200 23,328
B44 51921 Villa North Apartments Multifamily 11,228 11,523 23,004
B45 50598 1710-1730 Popham Ave Multifamily 78,750 41,320 15,023
B46 600006 Westview Terrace Apartments Multifamily 5,250 5,344 16,400 24,000
B47 51531 Sunshine Village Apartments Multifamily 3,757
B48 51659 Glenn Terrace Apartments Multifamily 9,252
B49 51059 L11 - Goldfarb Apartments Multifamily 18,125 10,200
B50 51961 SCI Portfolio-1401 Elm St. & 500 W 7th St. Office 1,389,031
B51 52804 Interstate Corporate Center Office 9,063 9,147 73,504
B52 51647 111 W. Jackson Office 81,060
B53 52323 West*Quest Office Buildings Office 120,000 120,388 31,535
H11 176225 11 East 44th Street Office 299,844 138,023 27,930
B54 51834 Bank One Plaza Office 18,000 19,746 35,436
B55 51830 Diamond Hill Office Complex Office 55,608
B56 52134 Toyota Office Building Office
H12 510238 Summit at Southpoint Office 28,200
B57 52721 Household Finance Building Office
B58 51552 Metro Square Office 100,000 21,432 36,951
B59 52644 Maritz Office Building Office
B60 51962 SCI Portfolio-1025 Elm Street Office 13,753
B61 50957 Birkdale Medical Village Office 37,469 16,806 1,000
B62 50945 The Paramount Building Office 47,500 20,000 11,376
B63 52286 Woodcreek I & II Office 7,500 7,653
H13 281300 Stanford Financial Group Building Office 3,839,753 888 10,652
B64 51504 Chubb Office Building-Reston, VA Office 2,064
H14 513597 100 South Bedford Road Office 313,875 30,000
</TABLE>
<TABLE>
<CAPTION>
CURRENT
BALANCE INITIAL ANNUAL CURRENT
IN TAX AND DEPOSIT DEPOSIT BALANCE
LOAN REPLACEMENT INSURANCE TO TI/LC TO TI/LC IN TI/LC REPORT
SEQUENCE NUMBER PROPERTY NAME RESERVES ESCROW ESCROW ESCROW ESCROW DATE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
B32 50221 Brookside Village 70,023 Yes 09/07/00
H9 513561 Edgecliff Village & Chapel Creek 107,166 Yes 09/11/00
B33 52257 Woodbridge Manor Apartments 10,290 Yes 09/07/00
B34 51823 Tanglewood North Apartments 33,048 Yes 09/07/00
B35 51641 Hickory Hills Townhomes Phase II 13,120 Yes 09/07/00
B36 51920 Art Museum Apartments 113,852 Yes 09/07/00
B37 52149 B & V Apartment Portfolio-Summary 16,083 Yes 09/07/00
B38 51315 Arbor Pointe Apartments 36,345 Yes 09/07/00
B39 51575 Emerald Estates 17,444 Yes 09/07/00
H10 283360 Paige East Apartments 8,111 Yes 09/11/00
B40 51676 Cedar Pointe Apartments-Tampa 15,719 Yes 09/07/00
B41 51829 Woodley Apartments 6,189 Yes 09/07/00
B42 51658 Cedar Park Apartments 7,820 Yes 09/07/00
B43 52249 Lake D'Ville North Apartments 47,584 Yes 09/07/00
B44 51921 Villa North Apartments 9,707 Yes 09/07/00
B45 50598 1710-1730 Popham Ave 8,323 Yes 09/07/00
B46 600006 Westview Terrace Apartments 22,744 Yes 09/07/00
B47 51531 Sunshine Village Apartments 4,836 Yes 09/07/00
B48 51659 Glenn Terrace Apartments 7,059 Yes 09/07/00
B49 51059 L11 - Goldfarb Apartments 5,434 Yes 09/07/00
B50 51961 SCI Portfolio-1401 Elm St. & 500 W 7th St. 1,179,441 Yes 2,600,437 2,600,437 09/07/00
B51 52804 Interstate Corporate Center 12,270 Yes 09/07/00
B52 51647 111 W. Jackson 40,957 Yes 09/07/00
B53 52323 West*Quest Office Buildings No 09/07/00
H11 176225 11 East 44th Street 28,413 Yes 188,004 54,247 09/11/00
B54 51834 Bank One Plaza 27,007 Yes 161,000 09/07/00
B55 51830 Diamond Hill Office Complex 32,960 Yes 09/07/00
B56 52134 Toyota Office Building No 09/07/00
H12 510238 Summit at Southpoint 45,871 Yes 1,240,000 240,000 969,173 09/11/00
B57 52721 Household Finance Building No 174,325 09/07/00
B58 51552 Metro Square 26,203 Yes 09/07/00
B59 52644 Maritz Office Building Yes 09/07/00
B60 51962 SCI Portfolio-1025 Elm Street 11,678 Yes 684,333 684,333 09/07/00
B61 50957 Birkdale Medical Village 2,018 Yes 09/07/00
B62 50945 The Paramount Building 17,094 Yes 483,695 09/07/00
B63 52286 Woodcreek I & II Tax Only 09/07/00
H13 281300 Stanford Financial Group Building 3,566 Yes 505,500 66,000 507,451 09/15/00
B64 51504 Chubb Office Building-Reston, VA 1,043 No 85,963 88,452 09/07/00
H14 513597 100 South Bedford Road 66,641 Yes 09/11/00
</TABLE>
B-2
<PAGE> 137
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE
TO CAPITAL IN CAPITAL INITIAL DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT REPLACEMENT
SEQUENCE NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES
-------- ------ ---------------------------------------- ------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
H15 162160 52 Duane Street Office 10,565 1,850
B65 51880 Collom and Carney Clinic Office 265,961 270,509 215,000
B66 51873 U.S. Sprint Building Office 6,494 6,624 75,000
B67 51528 Chubb Office Building-Alpharetta, GA Office
B68 52463 USinternetworking Plaza Building Office 31,875 32,421
B69 52258 Oilwell Supply Building Office
H16 521564 The Kirby Building Office 12,000 2,350
H17 540310 500 South Sepulveda Boulevard Office 45,125
H18 178365 One and Two Aspen Corporate Park Office 1,601
B70 51849 Thunderbird Medical Plaza II Office
B71 52308 Wake County Board of Education Building Office
B72 52342 180 Townsend Street Office
B73 52049 Coral Ridge Financial Center Office 32,875 33,274
H19 513596 146 & 146A Manetto Hill Road Office 400
B74 51817 Eden Medical Plaza Office
B75 52572 Pike Place Office Park Office 15,525 15,700
B76 51839 Roseville Health Care Center Office 1,125 1,160
B77 51574 Cohasset Village Office 16,875 17,560
B78 51657 Jefferson Park Medical Plaza Office 8,250
B79 52364 Jordan Creek Center Office 7,813
H20 280630 GTEC Center Office 597
B80 51922 Quail Medical Park I Office
B81 51650 OHA/SSA Office Building Office
B82 51929 Aptos Ridge Office Building Office
B83 51833 Greater Northeast Medical Center Office 8,775 3,272
B84 52186 3850 South Capitol Street Office
B85 52083 Verre Centre Office 4,938 5,082
B86 51571 Riverside Building Office 8,918
B87 51673 Residence Inn Portfolio Hotel 796,038 823,373
B88 51651 East Lansing Marriott Hotel 8,750 9,109
B89 51540 Marriott Courtyard Solana Beach Hotel
B90 51821 Holiday Inn Express-Garden City, KS Hotel
B91 51586 Days Inn - Chula Vista Hotel
B92 51926 Comfort Inn-Ottawa, IL Hotel 1,375 1,428
B93 51925 Comfort Inn-Princeton, IL Hotel 4,156 4,290
B94 52751 4900 Ampere Drive Industrial 10,063 10,067 25,000
B95 51672 Safdi Plaza Industrial 334,350 341,812
H21 280970 Federal Express Building - El Segundo Industrial 13,188
H22 279320 270 & 300-330 John Downey Drive Industrial 6,438 1,459
<CAPTION>
ANNUAL
DEPOSIT TO CURRENT BALANCE TAX AND ANNUAL DEPOSIT CURRENT
REPLACEMENT IN REPLACEMENT INSURANCE INITIAL DEPOSIT TO TO TI/LC BALANCE IN
SEQUENCE RESERVES RESERVES ESCROW TI/LC ESCROW ESCROW TI/LC ESCROW REPORT DATE
-------- ----------- --------------- --------- ------------------ -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
H15 22,200 34,157 Yes 4,167 50,004 76,913 09/11/00
B65 218,680 Yes 185,289 188,461 09/07/00
B66 24,484 84,689 Yes 09/07/00
B67 2,064 871 No 66,000 67,721 09/07/00
B68 19,199 4,820 Yes 09/07/00
B69 9,812 4,125 Yes 228,944 21,051 09/07/00
H16 28,200 53,015 Yes 09/11/00
H17 9,420 15,165 Yes 100,000 48,000 46,834 09/11/00
H18 19,207 12,954 Yes 09/11/00
B70 17,604 11,905 Yes 09/07/00
B71 3,485 875 Yes 09/07/00
B72 3,797 635 Tax Only 09/07/00
B73 20,706 1,731 Yes 09/07/00
H19 4,800 9,920 Yes 2,000 24,000 49,618 09/11/00
B74 2,769 1,406 Yes 16,999 8,617 09/07/00
B75 10,882 1,816 Yes 09/07/00
B76 9,473 4,810 Yes 09/07/00
B77 8,789 6,703 Yes 200,000 50,000 246,249 09/07/00
B78 8,076 673 Yes 09/08/00
B79 0 Yes 09/07/00
H20 7,166 2,401 Yes 54,418 53,013 67,671 09/11/00
B80 Tax Only 09/07/00
B81 3,081 1,295 Yes 19,841 10,029 09/07/00
B82 2,813 234 Yes 47,188 47,188 09/07/00
B83 6,187 4,202 Yes 09/07/00
B84 720 181 Yes 09/07/00
B85 9,924 4,186 Yes 32,421 09/07/00
B86 9,086 6,926 Yes 14,124 09/07/00
B87 1,731,678 1,604,558 Tax Only 09/07/00
B88 285,288 217,548 Tax Only 09/07/00
B89 143,060 133,419 Yes 09/07/00
B90 59,763 50,763 Yes 09/07/00
B91 63,117 48,085 Yes 09/11/00
B92 33,920 20,012 Yes 09/07/00
B93 29,670 17,507 Yes 09/07/00
B94 36,144 31,024 Yes 09/08/00
B95 14,595 6,130 Yes 09/07/00
H21 No 09/11/00
H22 17,520 13,322 Yes 52,088 25,080 70,600 09/11/00
</TABLE>
B-3
<PAGE> 138
ANNEX B
CAPITAL IMPROVEMENT, REPLACEMENT RESERVE AND ESCROW ACCOUNTS
<TABLE>
<CAPTION>
INITIAL DEPOSIT CURRENT BALANCE
TO CAPITAL IN CAPITAL INITIAL DEPOSIT TO
LOAN IMPROVEMENT IMPROVEMENT REPLACEMENT
SEQUENCE NUMBER PROPERTY NAME PROPERTY TYPE RESERVES RESERVES RESERVES
-------- ------ ---------------------------------------- ------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
B96 52477 Water's Ridge Office/ Warehouse Facility Industrial 6,725
B97 51598 Vatrano Commercial Park Industrial 6,063 6,387
B98 51643 Putty Hill Flex/Warehouse Facility Industrial 10,300 10,611
B99 51374 123 East Alma Avenue Industrial
B100 51609 Handy Storage 12 Mini Storage
B101 51631 Ace Self Storage Mini Storage
B102 51652 Morena Self Storage Mini Storage
B103 52071 American International Storage Mini Storage
B104 51628 AIM All Storage III Mini Storage
B105 51832 Capistrano A+ Storage Mini Storage
B106 51633 American Store & Lock #3 Mini Storage
=================================================================================================================================
TOTALS $4,432,615 $7,072,945 $636,547
<CAPTION>
ANNUAL
DEPOSIT TO CURRENT BALANCE TAX AND ANNUAL DEPOSIT CURRENT
REPLACEMENT IN REPLACEMENT INSURANCE INITIAL DEPOSIT TO TO TI/LC BALANCE IN
SEQUENCE RESERVES RESERVES ESCROW TI/LC ESCROW ESCROW TI/LC ESCROW REPORT DATE
-------- ----------- --------------- --------- ------------------ -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
B96 29,820 11,763 Yes 09/07/00
B97 19,198 3,300 Yes 09/07/00
B98 8,250 4,180 Yes 09/07/00
B99 No 09/07/00
B100 14,412 10,994 Yes 09/07/00
B101 Tax Only 09/07/00
B102 No 09/07/00
B103 10,584 4,447 Yes 09/07/00
B104 2,895 2,207 Yes 09/07/00
B105 No 09/07/00
B106 4,610 3,515 Yes 09/07/00
================================================================================================================
$6,399,046 $5,365,325 $7,306,790 $855,119 $6,087,182
</TABLE>
B-4
<PAGE> 139
ANNEX B
MULTIFAMILY SCHEDULE
<TABLE>
<CAPTION>
UTILITIES TENANT PAYS/
SEQUENCE LOAN NUMBER PROPERTY NAME CUT-OFF BALANCE PAYMENT OF UTIL.
