<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-31095
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME A FINAL PROSPECTUS
SUPPLEMENT AND THE RELATED PROSPECTUS IS DELIVERED. THIS PROSPECTUS SUPPLEMENT
AND THE RELATED PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
SUBJECT TO COMPLETION DATED FEBRUARY 20, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 20, 1998)
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
Depositor
$722,090,000(1)
Mortgage Pass-Through Certificates, Series 1998-C6
The Series 1998-C6 Mortgage Pass-Through Certificates (the "Certificates")
will include the following eight classes of Certificates, designated as the
Class A1, Class A2 and Class A3 Certificates (together, the "Class A
Certificates"), Class B, Class C, Class D, Class E and Class X Certificates
(the "Offered Certificates"). In addition to the Offered Certificates, the
Certificates will also include the Class F, Class G, Class H, Class NR, Class
R-I, Class R-II and Class R-III Certificates. Only the Offered Certificates
are offered hereby.
(Continued on the following page.)
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" AFTER THE SECTION CAPTIONED "SUMMARY OF PROSPECTUS
SUPPLEMENT" HEREIN AND AFTER THE SECTION CAPTIONED "SUMMARY OF PROSPECTUS" IN
THE PROSPECTUS BEFORE PURCHASING ANY OFFERED CERTIFICATES.
PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON
THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES DO NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE SELLER, THE MASTER SERVICER,
THE SPECIAL SERVICER, J.P. MORGAN & CO. INCORPORATED, THE TRUSTEE, THE
UNDERWRITER OR ANY OF THEIR AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR
THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY THE DEPOSITOR, THE SELLER, THE MASTER
SERVICER, THE SPECIAL SERVICER, J.P. MORGAN & CO. INCORPORATED, THE TRUSTEE,
THE UNDERWRITER OR ANY OF THEIR AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
- -----------------------------------------------------------------------------
INITIAL CLASS
BALANCE (1) PASS-THROUGH RATE (2)
- -----------------------------------------------------------------------------
Class A1 $100,000,000
- -----------------------------------------------------------------------------
Class A2 $222,000,000
- -----------------------------------------------------------------------------
Class A3 $247,650,000
- -----------------------------------------------------------------------------
Class B $ 48,139,000
- -----------------------------------------------------------------------------
Class C $ 40,116,000
- -----------------------------------------------------------------------------
Class D $ 48,139,000
- -----------------------------------------------------------------------------
Class E $ 16,046,000
- -----------------------------------------------------------------------------
Class X $ 0 Weighted Average Pass-Through Rate (3)(4)
- -----------------------------------------------------------------------------
(1) Subject to a permitted variance of plus or minus 1%.
(2) In addition to distributions of interest and principal, holders of the
Offered Certificates will be entitled to receive a portion of any
Prepayment Premiums as described herein.
(3) Based on the Notional Amount as described herein.
(4) The Pass-Through Rate for the Class X Certificates will be equal to the
weighted average of the Remittance Rates (as defined herein) on the
Mortgage Loans minus the weighted average of the Pass-Through Rates on
all other classes of Certificates.
There is currently no secondary market for the Offered Certificates. J.P.
Morgan Securities Inc. (the "Underwriter") currently expects to make a
secondary market in the Offered Certificates, but has no obligation to do so.
There can be no assurance that such a market will develop or, if it does
develop, that it will continue. See "Plan of Distribution" herein.
The Offered Certificates will be purchased by the Underwriter in the manner
described under "Plan of Distribution", from the Depositor and will be
offered by the Underwriter from time to time to the public in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. Proceeds to the Depositor from the sale of the Offered Certificates
will be % of the initial aggregate principal balance thereof, plus accrued
interest from March 1, 1998 (the "Cut-off Date"). The Seller will pay the
expenses of the Depositor in connection with the purchase of the Mortgage
Loans and the issuance of the Certificates.
The Offered Certificates are offered by the Underwriter when, as and if
issued and accepted by the Underwriter and subject to its right to reject
orders in whole or in part. It is expected that the Offered Certificates will
be delivered in book-entry form through the facilities of The Depository
Trust Company, Cedel Bank, societe anonyme and the Euroclear System on or
about March 10, 1998, against payment therefor in immediately available
funds.
J.P. MORGAN & CO.
February , 1998
<PAGE>
(Continued from preceding page.)
The Certificates will represent in the aggregate the entire beneficial
interest in a trust fund (the "Trust Fund") to be established by J.P. Morgan
Commercial Mortgage Finance Corp. (the "Depositor"). The Trust Fund will
consist primarily of a pool (the "Mortgage Pool") of fixed rate mortgage
loans with original terms to maturity of not more than 360 months (the
"Mortgage Loans") secured by first liens on a fee simple and/or leasehold
interest in multifamily, retail, office, hotel, industrial, nursing home and
congregate care, mobile home park and other commercial properties. The
Mortgage Loans sold by Morgan Guaranty Trust Company of New York (the
"Seller") were originated thereby or originated for purchase by the Seller
and acquired thereby prior to the Delivery Date (as defined herein).
Approximately 96.79% of the Mortgage Loans were originated by the Seller and
the remaining were originated by various other institutions (collectively
with the Seller, the "Originators"). On or prior to the Delivery Date, the
Seller will sell all the Mortgage Loans to the Depositor.
Distributions on the Certificates will be made, to the extent of available
funds, on the 15th day of each month or, if any such day is not a business
day, on the next succeeding business day, beginning in April 1998 (each, a
"Distribution Date"). As more fully described herein, distributions allocable
to interest, if any, on the Offered Certificates on each Distribution Date
will be based on the then applicable pass-through rate (the "Pass-Through
Rate") and the aggregate principal balance (the "Class Balance") (or the
Notional Amount in the case of the Class X Certificates) of such Class
outstanding immediately prior to such Distribution Date. The Pass-Through
Rate for the Class X Certificates will be variable and will be calculated as
set forth herein. The Pass-Through Rates for all other Offered Certificates
will be fixed at the rates set forth on the cover hereof. Distributions in
respect of principal, if any, of the Certificates will be made as described
herein under "Description of the Certificates--Distributions" and "--Priority
of Distributions" herein.
The Offered Certificates will evidence approximately an initial 90.0%, by
initial principal balance, undivided interest in the Trust Fund.
It is a condition of the issuance of the Class A1, Class A2 and Class A3
Certificates that they be rated "AAA" by Fitch IBCA, Inc. ("Fitch") and
Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's"). It is a condition of the issuance of the Class X
Certificates that they be rated "AAA" by Fitch. It is a condition of the
issuance of the Class B Certificates that they be rated not lower than "AA"
by Fitch and Standard & Poor's. It is a condition of the issuance of the
Class C Certificates that they be rated not lower than "A" by Fitch and
Standard & Poor's. It is a condition of the issuance of the Class D
Certificates that they be rated not lower than "BBB" by Fitch and Standard &
Poor's. It is a condition to the issuance of the Class E Certificates that
they be rated not lower than "BBB-" by Fitch and Standard & Poor's. The
ratings on the Class X Certificates do not address any prepayment or loss
scenarios with respect to the Mortgage Loans or the likelihood of receipt of
Prepayment Premiums. See "Rating" herein.
Dover House Capital, LLC will act as master servicer (in such capacity,
the "Master Servicer") of the Mortgage Loans. CRIIMI MAE Services Limited
Partnership will act as special servicer (the "Special Servicer" and together
with the Master Servicer, the "Servicers") of the Mortgage Loans. The
obligations of the Master Servicer and the Special Servicer with respect to
the Certificates will be limited to their contractual servicing obligations
and the obligation under certain circumstances to make P&I Advances (as
defined herein) to the Certificateholders. Either Servicer may purchase a
portion of the Class NR Certificates. See "Master Servicer and Special
Servicer" herein.
As described herein, three separate "real estate mortgage investment
conduit" ("REMIC") elections will be made in connection with the Trust Fund
for federal income tax purposes. The Certificates (other than the Class X,
Class R-I, Class R-II and Class R-III Certificates) and each component of the
Class X Certificates will constitute "regular interests" in REMIC III and the
Class R-I, Class R-II and Class R-III Certificates will constitute the sole
class of "residual interests" in the related REMIC. See "Certain Federal
Income Tax Consequences" herein and in the Prospectus.
The Offered Certificates initially will be represented by certificates
registered in the name of Cede & Co., as nominee of The Depository Trust
Company ("DTC"), as further described herein. The interests
ii
<PAGE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. JP MORGAN
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C6
[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.]
NEW YORK GEORGIA ARIZONA MICHIGAN
5 loans 5 loans 2 loans 5 loans
$55,928,364 $18,181,935 $5,856,259 $56,068,429
7.0% of total 2.3% of total 0.7% of total 7.0% of total
MASSACHUSETTS FLORIDA CALIFORNIA INDIANA
1 loan 10 loans 8 loans 4 loans
$2,933,913 $49,728,938 $121,608,341 $23,568,480
0.4% of total 6.2% of total 15.1% of total 2.9% of total
NEW JERSEY ALABAMA WASHINGTON OHIO
5 loans 1 loan 2 loans 7 loans
$76,811,013 $2,276,350 $6,184,973 $19,024,369
9.6% of total 0.3% of total 0.8% of total 2.4% of total
MARYLAND KENTUCKY UTAH PENNSYLVANIA
2 loans 1 loan 1 loan 1 loan
$7,140,566 $4,334,325 $3,559,007 $24,877,953
0.9% of total 0.5% of total 0.4% of total 3.1% of total
VIRGINIA TEXAS MINNESOTA HAWAII
5 loans 13 loans 1 loan 1 loan
$171,829,599 $37,384,080 $2,737,075 $27,510,828
21.4% of total 4.7% of total 0.3% of total 3.4% of total
NORTH CAROLINA COLORADO ILLINOIS
3 loans 1 loan 4 loans
$42,461,705 $1,797,475 $14,878,103
5.3% of total 0.2% of total 1.9% of total
TENNESSEE ALASKA WISCONSIN
1 loan 2 loans 2 loans
$2,392,280 $4,024,245 $19,227,907
0.3% of total 0.5% of total 2.4% of total
<PAGE>
[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.]
[PICTURES DEPICTING BUILDINGS FROM DIFFERENT AREAS OF THE UNITED STATES]
[PHOTO]
1065 AVENUE OF THE AMERICAS
New York, NY
[PHOTO]
KILROY AIRPORT CENTER
El Segundo, CA
[PHOTO]
CRYSTAL PLAZA APARTMENTS
Arlington, VA
[PHOTO]
HOECHST
Warren, NJ
[PHOTO]
CRYSTAL GATEWAY MARRIOTT
Arlington, VA
THE PHOTOGRAPHS OF THE MORTGAGED PROPERTIES INCLUDED IN THIS PROSPECTUS
SUPPLEMENT ARE NOT REPRESENTATIVE OF ALL THE MORTGAGED PROPERTIES INCLUDED IN
ANY POOL LOAN OR OF ANY PARTICULAR TYPE OF MORTGAGED PROPERTY.
<PAGE>
of beneficial owners of the Offered Certificates will be represented by book
entries on the records of participating members of DTC. Definitive
certificates will be available for the Offered Certificates only under the
limited circumstances described herein. See "Description of the
Certificates--Book-Entry Registration of the Offered Certificates" herein.
THE YIELD TO MATURITY ON THE OFFERED CERTIFICATES WILL DEPEND ON THE RATE
AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS, DEFAULTS AND
LIQUIDATIONS) AND THE COLLECTION AND ALLOCATION OF ANY PREPAYMENT PREMIUM (AS
DEFINED HEREIN) ON THE MORTGAGE LOANS. THE YIELD TO MATURITY ON EACH CLASS OF
OFFERED CERTIFICATES WILL BE SENSITIVE TO LOSSES DUE TO DEFAULTS ON THE
MORTGAGE LOANS (AND THE TIMING THEREOF), TO THE EXTENT THAT SUCH LOSSES ARE
NOT COVERED BY ANY CLASS OF CERTIFICATES HAVING A LOWER PAYMENT PRIORITY, AS
DESCRIBED HEREIN. THE YIELD TO INVESTORS ON THE CLASS X CERTIFICATES WILL BE
SENSITIVE TO THE RATE AND TIMING OF PREPAYMENTS, DEFAULTS AND LIQUIDATIONS ON
THE MORTGAGE LOANS. THE RATES OF PREPAYMENTS, DEFAULTS AND LIQUIDATIONS ON
THE MORTGAGE LOANS MAY FLUCTUATE SIGNIFICANTLY OVER TIME. AN EXTREMELY RAPID
RATE OF PREPAYMENTS, DEFAULTS AND LIQUIDATIONS ON THE MORTGAGE LOANS COULD
RESULT IN THE FAILURE OF INVESTORS IN THE CLASS X CERTIFICATES TO RECOVER
THEIR INITIAL INVESTMENTS. SEE "SUMMARY OF PROSPECTUS SUPPLEMENT--SPECIAL
YIELD CONSIDERATIONS", AND "CERTAIN PREPAYMENT, MATURITY AND YIELD
CONSIDERATIONS" HEREIN AND "YIELD CONSIDERATIONS" IN THE PROSPECTUS.
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE
OFFERING OF THE OFFERED CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN
THE PROSPECTUS, DATED FEBRUARY 20, 1998 AND ATTACHED HERETO. PURCHASERS ARE
URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL.
SALES OF THE CERTIFICATES OFFERED HEREBY MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus Supplement and the accompanying Prospectus and if given or made,
such information or representations must not be relied upon as having been
authorized by the Depositor or the Underwriter. This Prospectus Supplement
and the accompanying Prospectus shall not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction in which, or to any person to whom, it is unlawful to make such
offer or solicitation in such jurisdiction. The delivery of this Prospectus
Supplement and the accompanying Prospectus at any time does not imply that
the information herein or therein is correct as of any time subsequent to the
date hereof.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
iii
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Executive Summary ........................................................ S-1
Summary of Prospectus Supplement ......................................... S-2
Risk Factors ............................................................. S-17
Description of the Mortgage Pool ......................................... S-27
Description of the Certificates .......................................... S-61
Certain Prepayment, Maturity and Yield Considerations .................... S-70
Master Servicer and Special Servicer ..................................... S-75
Description of the Pooling and Servicing Agreement ....................... S-79
Use of Proceeds .......................................................... S-82
Certain Federal Income Tax Consequences .................................. S-82
State Tax Considerations ................................................. S-83
ERISA Considerations ..................................................... S-83
Legal Investment ......................................................... S-85
Plan of Distribution ..................................................... S-85
Legal Matters............................................................. S-85
Rating.................................................................... S-86
Index of Principal Terms.................................................. S-87
Annex A: Certain Characteristics of the Mortgage Loans .................. A-1
Annex B: Global Clearance, Settlement and Tax Documentation Procedures . B-1
PROSPECTUS
Prospectus Supplement .................................................... 3
Available Information .................................................... 3
Incorporation of Certain Information by Reference ........................ 5
Summary of Prospectus .................................................... 6
Risk Factors ............................................................. 14
Description of the Trust Funds ........................................... 22
Use of Proceeds .......................................................... 28
Yield Considerations ..................................................... 28
The Depositor ............................................................ 31
Description of the Certificates .......................................... 32
Description of the Agreements ............................................ 39
Description of Credit Support ............................................ 55
Certain Legal Aspects of Mortgage Loans and the Leases ................... 57
Certain Federal Income Tax Consequences .................................. 72
State Tax Considerations ................................................. 97
ERISA Considerations ..................................................... 97
Legal Investment ......................................................... 99
Plan of Distribution ..................................................... 100
Legal Matters ............................................................ 101
Financial Information .................................................... 101
Rating ................................................................... 101
Index of Principal Terms ................................................. 102
iv
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to read carefully, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and the accompanying Prospectus in making their investment
decision. The following Executive Summary does not include all relevant
information relating to the Offered Certificates or the Mortgage Loans,
particularly with respect to the risks and special considerations involved
with an investment in the Offered Certificates, and is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus. Prior to making any investment decision, a prospective investor
should review fully this Prospectus Supplement and the Prospectus.
Capitalized terms used and not otherwise defined herein have the respective
meanings assigned to them in this Prospectus.
<TABLE>
<CAPTION>
INITIAL
AGGREGATE
RATING BY CERTIFICATE WEIGHTED PRINCIPAL
FITCH/ PRINCIPAL % OF % CREDIT PASS-THROUGH AVERAGE LIFE(1) WINDOW(1)
CLASS S&P AMOUNT TOTAL SUPPORT DESCRIPTION RATE (YEARS) (MONTHS)
----- --- ------ ----- ------- ----------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Senior Offered Certificates
A1 AAA/AAA $100,000,000 12.46% 29.0% Fixed %
A2 AAA/AAA $222,000,000 27.67% 29.0% Fixed %
A3 AAA/AAA $247,650,000 30.87% 29.0% Fixed %
X AAA/NR $802,326,512(2) N/A N/A WAC (3) N/A N/A
Subordinate Offered Certificates
B AA/AA $ 48,139,000 6.00% 23.0% Fixed %
C A/A $ 40,116,000 5.00% 18.0% Fixed %
D BBB/BBB $ 48,139,000 6.00% 12.0% Fixed %
E BBB-/BBB- $ 16,046,000 2.00% 10.0% Fixed %
</TABLE>
- ------------
(1) Assumes no prepayments or defaults. See "Certain Prepayment, Maturity
and Yield Considerations -- Weighted Average Life of Offered
Certificates" herein.
(2) Notional Amount.
(3) Initial Pass-Through Rate on the Class X Certificates will be % per
annum.
S-1
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary
are defined elsewhere in this Prospectus. See "Index of Principal Terms"
herein and in the Prospectus.
Title of Certificates ......... Mortgage Pass-Through Certificates, Series
1998-C6 (the "Certificates").
Depositor ..................... J.P. Morgan Commercial Mortgage Finance
Corp., a Delaware corporation, an indirect
wholly-owned limited purpose finance
subsidiary of J.P. Morgan & Co. Incorporated
and an affiliate of the Underwriter. See
"The Depositor" in the Prospectus.
Seller ........................ Morgan Guaranty Trust Company of New York
("MGT" or the "Seller"). The Mortgage Loans
sold by the Seller were originated thereby
or originated for purchase by the Seller and
acquired thereby prior to the Delivery Date.
Approximately 96.79% of the Mortgage Loans
were originated by the Seller and the
remaining were originated by various other
institutions (collectively with the Seller,
the "Originators"). On or prior to the
Delivery Date, the Seller will sell all the
Mortgage Loans to the Depositor. The Seller
is an affiliate of the Depositor and of J.P.
Morgan Securities Inc., the Underwriter.
Originators ................... Eighty-one Mortgage Loans representing
approximately 96.79% of the Initial Pool
Balance were originated by Morgan Guaranty
Trust Company of New York, a New York
banking corporation and an affiliate of the
Depositor and the Underwriter; 9 Mortgage
Loans representing approximately 2.28% of
the Initial Pool Balance were originated by
Banc One Commercial Loan Origination
Corporation, an Ohio corporation; and 2
Mortgage Loans representing approximately
0.76% of the Initial Pool Balance were
originated by Norwest Bank Minnesota,
National Association, a national
association; and 1 Mortgage Loan
representing approximately 0.16% of the
Initial Pool Balance was originated by John
Hancock Real Estate Finance Inc., a Delaware
corporation.
Master Servicer ............... Dover House Capital, LLC ("Dover House"), a
Georgia limited liability company. Dover
House is a real estate financial services
company which provides commercial and
multifamily mortgage loan origination
services exclusively for MGT and provides
servicing and asset management services to
MGT and others on large pools of commercial
and multifamily mortgage loans. Dover House
provided loan origination services,
including loan underwriting, due diligence
and closing services, to MGT in connection
with the Mortgage Loans originated directly
by MGT. See "Master Servicer and Special
Servicer" herein.
S-2
<PAGE>
Special Servicer .............. CRIIMI MAE Services Limited Partnership, a
Maryland limited partnership. The Special
Servicer may be removed without cause under
certain circumstances described herein under
"Master Servicer and Special
Servicer--Responsibilities of Special
Servicer".
Trustee ....................... State Street Bank and Trust Company, a
Massachusetts trust company. See
"Description of the Pooling and Servicing
Agreement" herein.
Deal Information/Analytics .... It is anticipated that certain Mortgage Loan
and Certificate information will be
available from the following services:
Bloomberg, Charter Research and The Trepp
Group.
Cut-off Date .................. March 1, 1998.
Delivery Date ................. On or about March 10, 1998.
Distribution Dates ............ Distributions on 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, on the next succeeding
business day, beginning in April 1998 (each,
a "Distribution Date"), to the holders of
record as of the close of business on the
last business day of the month preceding the
month of each such distribution (each, a
"Record Date"). Notwithstanding the above,
the final distribution on any Certificate
(whether a global Certificate or Definitive
Certificate) will be made after due notice
by the Trustee of the pendency of such
distribution and only upon presentation and
surrender of such Certificates by the holder
of such Certificates (which could be DTC in
the case of a global Certificate) at the
location to be specified in such notice. See
"Registration of the Offered Certificates"
below.
Rated Final Distribution Date . The Distribution Date in January 2030, which
is the first Distribution Date following the
second anniversary of the date at which all
the Mortgage Loans have zero balances,
assuming no prepayments, delinquencies or
defaults, and that the Mortgage Loans which
are ARD Loans and Balloon Mortgage Loans
fully amortize according to their
amortization schedule (i.e., the ARD Loans
do not prepay in full on the related
Anticipated Repayment Date and no Balloon
Payment is made).
Registration of the Offered
Certificates ................. The Offered Certificates initially will be
issued in book-entry form. Persons acquiring
beneficial ownership interests in the
Offered Certificates (the
"Certificateholders") may elect to hold
their book-entry Certificate interests
either through The Depository Trust Company
("DTC"), in the United States, or through
Cedel Bank, societe anonyme ("CEDEL") or the
Euroclear System ("Euroclear"), in Europe.
Transfers within DTC, CEDEL or Euroclear, as
the case may be, will be in accordance with
the usual rules and operating procedures of
the
S-3
<PAGE>
relevant system. The Offered Certificates
(the "DTC Registered Certificates") will be
represented by one or more global
certificates registered in the name of Cede
& Co., as nominee of DTC. No person
acquiring an interest in the DTC Registered
Certificates (any such person, a "Beneficial
Owner") will be entitled to receive a
Certificate of such class in fully
registered, certificated form (a "Definitive
Certificate"), except under the limited
circumstances described herein under
"Description of the Certificates--Book-Entry
Registration of the Offered
Certificates--Definitive Certificates" and
in the Prospectus under "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates". Instead, DTC will
effect payments and transfers in respect of
the DTC Registered Certificates by means of
its electronic recordkeeping services,
acting through certain participating
organizations ("DTC Participants" and,
together with the CEDEL and Euroclear
participating organizations, the
"Participants"). This may result in certain
delays in receipt of payments by an investor
and may restrict an investor's ability to
pledge its securities. Unless and until
Definitive Certificates are issued, the
rights of Beneficial Owners may only be
exercised through DTC and its Participants
and will be subject to procedures
established thereby, except as otherwise
specified herein. See "Description of the
Certificates--General" herein, "Annex B"
hereto and "Description of the
Certificates--Book-Entry Registration of the
Offered Certificates" in the Prospectus.
Denominations ................. The DTC Registered Certificates will be
issuable on the book-entry records of DTC
and its Participants in denominations of
(except in the case of the Class X
Certificates) $25,000 and integral multiples
of $1 in excess thereof. The Class X
Certificates will be issuable in
denominations of $100,000 Notional Amount
and integral multiples of $1 Notional
Amount.
The Mortgage Pool ............. The Trust Fund will consist of a pool (the
"Mortgage Pool") of 93 fixed rate mortgage
loans (the "Mortgage Loans") secured by
first liens on fee simple and/or leasehold
interests in office, multifamily, retail,
hotel, industrial, nursing home and
congregate care, mobile home park and other
commercial properties (each a "Mortgaged
Property") located in 26 states. See
"Description of the Mortgage Pool--General".
The Mortgage Loans will be acquired by the
Depositor from the Seller on or before the
Delivery Date. See "Description of the
Mortgage Pool--Underwriting Guidelines and
Process" herein.
The Mortgage Loans will have an aggregate
principal balance as of the Cut-off Date of
approximately $802,326,512 (the "Initial Pool
Balance") and individual principal balances as
of the Cut-off Date of at least $989,930 but
not more than $82,869,076 with an average
principal balance of approximately $8,627,167.
The Mortgage Loans will have terms to maturity
from the Cut-off Date of not more than 120
months, with respect to
S-4
<PAGE>
67.71% of the Mortgage Loans, and more than
120 months but not more than 240 months, with
respect to 32.29% of the Mortgage Loans, in
each case, by Initial Pool Balance, and a
weighted average remaining term to the earlier
of maturity or Anticipated Repayment Date of
approximately 126 months as of the Cut-off
Date. The Mortgage Loans will bear interest at
Mortgage Interest Rates of at least 6.86% per
annum but not more than 9.85% per annum, with
a weighted average Mortgage Interest Rate of
approximately 7.79% per annum as of the
Cut-off Date. The Mortgage Loans provide for
scheduled payments of principal and/or
interest ("Monthly Payments") to be due on the
first day of each month (the "Due Date").
Seventy-six of the Mortgage Loans representing
approximately 57.58% of the aggregate
principal balance of the Mortgage Loans as of
the Cut-off Date provide for monthly payments
of principal based on an amortization schedule
longer, and in some cases significantly
longer, than the remaining term of such
Mortgage Loan (each, a "Balloon Mortgage
Loan"), thereby leaving a substantial
outstanding principal amount due and payable
(the "Balloon Payment") on its Maturity Date,
unless prepaid prior thereto.
Five of the Mortgage Loans representing
approximately 30.30% of the aggregate
principal balance of the Mortgage Loans as of
the Cut-off Date are "ARD Loans," which
provide that any Excess Cash Flow (as defined
herein) will be applied to pay any amounts
outstanding on such Mortgage Loan following
the applicable Anticipated Repayment Date
unless prepaid in full on or prior to such
date. See "Description of the Mortgage
Pool--Certain Terms and Conditions of the
Mortgage Loans; ARD Loans" herein.
Six Mortgage Loans, representing approximately
37.75% of the aggregate principal balance of
the Mortgage Loans as of the Cut-off Date,
provide that after a specified period, the
applicable Mortgagor may obtain the release of
the related Mortgaged Property from the lien
of the related Mortgage upon the pledge to the
Trustee of noncallable U.S. government
obligations.
Four Mortgage Loans representing approximately
21.41% of the aggregate principal balance of
the Mortgage Loans as of the Cut-off Date are
each secured by liens on multiple properties
(the "Pool Loans"). Four Mortgage Loans
representing approximately 1.14% of the
aggregate principal balance of the Mortgage
Loans as of the Cut-off Date are
cross-defaulted and cross-collateralized with
another Mortgage Loan (the "Crossed Loans"). A
default under one of the Mortgages that
secures a group of Crossed Loans or one or
more properties securing a Pool Loan will
result in a default under all of the Mortgages
securing such Mortgage Loan.
S-5
<PAGE>
Each Mortgage Loan, except as set forth below
with respect to ARD Loans, prohibits voluntary
prepayments during a certain number of years
following the origination thereof and/or
allows the borrower thereunder (the
"Mortgagor") to prepay the principal balance
thereof in whole or in part during a certain
number of years following the origination if
accompanied by payment of a premium (the
"Prepayment Premium"). ARD Loans do not
require the payment of a Prepayment Premium
after the related Anticipated Repayment Date.
See Annex A hereto, the table entitled
"Prepayment Protection" under "Description of
the Mortgage Pool--Certain Characteristics of
the Mortgage Loans" herein and the diskette
attached to the inside back cover of this
Prospectus (the "Diskette"). Any Prepayment
Premium collected on a Mortgage Loan will be
distributed to the holders of the Certificates
as described herein. See "Risk Factors--
Special Prepayment Considerations" below,
"Description of the Certificates--
Distributions--Interest Distributions on the
Certificates" and "Certain Prepayment,
Maturity and Yield Considerations" herein and
"Yield Considerations" in the Prospectus.
The Seller will make certain representations
to the Depositor, which will be assigned to
the Trustee under the Pooling and Servicing
Agreement (as defined herein), and will
covenant to cure any material breach of such
representations and warranties or to
repurchase any Mortgage Loan in which there
has been a breach of a representation or
warranty which materially and adversely
affects the interest of the Certificateholders
in such Mortgage Loan. The sole remedy
available to the Certificateholders or the
Trustee on behalf of the Certificateholders is
the obligation of the Seller to cure any such
breach or repurchase any such Mortgage Loan.
For a further description of the Mortgage
Loans, see "Description of the Mortgage
Pool" herein.
The Offered Certificates ...... The Certificates will be issued pursuant to
a pooling and servicing agreement, to be
dated as of the Cut-off Date, among the
Depositor, the Master Servicer, the Special
Servicer and the Trustee (the "Pooling and
Servicing Agreement"). Only the Class A1,
Class A2, Class A3, Class B, Class C, Class
D, Class E and Class X Certificates (the
"Offered Certificates") are offered hereby.
The Offered Certificates will have the
initial Class Balances set forth on the
cover hereof. The Class X Certificates will
not have a Class Balance.
Pass-Through Rates on the
Offered Certificates ......... The Pass-Through Rates on the Class A1,
Class A2, Class A3, Class B, Class C, Class
D and Class E Certificates are fixed and are
set forth on the cover hereof. The
Pass-Through Rate on the Class X
Certificates will be equal to the weighted
average of the Remittance Rates in effect
from time to time on the Mortgage Loans
minus the weighted average (by Class
Balance) of the
S-6
<PAGE>
Pass-Through Rates on all other classes of
Certificates. The Pass-Through Rate on the
Class X Certificates for the initial
Distribution Date will be % per annum.
Interest Distributions on the
Certificates ................. Subject to the distribution of the Principal
Distribution Amount to the Holders of classes
of Certificates of a higher priority as
described under "Priority of Distributions"
below, Holders of each class of Certificates
will be entitled to receive on each
Distribution Date in the order described
herein, to the extent of the Available
Distribution Amount (as defined herein) for
such Distribution Date net of any Net
Prepayment Premium (as defined herein) (the
"Adjusted Available Distribution Amount"),
distributions allocable to interest in an
amount (the "Interest Distribution Amount")
equal to the interest accrued during the
period from and including the first day of the
month preceding the month of the Distribution
Date (or from the Cut-off Date, in the case of
the initial Distribution Date) to and
including the last day of the month preceding
the month of the Distribution Date (based on a
360-day year consisting of twelve 30-day
months) on the related Class Balance (or
Notional Amount in the case of the Class X
Certificates) immediately prior to such
Distribution Date at the then-applicable
Pass-Through Rate (the "Interest Accrual
Amount"), plus any shortfall as described in
the last sentence of this paragraph, less such
class' pro rata share, according to the
Interest Accrual Amount for each such class
for the Distribution Date, of any interest
shortfall not related to a Mortgagor
delinquency or default, such as Prepayment
Interest Shortfalls to the extent not offset
as described herein, and shortfalls associated
with exemptions provided by the Relief Act (as
defined in the Prospectus), and less, with
respect to each class of Certificates other
than the Class X, any Collateral Value
Adjustment Capitalization Amount (as defined
herein) allocated to such class as described
under "--Subordination" below (and not
reversed) (the "Collateral Value Adjustment
Reduction Amount"). The Notional Amount of the
Class X Certificates will equal the aggregate
Class Balance of all the Certificates. The
Notional Amount does not entitle the Class X
Certificates to any distributions of
principal. If the Adjusted Available
Distribution Amount for any Distribution Date
is less than the Interest Distribution Amount
for such Distribution Date, the shortfall will
be part of the Interest Distribution Amount
distributable to holders of Offered
Certificates on subsequent Distribution Dates.
In addition to the related Interest
Distribution Amount, any Net Prepayment
Premium will be allocated between the Offered
Certificates and the Other Certificates, as
more fully described herein, to the extent not
necessary to reimburse the Master Servicer for
reductions in its compensation due to
Prepayment Interest Shortfalls. See "Risk
Factors--Special Prepayment Considerations"
below and "Description of the
Certificates--Distributions--Interest
Distributions on the Certificates" herein.
S-7
<PAGE>
The Available Distribution Amount for any
Distribution Date generally includes: (i)
scheduled payments on the Mortgage Loans due
on or prior to the related Due Date
immediately preceding, and collected as of,
the related Determination Date (to the extent
not distributed on previous Distribution
Dates) and unscheduled payments and other
collections on the Mortgage Loans collected
during the related Remittance Period, net of
amounts payable or reimbursable to the
Trustee, the Master Servicer or the Special
Servicer therefrom and (ii) any P&I Advances
made or deemed to be made by the Trustee, the
Master Servicer or the Special Servicer for
the related Distribution Date. The
"Determination Date" for any Distribution Date
is the fourth business day prior to the
related Distribution Date. The "Remittance
Period" for any Distribution Date is the
period beginning after a Determination Date in
the immediately preceding month (or the
Cut-off Date, in the case of the first
Remittance Period) through the related
Determination Date. See "Description of the
Certificates--Distributions--Interest
Distributions on the Certificates" herein.
Principal Distributions on the
Certificates ................. Holders of a class of Certificates will be
entitled to receive on each Distribution
Date in reduction of the related Class
Balance in the order described herein until
the related Class Balance is reduced to
zero, to the extent of the balance of the
Adjusted Available Distribution Amount
remaining after the payment of the Interest
Distribution Amount for such Distribution
Date for such class of Certificates and each
other class of Certificates with a higher
priority of payment for interest payments
(as described under "Priority of
Distributions" below) distributions in
respect of principal in an amount (the
"Principal Distribution Amount") equal to
the aggregate of (i) all scheduled payments
of principal (other than Balloon Payments)
due on the Mortgage Loans on the related Due
Date whether or not received and all
scheduled Balloon Payments received on or
before the related Determination Date, (ii)
if the scheduled Balloon Payment is not
received, with respect to any Balloon
Mortgage Loans on and after the Maturity
Date thereof, the principal payment that
would need to be received in the related
month in order to fully amortize such
Balloon Mortgage Loan with level monthly
payments by the end of the term used to
derive scheduled payments of principal due
prior to the related Maturity Date, (iii) to
the extent not previously advanced, any
unscheduled principal recoveries received
during the related Remittance Period in
respect of the Mortgage Loans, whether in
the form of liquidation proceeds, insurance
proceeds, condemnation proceeds or amounts
received as a result of the purchase of any
Mortgage Loan out of the Trust Fund to the
extent not required to be otherwise applied
pursuant to the terms of the related
Mortgage Loan and (iv) any other portion of
the Adjusted Available Distribution Amount
remaining undistributed after payment of any
interest payable on the
S-8
<PAGE>
Certificates, including any principal
prepayments and Prepayment Interest Excess
(as defined herein) not offset by any
Prepayment Interest Shortfall occurring
during the related Remittance Period or
otherwise required to reimburse the Master
Servicer, as described herein, and interest
distributions on the Mortgage Loans, in
excess of interest distributions on the
Certificates, resulting from the application
of the amounts described in this clause (iv)
to principal distributions on the
Certificates. See "Description of the
Certificates--Distributions--Principal
Distributions on the Offered Certificates"
herein. The Class X Certificates do not have
a Class Balance and are therefore not
entitled to any principal distributions.
Priority of Distributions ..... The Adjusted Available Distribution Amount
for any Distribution Date will be applied
(a) first, to distributions of interest to
the classes of Certificates outstanding with
highest priority for interest payment (as
described below), (b) second, to
distributions of the Principal Distribution
Amount to the classes of Certificates then
entitled to distributions of principal as
described below, and (c) third, to
distributions of interest on each class of
Certificates other than the classes
described in clause (a) above in the order
of priority described below; provided that
on any Distribution Date on which the Class
Balance of a class of Certificates is
reduced to zero pursuant to clause (b)
above, interest distributions pursuant to
clause (a) above will be made to the class
of Certificates outstanding with the next
highest priority for interest payments prior
to making distributions of the Principal
Distribution Amount thereto pursuant to
clause (b) above. The priority of interest
payments for purposes of clauses (a) and
(c), above is: first to distribution of
interest on the Class A1, Class A2, Class A3
and Class X Certificates, pro rata, based on
their respective Interest Distribution
Amounts; second, to the Class B
Certificates; third, to the Class C
Certificates; fourth, to the Class D
Certificates; fifth, to the Class E
Certificates, and then to the remaining
classes of interest-bearing certificates.
The Principal Distribution Amount for such
Distribution Date will be applied to the
payment of principal of the Class A1, Class
A2, Class A3, Class B, Class C, Class D and
Class E Certificates, in that order, and
then to the remaining classes of
principal-bearing Certificates, until their
respective Class Balances have been reduced
to zero. Any Net Prepayment Premium for any
Distribution Date will be distributed in the
manner described herein. See "Description of
the Certificates--Priority of Distributions"
and "--Subordination" herein.
P&I Advances .................. The Master Servicer and the Special Servicer
(together, the "Servicers") are required to
make advances for delinquent Monthly
Payments on the Mortgage Loans, including
any Specially Serviced Mortgage Loans ("P&I
Advances") and for certain other expenses
for the protection of the Mortgaged
S-9
<PAGE>
Properties, subject to the limitations
described herein. Neither Servicer will be
required to advance the full amount of any
Balloon Payment not made by the related
Mortgagor. To the extent a Servicer is
required to make a P&I Advance on and after
the Due Date for a Balloon Payment, such P&I
Advance shall not exceed an amount equal to
the monthly payment calculated by such
Servicer or the Trustee necessary to pay the
monthly interest and fully amortize the
related Mortgage Loan over the period used for
purposes of calculating the scheduled monthly
payments thereon prior to the related date on
which the Mortgage Loan becomes due (the
"Maturity Date"). To the extent that a
Servicer fails to make any P&I Advance
required of it, the Trustee shall make such
required P&I Advance to the extent the Trustee
reasonably believes such advance will be
recoverable, as provided in the Pooling and
Servicing Agreement. As more fully described
herein, if either Servicer or the Trustee
makes a P&I Advance (or any other advance) it
will be entitled to reimbursement thereof and
interest thereon at the prime rate determined
in accordance with the Pooling and Servicing
Agreement to the extent provided therein. See
"Description of the Certificates--Advances"
herein.
Other Certificates ............ The Class F, Class G, Class H, Class NR,
Class R-I, Class R-II and Class R-III
Certificates (the "Other Certificates") are
not offered hereby. The Pass-Through Rates
on the Class F, Class G, Class H and Class
NR Certificates for any Distribution Date
will equal %, %, % and %, respectively,
per annum. The aggregate Class Balance of
the Other Certificates will equal
$80,236,512. The Remittance Rate in effect
for any Mortgage Loan as of any date of
determination is equal to the excess of the
Mortgage Interest Rate thereon (without
giving effect to any modification or
reduction thereof following the Cut-off
Date) over the sum of the related Basic
Servicing Fee Rate (as defined herein) and
the fee payable to the Trustee. The Class
R-I, Class R-II and Class R-III Certificates
will not have a Pass-Through Rate or a Class
Balance.
Subordination ................. Neither the Offered Certificates nor the
Mortgage Loans are insured or guaranteed
against losses suffered on the Mortgage
Loans by any government agency or
instrumentality or by the Depositor, the
Seller, the Trustee, the Underwriter, the
Master Servicer, the Special Servicer or any
of their respective affiliates.
Realized Losses and Collateral Value
Adjustments (as defined herein) on the
Mortgage Loans will be allocated, first, to
the Class NR, Class H, Class G and Class F
Certificates, in that order, second, to the
Class E Certificates, third, to the Class D
Certificates, fourth, to the Class C
Certificates, fifth, to the Class B
Certificates, and thereafter, to the Class
A1, Class A2 and Class A3 Certificates, on a
pro rata basis, based on Class Balance, in
each case until the related Class Balance is
reduced to zero. Any allocation of a
Realized Loss or a Collateral Value
S-10
<PAGE>
Adjustment to a class of Certificates will
result in a reduction of the related Class
Balance. Any allocation of a Realized Loss
to a class of Certificates will result in a
reduction of the Notional Amount of the
Class X Certificates. Interest accrued for
any Distribution Date on any Collateral
Value Adjustment or Collateral Value
Adjustment Capitalization Amount allocated
to the Class Balance of any class of
Certificates will not be distributed to such
class on such Distribution Date as interest
and will be added to the Class Balance
thereof. Interest distributions on the Class
X Certificates will not be affected by
Collateral Value Adjustments. Under certain
circumstances, a Collateral Value Adjustment
may be reversed. Such reversal will reduce
the accrual of the Collateral Value
Adjustment Capitalization Amount and
therefore, the amount otherwise available to
make distributions of principal on the more
senior classes of Certificates. In addition,
the Adjusted Available Distribution Amount
will be applied in the order set forth under
"Priority of Distributions" above.
Optional Termination .......... At its option, any holder of a Class R-I
Certificate, the holders of any aggregate
Percentage Interest in excess of 50% of the
Most Subordinate Class of Certificates (as
defined herein), the Master Servicer and (to
the extent all of the remaining Mortgage
Loans are being serviced by the Special
Servicer) the Special Servicer (in that
order) may purchase all of the Mortgage
Loans, at the price set forth under
"Description of the Pooling and Servicing
Agreement--Termination", and thereby effect
termination of the Trust Fund and early
retirement of the then outstanding
Certificates, on any Distribution Date on
which the aggregate Stated Principal Balance
(as defined herein) of the Mortgage Loans
remaining in the Trust Fund is less than 1%
of the aggregate principal balance of the
Mortgage Loans as of the Cut-off Date. See
"Description of the Pooling and Servicing
Agreement--Termination" herein and
"Description of the
Certificates--Termination" in the
Prospectus.
Special Principal Payment
Considerations ............... The rate and timing of principal payments,
if any, on the Offered Certificates will
depend, among other things, on the rate and
timing of principal payments (including
prepayments, defaults, liquidations and
purchases of Mortgage Loans due to a breach
of a representation and warranty) on the
Mortgage Loans. As described herein, certain
of the Mortgage Loans are in the related
Prepayment Premium Period and, if certain
voluntary prepayments are made, a Prepayment
Premium will be required to be paid during
such period. See "The Mortgage Pool" above
and "Description of the Mortgage Pool"
herein.
All classes of Offered Certificates entitled
to payments of principal are subject to
priorities for payment of principal as
described herein. Distributions of principal
on classes having an earlier priority of
payment will be directly affected by the
rates
S-11
<PAGE>
of prepayments of the Mortgage Loans. The
timing of commencement of principal
distributions and the weighted average lives
of classes of Certificates with a later
priority of payment will be affected by the
rates of prepayments experienced both before
and after the commencement of principal
distributions on such classes.
In addition, a portion of collections on the
Mortgage Loans in excess of scheduled and
unscheduled principal distributions, which
generally will be limited to interest
distributions not payable on a class of
Certificates as a result of a Collateral
Value Adjustment, will be allocated to the
classes of Certificates then entitled to
distributions of principal. Any such
allocation may result in a faster
amortization of such class of Certificates.
Special Yield Considerations .. The yield to maturity on each class of the
Offered Certificates will depend, among
other things, on the rate and timing of
principal payments (including prepayments,
defaults, liquidations and purchases of
Mortgage Loans due to breaches of
representations and warranties) and the
collection and allocation of any Prepayment
Premium on the Mortgage Loans and the
allocation thereof to reduce the Class
Balance or Notional Amount. The yield to
maturity on each class of the Offered
Certificates will also depend on the
Pass-Through Rate and the purchase price for
each such Certificate. The yield to
investors on any class of Offered
Certificates will be adversely affected by
any allocation thereto of Prepayment
Interest Shortfalls on the Mortgage Loans,
which may result from the distribution of
interest only to the date of a prepayment
occurring during any month following the
related Determination Date (rather than a
full month's interest). See "Description of
the Certificates--Distributions--Interest
Distributions on the Certificates" herein.
In general, if a class of Offered
Certificates is purchased at a premium and
principal distributions thereon occur at a
rate faster than anticipated at the time of
purchase, the investor's actual yield to
maturity will be lower than that assumed at
the time of purchase. Conversely, if a class
of Offered Certificates is purchased at a
discount and principal distributions thereon
occur at a rate slower than that assumed at
the time of purchase, the investor's actual
yield to maturity will be lower than that
assumed at the time of purchase.
The yield to investors on the Class X
Certificates will be sensitive to the rate
and timing of prepayments, defaults and
liquidations on the Mortgage Loans. The rate
of such prepayments, defaults and
liquidations on the Mortgage Loans may
fluctuate significantly over time. A
significantly faster than expected rate of
such prepayments, defaults and liquidations
on the Mortgage Pool will have a negative
effect on the yield to such investors and
could result in the failure of investors in
the Class X Certificates to recover their
initial investments. In addition, because
holders of the Class X Certificates have
rights
S-12
<PAGE>
to relatively larger portions of interest
payments on Mortgage Loans with higher
Mortgage Interest Rates than on Mortgage
Loans with lower Mortgage Interest Rates,
and because Mortgage Loans with higher
Mortgage Interest Rates are generally likely
to prepay at a faster rate than Mortgage
Loans with lower Mortgage Interest Rates,
the yield on the Class X Certificates will
be materially and adversely affected to a
greater extent than the yields on other
Offered Certificates if the Mortgage Loans
with higher Mortgage Interest Rates prepay
faster than the Mortgage Loans with lower
Mortgage Interest Rates. See "Certain
Prepayment, Maturity and Yield
Considerations," especially "--Class X
Certificate Yield Considerations" herein.
The sequential class structure of the
Offered Certificates causes the yield of
certain classes to be particularly sensitive
to changes in the rates of principal
payments (including prepayments, defaults,
liquidations and purchases of Mortgage Loans
due to a breach of a representation and
warranty) of the Mortgage Loans and other
factors.
The yield to investors on any of the
Certificates will be sensitive to losses due
to defaults on the Mortgage Loans (and the
timing thereof), because the amount of such
losses will be allocable to such class to
the extent such losses are not allocated to
a subordinate class of Certificates, as
described herein. Furthermore, as described
herein, the timing of receipt of principal
and interest by any such class of
Certificates may be adversely affected by
losses even if such class does not
ultimately bear such loss.
If a Servicer or the Trustee makes an
advance, it will be entitled to interest
thereon at the Prime Rate determined in
accordance with the Pooling and Servicing
Agreement to the extent provided therein.
Therefore, losses may be allocated to a
class of Offered Certificates with respect
to any delinquent Monthly Payment and
certain other expenses advanced by a
Servicer or the Trustee.