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H5 277025 Sanctuary Cove Apartments $ 29,849,232 Electric
H6 277035 Weston Place Apartments 26,165,960 Electric
H7 277070 Durango Canyon South Apartments 21,303,408 Electric, Gas
H8 277060 Durango Canyon North Apartments 10,297,269 Electric, Gas
SUB-TOTAL CROSSED LOANS $ 87,615,869
B23 52027 Meridian Corners Apartments 25,480,402 Electric, Cable TV
B24 52542 Silverado Apartments 15,242,981 Electric, Gas, Cable TV
B25 52370 Rio Apartments 12,927,440 Electric
B26 51963 Sonnet Cove Apartments 10,769,638 Electric
B27 52097 Verona Senior Citizens' Apartments 9,457,921 Electric
B28 52096 Duval Villa Apartments 6,723,690 Electric, Cable TV
B29 51836 Pinewood Apartments 5,018,058 Electric
B30 52024 Forest Hills Apartments 4,910,031 Electric, Gas, Sewer, Water
B31 51580 Oakview Terrace Apartments 4,877,419 Electric, Gas
B32 50221 Brookside Village 4,760,039 Electric/Sewer/Water/Hot Water/
Cable TV/AC/Heat
H9 513561 Edgecliff Village & Chapel Creek 4,667,578 Electric
B33 52257 Woodbridge Manor Apartments 4,642,562 Gas, Electric, Sewer, Water,
B34 51823 Tanglewood North Apartments 3,874,378 Electric, Gas, Sewer, Water, Cable TV
B35 51641 Hickory Hills Townhomes Phase II 3,813,962 Water, Sewer, Electric, Gas
B36 51920 Art Museum Apartments 3,581,609 Electric, Cable TV
B37.1 52149 B & V Apartment Portfolio-155 NW 10th St.
B37.2 52149 B & V Apartment Portfolio-1223 NE 1st Ave.
B37.3 52149 B & V Apartment Portfolio-929 NW 2nd St.
B37.4 52149 B & V Apartment Portfolio-67 NE 9th Court
B37.5 52149 B & V Apartment Portfolio-930 NW 1st Ave.
B37.6 52149 B & V Apartment Portfolio-938 NW 1st Ave.
B37.7 52149 B & V Apartment Portfolio-55 NE 9th Court
B37.8 52149 B & V Apartment Portfolio-960 NE 1st Ave.
B37.9 52149 B & V Apartment Portfolio-110 NE 10th Ave.
B37.10 52149 B & V Apartment Portfolio-186 NW 2nd St.
B37.11 52149 B & V Apartment Portfolio-194 NW 2nd St.
B37.12 52149 B & V Apartment Portfolio-460 NW 6th St.
B37.13 52149 B & V Apartment Portfolio-480 NW 6th St.
B37.14 52149 B & V Apartment Portfolio-521 NW 5th St.
B37.15 52149 B & V Apartment Portfolio-906 NW 1st Ave.
B37.16 52149 B & V Apartment Portfolio-925 N. Krome Ave.
B37.17 52149 B & V Apartment Portfolio-30100 Old Dixie Highway
B37 52149 B & V Apartment Portfolio (Roll-Up) 3,576,442 Electric, Gas, Cable TV
B38 51315 Arbor Pointe Apartments 3,221,402 Electric, Gas
B39 51575 Emerald Estates 3,054,721 Electric, Gas, Cable TV
H10 283360 Paige East Apartments 2,998,654 Electric
B40 51676 Cedar Pointe Apartments-Tampa 2,708,189 Water, Sewer, Electric
B41 51829 Woodley Apartments 2,145,049 Electric, Gas, Cable TV
B42 51658 Cedar Park Apartments 2,078,361 Electric, Water
</TABLE>
<TABLE>
<CAPTION>
STUDIO 1 BEDROOM 2 BEDROOM 3 BEDROOM 4 BEDROOM
--------------------------------------------------------------
# OF AVG # OF AVG # OF AVG # OF AVG # OF AVG
SEQUENCE LOAN NUMBER PROPERTY NAME UNITS RENT UNITS RENT UNITS RENT UNITS RENT UNITS RENT
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
H5 277025 Sanctuary Cove Apartments 112 950 190 1160 117 1,342
H6 277035 Weston Place Apartments 96 896 184 1044 92 1,294
H7 277070 Durango Canyon South Apartments 56 753 232 888 72 1,085
H8 277060 Durango Canyon North Apartments 80 735 104 899
SUB-TOTAL CROSSED LOANS
B23 52027 Meridian Corners Apartments 64 495 320 555 276 698
B24 52542 Silverado Apartments 184 548 236 635 20 839
B25 52370 Rio Apartments 90 584 204 685
B26 51963 Sonnet Cove Apartments 99 495 164 622 69 803
B27 52097 Verona Senior Citizens' Apartments 39 945 120 1000 1 1000
B28 52096 Duval Villa Apartments 8 783 103 972
B29 51836 Pinewood Apartments 112 1000
B30 52024 Forest Hills Apartments 166 398 23 575 1 750
B31 51580 Oakview Terrace Apartments 24 378 61 462 146 529 1 895
B32 50221 Brookside Village 155 585
H9 513561 Edgecliff Village & Chapel Creek 137 568 60 678
B33 52257 Woodbridge Manor Apartments 48 525 120 597
B34 51823 Tanglewood North Apartments 1 450 73 568 52 784 1 995
B35 51641 Hickory Hills Townhomes Phase II 64 875
B36 51920 Art Museum Apartments 128 425 48 540
B37.1 52149 B & V Apartment Portfolio-155 NW 10th St.
B37.2 52149 B & V Apartment Portfolio-1223 NE 1st Ave.
B37.3 52149 B & V Apartment Portfolio-929 NW 2nd St.
B37.4 52149 B & V Apartment Portfolio-67 NE 9th Court
B37.5 52149 B & V Apartment Portfolio-930 NW 1st Ave.
B37.6 52149 B & V Apartment Portfolio-938 NW 1st Ave.
B37.7 52149 B & V Apartment Portfolio-55 NE 9th Court
B37.8 52149 B & V Apartment Portfolio-960 NE 1st Ave.
B37.9 52149 B & V Apartment Portfolio-110 NE 10th Ave.
B37.10 52149 B & V Apartment Portfolio-186 NW 2nd St.
B37.11 52149 B & V Apartment Portfolio-194 NW 2nd St.
B37.12 52149 B & V Apartment Portfolio-460 NW 6th St.
B37.13 52149 B & V Apartment Portfolio-480 NW 6th St.
B37.14 52149 B & V Apartment Portfolio-521 NW 5th St.
B37.15 52149 B & V Apartment Portfolio-906 NW 1st Ave.
B37.16 52149 B & V Apartment Portfolio-925 N. Krome Ave.
B37.17 52149 B & V Apartment Portfolio-30100
Old Dixie Highway
B37 52149 B & V Apartment Portfolio (Roll-Up) 128 529 65 621
B38 51315 Arbor Pointe Apartments 14 575 71 683 6 825
B39 51575 Emerald Estates 53 417 65 512 2 625
H10 283360 Paige East Apartments 22 442 125 503 6 608
B40 51676 Cedar Pointe Apartments-Tampa 75 562
B41 51829 Woodley Apartments 5 535 37 730 7 829 1 1100
B42 51658 Cedar Park Apartments 11 473 11 518 55 598
</TABLE>
B-5
<PAGE> 140
ANNEX B
MULTIFAMILY SCHEDULE
<TABLE>
<CAPTION>
UTILITIES TENANT PAYS/
SEQUENCE LOAN NUMBER PROPERTY NAME CUT-OFF BALANCE PAYMENT OF UTIL.
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
B43 52249 Lake D'Ville North Apartments 1,997,900 Gas, Electric, Cable TV
B44 51921 Villa North Apartments 1,968,498 Electric, Gas
B45 50598 1710-1730 Popham Ave 1,848,873 Electric, Gas
B46 600006 Westview Terrace Apartments 1,477,020 None
B47 51531 Sunshine Village Apartments 1,442,918 Electric, Gas, Water
B48 51659 Glenn Terrace Apartments 1,080,144 Electric, Water, Sewer, Gas
B49 51059 L11 - Goldfarb Apartments 1,019,518 Electric, Gas, Sewer, Cable TV, Water
($11/mo. for 1 Br & $14/mo.for 2 Br)
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL MULTIFAMILY LOANS $238,981,263
</TABLE>
<TABLE>
<CAPTION>
STUDIO 1 BEDROOM 2 BEDROOM 3 BEDROOM 4 BEDROOM
--------------------------------------------------------------
# OF AVG # OF AVG # OF AVG # OF AVG # OF AVG
SEQUENCE LOAN NUMBER PROPERTY NAME UNITS RENT UNITS RENT UNITS RENT UNITS RENT UNITS RENT
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
B43 52249 Lake D'Ville North Apartments 32 525 64 625
B44 51921 Villa North Apartments 18 341 64 449 10 569
B45 50598 1710-1730 Popham Ave 7 498 52 556 14 600
B46 600006 Westview Terrace Apartments 60 434 32 556 4 668
B47 51531 Sunshine Village Apartments 12 1411 3 1650 1 1650
B48 51659 Glenn Terrace Apartments 14 545 15 641
B49 51059 L11 - Goldfarb Apartments 16 382 24 449
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-6
<PAGE> 141
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
DISTRIBUTION DATE STATEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
STATEMENT SECTIONS PAGE(S)
<S> <C>
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7-9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Detail 16
Liquidated Loan Detail 17
</TABLE>
<TABLE>
<CAPTION>
PLACEMENT AGENT MASTER SERVICER SPECIAL SERVICER
<S> <C> <C>
Banc of America Securities LLC ORIX Real Estate Capital Markets, LLC Lennar Partners, Inc.
100 North Tryon Street 1717 Main Street 700 N.W. 107th Avenue
Charlotte, NC 28255 14th Floor Miami, FL 33172
Dallas, TX 75201
Contact: David Gertner Contact: Paul G. Smyth Contact: Steve Bruha
Phone Number: (704) 388-3621 Phone Number: (214) 237-2010 Phone Number: (305) 229-6614
</TABLE>
This report has been compiled from information provided to Wells Fargo Bank MN.,
N.A. by various third parties, which may include the Servicer, Master Servicer,
Special Servicer and others. Wells Fargo Bank MN., N.A. has not independently
confirmed the accuracy of information received from these third parties and
assumes no duty to do so. Wells Fargo Bank MN., N.A. expressly disclaims any
responsibility for the accuracy or completeness of information furnished by
third parties.
Page 1 of 17
C-1
<PAGE> 142
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
Class CUSIP Pass-Through Original Beginning Principal Interest Prepayment Realized Loss/
\Component Rate Balance Balance Distribution Distribution Premium Additional Trust
Fund Expenses
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 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
B 0.000000% 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
D 0.000000% 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
F 0.000000% 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
H 0.000000% 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
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
L 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
M 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
N 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
O 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
P 0.000000% 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
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
Totals
<CAPTION>
Class Total Ending Current
\Component Distribution Balance Subordination
Level
<S> <C> <C> <C>
A-1 0.00 0.00 0.00%
A-2 0.00 0.00 0.00%
B 0.00 0.00 0.00%
C 0.00 0.00 0.00%
D 0.00 0.00 0.00%
E 0.00 0.00 0.00%
F 0.00 0.00 0.00%
G 0.00 0.00 0.00%
H 0.00 0.00 0.00%
J 0.00 0.00 0.00%
K 0.00 0.00 0.00%
L 0.00 0.00 0.00%
M 0.00 0.00 0.00%
N 0.00 0.00 0.00%
O 0.00 0.00 0.00%
P 0.00 0.00 0.00%
R-I 0.00 0.00 0.00%
R-II 0.00 0.00 0.00%
Totals 0.00 0.00 0.00%
</TABLE>
<TABLE>
<CAPTION>
Class CUSIP Pass-Through Original Beginning Interest Prepayment Total Ending
Rate Notional Notional Distribution Premiums Distribution Notional
Amount Amount Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C>
X 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).
Page 2 of 17
C-2
<PAGE> 143
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
Class CUSIP Beginning Principal Interest Prepayment Realized Loss/ Ending
Balance Distribution Distribution Premium Additional Trust Balance
Fund Expenses
<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
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
L 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
M 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
N 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
O 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
P 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>
Class CUSIP Beginning Ending
Notional Interest Prepayment Notional
Amount Distribution Premium Amount
<S> <C> <C> <C> <C> <C>
X 0.00000000 0.00000000 0.00000000 0.00000000
</TABLE>
Page 3 of 17
C-3
<PAGE> 144
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
RECONCILIATION DETAIL
<TABLE>
<CAPTION>
ADVANCE SUMMARY SERVICING FEE BREAKDOWNS
<S> <C> <C> <C>
P & I Advances Outstanding 0.00 Current Period Accrued Master Servicing Fees 0.00
Servicing Advances Outstanding 0.00 Less Master Servicing Fees on Delinquent Payments 0.00
Reimbursement for Interest on P & I 0.00 Less Reductions to Master Servicing Fees 0.00
Advances paid from general collections Plus Master Servicing Fees for Delinquent Payments Received 0.00
Reimbursement for Interest on Servicing 0.00 Plus Adjustments for Prior Master Servicing Calculation 0.00
Advances paid from general collections Total Master Servicing Fees Collected 0.00
</TABLE>
CERTIFICATE INTEREST RECONCILIATION
<TABLE>
<CAPTION>
Accrued Uncovered Certificate Unpaid
Certificate Prepayment Indemnification Deferred Interest Interest
Class Interest Interest Shortfall Expenses Amount Shortfall Amount
<S> <C> <C> <C> <C> <C>
A-1A
A-2A
X
B
C
D
E
F
G
H
J
K
L
M
N
O
P
Total
Optimal Interest Interest Appraisal
Distribution Shortfall Interest Reduction
Class Amount Amount Distribution Amount
<S> <C> <C> <C> <C>
A-1A
A-2A
X
B
C
D
E
F
G
H
J
K
L
M
N
O
P
Total
</TABLE>
Page 4 of 17
C-4
<PAGE> 145
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
OTHER REQUIRED INFORMATION
<TABLE>
<S> <C>
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Stated Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Amount of Primary Servicing Fee Fee 0.00
Aggregate Trust Fund Expenses 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
</TABLE>
Appraisal Reduction Amount
<TABLE>
<CAPTION>
Appraisal Cumulative Most Recent
Loan Reduction ASER App. Red.
Number Amount Amount Date
<S> <C> <C> <C>
Total
</TABLE>
Page 5 of 17
C-5
<PAGE> 146
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
RATINGS DETAIL
<TABLE>
<CAPTION>
Original Ratings Current Ratings(1)
------------------------------- -------------------------------
Class CUSIP Fitch Moody's S&P Fitch Moody's S&P
<S> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
X
B
C
D
E
F
G
H
J
K
L
M
N
O
P
</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>
Fitch, Inc. Moody's Investors Service Standard & Poor's Rating Services
One State Street Plaza 99 Church Street 55 Water Street
New York, New York 10004 New York, New York 10007 New York, New York 10041
(212) 908-0500 (212) 553-0300 (212) 438-2000
</TABLE>
C-6
Page 6 of 17
<PAGE> 147
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE
<TABLE>
<CAPTION>
% of
Scheduled # of Scheduled Agg. WAM Weighted
Balance Loans Balance Bal. (2) WAC Avg DSCR(1)
<S> <C> <C> <C> <C> <C> <C>
Totals
STATE(3)
<CAPTION>
% of
# of Scheduled Agg. WAM Weighted
State Props Balance Bal. (2) WAC Avg DSCR(1)
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
See footnotes on last page of this section.
Page 7 of 17
C-7
<PAGE> 148
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO (1)
<TABLE>
<CAPTION>
Debt Service # of Scheduled % of WAM Weighted
Coverage Ratio Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
PROPERTY TYPE(3)
<TABLE>
<CAPTION>
Property # of Scheduled % of WAM Weighted
Type Props. Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
NOTE RATE
<TABLE>
<CAPTION>
Note # of Scheduled % of WAM Weighted
Rate Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
SEASONING
<TABLE>
<CAPTION>
Seasoning # of Scheduled % of WAM Weighted
Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
See footnotes on last page of this section.
Page 8 of 17
C-8
<PAGE> 149
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
ANTICIPATED REMAINING TERM (ARD AND BALLOON LOANS)
<TABLE>
<CAPTION>
Anticipated 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
</TABLE>
REMAINING STATED TERM (FULLY AMORTIZING LOANS)
<TABLE>
<CAPTION>
Remaining Stated # of Scheduled % of WAM Weighted
Term Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
REMAINING AMORTIZATION TERM (ARD AND BALLOON LOANS)
<TABLE>
<CAPTION>
Remaining Amortization # of Scheduled % of WAM Weighted
Term Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
AGE OF MOST RECENT NOI
<TABLE>
<CAPTION>
Age of Most # of Scheduled % of WAM Weighted
Recent NOI Loans Balance Agg. (2) WAC Avg. DSCR(1)
Bal.
<S> <C> <C> <C> <C> <C> <C>
Totals
</TABLE>
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures
become available from borrowers on an asset level. In all cases the most current
DSCR provided by the Servicer is used. To the extent that no DSCR is provided by
the Servicer, information from the offering document is used. 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.
Page 9 of 17
C-9
<PAGE> 150
(WELLS FARGO LOGO)
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
MORTGAGE LOAN DETAIL
<TABLE>
<CAPTION>
Anticipated
Loan Property Interest Principal Gross Repayment
Number ODCR Type(1) City State Payment Payment Coupon Date
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Net. Beginning Ending Paid Appraisal Appraisal Res. Mod.
Maturity Amort Scheduled Scheduled Thru Reduction Reduction Strat. Code
Date (Y/N) Balance Balance Date Date Amount (2) (3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(1) Property Type Code (2) Resolution Strategy Code
------------------------------------------------- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MF - Multi-Family OF - Office 1 - Modification 6 - DPO 10 - Deed in Lieu Of
RT - Retail MU - Mixed Use 2 - Foreclosure 7 - REO Foreclosure
HC - Health Care LO - Lodging 3 - Bankruptcy 8 - Resolved 11 - Full Payoff
IN - Industrial SS - Self Storage 4 - Extension 9 - Pending Return 12 - Reps and Warranties
WH - Warehouse OT - Other 5 - Note Sale to Master Servicer 13 - Other or TBD
MH - Mobile Home Park
<CAPTION>
(3) Modification Code
-------------------------------
<S> <C> <C>
1 - Maturity Date Extension
2 - Amortization Change
3 - Principal Write-Off
4 - Combination
</TABLE>
Page 10 of 17
C-10
<PAGE> 151
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
11000 Broken Land Parkway Reports Available on the World Wide Web
Columbia, MD 21044 @www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
PRINCIPAL PREPAYMENT DETAIL
<TABLE>
<CAPTION>
Offering Document Principal Prepayment Amount Prepayment Premium
Loan Number Cross-Reference Payoff Amount Curtailment Amount Percentage Premium Yield Maintenance Charge
<S> <C> <C> <C> <C> <C>
Totals
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 11 of 17
C-11
<PAGE> 152
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
11000 Broken Land Parkway Report Available on the World Wide Web
Columbia, MD 21004 @www.ctslink.com/cmbs
Payment Date: 11/15/2000
Record Date: 10/31/2000
HISTORICAL DETAIL
<TABLE>
<CAPTION>
Delinquencies
--------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications
Date # Balance # Balance # Balance # Balance # Balance # Balance
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
Prepayments Rate and Maturities
------------------------- ---------------------------
Curtailments Payoff Next Weighted Avg.
# Amount # Amount Coupon Remit WAM
<S> <C> <C> <C>
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 12 of 17
C-12
<PAGE> 153
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Faro Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
11000 Broken Land Parkway Reports Available on the World Wide Web
Columbia, MD 21044 @www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
DELINQUENCY LOAN DETAIL
<TABLE>
<CAPTION>
Offering # of Paid Through Current Outstanding Status of Resolution Servicing
Loan Number Document Months Date P & I P & I Mortgage Strategy Transfer Date
Cross-Reference Delinq. Advances Advances** Loan (1) Code (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Foreclosure Actual Outstanding Bankruptcy REO
Date Principal Servicing Date Date
Balance Advances
<S> <C> <C> <C> <C>
Totals
</TABLE>
(1) Status of Mortgage Loan
A - Payment Not Received But Still in Grace Period
B - Late Payment But Less Than 1 Month Delinquent
0 - Current
1 - One Month Delinquent
2 - Two Months Delinquent
3 - Three or More Months Delinquent
- Assumed Scheduled Payment (Performing Matured Balloon)
7 - Foreclosure
9 - REO
(2) Resolution Strategy Code
1 - Modification
2 - Foreclosure
3 - Bankruptcy
4 - Extension
5 - Note Sale
6 - DPO
7 - REO
8 - Resolved
9 - Pending Return to Master Servicer
10 - Deed in Lieu of Foreclosure
11 - Full Payoff
12 - Reps and Warranties
13 - Other or TBD
**Outstanding P & I Advances include the current period advance.
Copyright 1997, Wells Fargo Bank MN, N.A. Page 13 of 17
<PAGE> 154
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-1
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
11000 Broken Land Parkway Reports Available on the World Wide Web
Columbia, MD 21044 @www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
Offering Servicing Resolution
Loan Document Transfer Strategy Scheduled Property Interest
Number Cross-Reference Date Code(1) Balance Type(2) State Rate
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Net Remaining
Actual Operating DSCR Note Maturity Amortization
Balance Income Date DSCR Date Date Term
<C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(1) Resolution Strategy Code (2) Property Type Code
<S> <C> <C> <C> <C>
1 - Modification 6 - DPO 10 - Deed in Lieu of MF - Multi-Family OF - Office
2 - Foreclosure 7 - REO Foreclosure RT - Retail MU - Mixed Use
3 - Bankruptcy 8 - Resolved 11 - Full Payoff HC - Health Care LO - Lodging
4 - Extension 9 - Pending Return 12 - Reps and Warranties IN - Industrial SS - Self Storage
5 - Note Sale to Master Servicer 13 - Other or TBD WH - Warehouse OT - Other
MH - Mobile Home Park
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 14 of 17
C-14
<PAGE> 155
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
11000 Broken Land Parkway Reports Available on the World Wide Web
Columbia, MD 21044 @www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
SPECIALLY SERVICED LOAN DETAIL - PART 2
<TABLE>
<CAPTION>
Offering Resolution Site
Loan Document Strategy Inspection Phase 1 Date Appraisal Appraisal Other REO
Number Cross-Reference Code(1) Date Date Value Property Revenue Comment
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(1) RESOLUTION STRATEGY CODE
----------------------------
1 - Modification 6 - DPO 10 - Deed in Lieu of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
Copyright 1997, Wells Fargo Bank MN, N.A. Page 15 of 17
C-15
<PAGE> 156
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
11000 Broken Land Parkway Reports Available on the World Wide Web
Columbia, MD 21044 @ www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
MODIFIED LOAN DETAIL
<TABLE>
<CAPTION>
Offering
Loan Document Pre-Modification
Number Cross-Reference Balance Modification Date Modification Description
<S> <C> <C> <C> <C>
Totals
</TABLE>
Copyright 1997, Wells Fargo Bank MN, N.A. Page 16 of 17
C-16
<PAGE> 157
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-2
(WELLS FARGO LOGO) For Additional Information, please contact
Wells Fargo Bank Minnesota, N.A. CTSLink Customer Service
Corporate Trust Services (301) 815-6600
11000 Broken Land Parkway Reports Available on the World Wide Web
Columbia, MD 21044 @www.ctslink.com/cmbs
PAYMENT DATE: 11/15/2000
RECORD DATE: 10/31/2000
LIQUIDATED LOAN DETAIL
<TABLE>
<CAPTION>
Final Recovery Offering Gross Proceeds
Determination Document Appraisal Appraisal Actual Gross as a % of
Loan Number Date Cross-Reference Date Value Balance Proceeds Actual Balance
<S> <C> <C> <C> <C> <C> <C> <C>
Current Total
Cumulative Total
<CAPTION>
Aggregate Net Net Proceeds Repurchased
Liquidation Liquidation as a % of Realized by Seller
Expenses* Proceeds Actual Balance Loss (Y/N)
<C> <C> <C> <C>
Current Total
Cumulative Total
</TABLE>
* Aggregate liquidation expenses also include outstanding
P & I advances and unpaid fees (servicing, trustee, etc).
Copyright 1997, Wells Fargo Bank MN, N.A. Page 17 of 17
C-17
<PAGE> 158
Prospectus
BANC OF AMERICA COMMERCIAL MORTGAGE INC.