The Special Servicer will be entitled to
receive compensation in the form of a
percentage of the outstanding principal
balance of each Mortgage Loan and an
additional amount equal to a percentage of
the outstanding principal balance of any
Mortgage Loan which is being serviced by the
Special Servicer (a "Specially Serviced
Mortgage Loan") prior to the right of
Certificateholders to receive distributions
on the Certificates. Such additional
compensation with respect to the Specially
Serviced Mortgage Loans will result in
shortfalls which will be allocated to the
classes of Certificates with the lowest
payment priority for purposes of application
of the Adjusted Available Distribution
Amount in the order described herein. See
"Master Servicer and Special
Servicer--Servicing and Other Compensation
and Payment of Expenses" herein.
See "Certain Prepayment, Maturity and Yield
Considerations" herein and "Yield
Considerations" in the Prospectus.
S-13
<PAGE>
Certain Federal Income Tax
Consequences ................. Three separate real estate mortgage
investment conduit ("REMIC") elections will
be made with respect to the Trust Fund for
federal income tax purposes. Upon the
issuance of the Offered Certificates, Brown
& Wood llp, counsel to the Depositor, will
deliver its opinion generally to the effect
that, assuming compliance with all
provisions of the Pooling and Servicing
Agreement, for federal income tax purposes,
REMIC I, REMIC II and REMIC III (each as
defined in the Pooling and Servicing
Agreement) will each qualify as a REMIC
under Sections 860A through 860G of the
Internal Revenue Code of 1986, as amended
(the "Code").
For federal income tax purposes, the Class
R-I Certificates will be the sole class of
"residual interests" in REMIC I, the Class
R-II Certificates will be the sole class of
"residual interests" in REMIC II, and the
Class R-III Certificates will be the sole
class of "residual interests" in REMIC III.
The Offered Certificates (other than the
Class X Certificates), the Other
Certificates (other than the Class R-I,
Class R-II and Class R-III Certificates) and
each component of the Class X Certificates
will be "regular interests" of REMIC III and
will generally be treated as debt
instruments of REMIC III.
The Class X Certificates will, and the other
Offered Certificates may, be treated as
having been issued with original issue
discount for federal income tax purposes.
For further information regarding the
federal income tax consequences of investing
in the Offered Certificates, see "Certain
Federal Income Tax Consequences" herein and
in the Prospectus.
ERISA Considerations .......... A fiduciary of any employee benefit plan or
other retirement arrangement subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975
of the Code should review carefully with its
legal advisors whether the purchase or
holding of any class 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 to an
investment therein. The U.S. Department of
Labor has issued an individual exemption,
Prohibited Transaction Exemption 90-23, to
J.P. Morgan Securities Inc., that generally
exempts from the application of certain of
the prohibited transaction provisions of
Section 406 of ERISA, and the excise taxes
imposed on such prohibited transactions by
Section 4975(a) and (b) of the Code and
Section 502(i) of ERISA, transactions
relating to the purchase, sale and holding
of pass-through certificates purchased and
sold by J.P. Morgan Securities Inc., such as
the Class A1, Class A2, Class A3 and Class X
Certificates and the servicing and operation
of asset pools, provided that certain
conditions are satisfied. Purchasers
S-14
<PAGE>
using insurance company general account
funds to effect such purchase should
consider the availability of Prohibited
Transaction Class Exemption 95-60 (60 Fed.
Reg. 35925, July 12, 1995) issued by the
U.S. Department of Labor. See "ERISA
Considerations" herein and in the
Prospectus.
Rating ........................ It is a condition of the issuance of the
Class A1, Class A2 and Class A3 Certificates
that they be rated "AAA" by Fitch IBCA, Inc.
("Fitch") and Standard & Poor's Ratings
Group, a division of the McGraw-Hill
Companies, Inc. ("Standard & Poor's"). It is
a condition of the issuance of the Class X
Certificates that they be rated "AAA" by
Fitch. It is a condition of the issuance of
the Class B Certificates that they be rated
not lower than "AA" by Fitch and Standard &
Poor's. It is a condition of the issuance of
the Class C Certificates that they be rated
not lower than "A" by Fitch and Standard &
Poor's. It is a condition of the issuance of
the Class D Certificates that they be rated
not lower than "BBB" by Fitch and Standard &
Poor's. It is a condition of the issuance of
the Class E Certificates that they be rated
not lower than "BBB-" by Fitch and Standard
& Poor's. See "Rating" herein. 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. A rating on
mortgage pass-through certificates addresses
the likelihood of the receipt of
distributions of principal and interest to
which Certificateholders are entitled,
including payment of all principal on the
Certificates by the Rated Final Distribution
Date. The ratings on the Offered
Certificates do not represent any assessment
of (i) the likelihood or frequency of
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 and is not a
recommendation to buy, sell or hold
securities and may be subject to downgrade,
qualification or withdrawal at any time by
the assigning rating agency. A rating of any
of the Class X Certificates does not address
the possibility that the holders of such
Certificates may fail to recover fully their
initial investments due to a rapid rate of
prepayments, defaults or liquidations. In
general, the ratings thus address credit
risk and not prepayment risk. See "Certain
Prepayment, Maturity and Yield
Considerations" herein, "Risk Factors", and
"Rating" herein and in the Prospectus and
"Yield Considerations" in the Prospectus.
Legal Investment .............. The Class A1, Class A2, Class A3, Class B
and Class X Certificates will be "mortgage
related securities" within the meaning of
the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA") so long as they are
rated in one of the two highest rating
categories by at least one nationally
recognized statistical rating organization.
The Class C, Class D and Class E
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Certificates will not be "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 any Class of Offered Certificates,
may be subject to significant interpretative
uncertainties.
In addition, institutions whose investment
activities are subject to review by certain
regulatory authorities may be or may become
subject to restrictions, which may be
retroactively imposed by such regulatory
authorities, on the investment by such
institutions in certain forms of
mortgage-backed securities. Furthermore,
certain states have enacted legislation
overriding the legal investment provisions
of SMMEA. Accordingly, investors should
consult their own legal advisors to
determine whether and to what extent the
Offered Certificates constitute legal
investments for them. See "Legal Investment"
herein and in the Prospectus.
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RISK FACTORS
Prospective purchasers of the Offered Certificates should consider, among
other things, the following risk factors (as well as the risk factors set
forth under "Risk Factors" in the Prospectus) in connection with an
investment in the Offered Certificates.
Special Prepayment Considerations. The rate and timing of principal
payments on the Offered Certificates will depend, among other things, on the
rate and timing of principal payments (including prepayments, defaults,
liquidations and purchases of Mortgage Loans due to a breach of
representation and warranty) on the Mortgage Loans. The rate at which
principal payments occur on the Mortgage Pool will be affected by a variety
of factors, including, without limitation, the terms of the Mortgage Loans,
the level of prevailing interest rates, the availability of mortgage credit
and economic, demographic, geographic, tax, legal and other factors. In
general, however, if prevailing interest rates fall significantly below the
Mortgage Interest Rates on the Mortgage Loans, such Mortgage Loans are likely
to be the subject of higher principal prepayments than if prevailing rates
remain at or above the rates borne by such Mortgage Loans. The rate of
principal payments on the Offered Certificates will correspond to the rate of
principal payments on the Mortgage Loans and may be affected by the
Prepayment Premium provisions applicable to the Mortgage Loans and by the
extent to which a Servicer is able to enforce such provisions. Mortgage Loans
with a Prepayment Premium provision, to the extent enforceable, generally
would be expected to experience a lower rate of principal prepayments than
otherwise identical mortgage loans without such provisions. See "Description
of the Mortgage Pool," "Description of the Certificates--Distributions--
Priority of Distributions" and "Certain Prepayment, Maturity and Yield
Considerations" herein and "Yield Considerations" in the Prospectus.
Special Yield Considerations. The yield to maturity on each class of the
Offered Certificates will depend, among other things, on the rate and timing
of principal payments (including prepayments, defaults, liquidations and
purchases of Mortgage Loans due to a breach of representation and warranty)
and the collection and allocation of any Prepayment Premium on the Mortgage
Loans and the allocation thereof to reduce the Class Balance of such class.
Mortgage Loans with higher Mortgage Interest Rates will have higher
Remittance Rates, and therefore, the yield on the Class X Certificates could
be adversely affected if Mortgage Loans with higher Mortgage Interest Rates
pay faster than the Mortgage Loans with lower Mortgage Interest Rates. The
yield to investors on the Offered Certificates will be adversely affected by
any allocation thereto of interest shortfalls on the Mortgage Loans, such as
Prepayment Interest Shortfalls. Neither the Certificates nor the Mortgage
Loans are guaranteed by any governmental entity or instrumentality or any
other entity.
In general, if a Certificate is purchased at a premium and principal
distributions thereon occur at a rate faster than anticipated at the time of
purchase, the investor's actual yield to maturity will be lower than that
assumed at the time of purchase and, in the case of the Class X Certificates,
could result in the failure of investors in the Class X Certificates to
recover their initial investment. Conversely, if a Certificate is purchased
at a discount and principal distributions thereon occur at a rate slower than
that assumed at the time of purchase, the investor's actual yield to maturity
will be lower than assumed at the time of purchase. See "Certain Prepayment,
Maturity and Yield Considerations" herein and "Yield Considerations" in the
Prospectus.
Risks Associated with Commercial Mortgage Loans. The Mortgage Loans are
secured by an interest in office, multifamily, retail, hotel, industrial,
nursing home and congregate care, mobile home park and other commercial
properties. All the Mortgage Loans are nonrecourse loans. See "--Nonrecourse
Mortgage Loans" below. Due to the nonrecourse nature of the Mortgage Loans,
the repayment of loans secured by income producing properties is solely
dependent upon the successful operation of the related property. If the cash
flow from the property is reduced (for example, if leases are not obtained or
renewed), the Mortgagor's ability to repay the loan may be impaired.
Commercial and multifamily real estate can be affected significantly by the
supply and demand in the market for the type of property securing the loan
and, therefore, may be subject to adverse economic conditions. Market values
may vary as a result of economic events or governmental regulations outside
the control of the Mortgagor or lender, such as rent control laws in the case
of multifamily mortgage loans, which impact the future cash flow of
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the property. Historical operating results of the Mortgaged Properties may
not be indicative of future operating results. In addition, other factors may
adversely affect the Mortgaged Properties' value without affecting the
current net operating income, including changes in governmental regulations,
zoning or tax laws; potential environmental or other legal liabilities; the
availability of refinancing; and changes in interest rate levels.
The successful operation of a real estate project is also dependent on the
performance and viability of the property manager of such project. The
property manager is responsible for responding to changes in the local
market, planning and implementing the rental structure, including
establishing appropriate rental rates, and advising the Mortgagors so that
maintenance and capital improvements can be carried out in a timely fashion.
There is no assurance regarding the performance of any operators and/or
managers or persons who may become operators and/or managers upon the
expiration or termination of leases or management agreements or following any
default or foreclosure under a Mortgage Loan.
Mortgaged Properties may become unprofitable due to competition, age of
the improvements, decreased demand, zoning restrictions or other factors. The
net operating income of the Mortgaged Properties may decline over time, which
would adversely impact the ability of the Mortgagor to satisfy its payment
obligations under the related Mortgage Loan. Certain types of Mortgaged
Properties are not readily convertible to alternative uses.
An appraisal of each of the Mortgaged Properties was made between October
1995 and November 1997. It is possible that the market value of a Mortgaged
Property securing a Mortgage Loan has declined since the most recent
appraisal for such Mortgaged Property.
The value of the Mortgaged Properties may decline over time which could
adversely impact the ability of a Mortgagor to refinance the related Mortgage
Loan and the recovery value of such Mortgage Loan in default.
Commercial and multifamily property values and net operating income are
subject to volatility. The net operating income and value of the Mortgaged
Properties may be adversely affected by a number of factors, including but
not limited to national, regional and local economic conditions (which may be
adversely impacted by plant closings, industry slowdowns and other factors);
local real estate conditions (such as an oversupply of housing, retail,
industrial or office space); changes or continued weakness in certain
industries; perceptions by prospective tenants and their customers and, in
the case of retail properties, retailers and shoppers, of the safety,
convenience, services and attractiveness of the property; the willingness and
ability of the property's owner to provide capable management and adequate
maintenance; construction quality, age and design; demographic factors;
retroactive changes to building or similar codes; and increases in operating
expenses (such as energy costs).
The Mortgage Loans secured by office, multifamily, retail, hotel,
industrial, nursing home and congregate care, mobile home park or other
commercial properties represent approximately 32.71%, 23.62%, 18.13%, 14.91%,
6.88%, 1.81%, 1.10% and 0.84%, of the Mortgage Loans, respectively, as of the
Cut-off Date by aggregate principal balance.
Risks Associated with Hotel Properties. Eleven of the Mortgage Loans
representing 14.91% of the aggregate principal balance of the Mortgage Loans
as of the Cut-off Date are secured by hotel properties. Like any income
producing property, the income generated by a hotel property is subject to
several factors such as local, regional and national economic conditions and
competition. However, because such income is primarily generated by room
occupancy and such occupancy is usually for short periods of time, the level
of such income may respond more quickly to conditions such as those described
above. Sensitivity to competition may require more frequent improvements and
renovations than other properties. To the extent a hotel is affiliated to, or
associated with, a regional, national or international chain, changes in the
public perception of such chain may have an impact on the income generated by
the related property. Finally, the hotel industry is generally seasonal. This
will result in regular fluctuations in the income generated by hotel
properties.
Risks Associated with Nursing Homes and Congregate Care. Three of the
Mortgage Loans representing 1.81% of the aggregate principal balance of the
Mortgage Loans as of the Cut-off Date are
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<PAGE>
secured by residential health care facilities. Mortgage Loans secured by
liens on residential health care facilities pose risks not associated with
loans secured by liens on other types of income-producing real estate.
Providers of long-term nursing care, assisted living and other medical
services are subject to federal and state laws that relate to the adequacy of
medical care, distribution of pharmaceuticals, rate setting, equipment,
personnel, operating policies and additions to facilities and services and to
the reimbursement policies of government programs and private insurers. The
failure of any of the Mortgagors to maintain or renew any required license or
regulatory approval could prevent it from continuing operations (in which
case no revenues would be received from the related Mortgaged Property or the
portion thereof requiring licensing) or, if applicable, bar it from
participation in certain reimbursement programs. Furthermore, in the event of
foreclosure, there can be no assurance that the Trustee or any other
purchaser at a foreclosure sale would be entitled to the rights under such
licenses and such party may have to apply in its own right for such a
license. There can be no assurance that a new license could be obtained. In
addition, to the extent any nursing home receives a significant portion of
its revenues from government reimbursement programs, primarily Medicaid and
Medicare, such revenue may be subject to statutory and regulatory changes,
retroactive rate adjustments, administrative rulings, policy interpretations,
delays by fiscal intermediaries and government funding restrictions.
Moreover, governmental payors have employed cost-containment measures that
limit payments to health care providers, and there are currently under
consideration various proposals that could materially change or curtail those
payments. Accordingly, there can be no assurances that payments under
government programs will, in the future, be sufficient to fully reimburse the
cost of caring for program beneficiaries. If not, net operating income of the
Mortgaged Properties that receive substantial revenues from those sources,
and consequently, the ability of the related Mortgagors to meet their
Mortgage Loan obligations, could be adversely affected. Under applicable
federal and state laws and regulations, including those that govern Medicare
and Medicaid programs, only the provider who actually furnished the related
medical goods and services may sue for or enforce its rights to
reimbursement. Accordingly, in the event of foreclosure, none of the Trustee,
the Master Servicer, the Special Servicer or a subsequent lessee or operator
of the property would generally be entitled to obtain from federal or state
governments any outstanding reimbursement payments relating to services
furnished at the respective properties prior to such foreclosure.
Tenant Credit Risk. Income from and the market value of retail, office and
industrial Mortgaged Properties would be adversely affected if space in the
Mortgaged Properties could not be leased, if tenants were unable to meet
their lease obligations, if a significant tenant were to become a debtor in a
bankruptcy case under any bankruptcy or other similar law related to debtors
rights or if for any other reason rental payments could not be collected. If
tenant sales in the Mortgaged Properties that contain retail space were to
decline, rents based upon such sales would decline and tenants may be unable
to pay their rent or other occupancy costs. Upon the occurrence of an event
of default by a tenant, delays and costs in enforcing the lessor's rights
could be experienced. Repayment of the Mortgage Loans will be affected by the
expiration of space leases and the ability of the respective Mortgagors to
renew the leases or relet the space on comparable terms. Even if vacated
space is successfully relet, the costs associated with reletting, including
tenant improvements, leasing commissions and free rent, could exceed the
amount of any reserves maintained for such purpose and could reduce cash flow
from the Mortgaged Properties. Although many of the Mortgage Loans require
the Mortgagor to maintain escrows for such expenses, there can be no
assurance that such factors will not adversely affect the ability of a
Mortgagor to repay a Mortgage Loan.
Nonrecourse Mortgage Loans. Each Mortgage Loan is a nonrecourse loan as to
which, in the event of a default under such Mortgage Loan, recourse generally
may be had only against the related Mortgaged Property. Consequently, payment
of each such Mortgage Loan prior to maturity is dependent primarily on the
sufficiency of the net operating income of the related Mortgaged Property,
and at maturity (whether at scheduled maturity or in the event of a default,
upon the acceleration of such maturity after default), upon the then market
value of the related Mortgaged Property, or the ability to refinance such
Mortgage Loan.
Concentration of Mortgage Loans. The average principal balance of the
Mortgage Loans as of the Cut-off Date is approximately $8,627,167, which is
equal to approximately 1.08% of the Initial Pool Balance.
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<PAGE>
A mortgage pool consisting of fewer loans each having a relatively higher
outstanding principal balance may result in losses that are more severe,
relative to the size of the pool, than would be the case if the pool
consisted of a greater number of mortgage loans each having a relatively
smaller outstanding principal balance. In addition, the concentration of any
mortgage pool in one or more loans that have outstanding principal balances
that are substantially larger than the other mortgage loans in such pool can
result in losses that are substantially more severe, relative to the size of
the pool, than would be the case if the aggregate balance of the pool were
more evenly distributed among the loans in such pool. No Mortgage Loan
represents more than 10.33% of the Initial Pool Balance and no Mortgage Loans
with related Mortgagors represent in the aggregate more than 18.49% of the
Initial Pool Balance. See "Description of the Mortgage Pool--Certain
Characteristics of the Mortgage Loans--Borrower Concentration and Related
Borrowers" herein.
Limitations on Enforceability of Cross-Collateralization. Four of the
Mortgage Loans representing approximately 21.41% by principal balance and
having principal balances as of the Cut-off Date ranging from $2,488,475 to
$82,869,076 are secured by more than one Mortgaged Property. These
arrangements seek to reduce the risk that the inability of a Mortgaged
Property securing each such Mortgage Loan to generate net operating income
sufficient to pay debt service will result in defaults and ultimate losses.
Cross-collateralization arrangements involving more than one Mortgagor
could be challenged as a fraudulent conveyance by creditors of a Mortgagor or
by the representative of the bankruptcy estate of a Mortgagor, if a Mortgagor
were to become a debtor in a bankruptcy case. Generally, under federal and
most 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
(i) was insolvent or was rendered insolvent by such obligation or transfer,
(ii) was engaged in business or a transaction, or was about to engage in
business or a transaction, for which any property remaining with the person
was an unreasonably small capital or (iii) intended to, or believed that it
would, incur debts that would be beyond the person's ability to pay as such
debts matured. Accordingly, a lien granted by a Mortgagor to secure repayment
of another Mortgagor's Mortgage Loan could be avoided if a court were to
determine that (i) such Mortgagor was insolvent at the time of granting 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 (ii)
the Mortgagor did not, when it allowed its Mortgaged Property to be
encumbered by a lien securing the entire indebtedness represented by the
other Mortgage Loan, receive fair consideration or reasonably equivalent
value for pledging such Mortgaged Property for the equal benefit of the other
Mortgagor.
Risks of Different Timing of Mortgage Loan Amortization. If and as
principal payments, property releases, or prepayments are made on a Mortgage
Loan, the remaining Mortgage Pool may be subject to more concentrated risk
with respect to the diversity of properties, types of properties and property
characteristics and with respect to the number of Mortgagors. See the table
entitled "Year of Scheduled Maturity" under "Description of the Mortgage
Pool--Certain Characteristics of the Mortgage Loans" herein for a description
of the respective maturity dates of the Mortgage Loans. Because principal on
the Offered Certificates is payable in sequential order, and no class
receives principal until the Class Balance of the preceding class or classes
has been reduced to zero, classes that have a lower sequential priority are
more likely to be exposed to the risk of concentration discussed under
"--Concentration of Mortgage Loans" above than classes with a higher
sequential priority.
Geographical Concentration. Six, twenty, five, five, five, ten and
thirteen of the Mortgaged Properties, representing approximately 21.42%,
15.16%, 9.57%, 6.99%, 6.97%, 6.20% and 5.29%, respectively, of the aggregate
principal balance of the Mortgage Loans as of the Cut-off Date, are located
in Virginia, California, New Jersey, Michigan, New York, Florida and North
Carolina, respectively. Except as indicated in the immediately preceding
sentence, no more than 5.0% of the Mortgage Loans, by aggregate principal
balance of the Mortgage Loans as of the Cut-off Date are secured by Mortgaged
Properties in any one state. Repayments by Mortgagors and the market value of
the Mortgaged Properties could be affected by economic conditions generally
or in regions where the Mortgagors and the
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<PAGE>
Mortgaged Properties are located, conditions in the real estate market where
the Mortgaged Properties are located, changes in governmental rules and
fiscal policies, acts of nature, including earthquakes (which may result in
uninsured losses), and other factors which are beyond the control of the
Mortgagors.
Environmental Risks. Under various federal, state and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be liable for the costs of removal and remediation of
hazardous or toxic substances on, under, adjacent to or in such property.
Such laws often impose liability whether or not the owner or operator knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The cost of any required remediation and the owner's liability
therefor as to any property is generally not limited under such enactments
and could exceed the value of the property and/or the aggregate assets of the
owner. In addition, the presence of hazardous or toxic substances, or the
failure to properly remediate such property, may adversely affect the owner's
or operator's ability to borrow using such property as collateral. Persons
who arrange for the disposal or treatment of hazardous or toxic substances
may also be liable for the costs of removal or remediation of such substances
at the disposal or treatment facility. Certain laws impose liability for
release of asbestos into the air and third parties may seek recovery from
owners or operators of real properties for personal injury associated with
exposure to asbestos.
Under some environmental laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
("CERCLA"), as well as certain state laws, a secured lender (such as the
Trust Fund) may be liable as an "owner" or "operator," for the costs of
responding to a release or threat of a release of hazardous substances on or
from a Mortgagor's property, if agents or employees of a lender are deemed to
have participated in the management of the Mortgagor's property, regardless
of whether a previous owner caused the environmental damage. The Trust Fund's
potential exposure to liability for cleanup costs pursuant to CERCLA may
increase if the Trust Fund actually takes possession of a Mortgagor's
property, or control of its day-to-day operations, as for example through the
appointment of a receiver.
An environmental site assessment ("ESA") of each of the Mortgaged
Properties was performed (or prior assessments were updated) in connection
with the initial underwriting and origination of the Mortgage Loans. In
certain cases, environmental testing in addition to the ESA was performed.
The following information is based on the ESAs and has not been
independently verified by the Seller, the Depositor, the Servicers, the
Trustee, the Underwriter, or by any of their respective affiliates. With
respect to a number of the Mortgaged Properties, the ESAs revealed the
existence or possible existence of asbestos-containing materials, possible
radon gas and other environmental matters at the related Mortgaged
Properties, none of which constituted a material violation of any
environmental law in the judgment of the assessor. In these cases, the
Mortgagors agreed to establish and maintain operations and maintenance
programs or had other remediation agreements or escrows in place.
It is possible that the ESAs did not reveal all environmental liabilities,
that there are material environmental liabilities of which neither the Seller
nor the Depositor are aware and that the environmental condition of the
Mortgaged Properties in the future could be affected by tenants and occupants
or by third parties unrelated to the Mortgagors.
Each Mortgagor has represented that, except as described in the
environmental reports referred to above, each Mortgaged Property either was,
or to the best of its knowledge was, in compliance with applicable
environmental laws and regulations on the date of the origination of the
related Mortgage Loan, that, except as described in the environmental reports
referred to above, no actions, suits or proceedings have been commenced or
are pending or, to the best knowledge of the Mortgagor, are threatened with
respect to any applicable environmental laws and that such Mortgagor has not
received notice of any violation of a legal requirement relating to the use
and occupancy of any Mortgaged Property; and has agreed not to use, cause or
permit to exist on the related Mortgaged Property any Hazardous Materials in
a manner which violates applicable laws. The principal security for the
obligations under each Mortgage Loan consists of the Mortgaged Property and,
accordingly, if any such representations are breached, there can be no
assurance that any other assets of the Mortgagor would be available in
connection with any exercise of remedies in respect of such breach. Moreover,
most Mortgagors are structured as single asset entities and therefore have no
assets other than the related Mortgaged Property.
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<PAGE>
The Pooling and Servicing Agreement provides that the Special Servicer,
acting on behalf of the Trust Fund, may not acquire, through foreclosure or
deed in lieu thereof, title to a Mortgaged Property or take over its
operation unless the Special Servicer has previously determined, based on a
report prepared by a qualified person who regularly conducts environmental
audits, that (i) the Mortgaged Property is in compliance with applicable
environmental laws or that taking the actions necessary to comply with such
laws is reasonably likely to produce a greater recovery on a present value
basis than not taking such actions and (ii) there are no circumstances known
to the Special Servicer relating to the use of hazardous substances or
petroleum-based materials which require investigation or remediation, or that
if such circumstances exist, taking such remedial actions is reasonably
likely to produce a greater recovery on a present value basis than not taking
such actions.
Litigation. There may be legal proceedings pending and, from time to time,
threatened against the Mortgagors and the managers of the Mortgaged
Properties and their respective affiliates arising out of the ordinary
business of the Mortgagor, the managers and such affiliates. There can be no
assurance that such litigation may not have a material adverse effect on
distributions to Certificateholders.
Other Financings. Each Mortgagor is restricted from incurring any
indebtedness secured by the related Mortgaged Property, other than the
related Mortgage Loan, without the consent of the mortgagee. Forty-four
Mortgage Loans representing approximately 58.06% of the Initial Pool Balance
were made to single-purpose entities, which are restricted from incurring any
indebtedness other than the Mortgage Loan, normal trade accounts payable and
certain purchase financing debt. Three Mortgage Loans representing
approximately 15.50% of the Initial Pool Balance have unsecured subordinate
debt or payment obligations that are subject, in each case (except with
respect to the Crystal Plaza Loan, see "Description of the Mortgage Pool --
Borrower Concentration and Related Borrowers -- Ten Largest Mortgage Loans --
The Crystal Plaza Loan") to subordination and standstill agreements limiting
in varying degrees the rights of the holder of such additional indebtedness
including limitations on its right to commence any enforcement or foreclosure
proceeding.
In cases where one or more junior liens are imposed on a Mortgaged
Property or the Mortgagor incurs other indebtedness, the Trust Fund is
subjected to additional risks, including, without limitation, the risks that
the Mortgagor may have greater incentives to repay the junior or unsecured
indebtedness first and that it may be more difficult for the Mortgagor to
refinance the Mortgage Loan or to sell the Mortgaged Property for purposes of
making the Balloon Payment upon the maturity of the Mortgage Loan.
Effect of Mortgagor Delinquencies and Defaults. The aggregate amount of
distributions on the Offered Certificates, the yield to maturity of the
Offered Certificates, the rate of principal payments on the Offered
Certificates and the weighted average lives of the Offered Certificates will
be affected by the rate and timing of delinquencies and defaults on the
Mortgage Loans. If a purchaser of a class of Offered Certificates calculates
its anticipated yield based on an assumed rate of default and amount of
losses on the Mortgage Loans that is lower than the default rate and amount
of losses actually experienced and such additional losses are allocable to
such class of Certificates, such purchaser's actual yield to maturity will be
lower than that so calculated and could, under certain extreme scenarios, be
negative. The timing of any loss on a liquidated Mortgage Loan will also
affect the actual yield to maturity of the class of Offered Certificates to
which a portion of such loss is allocable, even if the rate of defaults and
severity of losses are consistent with an investor's expectations. In
general, the earlier a loss borne by an investor occurs, the greater is the
effect on such investor's yield to maturity.
As and to the extent described herein, each Servicer and the Trustee will
be entitled to receive interest on unreimbursed P&I Advances and unreimbursed
advances of servicing expenses until such advances (i) are recovered out of
amounts received on the Mortgage Loan as to which such advances were made
pursuant to the Pooling and Servicing Agreement, which amounts are in the
form of late payments, liquidation proceeds, insurance proceeds, condemnation
proceeds or amounts paid in connection with the purchase of such Mortgage
Loan out of the Trust Fund or (ii) are otherwise recovered following a
determination that such advance is a nonrecoverable advance. A Servicer's and
the Trustee's right to
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receive such payments of interest is prior to the rights of
Certificateholders to receive distributions on the Certificates and,
consequently, is likely to result in losses being allocated to the Offered
Certificates that would not otherwise have resulted absent the accrual of
such interest.
The Special Servicer will be entitled to receive, with respect to each
Specially Serviced Mortgage Loan, additional compensation in the form of a
percentage of the outstanding principal balance of any such Specially
Serviced Mortgage Loan prior to the right of Certificateholders to receive
distributions on the Certificates. See "Master Servicer and Special
Servicer--Servicing and Other Compensation and Payment of Expenses" herein.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of a class of Offered Certificates, to the extent that P&I Advances or
the subordination of another class of Certificates does not fully offset the
effects of any such delinquency or default. The Special Servicer has the
ability to extend and modify Mortgage Loans that are in default or as to
which a payment default is imminent, including the ability to extend the date
on which a Balloon Payment is due, subject to certain conditions described in
the Pooling and Servicing Agreement. A Servicer's and the Trustee's
obligation to make P&I Advances in respect of a Mortgage Loan that is
delinquent as to its Balloon Payment is limited, however, to the extent
described under "Description of the Certificates--Advances". Until such time
as any Mortgage Loan delinquent in respect of its Balloon Payment is
liquidated, the entitlement of the holders of any class of Offered
Certificates on each Distribution Date in respect of principal of such
Mortgage Loan will be limited to any payment made by the related Mortgagor
and any related P&I Advance made by a Servicer and the Trustee. Consequently,
any delay in the receipt of a Balloon Payment that is payable, in whole or in
part, to holders of the Offered Certificates will extend the weighted average
life of the Offered Certificates.
As described under "Description of the Certificates--Distributions"
herein, if the portion of the Adjusted Available Distribution Amount
distributable in respect of interest on any class of Offered Certificates on
any Distribution Date is not sufficient to distribute the Interest
Distribution Amount then payable for such class, the shortfall will be
distributable to holders of such class of Certificates on subsequent
Distribution Dates, to the extent of available funds.
Balloon Mortgage Loans. Seventy-six Mortgage Loans, representing
approximately 57.58% of the aggregate principal balance of the Mortgage Loans
as of the Cut-off Date, are Balloon Mortgage Loans. The Balloon Mortgage
Loans do not fully amortize over their terms to maturity and, thus, require
substantial principal payments (i.e., balloon payments) at their stated
maturity. Mortgage Loans with balloon payments involve a greater degree of
risk because the ability of a Mortgagor to make a balloon payment typically
will depend upon its ability either to refinance the loan or to sell the
related Mortgaged Property in a timely fashion. The ability of a Mortgagor to
accomplish either of these goals will be affected by a number of factors,
including the level of available mortgage interest rates at the time of sale
or refinancing, the Mortgagor's equity in the related Mortgaged Property, the
financial condition and operating history of the Mortgagor and the related
Mortgaged Property, tax laws, rent control laws (with respect to certain
multifamily properties), renewability of operating licenses, prevailing
general economic conditions and the availability of credit for commercial or
multifamily real properties, as the case may be, generally.
ARD Loans. Five Mortgage Loans, representing approximately 30.30% of the
aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are
ARD Loans. After the Anticipated Repayment Date, any Excess Cash Flow will be
required to be applied to payments of principal and interest on the related
ARD Loan. Additionally, all of the ARD Loans will have substantial principal
balances on their Anticipated Repayment Date. The failure to pay an ARD Loan
by the related Anticipated Repayment Date will not result in an event of
default or acceleration. The ability of a Mortgagor to repay a Mortgage Loan
on the Anticipated Repayment Date will depend on its ability either to
refinance the Mortgage Loan or to sell the related Mortgaged Property. The
ability of a Mortgagor to accomplish either of these goals will be affected
by a number of factors, including the level of available mortgage interest
rates at the time of sale or refinancing, the Mortgagor's equity in the
related Mortgaged Property, the financial
S-23
<PAGE>
condition and operating history of the Mortgagor and the related Mortgaged
Property, tax laws, rent control laws (with respect to certain multifamily
properties), renewability of operating licenses, prevailing general economic
conditions and the availability of credit for commercial or multifamily real
properties, as the case may be, generally.
Ground Leases and Other Leasehold Interests. Five Mortgage Loans,
representing approximately 4.78% of the aggregate principal balance of the
Mortgage Loans as of the Cut-off Date, are secured in part by a leasehold
interest in their respective Mortgaged Properties. Pursuant to Section 365(h)
of the Bankruptcy Code, ground lessees are currently afforded rights not to
treat a ground lease as terminated and to remain in possession of their
leased premises upon the bankruptcy of their ground lessor and the rejection
of the ground lease by the representative of such ground lessor's bankruptcy
estate. The leasehold mortgages provide that the Mortgagor may not elect to
treat the ground lease as terminated on account of any such bankruptcy of,
and rejection by, the ground lessor without the consent of the Servicer. In
the event of a bankruptcy of a ground lessee/Mortgagor, the ground
lessee/Mortgagor under the protection of the Bankruptcy Code has the right to
assume (continue) or reject (terminate) any or all of its ground leases. In
the event of concurrent bankruptcy proceedings involving the ground lessor
and the ground lessee/Mortgagor, the Master Servicer may be unable to enforce
the bankrupt ground lessee/ Mortgagor's obligation to refuse to treat a
ground lease rejected by a bankrupt ground lessor as terminated. In such
circumstances, a ground lease could be terminated notwithstanding lender
protection provisions contained therein or in the mortgage.
Attornment Considerations. Some of the tenant leases, including the anchor
tenant leases, contain certain provisions that require the tenant to attorn
to (that is, recognize as landlord under the lease) a successor owner of the
property following foreclosure. Some of the leases, including the anchor
tenant leases, may be either subordinate to the liens created by the Mortgage
Loans or else contain a provision that requires the tenant to subordinate the
lease if the mortgagee agrees to enter into a non-disturbance agreement. In
some states, if tenant leases are subordinate to the liens created by the
Mortgage Loans and such leases do not contain attornment provisions, such
leases may terminate upon the transfer of the property to a foreclosing
lender or purchaser at foreclosure. Accordingly, in the case of the
foreclosure of a Mortgaged Property located in such a state and leased to one
or more desirable tenants under leases that do not contain attornment
provisions, such Mortgaged Property could experience a further decline in
value if such tenants' leases were terminated (e.g., if such tenants were
paying above-market rents). If a Mortgage is subordinate to a lease, the
lender will not (unless it has otherwise agreed with the tenant) possess the
right to dispossess the tenant upon foreclosure of the property, and if the
lease contains provisions inconsistent with the Mortgage (e.g., provisions
relating to application of insurance proceeds or condemnation awards), the
provisions of the lease will take precedence over the provisions of the
Mortgage.
Liquor License Considerations. Eleven Mortgage Loans representing
approximately 14.91% of the aggregate principal balance of the Mortgage Loans
as of the Cut-off Date, are secured by hotel properties. The liquor licenses
for some of such properties may be held by the property manager rather than
by the related Mortgagor. The applicable laws and regulations relating to
such licenses generally prohibit the transfer of such licenses to any person.
In the event of a foreclosure of a hotel property it is unlikely that the
Master Servicer (or Special Servicer) or purchaser in any such sale would be
entitled to the rights under the liquor license for such hotel property and
such party would be required to apply in its own right for such license.
Special Servicer Actions. In connection with the servicing of Specially
Serviced Mortgage Loans, the Special Servicer may take actions with respect
to such Mortgage Loans that could adversely affect the holders of some or all
of the classes of Offered Certificates. As described herein under "Master
Servicer and Special Servicer--Responsibilities of Special Servicer," the
actions of the Special Servicer will be subject to review and may be rejected
by a representative of the holders of the Monitoring Certificates (as defined
herein), who may have interests that conflict with those of the holders of
the other classes of Certificates. As a result, it is possible that such
representative may cause the Special Servicer to take actions which conflict
with the interests of certain classes of Certificates. In addition, the
Special Servicer may be removed without cause by the Directing
Certificateholders as described under "Master Servicer and Special
Servicer--Responsibilities of Special Servicer," herein.
S-24
<PAGE>
Enforceability. Mortgages may contain a due-on-sale clause, which permits
the lender to accelerate the maturity of the Mortgage Loan if the Mortgagor
sells, transfers or conveys the related Mortgaged Property or its interest in
the Mortgaged Property. Mortgages may also include a debt-acceleration
clause, which permits the lender to accelerate the debt upon a monetary or
non-monetary default of the 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.
Certain of the Mortgage Loans will be secured in part by an assignment of
leases and rents pursuant to which the Mortgagor typically assigns its right,
title and interest as landlord under the leases on the related Mortgaged
Property and the income derived therefrom to the lender as further security
for the related Mortgage Loan, while retaining a license to collect rents for
so long as there is no default. In the event the Mortgagor defaults, the
license terminates and the lender is entitled to collect rents. Such
assignments are typically not perfected as security interests prior to actual
possession of the cash flows. Some state laws may require that the lender
take possession of the Mortgaged Property and obtain a judicial appointment
of a receiver before becoming entitled to collect the rents. In addition, if
bankruptcy or similar proceedings are commenced by or in respect of the
Mortgagor, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents" in the Prospectus.
One Action Considerations. 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. The Special Servicer may need 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. In addition,
in the case of a Pool Loan secured by Mortgaged Properties located in
multiple states, the Special Servicer may be required to foreclose first on
properties located in states where such "one action" rules apply (and where
non-judicial foreclosure is permitted) before foreclosing on properties
located in states where judicial foreclosure is the only permitted method of
foreclosure. See "Certain Legal Aspects of Mortgage Loans and the
Leases--Foreclosure" in the Prospectus.
Limitations of Appraisals and Market Studies. In general, appraisals
represent the analysis and opinion of the respective appraisers at or before
the time made and are not guarantees, 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 the same method of, appraising the property.
Moreover, 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. Information regarding the values of the
Mortgaged Properties as of the Cut-off Date is presented under "Description
of the Mortgage Pool" herein for illustrative purposes only.
Conflicts of Interest. A substantial number of the Mortgaged Properties
are managed by property managers affiliated with the respective Mortgagors.
These property managers may also manage additional properties, including
properties that may compete with the Mortgaged Properties. Moreover,
affiliates of the managers and/or the Mortgagors, or the managers and/or the
Mortgagors themselves, may also own other properties, including competing
properties. Accordingly, the managers of the Mortgaged Properties and the
Mortgagors may experience conflicts of interest in the management and/or
ownership of such properties. In addition, the Seller or affiliates thereof
may have other financing arrangements with affiliates of the Mortgagors and
may enter into additional financing relationships in the future.
Zoning Compliance; Inspections. As a consequence of, among other things,
changes in applicable building and zoning ordinances and codes ("Zoning
Laws") affecting certain of the Mortgaged Properties which have come into
effect after the construction of improvements on such Mortgaged Properties,
certain improvements may not comply fully with current Zoning Laws, including
density, use, parking and set-back requirements, but qualify as permitted
non-conforming uses. Such changes may limit the ability
S-25
<PAGE>
of the Mortgagor to rebuild the premises "as is" in the event of a
substantial casualty loss with respect thereto and may adversely affect the
ability of the Mortgagor to meet its Mortgage Loan obligations from cash
flow. While it is expected that insurance proceeds would be available for
application to the related Mortgage Loan if a substantial casualty were to
occur, no assurance can be given that such proceeds would be sufficient to
pay off such Mortgage Loan in full or, if the Mortgaged Property were to be
repaired or restored in conformity with current law, what its value would be
relative to the remaining balance on the related Mortgage Loan, whether the
Mortgaged Property would have a value equal to that before the casualty, or
what its revenue-producing potential would be.
Inspections of the Mortgaged Properties were conducted in connection with
the origination of the Mortgage Loans by licensed engineers to assess the
structure, exterior walls, roofing interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the Mortgaged Properties. There can be no assurance
that all conditions requiring repair or replacement have been identified in
such inspections.
Costs of Compliance with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the
extent "readily achievable." To the extent the Mortgaged Properties do not
comply with the ADA, the Mortgagors may be required to incur costs of
complying with the ADA. In addition, noncompliance could result in the
imposition of fines by the federal government or an award of damages to
private litigants. The requirements of the ADA may also be imposed on a
foreclosing lender who succeeds to the interest of the Mortgagor as owner or
landlord. 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 Mortgagor of complying with the
requirements of the ADA may be subject to more stringent requirements than
those to which the Mortgagor is subject.
Control. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the aggregate Certificate Balance of all
outstanding Certificates ("Voting Rights") will be required to direct, and
will be sufficient to bind all Certificateholders to, certain actions,
including directing the Special Servicer or the Master Servicer with respect
to actions to be taken with respect to certain Mortgage Loans and REO
Properties and amending the Pooling and Servicing Agreement in certain
circumstances. See "Description of the Pooling and Servicing
Agreement--Voting Rights" herein.
S-26
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Trust Fund will consist primarily of a pool of fixed rate Mortgage
Loans with an aggregate principal balance as of the Cut-off Date, after
deducting payments of principal due on such date, of approximately
$802,326,512 (the "Initial Pool 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") creating a first
lien on a fee simple and/or leasehold interests in an office, multifamily,
retail, hotel, industrial, nursing home and congregate care, mobile home park
or other commercial property (a "Mortgaged Property"). Except as otherwise
indicated, all percentages of the Mortgage Loans described herein are
approximate percentages by aggregate principal balance as of the Cut-off
Date.
The Mortgage Loans were originated by the Seller or originated for
purchase by the Seller. The Seller is an affiliate of the Depositor and of
J.P. Morgan Securities Inc., the Underwriter. Dover House provides commercial
and multifamily mortgage loan origination services exclusively for MGT and
provides servicing and asset management services to MGT and others on large
pools of commercial and multifamily mortgage loans. Dover House provided loan
origination services, including loan underwriting, due diligence and closing
services, to MGT in connection with the Mortgage Loans originated directly by
MGT, and will be the Master Servicer.
The Mortgage Loans were underwritten generally in conformity with the
guidelines described below. See "--Underwriting Guidelines and Processes"
below. The Seller will sell the Mortgage Loans to the Depositor on or prior
to the Delivery Date pursuant to a loan sale agreement (the "Loan Sale
Agreement"). The Depositor will cause the Mortgage Loans in the Mortgage Pool
to be assigned to the Trustee pursuant to the Pooling and Servicing
Agreement.
See Annex A for additional information with respect to certain of the
Mortgage Loans and the Diskette for additional information with respect to
all of the Mortgage Loans.
REPRESENTATIONS AND WARRANTIES
Under the Loan Sale Agreement, the Seller will make certain
representations and warranties to the Depositor. Pursuant to the terms of the
Loan Sale Agreement, the Seller will be obligated to cure any breach of such
representations and warranties or to repurchase any Mortgage Loan from the
Depositor as to which there exists a breach of any such representation or
warranty that materially and adversely affects the interests of the
Certificateholders in such Mortgage Loan. The Seller shall covenant with the
Depositor to repurchase any Mortgage Loan from the Depositor or cure any such
breach within 90 days of receiving notice thereof. Under the Pooling and
Servicing Agreement, the Depositor will assign its rights under the Loan Sale
Agreement to the Trustee for the benefit of the Certificateholders. The sole
remedy available to the Trustee or the Certificateholders is the obligation
of the Seller to cure or repurchase any Mortgage Loan in connection with
which there has been a breach of any such representation or warranty which
materially and adversely affects the interest of the Certificateholders in
such Mortgage Loan.