(FORMERLY KNOWN AS NATIONSLINK FUNDING CORPORATION)
DEPOSITOR
MORTGAGE PASS-THROUGH CERTIFICATES
<TABLE>
<CAPTION>
<S> <C>
CONSIDER CAREFULLY THE RISK FACTORS THE TRUST --
BEGINNING ON PAGE 10 IN THIS - may periodically issue mortgage pass-through
PROSPECTUS. certificates in one or more series with one or more
Neither the certificates nor the classes; and
underlying mortgage loans are insured - will own --
by any governmental agency. - multifamily and commercial mortgage loans;
The certificates will represent - mortgage-backed securities; and
interests only in the related trust - other property described and in the accompanying
only and will not represent interests prospectus supplement.
in or obligations of Banc of America THE CERTIFICATES --
Commercial Mortgage Inc. or any of - will represent interests in the Trust and will be
its affiliates, including Bank of paid only from the trust assets;
America Corporation. - provide for the accrual of interest based on a fixed,
This prospectus may be used to offer variable or adjustable interest rate;
and sell any series of certificates - may be offered through underwriters, which may
only if accompanied by the prospectus include Banc of America Securities LLC, an affiliate of
supplement for that series. Banc of America Commercial Mortgage Inc.; and
- will not be listed on any securities exchange.
THE CERTIFICATEHOLDERS --
- will receive interest and principal payments based on
the rate of payment of principal and the timing of
receipt of payments on mortgage loans.
</TABLE>
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
October 25, 2000
<PAGE> 159
FOR MORE INFORMATION
Banc of America Commercial
Mortgage Inc. (formerly known
as NationsLink Funding
Corporation) has filed with
the SEC additional
registration materials
relating to the certificates.
You may read and copy any of
these materials at the SEC's
Public Reference Room at the
following locations:
- SEC Public Reference
Section
450 Fifth Street, N.W.
Room 1204
Washington, D.C. 20549
- SEC Midwest Regional
Offices Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois
60661-2511
- SEC Northeast Regional
Office
7 World Trade Center
Suite 1300
New York, New York 10048
You may obtain information on
the operation of the Public
Reference Room by calling the
SEC at 1-800-SEC-0330. The
SEC also maintains an
Internet site that contains
reports, proxy and
information statements, and
other information that has
been filed electronically
with the SEC. The Internet
address is
http://www.sec.gov.
You may also contact Banc of
America Commercial Mortgage
Inc. in writing at Bank of
America Corporate Center, 100
North Tryon Street,
Charlotte, North Carolina
28255, or by telephone at
(704) 386-2400.
See also the sections
captioned "Available
Information" and
"Incorporation of Certain
Information by Reference"
appearing at the end of this
prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF PROSPECTUS.......................... 5
RISK FACTORS................................... 10
Limited Liquidity of Certificates............ 10
Limited Assets............................... 10
Credit Support Limitations................... 11
Effect of Prepayments on Average Life of
Certificates.............................. 11
Effect of Prepayments on Yield of
Certificates.............................. 12
Limited Nature of Ratings.................... 12
Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage
Loans..................................... 13
Inclusion of Delinquent Mortgage Loans in a
Mortgage Asset Pool....................... 16
PROSPECTUS SUPPLEMENT.......................... 16
DESCRIPTION OF THE TRUST FUNDS................. 18
General...................................... 18
Mortgage Loans............................... 18
MBS.......................................... 22
Certificate Accounts......................... 23
Credit Support............................... 23
Cash Flow Agreements......................... 23
YIELD AND MATURITY CONSIDERATIONS.............. 23
General...................................... 23
Pass-Through Rate............................ 24
Payment Delays............................... 24
Certain Shortfalls in Collections of
Interest.................................. 24
Yield and Prepayment Considerations.......... 24
Weighted Average Life and Maturity........... 26
Other Factors Affecting Yield, Weighted
Average Life and Maturity................. 27
THE DEPOSITOR.................................. 28
DESCRIPTION OF THE CERTIFICATES................ 29
General...................................... 29
Distributions................................ 30
Distributions of Interest on the
Certificates.............................. 30
Distributions of Principal of the
Certificates.............................. 31
Distributions on the Certificates Concerning
Prepayment Premiums or Concerning Equity
Participations............................ 32
Allocation of Losses and Shortfalls.......... 32
Advances in Respect of Delinquencies......... 32
Reports to Certificateholders................ 33
Voting Rights................................ 34
Termination.................................. 35
Book-Entry Registration and Definitive
Certificates.............................. 35
THE POOLING AND SERVICING AGREEMENTS........... 36
General...................................... 36
Assignment of Mortgage Loans; Repurchases.... 37
Representations and Warranties;
Repurchases............................... 39
Collection and Other Servicing Procedures.... 39
Sub-Servicers................................ 41
Certificate Account.......................... 42
Modifications, Waivers and Amendments of
Mortgage Loans............................ 44
</TABLE>
2
<PAGE> 160
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Realization upon Defaulted Mortgage Loans.... 44
Hazard Insurance Policies.................... 46
Due-on-Sale and Due-on-Encumbrance
Provisions................................ 47
Servicing Compensation and Payment of
Expenses.................................. 47
Evidence as to Compliance.................... 47
Certain Matters Regarding the Master
Servicer, the Special Servicer, the REMIC
Administrator and the Depositor........... 48
Events of Default............................ 49
Rights Upon Event of Default................. 50
Amendment.................................... 51
List of Certificateholders................... 52
The Trustee.................................. 52
Duties of the Trustee........................ 52
Certain Matters Regarding the Trustee........ 52
Resignation and Removal of the Trustee....... 52
DESCRIPTION OF CREDIT SUPPORT.................. 53
General...................................... 53
Subordinate Certificates..................... 53
Insurance or Guarantees Concerning to
Mortgage Loans............................ 54
Letter of Credit............................. 54
Certificate Insurance and Surety Bonds....... 54
Reserve Funds................................ 54
Cash Collateral Account...................... 55
Credit Support with respect to MBS........... 55
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS........ 55
General...................................... 55
Types of Mortgage Instruments................ 55
Leases and Rents............................. 56
Personalty................................... 57
Foreclosure.................................. 57
Bankruptcy Laws.............................. 60
Environmental Considerations................. 61
Due-on-Sale and Due-on-Encumbrance
Provisions................................ 63
Junior Liens; Rights of Holders of Senior
Liens..................................... 63
Subordinate Financing........................ 64
Default Interest and Limitations on
Prepayments............................... 64
Applicability of Usury Laws.................. 65
Certain Laws and Regulations................. 65
Americans with Disabilities Act.............. 65
Soldiers' and Sailors' Civil Relief Act of
1940...................................... 66
Forfeitures in Drug and RICO Proceedings..... 66
CERTAIN FEDERAL INCOME TAX CONSEQUENCES........ 66
General...................................... 66
REMICs....................................... 67
Grantor Trust Funds.......................... 84
STATE AND OTHER TAX CONSEQUENCES............... 92
CERTAIN ERISA CONSIDERATIONS................... 93
General...................................... 93
Plan Asset Regulations....................... 93
Insurance Company General Accounts........... 94
Consultation With Counsel.................... 95
Tax Exempt Investors......................... 95
</TABLE>
3
<PAGE> 161
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LEGAL INVESTMENT............................. 95
USE OF PROCEEDS.............................. 97
METHOD OF DISTRIBUTION....................... 97
LEGAL MATTERS................................ 98
FINANCIAL INFORMATION........................ 99
RATING....................................... 99
AVAILABLE INFORMATION........................ 99
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE................................. 100
INDEX OF PRINCIPAL DEFINITIONS............... 101
</TABLE>
4
<PAGE> 162
SUMMARY OF PROSPECTUS
This summary highlights selected information from this prospectus. It does not
contain all the information you need to consider in making your investment
decision. You should carefully review this prospectus and the related prospectus
supplement in their entirety before making any investment in the certificates of
any series. As used in this prospectus, "you" refers to a prospective investor
in certificates, and "we" refers to the Depositor, Banc of America Commercial
Mortgage Inc. An Index of Principal Definitions appears at the end of this
Prospectus.
SECURITIES OFFERED
Mortgage pass-through certificates.
DEPOSITOR
Banc of America Commercial Mortgage Inc., a Delaware corporation and a
subsidiary of Bank of America, N.A., formerly known as NationsLink Funding
Corporation, has its principal executive offices at Bank of America Corporate
Center, 100 North Tryon Street, Charlotte, North Carolina 28255, and its
telephone number is (704) 386-2400.
TRUSTEE
The trustee for each series of certificates will be named in the related
prospectus supplement.
MASTER SERVICER
If the trust includes mortgage loans, the master servicer for the corresponding
series of certificates will be named in the prospectus supplement.
SPECIAL SERVICER
If the trust includes mortgage loans, 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 prospectus supplement.
MBS ADMINISTRATOR
If the trust includes mortgage-backed securities, the entity responsible for
administering the mortgage-backed securities will be named in the prospectus
supplement.
REMIC ADMINISTRATOR
The person responsible for the various tax-related administration duties for a
series of certificates concerning real estate mortgage investment conduits will
be named in the prospectus supplement.
THE MORTGAGE LOANS
Each series of certificates will, in general, consist of a pool of mortgage
loans (a "Mortgage Asset Pool") secured by first or junior liens on --
- 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; or
- office buildings, retail stores, 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.
5
<PAGE> 163
However, no one of the following types of properties will be overly-represented
in the trust at the time the trust is formed: (1) restaurants; (2) entertainment
or sports arenas; (3) marinas; or (4) nursing homes, hospitals or other health
care-related facilities.
The mortgage loans will not be guaranteed or insured by Banc of America
Commercial Mortgage Inc. or any of its affiliates or, unless otherwise provided
in the prospectus supplement, by any governmental agency or by any other person.
If specified in the prospectus supplement, some mortgage loans may be delinquent
as of the date the trust is formed.
As described in the prospectus supplement, a mortgage loan may --
- provide for no accrual of interest or for accrual of interest at an interest
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;
- 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;
- be fully amortizing or may be partially amortizing or nonamortizing, with a
balloon payment due on its stated maturity date;
- 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
- provide for payments of principal, interest or both, on due dates that occur
monthly, quarterly, semi-annually or at such other interval as specified in
the 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 Banc of America
Commercial Mortgage Inc., although one of its affiliates may have originated
some of the mortgage loans.
If any mortgage loan, or group of related mortgage loans, involves unusual
credit risk, financial statements or other financial information concerning the
related mortgaged property will be included in the related prospectus
supplement.
As described in the prospectus supplement, the trust may also consist of
mortgage participations, mortgage pass-through certificates and/or other
mortgage-backed securities that evidence an interest in, or are secured by a
pledge of, one or more mortgage loans similar to the other mortgage loans in the
trust and which may or may not be issued, insured or guaranteed by the United
States or any governmental agency.
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 prospectus
supplement and will represent in total the entire beneficial ownership interest
in the trust.
As described in the prospectus supplement, the certificates of each series may
consist of one or more classes that --
- 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;
- are "stripped principal certificates" entitled to distributions of principal,
with disproportionate, nominal or no distributions of interest;
- are "stripped interest certificates" entitled to distributions of interest,
with disproportionate, nominal or no distributions of principal;
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- provide for distributions of interest or principal that commence only after
the occurrence of certain events, such as the retirement of one or more other
classes of certificates of such series;
- provide for distributions of principal 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 trust;
- provide for distributions of principal to be made, subject to available funds,
based on a specified principal payment schedule or other methodology; or
- provide for distribution based on collections on the mortgage assets in the
trust attributable to prepayment premiums, yield maintenance payments or
equity participations.
If specified in the prospectus supplement, a series of certificates may include
one or more "controlled amortization classes," which will entitle the holders 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 trust remains relatively constant at the rate 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.
Each class of certificates, other than certain classes of stripped interest
certificates and certain classes of real estate mortgage investment conduit
residual certificates (also known as "REMIC residual certificates"), will have
an initial stated principal amount (a "Certificate Balance"). Each class of
certificates, other than certain classes of stripped principal certificates and
certain classes of REMIC residual certificates, will accrue interest on its
certificate balance or, in the case of certain classes of stripped interest
certificates, on a notional amount, based on a pass-through rate (a
"Pass-Through Rate") which may be fixed, variable or adjustable. The prospectus
supplement will specify the certificate balance, notional amount and/or pass-
through rate for each class of certificates.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Interest on each class of 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 and will paid on a distribution date. However, in the case of certain
classes of stripped interest certificates, the notional amount outstanding from
time to time will be paid to certificateholders as provided in the prospectus
supplement on a specified distribution date (each of the specified dates on
which distributions are to be made, a "Distribution Date").
Distributions of interest concerning 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. Interest accrued concerning a class of accrual certificates prior
to the occurrence of such an event will either be added to the certificate
balance or otherwise deferred as described in the prospectus supplement.
Distributions of interest concerning one or more classes of certificates may be
reduced to the extent of certain delinquencies, losses and other contingencies
described in this prospectus and in the prospectus supplement.
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 are then entitled to receive in respect of principal
from future cash flow on the assets in the trust. The initial total 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
cut-off date, after application of scheduled payments
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due on or before such date, whether or not received. As described in the
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 certificates of such series then entitled 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) or slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on the assets in
the trust;
- 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;
- may be made, subject to certain limitations, based on a specified principal
payment schedule; or
- 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 trust are received. Unless
otherwise specified in the prospectus supplement, distributions of principal
of any class of certificates will be made on a pro rata basis among all of the
certificates of such class.
CREDIT SUPPORT AND CASH FLOW AGREEMENTS
If specified in the prospectus supplement, partial or full protection against
certain defaults and losses on the assets in the trust may be provided to one or
more classes of certificates by (1) subordination of one or more other classes
of certificates to classes in the same series, or by (2) of such series, one or
more other types of credit support, such as a letter of credit, insurance
policy, guarantee, reserve fund, cash collateral account or
overcollateralization (any such coverage with respect to the Certificates of any
series, "Credit Support"). If so provided in the prospectus supplement, the
trust may include --
- guaranteed investment contracts pursuant to which moneys held in the funds and
accounts established for the related series will be invested at a specified
rate; or
- 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.
Certain relevant information regarding any applicable credit support or cash
flow agreement will be set forth in the prospectus supplement for a series of
certificates.
ADVANCES
As specified in the prospectus supplement, if the trust includes mortgage loans,
the master servicer, the special servicer, the trustee, any provider of credit
support, and/or another specified person may be obligated to make, or have the
option of making, certain advances concerning delinquent scheduled payments of
principal and/or interest on mortgage loans. Any advances made concerning a
particular mortgage loan will be reimbursable from subsequent recoveries
relating to the particular mortgage loan and as described in the prospectus
supplement. If specified in the prospectus supplement, any entity making such
advances may be entitled to receive interest for a specified period during which
certain or all of such advances are outstanding, payable from amounts in the
trust. If the trust includes mortgaged-backed securities, any comparable
advancing obligation of a party to the related pooling and servicing agreement,
or of a party to the related mortgage-backed securities agreement, will be
described in the prospectus supplement.
OPTIONAL TERMINATION
If specified in the prospectus supplement, a series of certificates may be
subject to optional early termination through the repurchase of the mortgage
assets in the trust. If 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, a specified party may be
authorized or required to solicit bids for the purchase of all of the assets of
the trust, or of a sufficient portion of such assets to retire such class or
classes.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The certificates of each series will constitute or evidence ownership of
either --
- "regular interests" ("REMIC Regular Certificates") and "residual interests"
("REMIC Residual Certificates") in the trust, or a designated portion thereof,
treated as a REMIC under Sections 860A through 860G of the Internal Revenue
Code of 1986; or
- certificates ("Grantor Trust Certificates") in a trust treated as a grantor
trust (or a partnership) under applicable provisions of the Internal Revenue
Code of 1986.
Investors are advised to consult their tax advisors and to review "Certain
Federal Income Tax Consequences" in this prospectus and in the prospectus
supplement.
CERTAIN ERISA CONSIDERATIONS
Fiduciaries of retirement plans and certain other employee benefit 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, or Section 4975 of
the Internal Revenue Code of 1986, should review with their legal advisors
whether the purchase or holding of certificates could give rise to a transaction
that is prohibited.
LEGAL INVESTMENT
The certificates will constitute "mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of 1984, as amended ("SMMEA"),
only if specified in the prospectus supplement. Investors whose investment
authority is subject to legal restrictions should consult their legal advisors
to determine whether and to what extent the certificates constitute legal
investments for them.
RATING
At their respective dates of issuance, each class of certificates will be rated
as of investment grade by one or more nationally recognized statistical rating
agencies (each, a "Rating Agency").
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RISK FACTORS
In considering an investment in the certificates of any series, you should
consider carefully the following risk factors and the risk factors in the
prospectus supplement.
LIMITED LIQUIDITY OF CERTIFICATES
General. The certificates of any series may have limited or no liquidity.
You may be forced to bear the risk of investing in the certificates for an
indefinite period of time. In addition, you may have no redemption rights, and
the certificates are subject to early retirement only under certain
circumstances.
Lack of a Secondary Market. We cannot assure you that a secondary market
for the certificates will develop or, if it does develop, that it will provide
certificateholders with liquidity of investment or that it will continue for as
long as the certificates remain outstanding.
The prospectus supplement may indicate that an underwriter intends to
establish a secondary market in the certificates, although no underwriter will
be obligated to do so. Any secondary market may provide less liquidity to
investors than any comparable market for securities relating to single-family
mortgage loans. Unless specified in the prospectus supplement, the certificates
will not be listed on any securities exchange.
Limited Ongoing Information. The primary source of ongoing information
regarding the certificates, including information regarding the status of the
related mortgage assets and any credit support for the certificates, will be the
periodic reports to certificateholders to be delivered pursuant to the related
pooling and servicing agreement.
We cannot assure you that any additional ongoing information regarding the
certificates will be available through any other source. The limited nature of
such information concerning a series of certificates may adversely affect
liquidity, even if a secondary market for the certificates does develop.
Sensitivity to Interest Rates. If a secondary market does develop for the
certificates, the market value of the certificates will be affected by several
factors, including (1) perceived liquidity, (2) the anticipated cash flow (which
may vary widely depending upon the prepayment and default assumptions concerning
the underlying mortgage loans) and (3) prevailing interest rates.
The price payable at any given time for certain classes of certificates may
be extremely sensitive to small fluctuations in prevailing interest rates. The
relative change in price for a certificate in response to an upward or downward
movement in prevailing interest rates may not necessarily equal the relative
change in price for the certificate in response to an equal but opposite
movement in such rates. Therefore, the sale of certificates by a holder in any
secondary market that may develop may be at a discount from the price paid by
such holder. We are not aware of any source through which price information
about the certificates will be generally available on an ongoing basis.
LIMITED ASSETS
Unless specified in the prospectus supplement, neither the certificates nor
the mortgage assets in the trust will be guaranteed or insured by Banc of
America Commercial Mortgage Inc. or any of its affiliates, by any governmental
agency or by any other person or entity. No certificate will represent a claim
against or security interest in the trust funds for any other series. Therefore,
if the related trust fund has insufficient assets to make payments, no other
assets will be available for payment of the deficiency, and the holders of one
or more classes of the certificates will be required to bear the consequent
loss.
Certain amounts on deposit from time to time in certain funds or accounts
constituting part of the trust, including the certificate account and any
accounts maintained as credit support, may be withdrawn under certain
conditions, for purposes other than the payment of principal of or interest on
the related series of certificates. On any distribution occurring after losses
or shortfalls in collections on the mortgage assets have been incurred, all or a
portion of the amount of losses or shortfalls in collections on the mortgage
assets will be borne on a disproportionate basis among classes of certificates.
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CREDIT SUPPORT LIMITATIONS
Limitations Regarding Types of Losses Covered. The prospectus supplement
for a series of certificates will describe any credit support. 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 certificates.
Disproportionate Benefits to Certain Classes and Series. A series of
certificates may include one or more classes of subordinate certificates, if
provided in the 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 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 certificates of such series has been repaid in full.
The impact of losses and shortfalls experienced with respect to the
mortgage assets may fall primarily upon those classes of certificates having a
later right of payment.
If a form of credit support covers the 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 certificates of one (or more) such
series such credit support will disproportionately benefit, to the detriment of
the holders of 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 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. However, we cannot assure you that the loss experience on the related
mortgage assets will not exceed such assumed levels. If the losses on the
related mortgage assets do exceed such assumed levels, the holders of one or
more classes of 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 the trust, the amount
and timing of distributions of principal and/or interest on the certificates of
the related series may be highly unpredictable. Prepayments on the mortgage
loans in the trust 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. Therefore, the prepayment experience on
the mortgage loans in the trust may affect the average life of one or more
classes of certificates of the related series.
The rate of principal payments on pools of mortgage loans varies among
pools and from time to 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 the trust, 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
the trust, 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.
We cannot assure you what as to the actual rate of prepayment on the
mortgage loans in the trust will be, or that such rate of prepayment will
conform to any model in any prospectus supplement. As a result, depending on the
anticipated rate of prepayment for the mortgage loans in the trust, the
retirement of any class of certificates of the related series could occur
significantly earlier or later, and its average life could be significantly
shorter or longer, than expected.
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The extent to which prepayments on the mortgage loans in trust ultimately
affect the average life of any class of certificates of the related series will
depend on the terms and provisions of the certificates. A class of certificates
may provide that on any distribution date the holders of the certificates are
entitled to a pro rata share of the prepayments on the mortgage loans in the
trust fund that are distributable on such date.
A class of certificates that entitles the holders to a disproportionately
large share of the prepayments on the mortgage loans in the trust increases the
likelihood of early retirement of such class if the rate of prepayment is
relatively fast. This type of early retirement risk is sometimes referred to as
"call risk."
A class of certificates that entitles the holders thereof to a
disproportionately small share of the prepayments on the mortgage loans in the
trust increases the likelihood of an extended average life of such class if the
rate of prepayment is relatively slow. This type of prolonged retirement risk is
sometimes referred to as "extension risk."
As described in the 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
trust 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 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 trust remains
relatively constant at the rate of prepayment used to establish the specific
principal payment schedule for the certificates. Prepayment risk concerning 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.
As described in the prospectus supplement, a companion class may entitle
the holders to a disproportionately large share of prepayments on the mortgage
loans in the trust when the rate of prepayment is relatively fast, and/or may
entitle the holders to a disproportionately small share of prepayments on the
mortgage loans in the trust when the rate of prepayment is relatively slow. 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 trust were allocated on a
pro rata basis.
EFFECT OF PREPAYMENTS ON YIELD OF CERTIFICATES
A series of certificates may include one or more classes 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 trust fund. If 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 yield to maturity of
any class of certificates may vary from the anticipated yield due to the degree
to which the certificates are purchased at a discount or premium and the amount
and timing of distributions.
You should consider, in the case of any 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. In the case of any certificate purchased at a
premium, you should consider 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.
LIMITED NATURE OF RATINGS
Any rating assigned by a rating agency to a class of certificates will
reflect only its assessment of the likelihood that holders of the certificates
will receive payments to which the certificateholders are entitled under the
related pooling and servicing agreement. Such rating will not constitute an
assessment of the
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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
trust. Any rating will not address the possibility that prepayment of the
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 purchasing a certificate at a significant premium might fail to recover
its initial investment under certain prepayment scenarios. Therefore, a rating
assigned by a rating agency does not guarantee or ensure the realization of any
anticipated yield on a class of certificates.
The amount, type and nature of credit support given 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. 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 properties that provide security for the mortgage loans. However,
we cannot assure you that those values will not decline in the future. As a
result, the credit support required in respect of the certificates of any series
may be insufficient to fully protect the holders thereof from losses on the
related mortgage asset pool.
CERTAIN FACTORS AFFECTING DELINQUENCY, FORECLOSURE AND LOSS OF THE MORTGAGE
LOANS
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 than loans made on the security of an owner-occupied
single-family property. 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. Therefore, 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
properties or on 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 the net operating income of a property, rental income (and maintenance
payments from tenant stockholders of a Cooperative) and the value of any
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 Properties may be secured by
owner-occupied properties or properties leased to a single tenant. Therefore, a
decline in the financial condition of the borrower or a single tenant may have a
disproportionately greater effect on the net operating income from such
properties than would be the case with respect to properties with multiple
tenants.
Changes in the expense components of the net operating income of a property
due to the general economic climate or economic conditions in a locality or
industry segment, such as (1) increases in interest rates, real estate and
personal property tax rates and other operating expenses including energy costs,
(2) changes in governmental rules, regulations and fiscal policies, including
environmental legislation, and (3) acts of God may also affect the net operating
income and the value of the property and the risk of default on the related
mortgage loan. In some cases leases of 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 as 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.
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Additional considerations may be presented by the type and use of a
particular property. For instance, 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. The transferability of a hotel's or restaurant's operating, liquor and
other licenses upon a transfer of the hotel or the restaurant, whether through
purchase or foreclosure, is subject to local law requirements.
In addition, the concentration of default, foreclosure and loss risks in
mortgage loans in the trust will generally be greater than for pools of
single-family loans because mortgage loans in the trust generally will 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. We anticipate 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. In this type of
mortgage loan, recourse in the event of borrower default will be limited to the
specific real property and other assets 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, we cannot assure you that
enforcement of such recourse provisions will be practicable, or that the assets
of the borrower will be sufficient to permit a recovery concerning a defaulted
mortgage loan in excess of the liquidation value of the related property.