The Seller has generally represented and warranted as of the Delivery Date
with respect to each Mortgage Loan, among other things, subject to certain
exceptions set forth in the related Loan Sale Agreement, that: (i) such
Mortgage Loan is not one month or more delinquent in payment of principal and
interest and has not been so delinquent more than once in a twelve-month
period prior to the Delivery Date and there is no payment default and no
other default under the Mortgage Loan which has a material adverse effect on
the Mortgage Loan; (ii) such Mortgage Loan is secured by a Mortgage that is a
valid and subsisting first priority lien on the Mortgaged Property (or a
leasehold interest therein) free and clear of any liens, claims or
encumbrances, subject only to certain permitted encumbrances; (iii) such
Mortgage, together with any separate security agreements, establishes a first
priority security interest in favor of the Seller in all the related
Mortgagor's personal property used in, and reasonably necessary to operate
the Mortgaged Property, and to the extent a security interest may be created
therein, the proceeds
S-27
<PAGE>
arising from the Mortgaged Property and any other collateral securing such
Mortgage subject only to certain permitted encumbrances; (iv) there is an
assignment of leases and rents provision creating a first priority security
interest in leases and rents arising in respect of the related Mortgaged
Property, subject only to certain permitted encumbrances; (v) there are no
mechanics' or other similar liens affecting the Mortgaged Property which are
or may be prior or equal to the lien of the Mortgage, except those insured
against pursuant to the applicable title insurance policy; (vi) the related
Mortgagor has good and indefeasible title in fee simple or leasehold interest
to, and no person has any outstanding exercisable rights of record with
respect to the purchase or sale of all or a portion of, the related Mortgaged
Property, except for rights of first refusal; (vii) the Mortgaged Property is
covered by a title insurance policy insuring that the Mortgage is a valid
first lien, subject only to certain permitted encumbrances; (viii) no claims
have been made under the related title insurance policy and such policy is in
full force and effect and will provide that the insured includes the owner of
the Mortgage Loan; (ix) at the time of the assignment of such Mortgage Loan
to the Depositor, the Seller had good title to and was the sole owner of such
Mortgage Loan free and clear of any pledge, lien or encumbrance and such
assignment validly transfers ownership of such Mortgage Loan to the Depositor
free and clear of any pledge, lien or encumbrance; (x) the related assignment
of mortgage and related assignment of the assignment of rents and leases is
legal, valid and binding and has been recorded or submitted for recording in
the applicable jurisdiction; (xi) the Seller's endorsement of the related
Mortgage Note constitutes the legal and binding assignment of such Mortgage
Note and together with an assignment of mortgage and the assignment of the
assignment of leases and rents, legally and validly conveys all right, title
and interest in such Mortgage Loan and related Mortgage Loan documents; (xii)
each Mortgage Loan document is a legal, valid and binding obligation of the
parties thereto, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by applicable state law and by
bankruptcy, insolvency, reorganization or other laws relating to creditors'
rights and general equitable principles and except that certain provisions of
such Mortgage Loan documents are or may be unenforceable in whole or in part,
but the inclusion of such provisions does not render the Mortgage Loan
documents invalid as a whole, and such Mortgage Loan documents taken as a
whole are enforceable to the extent necessary and customary for the practical
realization of the rights and benefits afforded thereby; (xiii) the Seller
has not modified the terms of such related Mortgage Loan and related Mortgage
Loan documents have not been modified or waived in any material respect
except as set forth in the Loan Sale Agreement and the Mortgage Loan
documents; (xiv) such Mortgage Loan has not been satisfied, canceled,
subordinated, released or rescinded and the related Mortgagor has not been
released from its obligations under any Mortgage Loan document; (xv) none of
the Mortgage Loan documents is subject to any right of rescission, set-off,
valid counterclaim or defense; (xvi) each Mortgage Loan document complied in
all respects with all material applicable state or federal laws including
usury to the extent non-compliance would have a material adverse effect on
the Mortgage Loan; (xvii) the related Mortgaged Property is, in all material
respects, in compliance with, and is used and occupied in accordance with
applicable law; (xviii) to the Seller's knowledge, (a) in reliance on an
engineering report, the related Mortgaged Property is in good repair and (b)
no condemnation proceedings are pending; (xix) the ESA prepared in connection
with the origination thereof reveals no known circumstances or conditions
with respect to the Mortgaged Property that would constitute or result in a
material violation of any environmental laws, require any expenditure
material in relation to the principal balance of such Mortgage Loan to
achieve or maintain compliance in all material respects with any
environmental laws or require substantial cleanup or remedial action or any
other extraordinary action in excess of the amount escrowed for such
purposes; (xx) the Mortgaged Property is covered by insurance policies
providing coverage against certain losses or damage; (xxi) all amounts
required to be deposited by the Mortgagor at origination have been deposited;
(xxii) to the Seller's knowledge, all significant leases are in full force
and effect, and there has been no material default by the related Mortgagor
or lessee; and (xxiii) to the Seller's knowledge, there are no pending, or to
the Seller's actual knowledge threatened, actions, suits or proceedings by or
before any court or other governmental authority against or affecting the
related Mortgagor under such Mortgage Loan or the Mortgaged Property which,
if determined against such Mortgagor or property would materially and
adversely affect the value of such property or ability of the Mortgagor to
pay principal, interest and other amounts due under such Mortgage Loan.
S-28
<PAGE>
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
All of the Mortgage Loans are secured by first liens on a fee simple
and/or leasehold interest in the related Mortgaged Properties. As of the
Cut-off Date, the Mortgage Loans had characteristics set forth below. The
totals in the following tables may not add up to 100% due to rounding.
MORTGAGE INTEREST RATES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
MORTGAGE INTEREST RATES LOANS LOANS DATE DATE
- ----------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
6.7501%-7.0000%......... 2 2.2% $ 84,528,710 10.5%
7.0001%-7.2500%......... 5 5.4 157,813,561 19.7
7.2501%-7.5000%......... 8 8.6 51,637,183 6.4
7.5001%-7.7500%......... 16 17.2 97,529,151 12.2
7.7501%-8.0000%......... 17 18.3 112,171,901 14.0
8.0001%-8.2500%......... 10 10.8 61,923,630 7.7
8.2501%-8.5000%......... 13 14.0 132,172,770 16.5
8.5001%-8.7500%......... 9 9.7 69,643,925 8.7
8.7501%-9.0000%......... 10 10.8 27,920,021 3.5
9.2501%-9.5000%......... 1 1.1 1,797,475 0.2
9.5001%-9.7500%......... 1 1.1 1,791,283 0.2
9.7501%-10.0000%........ 1 1.1 3,396,900 0.4
-- ----- ------------ -----
Total................... 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Mortgage Interest Rate: 7.79%
S-29
<PAGE>
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE LOANS LOANS DATE DATE
- ----------------------------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
Under $1,000,000.......................... 1 1.1% $ 989,930 0.1%
$1,000,001-2,000,000...................... 22 23.7 35,297,713 4.4
$2,000,001-3,000,000...................... 15 16.1 39,441,705 4.9
$3,000,001-4,000,000...................... 17 18.3 59,223,188 7.4
$4,000,001-5,000,000...................... 7 7.5 31,645,429 3.9
$5,000,001-7,500,000...................... 7 7.5 40,327,736 5.0
$7,500,001-10,000,000..................... 5 5.4 44,642,900 5.6
$10,000,001-12,000,000.................... 3 3.2 32,759,872 4.1
$12,000,001-15,000,000.................... 2 2.2 28,883,158 3.6
$15,000,001-17,500,000.................... 4 4.3 63,774,565 7.9
$20,000,001-25,000,000.................... 1 1.1 24,877,953 3.1
$25,000,001-30,000,000.................... 1 1.1 27,510,828 3.4
$30,000,001-35,000,000.................... 2 2.2 64,115,618 8.0
$35,000,001-40,000,000.................... 3(1) 3.2 111,504,254 13.9
$50,000,001-60,000,000.................... 1 1.1 50,615,148 6.3
$60,000,001-70,000,000.................... 1 1.1 63,847,440 8.0
$80,000,001-90,000,000.................... 1(2) 1.1 82,869,076 10.3
-- ----- ------------ -----
Total..................................... 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
- ------------
(1) Includes the Shannon Enterprises Loan which is secured by eleven
Mortgaged Properties.
(2) Includes the Kilroy Loan which is secured by thirteen Mortgaged
Properties.
Average Principal Balance per Mortgage Loan as of the Cut-off Date:
$8,627,167
Average Principal Balance per Mortgaged Property as of the Cut-off Date:
$6,857,492
S-30
<PAGE>
ORIGINAL TERM TO MATURITY/ANTICIPATED REPAYMENT DATE IN MONTHS(1)
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
ORIGINAL TERM TO MATURITY IN MONTHS LOANS LOANS DATE DATE
- ----------------------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
60-83............................... 1 1.1% $ 3,192,844 0.4%
84-119.............................. 7 7.5 153,891,115 19.2
120-179............................. 67 72.0 522,854,702 65.2
180-299............................. 18 19.4 122,387,850 15.3
-- ----- ------------ -----
Total............................... 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
(1) For purposes of this table the Crystal Gateway Loan, though not an ARD
Loan, was assumed to have an Anticipated Repayment Date in January 1,
2008. See "--Borrower Concentration and Related Borrowers--Ten Largest
Loans--The Crystal Gateway Loan."
Weighted Average Original Term to Maturity or Anticipated Repayment Date in
Months: 132
REMAINING TERM TO MATURITY/ANTICIPATED REPAYMENT DATE IN MONTHS(1)
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
REMAINING TERM TO MATURITY/ MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
ANTICIPATED REPAYMENT DATE IN MONTHS LOANS LOANS DATE DATE
- ------------------------------------ ----- ----- ---- ----
<S> <C> <C> <C> <C>
43-60................................ 1 1.1% $ 3,192,844 0.4%
73-84................................ 7 7.5 153,891,115 19.2
85-108............................... 10 10.8 54,099,144 6.7
109-120.............................. 52 55.9 332,111,047 41.4
121-132.............................. 1 1.1 27,510,828 3.4
133-144.............................. 4 4.3 109,133,684 13.6
169-180.............................. 9 9.7 59,923,530 7.5
217-240.............................. 9 9.7 62,464,320 7.8
-- ----- ------------ -----
Total................................ 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
(1) For purposes of this table the Crystal Gateway Loan, though not an ARD
Loan, was assumed to have an Anticipated Repayment Date in January 1,
2008. See "--Borrower Concentration and Related Borrowers--Ten Largest
Loans--The Crystal Gateway Loan."
Weighted Average Remaining Term to Maturity or Anticipated Repayment Date in
Months: 126
S-31
<PAGE>
MONTH AND YEAR OF ORIGINATION
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
MONTH/YEAR LOANS LOANS DATE DATE
- ---------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
November 1995 .. 1 1.1% $ 1,162,808 0.1%
December 1995 . 2 2.2 6,142,719 0.8
March 1996 ..... 1 1.1 2,459,359 0.3
May 1996 ....... 2 2.2 3,568,880 0.4
June 1996 ...... 1 1.1 1,976,226 0.2
July 1996 ...... 1 1.1 1,202,332 0.1
September 1996 1 1.1 1,797,475 0.2
January 1997 .. 1 1.1 82,869,076 10.3
February 1997 . 1 1.1 35,789,344 4.5
March 1997 ..... 2 2.2 9,355,471 1.2
June 1997 ...... 6 6.5 31,484,736 3.9
July 1997 ...... 4 4.3 11,371,051 1.4
August 1997 ... 13 14.0 48,038,970 6.0
September 1997 15 16.1 124,383,137 15.5
October 1997 .. 11 11.8 65,388,431 8.1
November 1997 . 14 15.1 149,943,990 18.7
December 1997 . 17 18.3 225,392,507 28.1
-- ----- ------------ -----
Total .......... 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
YEAR OF SCHEDULED MATURITY/ANTICIPATED REPAYMENT DATE(1)
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
YEAR LOANS LOANS DATE DATE
- ---- ----- ----- ---- ----
<S> <C> <C> <C> <C>
2003.... 1 1.1% $ 3,192,844 0.4%
2004.... 6 6.5 71,022,040 8.9
2005.... 2 2.2 84,031,884 10.5
2006.... 8 8.6 17,146,992 2.1
2007.... 40 43.0 229,227,335 28.6
2008.... 13 14.0 138,673,056 17.3
2009.... 4 4.3 86,029,364 10.7
2010.... 1 1.1 50,615,148 6.3
2012.... 8 8.6 54,803,686 6.8
2013.... 1 1.1 5,119,844 0.6
2017.... 8 8.6 60,187,970 7.5
2018.... 1 1.1 2,276,350 0.3
-- ----- ------------ -----
Total... 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
(1) For purposes of this table the Crystal Gateway Loan, though not an ARD
Loan, was assumed to have an Anticipated Repayment Date in January 1,
2008. See "--Borrower Concentration and Related Borrowers--Ten Largest
Loans--The Crystal Gateway Loan."
S-32
<PAGE>
Seventy-six of the Mortgage Loans, representing approximately 57.58% of
the Initial Pool Balance are Balloon Mortgage Loans.
BALLOON MORTGAGE LOANS
ORIGINAL TERM TO MATURITY IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
ORIGINAL TERM IN MONTHS LOANS LOANS DATE DATE
- ----------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
60 or less.............. 1 1.3% $ 3,192,844 0.7%
61-84................... 5 6.6 31,117,531 6.7
85-120.................. 60 78.9 286,573,407 62.0
121-180................. 8 10.5 93,326,807 20.2
181-300................. 2 2.6 47,756,303 10.3
-- ----- ------------ -----
Total................... 76 100.0% $461,966,891 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Original Term to Maturity in Months: 137
BALLOON MORTGAGE LOANS
REMAINING TERM TO MATURITY IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
REMAINING TERM IN MONTHS LOANS LOANS DATE DATE
- ------------------------ ----- ----- ---- ----
<S> <C> <C> <C> <C>
72 or less............... 1 1.3% $ 3,192,844 0.7%
73-84.................... 5 6.6 31,117,531 6.7
85-108................... 9 11.8 18,309,800 4.0
109-120.................. 51 67.1 268,263,607 58.1
121-132.................. 1 1.3 27,510,828 6.0
133-144.................. 2 2.6 24,604,974 5.3
169-180.................. 5 6.6 41,211,005 8.9
217-240.................. 2 2.6 47,756,303 10.3
-- ----- ------------ -----
Total.................... 76 100.0% $461,966,891 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Remaining Term to Maturity in Months: 132
BALLOON MORTGAGE LOANS
REMAINING AMORTIZATION TERM
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
REMAINING AMORTIZATION TERM IN MONTHS LOANS LOANS DATE DATE
- ------------------------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
240 or less........................... 9 11.8% $ 36,401,270 7.9%
241-300............................... 38 50.0 212,485,401 46.0
301-360............................... 29 38.2 213,080,220 46.1
-- ----- ------------ -----
Total................................. 76 100.0% $461,966,891 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Remaining Amortization Term in Months: 312
S-33
<PAGE>
Five of the Mortgage Loans, representing approximately 30.30% of the
Initial Pool Balance are ARD Mortgage Loans.
ARD MORTGAGE LOANS
ORIGINAL TERM TO ANTICIPATED REPAYMENT DATE IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
ORIGINAL TERM IN MONTHS LOANS LOANS DATE DATE
- ----------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
84-119.................. 2 40.0% $122,773,585 50.5%
120-179................. 3 60.0 120,318,054 49.5
- ----- ------------ -----
Total................... 5 100.0% $243,091,639 100.0%
= ===== ============ =====
</TABLE>
Weighted Average Original Term to Anticipated Repayment Date in Months: 114
ARD MORTGAGE LOANS
REMAINING TERM TO ANTICIPATED REPAYMENT DATE IN MONTHS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
REMAINING TERM IN MONTHS LOANS LOANS DATE DATE
- ------------------------ ----- ----- ---- ----
<S> <C> <C> <C> <C>
60-83.................... 2 40.0% $122,773,585 50.5%
84-119................... 1 20.0 35,789,344 14.7
120-179.................. 2 40.0 84,528,710 34.8
- ----- ------------ -----
Total.................... 5 100.0% $243,091,639 100.0%
= ===== ============ =====
</TABLE>
Weighted Average Remaining Term to Anticipated Repayment Date in Months: 107
ARD MORTGAGE LOANS
REMAINING AMORTIZATION TERM
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
REMAINING AMORTIZATION TERM IN MONTHS LOANS LOANS DATE DATE
- ------------------------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
180-299............................... 1 20.0% $ 82,869,076 34.1%
300 or Greater........................ 4 80.0 160,222,563 65.9
- ------ ------------ -----
Total................................. 5 100.00% $243,091,639 100.0%
= ====== ============ =====
</TABLE>
Weighted Average Remaining Amortization Term in Months: 332
The following two tables set forth the range of Cut-off Date LTV Ratios
and Maturity Date/ Anticipated Repayment Date LTV Ratios of the Mortgage
Loans. A "Cut-off Date LTV Ratio" is a fraction, expressed as a percentage,
the numerator of which is the Cut-off Date principal balance of a Mortgage
Loan, and the denominator of which is the appraised value of the related
Mortgaged Property as determined by an appraisal thereof obtained in
connection with the origination of such Mortgage Loan. A "Maturity
Date/Anticipated Repayment Date LTV Ratio" is a fraction, expressed as a
percentage, the numerator of which is the principal balance of a Mortgage
Loan on the related Maturity Date, or, in the case of an ARD Loan, the
related Anticipated Repayment Date (assuming the Crystal Gateway Loan, though
not an ARD Loan, has an Anticipated Repayment Date in January 1, 2008)
assuming all scheduled payments due prior thereto are made and there are no
principal prepayments, and the
S-34
<PAGE>
denominator of which is the appraised value of the related Mortgaged Property
as determined by an appraisal thereof obtained in connection with the
origination of such Mortgage Loan. Because the value of Mortgaged Properties
at the Maturity Date, or, in the case of an ARD Loan (or the Crystal Gateway
Loan), the Anticipated Repayment Date, may be different than such appraisal
value, there can be no assurance that the loan-to-value ratio for any
Mortgage Loan determined at any time following origination thereof will be
lower than the Cut-off Date LTV Ratio or Maturity Date/Anticipated Repayment
Date LTV Ratio, notwithstanding any positive amortization of such Mortgage
Loan. It is possible that the market value of a Mortgaged Property securing a
Mortgage Loan may decline between the origination thereof and the related
Maturity Date, or, in the case of an ARD Loan the Anticipated Repayment Date.
An appraisal of each of the Mortgaged Properties was made between October
1995 and November 1997. It is possible that the market value of a Mortgaged
Property securing a Mortgage Loan has declined since the most recent
appraisal for such Mortgaged Property. All appraisals were obtained in
accordance with the requirements of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, as amended ("FIRREA").
CUT-OFF DATE LTV RATIOS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
CUT-OFF DATE LTV RATIO(1) LOANS LOANS DATE DATE
- ------------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
50% or less.............. 3 3.2% $ 94,274,619 11.8%
50.01%-55.00%............ 9 9.7 82,515,216 10.3
55.01%-60.00%............ 3 3.2 8,132,609 1.0
60.01%-65.00%............ 12 12.9 68,763,523 8.6
65.01%-70.00%............ 25 26.9 216,815,290 27.0
70.01%-75.00%............ 17 18.3 150,700,703 18.8
75.01%-80.00%............ 20 21.5 165,418,526 20.6
80.01%-85.00%............ 3 3.2 14,028,026 1.7
85.01%-90.00%............ 1 1.1 1,678,000 0.2
-- ----- ------------ -----
Total.................... 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Cut-off Date LTV Ratio: 65.95%
(1) Loan-to-Value Ratio for the Embassy Suite Loan was calculated based on
the sum of the outstanding principal balance thereof and the
outstanding principal balance of the Excluded Mortgage Loan.
MATURITY DATE/ANTICIPATED REPAYMENT DATE
LTV RATIOS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MATURITY DATE MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
LTV RATIO (1) LOANS LOANS DATE DATE
- ------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
50% or less..... 21 25.6% $257,200,558 33.5%
50.01%-55.00% .. 11 13.4 35,624,491 4.6
55.01%-60.00% .. 16 19.5 185,806,267 24.2
60.01%-65.00% .. 15 18.3 137,521,268 17.9
65.01%-70.00% .. 16 19.5 138,297,455 18.0
70.01%-75.00% .. 3 3.7 14,455,931 1.9
-- ----- ------------ -----
Total........... 82 100.0% $768,905,970 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Maturity Date LTV Ratio: 52.19%
(1) Loan-to-Value Ratio for the Embassy Suite Loan was calculated based on
the sum of the outstanding Balloon Payment thereof and the outstanding
Balloon Payment of the Excluded Mortgage Loan.
S-35
<PAGE>
The following table sets forth the range of Underwritten Cash Flow Debt
Service Coverage Ratios for the Mortgage Loans. The "Underwritten Cash Flow
Debt Service Coverage Ratio" or "UW DSCR" for any Mortgage Loan for any
period as presented in the table below, Annex A or the Diskette, is the ratio
of Underwritten Cash Flow (or "UW Cash Flow") calculated for the related
Mortgaged Property for a period to the amounts of principal and interest due
under such Mortgage Loan for the same period. "Underwritten Cash Flow" means
the Underwritten NOI (as defined below) for the Mortgaged Property decreased
by an amount that the Seller has determined to be an appropriate allowance
for average annual tenant improvements, leasing commissions, and replacement
reserves for capital items based upon its respective underwriting guidelines.
"Underwritten NOI" or "UW NOI" means the NOI for the Mortgaged Property as
determined by the Seller in accordance with its underwriting guidelines for
similar properties. Revenue is generally calculated as follows: rental
revenue is calculated using actual rental rates, in some cases, adjusted
downward to market rates with vacancy rates equal to the higher of the
Mortgaged Property's historical rate, the market rate or an assumed vacancy
rate; other revenue, such as parking fees, laundry and other income items are
included only if supported by a trend and/or is likely to be recurring.
Operating expenses generally reflect the Mortgaged Property's historical
expenses, adjusted to account for inflation, significant occupancy increases
and a market rate management fee. Generally, "Net Operating Income" ("NOI")
for a Mortgaged Property equals the operating revenues (consisting
principally of rental and related revenue) for such Mortgaged Property minus
the operating expenses (such as utilities, repairs and maintenance, general
and administrative, management fees, marketing and advertising, insurance and
real estate tax expenses) for the Mortgaged Property. NOI generally does not
reflect replacement reserves, capital expenditures, debt service, tenant
improvements, leasing commissions, depreciation, amortization and similar
non-operating items.
The amounts representing "Net Operating Income", "Underwritten NOI" and
"Underwritten Cash Flow" are not a substitute for or an improvement upon net
income as determined in accordance with generally accepted accounting
principles as a measure of the results of the Mortgaged Property's operations
or a substitute for cash flows from operating activities determined in
accordance with generally accepted accounting principles as a measure of
liquidity. No representation is made as to the future net cash flow of the
properties, nor is "Net Operating Income", "Underwritten NOI" and
"Underwritten Cash Flow" set forth herein intended to represent such future
net cash flow.
The UW NOIs and NOIs used as a basis for calculating the DSCRs presented
in the following table, in Annex A attached hereto and in the Diskette, were
derived principally from operating statements obtained from the respective
Mortgagors (the "Operating Statements"). The Operating Statements were not
audited and in most cases were not prepared in accordance with generally
accepted accounting principles. To increase the level of consistency between
the Operating Statements, in some instances, adjustments were made to such
Operating Statements. These adjustments were principally for real estate tax
and insurance expenses (e.g., adjusting for the payment of two years of
expense in one year), and to eliminate obvious items not related to the
operation of the Mortgaged Property. However, such adjustments were
subjective in nature and may not have been made in a uniform manner.
S-36
<PAGE>
UNDERWRITTEN CASH FLOW DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
DEBT SERVICE COVERAGE MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
RATIO BASED ON UW CASH FLOWS(1) LOANS LOANS DATE DATE
- ------------------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
1.10x or less.................. 1 1.1% $ 1,678,000 0.2%
1.11x-1.15x.................... 1 1.1 2,459,359 0.3
1.16x-1.20x.................... 4 4.3 46,203,109 5.8
1.21x-1.25x.................... 10 10.8 59,551,550 7.4
1.26x-1.30x.................... 10 10.8 101,964,306 12.7
1.31x-1.40x.................... 21 22.6 103,985,422 13.0
1.41x-1.50x.................... 11 11.8 65,907,788 8.2
1.51x-1.60x.................... 18 19.4 148,063,193 18.5
1.61x-1.70x.................... 5 5.4 59,542,653 7.4
1.71x-1.80x.................... 4 4.3 16,309,258 2.0
1.81x-1.90x.................... 6 6.5 130,327,543 16.2
1.91x-2.00x.................... 1 1.1 63,847,440 8.0
2.01x-2.10x.................... 1 1.1 2,486,893 0.3
-- ----- ------------ -----
Total.......................... 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
Weighted Average UW DSCR: 1.54x
(1) UW DSCR for Embassy Suite Loan was calculated based on the combined
debt service for such Mortgage Loan and the Excluded Mortgage Loan.
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGED MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
STATE PROPERTIES LOANS LOANS DATE DATE
- ----- ---------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Virginia ....... 6 5 5.4% $171,829,599 21.4%
California (1) 20 8 8.6 121,608,340 15.2
New Jersey...... 5 5 5.4 76,811,013 9.6
Michigan ....... 5 5 5.4 56,068,429 7.0
New York ....... 5 5 5.4 55,928,364 7.0
Florida ........ 10 10 10.8 49,728,938 6.2
North Carolina . 13 3 3.2 42,461,705 5.3
Texas .......... 13 13 14.0 37,384,080 4.7
Hawaii ......... 1 1 1.1 27,510,828 3.4
Pennsylvania .. 1 1 1.1 24,877,953 3.1
Indiana ........ 4 4 4.3 23,568,480 2.9
Wisconsin ...... 2 2 2.2 19,227,907 2.4
Ohio ........... 7 7 7.5 19,024,369 2.4
Georgia ........ 5 5 5.4 18,181,935 2.3
Illinois ....... 5 4 4.3 14,878,103 1.9
Maryland ....... 2 2 2.2 7,140,566 0.9
Washington ..... 2 2 2.2 6,184,973 0.8
Arizona ........ 2 2 2.2 5,856,259 0.7
Kentucky ....... 1 1 1.1 4,334,325 0.5
Alaska ......... 2 2 2.2 4,024,245 0.5
Utah ........... 1 1 1.1 3,559,007 0.4
Massachusetts .. 1 1 1.1 2,933,913 0.4
Minnesota ...... 1 1 1.1 2,737,075 0.3
Tennessee ...... 1 1 1.1 2,392,280 0.3
Alabama ........ 1 1 1.1 2,276,350 0.3
Colorado ....... 1 1 1.1 1,797,475 0.2
--- -- ----- ------------ -----
Total........... 117 93 100.0% $802,326,512 100.0%
=== == ===== ============ =====
</TABLE>
- ------------
(1) Includes the Kilroy Loan which is secured by one property in Arizona.
S-37
<PAGE>
PROPERTY TYPES
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGED MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
TYPE PROPERTIES LOANS LOANS DATE DATE
- ---- ---------- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Office (1) ........... 25 12 12.9% $262,464,190 32.7%
Multifamily .......... 41 30 32.3 189,471,006 23.6
Hotel ................ 11 11 11.8 119,593,785 14.9
Anchored Retail ...... 13 13 14.0 119,385,608 14.9
Unanchored Retail ... 5 5 5.4 15,849,169 2.0
Single Tenant Retail 3 3 3.2 6,615,269 0.8
Retail/Office ........ 1 1 1.1 3,579,945 0.4
Industrial ........... 9 9 9.7 55,190,017 6.9
Nursing Home ......... 3 3 3.2 14,530,370 1.8
Mobile Home Park .... 3 3 3.2 8,847,199 1.1
Self Storage ......... 3 3 3.2 6,799,954 0.8
--- -- ----- ------------ -----
Total ................ 117 93 100.0% $802,326,512 100.0%
=== == ===== ============ =====
</TABLE>
(1) Includes the Kilroy Loan which is also secured by industrial
properties.
YEARS SINCE THE MORTGAGED PROPERTIES WERE BUILT(1)
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
PROPERTY AGE IN YEARS LOANS LOANS DATE DATE
- --------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
6 or less ............ 11 11.8% $ 61,403,194 7.7%
7-11 ................. 19 20.4 167,830,568 20.9
12-16 ................ 12 12.9 167,470,414 20.9
17-21 ................ 10 10.8 38,910,342 4.8
22-26 ................ 13 14.0 55,716,389 6.9
27-31 ................ 8 8.6 66,061,938 8.2
32 + ................. 20 21.5 244,933,667 30.5
-- ----- ------------ -----
Total ................ 93 100.0% $802,326,512 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Property Age in Years: 24
- ------------
(1) With respect to the Shannon Enterprises Loan, the related Mortgaged
Properties were built between 1959 and 1979. With respect to the Kilroy
Loan, the related Mortgaged Properties were built between 1955 and
1990. The earliest date was used in each case for purposes of the
related Mortgage Loan.
PHYSICAL OCCUPANCY PERCENTAGES(1)
MULTIFAMILY AND MOBILE HOME PARK
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES LOANS LOANS DATE DATE
- --------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
75.001%-80.000% ...... 1 3.0% $ 1,887,753 1.0%
80.001%-85.000% ...... 2 6.1 4,615,950 2.3
85.001%-90.000% ...... 3 9.1 4,956,155 2.5
90.001%-95.000% ...... 8 24.2 60,914,967 30.7
95.001%-100.000% .... 19 57.6 125,943,379 63.5
-- ----- ------------ -----
Total ................ 33 100.0% $198,318,205 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Occupancy Percentage: 95.5%
- ------------
(1) See Annex A for dates as of which occupancy percentages were calculated
for each Mortgaged Property.
S-38
<PAGE>
PHYSICAL OCCUPANCY PERCENTAGES(1)
RETAIL
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES LOANS LOANS DATE DATE
- --------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
85.001%-90.000% ...... 2 9.1% $ 7,468,447 5.1%
90.001%-95.000% ...... 1 4.5 4,386,510 3.0
95.001%-100.000% .... 19 86.4 133,575,035 91.8
-- ----- ------------ -----
Total ................ 22 100.0% $145,429,991 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Occupancy Percentage: 97.9%
- ------------
(1) See Annex A for dates as of which occupancy percentages were calculated
for each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES(1)
HOTEL
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES LOANS LOANS DATE DATE
- --------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
65.000% or less ...... 1 9.1% $ 1,271,487 1.1%
65.001%-70.000% ...... 2 18.2 18,628,915 15.6
70.001%-75.000% ...... 1 9.1 3,396,900 2.8
75.001%-80.000% ...... 2 18.2 11,458,464 9.6
80.001%-85.000% ...... 4 36.4 74,181,064 62.0
95.001%-100.000% .... 1 9.1 10,656,954 8.9
-- ----- ------------ -----
Total ................ 11 100.0% $119,593,785 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Occupancy Percentage: 79.6%
- ------------
(1) See Annex A for dates as of which occupancy percentages were calculated
for each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES(1)
OFFICE
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES LOANS LOANS DATE DATE
- --------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
90.001%-95.000% (2) . 2 16.7% $122,773,585 46.8%
95.001%-100.000% .... 10 83.3 139,690,605 53.2
-- ----- ------------ -----
Total ................ 12 100.0% $262,464,190 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Occupancy Percentage: 96.8%
- ------------
(1) See Annex A for dates as of which occupancy percentages were calculated
for each Mortgaged Property.
(2) Includes the Kilroy Loan which is also secured by industrial
properties.
S-39
<PAGE>
PHYSICAL OCCUPANCY PERCENTAGES(1)
OTHER
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES LOANS LOANS DATE DATE
- --------------------- ----- ----- ---- ----
<S> <C> <C> <C> <C>
80.001%-85.000% ...... 1 6.7% $ 2,722,797 3.6%
85.001%-90.000% ...... 3 20.0 9,122,476 11.9
95.001%-100.000% .... 11 73.3 64,675,068 84.5
-- ----- ----------- -----
Total ................ 15 100.0% $76,520,341 100.0%
== ===== ============ =====
</TABLE>
Weighted Average Occupancy Percentage: 97.2%
- ------------
(1) See Annex A for dates as of which occupancy percentages were calculated
for each Mortgaged Property.
With certain limited exceptions relating to casualty and condemnation
proceeds, or other prepayments beyond the Mortgagor's control, all of the
Mortgage Loans prohibit the prepayment thereof until a date specified in the
related Mortgage Note (such period, the "Lock-out Period" and the date of
expiration thereof, the "Lock-out Date") and/or provide that upon any
voluntary principal prepayment of a Mortgage Loan, the related Mortgagor will
be required to pay a prepayment premium or yield maintenance penalty (a
"Prepayment Premium"). Certain Mortgage Loans provide for Defeasance, in
whole and/or in part, during certain periods of time. The following table
sets forth the percentage of the declining aggregate principal balance of all
the Mortgage Loans that on March 1 of each of the years indicated will be
within their related Lock-out Period, are subject to Defeasance and/or in
which a principal prepayment must be accompanied by a Prepayment Premium.
S-40
<PAGE>
PREPAYMENT PROTECTION
PERCENTAGE OF MORTGAGE LOANS BY OUTSTANDING PRINCIPAL BALANCE AS OF THE
CUT-OFF DATE THAT HAVE PREPAYMENT LOCK-OUTS OR PENALTIES (ASSUMING NO
PREPAYMENTS)*
<TABLE>
<CAPTION>
MAR. MAR. MAR. MAR. MAR. MAR. MAR. MAR. MAR. MAR.
CURRENT 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lock-Out/Defeasance (1) ...... 100.0 100.0 99.1 79.1 45.1 31.6 19.7 17.5 15.7 16.8 0.0
YM1:
T+0BP; 1% Floor (2) .......... 0.0 0.0 0.9 10.2 44.1 54.6 59.2 77.6 78.0 66.7 64.5
YM2:
T+25BP; 1% Floor (2) ......... 0.0 0.0 0.0 10.3 10.3 10.3 10.3 0.0 0.0 0.0 0.0
Total Lockout and YM .......... 100.0 100.0 100.0 99.6 99.6 96.5 89.2 95.1 93.7 83.6 64.5
7.00%-7.99% (3) ............... 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0
6.00%-6.99% (3) ............... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.1 0.0 0.0 0.0
5.00%-5.99% (3) ............... 0.0 0.0 0.0 0.0 0.0 3.1 0.0 0.0 1.0 0.0 0.0
4.00%-4.99% (3) ............... 0.0 0.0 0.0 0.0 0.0 0.0 3.1 0.0 0.0 1.0 0.0
3.00%-3.99% (3) ............... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.8 0.0 0.0 14.2
2.00%-2.99% (3) ............... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.9 0.0 0.0
1.00%-1.99% (3) ............... 0.0 0.0 0.0 0.4 0.4 0.4 0.0 0.0 0.0 2.5 0.0
0.01%-0.99% ................... 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
No Prepayment Premium ......... 0.0 0.0 0.0 0.0 0.0 0.0 6.7 0.0 1.4 12.9 21.2
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total ......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Aggregate Mortgage Balance (4). 802.3 791.7 780.1 767.7 754.2 736.7 721.0 567.5 546.3 489.8 203.3
Percentage of Balance
Outstanding .................. 100.0% 98.7 97.2 95.7 94.0 91.8 89.9 70.7 68.1 61.1 25.3
</TABLE>
- ------------
(1) Certain Mortgage Loans permit the applicable Mortgagor after a
specified period (in most cases not less than two years from the
Delivery Date), to obtain the release of the related Mortgaged Property
from the lien of the related Mortgage upon substitution of direct
non-callable obligations of the United States providing payments in
amounts equal to the scheduled payments due on such Mortgage Loan to
the related Maturity Date or, in certain of the ARD Loans, the
Anticipated Repayment Date. The Master Servicer shall, on behalf of the
related Mortgagor, purchase such obligations of the United States for
deposit into the Trust Fund. Any such substitution shall be subject to,
among other things, the receipt of written confirmation from the Rating
Agencies that such substitution will not result in a downgrade,
qualification or withdrawal of the then current rating of any
Certificate. Such substitution of collateral is referred to herein as
"Defeasance." For purposes of this table, to the extent a Mortgagor may
elect to defease the related Mortgage Loan, such Mortgage Loan (other
than the Kilroy Loan) will be reflected in the "Lock-Out/Defeasance"
category. The Kilroy Loan is reflected in the "YM2" category because
the discount rate for the Yield Maintenance calculation is based on a
spread above the U.S. Treasury Rate.
(2) The Mortgage Loan generally requires the payment of a Prepayment
Premium in connection with any principal prepayment, in whole or in
part. Any Prepayment Premium will equal the present value, as of the
date of prepayment, of the remaining Monthly Payments from such date of
prepayment through the related stated maturity (including the Balloon
Payment), determined by discounting such payments at a U.S. Treasury
rate specified therein (or a specified number of basis points in excess
thereof), minus the then outstanding principal balance, subject to a
minimum Prepayment Premium equal to the indicated percentage of the
principal balance of such Mortgage Loan being prepaid ("Yield
Maintenance").
(3) The Mortgage Loan requires a Prepayment Premium equal to indicated
percentage of amount prepaid.
(4) Millions of dollars.
Key: YM = Yield Maintenance; T = U.S. Treasury Rate
*See Annex A and the Diskette for Mortgaged Property level information.
S-41
<PAGE>
BORROWER CONCENTRATION AND RELATED BORROWERS
TEN LARGEST MORTGAGE LOANS
The ten largest Mortgage Loans or groups of Mortgage Loans by Related
Borrowers by Initial Pool Balance are as follows:
The Kilroy Loan
The Loan. The largest Mortgage Loan (the "Kilroy Loan"), which represents
approximately 10.33% of the Initial Pool Balance, was originated by the
Seller on January 31, 1997 and has a principal balance as of the Cut-off Date
of $82,869,076. The Kilroy Loan is secured by a first deed of trust
encumbering thirteen properties, twelve of which are located in California
and one of which is located in Arizona (singularly, a "Kilroy Property" and
collectively, the "Kilroy Properties"). The Kilroy Loan was made to Kilroy
Realty Finance Partnership, L.P., a special purpose Delaware limited
partnership (the "Kilroy Borrower") which is controlled by Kilroy Realty
Corporation ("Kilroy"), a New York Stock Exchange listed real estate
investment trust which completed its initial public offering on January 31,
1997. As of June 30, 1997, Kilroy controlled approximately 2.5 million square
feet of commercial office space and 2.7 million square feet of industrial
space. Nine of the Kilroy Properties are improved by industrial buildings and
four of the Kilroy Properties are improved by office buildings.
The Kilroy Loan has a remaining amortization term of 287 months and
matures in December 2022. The Kilroy Loan may not be prepaid prior to March
1, 2001. However, the Kilroy Loan is subject to Defeasance, in whole or in
part, at any time on or after March 10, 2000. On or after March 1, 2001, the
Kilroy Loan may be prepaid, in whole but not in part, upon payment of a
Prepayment Premium based on a Yield Maintenance calculation. The Kilroy Loan
is an ARD Loan with an Anticipated Repayment Date of January 31, 2005; which
notwithstanding the foregoing, it may be prepaid, in whole or in part,
without payment of a Prepayment Premium at any time following the six months
preceding such Anticipated Repayment Date.
Additional terms and escrows for the Kilroy Loan are as set forth on Annex
A.
The Properties. The Kilroy Properties consist of thirteen office and
industrial properties (comprised of sixteen buildings) described in the table
below. Five of the industrial properties are net leased to single tenants. In
aggregate, as of August 1997, the Kilroy Properties were 96.51% occupied. The
Kilroy Airport Center is comprised of two class A office buildings totaling
701,307 square feet. Approximately 50% of this property is leased to Hughes
Space & Communications whose parent company, GM Hughes Electronics Corp., is
rated as of the Cut-off Date, "A" by Standard & Poor's. Westlake Plaza Center
II and 185 S. Douglas Street are class B office properties totaling 141,158
square feet. The La Palma Business Center is comprised of one 42,790 square
feet office building and two industrial buildings. There are eight additional
industrial properties at various locations throughout Southern California and
one industrial building, 5515 N. 27th Avenue, in Phoenix, Arizona.
S-42
<PAGE>
THE KILROY PROPERTIES
<TABLE>
<CAPTION>
GROSS OCCUPANCY
YEAR BUILT/ LEASABLE TYPE OF (AS OF
PROPERTY NAME RENOVATED LOCATION SQ. FEET PROPERTY MAJOR TENANTS AUG. 1997) VALUE
- ------------- --------- -------- -------- -------- ------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
(1) La Palma Business
Center........... 1986 Anaheim, CA 186,880 Industrial Bond Technologies 75.6%(A) $ 13,200,000
& Office Novacare Orthotics
CSTS, Inc.
(2) 1000 E. Ball
Road............. 1982 Anaheim, CA 100,000 Industrial Allen Bradley Company 100.0% $ 6,200,000
(3) 1230 S. Lewis
Street .......... 1982 Anaheim, CA 57,730 Industrial RGB Systems 100.0% $ 3,200,000
(4) 2031 E. Mariposa
Avenue .......... 1955/1990 El Segundo, CA 192,053 Industrial Mattel, Inc. 100.0% $ 16,000,000
(5) 2260 E. El
Segundo
Boulevard ....... 1979/1995 El Segundo, CA 113,820 Industrial Ace Medical Co. 100.0% $ 5,100,000
(6) 2265 E. El
Segundo
Boulevard........ 1978 El Segundo, CA 6,570 Industrial MSAS Cargo 100.0% $ 4,700,000
International
(7) 3332/3340 E. La
Palma Avenue ... 1966 Anaheim, CA 153,320 Industrial Furon Company 100.0% $ 9,400,000
Dovatron
Manufacturing
(8) 5115 N. 27th
Avenue .......... 1961 Phoenix, AZ 130,877 Industrial Festival Markets 100.0% $ 4,500,000
(9) 12691 Pala Drive . 1970 Garden Grove, CA 84,700 Industrial Rank Video Services 82.6% $ 5,400,000
America
(10) 12752 et al
Monarch Street . 1969-81 Garden Grove, CA 277,037 Industrial Cannon Equipment West 100.0% $ 10,200,000
(11) Kilroy Airport
Center ......... 1983 El Segundo, CA 701,307 Office Hughes Space and 97.6% $108,000,000
Communication
(12) Westlake Plaza
Centre II ...... 1990 Thousand Oaks, CA 81,158 Office LDDS Communications 100.0% $ 12,000,000
(13) 185 S. Douglas
Street ......... 1978 El Segundo, CA 60,000 Office Northwest Airlines 100.0% $ 6,800,000
</TABLE>
- ------------
(A) Does not include a fully executed lease to Rosemount Analytical for
45,581 square feet for which occupancy is scheduled for April 1998 and
which will raise occupancy to 97.5%.
Release and Substitution. The Kilroy Properties located at 185 South
Douglas Street, 2031 E. Mariposa Avenue, 3340 E. La Palma Avenue, 5115 N.
27th Avenue, and 12691 Pala Drive are eligible for release from the Kilroy
Loan after March 10, 2000 (the "Kilroy Releasable Properties"). The release
can be accomplished by substituting one or more properties for one or more of
the Kilroy Releasable Properties or by partial Defeasance. Any partial
Defeasance must defease 125% of the allocated loan amount of the Kilroy
Releasable Property to be released. The allocated loan amounts of the Kilroy
Releasable Properties are set forth in the Kilroy Loan documents. No
substitution or partial Defeasance may be effected without obtaining written
confirmation from each Rating Agency that such release will not cause such
Rating Agency to downgrade, qualify or withdraw any of its then current
ratings of any Certificates.
Property Management. The Kilroy Properties are managed by Kilroy Realty,
L.P., an affiliate of the Kilroy Borrower. The Kilroy Loan documents provide
that any future management agreement entered into by the Kilroy Borrower and
a third party will be subject to, inter alia, written confirmation from each
S-43
<PAGE>
Rating Agency that retention of such manager shall not result in a downgrade,
withdrawal or qualification of the then current ratings of any Certificates.
The Kilroy Loan documents further provide that the property manager can be
terminated with respect to the Kilroy Properties upon an event of default
under the Kilroy Loan.
Operating History:
<TABLE>
<CAPTION>
ACTUAL ORIGINATOR'S
1995 ACTUAL 1996 ACTUAL (2/97-7/97) UNDERWRITTEN
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Effective Gross Income
("EGI") .................. $29,201,341 $29,979,606 $14,861,753 $23,868,257
Expenses................... 6,095,407 5,274,561 2,407,988 6,107,660
- ----------- ----------- ----------- -----------
NOI........................ $23,105,934 $24,705,045 $12,453,765 $17,760,597
UW Cash Flow............... $15,057,455
Occupancy ................. 91.42% 97.87% 98.36% 88.40%
Operating Expense Ratio
(Expenses/EGI)("OER") ... 20.87% 17.59% 16.20% 25.59%
DSCR based on NOI.......... 2.88x 3.08x 3.11x 2.22x
DSCR based on UW Cash
Flow...................... 1.88x
</TABLE>
Lease Expiration Schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
GROSS LEASEABLE
YEAR SQUARE FEET SQUARE FEET
- ---- ----------- -----------
<S> <C> <C>
Vacant ... 104,457 4.71%
1998 ..... 207,067 9.35%
1999 ..... 206,413 9.32%
2000 ..... 249,896 11.28%
2001 ..... 472,863 21.34%
2002 ..... 29,314 1.32%
2003 ..... 211,966 9.57%
2004 ..... 386,884 17.46%
2005 ..... 169,281 7.64%
2006 ..... 177,311 8.00%
</TABLE>
Lockbox and Reserves. All revenues of the Kilroy Properties are collected
by the property manager and deposited into a rent account from which funds
are swept daily into a cash collateral account controlled by the Master
Servicer to fund a tax and insurance reserve sub-account, an interest escrow
sub-account, a seismic repair reserve sub-account, a tenant improvement and
leasing reserve sub-account, a deferred maintenance reserve sub-account, a
replacement reserve sub-account, and a mortgage escrow sub-account, with all
remaining funds being released to the Kilroy Borrower. After the Anticipated
Repayment Date, all sums which would otherwise have been released to the
Kilroy Borrower shall instead be applied to pay down the Kilroy Loan.
The Crystal Gateway Loan
The Loan. The second largest Mortgage Loan (the "Crystal Gateway Loan"),
which represents approximately 7.96% of the Initial Pool Balance, was
originated by the Seller on December 15, 1997, and has a principal balance as
of the Cut-off Date of $63,847,440. The Crystal Gateway Loan is secured by a
first deed of trust (the "Crystal Gateway Mortgage") encumbering a hotel (the
"Crystal Gateway Marriott") located in Arlington, Virginia.
The Crystal Gateway Loan was made to Eads Associates Limited Partnership,
a special purpose Virginia limited partnership (the "Crystal Gateway
Borrower"). The Crystal Gateway Borrower is sponsored by the Charles E. Smith
organization (the "Charles E. Smith Organization"), which also
S-44
<PAGE>
sponsored the Crystal Plaza Borrower and the Skyline Borrower. The Charles E.
Smith Organization is one of the largest real estate development,
construction, leasing and management organizations in the Washington, D.C.
metropolitan area. The firm's portfolio of owned and managed properties
includes over 20,000,000 square feet of commercial space, over 24,000
residential units and one million square feet of retail space.
The Crystal Gateway Loan has a remaining amortization term of 298 months
and matures in December 2017. The Crystal Gateway Loan may not be prepaid
prior to January 1, 2008. However, the Crystal Gateway Loan is subject to
Defeasance, in whole or in part, at any time between March 11, 2000 and
December 31, 2007, inclusive. On or after January 1, 2008, the Crystal
Gateway Loan may be prepaid, in whole but not in part, without payment of a
Prepayment Premium. The Mortgage Interest Rate for the Crystal Gateway Loan
will step up from 7.24% per annum to 7.39% per annum on January 1, 2008.
Thereafter, Monthly Payments on the Crystal Gateway Loan will be adjusted to
level payments which will fully amortize such loan sixty months prior to its
original amortization term. To the extent specified herein, the Crystal
Gateway Loan is treated for certain purposes herein as an ARD Loan with an
Anticipated Repayment Date of January 1, 2008, even though it is not an ARD
Loan. To the extent the Crystal Gateway Loan is not paid in full by January
1, 2008, the weighted average life of the Certificates may be extended.
Additional terms and escrows for the Crystal Gateway Loan are as set forth
on Annex A.
The Property. The Crystal Gateway Marriott is a twin tower, 18-story, 697
room (561,432 square feet), full service hotel located in the Crystal City
section of Arlington, Virginia, between the Pentagon and Washington National
Airport, approximately five miles from Washington, D.C.'s central business
district. The Crystal Gateway Marriott was built on a 145,565 square foot
site, one tower was built in 1982 and the other tower was built in 1986. The
Crystal Gateway Marriott contains two restaurants, a sports bar,
approximately 32,000 square feet of conference space, and 700 parking spaces.
Other amenities include an indoor/outdoor swimming pool and exercise
facilities. The 12-month average daily occupancy rate for calendar year 1997
for the Crystal Gateway Marriott was 82.3% with an average room rate of
$127.40. The room mix includes 374 double-double, 260 king, 59 suites and 4
presidential suites. The Crystal Gateway Marriott is leased to Marriott Hotel
Services, Inc. ("Marriott") pursuant to a triple-net operating lease (the
"Marriott Lease") at an annual rent equal to (a) 3% of gross sales and (b)
50% of net cash flow after debt service.
Property Management. The Crystal Gateway Marriott is managed by Marriott.
Operating History:
<TABLE>
<CAPTION>
TRAILING 12 MOS.
(9/96-8/97) ORIGINATOR'S
1995 ACTUAL 1996 ACTUAL ACTUAL UNDERWRITTEN
----------- ----------- ------ ------------
<S> <C> <C> <C> <C>
EGI .................. $36,254,807 $38,990,880 $41,191,848 $38,812,512
Expenses.............. 24,230,605 25,775,263 26,442,022 25,916,237
----------- ----------- ----------- -----------
NOI................... $12,024,202 $13,215,617 $14,749,826 $12,896,275
UW Cash Flow.......... $10,955,649
Occupancy ............ 78.90% 79.60% 81.60% 80.03%
OER................... 66.83% 66.11% 64.19% 66.77%
Revenue per Available
Room ................ $89.99 $93.97 $99.87 $94.57
Average Daily Rate
("ADR") ............. $114.06 $118.05 $122.39 $118.17
DSCR based on NOI .... 2.17x 2.38x 2.66x 2.33x
DSCR based on UW Cash
Flow................. 1.98x
</TABLE>
Lockbox and Reserves. Under the Marriott Lease, gross sales net of certain
expenses (including the 3% of gross sales described above) are required to be
deposited by Marriott into an account controlled
S-45
<PAGE>
by the Master Servicer. All sums deposited into such account are allocated to
a tax and insurance escrow sub-account (unless Marriott is retaining
sufficient funds under the Marriott Lease to pay taxes and insurance), a debt
service sub-account (until an amount equal to an entire calendar year's debt
service payments under the Crystal Gateway Loan shall be on deposit in such
sub-account) and a replacement reserve sub-account (unless Marriott is
retaining sufficient funds under the Marriott Lease to pay for recurring
replacements), with all remaining funds being released to the Crystal Gateway
Borrower and to Marriott.
Subordinate Debt. There is an unsecured revolving loan (the "Crystal
Gateway Junior Loan") from various partners in the Crystal Gateway Borrower
to the Crystal Gateway Borrower in the maximum principal balance of
$4,000,000 outstanding at any time. The Crystal Gateway Junior Loan is
subordinate to the Crystal Gateway Loan. Upon a default under the Crystal
Gateway Junior Loan the holder thereof will not be entitled to accelerate the
debt or pursue any remedies thereunder at any time that the Crystal Gateway
Loan is outstanding.
The Skyline Loan
The Loan. The third largest Mortgage Loan (the "Skyline Loan"), which
represents approximately 6.31% of the Initial Pool Balance was originated by
the Seller on December 3, 1997 and has a principal balance as of the Cut-off
Date of $50,615,148. The Skyline Loan is secured by a first deed of trust
encumbering an office building located in Fairfax County, Virginia (the
"Skyline Property"). The Skyline Loan was made to Twelfth Skyline Associates
Limited Partnership and Thirteenth Skyline Associates Limited Partnership,
each a special purpose Virginia limited partnership (collectively, the
"Skyline Borrower") sponsored by the Charles E. Smith Organization which also
sponsored the Crystal Plaza Borrower and the Crystal Gateway Borrower.
The Skyline Loan has a remaining amortization term of 358 months and
matures in January 2028. The Skyline Loan may not be prepaid prior to January
1, 2004. However, the Skyline Loan is subject to Defeasance, in whole or in
part, at any time between March 11, 2000 and December 31, 2003, inclusive. On
or after January 1, 2004, the Skyline Loan may be prepaid, in whole but not
in part, upon payment of a Prepayment Premium based on a Yield Maintenance
calculation. The Skyline Loan is an ARD Loan with an Anticipated Repayment
Date of January 1, 2010, therefore, notwithstanding the foregoing, it may be
prepaid, in whole but not in part, without payment of a Prepayment Premium at
any time six months preceding such Anticipated Repayment Date.
Additional terms and escrows for the Skyline Loan are as set forth on
Annex A.
The Property. The Skyline Property consists of two office buildings
located on approximately 6.23 acres in Falls Church, Virginia. It is
comprised of 509,808 net rental square feet of office space and 15,593 net
rentable square feet of retail space. Four Skyline Place is a 9-story,
multi-tenant office building with below grade parking and 257,135 net
rentable square foot property which was built in 1982. Five Skyline Place is
also a 9-story multi-tenant office building with below grade parking. It is a
291,982 net rentable square foot building which was built in 1984. Among the
larger tenants leasing space in the Skyline Property are the Justice
Department, the Army Corps of Engineers, the Air Force, the Internal Revenue
Service, and Electronic Data Systems. As of October 1997 the Skyline Property
was approximately 100% leased at an approximate average rent per square foot
of $21.54.
Property Management. The Skyline Property is managed by Charles E. Smith
Real Estate Services, L.P., an affiliate of the Skyline Borrower. The Skyline
Loan documents provide that the manager can be terminated upon the occurrence
of an event of default under the Skyline Loan or if the net operating income
for the Skyline Property in any fiscal year declines by more than 25% in such
fiscal year from the net operating income of the Skyline Property for the
fiscal year immediately preceding the closing date of the Skyline Loan.
S-46
<PAGE>
Operating History:
<TABLE>
<CAPTION>
TRAILING 12 MOS.
(9/96-8/97) ORIGINATOR'S
1995 ACTUAL 1996 ACTUAL ACTUAL UNDERWRITTEN
----------- ----------- ------ ------------
<S> <C> <C> <C> <C>
EGI ....................... $9,877,594 $10,644,717 $11,175,099 $10,950,804
Expenses .................. 3,933,976 3,538,678 3,557,669 3,682,660
---------- ----------- ----------- -----------
NOI ....................... $5,943,618 $ 7,106,039 $ 7,617,430 $ 7,268,144
UW Cash Flow .............. $ 6,585,988
Occupancy ................. 95.24% 99.44% 99.76% 95.00%
OER ....................... 39.83% 33.24% 31.84% 33.63%
DSCR based on NOI ......... 1.47x 1.76x 1.89x 1.80x
DSCR based on UW Cash
Flow...................... 1.63x
</TABLE>
Lease Expiration Schedule:
<TABLE>
<CAPTION>
PERCENTAGE
OF GROSS
SQUARE LEASABLE
YEAR FEET SQUARE FEET
- ---- ---- -----------
<S> <C> <C>
Vacant ... -- 0.00%
1998 ..... 56,975 10.84%
1999 ..... 65,877 12.53%
2000 ..... 121,250 23.06%
2001 ..... 93,224 17.73%
2002 ..... 52,411 9.97%
2003 ..... 31,357 5.96%
2011 ..... 5,300 1.01%
</TABLE>
Lockbox and Reserves. All revenues of the Skyline Property are collected
by the property manager and deposited into a rent account from which funds
are swept monthly into a cash collateral account controlled by the Master
Servicer. All funds deposited into the cash collateral account are allocated
to a tax and insurance escrow sub-account, a debt service sub-account, a
replacement reserve sub-account and a tenant improvement sub-account. Upon
the occurrence of an event of default under the Skyline Loan documents, or if
the DSCR falls below 1.2x, funds on deposit in the rent account shall be
swept into the cash collateral account on a daily basis.
Subordinate Debt. There are several unsecured loans (collectively, the
"Skyline Junior Loan") from various partners in the Skyline Borrower to the
Skyline Borrower which, as of the Cut-off Date, have an aggregate principal
balance of $18,100,552 (which as of December 1997, together with accrued
interest thereon represents an approximately $20,409,278 payment obligation
of the Skyline Borrower). The Skyline Junior Loan is subordinate to the
Skyline Loan. Upon a default under the Skyline Junior Loan the holder thereof
will not be entitled to accelerate the debt or pursue any remedies thereunder
at any time that the Skyline Loan is outstanding.
The 1065 Avenue of the Americas Loan
The Loan. The fourth largest Mortgage Loan (the "1065 Avenue of the
Americas Loan"), which represents approximately 4.97% of the Initial Pool
Balance, was originated by the Seller on November 5, 1997, and has a
principal balance as of the Cut-off Date of $39,904,509. The 1065 Avenue of
the Americas Loan is secured by a first mortgage encumbering an office
building located in midtown Manhattan (the "1065 Avenue of the Americas
Property"). The 1065 Avenue of the Americas Loan was made to TrizecHahn 1065
Avenue of the Americas, LLC (the "1065 Avenue of the Americas Borrower"), a
special purpose Delaware limited liability company which is controlled by
TrizecHahn, a New York Stock Exchange listed company which, as of December
31, 1997, managed approximately 67 million square feet of office and retail
space of which 40 million square feet was owned by TrizecHahn or its
affiliates.
S-47
<PAGE>
The 1065 Avenue of the Americas Loan has a remaining amortization term of
357 months and matures in December 2027. The 1065 Avenue of the Americas Loan
may not be prepaid prior to December 1, 2000. On or after December 1, 2000,
the 1065 Avenue of the Americas Loan may be prepaid, in whole but not in
part, upon payment of a Prepayment Premium based on a Yield Maintenance
calculation. After April 1, 2003, the 1065 Avenue of the Americas Loan may be
prepaid, in whole or in part, without payment of a Prepayment Premium. The
1065 Avenue of the Americas Loan is an ARD Loan with an Anticipated Repayment
Date of December 1, 2004.
Additional terms and escrows for the 1065 Avenue of the Americas Loan are
as set forth on Annex A hereto.
The Property. The 1065 Avenue of the Americas Property is a 585,824 square
feet office building located at the corner of Avenue of the Americas and West
40th Street in midtown Manhattan which was constructed in 1958. As of
September 1997, the 1065 Avenue of the Americas Property was approximately
90.4% occupied at an approximate average rent per square foot of $22.00. The
largest tenant, Chase Manhattan Bank, occupies approximately 11.50% of the
gross leasable square feet of the 1065 Avenue of the Americas Property.
Property Management. The 1065 Avenue of the Americas Property is managed
by TrizecHahn Office Properties Inc. (the "1065 Manager"), an affiliate of
the 1065 Avenue of the Americas Borrower. The 1065 Avenue of the Americas
Loan loan documents provide that the 1065 Manager can be terminated upon the
occurrence of any event of default under the 1065 Avenue of the Americas
Loan.
Operating History:
<TABLE>
<CAPTION>
TRAILING 12 MOS. ORIGINATOR'S
1995 ACTUAL 1996 ACTUAL ACTUAL UNDERWRITTEN
----------- ----------- ------ ------------
<S> <C> <C> <C> <C>
EGI ....................... $14,597,834 $13,759,517 N/A $15,090,100
Expenses .................. 8,743,118 7,765,197 N/A 8,108,012
----------- ----------- ----- -----------
NOI........................ $ 5,854,716 $ 5,994,320 N/A $ 6,982,088
NCF ....................... N/A $ 5,915,348
Occupancy ................. 97.80% 89.50% 90.40% 90.50%
OER ....................... 59.89% 56.44% N/A 53.73%
DSCR based on NOI.......... 1.80x 1.84x N/A 2.15x
DSCR based on UW Cash
Flow...................... 1.82x
</TABLE>
S-48
<PAGE>
Lease Expiration Schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
SQUARE GROSS LEASABLE
FEET SQUARE FEET
---- -----------
<S> <C> <C>
Vacant ... 55,888 9.64%
1998 ..... 34,152 5.89%
1999 ..... 39,153 6.75%
2000 ..... 9,742 1.68%
2001 ..... 47,842 8.25%
2002 ..... 42,423 7.32%
2003 ..... 72,159 12.44%
2004 ..... 53,208 9.18%
2005 ..... 81,308 14.02%
2006 ..... 53,407 9.21%
2007 ..... 16,795 2.90%
2008 ..... 9,349 1.61%
2010 ..... 64,418 11.11%
</TABLE>
Lockbox and Reserves. Commencing one month prior to the related
Anticipated Repayment Date, all rents from the 1065 Avenue of the Americas
Property will be required to be paid by the tenants directly into a cash
collateral account controlled by the Master Servicer. Funds deposited in such
cash collateral account shall be allocated to a tax and insurance
sub-account, a debt service sub-account, an operation and maintenance expense
sub-account and a curtailment reserve sub-account from which all Excess Cash
Flow shall be applied to pay down the 1065 Avenue of the Americas Loan.
The Hoechst Loan
The Loan. The fifth largest Mortgage Loan (the "Hoechst Loan"), which
represents approximately 4.46% of the Initial Pool Balance, was originated by
the Seller on November 7, 1997, and has a principal balance as of the Cut-off
Date of $35,810,400. The Hoechst Loan is secured by a first mortgage
encumbering an office building in Warren, New Jersey (the "Hoechst
Property"). The Hoechst Loan was made to JT Warren L.P., a special purpose
Georgia limited partnership (the "Hoechst Borrower").
The Hoechst Loan has a remaining amortization term of 249 months and
matures in December 2017. The Hoechst Loan may not be prepaid prior to
December 1, 2007. However, the Hoechst Loan is subject to Defeasance, in
whole or in part, at any time between December 1, 2001 and November 30, 2007,
inclusive. On or after December 1, 2007, the Hoechst Loan may be prepaid, in
whole but not in part, upon payment of a Prepayment Premium based on a
sliding scale prepayment calculation.
Additional terms and escrows for the Hoechst Loan are as set forth on
Annex A hereto.
The Property. The Hoechst Property is a 207,727 net rentable square foot
corporate headquarters office facility located on a 31.5 acre site within the
117 acre Somerset Hills Center at 30 Independence Boulevard, Warren, New
Jersey which was constructed in 1997. It is 100% occupied by Hoechst Celanese
Corporation ("Hoechst"). The Hoechst Property is contiguous to the Somerset
Hills Hilton and Route I-78. The Hoechst Property has four stories plus a
plaza level. There are 693 parking spaces in a four-story parking deck and
255 surface parking spaces. The Hoechst lease, which expires on April 30,
2012, provides for an average rent per square foot of $24.68 and three five
year renewal options. In addition to the base rent, Hoechst pays 100% of the
building's operating expenses other than expenses incurred for ordinary water
requirements.
The Tenant. Hoechst manufactures and markets chemicals, textile and
technical fibers, polyester resins and films, technical polymers and bulk
pharmaceuticals. Hoechst is an affiliate of the Hoechst Group of Frankfurt,
Germany, one of the world's largest producers of pharmaceuticals,
agricultural products and chemicals. Hoechst is rated "A+" by Standard &
Poor's.
S-49
<PAGE>
Property Management. The Hoechst Property is managed by Jamestown
Management Corporation, an affiliate of the Hoechst Borrower. The Hoechst
Loan documents provide that the property manager can be terminated after an
event of default occurs under the Hoechst Loan or if the net operating income
for the Hoechst Property in any year declines by more than 25% from the
fiscal year immediately preceding the closing date of the Hoechst Loan.
Operating History:
<TABLE>
<CAPTION>
ORIGINATOR'S
UNDERWRITTEN
------------
<S> <C>
EGI ........................ $5,195,595
Expenses ................... 103,912
----------
NOI ........................ $5,091,683
Cash Flow .................. $4,708,593
Occupancy .................. 100.00%
OER ........................ 2.00%
DSCR based on NOI .......... 1.55x
DSCR based on UW Cash Flow 1.43x
</TABLE>
Lockbox and Reserves. All revenues from the Hoechst Property are deposited
by Hoechst directly into a cash collateral account controlled by the Master
Servicer. Funds deposited in such cash collateral account are allocated to a
debt service sub-account, with all remaining funds being released to the
Hoechst Borrower. If Hoechst fails to renew its lease on or before April 30,
2011, all sums that would have otherwise been released to the Hoechst
Borrower shall first be allocated to a tax and insurance sub-account, a debt
service sub-account, an operation and maintenance sub-account, and a
reletting sub-account, with all remaining funds then being released to the
Hoechst Borrower.
The Shannon Enterprises Loan
The Loan. The sixth largest Mortgage Loan (the "Shannon Enterprises
Loan"), which represents approximately 4.46% of the Initial Pool Balance, was
originated by the Seller on February 28, 1997, and has a principal balance as
of the Cut-off Date of $35,789,344. The Shannon Enterprises Loan is secured
by cross-collateralized and cross-defaulted first deeds of trust encumbering
eleven apartment properties located in North Carolina (singularly, a "Shannon
Enterprises Property" and collectively, the "Shannon Enterprises
Properties"). The Shannon Enterprises Loan was made to Shannon Enterprises of
the Southeast, LLC, a special purpose North Carolina limited liability
company (the "Shannon Enterprises Borrower").
The Shannon Enterprises Loan has a remaining amortization term of 348
months and matures in March 2027. The Shannon Enterprises Loan may not be
prepaid prior to March 1, 2002. However, the Shannon Enterprises Loan is
subject to Defeasance, in whole or in part, at any time between March 1, 2000
and February 28, 2002 inclusive. On or after March 1, 2002, the Shannon
Enterprises Loan may be prepaid, in whole or in part, upon payment of a
Prepayment Premium based on a Yield Maintenance calculation. The Shannon
Enterprises Loan is an ARD Loan with an Anticipated Repayment Date of March
1, 2007; which, notwithstanding the foregoing, may be prepaid, in whole or in
part, without payment of a Prepayment Premium at any time following six
months preceding such Anticipated Repayment Date.
Additional terms and escrows for the Shannon Enterprises Loan are as set
forth on Annex A.
The Property. The Shannon Enterprises Properties consist of eleven
apartment complexes located in the Piedmont Triad region of North Carolina,
an eleven county region with the hub of the area consisting of the cities of
Greensboro, Winston-Salem, and High Point, North Carolina. The Piedmont Triad
region is the second-largest metropolitan area in North Carolina with a
Metropolitan Statistical Area ("MSA") of over 1.1 million people.
S-50
<PAGE>
THE SHANNON ENTERPRISES PROPERTIES
----------------------------------
<TABLE>
<CAPTION>
OCCUPANCY
YEAR BUILT/ (AS OF SEPT.
PROPERTY NAME # OF UNITS RENOVATED LOCATION 97) APPRAISED VALUE
------------- ---------- --------- -------- --- ---------------
<S> <C> <C> <C> <C> <C>
(1) Carolina Circle . 260 1972 Greensboro, NC 92.7% $8,375,000
(2) Creekbend ........ 268 1974 Greensboro, NC 94.8% $6,250,000
(3) Holiday Manor ... 94 1967 Greensboro, NC 92.6% $2,325,000
(4) Hunting Valley .. 96 1972 Greensboro, NC 99.0% $3,290,000
(5) McKnight Manor .. 140 1967 Greensboro, NC 91.4% $2,950,000
(6) Meadow Run ....... 132 1970 Greensboro, NC 93.9% $3,970,000
(7) Quail Creek ...... 160 1973 Greensboro, NC 94.4% $5,700,000
(8) Raintree ......... 230 1979 High Point, NC 96.5% $6,710,000
(9) Highland Hills ... 108 1973 Greensboro, NC 88.0% $2,900,000
(10) English Village 176 1959-66 Greensboro, NC 90.3% $2,750,000
(11) Skyline Village 169 1974 Winston Salem, NC 87.1% $2,425,000
</TABLE>
Release. No more than three of the Shannon Enterprises Properties may be
released during the term of the Shannon Enterprises Loan, no more than one of
which will be Hunting Valley, Meadow Run, Quail Creek, Raintree or Willow
Bend. Any such release is subject to the following conditions: (a) such
release must be accompanied by a partial prepayment or partial Defeasance of
the Shannon Enterprises Loan equal to 125% of the allocated loan amount of
the Shannon Enterprises Property to be released and (b) the DSCR of the
Shannon Enterprises Loan after such release must be not less than the greater
of (i) the DSCR prior to such release and (ii) 1.56x. Any partial prepayment
or partial Defeasance in order to release a Shannon Enterprises Property
shall be subject to the same terms and conditions described above applicable
to any prepayment or Defeasance.
Property Management. The Shannon Enterprises Properties are managed by
Alliance Management, Inc., an affiliate of the Shannon Enterprises Borrower.
The loan documents executed in connection with the Shannon Enterprises Loan
provide that the manager can be terminated upon an event of default under the
Shannon Enterprises Loan or if the DSCR for the Shannon Enterprises
Properties falls below 1.56x.
Operating History.
<TABLE>
<CAPTION>
SIX MONTHS ORIGINATOR'S
1995 ACTUAL 1996 ACTUAL ENDING 6/97 UNDERWRITTEN
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
EGI ....................... $8,436,373 $8,870,256 $4,460,931 $9,198,182
Expenses .................. 3,537,323 3,984,594 1,921,878 3,825,835
---------- ---------- ---------- ----------
NOI........................ $4,899,050 $4,885,662 $2,539,053 $5,372,346
========== ========== ========== ==========
Occupancy ................. 94.59% 93.97% 92.92% 92.54%
OER........................ 41.93% 44.92% 43.08% 41.59%
DSCR based on NOI ......... 1.56x 1.56x 1.62x 1.71x
DSCR based on UW Cash
Flow...................... 1.59x
</TABLE>
Lockbox and Reserves. All revenues of the Shannon Enterprises Property are
deposited by the property manager into a rent account from which sums are
swept daily into a cash collateral account controlled by the Master Servicer
to fund a tax and insurance reserve sub-account, a debt service payment
sub-account, a recurring replacement reserve sub-account, and, from and after
the related Anticipated Repayment Date or an event of default, an operation
and maintenance sub-account and a curtailment reserve sub-account from which
all Excess Cash Flow is applied to paydown the Shannon Enterprises Loan with,
prior to such Anticipated Repayment Date and provided no event of default has
occurred and is continuing, all remaining funds being released to the Shannon
Enterprises Borrower.
S-51
<PAGE>
The Crystal Plaza Loan
The Loan. The seventh largest Mortgage Loan (the "Crystal Plaza Loan"),
which represents approximately 4.23% of the Initial Pool Balance was
originated by the Seller on November 20, 1997, and has a principal balance as
of the Cut-off Date of $33,913,562. The Crystal Plaza Loan is secured by a
first deed of trust encumbering a multifamily apartment building located in
Arlington, Virginia (The "Crystal Plaza Property"). The Crystal Plaza Loan
was made to Smith Property Holdings Crystal Plaza L.L.C., a special purpose
Delaware limited liability company (the "Crystal Plaza Borrower") which is
controlled by Charles E. Smith Residential Realty Inc., a New York Stock
Exchange listed real estate investment trust which owns or manages over
24,000 residential units. Charles E. Smith Residential Reality, Inc. is an
affiliate of the Charles E. Smith Organization, the sponsor of the Crystal
Gateway Borrower and the Skyline Borrower.
The Crystal Plaza Loan has a remaining amortization term of 357 months and
matures in December 2027. The Crystal Plaza Loan may not be prepaid prior to
December 1, 2003. However, the Crystal Plaza Loan is subject to Defeasance,
in whole or in part, at any time between March 11, 2000 and November 30,
2003, inclusive. On or after December 1, 2003, the Crystal Plaza Loan may be
prepaid, in whole but not in part, with payment of a Prepayment Premium based
on a Yield Maintenance calculation. The Crystal Plaza Loan is an ARD Loan
with an Anticipated Repayment Date of November 1, 2009; which,
notwithstanding the foregoing, may be prepaid, in whole but not in part,
without payment of a Prepayment Premium at any time following six months
preceding such Anticipated Repayment Date.
Additional terms and escrows for the Crystal Plaza Loan are as set forth
on Annex A hereto.
The Property. The Crystal Plaza Property is a twelve story, 536 unit,
multifamily apartment building located at 2111 Jefferson Davis Highway in the
Crystal City section of Arlington, Virginia, between the Pentagon and
National Airport, approximately 5 miles from Washington D.C.'s central
business district. The Crystal Plaza Property was constructed in 1967.
Amenities include a 24-hour desk attendant, below grade garage with 581
parking spaces, pool, party room, laundry facilities, exercise room,
community room and a rooftop deck. As of October 1997 the Crystal Plaza
Property was approximately 98.3% leased at an approximate average rent per
unit of $1,269.
<TABLE>
<CAPTION>
SIZE WEIGHTED WEIGHTED RENT/ MONTHLY TOTAL
UNIT (SQUARE AVERAGE AVERAGE SQUARE TOTAL SQUARE
MIX FEET) SIZE RENT RENT FOOT RENT FEET
--- ----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Efficiency ......... 92 593-762 701 702-902 820 1.17 75,484 64,516
1 Bedroom--1 Bath . 190 847-1,051 930 958-1,060 995 1.07 189,016 176,650
2 Bedroom--1 Bath . 24 1,224 1,224 1,247-1,285 1,261 1.03 30,257 29,376
2 Bedroom--2 Bath . 149 1,197-1,442 1,321 1,259-1,402 1,348 1.02 200,838 196,900
2 Bedroom--2
Bath--Den ......... 23 1,572 1,572 1,474-1,550 1,509 0.96 34,710 36,156
3 Bedroom--2 Bath . 58 1,701 1,701 1,629-1,708 1,667 0.98 96,685 98,658
--- ------- -------
Totals.............. 536 626,989 602,256
=== ======= =======
Average............. 1,124 $1,170 $1.04
</TABLE>
Property Management. The Crystal Plaza Property is managed by the Charles
E. Smith Residential Realty, L.P., an affiliate of the Crystal Plaza
Borrower. The Crystal Plaza Loan documents provide that the property manager
can be terminated upon the occurrence of an event of default under the
Crystal Plaza Loan or if the net operating income for the Crystal Plaza
Property in any fiscal year declines by more than 25% in such fiscal year
from the net operating income of the Crystal Plaza Property for the fiscal
year immediately preceding the closing date of the Crystal Plaza Loan.
Lockbox and Reserves. All revenues of the Crystal Plaza Property are
collected by the property manager and deposited directly into a rent account
from which funds are swept monthly into a cash collateral account controlled
by the Master Servicer. All funds deposited into the cash collateral account
are allocated to a tax and insurance escrow sub-account, a debt service
sub-account and a replacement reserve sub-account. Upon the occurrence of an
event of default under the Crystal Plaza Loan documents, or if the DSCR falls
below 1.2x, funds on deposit in the cash collateral account shall be swept
into the cash collateral account on a daily basis.
S-52
<PAGE>
Subordinate Debt. The Crystal Plaza Property is encumbered by three deeds
of trust which are subordinate to the lien of the deed of trust securing the
Crystal Plaza Loan. Such subordinate liens secure the Crystal Plaza
Borrower's obligation to pay 5% of net profits (after the payment of debt
service and other expenses) attributable to the Crystal Plaza Property to the
fee owner of a parcel adjacent to the Crystal Plaza Property.
The Court at Deptford Loan
The Loan. The eighth largest Mortgage Loan (the "Deptford Loan"), which
represents approximately 3.76% of the Initial Pool was originated by the
Seller on September 22, 1997, and has a principal balance as of the Cut-off
Date of $30,202,056. The Deptford Loan is secured by a first mortgage (the
"Deptford Mortgage") encumbering a shopping center (the "Deptford Property")
called The Court at Deptford, located in Deptford, New Jersey. The Deptford
Loan was made to Almonesson Associates, L.P. (the "Deptford Borrower"), a
special purpose New Jersey limited partnership. The Deptford Borrower is an
affiliate of the Goldenberg Group. The Goldenberg Group, founded in 1984, has
developed and manages 1.8 million square feet of retail space in the Mid
Atlantic region.
The Deptford Loan has a remaining amortization term of 355 months and
matures in October 2012. The Deptford Loan may not be prepaid prior to
November 1, 2004. On or after November 1, 2004, the Deptford Loan may be
prepaid, in whole but not in part, upon payment of a Prepayment Premium based
on a Yield Maintenance calculation; provided, however, that notwithstanding
the foregoing, it may be prepaid, in whole but not in part, without payment
of a Prepayment Premium at any time following twenty-four months prior to
maturity.
Additional terms and escrows for the Deptford Loan are as set forth on
Annex A.
The Property. The Deptford Property is an anchored shopping center
comprising 343,472 leasable square feet of retail space located in Deptford
County in South-central, New Jersey within the Philadelphia MSA. It was
constructed in 1990 and has approximately 1,650 parking spaces. Based on the
Deptford Borrower's August, 1997 rent roll, the Deptford Property was
approximately 98.2% leased at an approximate average rent per square foot of
$11.98. Among the larger tenants leasing space at the Deptford Property are
Sam's Club (approximately 120,000 square feet), Circuit City (approximately
32,300 square feet), Sports Authority (approximately 40,200 square feet), RX
Place (approximately 27,100 square feet), Pier 1 Imports (approximately 9,680
square feet) and Ross Dress for Less (approximately 31,071 square feet). Two
restaurants, Red Lobster and The Olive Garden, are located in outparcels
which are not part of the Deptford Property.
Property Management. The Deptford Property is managed by Goldenberg
Management, Inc., an affiliate of the Deptford Borrower. The Deptford Loan
documents provide that the property manager can be terminated upon the
occurrence of an event of default under the Deptford Loan.
Operating History:
<TABLE>
<CAPTION>
8 MONTHS ORGINATOR'S
1995 ACTUAL 1996 ACTUAL ENDING 8/97 UNDERWRITTEN
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
EGI ....................... $4,996,281 $5,175,387 $3,451,671 $5,122,742
Expenses .................. 1,527,522 1,500,890 1,050,089 1,518,892
---------- ---------- ---------- ----------
NOI ....................... 3,468,759 3,674,497 2,401,582 3,603,850
========== ========== ========== ==========
Underwritten Cash Flow ... $3,441,129
Occupancy ................. 95.0% 97.0% 98.2% 97.4%
OER ....................... 30.6% 29.0% 30.4% 29.6%
DSCR based on NOI ......... 1.27x 1.35x 1.32x 1.32x
DSCR based on UW Cash
Flow...................... 1.26x
</TABLE>
S-53
<PAGE>
Lease Expiration Schedule.
<TABLE>
<CAPTION>
PERCENTAGE OF
SQUARE GROSS LEASABLE
FEET SQUARE FEET
---- -----------
<S> <C> <C>
Vacant... 6,493 1.89%
1998..... 4,800 1.40%
1999..... 1,600 0.47%
2000..... 38,608 11.24%
2001..... 73,741 21.39%
2002..... 17,330 5.05%
2003..... 2,000 0.58%
2004..... 6,670 1.94%
2010..... 160,200 46.64%
2011..... 32,300 9.41%
</TABLE>
Lockbox and Reserves. The Deptford Loan documents provide for reserves for
taxes, insurance and on-going replacements. The Deptford Loan documents do
not require the establishment of a lockbox or cash collateral account.
The Costco Loan
The Loan. The ninth largest Mortgage Loan (the "Costco Loan"), which
represents approximately 3.43% of the Initial Pool was originated by the
Seller on December 22, 1997, and has a principal balance as of the Cut-off
Date of $27,510,820. The Costco Loan is secured by a first mortgage (the
"Costco Mortgage") encumbering fee and leasehold interests in a shopping
center (the "Costco Property") located in Honolulu, Hawaii. The Costco Loan
was made jointly to Poseiden Proteus Partners and MacMaster Limited Partners,
both special purpose Hawaii limited partnerships (collectively, the "Costco
Borrower"). The principal owner of the Costco Borrower is part of the
McNaughton Group. The McNaughton Group is a diversified group of companies
that includes real estate development companies which have developed over 1.6
million square feet of retail space in Hawaii.
The Costco Loan has a remaining amortization term of 358 months and
matures in January 2009. The Costco Loan may not be prepaid prior to February
1, 2002. On or after February 1, 2002, the Costco Loan may be prepaid, in
whole but not in part, upon payment of a Prepayment Premium based on a Yield
Maintenance calculation; provided, however, that notwithstanding the
foregoing, it may be prepaid, in whole but not in part, without payment of a
Prepayment Premium at any time following twelve months prior to maturity.
Additional terms and escrows for the Costco Loan are as set forth on Annex
A.
The Property. The Costco Property is a 203,761 square foot retail center
located in the Ewa district of the County of Honolulu on the south side of
the island of Oahu, Hawaii. The Costco Property is comprised of three
concrete, tilt-up, buildings which were constructed in 1987 and is anchored
by Price Costco, which occupies approximately 131,607 square feet and as of
the Cut-off Date was rated "A-" by Standard & Poor's. Based on the Costco
Borrower's November, 1997 rent roll, the Costco Property was approximately
100% leased at an approximate average rent per square foot of $16.48. Among
the other larger tenants leasing space at the Costco Property are Title
Guaranty of Hawaii, Inc. (approximately 11,900 square feet), The Kennel Shop
(approximately 9,800 square feet) and Hobbies Hawaii (approximately 8,500
square feet).
Property Management. The Costco Property is managed by Chaney, Brooks &
Company. The Costco Loan documents provide that the property manager can be
terminated upon the occurrence of an event of default under the Costco Loan.
S-54
<PAGE>
Operating History:
<TABLE>
<CAPTION>
ORIGINATOR'S
1995 ACTUAL 1996 ACTUAL 9 MONTHS ENDING 9/97 UNDERWRITTEN
----------- ----------- -------------------- ------------
<S> <C> <C> <C> <C>
EGI ....................... $4,088,507 $4,103,345 $3,008,148 $3,949,948
Expenses .................. 900,614 913,111 686,447 934,807
---------- ---------- ---------- ----------
NOI ....................... 3,187,893 3,190,234 2,321701 3,015,141
========== ========== ========== ==========
Underwritten Cash Flow ... $2,908,568
Occupancy ................. 97.7% 99.0% 99.0% 93.5%
OER ....................... 22.0% 22.3 22.8% 26.4%
DSCR based on NOI ......... 1.35x 1.35x 1.31x 1.28x
DSCR based on UW Cash
Flow...................... 1.23x
</TABLE>
Lease Expiration Schedule.
<TABLE>
<CAPTION>
PERCENTAGE OF
SQUARE GROSS LEASABLE
FEET SQUARE FEET
---- -----------
<S> <C> <C>
Vacant... 2,240 1.10%
1999..... 6,516 3.20%
2000..... 21,158 10.38%
2001..... 6,386 3.13%
2002..... 3,120 1.53%
2004..... 26,164 12.84%
2008..... 138,177 67.81%
</TABLE>
Lockbox and Reserves. The Costco Loan documents provide for reserves for
taxes and insurance, immediate repairs and on-going replacements. The Costco
Loan documents do not require the establishment of a lockbox or cash
collateral account.
The One & Olney Square Loan
The Loan. The tenth largest Mortgage Loan (the "One and Olney Loan"),
which represents approximately 3.10% of the Initial Pool Balance, was
originated by the Seller on September 10, 1997, and has a principal balance
as of the Cut-off Date of $24,877,953. The One and Olney Loan is secured by a
first mortgage (the "One and Olney Mortgage") encumbering a shopping center
(the "One and Olney Property") known as The One and Olney Square Shopping
Center, located in Philadelphia, Pennsylvania. The One and Olney Loan was
made to Olney Square Associates, L.P., a Delaware limited partnership, and
Breslin Realty Associates, L.P., a special purpose Delaware limited
partnership (collectively, the "One and Olney Borrower"). The principal owner
of the One and Olney Borrower, Mr. Wilbur Breslin, has developed, acquired or
has an interest in over $155 million of commercial and residential properties
in the New York and Philadelphia metropolitan areas.
The One and Olney Loan has a remaining amortization term of 295 months and
matures in October 2007. The One and Olney Loan may not be prepaid prior to
November 1, 2002. On or after November 1, 2002, the One and Olney Loan may be
prepaid, in whole but not in part, upon payment of a Prepayment Premium based
on a Yield Maintenance calculation; provided, however, that notwithstanding
the foregoing, it may be prepaid, in whole but not in part, without payment
of a Prepayment Premium at any time following six months prior to maturity.
Additional terms and escrows for the One and Olney Loan are as set forth
on Annex A.
The Property. The One and Olney Property is an anchored shopping center
comprising 354,518 leasable square feet of retail space located in
Philadelphia, Pennsylvania, which was constructed in 1987. Based on the One
and Olney Borrower's February, 1998 rent roll, the One and Olney Property was
approximately 97.5% leased at an approximate average rent per square foot of
$11.29. Among the larger tenants leasing space at the One and Olney Property
are Shoprite Supermarkets, Inc. (approximately 55,196 square feet), Caldor
Holdings, Inc. (approximately 103,839 square feet), Suzette of Olney Square,
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Inc. (approximately 22,700 square feet), United States Postal Service
(approximately 26,974 square feet), Jerusalem Furniture Corp., (approximately
19,000 square feet) and Modell's Pa, Inc. (approximately 13,840 square feet).
Property Management. The One and Olney Center is managed by Kandor Realty
Management, Inc., an affiliate of the One and Olney Borrower. The One and
Olney Loan documents provide that the property manager can be terminated upon
the occurrence of an event of default under the One and Olney Loan.
Operating History:
<TABLE>
<CAPTION>
6 MONTHS ORIGINATOR'S
1995 ACTUAL 1996 ACTUAL ENDING 6/97 UNDERWRITTEN
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
EGI ....................... $4,823,281 $4,930,357 $2,297,567 $5,015,357
Expenses .................. 1,285,072 1,328,333 584,706 1,406,460
---------- ---------- ---------- ----------
NOI ....................... 3,538,209 3,602,024 1,712,861 3,608,897
========== ========== ========== ==========
Underwritten Cash Flow ... $3,398,611
Occupancy ................. 98.3% 97.2% 97.2% 95.0%
OER ....................... 26.6% 26.9% 25.4% 28.0%
DSCR based on NOI.......... 1.46x 1.49x 1.41x 1.49x
DSCR based on UW Cash
Flow...................... 1.40x
</TABLE>
Lease Expiration Schedule:
<TABLE>
<CAPTION>
PERCENTAGE OF
SQUARE GROSS LEASABLE
FEET SQUARE FEET
---- -----------
<S> <C> <C>
Vacant... 9,039 2.55%
1998..... 2,500 0.71%
1999..... 13,704 3.87%
2000..... 30,040 8.47%
2001..... 1,500 0.42%
2002..... 23,200 6.54%
2003..... 31,200 8.80%
2004..... 29,080 8.20%
2007..... 49,036 13.83%
2008..... 58,684 16.55%
2009..... 2,696 0.76%
2013..... 103,839 29.29%
</TABLE>
Lockbox and Reserves. The One and Olney Loan documents provide for
reserves for taxes, insurance, immediate repairs and on-going replacements.
The One and Olney Loan documents do not require the establishment of a
lockbox or cash collateral account.
BASIC CAPITAL MANAGEMENT
Nine of the Mortgage Loans, representing in the aggregate approximately
2.28% of the Mortgage Loans by principal balance as of the Cut-off Date, are
indirectly owned by publicly traded entities controlled by Basic Capital
Management, Inc. ("BCM"). The borrowing entities for each of these Mortgage
Loans are newly created, single purpose entities. None of these Mortgage
Loans are cross-collateralized or cross-defaulted with any other Mortgage
Loan. BCM is a privately-held Nevada corporation owned and controlled by the
family of Gene S. Phillips, former chairman of Southmark Corporation, a real
estate syndicator ("Southmark") and parent of San Jacinto Savings Association
("San Jacinto"). Southmark filed for bankruptcy in July 1989 and San Jacinto
was declared insolvent and placed in receivership by federal authorities in
December 1990. The nine Mortgage Loans are Woodland Hills Apartments, San
Antonio, Texas; Treehouse Apartments, Alamo Heights, Texas; East Point
Apartments,
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Mesquite, Texas; Villa Maria Health Care Center, Tucson, Arizona; Applecreek
Apartments, Dallas, Texas; Parkway Centre, Farmers Branch, Texas; Fairways
Apartments, Longview, Texas; Forest Ridge Apartments, Denton, Texas; and
Harbor Plaza Shopping Center, Aurora, Colorado.
EMBASSY SUITES AIRPORT/WESTSHORE.
One Mortgage Loan (the "Embassy Suites Loan") with a Cut-off Date
Principal Balance of $10,157,016 (representing approximately 1.27% of the
Mortgage Pool), is secured by a Mortgaged Property which also secures a
mortgage loan (the "Excluded Mortgage Loan") which is not part of the
Mortgage Pool. Pursuant to the terms of an intercreditor agreement (the
"Intercreditor Agreement"), the holder of the Excluded Mortgage Loan has
agreed to allow the holder of the related Mortgage Loan to implement and
pursue any actions, claims, negotiations, remedies and suits, agree to any
modification and waive any rights, provided such modification or waiver does
not modify the terms of the Excluded Mortgage Loan. The Excluded Mortgage
Loan will initially be held by the Seller. Moreover, pursuant to the terms of
the Intercreditor Agreement, the holders of the Excluded Mortgage Loan and
the related Mortgage Loan will share ratably all payments received with
respect to the Embassy Suites Loan and the Excluded Mortgage Loan. All
payments on both mortgage loans will be paid to the holder of the Embassy
Suites Loan. The Excluded Mortgage Loan has a principal balance as of the
Cut-off Date of $6,968,534 and accrues interest at an adjustable rate equal
to the sum of (a) the one month London Interbank Offered Rate as reported in
The Wall Street Journal and (b) 2.00%. The Excluded Mortgage Loan may be
prepaid in whole at any time without the payment of any prepayment
consideration. The information set forth herein with respect to Cut-off Date
Loan-to-Value (74.46%) and UW DSCR (1.78x) was determined giving effect to
principal balance of both the Embassy Suites Loan and the Excluded Mortgage
Loan.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
ARD Loans. Five of the Mortgage Loans representing approximately 30.30% of
the aggregate principal balance of the Mortgage Loans as of the Cut-off Date
are "ARD Loan." The ARD Loans substantially fully amortize over their stated
terms, which are at least 60 months after their related Anticipated Repayment
Dates (as defined below). If the related Mortgagor elects to prepay an ARD
Loan in full on the related Anticipated Repayment Date, a substantial amount
of principal will be due. If a Mortgagor elects not to prepay an ARD Loan on
or before its Anticipated Repayment Date, all or a substantial portion of
Excess Cash Flow (as defined below) collected after such date shall be
applied towards the prepayment of such ARD Loan. ARD Loans generally accrue
interest at a higher rate following the applicable Anticipated Repayment
Date. As used herein, the term "Mortgage Interest Rate" does not include the
portion of the interest rate attributable to the rate increase. The excess of
interest at such higher rate over interest at the Mortgage Interest Rate
(together with interest thereon) is referred to herein as Excess Interest.
The date on which all or substantially all of any Excess Cash Flow is
required to be applied toward prepayment of such loan and on which any such
Mortgage Loan begins accruing Excess Interest is referred to herein as the
"Anticipated Repayment Date." The Anticipated Repayment Date for any such ARD
Loan is set forth on Annex A.
Once the principal balance of an ARD Loan has been reduced to zero all
Excess Cash Flow will be applied to the payment of accrued Excess Interest.
With respect to any ARD Loan, payment of Excess Interest will be deferred
until the principal of such ARD Loan has been paid in full.
Commencing on the respective Anticipated Repayment Date each ARD Loan
generally will bear interest at a fixed rate (the "Revised Rate") per annum
equal to the Mortgage Interest Rate plus a specified percentage (no more than
2%, so long as the Mortgage Loan is included in the Trust Fund). Until the
principal balance of each such Mortgage Loan has been reduced to zero, such
Mortgage Loan will only be required to pay interest at the Mortgage Interest
Rate and the interest accrued at the excess of the related Revised Rate over
the related Mortgage Interest Rate will be deferred (such accrued and
deferred interest and interest thereon, if any, is "Excess Interest"). Excess
Interest so accrued will, except where limited by applicable law, not be
added to the principal balance of the related Mortgage Loan but will accrue
interest at the Revised Rate. Each Mortgagor under the ARD Loans has agreed
to have all revenue from the related Mortgaged Property deposited after the
Anticipated Repayment Date into a Lockbox Account controlled by the Master
Servicer.
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From and after the Anticipated Repayment Date, in addition to paying
interest (at the Mortgage Interest Rate) and principal (based on the
amortization schedule), the related Mortgagor generally will be required to
apply all monthly cash flow from the related Mortgaged Property to pay the
following amounts in the following order of priority: (i) required payments
for the tax and insurance fund and ground lease escrows fund, (ii) payment of
monthly debt service, (iii) payments to any other required escrow funds, (iv)
payment of operating expenses pursuant to the terms of an annual budget
approved by the Master Servicer or in an amount which is capped at 1/12 of
105% of the prior year's operating expenses, (v) principal on the Mortgage
Loan until such principal is paid in full and (vi) to Excess Interest. The
cash flow from the Mortgaged Property securing an ARD Loan after payments of
items (i) through (iv) above is referred to herein as "Excess Cash Flow." As
described below, each ARD Loan generally provides that the related Mortgagor
is prohibited from prepaying the Mortgage Loan until one to six months prior
to the Anticipated Repayment Date but, upon the commencement of such period,
may prepay the loan, in whole or in part, without payment of a Prepayment
Premium. The failure to pay an ARD Loan, including any Excess Interest due,
by the related Anticipated Repayment Date will not result in an event of
default or acceleration of the related Mortgage Loan. The Anticipated
Repayment Date for each ARD Loan is listed in Annex A.
The ARD Loans are as follows:
<TABLE>
<CAPTION>
LOAN LOAN NO. PRINCIPAL BALANCE
- ---- -------- -----------------
<S> <C> <C>
Kilroy...................... 1 $82,869,076
Skyline..................... 3 $50,615,148
1065 Avenue of the
Americas................... 4 $39,904,509
Shannon Enterprises......... 6 $35,789,344
Crystal Plaza............... 7 $33,913,562
</TABLE>
ESCROWS
Eighty-five Mortgage Loans which represent approximately 85.83% of the
Initial Pool Balance, provide for monthly escrows to cover property taxes on
the Mortgaged Properties and 79 of the Mortgage Loans, which represents
approximately 88.05% of the Initial Pool Balance, provide for monthly escrows
to cover insurance premiums on the Mortgaged Properties. With respect to the
Mortgage Loans which do not require monthly escrows to cover insurance
premiums, if the Mortgagor does not maintain the required insurance, then (i)
the Master Servicer may obtain such coverage at the cost of the Mortgagor or
(ii) with respect to most of the Mortgage Loans, the Master Servicer may
require monthly escrows in addition to providing force-placed coverage.