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. Cash flows generated on these type of mortgage loans
are available to support debt service on, and ultimate repayment of, the total
indebtedness. These arrangements 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 properties securing a group of mortgage loans which are
cross-collateralized 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. 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. A creditor seeking to enforce remedies against a property subject
to such cross-collateralization to repay such creditor's claim against the
related borrower could assert that (1) such borrower was insolvent at the time
the cross-collateralized mortgage loans were made and (2) 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" will be receiving
"guarantees" from each of the other borrowers in return, we cannot assure you
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
properties located in different states. Because of various state laws governing
foreclosure or the exercise of a power of sale and because foreclosure actions
are usually 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. Some of the
mortgage loans included in the trust may be nonamortizing or only partially
amortizing over their terms to maturity. These types of mortgage loans will
require substantial payments of principal and interest (that is, balloon
payments) at their
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stated maturity. These loans 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 property. The ability of a borrower to accomplish either of
these goals will be affected by --
- the value of the related property;
- the level of available mortgage rates at the time of sale or refinancing;
- the borrower's equity in the related property;
- the financial condition and operating history of the borrower and the related
property;
- tax laws;
- rent control laws (pertaining to certain residential properties);
- Medicaid and Medicare reimbursement rates (pertaining to hospitals and nursing
homes);
- prevailing general economic conditions; and
- the availability of credit for loans secured by multifamily or commercial
property.
Neither Banc of America Commercial Mortgage Inc. nor any of its affiliates
will be required to refinance any mortgage loan.
As specified in the prospectus supplement, 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. Although 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, we cannot assure you that any such extension or
modification will in fact increase the present value of receipts from or
proceeds of the affected mortgage loans.
Lender Difficulty in Collecting Rents Upon the Default and/or Bankruptcy of
Borrower. Each mortgage loan included in the trust secured by property that is
subject to leases typically will be secured by an assignment of leases and
rents. Under such an assignment, the mortgagor assigns to the mortgagee its
right, title and interest as lessor under the leases of the related property,
and the income derived, 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
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.
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 property or its interest in the 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
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threat was caused by the borrower or a prior owner. A lender also risks such
liability on foreclosure of the mortgage.
Lack of Insurance Coverage for Certain Special Hazard Losses. Unless
otherwise specified in a prospectus supplement, the master servicer and special
servicer for the trust will be required to cause the borrower on each mortgage
loan in the trust to maintain such insurance coverage in respect of the property
as is required under the related mortgage, including hazard insurance. As
described in the prospectus supplement, the master servicer and the special
servicer may satisfy its obligation to cause hazard insurance to be maintained
with respect to any 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 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 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 certificates of the related series.
INCLUSION OF DELINQUENT MORTGAGE LOANS IN A MORTGAGE ASSET POOL
If provided in the prospectus supplement, the trust fund for a particular
series of certificates may include mortgage loans that are past due. As
specified in the related prospectus supplement, the servicing of such mortgage
loans will be performed by the special servicer. 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 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 concerning the subject mortgage asset pool and the
yield on the certificates of such series.
PROSPECTUS SUPPLEMENT
To the extent appropriate, the prospectus supplement relating to each
series of offered certificates will contain:
- 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);
- information with respect to any other classes of Certificates of the same
series;
- the respective dates on which distributions are to be made;
- 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");
- the circumstances, if any, under which the related Trust Fund may be subject
to early termination;
- additional information with respect to the method of distribution of such
offered certificates;
- 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;
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- the initial percentage ownership interest in the related Trust Fund to be
evidenced by each class of Certificates of such series;
- information concerning the Trustee (as defined herein) of the related Trust
Fund;
- 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;
- information as to the nature and extent of subordination of any class of
Certificates of such series, including a class of offered certificates; and
- whether such offered certificates will be initially issued in definitive or
book-entry form.
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DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each trust (the "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 Banc of America Commercial Mortgage Inc. (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: (1) restaurants; (2)
entertainment or sports arenas; (3) marinas; or (4) 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
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
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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 (1) the risk of delay in distributions while a
deficiency judgment against the borrower is obtained and (2) 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 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, 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 (1) the Net Operating Income derived from the related
Mortgaged Property for a twelve-month period to (2) 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 (1)
noncash items such as depreciation and amortization, (2) capital expenditures
and (3) 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 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
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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 (1) the then outstanding principal balance of the
Mortgage Loan and any other loans senior thereto that are secured by the related
Mortgaged Property to (2) 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".
Payment Provisions of the Mortgage Loans. All of the Mortgage Loans will
(1) have had original terms to maturity of not more than 40 years and (2)
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 (1) 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, (2) 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
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negative amortization, (3) may be fully amortizing or may be partially
amortizing or nonamortizing, with a balloon payment due on its stated maturity
date, and (4) 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:
- the aggregate outstanding principal balance and the largest, smallest
and average outstanding principal balance of the Mortgage Loans,
- the type or types of property that provide security for repayment of
the Mortgage Loans,
- the earliest and latest origination date and maturity date of the
Mortgage Loans,
- 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,
- 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,
- the Mortgage Rates borne by the Mortgage Loans, or the range thereof,
and the weighted average Mortgage Rate borne by the Mortgage Loans,
- 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,
- information regarding the payment characteristics of the Mortgage
Loans, including, without limitation, balloon payment and other
amortization provisions, Lock-out Periods and Prepayment Premiums,
- 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
- 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.
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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 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 (1) 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 (2) 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 (1) have been previously registered under the Securities
Act of 1933, as amended, (2) be exempt from such registration requirements or
(3) 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,
- the aggregate approximate initial and outstanding principal amount(s)
and type of the MBS to be included in the Trust Fund,
- the original and remaining term(s) to stated maturity of the MBS, if
applicable,
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- the pass-through or bond rate(s) of the MBS or the formula for
determining such rate(s),
- the payment characteristics of the MBS,
- the MBS Issuer, MBS Servicer and MBS Trustee, as applicable, of each
of the MBS,
- a description of the related credit support, if any,
- the circumstances under which the related underlying mortgage loans,
or the MBS themselves, may be purchased prior to their maturity,
- the terms on which mortgage loans may be substituted for those
originally underlying the MBS,
- 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
described under "-- Mortgage Loans -- Mortgage Loan Information in
Prospectus Supplements", and
- 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 (any such agreement, a "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
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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 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
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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 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 (1) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (2) 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.
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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 (1) converting to a
fixed rate loan and thereby "locking in" such rate or (2) 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 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
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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 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 (1) limits
the amount by which its scheduled payment may adjust in response to a change in
its Mortgage Rate, (2) provides that its scheduled payment will adjust less
frequently than its Mortgage Rate or (3) 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 (1) whether such Offered Certificate was
purchased at a premium or a discount and (2) 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
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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 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 (1) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of Certificates and/or (2)
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 (1) amounts attributable to interest
accrued but not currently distributable on one or more classes of Accrual
Certificates, (2) Excess Funds or (3) 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 (A) 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 (B) 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
Banc of America Commercial Mortgage Inc., a Delaware corporation (the
"Depositor"), formerly known as NationsLink Funding Corporation, 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 Bank of America, N.A. The Depositor
maintains its principal office at Bank of America Corporate Center, Charlotte,
North Carolina 28255. Its telephone number is (704) 386-2400.
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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 Certificates of such series being offered for sale
(the "Offered Certificates"), may consist of one or more classes of Certificates
that, among other things:
- provide for the accrual of interest on the Certificate Balance or
Notional Amount thereof at a fixed, variable or adjustable rate;
- constitute Senior Certificates or Subordinate Certificates;
- constitute Stripped Interest Certificates or Stripped Principal
Certificates;
- 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;
- 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;
- provide for distributions of principal thereof to be made, subject to
available funds, based on a specified principal payment schedule or
other methodology; or
- 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.
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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 20th day of each month (or, if any such 20th 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 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
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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 (a
"Notional Amount") that is either (1) based on the principal balances of some or
all of the Mortgage Assets in the related Trust Fund or (2) 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 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
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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 CONCERNING PREPAYMENT PREMIUMS OR CONCERNING
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.
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 (1) a reduction in the entitlements to interest and/or the
Certificate Balances of one or more such classes of Certificates and/or (2)
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.
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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.
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:
- the amount of such distribution to holders of such class of Offered
Certificates that was applied to reduce the Certificate Balance thereof;
- the amount of such distribution to holders of such class of Offered
Certificates that was applied to pay Accrued Certificate Interest;
- 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;
- the amount, if any, by which such distribution is less than the amounts
to which holders of such class of Offered Certificates are entitled;
- if the related Trust Fund includes Mortgage Loans, the aggregate amount
of advances included in such distribution;
- 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;
- information regarding the aggregate principal balance of the related
Mortgage Assets on or about such Distribution Date;
- if the related Trust Fund includes Mortgage Loans, information regarding
the number and aggregate principal balance of such Mortgage Loans that
are delinquent;
- 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" (that is, the specified period, generally corresponding in length
to the period between Distribution Dates, during which prepayments and
other unscheduled collections on
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the Mortgage Loans in the related Trust Fund must be received in order to
be distributed on a particular Distribution Date);
- 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;
- 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;
- 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;
- 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
- the amount of Credit Support being afforded by any classes of Subordinate
Certificates.
In the case of information furnished pursuant to the first 3 bulleted items
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 the first 3 bulleted items 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
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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 (1) 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 (2)
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 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.
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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.
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 (1) 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 (2) 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 or other agreement specified in the related Prospectus
Supplement (in any case, a "Pooling and Servicing Agreement"). In general, the
parties to a Pooling and Servicing Agreement will include the Depositor, the
Trustee,
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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 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
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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 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.
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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: (1) 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; (2) the enforceability of the related Mortgage Note and Mortgage and
the existence of title insurance insuring the lien priority of the related
Mortgage; (3) the Warranting Party's title to the Mortgage Loan and the
authority of the Warranting Party to sell the Mortgage Loan; and (4) 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 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
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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 (1) such
procedures are consistent with the terms of the related Pooling and Servicing
Agreement and (2) 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: (1) Mortgage Loans that are delinquent in
respect of a specified number of scheduled payments; (2) Mortgage Loans as to
which the related borrower has entered into or consented to bankruptcy,
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 (3) 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
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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 collectibility 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 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. Unless
otherwise provided in the related Prospectus Supplement, 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
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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 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:
- all payments on account of principal, including principal prepayments, on
the Mortgage Loans;
- 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;
- 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 the seventh bulleted item listed 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;
- any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates;
- any advances made with respect to delinquent scheduled payments of
principal and interest on the Mortgage Loans;
- any amounts paid under any Cash Flow Agreement;
- 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
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Defaulted Mortgage Loans", and all proceeds of any Mortgage Asset
purchased as described under "Description of the
Certificates -- Termination";
- 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;
- 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";
- 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
- 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.
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:
- to make distributions to the Certificateholders on each Distribution
Date;
- 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;
- 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;
- 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 the bulleted clause immediately listed above incurred by it while such
remain outstanding and unreimbursed;
- 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";
- 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
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"-- Certain Matters Regarding the Master Servicer, the Special Servicer,
the REMIC Administrator and the Depositor" and "-- Certain Matters
Regarding the Trustee";
- 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;
- if and to the extent described in the related Prospectus Supplement, to
reimburse prior draws on any form of Credit Support;
- 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;
- to pay any servicing expenses not otherwise required to be advanced by
the Master Servicer, the Special Servicer or any other specified person;
- if one or more elections have been made to treat the Trust Fund or
designated portions thereof as a REMIC, to pay any federal, state or
local taxes imposed on the Trust Fund or its assets or transactions, as
and to the extent described under "Certain Federal Income Tax
Consequences -- REMICs -- Prohibited Transactions Tax and Other Taxes";
- to pay for the cost of various opinions of counsel obtained pursuant to
the related Pooling and Servicing Agreement for the benefit of
Certificateholders;
- to make any other withdrawals permitted by the related Pooling and
Servicing Agreement and described in the related Prospectus Supplement;
and
- 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 (1) will not affect the amount or timing of any scheduled
payments of principal or interest on the Mortgage Loan, (2) 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 (3) 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, (1) a
material default on the Mortgage Loan has occurred or a payment default is
imminent, (2) 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 (3) 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
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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:
(1) 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
(2) 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 (1)(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 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 (1) the Internal Revenue Service
(the "IRS") grants an extension of time to sell such property or (2) 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
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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.
Except as otherwise provided in the Prospectus Supplement, 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.
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 (1) the
replacement
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cost of the improvements less physical depreciation and (2) 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 in connection with the permitted transfer of a
Mortgaged Property. See "Certain Legal Aspects of Mortgage Loans -- Due-on-Sale
and Due-on-Encumbrance Provisions".
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: (1) a specified portion of the interest payments on
each Mortgage Loan in the related Trust Fund, whether or not serviced by it; (2)
an additional specified portion of the interest payments on each Mortgage Loan
then currently serviced by it; and (3) 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
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firm of independent certified public accountants stating that (1) 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 (2) 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 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
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misfeasance, bad faith or gross 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 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 gross 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,
- 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,
- 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;
- 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 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;
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- 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;
- certain events involving a determination by a Rating Agency that the
Master Servicer or the Special Servicer is no longer approved by
such Rating Agency to serve in such capacity; and
- 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 (except
where related only to a Rating Agency's evaluation of the acceptability of such
entity to act in a particular capacity) constitute an Event of Default in each
capacity.
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
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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, (1) to cure any ambiguity, (2) to correct or supplement any
provision therein which may be inconsistent with any other provision therein or
to correct any error, (3) 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, (4)
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 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), (5) 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 (6) 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 (1) 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 (2) 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.
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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 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 gross 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
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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 33 1/3% (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 and/or cash
collateral accounts, overcollateralization, 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 Certificateholders 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 (1) the nature and
amount of coverage under such Credit Support, (2) any conditions to payment
thereunder not otherwise described herein, (3) 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 (4) 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
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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 CONCERNING 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 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
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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.
CASH COLLATERAL ACCOUNT
If so specified in the related Prospectus Supplement, all or any portion of
credit enhancement for a series of Certificates may be provided by the
establishment of a cash collateral account. A cash collateral account will be
similar to a reserve fund except that generally a cash collateral account is
funded initially by a loan from a cash collateral lender, the proceeds of which
are invested with the cash collateral lender or other eligible institution. The
loan from the cash collateral lender will be repaid from such amounts as are
specified in the related Prospectus Supplement. Amounts on deposit in the cash
collateral account will be available in generally the same manner described
above with respect to a reserve fund. As specified in the related Prospectus
Supplement, a cash collateral account may be deemed to be part of the assets of
the related Trust, may be deemed to be part of the assets of a separate cash
collateral trust or may be deemed to be property of the party specified in the
related Prospectus Supplement and pledged for the benefit of the holders of one
or more classes of Certificates of a series.
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.
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
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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 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.
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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 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.
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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 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.
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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 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
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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 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, (1)
assume the lease and retain it or assign it to a third party or (2) 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
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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.
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
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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 any 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 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
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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 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 (1) the risk of delay in distributions
while a deficiency judgment against the borrower is obtained and (2) 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.
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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 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
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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.
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.
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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: (1) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (2) 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.
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 Internal Revenue Code of 1986, as amended (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
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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. 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: (1)
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 (2) 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 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
Certificates, 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 one or more REMICs and the REMIC Certificates offered with
respect thereto will be considered to evidence ownership of REMIC Regular
Certificates or REMIC Residual Certificates in a 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 one or more
REMICs 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.
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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 Administrator will report those determinations to Certificateholders in
the manner and at the times required by applicable Treasury regulations.
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
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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
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,
as discussed below under "Variable Rate REMIC Regular Certificates," at a
qualified variable rate.
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.
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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
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 (1) 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 (2) 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 (1) 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, (2) using a discount rate equal to the
original yield to maturity of the Certificate and (3) 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
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Regular Certificate on any given day equals the sum of (1) 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
(2) the daily portions of original issue discount for all days during such
accrual period prior to such day.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a variable rate. Under the OID Regulations,
interest is treated as payable at a variable rate if, generally, (1) the issue
price does not exceed the original principal balance by more than a specified
amount and (2) the interest compounds or is payable at least annually at current
values of (a) one or more "qualified floating rates", (b) a single fixed rate
and one or more qualified floating rates, (c) a single "objective rate", or (d)
a single fixed rate and a single objective rate that is a "qualified inverse
floating rate". A floating rate is a qualified floating rate if variations in
the rate can reasonably be expected to measure contemporaneous variations in the
cost of newly borrowed funds, where the rate is subject to a fixed multiple that
is greater than 0.65, but not more than 1.35. The rate may also be increased or
decreased by a fixed spread or subject to a fixed cap or floor, or a cap or
floor that is not reasonably expected as of the issue date to affect the yield
of the instrument significantly. An objective rate (other than a qualified
floating rate) is a rate that is determined using a single fixed formula and
that is based on objective financial or economic information, provided that the
information is not (1) within the control of the issuer or a related party or
(2) unique to the circumstances of the issuer or a related party. A qualified
inverse floating rate is a rate equal to a fixed rate minus a qualified floating
rate that inversely reflects contemporaneous variations in the cost of newly
borrowed funds; an inverse floating rate that is not a qualified floating rate
may nevertheless be an objective rate. A class of REMIC Regular Certificates may
be issued under this Prospectus that does not have a variable rate under the OID
Regulations, for example, a class that bears different rates at different times
during the period it is outstanding so that it is considered significantly
"front-loaded" or "back-loaded" within the meaning of the OID Regulations. It is
possible that a class of this type may be considered to bear "contingent
interest" within the meaning of the OID Regulations. The OID Regulations, as
they relate to the treatment of contingent interest, are by their terms not
applicable to REMIC Regular Certificates. However, if final regulations dealing
with contingent interest with respect to REMIC Regular Certificates apply the
same principles as the OID Regulations, those regulations may lead to different
timing of income inclusion than would be the case under the OID Regulations.
Furthermore, application of those principles could lead to the characterization
of gain on the sale of contingent interest REMIC Regular Certificates as
ordinary income. Investors should consult their tax advisors regarding the
appropriate treatment of any REMIC Regular Certificate that does not pay
interest at a fixed rate or variable rate as described in this paragraph.
Under the REMIC Regulations, a REMIC Regular Certificate (1) bearing a rate
that qualifies as a variable rate under the OID Regulations that is tied to
current values of a variable rate (or the highest, lowest or average of two or
more variable rates), including a rate based on the average cost of funds of one
or more financial institutions, or a positive or negative multiple of a rate
(plus or minus a specified number of basis points), or that represents a
weighted average of rates on some or all of the mortgage loans, including a rate
that is subject to one or more caps or floors, or (2) bearing one or more of
these variable rates for one or more periods or one or more fixed rates for one
or more periods, and a different variable rate or fixed rate for other periods
qualifies as a regular interest in a REMIC. Accordingly, unless otherwise
indicated in the applicable prospectus supplement, REMIC Regular Certificates
that qualify as regular interests under this rule will be treated in the same
manner as obligations bearing a variable rate for original issue discount
reporting purposes.
The amount of original issue discount with respect to a REMIC Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "-- Original Issue Discount" with the yield to maturity
and future payments on that REMIC Regular Certificate generally to be determined
by assuming that interest will be payable for the life of the REMIC Regular
Certificate based on the initial rate (or, if different, the value of the
applicable variable rate as of the pricing date) for the relevant class. Unless
otherwise specified in the applicable prospectus supplement, variable interest
will be treated as qualified stated interest, other than variable interest on an
interest-only class, which will be treated as non-qualified stated interest
includible in the stated redemption price at maturity. Ordinary income
reportable for any period will be adjusted based on subsequent changes in the
applicable interest rate index.
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Although unclear under the OID Regulations, unless required otherwise by
applicable final regulations, REMIC Regular Certificates bearing an interest
rate that is a weighted average of the net interest rates on mortgage loans
having fixed or adjustable rates, will be treated as having qualified stated
interest, except to the extent that initial "teaser" rates cause sufficiently
"back-loaded" interest to create more than de minimis original issue discount.
The yield on those REMIC Regular Certificates for purposes of accruing original
issue discount will be a hypothetical fixed rate based on the fixed rates, in
the case of fixed rate mortgage loans, and initial "teaser rates" followed by
fully indexed rates, in the case of adjustable rate mortgage loans. In the case
of adjustable rate mortgage loans, the applicable index used to compute interest
on the mortgage loans in effect on the pricing date (or possibly the issue date)
will be deemed to be in effect beginning with the period in which the first
weighted average adjustment date occurring after the issue date occurs.
Adjustments will be made in each accrual period either increasing or decreasing
the amount of ordinary income reportable to reflect the actual pass-through
interest rate on the REMIC Regular Certificates.
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 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, including de minimis market
discount discussed in the following paragraph. 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: (1) on the basis of a constant
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yield method, (2) 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 (3) 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 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.
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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 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 (a "REMIC Residual
Certificateholder") 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.
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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 (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, such Class's fair market value). 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.
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), but without regard to the de minimis
rule applicable to REMIC Regular Certificates. 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.
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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".
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
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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. In
general, the "excess inclusions" with respect to a REMIC Residual Certificate
for any calendar quarter will be the excess, if any, of (1) the daily portions
of REMIC taxable income allocable to such REMIC Residual Certificate over (2)
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 (1) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (2) will be treated as "unrelated business taxable income" to an
otherwise tax-exempt organization and (3) 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
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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.
In addition to these conditions for the transferor of a noneconomic
residual interest to be presumed not to have knowledge that the transferee would
be unwilling or unable to pay taxes due on its share of the taxable income of
the REMIC, recently proposed Treasury regulations (the "Proposed Regulations")
would add a third condition for the transferor to be presumed to lack such
knowledge. This third condition would require that the present value of the
anticipated tax liabilities associated with holding the noneconomic residual
interest not exceed the sum of:
(i) the present value of any consideration given to the transferee to
acquire the interest;
(ii) the present value of the expected future distributions on the
interest; and
(iii) the present value of the anticipated tax savings associated with
holding the interest as the REMIC generates losses.
For purposes of the computations under this third condition, the transferee is
assumed to pay tax at the highest rate of tax specified in Section 11(b)(1) of
the Code (currently 35%). Further, present values generally are computed using a
discount rate equal to the applicable Federal rate set forth in Section 1274(d)
of the Code compounded semiannually. However, a lower rate may be used if the
transferee can demonstrate that it regularly borrows, in the course of its trade
or business, substantial funds at such lower rate from unrelated third parties.
If adopted, the Proposed Regulations may apply to the transfer of a noneconomic
residual interest made as early as February 4, 2000 and thereafter.
Prior to purchasing a REMIC Residual Certificate, prospective purchasers
should consider the applicability and effect of the Proposed Regulations and
should consider the possibility that a purported transfer of such REMIC 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 acquired on or after January 4, 1995
will not be treated as a security and thus generally may not be marked to
market.
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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, (1) 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 (2) 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 (1) 3% of the excess of the
individual's adjusted gross income over such amount or (2) 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 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 20% for
property held for more than one year. 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 (1) 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 (2) 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
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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 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.
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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 (1) 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 (2) 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 (1) residual interests in
such entity are not held by disqualified organizations and (2) 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 such entity,
then a tax will be imposed on such entity equal to the product of (1) 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
(2) 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 (1) 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 (2) 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 (1) 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
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the Federal Home Loan Mortgage Corporation), (2) 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 (3) 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 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. 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.
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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. The New Regulations,
as described below, will change certain of the rules relating to certain
presumptions currently available relating to information reporting and backup
withholding. Non-U.S. Persons are urged to contact their own tax advisors
regarding the application to them of backup withholding and information
reporting.
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, any state or the District
of Columbia (including any entity treated as a corporation or partnership for
federal income tax purposes) 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 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.
The IRS has issued final regulations (the "New Regulations") which would
provide alternative methods of satisfying the beneficial ownership certification
requirement described above. The New Regulations will be
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effective January 1, 2001. Current withholding certificates remain valid until
the earlier of December 31, 2000 or the due date of expiration of the
certificate under the rules as currently in effect. The New Regulations would
require, in the case of Regular Certificates held by a foreign partnership, that
(x) the certification described above be provided by the partners rather than by
the foreign partnership and (y) the partnership provide certain information,
including a United States taxpayer identification number. A look-through rule
would apply in the case of tiered partnerships. Non-U.S. Persons should consult
their own tax advisors concerning the application of the certification
requirements in the New Regulations.
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 any
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 (1) "loans . . . secured by an interest in real property" within
the meaning of Section 7701(a)(19)(C)(v) of the Code; (2) "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) of the Code; and (3) "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.
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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)(B) 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 (1) 3% of the excess
of the individual's adjusted gross income over such amount or (2) 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 (1) a class of Grantor
Trust Strip Certificates is issued as part of the same series of Certificates or
(2) 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 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
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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 (1) the use of a reasonable
prepayment assumption in accruing original issue discount and (2) 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.
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
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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 regulations Section 1.1286-1, 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 (1) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (2) 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 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.
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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 (1) 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 (2) 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 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
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Loans should accrue, at the holder's option: (1) on the basis of a constant
yield method, (2) 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 (3) 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 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
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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 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.