Seventy-nine of the Mortgage Loans, which represent approximately 77.88%
of the Initial Pool Balance, also require monthly escrows to cover ongoing
replacements of furniture, fixtures and equipment and/or capital
expenditures.
Eighteen of the Mortgage Loans, which represent approximately 28.31% of
the Initial Pool Balance, also required upfront or monthly escrows for the
full term or a portion of the term of the related Mortgage Loan to cover
anticipated re-leasing costs, including tenant improvements and leasing
commissions. Ten of the Mortgage Loans, which represent approximately 19.73%
of the Initial Pool Balance, have front-end escrows to cover various other
contingencies.
See Annex A and the Diskette for additional information pertaining to
Mortgage Loan escrows.
UNDERWRITING GUIDELINES AND PROCESS
MGT created, and provided each of the other Originators with, guidelines
establishing certain procedures with respect to underwriting the Mortgage
Loans, as described more fully below. The Mortgage Loans were generally
originated in accordance with such guidelines. In some instances, one or more
provisions of the guidelines were waived or modified where it was determined
not to adversely affect the Mortgage Loans in any material respect.
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Property Analysis. Each of the Originators is required to perform a site
inspection to evaluate the location and quality of each Mortgaged Property.
Such inspection includes an evaluation of functionality, design,
attractiveness, visibility, and accessibility, as well as convenience to
major thoroughfares, transportation centers, employment sources, retail areas
and educational or recreational facilities. Each of the Originators also is
required to assess the submarket in which the property is located to evaluate
competitive or comparable properties as well as market trends. In addition,
each of the Originators is to evaluate the property's age, physical
condition, operating history, leases and tenant mix, and management.
Cash Flow Analysis. Each of the Originators is required to review
operating statements provided by the Mortgagor and to make adjustments in
order to determine the debt service coverage ratio. See "Description of the
Mortgage Pool--Certain Characteristics of the Mortgage Loans" herein.
Appraisal and Loan-to-Value Ratio. For each Mortgaged Property, each of
the Originators is required to obtain a current full narrative appraisal
conforming at least to the requirements of FIRREA. The appraisal must be
based on the highest and best use of the Mortgaged Property and must include
an estimate of the current market value of the property in its current
condition. Each of the Originators is required to determine the loan-to-value
ratio of the Mortgage Loan at the date of origination based on the value set
forth in the appraisal.
Evaluation of Mortgagor. Each of the Originators is required to evaluate
the Mortgagor and its principals with respect to credit history and prior
experience as an owner and operator of commercial real estate properties. The
evaluation generally is to include obtaining and reviewing a credit report or
other reliable indication of the Mortgagor's financial capacity; obtaining
and verifying credit references and/or business and trade references; and
obtaining and reviewing certifications provided by the Mortgagor as to prior
real estate experience and current contingent liabilities. Finally, although
the Mortgage Loans generally are non-recourse in nature, in the case of
certain Mortgage Loans, the Mortgagor and certain principals thereof may be
required to assume legal responsibility for liabilities relating to fraud,
misrepresentation, misappropriation of funds, breach of environmental or
hazardous waste requirements and unauthorized transfer of title to the
property. Each of the Originators is required to evaluate the financial
capacity of the Mortgagor and such principals to meet any obligations that
may arise with respect to such liabilities.
Environmental Site Assessment. Each of the Originators is required at
origination to obtain or update an ESA for each Mortgaged Property prepared
by a qualified environmental firm approved by the Seller. Each of the
Originators is required to review the ESA to verify the absence of reported
violations of applicable laws and regulations relating to environmental
protection and hazardous waste. In cases in which the ESA identifies such
violations, each of the Originators must require the Mortgagor to carry out
satisfactory remediation activities prior to the origination of the Mortgage
Loan, or to establish an operations and maintenance plan and to place
sufficient funds in escrow at the time of origination of the Mortgage Loan to
complete such remediation within twelve months.
Physical Assessment Report. Each of the Originators is required at
origination to obtain a physical assessment report ("PAR") for each Mortgaged
Property prepared by a qualified structural engineering firm approved by the
Seller. Each of the Originators is required to review the PAR to verify that
the property is reported to be in satisfactory physical condition, and to
determine the anticipated costs of necessary repair, replacement and major
maintenance or capital expenditure needs over the term of the Mortgage Loan.
In cases in which the PAR identifies material repairs or replacements needed
immediately, each of the Originators is generally obligated to require the
Mortgagor to carry out such repairs or replacements prior to the origination
of the Mortgage Loan, or to place sufficient funds in escrow at the time of
origination of the Mortgage Loan to complete such repairs or replacements
within not more than twelve months.
Title Insurance Policy. The Mortgagor is required to provide, and each of
the Originators is required to review, a title insurance policy for each
Mortgaged Property. The title insurance policy must meet the following
requirements: (a) the risk in connection with any one mortgage loan assumed
by one title insurance company may not be more than 40% of the sum of such
company's capital, surplus and reserves (exceptions can be made where
re-insurance or co-insurance by another title insurance company
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<PAGE>
will cover excess risk), (b) the policy must be written by a title insurer
licensed to do business in the jurisdiction where the Mortgaged Property is
located, (c) the policy must be in an amount equal to the original principal
balance of the loan, (d) the protection and benefits must run to the
mortgagee and its successors and assigns, (e) the policy should be written on
a standard policy form of the American Land Title Association or equivalent
policy promulgated in the jurisdiction where the Mortgaged Property is
located and (f) the legal description of the Mortgaged Property in the title
policy must conform to that shown on the survey of the Mortgaged Property,
where a survey has been required.
Property Insurance. The Mortgagor is required to provide, and each of the
Originators is required to review, certificates of required insurance with
respect to the Mortgaged Property. Such insurance generally may include: (1)
commercial general liability insurance for bodily injury or death and
property damage; (2) an "All Risk of Physical Loss" policy; (3) if
applicable, boiler and machinery coverage; (4) if the Mortgaged Property is
located in a flood hazard area, flood insurance; and (5) such other coverage
as each of the Originators may require based on the specific characteristics
of the Mortgaged Property.
ADDITIONAL INFORMATION
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed, together with the
Pooling and Servicing Agreement, with the Securities and Exchange Commission
within fifteen days after the initial issuance of the Offered Certificates.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will include the following eight classes of Offered
Certificates designated as the Class A1, Class A2, Class A-3, Class B, Class
C, Class D, Class E and Class X Certificates. In addition to the Offered
Certificates, the Certificates will also include the Class F, Class G, Class
H, Class NR, Class R-I, Class R-II and Class R-III Certificates. Only the
Offered Certificates are offered hereby. The Certificates represent in the
aggregate the entire beneficial ownership interest in a Trust Fund consisting
of: (i) a pool of fixed rate Mortgage Loans and all payments under and
proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of
payments of principal and interest due on or before the Cut-off Date); (ii)
any Mortgaged Property acquired on behalf of the Trust Fund through
foreclosure or deed in lieu of foreclosure (upon acquisition, an "REO
Property"); (iii) such funds or assets as from time to time are deposited in
the Collection or Certificate Accounts or any account established in
connection with REO Properties (the "REO Account"); and (iv) the rights of
the mortgagee under all insurance policies with respect to the Mortgage
Loans.
The Class A1, Class A2 and Class A3 Certificates will evidence
approximately an initial 71.0% undivided interest in the Trust Fund. The
Class B Certificates will evidence approximately an initial 6.0% undivided
interest in the Trust Fund. The Class C Certificates will evidence
approximately an initial 5.0% undivided interest in the Trust Fund. The Class
D Certificates will evidence approximately an initial 6.0% undivided interest
in the Trust Fund. The Class E Certificates will evidence approximately an
initial 2.0% undivided interest in the Trust Fund.
The Offered Certificates (the "DTC Registered Certificates") will be
issued, maintained and transferred on the book-entry records of The
Depository Trust Company ("DTC") and its Participants. The DTC Registered
Certificates (other than the Class X Certificates) will be issued in minimum
denominations of $25,000 and integral multiples of $1 in excess thereof. The
Class X Certificates will be issued in denominations of $100,000 Notional
Amount and integral multiples of $1 Notional Amount.
The DTC Registered Certificates will be represented by one or more
certificates registered in the name of the nominee of DTC. The Company has
been informed by DTC that DTC's nominee will be Cede & Co. ("Cede"). No
person acquiring an interest in the DTC Registered Certificates (a
"Beneficial Owner") will be entitled to receive a Definitive Certificate (as
defined below) representing such person's interest, except as set forth below
under "--Book-Entry Registration of the Offered Certificates--Definitive
Certificates". Unless and until Definitive Certificates are issued for the
DTC Registered Certificates under the limited circumstances described herein,
all references to actions by Certificateholders with respect to the DTC
Registered Certificates shall refer to actions taken by DTC upon instructions
from its Participants, and all references herein to distributions, notices,
reports and statements to Certificateholders with respect to the DTC
Registered Certificates shall refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the DTC Registered
Certificates, for distribution to Beneficial Owners by DTC in accordance with
DTC procedures. The Beneficial Owners may elect to hold their Certificates
through DTC, in the United States, or Cedel Bank, societe anonyme ("CEDEL")
or Euroclear, in Europe, through participants of such systems, or indirectly
through organizations which are participants in such systems.
BOOK-ENTRY REGISTRATION OF THE OFFERED CERTIFICATES
Book-Entry Registration. The Offered Certificates will be initially issued
through the book-entry facilities of DTC, or CEDEL or the Euroclear System
("Euroclear") if they are participants of such systems, or indirectly through
organizations which are participants in such systems. As to any such class of
Offered Certificates, the record holder of such Certificates will be DTC's
nominee. CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositories (the
"Depositories"), which in turn will hold such positions in customers'
securities accounts in Depositories' names on the books of DTC.
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DTC is a limited-purpose trust company organized under the laws of the
State of New York, which holds securities for its participating organizations
("DTC Participants", and together with the CEDEL and Euroclear participating
organizations, the "Participants") and facilitates the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes in the accounts of Participants. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Other institutions
that are not Participants but clear through or maintain a custodial
relationship with Participants (such institutions, "Indirect Participants")
have indirect access to DTC's clearance system.
Because of time zone differences, the securities account of a CEDEL or
Euroclear Participant (each as defined below) as a result of a transaction
with a DTC Participant (other than a depositary holding on behalf of CEDEL or
Euroclear) will be credited during the securities settlement processing day
(which must be a business day for CEDEL or Euroclear, as the case may be)
immediately following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear Participant or CEDEL Participant on such
business day. Cash received in CEDEL or Euroclear as a result of sales of
securities by or through a CEDEL Participant or Euroclear Participant to a
DTC Participant (other than the depository for CEDEL or Euroclear) will be
received with value on the DTC settlement date, but will be available in the
relevant CEDEL or Euroclear cash account only as of the business day
following settlement in DTC.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants or Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by the relevant Depositories; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to
its Depository to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants or Euroclear Participants may not deliver
instructions directly to the Depositories.
CEDEL, as a professional depository, holds securities for its
participating organizations ("CEDEL Participants") and facilitates the
clearance and settlement of securities transactions between CEDEL
Participants through electronic book-entry changes in accounts of CEDEL
Participants, thereby eliminating the need for physical movement of
certificates. As a professional depository, CEDEL is subject to regulation by
the Luxembourg Monetary Institute.
Euroclear was created to hold securities for participants of Euroclear
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities
and cash. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian co-operative corporation
(the "Clearance Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Clearance
Cooperative. The Clearance Cooperative establishes policies for Euroclear on
behalf of Euroclear Participants. The Euroclear Operator is the Belgian
branch of a New York banking corporation which is a member bank of the
Federal Reserve System. As such, it is regulated and examined by the Board of
Governors of the Federal Reserve System and the New York State Banking
Department, as well as the Belgian Banking Commission. Securities clearance
accounts and cash accounts with the Euroclear Operator are governed by the
Terms and Conditions Governing Use of Euroclear and the related
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Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities
and cash from Euroclear, and receipts of payments with respect to securities
in Euroclear. All securities in Euroclear are held on a fungible basis
without attribution of specific certificates to specific securities clearance
accounts.
Distributions in respect of the DTC Registered Certificates will be
forwarded by the Trustee to DTC, and DTC will be responsible for forwarding
such payments to Participants, each of which will be responsible for
disbursing such payments to the Beneficial Owners it represents or, if
applicable, to Indirect Participants. Accordingly, Beneficial Owners may
experience delays in the receipt of payments in respect of their
Certificates. Under DTC's procedures, DTC will take actions permitted to be
taken by holders of any class of DTC Registered Certificates under the
Pooling and Servicing Agreement only at the direction of one or more
Participants to whose account the DTC Registered Certificates are credited
and whose aggregate holdings represent no less than any minimum amount of
Percentage Interests or voting rights required therefor. DTC may take
conflicting actions with respect to any action of Certificateholders of any
class to the extent that Participants authorize such actions. None of the
Depositor, the Trustee or any of their respective affiliates will have any
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the DTC Registered Certificates
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Beneficial Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Pooling and Servicing
Agreement; provided, however, that Beneficial Owners will be permitted to
request and receive information furnished to Certificateholders by the
Trustee subject to receipt by the Trustee of a certification in form and
substance acceptable to the Trustee stating that the person requesting such
information is a Beneficial Owner. Otherwise, the Beneficial Owners will be
permitted to receive information furnished to Certificateholders and to
exercise the rights of Certificateholders only indirectly through DTC, its
Participants and Indirect Participants.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of the Offered Certificates among
Participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Certificates. Certificates initially issued in book-entry form
will be issued in fully registered, certificated form to Beneficial Owners or
their nominees ("Definitive Certificates"), rather than to DTC or its nominee
only if (i) the Depositor advises the Trustee in writing that DTC is no
longer willing or able to properly discharge its responsibilities as
depository with respect to the Certificates and the Depositor is unable to
locate a qualified successor or (ii) the Depositor, at its option, elects to
terminate the book-entry system through DTC.
Upon the occurrence of an event described in the preceding paragraph, the
Trustee is required to notify, through DTC, Participants who have ownership
of DTC Registered Certificates as indicated on the records of DTC of the
availability of Definitive Certificates for their DTC Registered
Certificates. Upon surrender by DTC of the definitive certificates
representing the DTC Registered Certificates and upon receipt of instructions
from DTC for re-registration, the Trustee will reissue the DTC Registered
Certificates as Definitive Certificates issued in the respective principal
amounts owned by individual Beneficial Owners, and thereafter the Trustee
will recognize the holders of such Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
on the 15th day of each month or, if such 15th day is not a business day,
then on the next succeeding business day, commencing in April 1998 (each, a
"Distribution Date"). All distributions (other than the final distribution on
any Certificate) will be made by the Trustee to the persons in whose names
the Certificates are registered at the close of business on each Record Date,
which will be the last business day of the month preceding the
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month in which the related Distribution Date occurs. Such distributions 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 wiring instructions as provided in the Pooling and Servicing
Agreement or, if no such instructions have been provided, by check mailed to
the address listed for such Certificateholder on the Certificate Register.
The final distribution on any Certificate will be made in like manner, but
only upon presentment or surrender of such Certificate at the location
specified in the notice to the holder thereof of such final distribution. All
distributions made with respect to a class of Certificates on each
Distribution Date will be allocated pro rata among the outstanding
Certificates of such class based on their respective Percentage Interests.
The "Percentage Interest" evidenced by any Certificate is equal to the
initial denomination thereof as of the Delivery Date, divided by the initial
Class Balance or Notional Amount, as applicable, for such class. The
aggregate distribution to be made on the Certificates on any Distribution
Date shall equal the Available Distribution Amount.
The "Available Distribution Amount" for any Distribution Date is an amount
equal to (a) the sum of (i) the amount on deposit in the Collection Account
(as defined herein) as of the close of business on the related Determination
Date, which amount will include scheduled payments on the Mortgage Loans due
on or prior to the Due Date occurring in the Remittance Period immediately
preceding, and collected as of, such Determination Date (to the extent not
distributed on previous Distribution Dates) and unscheduled payments and
other collections on the Mortgage Loans collected during the related
Remittance Period and (ii) the aggregate amount of any P&I Advances made by a
Servicer or the Trustee in respect of such Distribution Date (not otherwise
included in clause (i) above) net of (b) the portion of the amount described
in clause (a)(i) hereof that represents (i) Monthly Payments due on a Due
Date subsequent to the end of the related Remittance Period, (ii) any amounts
payable or reimbursable therefrom to any Servicer or the Trustee or (iii) any
servicing and trustee compensation.
Pass-Through Rate on the Offered Certificates. The "Pass-Through Rates" on
the Class A1, Class A2, Class A3, Class B, Class C, Class D and Class E
Certificates are fixed and are set forth on the cover hereof. The
Pass-Through Rate on the Class X Certificates will be equal to the weighted
average of the Remittance Rates in effect from time to time on the Mortgage
Loans minus the weighted average (by Class Balance) of the Pass-Through Rates
on all other classes of Certificates. The Pass-Through Rate on the Class X
Certificates for the initial Distribution Date will be % per annum. The
"Remittance Rate" for any Mortgage Loan is equal to the excess of the
Mortgage Interest Rate thereon (without giving effect to any modification or
other reduction thereof following the Cut-off Date) over the sum of the
applicable Basic Servicing Fee Rate.
Interest Distributions on the Certificates. Subject to the distribution of
the Principal Distribution Amount to the Holders of classes of Certificates
of a higher priority, as described under "Priority of Distributions" below,
Holders of each class of Certificates will be entitled to receive on each
Distribution Date, to the extent of the Available Distribution Amount for
such Distribution Date (net of any Net Prepayment Premium) (the "Adjusted
Available Distribution Amount"), distributions allocable to interest in an
amount (the "Interest Distribution Amount") equal to the sum of interest
accrued during the period from and including the first day of the month
preceding the month of the Distribution Date (or from the Cut-off Date in the
case of the initial Distribution Date) to and including the last day of the
month preceding the month of the Distribution Date (calculated on the basis
of a 360-day year consisting of twelve 30-day months) on the Class Balance
(or the Notional Amount, in the case of the Class X Certificates) of such
class of Certificates outstanding immediately prior to such Distribution
Date, at the then-applicable Pass-Through Rate (the "Interest Accrual
Amount"), plus any shortfall as described in the penultimate sentence of this
paragraph, less such class' pro rata share, according to the Interest Accrual
Amount, of any interest shortfall not related to a Mortgagor delinquency or
default, such as Prepayment Interest Shortfalls (as defined herein) and
shortfalls associated with exemptions provided by the Relief Act (as defined
in the Prospectus), and less, with respect to each class of Certificates
other than the Class X, any Collateral Value Adjustment Capitalization Amount
(as defined herein) allocated to such class as described under
"--Subordination" below (and not reversed) (the "Collateral Value Adjustment
Reduction Amount"). The "Notional Amount" of the Class X Certificates will
equal the aggregate of the
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Class Balances of all the other Certificates. The Notional Amount does not
entitle the Class X to any distributions of principal. If the Adjusted
Available Distribution Amount for any Distribution Date is less than the
Interest Distribution Amount for such Distribution Date, the shortfall will
be part of the Interest Distribution Amount distributable to holders of
Certificates affected by such shortfall on subsequent Distribution Dates. Any
such shortfall will bear interest at the related Pass-Through Rate.
To the extent not necessary to reimburse the Master Servicer for
reductions in its compensation to cover Prepayment Interest Shortfalls, in
addition to the related Interest Distribution Amount, each class of
Certificates (other than the Class X Certificates) will receive on each
Distribution Date the product of (a) any Net Prepayment Premium paid with
respect to the Mortgage Loans if such Net Prepayment Premium is calculated by
reference to a U.S. Treasury rate, (b) the related Class Prepayment Fraction
and (c) the related Allocation Fraction. On each Distribution Date, the Net
Prepayment Premium not payable to the Master Servicer or the holders of a
class of Certificates, other than the Class X Certificates, will be paid to
the holders of the Class X Certificates. On each Distribution Date, the Net
Prepayment Premium not payable to the Master Servicer or the holders of the
Offered Certificates will be paid the holders of one or more classes of Other
Certificates. The "Class Prepayment Fraction" for any class of Offered
Certificates and any Distribution Date will equal a fraction the numerator of
which is the amount of principal paid to such class in reduction of the Class
Balance thereof on such Distribution Date and the denominator of which is the
amount of principal paid to all classes of Certificates in reduction of their
respective Class Balances on such Distribution Date. The "Allocation
Fraction" for any class of Offered Certificates and any Distribution Date
will equal a fraction (not greater than one and not less than zero) (x) the
numerator of which is the excess of (a) the Pass-Through Rate of such class
of Offered Certificates over (b) the discount rate used to calculate the
related Net Prepayment Premium and (y) the denominator of which is the excess
of (a) the Mortgage Interest Rate on the related Mortgage Loan over (b) the
discount rate referenced in clause (x) above. To the extent not necessary to
reimburse the Master Servicer, as described above, any Net Prepayment Premium
paid with respect to a Mortgage Loan which is not calculated by reference to
a U.S. Treasury rate will be distributed solely to the holders of the Class X
Certificates.
To the extent any Mortgage Loan is prepaid in full or in part between a
Determination Date and the related Due Date immediately following such
Determination Date, an interest shortfall may result on the second
Distribution Date following such Determination Date because interest on
prepayments in full or in part will only accrue to the date of payment (such
shortfall, a "Prepayment Interest Shortfall"). To the extent any Mortgage
Loan is prepaid in full or in part between the related Due Date and the
Determination Date immediately following such Due Date, the interest on such
prepayment will be included in the Available Distribution Amount for the
immediately succeeding Distribution Date (the "Prepayment Interest Excess").
If a Mortgage Loan is prepaid in full or in part during any Remittance
Period, any related Prepayment Interest Shortfall shall be offset to the
extent of any Prepayment Interest Excess and any Prepayment Premium collected
during such Remittance Period. If the Prepayment Interest Shortfall for any
Remittance Period exceeds any Prepayment Interest Excess and any Prepayment
Premiums collected during such period, such shortfall shall only be offset by
an amount up to the portion of the Master Servicing Fee payable to the Master
Servicer on the related Distribution Date. To the extent that any such
shortfall shall have been offset by a portion of the Master Servicing Fee,
the Master Servicer shall be entitled to any excess of the Prepayment
Interest Excess and Prepayment Premiums over the Prepayment Interest
Shortfall for any subsequent period.
The "Net Prepayment Premium" with respect to any Distribution Date will
equal the excess of (a) the total amount of Prepayment Premiums received
during the related Remittance Period over (b) the Prepayment Interest
Shortfall for any Remittance Period over the Prepayment Interest Excess for
any Remittance Period.
The Pass-Through Rate on the Class X Certificates will not be affected by
the deferral of interest or reduction of the Mortgage Interest Rate on any
Mortgage Loan by the Special Servicer or by the occurrence of either such
event in connection with any bankruptcy proceeding involving the related
Mortgagor. The amount of any resulting interest shortfall will be allocated
to the Certificates, in the order described under "Subordination" below.
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Principal Distributions on the Offered Certificates. Holders of a class
of Certificates will be entitled to receive on each Distribution Date in
reduction of the related Class Balance in the order described herein until
the related Class Balance is reduced to zero, to the extent of the balance of
the Adjusted Available Distribution Amount remaining after the payment of the
Interest Distribution Amount for such Distribution Date for such class of
Certificates and each other class of Certificates with a higher priority for
interest payments (as described under "Priority of Distributions" below),
distributions in respect of principal in an amount (the "Principal
Distribution Amount") equal to the aggregate of (i) all scheduled payments of
principal (other than Balloon Payments) due on the Mortgage Loans on the
related Due Date whether or not received and all scheduled Balloon Payments
received on or before the related Determination Date, (ii) if the scheduled
Balloon Payment is not received, with respect to any Balloon Mortgage Loans
on and after the Maturity Date thereof, the principal payment that would need
to be received in the related month in order to fully amortize such Balloon
Mortgage Loan with level monthly payments by the end of the term used to
derive scheduled payments of principal due prior to the related Maturity
Date, (iii) to the extent not previously advanced any unscheduled principal
recoveries received during the related Remittance Period in respect of the
Mortgage Loans, whether in the form of liquidation proceeds, insurance
proceeds, condemnation proceeds or amounts received as a result of the
purchase of any Mortgage Loan out of the Trust Fund and (iv) any other
portion of the Adjusted Available Distribution Amount remaining undistributed
after payment of any interest payable on the Certificates for the related or
any prior Distribution Date, including any principal prepayments received
during the related Remittance Period and Prepayment Interest Excess not
offset by any Prepayment Interest Shortfall occurring during the related
Remittance Period or otherwise required to reimburse the Master Servicer, as
described herein, and interest distributions on the Mortgage Loans, in excess
of interest distributions on the Certificates, resulting from the allocation
of certain amounts described in this clause (iv) to principal distributions
on the Certificates. The "Class Balance" for any class of Certificates on any
Distribution Date will equal the initial Class Balance thereof reduced by
distributions in reduction thereof and Realized Losses allocated thereto, as
described under "--Subordination" below, and increased by any Collateral
Value Adjustment Capitalization Amounts allocated thereto as described under
"--Subordination" below. The Class X Certificates do not have a Class Balance
and are therefore not entitled to any principal distributions.
PRIORITY OF DISTRIBUTIONS
The Adjusted Available Distribution Amount for each Distribution Date will
be applied in the following order of priority:
(a) to distributions of the Interest Distribution Amounts for such
Distribution Date on the Class A1, Class A2, Class A3 and Class X
Certificates, pro rata, based on their respective Interest Distribution
Amounts;
(b) to distributions of the Principal Distribution Amount for such
Distribution Date to Class A1 Certificates until the Class Balance thereof
is reduced to zero;
(c) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class A1
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class A2 Certificates, until the Class Balance
thereof is reduced to zero;
(d) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class A2
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class A3 Certificates, until the Class Balance
thereof is reduced to zero;
(e) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class B Certificates;
(f) to distribution of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class A3
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date to the Class B Certificates, until the Class Balance
thereof is reduced to zero;
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(g) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class C Certificates;
(h) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class B
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date to the Class C Certificates until the Class Balance
thereof is reduced to zero;
(i) to the distributions of the Interest Distribution Amount for such
Distribution Date on the Class D Certificates;
(j) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class C
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class D Certificates, until the Class Balance
thereof is reduced to zero;
(k) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class E Certificates;
(l) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class D
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class E Certificates, until the Class Balance
thereof is reduced to zero;
(m) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class F Certificates;
(n) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class E
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class F Certificates, until the Class Balance
thereof is reduced to zero;
(o) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class G Certificates;
(p) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class F
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class G Certificates, until the Class Balance
thereof is reduced to zero; and
(q) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class H Certificates;
(r) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class G
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class H Certificates, until the Class Balance
thereof is reduced to zero;
(s) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class NR Certificates; and
(t) to distributions of the Principal Distribution Amount (or the portion
thereof remaining after the distribution thereof to the Class H
Certificates in reduction of the Class Balance thereof to zero) for such
Distribution Date on the Class NR Certificates, until the Class Balance
thereof is reduced to zero.
To the extent only the Class A1, Class A2 and Class A3 Certificates are
outstanding on any Distribution Date, the Adjusted Available Distribution
Amount remaining after application pursuant to clause (a) above shall be
applied to distribution of the Principal Distribution Amount for such
Distribution Date to the Class A1, Class A2 and Class A3 Certificates pro
rata based on their respective Class Balances.
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OTHER CERTIFICATES
The Class F, Class G, Class H, Class NR, Class R-I, Class R-II and Class
R-III Certificates (the "Other Certificates") are not offered hereby. The
Pass-Through Rates on the Class F, Class G, Class H and Class NR Certificates
for any Distribution Date will equal %, %, % and %, respectively, per
annum. The aggregate Class Balance for the Class F, Class G, Class H and
Class NR Certificates will equal $80,236,512.
The Class R-I, Class R-II and Class R-III Certificates will not have a
Pass-Through Rate or a Class Balance.
SUBORDINATION
Neither the Offered Certificates nor the Mortgage Loans are insured or
guaranteed against losses suffered on the Mortgage Loans by any government
agency or instrumentality or by the Depositor, the Seller, the Trustee, the
Master Servicer, the Special Servicer, the Underwriter, or any affiliate
thereof.
In addition to the payment priorities described under "--Priority of
Distributions" above, certain Certificates will be subordinated to other
Certificates with respect to the allocation of Realized Losses. Realized
Losses on the Mortgage Loans will be allocated, first, to the Class NR, Class
H, Class G and Class F Certificates, in that order, second, to the Class E
Certificates, third, to the Class D Certificates, fourth, to the Class C
Certificates, fifth, to the Class B Certificates, and thereafter, to the
Class A1, Class A2 and Class A3 Certificates, on a pro rata basis, based on
Class Balance, in each case until the related Class Balance is reduced to
zero. The Class Balance of a class of Certificates will be reduced by the
principal portion of any Realized Losses allocated to such class.
In addition to Realized Losses, shortfalls will also occur as a result of
a Servicer's and the Trustee's right to receive payments of interest with
respect to unreimbursed advances, the related Special Servicer's right to
additional compensation with respect to Specially Serviced Mortgage Loans and
as a result of other Trust Fund expenses. Such shortfalls will be allocated
as described above to the classes of Certificates with the lowest payment
priority for purposes of the application of Available Distribution Amount in
the order described herein.
Within 30 days after the earliest to occur of (i) 90 days after the date
on which an uncured delinquency occurs in respect of a Mortgage Loan, (ii)
the date on which a receiver is appointed in respect of a Mortgaged Property,
(iii) the date on which a Mortgaged Property becomes an REO Property or (iv)
the date on which a change in the payment rate, Mortgage Interest Rate,
principal balance, amortization terms or Maturity Date of any Specially
Serviced Mortgage Loan becomes effective (the earliest of such dates, a
"Required Appraisal Date"), an appraisal will be obtained by the Special
Servicer from an independent MAI appraiser at the expense of the Trust Fund
(except if an appraisal has been conducted within the 12 month period
preceding such event). As a result of such appraisal, a Collateral Value
Adjustment may result, which Collateral Value Adjustment will be allocated,
for purposes of determining distributions of interest to the Certificates, in
the manner and priority described below. Notwithstanding the foregoing, a
Collateral Value Adjustment will be zero with respect to such a Mortgage Loan
if (i) the event giving rise to such Collateral Value Adjustment is the
extension of the maturity of such Mortgage Loan, (ii) the payments on such
Mortgage Loan were not delinquent during the twelve month period immediately
preceding such extension and (iii) the payments on such Mortgage Loan are
then current, provided, that if at any later date there occurs a delinquency
in payment with respect to such Mortgage Loan, the Collateral Value
Adjustment will be recalculated and applied as described above. In addition,
in any case, upon the occurrence of any event giving rise to a subsequent
Collateral Value Adjustment (including the delinquency referred to in the
immediately preceding sentence) more than twelve months after an appraisal
was obtained with respect to a Collateral Value Adjustment, the Special
Servicer will order a new appraisal as described above, within 30 days of the
occurrence of any such event giving rise to a subsequent Collateral Value
Adjustment and will adjust the amount of the Collateral Value Adjustment in
accordance therewith.
The "Collateral Value Adjustment" for any Distribution Date with respect
to any Mortgage Loan will be an amount equal to the excess of (a) the
principal balance of such Mortgage Loan over (b) the
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excess of (i) 90% of the current appraised value of the related Mortgaged
Property as determined by an independent MAI appraisal of such Mortgaged
Property over (ii) the sum of (A) to the extent not previously advanced by a
Servicer, all unpaid interest on such Mortgage Loan at a per annum rate equal
to the Mortgage Interest Rate, (B) all unreimbursed Advances and interest
thereon, (C) any unpaid Servicing and Trustee fees and (D) all currently due
and delinquent real estate taxes and assessments, insurance premiums and, if
applicable, ground rents in respect of such Mortgaged Property (net of any
amount escrowed or otherwise available for payment of the amount due on such
Mortgage Loan). The excess of the principal balance of any Mortgage Loan over
the related Collateral Value Adjustment is referred to herein as the
"Adjusted Collateral Value". A Collateral Value Adjustment shall result in a
reduction of the Interest Distribution Amount of one or more classes of
Certificates and shall not be a permanent reduction of the Class Balance (or
Notional Amount) of any class of Certificates prior to the occurrence of a
Realized Loss.
A "Realized Loss", in the case of any Mortgage Loan described in clause
(a) or clause (b) of the succeeding sentence, is equal to the sum of (a) the
Stated Principal Balance of any Loss Mortgage Loan, (b) interest thereon not
previously distributed or advanced to Certificateholders through the last day
of the month in which such Mortgage Loan became a Loss Mortgage Loan, (c) any
advances made by a Servicer or the Trustee which remain unreimbursed and (d)
any interest accrued on such advances (see "--Advances" below) as of such
time, reduced by any amounts recovered thereon as of such time and, in the
case of any Mortgage Loan described in clause (c) of the succeeding sentence,
is the amount determined to have been permanently forgiven as described in
such clause (c). A "Loss Mortgage Loan" is any Mortgage Loan (a) which is
finally liquidated, (b) with respect to which a determination has been made
that an advance which has been made or would otherwise be required to be
made, is not, or, if made, would not be, recoverable out of proceeds on such
Mortgage Loan or (c) with respect to which a portion of the principal balance
thereof has been permanently forgiven whether pursuant to a modification or a
valuation resulting from a proceeding initiated under the Bankruptcy Code.
The "Stated Principal Balance" of any Mortgage Loan as of any date of
determination is the principal balance as of the Cut-off Date minus the sum
of (i) the principal portion of each Monthly Payment due on such Mortgage
Loan after the Cut-off Date, to the extent received from the Mortgagor or
advanced and distributed to Certificateholders, (ii) any unscheduled amounts
of principal received with respect to such Mortgage Loans, to the extent
distributed to Certificateholders and (iii) any Realized Loss previously
allocated with respect to such Mortgage Loan.
The Collateral Value Adjustment will be allocated on each Distribution
Date, for purposes of determining distributions in respect of interest on
such Distribution Date, to the Class Balance of the most subordinate class of
Certificates that would otherwise receive distributions of interest, up to an
aggregate amount (net of any positive adjustments) equal to the Class Balance
thereof. For so long as a more senior class of Certificates is outstanding,
the amount of interest otherwise distributable on such Distribution Date to
each class of Certificates to which a Collateral Value Adjustment has been
allocated (to the extent not reversed) with respect to prior Distribution
Dates will be reduced by interest accrued at the related Pass-Through Rate on
the portion of the Class Balance of such class equal to the sum of the
aggregate Collateral Value Adjustment allocated to such class for such
Distribution Date and accrued and unpaid interest at the related Pass-Through
Rate on such Collateral Value Adjustment amount for prior Distribution Dates.
Such accrued and unpaid interest (the "Collateral Value Adjustment
Capitalization Amount") will be added to the Certificate Balance of such
class or classes of Certificates, and an equal amount will be included in the
Principal Distribution Amount to be distributed to holders of the most senior
classes of Certificates on such Distribution Date as described herein, to the
extent actually paid by the Mortgagor or received as interest in respect of
any REO Property. Interest distributions on the Class X Certificates will not
be affected by Collateral Value Adjustments. The Special Servicer is
required, within 30 days of each anniversary of the Required Appraisal Date,
to order an update of the prior appraisal (the cost of which will be advanced
by the Special Servicer and reimbursed thereto from the Trust Fund). The
Special Servicer will determine and report to the Trustee the updated
appraisal. A lower appraisal value will increase the Collateral Value
Adjustment. Such increase will be allocated as described above. A higher
appraised value will reverse the Collateral Value Adjustment by the amount of
the reported increase. Any such reversal or reduction will reduce the accrual
of the Collateral Value
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Adjustment Capitalization Amount and therefore reduce the amount otherwise
available to make distributions of principal on the classes of Certificates
senior to the class of Certificates to which such reversal is allocated.
However, in neither case will the Class Balance of the affected class or
classes of Certificates be reduced by such reversal or reduction except as
otherwise set forth herein. In such event, the total Collateral Value
Adjustment Capitalization Amount previously added to the related Class
Balance shall be reduced in proportion to the Collateral Value Adjustment
reversal.
ADVANCES
On the business day immediately preceding each Distribution Date, the
Master Servicer (and under certain circumstances, the Special Servicer) will
be obligated to make advances out of its own funds or funds held in the
Collection Account (as defined herein) that are not required to be part of
the Available Distribution Amount for such Distribution Date (each, a "P&I
Advance"), in an amount equal to the excess of all Monthly Payments (net of
the Servicing Fee) due over the amount actually received, subject to the
limitations described herein. To the extent that the Master Servicer fails to
make a P&I Advance required of it prior to such Distribution Date, the
Trustee shall make such required P&I Advance on such Distribution Date, as
provided in the Pooling and Servicing Agreement. In addition, the Master
Servicer will be required to advance certain property related expenses. The
Servicers generally may not advance any amounts, other than P&I Advances,
unless such advance is contemplated in the related Asset Strategy Report (as
defined herein) for the related Mortgage Loan or such advance is for one of
several purposes specified in the Pooling and Servicing Agreement as
"Property Protection Expenses." All such advances will be reimbursable to a
Servicer and the Trustee from late payments, insurance proceeds, liquidation
proceeds, condemnation proceeds or amounts paid in connection with the
purchase of such Mortgage Loan to the extent such amounts are not required to
be otherwise applied pursuant to the terms of the related Mortgage Loan or,
as to any such advance that is deemed not otherwise recoverable, from any
amounts required to be deposited in the Collection Account. Notwithstanding
the foregoing, a Servicer and the Trustee will be obligated to make any such
advance only to the extent that it determines in its reasonable good faith
judgment that such advance, if made, would be recoverable out of late
payments, insurance proceeds, liquidations, condemnation proceeds or certain
other collections on the related Mortgage Loan. None of the Servicers and the
Trustee will be required to advance the full amount of any Balloon Payment
not made by the related Mortgagor. To the extent a Servicer and the Trustee
are required to make a P&I Advance on and after the Due Date for such Balloon
Payment, such P&I Advance shall not exceed an amount equal to a monthly
payment calculated by the Special Servicer necessary to fully amortize the
related Mortgage Loan over the period used for purposes of calculating the
scheduled monthly payments thereon prior to the related Maturity Date. Any
failure by a Servicer to make a P&I Advance as required under the Pooling and
Servicing Agreement will constitute an event of default thereunder, in which
case the Trustee will be obligated to make any required advance, in
accordance with the terms of the Pooling and Servicing Agreement. The Trustee
will be entitled to a reimbursement for each P&I Advance (together with
interest thereon) made by it in the same manner and to the same extent, but
prior to, the Servicers.
Each Servicer and the Trustee shall be entitled to interest on the
aggregate amount of all advances made by such Servicer or the Trustee at a
per annum rate equal to the Prime Rate reported in The Wall Street Journal.
See "Risk Factors--Effect of Mortgagor Delinquencies and Defaults" herein.
CERTAIN PREPAYMENT, MATURITY AND YIELD CONSIDERATIONS
GENERAL
The yield to maturity on the Offered Certificates will be affected by the
rate of principal payments on the Mortgage Loans including, for this purpose,
prepayments, which may include amounts received by virtue of the
curtailments, voluntary repayment in full, repurchases by the Seller,
condemnation or casualty with respect to the Mortgaged Property or
foreclosure pursuant to a default on a Mortgage Loan ("Prepayment"). The rate
of principal payments on the Offered Certificates will correspond to the rate
of principal payments (including prepayments) on the related Mortgage Loans.
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Each Mortgage Loan either prohibits voluntary prepayments during a
certain number of years following the origination thereof and/or allows the
related Mortgagor to prepay the principal balance thereof in whole during a
certain number of years following the origination if accompanied by payment
of a Prepayment Premium. See Annex A hereto, the Diskette and the table
entitled "Prepayment Protection" under "Description of the Mortgage
Pool--Certain Characteristics of the Mortgage Loan" herein. Any Net
Prepayment Premium collected on a Mortgage Loan will be distributed to the
holders of the Certificates as described herein. See "Risk Factors--Special
Prepayment Considerations" herein, "Description of the
Certificates--Distributions--Interest Distributions on the Certificates" and
"Certain Prepayment, Maturity and Yield Considerations" herein, and "Yield
Considerations" in the Prospectus.
The yield to maturity on each class of the Offered Certificates will
depend on, among other things, the rate and timing of principal payments
(including prepayments, defaults, liquidations and purchases of Mortgage
Loans due to a breach of a representation and warranty) on the Mortgage Loans
and the allocation thereof to reduce the Class Balance or Notional Amount of
such class and the collection and allocation of any Prepayment Premium
thereon. The yield to investors on any Class of Offered Certificates will be
adversely affected by any allocation thereto of Prepayment Interest
Shortfalls on the Mortgage Loans, which may result from the distribution of
interest only to the date of a prepayment occurring during any month
following the related Determination Date (rather than a full month's
interest) to the extent any such interest shortfall is not offset by
Prepayment Premiums, any Prepayment Interest Excess or the Master Servicing
Fee for such Distribution Date.
ARD Loans may be prepayed in full on or after the Anticipated Repayment
Date without the payment of any Prepayment Premium. Excess Cash Flow on an
ARD Loan will be applied to reduce the principal thereof after its respective
Anticipated Repayment Date and the related Mortgage Rate will be reset at the
related Revised Rate. There can be no assurance that any of such Mortgage
Loan will be prepaid on that date or any date prior to maturity. The failure
to pay an ARD Loan by the related Anticipated Repayment Date will not result
in an event of default. For purposes of the discussion and calculation set
forth below, the Crystal Gateway Loan is treated as an ARD Loan. To the
extent the Crystal Gateway Loan is not paid in full by January 1, 2008 (the
Anticipated Repayment Date), the weighted average life of the Certificate may
be extended.
In general, if a class of Offered Certificates is purchased at a premium
and principal distributions thereon occur at a rate faster than anticipated
at the time of purchase, the investor's actual yield to maturity will be
lower than that assumed at the time of purchase. Conversely, if a class of
Offered Certificates is purchased at a discount and principal distributions
thereon occur at a rate slower than that assumed at the time of purchase, the
investor's actual yield to maturity will be lower than that assumed at the
time of purchase.
If a Mortgage Loan becomes a Specially Serviced Mortgage Loan, the Special
Servicer may adopt a servicing strategy which affects the yield to maturity
of one or more classes of Offered Certificates.
The assumed final Distribution Date for the Certificates will be the
Distribution Date in January 2030, which is the first Distribution Date
following the second anniversary of the date at which all the Mortgage Loans
have zero balances, assuming no prepayments, all ARD Loans will pay on their
respective Anticipated Repayment Dates, and that the Mortgage Loans which are
Balloon Loans fully amortize according to their amortization schedule and no
Balloon Payment is made.
WEIGHTED AVERAGE LIFE OF THE OFFERED CERTIFICATES
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average life of the Offered
Certificates will be influenced by the rate at which principal payments
(including scheduled payments, principal prepayments, condemnation proceeds
and payments made pursuant to any applicable policies of insurance) on the
Mortgage Loans are made. Principal payments on the Mortgage Loans may be in
the form of scheduled amortization or prepayments (for this purpose, the term
"prepayment" includes prepayments, partial prepayments and liquidations due
to a default or other dispositions of the Mortgage Loans).
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Prepayments on loans are commonly measured relative to a prepayment
standard or model, such as the constant prepayment rate prepayment model
("CPR"). CPR represents a constant assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans for the
life of such loans. Neither CPR nor any other prepayment model or assumption
purports to be a historical description of prepayment experience or a
prediction of the anticipated rate of prepayment of any pool of loans,
including the Mortgage Loans.
The table of Percent of Initial Class Balance Outstanding for each class
of the Offered Certificates at each CPR set forth below indicates the
weighted average life of such Certificates and sets forth the percentage of
the initial principal amount of such Certificates that would be outstanding
after each of the dates shown at the indicated CPR. The table has been
prepared on the basis of the characteristics of the Mortgage Loans in the
attached diskette and on the basis of the following assumptions: (i) the
Mortgage Loans prepay at the indicated CPR; (ii) the Maturity Date of each of
the Balloon Mortgage Loans is not extended; (iii) distributions on the
Offered Certificates are received in cash, on the 15th day of each month,
commencing in April 1998; (iv) no defaults or delinquencies in, or
modifications, waivers or amendments respecting, the payment by the
Mortgagors of principal and interest on the Mortgage Loans occur; (v)
prepayments represent payment in full of individual Mortgage Loans and are
received on the respective Due Dates and include a month's interest thereon;
(vi) there are no repurchases of Mortgage Loans due to breaches of any
representation and warranty, or pursuant to an optional termination as
described under "Description of the Pooling and Servicing
Agreement--Termination" or otherwise; (vii) the Offered Certificates are
purchased on March 10, 1998; (viii) all of the ARD Loans are fully prepaid on
their related Anticipated Repayment Date and all of the other Mortgage Loans
are paid in full on their Maturity Date; and (ix) any Mortgage Loan maturing
after the first and prior to the fifteenth day of any month will be assumed
to mature on the first day of such month and any Mortgage Loan maturing on or
after the fifteenth day of any month will be assumed to mature on the first
day of the next month.
Variations in the actual prepayment experience and the balance of the
Mortgage Loans that prepay may increase or decrease the percentage of initial
Class Balance (and weighted average life) shown in the following table. Such
variations may occur even if the average prepayment experience of all such
Mortgage Loans is the same as any of the specified assumptions.
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<PAGE>
PERCENT OF INITIAL CLASS BALANCE OUTSTANDING
AT THE FOLLOWING PERCENTAGES OF CPR (1)
<TABLE>
<CAPTION>
CLASS A1 CLASS A2 CLASS A3 CLASS B CLASS C CLASS D CLASS E
-------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
DISTRIBUTION
DATE
Initial percentage
March 1999 .........
March 2000 .........
March 2001 .........
March 2002 .........
March 2003 .........
March 2004 .........
March 2005 .........
March 2006 .........
March 2007 .........
March 2008 .........
March 2009 .........
March 2010 .........
March 2011 .........
March 2012 .........
March 2013 .........
March 2014 .........
March 2015 .........
March 2016 .........
March 2017 .........
March 2018 .........
March 2019 .........
March 2020 .........
March 2021 .........
March 2022 .........
March 2023 .........
Weighted Average
life in years (2)
</TABLE>
- ------------
(1) Prepayments are assumed to occur after the Lock-out Period and/or yield
maintenance penalty period.
(2) The weighted average life of a class of Offered Certificates is
determined by (i) multiplying the amount of each distribution of
principal by the number of years from the date of issuance to the
related Distribution Date, (ii) adding the results and (iii) dividing
the sum by the total principal distributions on such class of
Certificates.
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CLASS X CERTIFICATES YIELD CONSIDERATIONS
The following table indicates the sensitivity of the pre-tax yield to
maturity on the Class X Certificates to various constant rates of prepayment
on the Mortgage Loans by projecting the monthly aggregate payments on the
Class X Certificates and computing the corresponding pre-tax yields to
maturity on a corporate bond equivalent basis, based on the assumptions
described in clauses (i) through (ix) in the second paragraph preceding the
table entitled "Percent of Initial Class Balance Outstanding at the Following
Percentages of CPR" under the heading "Certain Prepayment, Maturity and Yield
Considerations -- Weighted Average Life of the Offered Certificates" herein,
including the assumptions regarding the performance of the Mortgage Loans
which may differ from the actual performance thereof and assuming the
aggregate purchase price and Pass-Through Rate set forth below and assuming
further that the initial Notional Amount of the Class X Certificates is as
set forth herein. The yield maintenance calculations are based on the market
yield on of actively traded Treasury securities of appropriate
maturities. Any differences between such assumptions and the actual
characteristics and performance of the Mortgage Loans and of the Certificates
may result in yields being different from those shown in such table.
Discrepancies between assumed and actual characteristics and performance
underscore the hypothetical nature of the table, which are provided only to
give a general sense of the sensitivity of yields in varying prepayment
scenarios.
PRE-TAX YIELD TO MATURITY OF THE CLASS X CERTIFICATES
ASSUMED
PURCHASE PRICE
AS A PERCENTAGE CPR PREPAYMENT ASSUMPTION RATE
OF THE NOTIONAL ASSUMED ------------------------------
AMOUNT PASS-THROUGH RATE (1) 0% 2% 4% 6%
------ --------------------- -- -- -- --
% % % % % %
- ------------
(1) Calculated based on the weighted average of the Remittance Rates on
the Mortgage Loans as of the Cut-off Date and the initial weighted
average of the Pass-Through Rates of the Certificates. The
Pass-Through Rate on the Class X Certificates will be subject to
adjustment on each Distribution Date.
Each pre-tax yield to maturity set forth in the preceding table was
calculated by determining the monthly discount rate which, when applied to
the assumed stream 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 listed in the table. Accrued interest is
included in the assumed purchase price of the Class X Certificates and is
used in computing the corporate bond equivalent yields shown. These yields do
not take into account the different interest rates at which investors may be
able to reinvest funds received by them as distributions on the Class X
Certificates, and thus do not reflect the return on any investment in the
Class X Certificates when, as applicable, any reinvestment rates other than
the discount rates set forth in the preceding table are considered.
Notwithstanding the assumed prepayment rates reflected in the preceding
table, it is highly unlikely that the Mortgage Loans will be prepaid
according to one particular pattern. For this reason and because the timing
of cash flows is critical to determining yields, the pre-tax yield to
maturity on the Class X Certificates is likely to differ from those shown in
the table, even if all of the Mortgage Loans prepay at the indicated constant
percentages of CPR over any given time period or over the entire life of the
Certificates.
There can be no assurance that the Mortgage Loans will prepay at any
particular rate or that the yield on the Class X Certificates will conform to
the yields described herein. Moreover, the various remaining terms to
maturity of the Mortgage Loans could produce slower or faster principal
distributions than indicated in the preceding table at the various constant
percentages of CPR specified, even if the weighted average remaining term to
maturity of the Mortgage Loans is as assumed. Investors are urged to make
their investment decisions based on their determinations as to anticipated
rates of prepayment under a variety of scenarios. Investors in the Class X
Certificates should fully consider the risk that an extremely
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rapid rate of prepayments on the Mortgage Loans could result in the failure
of such investors to fully recover their investments. In addition, holders of
the Class X Certificates generally have rights to relatively larger portions
of interest payments on Mortgage Loans with higher Mortgage Interest Rates;
thus, the yield on the Class X Certificates will be materially and adversely
affected to a greater extent than on the other Offered Certficates if the
Mortgage Loans with higher Mortgage Interest Rates prepay faster than the
Mortgage Loans with lower Mortgage Rates.
For additional considerations relating to the yield on the Certificates,
see "Yield Considerations" in the Prospectus.
The yield to maturity on the Class X Certificates will be extremely
sensitive to losses on the Mortgage Loans (and the timing thereof) because
any such losses will be allocated to reduce the Class Balance of the
Certificates and therefore will reduce the Notional Amount of the Class X
Certificates.
Investors in the Class X Certificates should fully consider the risk that
Realized Losses on the Mortgage Loans could result in a failure of such
investors to fully recover their investments.
MASTER SERVICER AND SPECIAL SERVICER
MASTER SERVICER
Dover House Capital, LLC ("Dover House") is the Master Servicer. Dover
House was organized under the laws of the state of Georgia in 1996 as a
limited liability company. Dover House is a real estate financial services
company which provides commercial and multifamily mortgage loan origination
services exclusively for MGT and provides loan servicing and asset management
for large pools of commercial and multifamily real estate assets. Dover
House's address is 400 Perimeter Center Terrace, Suite 575, Atlanta, Georgia
30346.
As of January 1, 1998, Dover House was responsible for the servicing of
approximately 249 commercial and multifamily loans with an aggregate
principal balance of approximately $1.6 billion, the collateral for which is
located in 33 states and Canada. Property type concentrations within the
portfolio include multifamily, office, retail, hotel/motel and other types of
income producing properties.
Dover House may have a direct or indirect interest in approximately 12% of
the Class NR Certificates.
The information set forth herein concerning Dover House has been provided
by it and neither the Depositor nor the Underwriter makes any representation
or warranty as to the accuracy or completeness of such information.
SPECIAL SERVICER
The duties of the Special Servicer will be performed by CRIIMI MAE
Services Limited Partnership, a Maryland limited partnership ("CRIIMI MAE"),
the general partner of which is CRIIMI MAE Management, Inc. As of December
31, 1997, CRIIMI MAE was responsible for performing certain servicing
functions with respect to approximately 3,600 commercial and multifamily
loans with an aggregate principal balance of approximately $16.5 billion, the
real property securing which is located in 49 states, Puerto Rico and the
District of Columbia. CRIIMI MAE has been approved as a special servicer for
investment grade-rated commercial and multifamily mortgage-backed securities
by Fitch and Standard & Poor's. The information set forth herein concerning
CRIIMI MAE has been provided by it, and neither the Depositor nor the
Underwriter makes any representation or warranty as to the accuracy or
completeness of such information.
CRIIMI MAE has indicated its intention to purchase approximately 88% of
the Class NR Certificates.
RESPONSIBILITIES OF MASTER SERVICER
Under the Pooling and Servicing Agreement, the Master Servicer is required
to service and administer the Mortgage Loans solely on behalf of and in the
best interests of and for the benefit of the
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Certificateholders, in accordance with the terms of the Pooling and Servicing
Agreement and the Mortgage Loans and to the extent consistent with such
terms, with the higher of (a) the standard of care, skill, prudence and
diligence with which the Master Servicer services and administers mortgage
loans that are held for other portfolios that are similar to the Mortgage
Loans and (b) the standard of care, skill, prudence and diligence with which
the Master Servicer services and administers mortgage loans for its own
portfolio that are similar to the Mortgage Loans, in either case, giving due
consideration to customary and usual standards of practice of prudent
institutional multifamily and commercial mortgage lenders, loan servicers and
asset managers (with respect to the Master Servicer, the "Servicing
Standard") and without regard to (a) any relationship between itself and any
Mortgagor, (b) any ownership of the Certificates, (c) its obligation to make
advances, (d) any debt that it extended to any Mortgagor and (e) any
servicing compensation to which such Servicer may be entitled.
The Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or using
its best efforts to cause the Mortgagor under each Mortgage Loan to maintain)
hazard, business interruption and general liability insurance policies (and,
if applicable, rental interruption policies) as described herein and filing
and settling claims thereunder; maintaining escrow or impoundment accounts of
Mortgagors for payment of taxes, insurance and other items required to be
paid by any Mortgagor pursuant to the Mortgage Loan; processing, in
consultation with the Special Servicer, assumptions or substitutions in those
cases where the Master Servicer has determined not to enforce any applicable
due-on-sale clause; demanding that the Mortgagor cure delinquencies;
inspecting and managing Mortgaged Properties under certain circumstances; and
maintaining records relating to the Mortgage Loans.
RESPONSIBILITIES OF SPECIAL SERVICER
The servicing responsibility on a particular Mortgage Loan will be
generally transferred to the Special Servicer upon the occurrence of certain
servicing transfer events (each, a "Servicing Transfer Event"), including the
following: (i) the Mortgage Loan becomes a "Defaulted Mortgage Loan" because
it is more than 60 days delinquent in whole or in part in respect of any
monthly payment or is delinquent in whole or in part in respect of the
related Balloon Payment; (ii) the related Mortgagor has entered into or
consented to bankruptcy, appointment of a receiver or conservator or a
similar insolvency or similar proceeding, or the Mortgagor has become the
subject of a decree or order for such a proceeding; (iii) the Master Servicer
shall have received notice of the foreclosure or proposed foreclosure of any
other lien on the Mortgaged Property; (iv) the related Mortgagor admits in
writing its inability to pay its debts generally as they become due, files a
petition to take advantage of any applicable insolvency or reorganization
statute, makes an assignment for the benefit of its creditors, or voluntarily
suspends payment of its obligations; (v) any other default has occurred which
has materially and adversely affected the value of the related Mortgage Loan
and has continued unremedied for the applicable grace period specified in the
related Mortgage Note; (vi) the related Mortgaged Property becomes an REO
Property; or (vii) if for any reason an assumption agreement cannot be
entered into upon the transfer by the related Mortgagor of the Mortgaged
Property. A Mortgage Loan serviced by the Special Servicer is referred to
herein as a "Specially Serviced Mortgage Loan". The Special Servicer will
collect certain payments on such Specially Serviced Mortgage Loans and make
certain remittances to, and prepare certain reports for the Master Servicer
with respect to such Mortgage Loans. The Master Servicer shall have no
responsibility for the performance by the Special Servicer of its duties
under the Pooling and Servicing Agreement provided that the Master Servicer
continues to perform certain servicing functions on such Specially Serviced
Mortgage Loans and, based on the information provided to it by the Special
Servicer, prepares certain reports for the Trustee with respect to such
Specially Serviced Mortgage Loans. To the extent that any Mortgage Loan, in
accordance with its original terms or as modified in accordance with the
Pooling and Servicing Agreement, becomes a performing Mortgage Loan for at
least three consecutive months, the Special Servicer will cease to service
such Mortgage Loan.
CRIIMI MAE will act as the Special Servicer with respect to the Mortgage
Loans. Under the Pooling and Servicing Agreement the Special Servicer is
required to service, administer and dispose of Specially Serviced Mortgage
Loans solely in the best interests of and for the benefit of the
Certificateholders, in accordance with the Pooling and Servicing Agreement
and the Mortgage Loans and to the extent
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consistent with such terms, with the higher of (a) the standard of care,
skill, prudence and diligence with which the Special Servicer services,
administers and disposes of, distressed mortgage loans and related real
property that are held for other portfolios that are similar to the Mortgage
Loans, Mortgaged Properties and REO Properties and (b) the standard of care,
skill, prudence and diligence with which the Special Servicer services,
administers and disposes of distressed mortgage loans and related real
property for its own portfolio that are similar to the Mortgage Loans,
Mortgaged Properties and REO Properties, giving due consideration to
customary and usual standards of practice of prudent institutional
multifamily and commercial mortgage lenders, loan servicers and asset
managers, so as to maximize the net present value of recoveries on the
Mortgage Loans (with respect to the Special Servicer, the "Servicing
Standard").
The Special Servicer, on behalf of the Trust Fund, may at any time
institute foreclosure proceedings, exercise any power of sale contained in
any Mortgage Note, obtain a deed in lieu of foreclosure, or otherwise
acquire, on behalf of the Trust Fund, title to a Mortgaged Property securing
a Specially Serviced Mortgage Loan by operation of law or otherwise, if such
action is consistent with the Servicing Standard. The Special Servicer may
not acquire title to any related Mortgaged Property or take any other action
that would cause the Trustee, for the benefit of Certificateholders, or any
other specified person to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Special Servicer has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (the costs
of which report will be paid as an expense of the Trust Fund), that: (i) the
Mortgaged Property is in compliance with applicable environmental laws; or if
not, that taking such actions as are necessary to bring the Mortgaged
Property in compliance therewith is reasonably likely to produce a greater
recovery on a present value basis, after taking into account any risks
associated therewith, than not taking such actions; and (ii) there are no
circumstances present at the Mortgaged Property relating to the use,
management or disposal of any hazardous substances, hazardous materials,
wastes, or petroleum-based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
federal, state or local law or regulation or that, if any such materials are
present, taking such action with respect to the affected Mortgaged Property
is reasonably likely to produce a greater recovery on a present value basis,
after taking into account any risks associated therewith, than not taking
such actions.
The Special Servicer, on behalf of the Trust Fund, will use its best
efforts to sell the Mortgaged Property within two years of acquisition,
unless (i) the Internal Revenue Service grants an extension of time to sell
such property or (ii) the Special Servicer provides to the Trustee an opinion
of independent counsel to the effect that the holding of the property by the
Trust Fund subsequent to two years after its acquisition will not result in
the imposition of a tax on the Trust Fund or cause the Trust Fund to fail to
qualify as a REMIC under the Code at any time that any Certificate is
outstanding. Subject to the foregoing, the Special Servicer will be required
to (i) solicit offers for any Mortgaged Property so acquired in such a manner
as will be reasonably likely to realize a fair price for such property and
(ii) accept an offer received from any person that constitutes a fair price
and which is in the best interest of the Certificateholders as determined by
the Special Servicer in accordance with Servicing Standard.
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 any of its
obligations with respect to the management and operation of such Mortgaged
Property. Any such property acquired by the Trust Fund will be managed in a
manner consistent with the Servicing Standard.
The Special Servicer will be obligated to follow or cause to be followed
such normal practices and procedures as it deems necessary or advisable to
realize upon Specially Serviced Mortgage Loans. If the proceeds of any
liquidation of the property securing the Specially Serviced Mortgage Loan are
less than the outstanding principal balance of the Specially Serviced
Mortgage Loan plus interest accrued thereon at the Mortgage Interest Rate
plus the aggregate amount of expenses incurred by the Special Servicer in
connection with such proceedings and which are reimbursable under the Pooling
and Servicing
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Agreement, the Trust Fund will realize a loss in the amount of such
difference. The Special Servicer will be entitled to be paid from the amounts
on deposit in the Collection Account, prior to the distribution to
Certificateholders, amounts representing its servicing compensation on the
Specially Serviced Mortgage Loans.
The Special Servicer shall have full power and authority to do any and all
things in connection with servicing and administering a Mortgage Loan that it
may deem in its best judgment necessary or advisable, including, without
limitation, to execute and deliver on behalf of the Trust Fund any and all
instruments of satisfaction or cancellation or of partial release or full
release or discharge and all other comparable instruments, to reduce the
related Mortgage Interest Rate, and to defer or forgive payment of interest
and/or principal with respect to any Specially Serviced Mortgage Loan or any
Mortgaged Property. The Special Servicer may not permit a modification or
extension of any Mortgage Loan to a date later than three years prior to the
Rated Final Distribution Date. Notwithstanding the foregoing, the Special
Servicer may not permit any such modification with respect to a Balloon
Mortgage Loan if it results in the extension of such Maturity Date beyond the
amortization term of such Balloon Mortgage Loan absent the related Balloon
Payment. The Special Servicer will prepare a report (an "Asset Strategy
Report") for each Mortgage Loan which becomes a Specially Serviced Mortgage
Loan not later than thirty (30) days after the servicing of such Mortgage
Loan is transferred to the Special Servicer. The holders of the fewest number
of classes of Certificates representing the most subordinate interests in the
Trust Fund that equals at least a 1.50% interest (by Class Balance (adjusted
for Collateral Value Adjustments)) in the Trust Fund (the "Monitoring
Certificateholders") will designate one Monitoring Certificateholder pursuant
to the Pooling and Servicing Agreement (the "Directing Certificateholder").
Each Asset Strategy Report will be delivered to the Directing
Certificateholder. The Directing Certificateholder may object to any Asset
Strategy Report within 10 business days of receipt; provided, however, that
the Special Servicer shall implement the recommended action as outlined in
such Asset Strategy Report if it makes an affirmative determination that such
objection is not in the best interest of all the Certificateholders. In
connection with making such affirmative determination, the Special Servicer,
by notice to the Trustee, may request a vote by all the Certificateholders.
If the Directing Certificateholder does not disapprove an Asset Strategy
Report within 10 business days, the Special Servicer shall implement the
recommended action as outlined in such Asset Strategy Report. If the
Directing Certificateholder disapproves such Asset Strategy Report and the
Special Servicer has not made the affirmative determination described above,
the Special Servicer will revise such Asset Strategy Report as soon as
practicable. The Special Servicer will revise such Asset Strategy Report
until the Directing Certificateholder fails to disapprove such revised Asset
Strategy Report as described above, provided that the Special Servicer shall
not be under any obligation to perform any actions which are not consistent
with applicable laws and the related Mortgage Loan documents. Any
Certificateholder may request and obtain a copy of any Asset Strategy Report
except to the extent prohibited by applicable law or the related Mortgage
Loan documents.
The Directing Certificateholder may at any time terminate the Special
Servicer and appoint a replacement (a "Replacement Special Servicer") to
perform such duties under substantially the same terms and conditions as
applicable to the 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. The designated replacement shall
become the Replacement 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 and Servicing Agreement, none of the then-current rating or ratings
of all outstanding classes of the Certificates would 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 (obtained at the expense of the Directing
Certificateholder) to the effect that the designation of such replacement to
serve as Replacement Special Servicer is in compliance with the Pooling and
Servicing Agreement, that the designated replacement will be bound by the
terms of the Pooling and Servicing Agreement and that the Pooling and
Servicing Agreement will be enforceable against such designated replacement
in accordance with its terms. The Special Servicer shall be deemed to have
resigned from its duties simultaneously with such designated replacement's
becoming the Replacement Special Servicer under the Pooling and Servicing
Agreement. Any Replacement Special Servicer may be similarly so replaced by
the Directing Certificateholder.
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SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its servicing activities will be the "Master Servicing Fee". The Master
Servicing Fee will be payable monthly and will accrue at the applicable
"Master Servicing Fee Rate" and will be computed on the basis of the
principal balance (after giving effect to all scheduled (whether or not
received) and unscheduled payments of principal in reduction thereof) and for
the same period respecting which any related interest payment on each
Mortgage Loan is computed. The "Master Servicing Fee Rate" will be 0.03% per
annum of the then outstanding balance for the Crystal Gateway Loan, the
Skyline Loan, the 1065 Avenue of the Americas Loan, the Hoechst Loan and the
Crystal Plaza Loan and 0.05% per annum of the then outstanding balance for
all other Mortgage Loans.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the "Special Servicing Fee". The
Special Servicing Fee will equal 0.0125% per annum of the then outstanding
balance of each Mortgage Loan (the "Special Servicing Fee Rate") and an
additional 0.25% per annum of the then outstanding balance of any Specially
Serviced Mortgage Loans.
The sum of the Master Servicing Fee Rate and the Special Servicing Fee
Rate is referred to herein as the "Basic Servicing Fee Rate."
The Pooling and Servicing Agreement will provide that the Servicers will
be entitled to indemnification from the Trust Fund for any and all costs,
expenses, losses, damages, claims and liabilities incurred in connection with
any legal action relating to any Mortgage Loan and the Pooling and Servicing
Agreement, other than any cost, expense, damage, claim or liability incurred
by reason of willful misfeasance, bad faith or negligence of such Servicer in
the performance of duties thereunder or by reason of reckless disregard of
such obligations and duties.
CONFLICTS OF INTEREST
The Master Servicer, Special Servicer or their respective affiliates own
and are in the business of acquiring assets similar to the Mortgage Loans
held by the Trust Fund. To the extent that any mortgage loans owned and/or
serviced by the Special Servicer or their respective affiliates are similar
to the Mortgage Loans held by the Trust Fund, the mortgaged properties
related to such mortgage loans may, depending upon certain circumstances such
as the location of the mortgaged property, compete with the Mortgaged
Properties related to the Mortgage Loans held by the Trust Fund for tenants,
purchasers, financing and similar resources.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of March 1, 1998 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer, the Special
Servicer and the Trustee. Following are summaries of certain provisions of
the Pooling and Servicing Agreement. The summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the provisions of the Pooling and Servicing Agreement. The Trustee will
provide to a prospective or actual Certificateholder, upon written request, a
copy (without exhibits) of the Pooling and Servicing Agreement. Requests
should be addressed to State Street Bank and Trust Company, Two International
Place, Boston, Massachusetts 02110, Attention: Corporate Trust
Department--J.P. Morgan Commercial Mortgage Finance Corp., Series 1998-C6.
ASSIGNMENT OF THE MORTGAGE LOANS
On or prior to the Delivery Date, the Depositor will assign or cause to be
assigned the Mortgage Loans, without recourse, to the Trustee for the benefit
of the Certificateholders. On or prior to the Delivery Date, the Depositor
will, as to each Mortgage Loan, deliver to the Trustee (or the Custodian),
among other things, the following documents (collectively, as to such
Mortgage Loan, the "Mortgage
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Loan File"): (i) the original Mortgage, and any intervening assignments
thereof, in each case with evidence of recording thereon or in case such
documents have not been returned by the applicable recording office,
certified copies thereof; (ii) the original or, if accompanied by a "lost
note" affidavit, a copy of the Mortgage Note, endorsed by the Seller, without
recourse, in blank or to the order of Trustee; (iii) an assignment of the
Mortgage, executed by the Seller, in blank or to the order of the Trustee, in
recordable form; (iv) originals or certified copies of any related assignment
of leases, rents and profits and any related security agreement (if, in
either case, such item is a document separate from the Mortgage) and any
intervening assignments of each such document or instrument; (v) assignments
of any related assignment of leases, rents and profits and any related
security agreement (if, in either case, such item is a document separate from
the Mortgage), executed by the Seller, in blank or to the order of the
Trustee; (vi) originals or certified copies of all assumption, modification
and substitution agreements in those instances where the terms or provisions
of the Mortgage or Mortgage Note have been modified or the Mortgage or
Mortgage Note has been assumed; (vii) the originals or certificates of a
lender's title insurance policy issued on the date of the origination of such
Mortgage Loan or, with respect to each Mortgage Loan not covered by a
lender's title insurance policy, an attorney's opinion of title given by an
attorney licensed to practice law in the jurisdiction where the Mortgaged
Property is located; (viii) originals or copies of any UCC financing
statements; (ix) originals or copies of any guaranties related to such
Mortgage Loan; (x) originals or copies of insurance policies related to the
Mortgaged Property; (xi) originals or certified copies of any environmental
liabilities agreement; (xii) originals or copies of any escrow agreements;
(xiii) originals or certified copies of any prior assignments of mortgage if
the Originator is not the originator of record; (xiv) any collateral
assignments of property management agreements and other servicing agreements;
(xv) any appraisals of the Mortgaged Property; (xvi) a PAR of the Mortgaged
Property; (xvii) an ESA of the Mortgaged Property; (xviii) originals or
certified copies of any lease subordination agreements and tenant estoppels;
and (xix) any opinions of Mortgagor's counsel. The Pooling and Servicing
Agreement will require the Depositor to cause each assignment of the Mortgage
described in clause (iii) above to be submitted for recording in the real
property records of the jurisdiction in which the related Mortgaged Property
is located. Any such assignment delivered in blank will be completed to the
order of the Trustee prior to recording. The Pooling and Servicing Agreement
will also require the Depositor to cause the endorsements on the Mortgage
Notes delivered in blank to be completed to the order of the Trustee.
TRUSTEE
State Street Bank and Trust Company shall serve as Trustee under the
Pooling and Servicing Agreement pursuant to which the Certificates are being
issued. Except in circumstances such as those involving defaults (when it
might request assistance from other departments in the bank), its
responsibilities as trustee are carried out by its Corporate Trust
Department. The Trustee will be entitled to a fee equal to 0.005% per annum
of the Mortgage Loans by aggregate principal balance as of the Cut-off Date.
Its principal corporate trust office is located at 5th Floor, Two
International Place, Boston, Massachusetts 02110, Attention: J.P. Morgan
Commercial Mortgage Finance Corp., Series 1998-C6.
ACCOUNTS
The Master Servicer is required to deposit all amounts received with
respect to the Mortgage Loans, net of certain amounts retained by the Master
Servicer as additional servicing compensation and certain amounts to be
deposited into escrow accounts, into a separate Collection Account (the
"Collection Account") maintained by the Master Servicer on behalf of the
Trust Fund. The Master Servicer is required to deposit on the business day
preceding each Distribution Date all amounts received with respect to the
Mortgage Loans into a separate account (the "Certificate Account") maintained
with the Trustee. The Trustee will be entitled to make withdrawals from the
Certificate Account to pay the Trustee fee or to reimburse the Trustee for
expenses not otherwise reimbursed from a Collection Account. Interest or
other income earned on funds in the Collection Account will be paid to the
Master Servicer maintaining such account as additional servicing
compensation. See "Description of the Trust Funds--Mortgage Loans" and
"Description of the Agreements--Distribution Account and Other Collection
Accounts" in the Prospectus.
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REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, based upon information provided by the
Servicers, the Trustee shall furnish to each Certificateholder, the Seller,
the Depositor and each Rating Agency a statement setting forth certain
information with respect to the Mortgage Loans and the Certificates required
pursuant to the Pooling and Servicing Agreement. In addition, within a
reasonable period of time after each calendar year, the Trustee shall furnish
to each person who at any time during such calendar year was the holder of a
Certificate a statement containing certain information with respect to the
Certificates required pursuant to the Pooling and Servicing Agreement,
aggregated for such calendar year or portion thereof during which such person
was a Certificateholder. Unless and until Definitive Certificates are issued,
such statements or reports will be furnished only to Cede, as nominee for
DTC; provided, however, that the Trustee shall furnish a copy of any such
statement or report to any Beneficial Owner which requests such copy and
provides to the Trustee a certification, in form acceptable to the Trustee,
stating that it is the Beneficial Owner of a Certificate. The Trustee will
make available the monthly statement to Certificateholders and certain other
information through its Corporate Trust home page on the world wide web
and/or by facsimile through its Street Fax automated fax-back system. The web
page is located at "corporatetrust.statestreet.com". CMBS information is
available by clicking the "Investor Information & Reporting" button, and
selecting the appropriate transaction. Interested parties can register for
Street Fax by calling (617) 664-5600 and requesting an account application by
following the instructions provided by the system. Any Asset Strategy Report
that has been delivered to the Trustee shall be made available by the Trustee
upon written request to any Beneficial Owner of an Offered Certificate
subject to receipt by the Trustee and the Special Servicer of evidence
satisfactory to them that the request is made by a Beneficial Owner and the
receipt by the Trustee of a certificate acknowledging certain limitations
with respect to the use of such statement or report. See "Description of the
Certificates--Reports to Certificateholders" in the Prospectus. The Directing
Certificateholder shall receive all reports prepared or received by the
Master Servicer or the Special Servicer. For those who have obtained an
account number and PIN on the Trustee's Street Fax system, the foregoing
report may be obtained from the Trustee via automated facsimile by calling
(617) 664-5600 and requesting the report code associated with J.P. Morgan
Commercial Mortgage Finance Corp., Series 1998-C6. Report codes may be
obtained by calling the same telephone number and requesting a report
listing. In addition, if the Depositor so directs the Trustee and on terms
acceptable to the Trustee, the Trustee will make certain information related
to the mortgage loans available through its Corporate Trust web site.
VOTING RIGHTS
At all times during the term of this Agreement, 98.0% of all Voting Rights
shall be allocated among the classes of Certificates, including the Other
Certificates, (other than the Class X, Class R-I, Class R-II and Class R-III
Certificates) in proportion to the respective Class Balances, 1.00% of all
Voting Rights shall be allocated to the Class X Certificates and 0.33 1/3% of
all Voting Rights shall be allocated to each of the Class R-I, Class R-II and
Class R-III Certificates. Voting Rights allocated to a class of Certificates
shall be allocated among the holders of such class in proportion to the
Percentage Interests evidenced by their respective Certificates. Allocations
of Realized Losses and Collateral Value Adjustments to a Class of
Certificates and any other event which changes such Class Balance will result
in a corresponding change to such Class' Voting Rights.
As described under "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in the Prospectus, unless and until
Definitive Certificates are issued, except as otherwise expressly provided
herein, Certificate Owners may only exercise their rights as owners of
Certificates indirectly through DTC or their respective Participant or
Indirect Participant.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earliest of (i) the final payment or other
liquidation of the last Mortgage Loan or REO Property subject thereto, and
(ii) the purchase of all of the assets of the Trust Fund by any holder of a
Class R-I Certificate, the holders of an aggregate Percentage Interest in
excess of 50% of the Most Subordinate Class of Certificates,
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the Master Servicer and (to the extent all of the remaining Mortgage Loans
are being serviced by the Special Servicer) the Special Servicer (in that
order). The "Most Subordinate Class of Certificates" at the time of
determination shall be the class of Certificates to which Realized Losses
would be allocated at such time as described under "Description of the
Certificates--Subordination" herein. Written notice of termination of the
Pooling and Servicing Agreement will be given to each Certificateholder, and
the final distribution will be made only upon surrender and cancellation of
the Certificates at the office of the Certificate Registrar specified in such
notice of termination.
Any such purchase of all the Mortgage Loans and other assets in the Trust
Fund is required to be made at a price equal to the greater of (1) the
aggregate fair market value of all the Mortgage Loans and REO Properties then
included in the Trust Fund, determined pursuant to the Pooling and Servicing
Agreement, and (2) the aggregate Class Balance of all the Certificates plus
accrued and unpaid interest thereon. Such purchase will effect early
retirement of the then outstanding Certificates, but the right to effect such
termination is subject to the requirements, among other things, that the
aggregate Stated Principal Balance of the Mortgage Loans then in the Trust
Fund is less than (i) 1% of the aggregate principal balance of the Mortgage
Loans as of the Cut-off Date, and (ii) the purchaser provides to the Trustee
an opinion of independent counsel, addressed to the Trustee, to the effect
that the resulting termination will be a "qualified liquidation" under
Section 860F(a)(4) of the Code with respect to REMICs I, II and III.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Certificates will be used by
the Depositor to pay the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered
Certificates is based on the advice of Brown & Wood llp, counsel to the
Depositor. This summary is based on laws, regulations, including the REMIC
regulations promulgated by the Treasury Department (the "REMIC Regulations"),
rulings and decisions now in effect or (with respect to regulations)
proposed, all of which are subject to change either prospectively or
retroactively. This summary does not address the federal income tax
consequences of an investment in Offered Certificates applicable to all
categories of investors, some of which (for example, banks and insurance
companies) may be subject to special rules. Prospective investors should
consult their tax advisors regarding the federal, state, local and any other
tax consequences to them of the purchase, ownership and disposition of
Offered Certificates.
Three separate real estate mortgage investment conduit ("REMIC") elections
will be made with respect to the Trust Fund for federal income tax purposes.
Upon the issuance of the Certificates, Brown & Wood llp, counsel to the
Depositor, will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the Pooling and Servicing Agreement, for
federal income tax purposes, REMIC I, REMIC II and REMIC III (each as defined
in the Pooling and Servicing Agreement) will each qualify as a REMIC under
the Code.
For federal income tax purposes, the Class R-I Certificates will be the
sole class of "residual interests" in REMIC I, the Class R-II Certificates
will be the sole class of "residual interests" in REMIC II, and the Class
R-III Certificates will be the sole class of "residual interests" in REMIC
III. The Offered Certificates (other than the Class X Certificates), the
Other Certificates (other than the Class R-I, Class R-II and Class R-III
Certificates) and each component of the Class X Certificates will be "regular
interests" of REMIC III and will be treated as debt instruments of the REMIC
III. See "Certain Federal Income Tax Consequences--REMICs" in the Prospectus.
The Class X Certificates will, and the other classes of Offered
Certificates may, be treated as having been issued with original issue
discount for federal income tax reporting purposes. For purposes of computing
the rate of accrual of original issue discount, market discount and premium,
if any, for federal income tax purposes it will be assumed that there are no
prepayments on the Mortgage Loans. No
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representation is made that the Mortgage Loans will not prepay at another
rate. See "Certain Federal Income Tax Consequences--REMICs--Taxation of
Owners of REMIC Regular Certificates" and "--Original Issue Discount" in the
Prospectus.
Net Prepayment Premiums allocated to the Certificates will be taxable to
the holders of such Certificates on the date the amount of such premiums
becomes fixed.
The Offered Certificates may be treated for federal income tax purposes as
having been issued at a premium. Whether any holder of such a class of
Certificates will be treated as holding a certificate with amortizable bond
premium will depend on such Certificateholder's purchase price and the
distributions remaining to be made on such Certificate at the time of its
acquisition by such Certificateholder. Holders of such class of Certificates
should consult their own tax advisors regarding the possibility of making an
election to amortize such premium. See "Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of REMIC Regular Certificates" and
"--Premium" in the Prospectus.
The Offered Certificates will be treated as "real estate assets" within
the meaning of Section 856(c)(5)(B) of the Code generally in the same
proportion that the assets of the REMIC underlying such Certificates would be
so treated. In addition, interest (including original issue discount) on the
Offered Certificates will be interest described in Section 856(c)(3)(B) of
the Code to the extent that such Offered Certificates are treated as "real
estate assets" under Section 856(c)(5)(B) of the Code. Moreover, the Offered
Certificates will be "obligation[s] . . . which . . . [are] principally
secured by an interest in real property" within the meaning of Section
860G(a)(3)(C) of the Code. The Offered Certificates will not be considered to
represent an interest in "loans . . . secured by an interest in real property
which is . . . residential real property" within the meaning of Section
7701(a)(19)(C)(v) of the Code except in the proportion that the assets of the
Trust Fund are represented by Mortgage Loans secured by multifamily apartment
buildings. See "Certain Federal Income Tax Consequences--REMICs" in the
Prospectus.
For further information regarding the federal income tax consequences of
investing in the Certificates, see "Certain Federal Income Tax Consequences"
in the Prospectus.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences", potential investors should consider the
state income tax consequences of the acquisition, ownership, and disposition
of the Offered Certificates. State income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state. Therefore, potential
investors should consult their own tax advisors with respect to the various
tax consequences of investments in the Offered Certificates.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such
plans, accounts or arrangements are invested, that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975
of the Code should carefully review with its legal advisors whether the
purchase or holding of any Class 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.
The U.S. Department of Labor issued an individual exemption, Prohibited
Transaction Exemption 90-23 (the "Exemption"), on May 17, 1990 to J.P. Morgan
Securities Inc., which generally exempts from the application of the
prohibited transaction provisions of Section 406 of ERISA, and the excise
taxes imposed on such prohibited transactions pursuant to Sections 4975(a)
and (b) of the Code and Section 501(i) of ERISA, certain transactions, among
others, relating to the servicing and operation of mortgage pools and the
purchase, sale and holding of mortgage pass-through certificates underwritten
by an Underwriter (as hereinafter defined), provided that certain conditions
set forth in the Exemption are satisfied. For purposes of this Section "ERISA
Considerations", the term "Underwriter" shall include (a)
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J.P. Morgan Securities Inc., (b) any person directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common
control with J.P. Morgan Securities Inc. 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 Class A1, Class A2, Class
A3 and Class X Certificates.
The Exemption sets forth six general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of such Classes of
Offered Certificates to be eligible for exemptive relief thereunder. First,
the acquisition of such Classes of Offered Certificates by certain employee
benefit plans subject to Section 4975 of the Code (each, a "Plan"), must be
on terms (including the price) 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 Classes of Offered Certificates
must not be subordinate to the rights and interests evidenced by the other
certificates of the same trust. Third, such Classes of Offered Certificates
at the time of acquisition by the Plan must be rated in one of the three
highest generic rating categories by Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc.,
Duff & Phelps Credit Rating Co. or Fitch IBCA, Inc. Fourth, the Trustee
cannot be an affiliate of any member of the "Restricted Group," which
consists of the Underwriter, the Depositor, the Seller, the Sub-Servicer, the
Master Servicer, the Special Servicer and any Mortgagor with respect to
Mortgage Loans constituting more than 5% of the aggregate unamortized
principal balance of the Mortgage Loans as of the date of initial issuance of
such Classes of Offered Certificates. Fifth, the sum of all payments made to
and retained by the Underwriter must represent not more than reasonable
compensation for underwriting such Classes of Offered Certificates; the sum
of all payments made to and retained by the Depositor pursuant to the
assignment of the Mortgage Loans to the Trust Fund 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 and the Special Servicer must
represent not more than reasonable compensation for such person's services
under the Pooling and Servicing 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 Securities and Exchange Commission under the Securities Act of 1933.
Because the Class A1, Class A2, Class A3 and Class X Certificates are not
subordinate 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 the issuance of the Class A1, Class A2 and Class A3 Certificates
that they be rated "AAA" by Fitch and Standard & Poor's and it is a condition
to the issuance of the Class X Certificates that they be rated "AAA" by
Fitch. The Depositor expects that the fourth general condition set forth
above will be satisfied with respect to each of such Classes of Certificates.
A fiduciary of a Plan contemplating purchasing any such Class of Certificate
must make its own determination that the first, third, and fifth general
conditions set forth above will be satisfied with respect to any such Class
of Certificate. Each purchaser purchasing Class A1, Class A2, Class A3 or
Class X Certificates with the assets of a Plan shall be deemed to represent
and warrant that it is an "accredited investor" as described in the sixth
general condition set forth above.
The Class B, Class C, Class D and Class E Certificates do not satisfy the
second condition described above because they are subordinated to the Class
A1, Class A2, Class A3 and Class X Certificates, and accordingly, may not be
purchased with the assets of a Plan, and furthermore the Class D and Class E
Certificates are not expected to satisfy the third condition described above.
Before purchasing any such Class of Certificate, a fiduciary of a Plan
should itself confirm (a) that such Certificates constitute "certificates"
for purposes of the Exemption and (b) that the specific and general
conditions of the Exemption 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 should consider the availability of any other prohibited
transaction exemptions.
Purchasers using insurance company general account funds to effect such
purchase should consider the availability of Prohibited Transaction Class
Exemption 95-60 (60 Fed. Reg. 35925, July 12, 1995) issued by the U.S.
Department of Labor.
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Any Plan fiduciary considering whether to purchase any such Class of
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. See "ERISA
Considerations" in the Prospectus.
LEGAL INVESTMENT
The Class A1, Class A2, Class A3, Class X and Class B Certificates will be
"mortgage related securities" within the meaning of the Secondary Mortgage
Market Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are
rated in one of the two highest rating categories by at least one nationally
recognized statistical rating organization. The Class C, Class D and Class E
Certificates will not be "mortgage related securities" within the meaning of
SMMEA.
In addition, institutions whose investment activities are subject to
review by certain regulatory authorities may be or may become subject to
restrictions, which may be retroactively imposed by such regulatory
authorities, on the investment by such institutions in certain forms of
mortgage-backed securities. Furthermore, certain states have enacted
legislation overriding the legal investment provisions of SMMEA.
The Depositor makes no representations as to the proper characterization
of the Offered Certificates for legal investment or other purposes, or as to
the ability of particular investors to purchase the Offered Certificates
under applicable legal investment restrictions. These uncertainties may
adversely affect the liquidity of the Offered Certificates. Accordingly, 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 a legal
investment or is subject to investment, capital or other restrictions. See
"Legal Investment" in the Prospectus.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement between the Depositor and the Underwriter, the Depositor has agreed
to sell to the Underwriter and the Underwriter has agreed to purchase from
the Depositor upon issuance, the Offered Certificates.
The obligations of the Underwriter under the Underwriting Agreement are
subject to certain conditions precedent and the Underwriter will be obligated
to purchase all of the Offered Certificates if any are purchased.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices
to be determined at the time of sale. Proceeds to the Depositor from the
Offered Certificates will be % of the initial aggregate principal balance
thereof. In connection with the purchase and sale of the Offered
Certificates, the Underwriter shall receive an underwriting fee equal to %
of the aggregate Class Balance of the Offered Certificates.
The Depositor also has been advised by the Underwriter that the
Underwriter currently expects to make a market in the Offered Certificates;
however, the Underwriter has no obligation to do so, any market making may be
discontinued at any time, and there can be no assurance that an active public
market for the Offered Certificates will develop, or if it does develop, that
it will continue.
The Depositor has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities,
including liabilities under the Securities Act of 1933.
The Seller has agreed to pay the expenses of the Depositor in connection
with the purchase of the Mortgage Loans and the issuance of the Certificates.
The Underwriter is an affiliate of the Seller and the Depositor.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor, the Master
Servicer and for the Underwriter by Brown & Wood llp, New York, New York.
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RATING
It is a condition of the issuance of the Class A1, Class A2 and Class A3
Certificates that they be rated "AAA" by Fitch IBCA, Inc. ("Fitch") and
Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies,
Inc. ("Standard & Poor's"). It is a condition of the issuance of the Class X
Certificates that they be rated "AAA" by Fitch. It is a condition of the
issuance of the Class B Certificates that they be rated not lower than "AA"
by Fitch and Standard & Poor's. It is a condition of the issuance of the
Class C Certificates that they be rated not lower than "A" by Fitch and
Standard & Poor's. It is a condition of the issuance of the Class D
Certificates that they be rated not lower than "BBB" by Fitch and Standard &
Poor's. It is a condition of the issuance of the Class D Certificates that
they be rated not lower than "BBB-" by Fitch and Standard & Poor's.
A rating on mortgage pass-through certificates addresses the likelihood of
the receipt of distributions of principal and interest to which
Certificateholders are entitled, including payment of all principal on the
Certificates by the Rated Final Distribution Date. The ratings on the
Certificates do not represent any assessment 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, (iii) whether and to what extent Prepayment Premiums
will be received or (iv) does not address receipt of Excess Interest or
default interest. Also, a security rating does not represent any assessment
of the yield to maturity that investors may experience. In general, the
ratings thus address credit risk and not prepayment risk. The rating of the
Class X Certificates does not address the possibility that the holders of
such Certificates may fail to fully recover their initial investments due to
a rapid rate of prepayments, defaults or liquidations.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so,
what such rating would be. A rating assigned to the Offered Certificates by a
rating agency that has not been requested by the Depositor to do so may be
lower than the rating assigned by Fitch, Moody's or Standard & Poor's
pursuant to the Depositor's request. The Depositor only requested that Fitch
issue a rating with respect to the Class X Certificates.
The rating of 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
downgrade, qualification or withdrawal at any time by the assigning rating
agency. Each security rating should be evaluated independently of any other
security rating. A security rating does not address the frequency or
likelihood of prepayments (whether voluntary or involuntary) of Mortgage
Loans, or the corresponding effect on the yield to investors.