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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 instruments 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 projected 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 and 20%
on long-term capital gains (generally, property held for more than one year). 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 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
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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 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.
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CERTAIN ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on retirement plans, and on certain
other employee benefit 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 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.
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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. Accordingly, even if such MBS included in a Trust Fund were deemed
to be assets of Plan investors, the mortgages underlying such MBS 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 Certificates if such MBS are included in the Trust Fund.
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 such 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.
The DOL has granted to certain underwriters administrative exemptions,
referred to herein as the "Exemptions", for certain mortgage-backed and
asset-backed certificates underwritten in whole or in part by the underwriters.
An Exemption might be applicable to the initial purchase, the holding, and the
subsequent resale by a Plan of certain certificates, such as the Offered
Certificates, underwritten by the underwriters, representing interests in
pass-through trusts that consist of certain receivables, loans and other
obligations, provided that the conditions and requirements of the Exemption are
satisfied. The loans described in the Exemptions include mortgage loans such as
the Mortgage Assets. However, it should be noted that in issuing the Exemptions,
the DOL may not have considered interests in pools of the exact nature as some
of the Offered Certificates. If all of the conditions of an Exemption are met,
whether or not a Plan's assets would be deemed to include an ownership interest
in the Mortgage Assets, the acquisition, holding and resale of the Offered
Certificates by Plans would be exempt from certain of the prohibited transaction
provisions of ERISA and the Code.
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 any of the Exemptions
solely because they (1) are subordinated to other Classes of Certificates in the
Trust and/or (2) 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 one 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.
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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, 1997, 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 Section 4975 of the Code on the
basis of a claim that the assets of an insurance company general account
constitute Plan Assets, unless (1) as otherwise provided by the Secretary of
Labor in the 401(c) Regulations to prevent avoidance of the regulations or (2)
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. The appropriate characterization of those Offered Certificates not
qualifying as "mortgage related securities" ("Non-SMMEA Certificates") under
various legal investment restrictions, and thus the ability of investors subject
to these restrictions to purchase such Offered Certificates, may be subject to
significant interpretive uncertainties. Accordingly, investors whose investment
authority is subject to legal restrictions should consult their own legal
advisors to determine whether and to what extent the Non-SMMEA Certificates
constitute legal investments for them.
Generally, only classes of Offered Certificates that (1) are rated in one
of the two highest rating categories by one or more Rating Agencies and (2) are
part of a series evidencing interests in a Trust Fund consisting of loans
originated by certain types of Originators specified in SMMEA and secured by
first liens on real estate, will be "mortgage related securities" for purposes
of SMMEA. Classes of Offered Certificates qualifying as "mortgage related
securities" will constitute legal investments for persons, trusts, corporations,
partnerships, associations, business trusts and business entities (including
depository institutions, insurance
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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. Under 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" (effective December 31, 1996) 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. Section 347 also provides that the enactment by a state of
any such legislative restrictions shall not affect the validity of any
contractual commitment to purchase, hold or invest in securities qualifying as
"mortgage related securities" solely by reason of Section 347 that was made, and
shall not require the sale or disposition of any securities acquired, prior to
the enactment of such state legislation. Accordingly, the investors affected by
any such state legislation, when and if enacted, will 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 in 12 C.F.R. sec. 1.5 concerning
"safety and soundness" and retention of credit information), 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. The National Credit Union
Administration ("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. The Office of Thrift Supervision (the "OTS") has issued Thrift
Bulletin 13a (December 1, 1998), "Management of Interest Rate Risk, Investment
Securities, and Derivative Activities," which thrift institutions subject to the
jurisdiction of the OTS should consider before investing in any of the Offered
Certificates.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities" (the "1998 Policy Statement") of
the Federal Financial Institutions Examination Council, which has been adopted
by the
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Board of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, the OCC and the OTS effective May 26, 1998, and by the NCUA
effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines which depository institutions must follow in managing risks
(including market, credit, liquidity, operational (transaction), and legal
risks) applicable to all securities (including mortgage pass-through securities
and mortgage-derivative products) used for investment purposes.
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 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 representations are 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 Banc of America
Securities LLC, 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.
97
<PAGE> 255
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 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 Banc of America Securities LLC in connection with
offers and sales related to market-making transactions in Offered Certificates
previously offered hereunder in transactions with respect to which Banc of
America Securities LLC acts as principal. Banc of America Securities LLC may
also act as agent in such transactions. Sales may be made at negotiated prices
determined at the time of sale.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Depositor and 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.
98
<PAGE> 256
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.
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.
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 in this Prospectus or in such Prospectus Supplement, 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.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that
contains reports, proxy and information statements, and other information that
has been filed electronically with the SEC. The Internet address is
http://www.sec.gov.
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 in this Prospectus since the date hereof or in such
Prospectus Supplement 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.
99
<PAGE> 257
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 in this Prospectus, 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 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 (1) 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 (2) 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
The Depositor hereby incorporates 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 in this Prospectus 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 Bank of America Corporate Center, Charlotte, North Carolina 28255, or by
telephone at (704) 386-2400.
100
<PAGE> 258
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
<S> <C>
1998 Policy Statement......... 96
401(c) Regulations............ 95
Accrual Certificates.......... 7
Accrued Certificate
Interest.................... 30
Act........................... 61
ADA........................... 65
ARM Loans..................... 21
Available Distribution
Amount...................... 30
Book-Entry Certificates....... 29
Call Risk..................... 12
Cash Flow Agreement........... 23
CERCLA........................ 61
Certificate Account........... 23
Certificate Balance........... 7
Certificate Owner............. 35
Certificateholder............. 36
Closing Date.................. 69
Code.......................... 66
Commercial Properties......... 18
Commission.................... 99
Committee Report.............. 69
Companion Class............... 32
Contingent Payment
Regulations................. 91
Contributions Tax............. 80
Controlled Amortization
Class....................... 32
Cooperatives.................. 18
CPR........................... 26
Credit Support................ 8
Crime Control Act............. 66
Cut-off Date.................. 31
Debt Service Coverage Ratio... 19
Definitive Certificates....... 29
Depositor..................... 18, 28
Determination Date............ 24, 30
Direct Participants........... 35
Distribution Date............. 7
Distribution Date Statement... 33
DOL........................... 93
DTC........................... 100
Due Dates..................... 20
Due Period.................... 24
Equity Participation.......... 21
ERISA......................... 93
Events of Default............. 49
Excess Funds.................. 28
Exchange Act.................. 100
Exemptions.................... 94
extension risk................ 12
FAMC.......................... 22
FHLMC......................... 22
FNMA.......................... 22
GNMA.......................... 22
Garn Act...................... 63
Grantor Trust Certificates.... 9
Grantor Trust Fractional
Interest Certificate........ 84
Grantor Trust Fund............ 67
Grantor Trust Strip
Certificate................. 84
Indirect Participants......... 35
Insurance and Condemnation
Proceeds.................... 42
IRS........................... 45, 67
Issue Premium................. 76
Letter of Credit Bank......... 54
Liquidation Proceeds.......... 42
Loan-to-Value Ratio........... 20
Lock-out Date................. 21
Lock-out Period............... 21
Mark-to-Market Regulations.... 78
Master Servicer............... 5
MBS........................... 18
MBS Administrator............. 5
MBS Agreement................. 22
MBS Issuer.................... 22
MBS Servicer.................. 22
MBS Trustee................... 22
Mortgages..................... 18
Mortgage Asset Seller......... 18
Mortgage Asset Pool........... 5
Mortgage Assets............... 18
Mortgage Loans................ 18
Mortgage Notes................ 18
Mortgage Rate................. 20
Mortgaged Properties.......... 18
Multifamily Properties........ 18
NCUA.......................... 96
Net Leases.................... 13, 20
Net Operating Income.......... 19
New Regulations............... 83
Non-SMMEA Certificates........ 95
Nonrecoverable Advance........ 32
Notional Amount............... 31
OCC........................... 96
OID Regulations............... 67
Offered Certificates.......... 29
Originator.................... 18
OTS........................... 96
Participants.................. 35
Parties in Interest........... 93
Pass-Through Rate............. 7
Percentage Interest........... 30
Permitted Investments......... 42
</TABLE>
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<PAGE> 259
<TABLE>
<S> <C>
Plan Asset Regulations........ 93
Plans......................... 93
Pooling and Servicing
Agreement................... 36
Prepayment Assumption......... 69
Prepayment Interest
Shortfall................... 24
Prepayment Period............. 33
Prepayment Premium............ 21
Prohibited Transactions Tax... 80
Prospectus Supplement......... cover
PTCE.......................... 94
PTCE 95-60.................... 94
Purchase Price................ 38
Rating Agency................. 9
RCRA.......................... 62
Record Date................... 30
Related Proceeds.............. 32
Relief Act.................... 66
REMIC......................... 67
REMIC Administrator........... 16
REMIC Certificates............ 67
REMIC Provisions.............. 67
REMIC Regular Certificates.... 9
REMIC Regulations............. 67
REMIC Residual
Certificateholder........... 74
REMIC Residual Certificates... 7, 9
REO Property.................. 40
RICO.......................... 66
Senior Certificates........... 6
Senior Liens.................. 18
SMMEA......................... 9
SPA........................... 26
Special Servicer.............. 5
stripped interest
certificates................ 6
stripped principal
certificates................ 6
Subordinate Certificates...... 6, 53
Sub-Servicer.................. 41
Sub-Servicing Agreement....... 41
Tax Exempt Investor........... 95
Tiered REMICs................. 68
Title V....................... 65
Trust Assets.................. 16
Trust Fund.................... 18
Trustee....................... 5
UBTI.......................... 95
UCC........................... 56
U.S. Person................... 83
Value......................... 20
Voting Rights................. 34
Warranting Party.............. 39
</TABLE>
102
<PAGE> 260
NOTES CONCERNING INFORMATION
PRESENTED IN THE ATTACHED
COMPUTER DISKETTE
[DISKETTE]
This diskette contains a spreadsheet file that can be put on a
user-specified hard drive or network drive. The file is "BACM2000_2.xls" The
file "BACM2000_2.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
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YOU SHOULD RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE CERTIFICATES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS AS OF ANY DATE OTHER THAN THE DATES STATED ON
THEIR RESPECTIVE COVERS.
DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
WHEN ACTING AS UNDERWRITERS OF THE CERTIFICATES AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THE CERTIFICATES
WILL DELIVER A PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS UNTIL
JANUARY 25, 2001.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Table of Contents......................... S-1
Important Notice About Information
Presented in this Prospectus Supplement
and the Accompanying Prospectus......... S-5
Executive Summary......................... S-6
Summary of Prospectus Supplement.......... S-9
Risk Factors.............................. S-19
Description of the Mortgage Pool.......... S-38
Servicing of the Mortgage Loans........... S-61
Description of the Certificates........... S-74
Yield and Maturity Considerations......... S-94
Use of Proceeds........................... S-102
Certain Federal Income Tax Consequences... S-102
Certain ERISA Considerations.............. S-104
Legal Investment.......................... S-107
Method of Distribution.................... S-108
Legal Matters............................. S-108
Ratings................................... S-109
Index of Principal Definitions............ S-111
Annex A................................... A-1
Annex B................................... B-1
Annex C................................... C-1
PROSPECTUS
Summary of Prospectus..................... 5
Risk Factors.............................. 10
Prospectus Supplement..................... 16
Description of the Trust Funds............ 18
Yield and Maturity Considerations......... 23
The Depositor............................. 28
Description of the Certificates........... 29
The Pooling and Servicing Agreements...... 36
Description of Credit Support............. 53
Certain Legal Aspects of Mortgage Loans... 55
Certain Federal Income Tax Consequences... 66
State and Other Tax Consequences.......... 92
Certain ERISA Considerations.............. 93
Legal Investment.......................... 95
Use of Proceeds........................... 97
Method of Distribution.................... 97
Legal Matters............................. 98
Financial Information..................... 99
Rating.................................... 99
Available Information..................... 99
Incorporation of Certain Information by
Reference............................... 100
Index of Principal Definitions............ 101
</TABLE>
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$804,473,831
(APPROXIMATE)
BANC OF AMERICA
COMMERCIAL MORTGAGE INC.
(FORMERLY KNOWN AS NATIONSLINK FUNDING CORPORATION)
DEPOSITOR
CLASS A-1, CLASS A-2,
CLASS X, CLASS B,
CLASS C, CLASS D,
CLASS E, CLASS F,
CLASS G AND CLASS H
BANC OF AMERICA
COMMERCIAL MORTGAGE INC.
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 2000-2
-------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------
BANC OF AMERICA
SECURITIES LLC
HYPOVEREINSBANK CAPITAL MARKETS
October 25, 2000
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