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INDEX OF PRINCIPAL TERMS
1065 Avenue of the Americas Borrower .................... S-47
1065 Avenue of the Americas Loan ........................ S-47
1065 Avenue of the Americas Property .................... S-47
1065 Manager ............................................ S-48
ADA ..................................................... S-26
Adjusted Available Distribution Amount .................. S-7, S-64
Adjusted Collateral Value ............................... S-69
ADR ..................................................... S-45
Allocation Fraction ..................................... S-65
Anticipated Repayment Date .............................. S-57
ARD Loan ................................................ S-57
ARD Loans ............................................... S-5
Asset Strategy Report ................................... S-78
Available Distribution Amount ........................... S-64
Balloon Mortgage Loan ................................... S-5
Balloon Payment ......................................... S-5
Basic Servicing Fee Rate ................................ S-79
BCM ..................................................... S-56
Beneficial Owner ........................................ S-4, S-61
Cede .................................................... S-61
CEDEL ................................................... S-3, S-61
CEDEL Participants ...................................... S-62
CERCLA .................................................. S-21
Certificate Account ..................................... S-80
Certificateholders ...................................... S-3
Certificates ............................................ Cover, S-2
Charles E. Smith Organization ........................... S-44
Class A Certificates .................................... Cover
Class Balance ........................................... ii, S-66
Class Prepayment Fraction ............................... S-65
Clearance Cooperative ................................... S-62
Code .................................................... S-14
Collateral Value Adjustment ............................. S-68
Collateral Value Adjustment Capitalization Amount ....... S-69
Collateral Value Adjustment Reduction Amount ............ S-7, S-64
Collection Account ...................................... S-80
Costco Borrower ......................................... S-54
Costco Loan ............................................. S-54
Costco Mortgage ......................................... S-54
Costco Property ......................................... S-54
CPR ..................................................... S-72
CRIIMI MAE .............................................. S-75
Crossed Loans ........................................... S-5
Crystal Gateway Borrower ................................ S-44
Crystal Gateway Junior Loan ............................. S-46
Crystal Gateway Loan .................................... S-44
Crystal Gateway Marriott ................................ S-44
Crystal Gateway Mortgage ................................ S-44
Crystal Plaza Borrower .................................. S-52
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<PAGE>
Crystal Plaza Loan ...................................... S-52
Crystal Plaza Property .................................. S-52
Cut-off Date ............................................ Cover
Cut-off Date LTV Ratio .................................. S-34
Defaulted Mortgage Loan ................................. S-76
Defeasance .............................................. S-41
Definitive Certificate .................................. S-4
Definitive Certificates ................................. S-63
Depositor ............................................... ii
Depositories ............................................ S-61
Deptford Borrower ....................................... S-53
Deptford Loan ........................................... S-53
Deptford Mortgage ....................................... S-53
Deptford Property ....................................... S-53
Determination Date ...................................... S-8
Directing Certificateholder ............................. S-78
Diskette ................................................ S-6
Distribution Date ....................................... ii, S-3, S-63
Dover House ............................................. S-2, S-75
DTC ..................................................... ii, S-3, S-61
DTC Participants ........................................ S-4, S-62
DTC Registered Certificates ............................. S-4, S-61
Due Date ................................................ S-5
EGI ..................................................... S-44
Embassy Suites Loan ..................................... S-57
ERISA ................................................... S-14, S-83
ESA ..................................................... S-21
Euroclear ............................................... S-3, S-61
Euroclear Operator ...................................... S-62
Euroclear Participants .................................. S-62
Excess Cash Flow ........................................ S-58
Excess Interest ......................................... S-57
Excluded Mortgage Loan .................................. S-57
Exemption ............................................... S-83
FIRREA .................................................. S-35
Fitch ................................................... ii, S-15, S-86
Form 8-K ................................................ S-60
Global Securities ....................................... B-1
Hoechst ................................................. S-49
Hoechst Borrower ........................................ S-49
Hoechst Loan ............................................ S-49
Hoechst Property ........................................ S-49
Indirect Participants ................................... S-62
Initial Pool Balance .................................... S-4, S-27
Intercreditor Agreement ................................. S-57
Interest Accrual Amount ................................. S-7, S-64
Interest Distribution Amount ............................ S-7, S-64
Kilroy .................................................. S-42
Kilroy Borrower ......................................... S-42
Kilroy Loan ............................................. S-42
Kilroy Properties ....................................... S-42
S-88
<PAGE>
Kilroy Property ......................................... S-42
Kilroy Releasable Properties ............................ S-43
Loan Sale Agreement ..................................... S-27
Lock-out Date ........................................... S-40
Lock-out Period ......................................... S-40
Loss Mortgage Loan ...................................... S-69
Marriott ................................................ S-45
Marriott Lease .......................................... S-45
Master Servicer ......................................... ii
Master Servicing Fee .................................... S-79
Master Servicing Fee Rate ............................... S-79
Maturity Date ........................................... S-10
Maturity Date/Anticipated Repayment Date LTV Ratio ...... S-34
MGT ..................................................... S-2
Monitoring Certificateholders ........................... S-78
Monthly Payments ........................................ S-5
Mortgage ................................................ S-27
Mortgage Interest Rate .................................. S-57
Mortgage Loan File ...................................... S-79
Mortgage Loans .......................................... ii, S-4
Mortgage Note ........................................... S-27
Mortgage Pool ........................................... ii, S-4
Mortgaged Property ...................................... S-4, S-27
Mortgagor ............................................... S-6
Most Subordinate Class of Certificates .................. S-82
MSA ..................................................... S-50
Net Prepayment Premium .................................. S-65
NOI ..................................................... S-36
Notional Amount ......................................... S-64
OER ..................................................... S-44
Offered Certificates .................................... Cover, S-6
One and Olney Borrower .................................. S-55
One and Olney Loan ...................................... S-55
One and Olney Mortgage .................................. S-55
One and Olney Property .................................. S-55
Operating Statements .................................... S-36
Originators ............................................. ii, S-2
Other Certificates ...................................... S-10, S-68
PAR ..................................................... S-59
Participants ............................................ S-4, S-62
Pass-Through Rate ....................................... ii
Pass-Through Rates ...................................... S-64
Percentage Interest ..................................... S-64
P&I Advance ............................................. S-70
P&I Advances ............................................ S-9
Plan .................................................... S-84
Pool Loans .............................................. S-5
Pooling and Servicing Agreement ......................... S-6, S-79
Prepayment .............................................. S-70
Prepayment Interest Excess .............................. S-65
Prepayment Interest Shortfall ........................... S-65
S-89
<PAGE>
Prepayment Premium ...................................... S-6, S-40
Principal Distribution Amount ........................... S-8, S-66
Priority of Distributions ............................... S-8, S-66
Property Protection Expenses ............................ S-70
Realized Loss ........................................... S-69
Record Date ............................................. S-3
REMIC ................................................... ii, S-14, S-82
REMIC Regulations ....................................... S-82
Remittance Period ....................................... S-8
Remittance Rate ......................................... S-64
REO Account ............................................. S-61
REO Property ............................................ S-61
Replacement Special Servicer ............................ S-78
Required Appraisal Date ................................. S-68
Restricted Group ........................................ S-84
Revised Rate ............................................ S-57
San Jacinto ............................................. S-56
Seller .................................................. ii, S-2
Servicers ............................................... ii, S-9
Servicing Standard ...................................... S-76, S-77
Servicing Transfer Event ................................ S-76
Shannon Enterprises Borrower ............................ S-50
Shannon Enterprises Loan ................................ S-50
Shannon Enterprises Properties .......................... S-50
Shannon Enterprises Property ............................ S-50
Skyline Borrower ........................................ S-46
Skyline Junior Loan ..................................... S-47
Skyline Loan ............................................ S-46
Skyline Property ........................................ S-46
SMMEA ................................................... S-15, S-85
Southmark ............................................... S-56
Special Servicer ........................................ ii
Special Servicing Fee ................................... S-79
Special Servicing Fee Rate .............................. S-79
Specially Serviced Mortgage Loan ........................ S-13, S-76
Standard & Poor's ....................................... ii, S-15, S-86
Stated Principal Balance ................................ S-69
Terms and Conditions .................................... S-63
Trust Fund .............................................. ii
Underwriter ............................................. Cover, S-83
Underwritten Cash Flow .................................. S-36
Underwritten Cash Flow Debt Service Coverage Ratio ...... S-36
Underwritten NOI ........................................ S-36
UW Cash Flow ............................................ S-36
UW DSCR ................................................. S-36
UW NOI .................................................. S-36
Voting Rights ........................................... S-26
Yield Maintenance ....................................... S-41
Zoning Laws ............................................. S-25
S-90
<PAGE>
<TABLE>
<CAPTION>
LOAN PROPERTY
NUMBER PROPERTY NAME PROPERTY ADDRESS PROPERTY CITY STATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Kilroy Portfolio (Totals) Various Various CA, AZ
Kilroy Airport Center 2240, 2250, 2260 East Imperial Highway El Segundo CA
LaPalma Business Center 4175, 4150, 4125 East La Palma Ave. Bldg. A, B, C Anaheim CA
Westlake Plaza Centre II 2829 Townsgate Road Westlake Village CA
185 South Douglas Street 185 South Douglas Street El Segundo CA
1000 East Ball Road 1000 East Ball Road Anaheim CA
1230 South Lewis Street 1230 South Lewis Street Anaheim CA
2031 East Mariposa Avenue 2031 East Mariposa Avenue El Segundo CA
2260 El Segundo Boulevard 2260 El Segundo Boulevard El Segundo CA
2265 El Segundo Boulevard 2265 El Segundo Boulevard El Segundo CA
3332-3340 East La Palma Avenue 3332-3340 East La Palma Avenue Anaheim CA
5115 North 27th Avenue 5115 North 27th Avenue Phoenix AZ
12691 Pala Drive 12691 Pala Drive Garden Grove CA
12752 et al Monarch Street 12752 et al Monarch Street Garden Grove CA
2 Crystal Gateway Marriott 1700 Jefferson Davis Highway Arlington VA
3 Four & Five Skyline Place 5111 & 5113 Leesburg Pike Falls Church VA
4 1065 Avenue of the Americas 1065 Avenue of the Americas New York NY
5 Hoechst Celanese Corporation 30 Independence Boulevard Warren NJ
6 Shannon Portfolio (Totals) Various Various NC
Carolina Circle Apartments 3128 Utah Place Greensboro NC
Creekbend Apartments 3900 Hahns Lane Greensboro NC
English Village Apartments 307 Avalon Road Greensboro NC
Holiday Manor Apartments 1604 17th Street Greensboro NC
Hunting Valley Apartments 3716 Groometown Road Greensboro NC
McKnight Manor Apartments 3200 Trent Street Greensboro NC
Meadow Run Apartments 3216 South Holden Road Greensboro NC
Quail Creek Apartments 8 Covey Lane Greensboro NC
Raintree Apartments 251 Northpoint Avenue High Point NC
Skyline Village Apartments 100 Bruce Street Winston-Salem NC
Highland Hills Apartments 100 Tall Oaks Drive Greensboro NC
7 Crystal Plaza Apartments 2100 Jefferson Davis Highway Crystal City VA
8 The Court at Deptford I 1500 Almonesson Road Deptford Township NJ
9 Costco Center 4410 Lawehana Street Honolulu HI
10 One & Olney Square Shopping Center 5675 North Front Street Philadelphia PA
11 Avalon Apartments 4217 South Semoran Boulevard Orlando FL
12 Waterchase Apartments 3100 Waterchase Way, Southwest Wyoming MI
13 Crowne Plaza Hotel of Grand Rapids 5700 28th Street Grand Rapids MI
14 Parkridge Three 10801 Parkridge Boulevard Reston VA
15 Burns Clinic 560 West Mitchell Street Petoskey MI
16 Deer Run Apartments 4401 West Deer Run Drive Brown Deer WI
17 1149 Chess Drive 1149 Chess Drive Foster City CA
18 Benjamin Franklin Hotel 36 East Third Avenue San Mateo CA
19 Embassy Suites - Airport Westshore 55 North Westshore Blvd Tampa FL
20 Chase Street Industrial Facility 700 Chase Street Gary IN
21 Crown Nursing Home 3457 Nostrand Avenue Brooklyn NY
22 Houston Foods Industrial Facility, I 2721 Edgington Street Franklin Park IL
23 Battlefield Business Park 10001 & 10110 Battleview Parkway Manassas VA
24 Alford Refrigerated Warehouses 318 Cadiz Street Dallas TX
25 Brandy Chase Apartments and Townhouse 4560 Craftsbury Circle Fort Wayne IN
26 Savannah Festival Factory Stores 11 Gateway Boulevard South Savannah GA
27 Centergate Plaza Bee Ridge & Cattleman Road Sarasota FL
28 Woodland Mobile Home Estates 1441 West Romeo Road Oakland MI
29 The Ridges of Geneva East Highway 50 & Route 12 Lake Geneva WI
30 Baymeadows Commons Shopping Center 9550 Baymeadows Road Jacksonville FL
31 North By Northeast 7800 East 96th Street Fishers IN
32 Northern Ohio Industrial Park 1400 Lowell Street Elyria OH
33 Carmel on Providence Apartments 4208 Knob Oak Lane Charlotte NC
34 Wilderness Village Shopping Center 22117 Southeast 237th Street Maple Valley WA
35 Plaza at Deptford 1450 Clements Bridge Road Deptford NJ
36 Comfort Suites at the Park 2141 South Harbor Boulevard Anaheim CA
37 Apple Valley Apartments 9552 Apple Valley Drive Independence KY
38 Southgate Marketplace 337 Hospital Drive Glen Burnie MD
39 Gibraltar Square Office Park 2375-2395 Wall Street Conyers GA
40 Hyde Park Condominiums 6262 Melody Lane Dallas TX
41 Atrium II Office Center 1000 Victor Way Ann Arbor MI
42 Medical Park Plaza 4319 Medical Drive San Antonio TX
43 Airport Days Inn 1900 West North Temple Salt Lake City UT
44 Stanford Gardens Apartments 1735 Woodland Drive East Palo Alto CA
45 The Parthenon Apartments 800 Gaines School Road Athens GA
46 20 Sand Park Road 20 Sand Park Road Cedar Grove NJ
47 Fairfield Inn by Marriott 4702 East University Drive Phoenix AZ
48 The Woodbriar 10415 Paramount Boulevard Downey CA
49 Westbrook Apartments 6300-6318 West Bancroft Street Toledo OH
50 Harbin Springs Apartments 1012 Harbin Springs Road Atlanta GA
51 East Point Apartments 4125-4165 Childress Avenue Mesquite TX
52 535 Broadhollow Road 535 Broadhollow Road Melville NY
53 Ridge Road Shopping Center 1102-1209 Ridge Road Rockwall TX
54 Walbridge Apartments 505 North Main Street Walbridge OH
55 The Roomstore 4720 South Cooper Street Arlington TX
56 3200 Liberty Avenue 3200 Liberty Avenue Bergen NJ
57 Colonial Village Shopping Center 7000-7014 Reistertown Road Pikeville MD
58 Cyrk Warehouse 125 Water Street Danvers MA
59 Comfort Inn-Belleville 855 Comfort Plaza Drive Bellville OH
60 Treehouse Apartments 101 Arcadia Place Alamo Heights TX
61 Olympik Village Apartments 402 31st Street Northeast Rochester MN
62 Arctic Self Storage 5861 Arctic Boulevard #A Anchorage AK
63 Hiawassee Woods SC & Professional Building 6861 West Colonial Drive Orlando FL
64 Buckingham Pews / Seminary Court 701 West Buckingham Place & 3159 North Semin Chicago IL
65 Sunray East Convalescent Hospital 3210 West Pico Boulevard Los Angeles CA
66 Mayfair Apartments 18645 Detroit Avenue Lakewood OH
67 Villa Maria Health Care Center 4310 East Grant Road Tucson AZ
68 Hampton Inn 508 North State of Franklin Road Johnson City TN
69 San Ramon Valley Self Storage 1911 San Ramon Valley Boulevard San Ramon CA
70 Post Ridge Apartments 501 16th Avenue Phenix City AL
71 Festival de Las Flores 2601-2659 NW 20th Street & 2600-2666 NW 21st Miami FL
72 CS Technical Center 12350 Northwest 39th Street Coral Springs FL
73 Fairways Apartments 3823 McCann Road Longview TX
74 511 Queens Apartments 511 Queens Road Charlotte NC
75 Harbor Plaza Shopping Center 13700 East Quincy Avenue Aurora CO
76 Sun Country Mobile Home Park 799 East Klostermann Road Tarpon Springs FL
77 Parkway Centre 13450-13520 Inwood Road Farmers Branch TX
78 Applecreek Apartments 9874 Dale Crest Dallas TX
79 Sound Advice Store 2925 Tyrone Boulevard St. Petersburg FL
80 IMC Global Office Building 6 Eastport Executive Drive Collinsville IL
81 Oak View Shopping Center 1727-37 East-West Road Calumet City IL
82 South Seminole Storage Park 540 North Highway 434, Suite 530 Altamonte Springs FL
83 Watertown Rite-Aid 842 State Street Watertown NY
84 Harvest Manor Mobile Home Park 4815 Airway Drive Moses Lake WA
85 Gristede's - Battery Park City 21 South End Avenue New York NY
86 Granger Revco Center 12544 Adams Road Granger IN
87 Inlet Inn 539 H Street Anchorage AK
88 Comfort Inn - Webster 750 West Nasa Road 1 Webster TX
89 Forest Ridge Apartments 1800-1810 Westminster Street Denton TX
90 Knollwood Estates 1632 Lexington Avenue Mansfield OH
91 Woodland Hills Apartments 7110 Wurzbach Road San Antonio TX
92 Northgate Apartments 3555 Lawrenceville Highway Tucker GA
93 Blake House 165 S.O.M. Center Road Mayfield Heights OH
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LOAN LARGEST YEAR YEAR
NUMBER ZIP CODE PROPERTY TYPE LARGEST TENANT SQ FT BUILT RENOVATED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Various Office, Industrial Hughes Space & Comm. 387,129 Various
90245 Office Hughes Space & Comm. 387,129 1983
92807 Office CSTS, Inc. 23,981 1986
91361 Office LDDS Communications 27,761 1990
90245 Office Northwest Airlines 60,000 1978
92805 Industrial Allen-Bradley Company 100,000 1982
92805 Industrial RGB Systems (Extron Elect) 57,730 1982
90245 Industrial Mattel, Inc. 192,053 1955
90245 Industrial Ace Medical 113,820 1979
90245 Industrial MSAS Cargo International 76,570 1978
92806 Industrial Furon 90,746 1966
85017 Industrial Festival Markets, Inc. 130,877 1961
92841 Industrial Rank Video Services 70,000 1970
92841 Industrial Cannon Equipment West 165,981 1969-1981
2 22202 Hotel 1982/1986
3 22041 Office GSA GS-11B-30064 38,507 1982/1984
4 10018 Office Thomaston Mills 29,537 1958 1990
5 07059 Office Hoechst Celanese Corporation 207,727 1997
6 Various Multifamily Various
27405 Multifamily 1972
27405 Multifamily 1974
27405 Multifamily 1959-1966
27405 Multifamily 1967
27405 Multifamily 1972
27405 Multifamily 1967
27405 Multifamily 1970
27405 Multifamily 1973
27262 Multifamily 1979
27107 Multifamily 1974
27405 Multifamily 1973
7 22202 Multifamily 1967
8 08096 Anchored Retail Sam's Club 120,000 1990
9 96813 Anchored Retail PriceCostco 131,607 1987
10 19120 Anchored Retail Caldor Holdings, Inc 103,839 1987
11 32822 Multifamily 1974
12 49509 Multifamily 1990-1992/1995-1996
13 49546 Hotel 1980 1989
14 20191 Office GSA 110,147 1985
15 49770 Office PhyCor of Northern Michigan, Inc 152,960 1954 1994
16 53223 Multifamily 1991
17 94404 Industrial Franklin Resources/Perkin Elmer 120,942 1971 1990
18 94401 Hotel 1926
19 33609 Hotel 1984 1992
20 46404 Industrial Chicago Steel 412,236 1950 1995
21 11229 Nursing Home 1967 1995-1996
22 60131 Industrial Houston Foods Co. 474,877 1959 1992
23 22110 Office AT&T Resource Management Corp 154,226 1988
24 75207 Industrial MM Mars 92,360 1947
25 46818 Multifamily 1972 1995-1996
26 31419 Anchored Retail Dress Barn 10,655 1987
27 33609 Anchored Retail Publix 48,555 1988 1993-1996
28 48363 Mobile Home Park 1972/1974
29 53147 Multifamily 1995
30 32299 Anchored Retail Food Lion 30,690 1990
31 46038 Unanchored Retail Kinko's 6,400 1989
32 44035 Industrial MTD Products, Inc 332,796 1946
33 28211 Multifamily 1974 1995-1996
34 98038 Anchored Retail (5) Villiage Drug 10,164 1963-1997
35 08096 Anchored Retail Pathmark 55,520 1986
36 92802 Hotel 1989 1996-1997
37 41051 Multifamily 1992
38 21061 Unanchored Retail Blockbuster Video 6,600 1985/1990
39 30013 Office AT&T 28,322 1989-1993
40 75231 Multifamily 1978 1990
41 48108 Office 1991
42 78229 Retail/Office Hematology Oncology Assoc. of South Texas 13,164 1978 1990
43 84116 Hotel 1984
44 94303 Multifamily 1962
45 30605 Multifamily 1972 1988,1990-1996
46 07009 Industrial Nash Harmon Cosmetics 100,000 1967 1993
47 85034 Hotel 1994
48 90241 Multifamily 1972
49 43615 Multifamily 1977 1993
50 30093 Multifamily 1985
51 75150 Multifamily 1985 1989
52 11747 Office Court Reporting Institute 25,000 1963 1986
53 75087 Anchored Retail Brookshires Grocery Company 38,233 1974 1996
54 43465 Multifamily 1985/1987
55 76017 Single Tenant Retail The Room Store 52,333 1989
56 07047 Industrial Westchester Lace 81,635 1959
57 21208 Unanchored Retail Shuvalsky Enter, Inc 10,412 1953 1983
58 01923 Industrial Cyrk, Inc 120,000 1986
59 44813 Hotel 1989-1992
60 78209 Multifamily 1972-1975 1995
61 55906 Multifamily 1975 1996
62 99502 Self Storage 1977
63 32818 Anchored Retail Eckerd Drug 10,368 1983
64 60657 Multifamily 1907/1935 1987
65 90019 Nursing Home 1967
66 44107 Multifamily 1963
67 85712 Nursing Home 1963 1980
68 37604 Hotel 1995
69 94583 Self Storage 1995
70 36867 Multifamily 1977/1981/1996 1995-1997
71 33142 Industrial Amparao Angel 5,420 1976 1971/1981
72 33065 Office VNU Operations Center Inc 31,272 1987 1997
73 75605 Multifamily 1980
74 28207 Multifamily 1963 1985
75 80015 Unanchored Retail Tuesday Morning 7,589 1979
76 34689 Mobile Home Park 1970
77 75234 Unanchored Retail Leather Center 7,190 1979
78 75220 Multifamily 1969
79 33710 Single Tenant Retail Sound Advice 17,639 1989
80 62234 Office Vigoro Industries 32,000 1994
81 60409 Anchored Retail (5) Michael Stores 16,420 1993
82 32714 Self Storage 1974 1994-1997
83 13601 Single Tenant Retail Rite Aid 11,348 1997
84 98837 Mobile Home Park 1980
85 10280 Anchored Retail Gristede 7,900 1988
86 46530 Anchored Retail Revco 10,722 1996
87 99501 Hotel 1941-1969 1948/1966/1969
88 77598 Hotel 1995
89 76205 Multifamily 1975 1995
90 44907 Multifamily 1990
91 78229 Multifamily 1972 1992
92 30084 Multifamily 1968
93 44146 Multifamily 1966
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LOAN # OF UNITS/ OCCUPANCY OCCUPANCY
NUMBER SQ FT PERCENTAGE AS OF DATE
- -----------------------------------------------------
<S> <C> <C> <C>
1 2,215,452 94.46 08/01/97
701,307 97.60 08/01/97
186,880 75.56 08/01/97
81,158 100.00 08/01/97
60,000 100.00 08/01/97
100,000 100.00 08/01/97
57,730 100.00 08/01/97
192,053 100.00 08/01/97
113,820 100.00 08/01/97
76,570 100.00 08/01/97
153,320 100.00 08/01/97
130,877 100.00 08/01/97
84,700 82.64 08/01/97
277,037 100.00 08/01/97
2 697 80.03 10/15/97
3 525,790 100.00 10/01/97
4 585,824 90.46 09/25/97
5 207,727 100.00 10/12/97
6 1,833 92.79 09/01/97
260 92.69 09/01/97
268 94.78 09/01/97
176 90.34 09/01/97
94 92.55 09/01/97
96 98.95 09/01/97
140 91.43 09/01/97
132 93.94 09/01/97
160 94.38 09/01/97
230 96.52 09/01/97
169 87.14 09/01/97
108 87.96 09/01/97
7 536 98.29 10/12/97
8 361,945 98.20 08/22/97
9 203,761 100.00 11/27/97
10 354,518 97.50 08/21/97
11 450 96.90 12/04/97
12 418 96.20 11/07/97
13 319 69.00 08/07/97
14 110,147 100.00 11/01/97
15 154,000 100.00 10/10/97
16 232 97.00 08/29/97
17 120,942 100.00 09/01/97
18 99 100.00 07/31/97
19 221 76.11 06/30/97
20 1,032,331 99.50 09/30/97
21 189 97.90 09/30/97
22 474,877 100.00 09/01/97
23 154,226 100.00 06/01/97
24 1,152,618 98.80 07/01/97
25 170 95.24 09/22/97
26 130,680 96.60 08/15/97
27 88,753 100.00 01/26/98
28 375 99.20 01/23/98
29 120 94.20 09/04/97
30 72,090 100.00 08/20/97
31 55,938 95.70 10/31/97
32 1,056,527 87.20 10/01/97
33 109 94.50 10/14/97
34 45,731 100.00 01/23/97
35 135,390 93.40 09/17/97
36 94 82.00 06/01/97
37 108 100.00 09/10/97
38 57,391 90.00 12/03/97
39 57,910 100.00 09/01/97
40 293 92.80 05/01/97
41 45,276 100.00 11/26/97
42 68,512 95.10 11/11/97
43 111 84.80 09/16/97
44 82 98.70 09/01/97
45 168 82.70 05/01/97
46 137,655 100.00 12/01/97
47 90 74.36 12/31/97
48 76 97.40 10/17/97
49 180 94.40 10/30/97
50 100 93.00 07/30/97
51 126 97.60 10/14/97
52 97,648 96.60 09/26/97
53 123,304 88.40 11/03/97
54 129 93.80 11/30/97
55 52,333 100.00 11/21/97
56 211,500 100.00 07/11/97
57 50,797 100.00 12/11/97
58 120,000 100.00 07/29/97
59 101 65.12 07/10/97
60 106 97.20 01/15/98
61 140 100.00 10/01/97
62 1,065(7) 83.00 07/01/97
63 51,052 100.00 08/01/97
64 41 100.00 08/18/97
65 99 98.80 08/31/97
66 144 97.20 09/30/97
67 143 85.60 09/30/97
68 77 81.40 09/01/97
69 419 99.20 03/01/97
70 152 98.02 12/10/97
71 122,895 95.70 12/01/97
72 31,272 100.00 10/27/97
73 152 86.80 10/15/97
74 54 77.80 09/30/97
75 45,863 97.00 10/20/97
76 120 97.50 10/01/97
77 28,374 100.00 10/20/97
78 216 88.90 10/15/97
79 17,639 100.00 10/01/97
80 32,000 100.00 09/12/97
81 26,420 100.00 09/30/97
82 351 86.10 08/25/97
83 11,348 100.00 09/16/97
84 194 100.00 08/31/97
85 9,800 100.00 11/10/97
86 17,962 95.20 06/18/97
87 85 77.40 08/31/97
88 63 65.00 09/01/97
89 56 87.50 10/14/97
90 28 100.00 10/09/97
91 96 83.30 10/15/97
92 42 93.00 07/30/97
93 36 100.00 07/28/97
</TABLE>
(1) For ARD Loans, the Maturity Date listed is the Anticipated Repayment
Date. Final Maturity Dates for ARD Loans are: Kilroy 2/1/2022, Shannon
3/1/2027, 1065 Avenue of Americas 12/1/2027, Crystal Plaza Apartments
12/1/2027 and Four and Five Skyline 1/1/2028. The Crystal Gateway Loan,
though not an ARD Loan, is assumed to have an Anticipated Repayment
Date of January 1, 2008 and a Final Maturity Date of December 1, 2017.
(2) Key: LO=Lock-out Period, 0%=No Prepayment Premium, YM1=greater of 1% or
Yield Maintenance, YM2=greater of 1% or Yield Maintenance based on a
discount rate equal to 25 basis points over the U.S. Treasury rate. For
example, "LO-45, YM1-12, 3%-12, 2%-12, 1%-12, 0%-3" means that as of
the Cut-Off Date, a Mortgage Loan has a 45-month Lock-out Period
followed by a 12 month period where Prepayment Premium is calculated
based on Yield Maintenance, followed by three 12 month periods where
the Prepayment Premium is 3%, 2%, 1%, respectively, of amount prepaid
followed by a 3 month period where there is no Prepayment Premium.
<PAGE>
ANNEX A
<TABLE>
<CAPTION>
NET
APPRAISED APPRAISAL ORIGINAL ORIGINAL CUT OFF MORTGAGE MORTGAGE ANNUAL DEBT REMAINING REMAINING
VALUE DATE LTV BALANCE BALANCE INTEREST RATE INTEREST RATE SERVICE TERM AM TERM
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
204,700,000 Various 41.04 84,000,000 82,869,076 8.3500 8.2825 8,015,051 83 287
108,000,000 12/31/96 36.30 39,203,565
13,200,000 12/31/96 43.97 5,804,160
12,000,000 12/31/96 27.56 3,306,751
6,800,000 12/31/96 51.77 3,520,211
6,200,000 09/28/96 51.37 3,184,754
3,200,000 12/31/96 40.84 1,306,926
16,000,000 12/31/96 54.36 8,697,121
5,100,000 12/31/96 50.91 2,596,551
4,700,000 12/31/96 56.35 2,648,254
9,400,000 12/31/96 54.46 5,119,707
4,500,000 12/31/96 35.14 1,581,314
5,400,000 12/31/96 47.22 2,549,966
10,200,000 12/31/96 43.93 4,480,720
120,000,000 10/02/97 53.33 64,000,000 63,847,440 7.2400 7.1925 5,546,210 118 298
74,700,000 09/23/97 67.87 50,700,000 50,615,148 6.8600 6.8125 3,990,725 142 358
61,000,000 09/11/97 65.57 40,000,000 39,904,509 7.1800 7.1325 3,251,687 81 357
56,200,000 10/01/97 64.06 36,000,000 35,810,400 7.0270 6.9795 3,283,694 237 249
47,645,000 Various 75.77 36,100,000 35,789,344 7.8500 7.7825 3,133,487 108 348
8,375,000 02/11/97 72.91 6,106,191
6,250,000 02/12/97 81.36 5,085,129
2,750,000 02/12/97 71.97 1,979,201
2,325,000 02/12/97 64.93 1,509,647
3,290,000 02/11/97 75.27 2,476,233
2,950,000 02/11/97 78.30 2,309,806
3,970,000 02/11/97 78.71 3,124,880
5,700,000 02/11/97 75.91 4,326,614
6,710,000 02/12/97 78.75 5,284,341
2,425,000 02/12/97 74.74 1,812,549
2,900,000 02/12/97 71.91 2,085,409
48,500,000 10/01/97 70.10 34,000,000 33,913,562 6.8600 6.8125 2,676,182 140 357
38,000,000 07/25/97 79.74 30,300,000 30,202,056 8.2500 8.1825 2,731,605 175 355
37,500,000 08/24/97 73.47 27,550,000 27,510,828 7.7300 7.6625 2,363,891 130 358
33,500,000 08/20/97 74.63 25,000,000 24,877,953 8.5400 8.4725 2,423,773 115 295
21,000,000 11/11/97 79.52 16,700,000 16,666,723 7.2900 7.2225 1,416,487 118 322
20,600,000 08/01/97 77.67 16,000,000 15,974,862 7.2300 7.1625 1,307,175 118 358
22,500,000 07/14/97 70.67 15,900,000 15,806,064 8.5100 8.4425 1,537,659 114 294
20,500,000 11/04/97 74.88 15,350,000 15,326,916 7.4500 7.3825 1,281,652 118 358
20,600,000 09/16/97 72.82 15,000,000 14,935,138 7.8900 7.8225 1,376,178 116 296
17,700,000 08/29/97 79.10 14,000,000 13,948,020 7.5600 7.4925 1,181,590 139 355
18,000,000 08/27/97 66.67 12,000,000 11,945,902 7.6300 7.5625 1,076,354 236 296
15,250,000 07/16/97 70.49 10,750,000 10,656,954 7.9500 7.8825 1,074,997 139 235
23,000,000 07/25/97 74.78 10,200,000 10,157,016 8.0500 7.9825 948,761 80 296
21,000,000 06/09/97 47.62 10,000,000 9,922,819 8.6800 8.6125 980,872 112 292
13,900,000 01/30/97 70.50 9,800,000 9,584,119 8.8300 8.7625 1,180,914 172 172
11,800,000 08/20/97 76.27 9,000,000 8,975,760 7.9000 7.8325 807,324 117 321
11,300,000 09/04/97 72.12 8,150,000 8,126,534 7.7000 7.6325 697,275 80 356
12,300,000 08/25/97 65.85 8,100,000 8,033,669 8.4000 8.3325 837,382 115 235
8,500,000 10/07/97 83.53 7,100,000 7,084,125 7.5100 7.4425 596,314 117 357
9,400,000 07/21/97 66.76 6,275,000 6,244,015 8.4700 8.4025 604,814 115 295
8,200,000 12/14/96 73.17 6,000,000 5,958,571 8.5000 8.4325 553,618 109 349
8,700,000 07/07/97 63.22 5,500,000 5,457,899 7.8800 7.8125 504,163 77 293
6,800,000 09/02/97 77.94 5,300,000 5,279,887 7.4500 7.3825 442,525 115 355
6,900,000 06/18/97 75.36 5,200,000 5,183,395 8.3100 8.2425 471,425 115 355
8,150,000 10/07/97 63.19 5,150,000 5,119,844 7.8900 7.8225 586,675 178 178
7,487,720 08/08/97 66.78 5,000,000 4,970,316 8.4800 8.4125 482,328 114 294
6,600,000 09/10/97 72.73 4,800,000 4,784,609 7.9400 7.8725 442,279 117 297
6,150,000 10/12/97 75.00 4,612,500 4,592,873 7.9900 7.9225 426,834 116 296
8,400,000 06/11/97 52.38 4,400,000 4,386,510 8.5100 8.4425 406,361 175 355
6,300,000 08/14/97 69.84 4,400,000 4,382,338 8.3500 8.2825 419,836 116 296
5,510,000 08/06/97 78.95 4,350,000 4,334,325 7.7100 7.6425 372,525 115 355
5,615,000 07/11/97 74.80 4,200,000 4,194,459 8.1000 8.0325 373,337 118 358
5,000,000 09/04/97 80.00 4,000,000 3,986,912 8.1900 8.1225 358,585 115 355
5,700,000 05/30/97 70.18 4,000,000 3,979,181 8.2700 8.2025 361,283 76 352
6,415,000 10/29/97 60.80 3,900,000 3,894,466 7.7400 7.6725 334,958 118 358
5,700,000 06/11/97 63.16 3,600,000 3,579,945 8.8700 8.8025 358,695 114 294
4,350,000 09/03/97 82.07 3,570,000 3,559,007 8.1900 8.1225 336,056 117 297
4,860,000 10/20/97 72.02 3,500,000 3,487,946 7.4950 7.4275 310,240 177 297
4,500,000 05/28/97 77.78 3,500,000 3,453,142 8.3100 8.2425 359,451 232 232
5,100,000 10/14/97 67.65 3,450,000 3,443,693 7.7800 7.7125 306,130 118 322
5,760,000 01/24/97 59.90 3,450,000 3,396,900 9.8500 9.7825 395,413 73 229
4,250,000 10/20/97 80.00 3,400,000 3,394,877 7.4400 7.3725 283,605 118 358
4,500,000 07/17/97 75.56 3,400,000 3,388,921 7.8400 7.7725 310,589 117 297
4,100,000 08/15/97 82.93 3,400,000 3,384,894 7.5900 7.5225 287,798 114 354
4,400,000 11/10/95 77.27 3,400,000 3,332,301 7.7500 7.6825 292,296 94 334
5,000,000 03/26/97 66.00 3,300,000 3,279,012 8.6100 8.5425 346,420 116 236
6,410,000 05/05/97 51.48 3,300,000 3,273,988 8.5500 8.4825 320,205 112 292
4,250,000 09/22/97 75.29 3,200,000 3,195,159 7.4200 7.3525 266,398 118 358
4,600,000 10/09/97 69.57 3,200,000 3,192,844 7.6400 7.5725 287,279 58 298
5,550,000 06/25/97 54.05 3,000,000 2,968,353 7.8500 7.7825 297,766 114 234
4,065,000 07/10/97 72.57 2,950,000 2,946,108 8.1000 8.0325 262,225 118 358
4,200,000 03/31/97 70.24 2,950,000 2,933,913 9.0000 8.9325 297,075 114 294
4,600,000 07/23/97 61.96 2,850,000 2,822,852 8.6800 8.6125 300,703 114 234
3,850,000 10/18/95 75.32 2,900,000 2,810,418 7.7500 7.6825 262,854 94 274
4,000,000 05/20/97 70.00 2,800,000 2,737,075 8.6000 8.5325 332,845 172 172
4,000,000 06/30/97 68.75 2,750,000 2,722,797 8.3750 8.3075 283,776 234 234
3,230,000 07/21/97 78.95 2,550,000 2,537,652 8.5900 8.5225 248,258 115 295
3,850,000 08/14/97 64.94 2,500,000 2,488,475 7.4900 7.4225 221,502 116 296
3,650,000 08/22/97 68.49 2,500,000 2,486,893 7.8400 7.7725 234,939 116 272
3,500,000 06/27/97 71.43 2,500,000 2,474,825 8.2300 8.1625 255,243 234 234
4,250,000 02/16/96 60.12 2,555,000 2,459,359 9.0000 8.9325 275,856 97 217
3,675,000 09/05/97 65.31 2,400,000 2,392,280 7.9200 7.8525 220,759 117 297
3,700,000 06/20/97 64.86 2,400,000 2,384,355 7.9000 7.8325 220,379 114 294
4,000,000 11/29/97 57.13 2,285,000 2,276,350 7.1400 7.0725 214,897 238 238
3,700,000 10/28/97 54.05 2,000,000 1,995,592 7.7300 7.6625 180,964 118 298
2,950,000 10/03/97 67.80 2,000,000 1,995,563 7.6900 7.6225 180,335 118 298
3,100,000 04/22/96 64.52 2,000,000 1,976,226 8.9375 8.8700 192,031 100 340
2,400,000 04/29/97 79.17 1,900,000 1,887,753 7.9700 7.9025 175,521 114 294
2,720,000 07/01/96 67.10 1,825,000 1,797,475 9.4100 9.3425 189,971 103 283
2,675,000 10/21/97 67.29 1,800,000 1,797,200 7.2800 7.2125 147,790 118 358
2,900,000 03/14/96 62.93 1,825,000 1,791,283 9.5625 9.4950 192,292 99 279
3,250,000 03/06/96 55.85 1,815,000 1,777,597 8.8750 8.8075 180,916 99 279
2,900,000 09/11/97 60.34 1,750,000 1,744,425 7.9800 7.9125 161,803 117 297
2,400,000 08/19/97 71.88 1,725,000 1,720,516 8.1000 8.0325 157,540 117 321
2,730,000 05/01/97 62.27 1,700,000 1,693,352 9.0000 8.9325 164,143 113 353
3,100,000 09/12/97 54.84 1,700,000 1,692,801 8.0200 7.9525 157,721 176 296
1,900,000 08/19/97 89.16 1,694,000 1,678,000 7.7100 7.6425 168,517 228 228
2,100,000 06/27/97 76.19 1,600,000 1,592,099 8.4700 8.4025 154,216 115 295
3,100,000 05/02/97 48.39 1,500,000 1,482,724 8.4200 8.3525 155,298 113 233
2,175,000 06/12/97 66.67 1,450,000 1,441,692 8.7800 8.7125 146,961 175 271
2,400,000 08/14/97 54.58 1,310,000 1,301,448 8.4000 8.3325 135,429 116 236
2,450,000 11/06/96 53.06 1,300,000 1,271,487 8.8800 8.8125 157,114 172 172
1,800,000 05/29/96 68.06 1,225,000 1,202,332 8.8750 8.8075 122,106 101 281
1,500,000 10/24/97 79.00 1,185,000 1,182,366 7.5400 7.4725 99,818 117 357
1,700,000 10/18/95 70.59 1,200,000 1,162,808 8.0000 7.9325 111,141 93 273
1,420,000 07/31/97 79.23 1,125,000 1,112,973 7.7400 7.6725 110,745 234 234
1,400,000 06/23/97 71.43 1,000,000 989,930 8.2300 8.1625 102,097 234 234
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
APPRAISED MATURITY BALLOON MAT DATE 95 NOI
VALUE ORIG DATE DATE (1) BALANCE LTV PREPAYMENT PROVISIONS (2) 95 NOI MONTHS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
204,700,000 01/31/97 01/31/05 72,660,836 35.50 LO-24, Defeasance-11, YM2-41, 0%-6 23,105,934 12
108,000,000 14,107,036 12
13,200,000 1,210,904 12
12,000,000 1,066,857 12
6,800,000 1,296,408 12
6,200,000 637,622 12
3,200,000 170,927 12
16,000,000 1,656,420 12
5,100,000 (12,739) 12
4,700,000 485,271 12
9,400,000 1,061,822 12
4,500,000 606,399 12
5,400,000 457,266 12
10,200,000 361,741 12
120,000,000 12/15/97 01/01/08 50,661,460 42.22 LO-24, Defeasance-93, 0%-1 12,024,202 12
74,700,000 12/03/97 01/01/10 41,191,866 55.14 LO-24, Defeasance-45, YM1-66, 0%-7 5,943,618 12
61,000,000 11/05/97 12/01/04 36,559,866 59.93 LO-32, YM1-29, 0 %-20 5,854,716 12
56,200,000 11/07/97 12/01/17 3,162,048 5.63 LO-44, Defeasance-72, 3%-6, 2.5%-18, 2%-6,
1.5%-18, 1%-66, 0%-7 --
47,645,000 02/28/97 03/01/07 31,569,914 66.26 LO-23, Defeasance-24, YM1-54, 0%-7 4,899,050 12
8,375,000 736,000 12
6,250,000 676,176 12
2,750,000 263,621 12
2,325,000 255,819 12
3,290,000 340,082 12
2,950,000 323,684 12
3,970,000 400,363 12
5,700,000 616,129 12
6,710,000 671,912 12
2,425,000 343,773 12
2,900,000 271,491 12
48,500,000 11/20/97 11/01/09 27,688,015 57.09 LO-24, Defeasance-44, YM1-65, 0%-7 4,191,664 12
38,000,000 09/22/97 10/01/12 23,464,005 61.75 LO-79, YM1-71, 0%-25 3,468,759 12
37,500,000 12/22/97 01/01/09 23,507,064 62.69 LO-46, YM1-71, 0%-13 3,187,893 12
33,500,000 09/10/97 10/01/07 20,462,369 61.08 LO-55, YM1-53, 0%-7 3,538,209 12
21,000,000 12/26/97 01/01/08 13,782,577 65.63 LO-58, YM1-53, 0%-7 -- --
20,600,000 12/31/97 01/01/08 13,803,361 67.01 LO-46, YM1-65, 0%-7 1,214,019 12
22,500,000 08/13/97 09/01/07 13,004,661 57.80 LO-42, YM1-65, 0%-7 2,020,529 12
20,500,000 12/11/97 01/01/08 13,308,315 64.92 LO-58, YM1-53, 0%-7 1,411,858 12
20,600,000 10/31/97 11/01/07 12,080,481 58.64 LO-44, YM1-65, 0%-7 2,038,723 12
17,700,000 09/17/97 10/01/09 11,604,085 65.56 LO-55, YM1-59, 0%-25 -- --
18,000,000 10/02/97 11/01/17 4,462,541 24.79 LO-84, YM1-115,0%-37 1,212,987 12
15,250,000 09/30/97 10/01/09 6,348,332 41.63 LO-43, YM1-59, 0%-37 975,882 12
23,000,000 10/07/97 11/01/04 9,005,051 65.84 LO-32, YM1-41, 0%-7 2,018,800 12
21,000,000 06/27/97 07/01/07 8,212,373 39.11 LO-52, 5%-12, 4%-12, 3%-12, 2%-12, 1%-5, 0%-7 257,802 12
13,900,000 06/30/97 07/01/12 -- -- LO-64, 7%-12, 6%-12, 5%-12, 4%-12, 3%-12,
2%-12, 1%-23, 0%-13 2,954,682 12
11,800,000 11/21/97 12/01/07 7,539,660 63.90 LO-57, 5%-12, 4%-12, 3%-12, 2%-12, 1%-5, 0%-7 530,279 5
11,300,000 10/01/97 11/01/04 7,505,866 66.42 LO-44, YM1-29, 0%-7 -- --
12,300,000 09/15/97 10/01/07 5,652,574 45.96 LO-43, YM1-65, 0%-7 1,846,078 12
8,500,000 11/28/97 12/01/07 6,163,800 72.52 LO-45, YM1-65, 0%-7 -- --
9,400,000 09/30/97 10/01/07 5,127,379 54.55 LO-43, YM1-65, 0%-7 1,092,354 12
8,200,000 03/17/97 04/01/07 5,316,153 64.83 LO-37, YM1-65, 0%-7 642,666 12
8,700,000 07/21/97 08/01/04 4,841,846 55.65 LO-29, YM1-41, 0%-7 880,939 12
6,800,000 09/25/97 10/01/07 4,595,053 67.57 LO-55, 5%-12, 4%-12, 3%-12, 2%-12, 1%-5, 0%-7 430,066 12
6,900,000 09/12/97 10/01/07 4,590,300 66.53 LO-43, YM1-65, 0%-7 524,759 12
8,150,000 12/22/97 01/01/13 -- -- LO-58, YM1-83, 0%-37 801,912 12
7,487,720 08/29/97 09/01/07 4,086,550 54.58 LO-42, YM1-65, 0%-7 565,190 12
6,600,000 11/24/97 12/01/07 3,870,712 58.65 LO-45, YM1-65, 0%-7 599,220 12
6,150,000 10/31/97 11/01/07 3,724,261 60.56 LO-44, YM1-65, 0%-7 -- --
8,400,000 09/30/97 10/01/12 3,436,770 40.91 LO-43, YM1-125, 0%-7 498,808 12
6,300,000 10/03/97 11/01/07 3,584,788 56.90 LO-44, YM1-65, 0%-7 901,286 12
5,510,000 09/25/97 10/01/07 3,792,846 68.84 LO-43, YM1-65, 0%-7 469,951 12
5,615,000 12/19/97 01/01/08 3,691,985 65.75 LO-46, YM1-65, 0%-7 581,295 12
5,000,000 09/30/97 10/01/07 3,522,573 70.45 LO-43, YM1-65, 0%-7 505,257 12
5,700,000 06/30/97 07/01/04 3,712,296 65.13 LO-28, YM1-41, 0%-7 469,212 12
6,415,000 12/12/97 01/01/08 3,402,664 53.04 LO-46, YM1-65, 0%-7 258,138 12
5,700,000 08/07/97 09/01/07 2,969,679 52.10 LO-42, YM1-65, 0%-7 205,994 12
4,350,000 11/06/97 12/01/07 2,897,077 66.60 LO-45, YM1-65, 0%-7 579,241 12
4,860,000 11/25/97 12/01/12 2,178,484 44.82 LO-57, YM1-113, 0%-7 430,860 12
4,500,000 06/30/97 07/01/17 -- -- LO-112, YM1-83, 0%-37 533,958 12
5,100,000 12/11/97 01/01/08 2,881,944 56.51 LO-46, YM1-65, 0%-7 468,929 12
5,760,000 03/20/97 04/01/04 2,892,921 50.22 LO-25, 1 %-41, 0%-7 462,154 12
4,250,000 12/05/97 01/01/08 2,947,116 69.34 LO-46, YM1-59, 0%-13 396,497 12
4,500,000 11/25/97 12/01/07 2,734,717 60.77 LO-45, YM1-65, 0%-7 494,991 12
4,100,000 08/29/97 09/01/07 2,956,851 72.12 LO-42, YM1-65, 0%-7 369,462 12
4,400,000 12/27/95 01/01/06 2,967,057 67.43 LO-21, YM1-66, 0%-7 458,957 12
5,000,000 10/30/97 11/01/07 2,317,350 46.35 LO-44, YM1-65, 0%-7 321,434 12
6,410,000 06/26/97 07/01/07 2,701,683 42.15 LO-40, YM1-65, 0%-7 -- --
4,250,000 12/19/97 01/01/08 2,772,523 65.24 LO-46, YM1-65, 0%-7 365,238 12
4,600,000 12/05/97 01/01/03 2,940,385 63.92 LO-34, YM1-17, 0%-7 381,657 12
5,550,000 08/25/97 09/01/07 2,058,619 37.09 LO-54, YM1-50, 0%-10 -- --
4,065,000 12/19/97 01/01/08 2,593,179 63.79 LO-46, YM1-65, 0%-7 388,075 12
4,200,000 08/29/97 09/01/07 2,440,808 58.11 LO-42, YM1-65, 0%-7 -- --
4,600,000 08/27/97 09/01/07 2,005,484 43.60 LO-42, YM1-65, 0%-7 670,945 12
3,850,000 12/26/95 01/01/06 2,327,112 60.44 LO-21, YM1-66, 0%-7 374,896 12
4,000,000 07/01/97 07/01/12 -- -- LO-52, YM1-83, 0%-37 399,806 12
4,000,000 08/28/97 09/01/17 -- -- LO-78, YM1-119, 0%-37 554,132 12
3,230,000 09/04/97 10/01/07 2,089,668 64.70 LO-43, YM1-65, 0%-7 276,038 12
3,850,000 10/08/97 11/01/07 1,992,405 51.75 LO-44, YM1-65, 0%-7 361,783 12
3,650,000 10/28/97 11/01/07 1,911,628 52.37 LO-44, YM1-65, 0%-7 414,502 12
3,500,000 08/13/97 09/01/17 -- -- LO-78, YM1-95, 0%-61 366,010 12
4,250,000 03/29/96 04/01/06 1,814,711 42.70 LO-24, YM1-66, 0%-7 514,728 12
3,675,000 11/13/97 12/01/07 1,934,365 52.64 LO-45, YM1-65, 0%-7 275,141 7
3,700,000 08/28/97 09/01/07 1,933,374 52.25 LO-42, YM1-65, 0%-7 -- --
4,000,000 12/19/97 01/01/18 -- -- LO-118, YM1-83, 0%-37 378,490 12
3,700,000 12/30/97 01/01/08 1,604,067 43.35 LO-46, YM1-65, 0%-7 -- --
2,950,000 11/30/97 01/01/08 1,602,389 54.32 LO-46, YM1-65, 0%-7 292,543 12
3,100,000 06/21/96 07/01/06 1,786,582 57.63 LO-27, YM1-66, 0%-7 278,304 12
2,400,000 08/12/97 09/01/07 1,533,331 63.89 LO-42, YM1-65, 0%-7 281,244 12
2,720,000 09/18/96 10/01/06 1,523,962 56.03 LO-30, YM1-66, 0%-7 268,193 12
2,675,000 12/29/97 01/01/08 1,554,646 58.12 LO-46, YM1-65, 0%-7 265,649 12
2,900,000 05/24/96 06/01/06 1,529,040 52.73 LO-26, YM1-66, 0%-7 280,615 12
3,250,000 05/16/96 06/01/06 1,497,386 46.07 LO-26, YM1-66, 0%-7 301,858 12
2,900,000 11/04/97 12/01/07 1,412,638 48.71 LO-44, YM1-66, 0%-7 291,764 12
2,400,000 11/12/97 12/01/07 1,451,885 60.50 LO-45, YM1-65, 0%-7 -- --
2,730,000 07/23/97 08/01/07 1,520,307 55.69 LO-41, YM1-65, 0%-7 332,302 12
3,100,000 10/31/97 11/01/12 1,082,355 34.91 LO-80, YM1-71, 0%-25 250,632 12
1,900,000 09/18/97 03/02/17 -- -- LO-79, YM1-143, 0%-6 -- --
2,100,000 09/30/97 10/01/07 1,307,379 62.26 LO-43, YM1-65, 0%-7 186,682 12
3,100,000 07/30/97 08/01/07 1,047,401 33.79 LO-41, YM1-65, 0%-7 -- 12
2,175,000 09/26/97 10/01/12 842,493 38.74 LO-79, YM1-59, 0%-37 -- 12
2,400,000 10/03/97 11/01/07 914,182 38.09 LO-44, YM1-65, 0%-7 268,065 12
2,450,000 06/25/97 07/01/12 -- -- LO-76, YM1-89, 0%-7 111,453 5
1,800,000 07/25/96 08/01/06 1,010,634 56.15 LO-28, YM1-66, 0%-7 176,061 12
1,500,000 11/26/97 12/01/07 1,029,425 68.63 LO-45, YM1-65, 0%-7 142,121 12
1,700,000 11/22/95 12/01/05 969,161 57.01 LO-20, YM1-66, 0%-7 169,732 12
1,420,000 08/29/97 09/01/17 -- -- LO-78, YM1-119, 0%-37 153,814 12
1,400,000 08/13/97 09/01/17 -- -- LO-78, YM1-95, 0%-61 122,292 12
</TABLE>
(3) Prior to 12/1/98 no TI/LC is collected, after 12/1/98 TI/LC of $6,250
per month is collected, after 12/1/99 TI/LC of $10,417 per month is
collected, and after 12/1/2001 TI/LC of $19,445 per month is collected.
(4) Amount for use as an Ongoing Replacement Reserve.
(5) Anchor tenant is not part of the Mortgaged Property.
(6) Mortgagee may require Ongoing Replacement Reserves based on a capital
expenditures budget.
(7) Property also contains 97,400 square feet of industrial/office space.
<PAGE>
<TABLE>
<CAPTION>
96 NOI 97 NOI 97 NOI AS
96 NOI MONTHS 97 NOI MONTHS OF DATE UW NOI UW CASH FLOW UW DSCR
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
24,705,045 12 12,453,765 6 07/31/97 17,760,597 15,057,445 1.88
14,509,947 12 7,199,963 6 07/31/97 8,922,078 7,532,178
1,256,214 12 508,148 6 07/31/97 1,102,746 918,572
1,363,665 12 745,681 6 07/31/97 1,111,463 898,743
1,295,550 12 650,490 6 07/31/97 781,806 615,156
640,642 12 315,990 6 07/31/97 573,838 484,894
274,717 12 88,427 6 07/31/97 252,950 210,830
1,828,028 12 911,328 6 07/31/97 1,603,911 1,422,291
424,205 12 254,022 6 07/31/97 450,188 396,009
493,259 12 253,986 6 07/31/97 458,666 413,398
831,124 12 507,552 6 07/31/97 921,089 796,962
623,074 12 333,438 6 07/31/97 316,030 258,968
469,384 12 224,622 6 07/31/97 449,657 396,989
695,236 12 460,118 6 07/31/97 816,174 712,455
13,215,617 12 14,749,826 12 08/31/97 12,896,275 10,955,649 1.98
7,106,039 12 7,617,430 12 08/31/97 7,268,144 6,585,988 1.65
5,994,320 12 -- 6,982,088 5,915,348 1.82
-- -- 5,091,683 4,708,593 1.43
4,885,662 12 2,539,053 6 06/30/97 5,372,347 4,980,084
762,472 12 407,142 6 06/30/97 873,540 817,900
701,177 12 360,425 6 06/30/97 797,432 740,080
287,951 12 196,908 6 06/30/97 310,034 272,370
203,378 12 115,081 6 06/30/97 265,738 245,622
338,534 12 169,935 6 06/30/97 359,156 338,612
307,313 12 146,419 6 06/30/97 384,674 354,714
421,078 12 231,156 6 06/30/97 463,811 435,563
549,563 12 317,603 6 06/30/97 622,714 588,474
734,300 12 386,069 6 06/30/97 722,157 672,937
298,189 12 46,461 6 06/30/97 254,097 217,931
281,707 12 161,854 6 06/30/97 318,994 295,882
4,574,606 12 2,871,629 8 08/31/97 4,418,062 4,283,062 1.60
3,674,497 12 2,401,582 8 08/31/97 3,603,850 3,441,129 1.26
3,138,505 12 2,321,701 9 09/30/97 3,015,141 2,908,568 1.23
3,602,024 12 1,712,861 6 06/30/97 3,607,787 3,397,501 1.40
691,364 5 1,885,292 12 10/31/97 1,912,073 1,781,019 1.26
1,649,779 12 1,446,547 10 10/30/97 1,625,981 1,542,381 1.18
2,338,796 12 2,219,161 9 09/30/97 2,545,336 2,154,866 1.40
1,400,084 12 1,307,691 10 10/31/97 1,846,621 1,641,527 1.28
2,373,746 12 1,251,706 6 06/30/97 2,309,643 2,139,721 1.55
1,150,398 12 882,624 7 07/15/97 1,447,636 1,401,236 1.19
1,247,155 12 740,669 7 07/31/97 1,280,939 1,259,774 1.17
1,144,764 12 1,413,658 12 06/30/97 1,501,263 1,393,395 1.30
2,540,837 12 1,586,897 6 06/30/97 2,019,464 1,684,615 1.78
1,860,903 12 931,712 5 05/30/97 1,722,235 1,484,731 1.51
3,292,277 12 2,725,150 9 09/30/97 1,905,550 1,858,300 1.57
1,285,927 12 983,801 9 09/30/97 1,188,061 1,046,137 1.30
690,214 9 772,047 9 09/30/97 981,464 860,838 1.23
2,005,135 12 1,203,998 7 07/31/97 1,683,500 1,327,927 1.59
286,820 12 627,145 12 09/30/97 800,707 766,707 1.29
1,007,416 12 596,813 7 07/30/97 1,062,926 963,342 1.59
666,958 12 630,637 9 09/30/97 770,739 735,755 1.33
897,811 12 755,221 9 09/30/97 777,315 758,565 1.50
591,906 12 356,628 7 07/31/97 605,510 581,510 1.31
544,135 12 332,822 7 07/31/97 616,158 588,050 1.25
730,980 12 671,745 9 09/30/97 830,699 771,185 1.31
1,006,229 12 348,742 3 09/30/97 1,046,129 631,139 1.31
662,463 12 452,449 8 08/31/97 635,712 612,884 1.39
-- -- 401,192 12 09/30/97 601,790 565,415 1.32
823,675 12 209,759 3 09/30/97 706,440 630,894 1.55
808,748 12 428,184 6 06/30/97 734,477 643,292 1.53
518,890 12 233,146 6 06/30/97 472,533 445,206 1.20
519,432 12 245,967 6 06/30/97 583,119 528,091 1.41
537,126 12 402,852 8 08/31/97 524,638 460,092 1.28
509,748 12 533,317 12 05/31/97 503,317 437,392 1.21
405,296 12 424,035 9 09/30/97 485,367 413,175 1.23
292,285 12 176,066 6 06/30/97 534,349 475,897 1.33
644,033 12 439,717 8 08/31/97 576,651 502,207 1.49
501,234 12 423,457 9 09/30/97 465,269 444,769 1.43
520,915 12 237,352 5 05/31/97 511,525 473,725 1.32
516,322 12 362,130 9 09/30/97 472,556 410,792 1.34
694,810 12 603,208 9 09/30/97 819,921 728,603 1.84
449,454 12 358,866 10 10/30/97 374,543 359,274 1.27
466,066 12 473,684 12 09/30/97 428,218 387,718 1.25
394,478 12 213,044 6 06/30/97 432,630 405,630 1.41
450,425 12 372,620 9 09/30/97 441,706 410,206 1.40
473,457 12 756,175 9 09/30/97 673,144 539,335 1.56
435,670 12 378,289 9 09/30/97 544,608 493,395 1.54
366,619 12 362,194 11 11/30/97 367,500 341,700 1.28
440,047 12 336,617 10 10/07/97 379,806 351,003 1.22
-- -- 533,308 11 11/30/97 565,285 494,008 1.66
410,900 12 368,559 11 11/30/97 421,251 376,852 1.44
442,696 8 169,672 7 07/31/97 419,344 393,424 1.32
654,518 12 555,155 12 06/30/97 533,407 481,224 1.60
378,170 12 294,431 9 09/30/97 389,603 363,103 1.38
461,480 12 388,851 9 09/30/97 536,432 501,432 1.51
543,092 12 410,661 9 09/30/97 449,004 432,918 1.53
294,521 12 349,485 12 12/31/97 359,653 329,984 1.33
415,733 12 405,519 12 08/31/97 388,828 378,828 1.71
597,662 12 389,801 7 07/31/97 514,200 491,925 2.09
361,758 12 270,882 9 09/30/97 358,628 326,228 1.28
149,416 12 29,744 3 09/30/97 332,068 308,208 1.12
420,008 12 382,057 8 08/31/97 431,784 382,604 1.73
321,265 12 244,319 7 07/31/97 366,373 360,123 1.63
359,384 12 348,031 11 11/30/97 330,686 299,298 1.39
345,035 12 244,927 9 09/30/97 327,696 271,657 1.50
385,238 12 206,212 10 10/31/97 273,763 247,182 1.37
342,075 12 249,775 9 09/30/97 341,469 303,469 1.58
281,908 12 148,802 6 06/30/97 277,412 245,331 1.40
274,336 12 298,872 10 10/20/97 314,056 275,347 1.45
278,180 12 216,234 10 10/30/97 251,486 245,486 1.66
283,819 12 276,439 10 10/31/97 306,910 271,443 1.41
288,884 12 261,020 9 09/30/97 346,921 292,921 1.62
300,062 12 254,300 10 10/31/97 271,854 256,979 1.59
264,960 12 176,640 8 08/31/97 223,451 205,902 1.31
243,005 12 77,205 4 04/30/97 215,067 203,672 1.24
302,971 12 306,006 12 09/30/97 300,423 289,623 1.84
-- -- 136,025 9 11/30/97 178,646 176,944 1.05
213,565 12 175,476 8 08/31/97 198,340 189,168 1.23
-- 12 63,250 3 10/31/97 242,610 227,262 1.46
-- 12 73,601 5 05/30/97 197,576 192,046 1.31
251,367 12 327,632 12 07/30/97 273,413 247,767 1.83
285,024 12 196,052 9 09/30/97 310,158 282,735 1.80
200,921 12 136,759 9 09/30/97 200,602 187,602 1.54
144,563 12 148,779 12 09/30/97 142,510 136,910 1.37
234,743 12 130,174 9 09/30/97 231,969 207,969 1.87
172,658 12 92,315 6 06/30/97 184,668 167,868 1.52
132,408 12 107,294 9 09/30/97 134,435 126,335 1.24
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UPFRONT RESERVES ONGOING MONTHLY RESERVES
------------------------------------------------------ -------------------------------------
REPAIR &
96 NOI REMEDIATION TI/LC ENVIRONMENTAL OTHER TOTAL REPLACEMENT TAXES INSURANCE TI/LC RATE RESET STEP-UP
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
24,705,045 1,186,100 -- -- 908,000 2,094,100 36,757 1/12 1/12 213,000 10.35%
14,509,947
1,256,214
1,363,665
1,295,550
640,642
274,717
1,828,028
424,205
493,259
831,124
623,074
469,384
695,236
13,215,617 -- -- -- -- -- -- NA 1/12 -- 7.39%
7,106,039 -- -- -- -- -- 8,763 1/12 1/12 47,481 8.86%
5,994,320 273,750 -- -- 1,000,000 1,273,750 -- 1/12 1/12 -- 9.18%
-- -- -- -- -- -- -- NA NA --
4,885,662 625,000 -- -- -- 625,000 42,006 1/12 1/12 -- 9.85%
762,472
701,177
287,951
203,378
338,534
307,313
421,078
549,563
734,300
298,189
281,707
4,574,606 -- -- -- -- -- 10,125 1/12 1/12 -- 8.86%
3,674,497 -- -- -- -- -- 3,016 1/12 1/12 --
3,138,505 14,375 -- -- -- 14,375 2,547 1/12 1/12 --
3,602,024 182,295 347,500 -- -- 529,795 4,682 1/12 1/12 --
691,364 -- -- -- -- -- 10,921 1/12 1/12 --
1,649,779 -- -- -- -- -- 6,967 1/12 1/12 --
2,338,796 45,938 -- -- -- 45,938 32,539 1/12 1/12 --
1,400,084 -- -- -- -- -- 1,836 1/12 NA --(3)
2,373,746 30,000 -- -- -- 30,000 2,075 1/12 1/12 --
1,150,398 3,000 -- -- -- 3,000 2,900 1/12 1/12 --
1,247,155 5,625 600,000 -- -- 605,625 1,750 1/12 1/12 --
1,144,764 -- -- -- -- -- 6,250 1/12 NA --
2,540,837 100 -- -- -- 100 27,811 1/12 1/12 --
1,860,903 159,000(4) -- -- 500,000 659,000 -- 1/12 1/12 --
3,292,277 -- -- 21,120 -- 21,120 3,938 1/12 1/12 --
1,285,927 21,250 -- -- -- 21,250 5,936 1/12 1/12 70,737
690,214 4,750 -- -- -- 4,750 2,644 1/12 1/12 --
2,005,135 285,000 -- 300,000 -- 585,000 20,495 1/12 1/12 9,172
286,820 -- -- -- 500,000 500,000 2,834 1/12 1/12 --
1,007,416 4,938 -- -- -- 4,938 527 1/12 1/12 --
666,958 22,500 -- -- -- 22,500 1,119 1/12 1/12 --
897,811 -- -- -- -- -- -- 1/12 1/12 --
591,906 25,000(4) -- -- -- 25,000 -- 1/12 1/12 --
544,135 3,256 -- -- -- 3,256 630 1/12 1/12 --
730,980 1,938 -- -- -- 1,938 872 1/12 NA --
1,006,229 72,750 -- -- 90,000 162,750 10,360 1/12 1/12 3,250
662,463 94,715 -- -- 181,020 275,735 1,902 1/12 1/12 --
-- -- -- -- -- -- 572 1/12 1/12 2,013
823,675 -- -- -- -- -- 1,693 1/12 1/12 4,602
808,748 -- -- -- -- -- 7,599 1/12 1/12 --
518,890 21,525 -- -- -- 21,525 2,277 1/12 1/12 --
519,432 -- -- -- -- -- 669 1/12 1/12 --
537,126 -- -- -- -- -- 949 1/12 1/12 4,430
509,748 47,938 -- -- -- 47,938 5,494 1/12 1/12 --
405,296 -- 40,000 -- -- 40,000 566 1/12 1/12 4,583
292,285 175,000 -- -- -- 175,000 857 1/12 NA --
644,033 884,869 -- -- 3,500 888,369 5,766 1/12 NA --
501,234 20,000 -- -- -- 20,000 1,200 1/12 1/12 --
520,915 27,900 -- 5,000 -- 32,900 3,850 1/12 1/12 --
516,322 -- -- -- -- -- 2,525 1/12 NA --
694,810 -- -- -- -- -- 5,700 1/12 1/12 --
449,454 1,844 -- 900 -- 2,744 1,272 1/12 NA --
466,066 1,500 -- -- -- 1,500 3,375 1/12 1/12 --
394,478 2,750 -- -- -- 2,750 2,250 1/12 1/12 --
450,425 7,063 -- -- -- 7,063 2,520 1/12 1/12 --
473,457 -- -- 5,000 -- 5,000 1,994 1/12 1/12 4,167
435,670 5,125 -- 225,000 -- 230,125 1,726 1/12 1/12 2,541
366,619 -- -- -- -- -- 2,150 1/12 1/12 --
440,047 -- -- -- -- -- -- NA NA 1,964
-- -- -- -- -- -- -- NA NA --
410,900 5,000 -- -- -- 5,000 974 1/12 1/12 --
442,696 2,125 -- -- -- 2,125 1,500 1/12 1/12 660
654,518 -- -- -- -- -- 4,349 1/12 1/12 --
378,170 24,151 -- -- -- 24,151 2,120 1/12 1/12 --
461,480 -- -- -- -- -- --(6) 1/12 NA --
543,092 53,063 -- 95,550 -- 148,613 1,341 1/12 1/12 --
294,521 8,938 -- -- -- 8,938 638 1/12 1/12 --
415,733 -- -- -- -- -- 900 1/12 1/12 --
597,662 -- -- -- -- -- 1,856 1/12 1/12 --
361,758 1,700 -- -- -- 1,700 2,700 1/12 1/12 --
149,416 10,000 -- -- -- 10,000 3,277 NA 1/12 --
420,008 -- -- -- -- -- 4,744 1/12 NA --
321,265 -- -- -- -- -- 349 1/12 1/12 --
359,384 35,250 -- -- -- 35,250 -- 1/12 1/12 --
345,035 13,795 -- -- -- 13,795 1,500 1/12 1/12 --
385,238 14,085 -- -- -- 14,085 521 NA NA --
342,075 11,625 -- -- -- 11,625 3,167 1/12 1/12 --
281,908 15,308 -- -- -- 15,308 1,800 1/12 1/12 --
274,336 -- -- -- 125,000 125,000 1,278 1/12 1/12 9,926
278,180 3,288 -- -- -- 3,288 500 1/12 1/12 --
283,819 9,875 46,500 -- 183,498 239,873 640 1/12 1/12 2,308
288,884 106,563 -- -- -- 106,563 4,449 1/12 1/12 --
300,062 5,625 -- -- -- 5,625 294 1/12 1/12 --
264,960 -- -- -- -- -- -- NA 1/12 --
243,005 -- -- -- -- -- 221 1/12 1/12 1,104
302,971 19,063 -- -- -- 19,063 1,200 1/12 1/12 --
-- -- -- -- -- -- 142 NA NA --
213,565 3,938 -- -- 12,000 15,938 -- 1/12 1/12 --
-- -- -- -- -- -- -- 1/12 1/12 --
-- -- -- -- -- -- 225 1/12 1/12 --
251,367 2,094 -- 4,500 -- 6,594 2,137 1/12 1/12 --
285,024 -- -- -- -- -- --(6) 1/12 1/12 --
200,921 24,340 -- -- -- 24,340 1,479 1/12 1/12 --
144,563 3,500 -- 20,000 -- 23,500 462 1/12 1/12 --
234,743 18,388 -- -- -- 18,388 2,000 1/12 1/12 --
172,658 37,350 -- -- -- 37,350 1,400 1/12 1/12 --
132,408 1,500 -- -- -- 1,500 750 1/12 1/12 --
</TABLE>
<PAGE>
LOAN DATA
<TABLE>
<CAPTION>
LOAN FOOT- PROPERTY
NUMBER NOTES PROPERTY NAME PROPERTY ADDRESS PROPERTY CITY STATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Kilroy Portfolio (Totals) Various Various CA, AZ
Kilroy Airport Center 2240, 2250, 2260 East Imperial Highway El Segundo CA
LaPalma Business Center 4175, 4150, 4125 East La Palma Ave.
Bldg. A, B, C Anaheim CA
Westlake Plaza Centre II 2829 Townsgate Road Westlake Village CA
185 South Douglas Street 185 South Douglas Street El Segundo CA
1000 East Ball Road 1000 East Ball Road Anaheim CA
1230 South Lewis Street 1230 South Lewis Street Anaheim CA
2031 East Mariposa Avenue 2031 East Mariposa Avenue El Segundo CA
2260 El Segundo Boulevard 2260 El Segundo Boulevard El Segundo CA
2265 El Segundo Boulevard 2265 El Segundo Boulevard El Segundo CA
3332-3340 East La Palma Avenue 3332-3340 East La Palma Avenue Anaheim CA
5115 North 27th Avenue 5115 North 27th Avenue Phoenix AZ
12691 Pala Drive 12691 Pala Drive Garden Grove CA
12752 et al Monarch Street 12752 et al Monarch Street Garden Grove CA
2 Crystal Gateway Marriott 1700 Jefferson Davis Highway Arlington VA
3 Four & Five Skyline Place 5111 & 5113 Leesburg Pike Falls Church VA
4 1065 Avenue of the Americas 1065 Avenue of the Americas New York NY
5 Hoechst Celanese Corporation 30 Independence Boulevard Warren NJ
6 Shannon Portfolio (Totals) Various Various NC
Carolina Circle Apartments 3128 Utah Place Greensboro NC
Creekbend Apartments 3900 Hahns Lane Greensboro NC
English Village Apartments 307 Avalon Road Greensboro NC
Holiday Manor Apartments 1604 17th Street Greensboro NC
Hunting Valley Apartments 3716 Groometown Road Greensboro NC
McKnight Manor Apartments 3200 Trent Street Greensboro NC
Meadow Run Apartments 3216 South Holden Road Greensboro NC
Quail Creek Apartments 8 Covey Lane Greensboro NC
Raintree Apartments 251 Northpoint Avenue High Point NC
Skyline Village Apartments 100 Bruce Street Winston-Salem NC
Highland Hills Apartments 100 Tall Oaks Drive Greensboro NC
7 Crystal Plaza Apartments 2100 Jefferson Davis Highway Crystal City VA
8 The Court at Deptford I 1500 Almonesson Road Deptford Township NJ
9 Costco Center 4410 Lawehana Street Honolulu HI
10 One & Olney Square Shopping Center 5675 North Front Street Philadelphia PA
11 Avalon Apartments 4217 South Semoran Boulevard Orlando FL
12 Waterchase Apartments 3100 Waterchase Way, Southwest Wyoming MI
13 Crowne Plaza Hotel of Grand Rapids 5700 28th Street Grand Rapids MI
14 (3) Parkridge Three 10801 Parkridge Boulevard Reston VA
15 Burns Clinic 560 West Mitchell Street Petoskey MI
16 Deer Run Apartments 4401 West Deer Run Drive Brown Deer WI
17 1149 Chess Drive 1149 Chess Drive Foster City CA
18 Benjamin Franklin Hotel 36 East Third Avenue San Mateo CA
19 Embassy Suites - Airport Westshore 55 North Westshore Blvd Tampa FL
20 (4) Chase Street Industrial Facility 700 Chase Street Gary IN
21 Crown Nursing Home 3457 Nostrand Avenue Brooklyn NY
22 Houston Foods Industrial Facility, I 2721 Edgington Street Franklin Park IL
23 Battlefield Business Park 10001 & 10110 Battleview Parkway Manassas VA
24 Alford Refrigerated Warehouses 318 Cadiz Street Dallas TX
25 Brandy Chase Apartments and Townhouse 4560 Craftsbury Circle Fort Wayne IN
26 Savannah Festival Factory Stores 11 Gateway Boulevard South Savannah GA
27 Centergate Plaza Bee Ridge & Cattleman Road Sarasota FL
28 Woodland Mobile Home Estates 1441 West Romeo Road Oakland MI
29 (4) The Ridges of Geneva East Highway 50 & Route 12 Lake Geneva WI
30 Baymeadows Commons Shopping Center 9550 Baymeadows Road Jacksonville FL
31 North By Northeast 7800 East 96th Street Fishers IN
32 Northern Ohio Industrial Park 1400 Lowell Street Elyria OH
33 Carmel on Providence Apartments 4208 Knob Oak Lane Charlotte NC
34 (5) Wilderness Village Shopping Center 22117 Southeast 237th Street Maple Valley WA
35 Plaza at Deptford 1450 Clements Bridge Road Deptford NJ
36 Comfort Suites at the Park 2141 South Harbor Boulevard Anaheim CA
37 Apple Valley Apartments 9552 Apple Valley Drive Independence KY
38 Southgate Marketplace 337 Hospital Drive Glen Burnie MD
39 Gibraltar Square Office Park 2375-2395 Wall Street Conyers GA
40 Hyde Park Condominiums 6262 Melody Lane Dallas TX
41 Atrium II Office Center 1000 Victor Way Ann Arbor MI
42 Medical Park Plaza 4319 Medical Drive San Antonio TX
43 Airport Days Inn 1900 West North Temple Salt Lake City UT
44 Stanford Gardens Apartments 1735 Woodland Drive East Palo Alto CA
45 The Parthenon Apartments 800 Gaines School Road Athens GA
46 20 Sand Park Road 20 Sand Park Road Cedar Grove NJ
47 Fairfield Inn by Marriott 4702 East University Drive Phoenix AZ
48 The Woodbriar 10415 Paramount Boulevard Downey CA
49 Westbrook Apartments 6300-6318 West Bancroft Street Toledo OH
50 Harbin Springs Apartments 1012 Harbin Springs Road Atlanta GA
51 East Point Apartments 4125-4165 Childress Avenue Mesquite TX
52 535 Broadhollow Road 535 Broadhollow Road Melville NY
53 Ridge Road Shopping Center 1102-1209 Ridge Road Rockwall TX
54 Walbridge Apartments 505 North Main Street Walbridge OH
55 The Roomstore 4720 South Cooper Street Arlington TX
56 3200 Liberty Avenue 3200 Liberty Avenue Bergen NJ
57 Colonial Village Shopping Center 7000-7014 Reistertown Road Pikeville MD
58 Cyrk Warehouse 125 Water Street Danvers MA
59 Comfort Inn-Belleville 855 Comfort Plaza Drive Bellville OH
60 Treehouse Apartments 101 Arcadia Place Alamo Heights TX
61 (6) Olympik Village Apartments 402 31st Street Northeast Rochester MN
62 (7) Arctic Self Storage 5861 Arctic Boulevard #A Anchorage AK
63 Hiawassee Woods SC & Professional
Building 6861 West Colonial Drive Orlando FL
64 Buckingham Pews / Seminary Court 701 West Buckingham Place & 3159
North Semin Chicago IL
65 Sunray East Convalescent Hospital 3210 West Pico Boulevard Los Angeles CA
66 Mayfair Apartments 18645 Detroit Avenue Lakewood OH
67 Villa Maria Health Care Center 4310 East Grant Road Tucson AZ
68 Hampton Inn 508 North State of Franklin Road Johnson City TN
69 San Ramon Valley Self Storage 1911 San Ramon Valley Boulevard San Ramon CA
70 Post Ridge Apartments 501 16th Avenue Phenix City AL
71 Festival de Las Flores 2601-2659 NW 20th Street & 2600-2666
NW 21st Miami FL
72 CS Technical Center 12350 Northwest 39th Street Coral Springs FL
73 Fairways Apartments 3823 McCann Road Longview TX
74 511 Queens Apartments 511 Queens Road Charlotte NC
75 Harbor Plaza Shopping Center 13700 East Quincy Avenue Aurora CO
76 Sun Country Mobile Home Park 799 East Klostermann Road Tarpon Springs FL
77 Parkway Centre 13450-13520 Inwood Road Farmers Branch TX
78 Applecreek Apartments 9874 Dale Crest Dallas TX
79 Sound Advice Store 2925 Tyrone Boulevard St. Petersburg FL
80 IMC Global Office Building 6 Eastport Executive Drive Collinsville IL
81 (5) Oak View Shopping Center 1727-37 East-West Road Calumet City IL
82 South Seminole Storage Park 540 North Highway 434, Suite 530 Altamonte Springs FL
83 Watertown Rite-Aid 842 State Street Watertown NY
84 Harvest Manor Mobile Home Park 4815 Airway Drive Moses Lake WA
85 Gristede's - Battery Park City 21 South End Avenue New York NY
86 Granger Revco Center 12544 Adams Road Granger IN
87 Inlet Inn 539 H Street Anchorage AK
88 (6) Comfort Inn - Webster 750 West Nasa Road 1 Webster TX
89 Forest Ridge Apartments 1800-1810 Westminster Street Denton TX
90 Knollwood Estates 1632 Lexington Avenue Mansfield OH
91 Woodland Hills Apartments 7110 Wurzbach Road San Antonio TX
92 Northgate Apartments 3555 Lawrenceville Highway Tucker GA
93 Blake House 165 S.O.M. Center Road Mayfield Heights OH
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LOAN LARGEST YEAR
NUMBER ZIP CODE PROPERTY TYPE LARGEST TENANT SQ FT YEAR BUILT RENOVATED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Various Office, Industrial Hughes Space & Comm. 387,129 Various
90245 Office Hughes Space & Comm. 387,129 1983
92807 Office CSTS, Inc. 23,981 1986
91361 Office LDDS Communications 27,761 1990
90245 Office Northwest Airlines 60,000 1978
92805 Industrial Allen-Bradley Company 100,000 1982
92805 Industrial RGB Systems (Extron Elect) 57,730 1982
90245 Industrial Mattel, Inc. 192,053 1955
90245 Industrial Ace Medical 113,820 1979
90245 Industrial MSAS Cargo International 76,570 1978
92806 Industrial Furon 90,746 1966
85017 Industrial Festival Markets, Inc. 130,877 1961
92841 Industrial Rank Video Services 70,000 1970
92841 Industrial Cannon Equipment West 165,981 1969-1981
2 22202 Hotel 1982/1986
3 22041 Office GSA GS-11B-30064 38,507 1982/1984
4 10018 Office Thomaston Mills 29,537 1958 1990
5 07059 Office Hoechst Celanese Corporation 207,727 1997
6 Various Multifamily Various
27405 Multifamily 1972
27405 Multifamily 1974
27405 Multifamily 1959-1966
27405 Multifamily 1967
27405 Multifamily 1972
27405 Multifamily 1967
27405 Multifamily 1970
27405 Multifamily 1973
27262 Multifamily 1979
27107 Multifamily 1974
27405 Multifamily 1973
7 22202 Multifamily 1967
8 08096 Anchored Retail Sam's Club 120,000 1990
9 96813 Anchored Retail PriceCostco 131,607 1987
10 19120 Anchored Retail Caldor Holdings, Inc 103,839 1987
11 32822 Multifamily 1974
12 49509 Multifamily 1990-1992/1995-1996
13 49546 Hotel 1980 1989
14 20191 Office GSA 110,147 1985
15 49770 Office PhyCor of Northern Michigan, Inc 152,960 1954 1994
16 53223 Multifamily 1991
17 94404 Industrial Franklin Resources/Perkin Elmer 120,942 1971 1990
18 94401 Hotel 1926
19 33609 Hotel 1984 1992
20 46404 Industrial Chicago Steel 412,236 1950 1995
21 11229 Nursing Home 1967 1995-1996
22 60131 Industrial Houston Foods Co. 474,877 1959 1992
23 22110 Office AT&T Resource Management Corp 154,226 1988
24 75207 Industrial MM Mars 92,360 1947
25 46818 Multifamily 1972 1995-1996
26 31419 Anchored Retail Dress Barn 10,655 1987
27 33609 Anchored Retail Publix 48,555 1988 1993-1996
28 48363 Mobile Home Park 1972/1974
29 53147 Multifamily 1995
30 32299 Anchored Retail Food Lion 30,690 1990
31 46038 Unanchored Retail Kinko's 6,400 1989
32 44035 Industrial MTD Products, Inc 332,796 1946
33 28211 Multifamily 1974 1995-1996
34 98038 Anchored Retail Villiage Drug 10,164 1963-1997
35 08096 Anchored Retail Pathmark 55,520 1986
36 92802 Hotel 1989 1996-1997
37 41051 Multifamily 1992
38 21061 Unanchored Retail Blockbuster Video 6,600 1985/1990
39 30013 Office AT&T 28,322 1989-1993
40 75231 Multifamily 1978 1990
41 48108 Office 1991
42 78229 Retail/Office Hematology Oncology Assoc. of
South Texas 13,164 1978 1990
43 84116 Hotel 1984
44 94303 Multifamily 1962
45 30605 Multifamily 1972 1988,1990-1996
46 07009 Industrial Nash Harmon Cosmetics 100,000 1967 1993
47 85034 Hotel 1994
48 90241 Multifamily 1972
49 43615 Multifamily 1977 1993
50 30093 Multifamily 1985
51 75150 Multifamily 1985 1989
52 11747 Office Court Reporting Institute 25,000 1963 1986
53 75087 Anchored Retail Brookshires Grocery Company 38,233 1974 1996
54 43465 Multifamily 1985/1987
55 76017 Single Tenant Retail The Room Store 52,333 1989
56 07047 Industrial Westchester Lace 81,635 1959
57 21208 Unanchored Retail Shuvalsky Enter, Inc 10,412 1953 1983
58 01923 Industrial Cyrk, Inc 120,000 1986
59 44813 Hotel 1989-1992
60 78209 Multifamily 1972-1975 1995
61 55906 Multifamily 1975 1996
62 99502 Self Storage 1977
63 32818 Anchored Retail Eckerd Drug 10,368 1983
64 60657 Multifamily 1907/1935 1987
65 90019 Nursing Home 1967
66 44107 Multifamily 1963
67 85712 Nursing Home 1963 1980
68 37604 Hotel 1995
69 94583 Self Storage 1995
70 36867 Multifamily 1977/1981/1996 1995-1997
71 33142 Industrial Amparao Angel 5,420 1976 1971/1981
72 33065 Office VNU Operations Center Inc 31,272 1987 1997
73 75605 Multifamily 1980
74 28207 Multifamily 1963 1985
75 80015 Unanchored Retail Tuesday Morning 7,589 1979
76 34689 Mobile Home Park 1970
77 75234 Unanchored Retail Leather Center 7,190 1979
78 75220 Multifamily 1969
79 33710 Single Tenant Retail Sound Advice 17,639 1989
80 62234 Office Vigoro Industries 32,000 1994
81 60409 Anchored Retail Michael Stores 16,420 1993
82 32714 Self Storage 1974 1994-1997
83 13601 Single Tenant Retail Rite Aid 11,348 1997
84 98837 Mobile Home Park 1980
85 10280 Anchored Retail Gristede 7,900 1988
86 46530 Anchored Retail Revco 10,722 1996
87 99501 Hotel 1941-1969 1948/1966/1969
88 77598 Hotel 1995
89 76205 Multifamily 1975 1995
90 44907 Multifamily 1990
91 78229 Multifamily 1972 1992
92 30084 Multifamily 1968
93 44146 Multifamily 1966
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LOAN NUMBER # OF UNITS/ SQ FT OCCUPANCY PERCENTAGE OCCUPANCY AS OF DATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 2,215,452 94.46 08/01/97
701,307 97.60 08/01/97
186,880 75.56 08/01/97
81,158 100.00 08/01/97
60,000 100.00 08/01/97
100,000 100.00 08/01/97
57,730 100.00 08/01/97
192,053 100.00 08/01/97
113,820 100.00 08/01/97
76,570 100.00 08/01/97
153,320 100.00 08/01/97
130,877 100.00 08/01/97
84,700 82.64 08/01/97
277,037 100.00 08/01/97
2 697 80.03 10/15/97
3 525,790 100.00 10/01/97
4 585,824 90.46 09/25/97
5 207,727 100.00 10/12/97
6 1,833 92.79 09/01/97
260 92.69 09/01/97
268 94.78 09/01/97
176 90.34 09/01/97
94 92.55 09/01/97
96 98.95 09/01/97
140 91.43 09/01/97
132 93.94 09/01/97
160 94.38 09/01/97
230 96.52 09/01/97
169 87.14 09/01/97
108 87.96 09/01/97
7 536 98.29 10/12/97
8 361,945 98.20 08/22/97
9 203,761 100.00 11/27/97
10 354,518 97.50 08/21/97
11 450 96.90 12/04/97
12 418 96.20 11/07/97
13 319 69.00 08/07/97
14 110,147 100.00 11/01/97
15 154,000 100.00 10/10/97
16 232 97.00 08/29/97
17 120,942 100.00 09/01/97
18 99 100.00 07/31/97
19 221 76.11 06/30/97
20 1,032,331 99.50 09/30/97
21 189 97.90 09/30/97
22 474,877 100.00 09/01/97
23 154,226 100.00 06/01/97
24 1,152,618 98.80 07/01/97
25 170 95.24 09/22/97
26 130,680 96.60 08/15/97
27 88,753 100.00 01/26/98
28 375 99.20 01/23/98
29 120 94.20 09/04/97
30 72,090 100.00 08/20/97
31 55,938 95.70 10/31/97
32 1,056,527 87.20 10/01/97
33 109 94.50 10/14/97
34 45,731 100.00 01/23/97
35 135,390 93.40 09/17/97
36 94 82.00 06/01/97
37 108 100.00 09/10/97
38 57,391 90.00 12/03/97
39 57,910 100.00 09/01/97
40 303 92.80 05/01/97
41 45,276 100.00 11/26/97
42 68,512 95.10 11/11/97
43 111 84.80 09/16/97
44 82 98.70 09/01/97
45 168 82.70 05/01/97
46 137,655 100.00 12/01/97
47 90 74.36 12/31/97
48 76 97.40 10/17/97
49 180 94.40 10/30/97
50 100 93.00 07/30/97
51 126 97.60 10/14/97
52 97,648 96.60 09/26/97
53 123,304 88.40 11/03/97
54 129 93.80 11/30/97
55 52,333 100.00 11/21/97
56 211,500 100.00 07/11/97
57 50,797 100.00 12/11/97
58 120,000 100.00 07/29/97
59 101 65.12 07/10/97
60 106 97.20 01/15/98
61 140 100.00 10/01/97
62 1,065 83.00 07/01/97
63 51,052 100.00 08/01/97
64 41 100.00 08/18/97
65 99 98.80 08/31/97
66 144 97.20 09/30/97
67 143 85.60 09/30/97
68 77 81.40 09/01/97
69 419 99.20 03/01/97
70 152 98.02 12/10/97
71 122,895 95.70 12/01/97
72 31,272 100.00 10/27/97
73 152 86.80 10/15/97
74 54 77.80 09/30/97
75 45,863 97.00 10/20/97
76 120 97.50 10/01/97
77 28,374 100.00 10/20/97
78 216 88.90 10/15/97
79 17,639 100.00 10/01/97
80 32,000 100.00 09/12/97
81 26,420 100.00 09/30/97
82 351 86.10 08/25/97
83 11,348 100.00 09/16/97
84 194 100.00 08/31/97
85 9,800 100.00 11/10/97
86 17,962 95.20 06/18/97
87 85 77.40 08/31/97
88 63 65.00 09/01/97
89 56 87.50 10/14/97
90 28 100.00 10/09/97
91 96 83.30 10/15/97
92 42 93.00 07/30/97
93 36 100.00 07/28/97
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE NET MORTGAGE
APPRAISED APPRAISAL ORIGINAL ORIGINAL CUT OFF INTEREST INTEREST ANNUAL DEBT REMAINING REMAINING
VALUE DATE LTV BALANCE BALANCE RATE RATE SERVICE TERM AM TERM
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
204,700,000 Various 41.04 84,000,000 82,869,076 8.3500 8.2825 8,015,051 83 287
108,000,000 12/31/96 36.30 39,203,565
13,200,000 12/31/96 43.97 5,804,160
12,000,000 12/31/96 27.56 3,306,751
6,800,000 12/31/96 51.77 3,520,211
6,200,000 09/28/96 51.37 3,184,754
3,200,000 12/31/96 40.84 1,306,926
16,000,000 12/31/96 54.36 8,697,121
5,100,000 12/31/96 50.91 2,596,551
4,700,000 12/31/96 56.35 2,648,254
9,400,000 12/31/96 54.46 5,119,707
4,500,000 12/31/96 35.14 1,581,314
5,400,000 12/31/96 47.22 2,549,966
10,200,000 12/31/96 43.93 4,480,720
120,000,000 10/02/97 53.33 64,000,000 63,847,440 7.2400 7.1925 5,546,210 118 298
74,700,000 09/23/97 67.87 50,700,000 50,615,148 6.8600 6.8125 3,990,725 142 358
61,000,000 09/11/97 65.57 40,000,000 39,904,509 7.1800 7.1325 3,251,687 81 357
56,200,000 10/01/97 64.06 36,000,000 35,810,400 7.0270 6.9795 3,283,694 237 249
47,645,000 Various 75.77 36,100,000 35,789,344 7.8500 7.7825 3,133,487 108 348
8,375,000 02/11/97 72.91 6,106,191
6,250,000 02/12/97 81.36 5,085,129
2,750,000 02/12/97 71.97 1,979,201
2,325,000 02/12/97 64.93 1,509,647
3,290,000 02/11/97 75.27 2,476,233
2,950,000 02/11/97 78.30 2,309,806
3,970,000 02/11/97 78.71 3,124,880
5,700,000 02/11/97 75.91 4,326,614
6,710,000 02/12/97 78.75 5,284,341
2,425,000 02/12/97 74.74 1,812,549
2,900,000 02/12/97 71.91 2,085,409
48,500,000 10/01/97 70.10 34,000,000 33,913,562 6.8600 6.8125 2,676,182 140 357
38,000,000 07/25/97 79.74 30,300,000 30,202,056 8.2500 8.1825 2,731,605 175 355
37,500,000 08/24/97 73.47 27,550,000 27,510,828 7.7300 7.6625 2,363,891 130 358
33,500,000 08/20/97 74.63 25,000,000 24,877,953 8.5400 8.4725 2,423,773 115 295
21,000,000 11/11/97 79.52 16,700,000 16,666,723 7.2900 7.2225 1,416,487 118 322
20,600,000 08/01/97 77.67 16,000,000 15,974,862 7.2300 7.1625 1,307,175 118 358
22,500,000 07/14/97 70.67 15,900,000 15,806,064 8.5100 8.4425 1,537,659 114 294
20,500,000 11/04/97 74.88 15,350,000 15,326,916 7.4500 7.3825 1,281,652 118 358
20,600,000 09/16/97 72.82 15,000,000 14,935,138 7.8900 7.8225 1,376,178 116 296
17,700,000 08/29/97 79.10 14,000,000 13,948,020 7.5600 7.4925 1,181,590 139 355
18,000,000 08/27/97 66.67 12,000,000 11,945,902 7.6300 7.5625 1,076,354 236 296
15,250,000 07/16/97 70.49 10,750,000 10,656,954 7.9500 7.8825 1,074,997 139 235
23,000,000 07/25/97 74.78 10,200,000 10,157,016 8.0500 7.9825 948,761 80 296
21,000,000 06/09/97 47.62 10,000,000 9,922,819 8.6800 8.6125 980,872 112 292
13,900,000 01/30/97 70.50 9,800,000 9,584,119 8.8300 8.7625 1,180,914 172 172
11,800,000 08/20/97 76.27 9,000,000 8,975,760 7.9000 7.8325 807,324 117 321
11,300,000 09/04/97 72.12 8,150,000 8,126,534 7.7000 7.6325 697,275 80 356
12,300,000 08/25/97 65.85 8,100,000 8,033,669 8.4000 8.3325 837,382 115 235
8,500,000 10/07/97 83.53 7,100,000 7,084,125 7.5100 7.4425 596,314 117 357
9,400,000 07/21/97 66.76 6,275,000 6,244,015 8.4700 8.4025 604,814 115 295
8,200,000 12/14/96 73.17 6,000,000 5,958,571 8.5000 8.4325 553,618 109 349
8,700,000 07/07/97 63.22 5,500,000 5,457,899 7.8800 7.8125 504,163 77 293
6,800,000 09/02/97 77.94 5,300,000 5,279,887 7.4500 7.3825 442,525 115 355
6,900,000 06/18/97 75.36 5,200,000 5,183,395 8.3100 8.2425 471,425 115 355
8,150,000 10/07/97 63.19 5,150,000 5,119,844 7.8900 7.8225 586,675 178 178
7,487,720 08/08/97 66.78 5,000,000 4,970,316 8.4800 8.4125 482,328 114 294
6,600,000 09/10/97 72.73 4,800,000 4,784,609 7.9400 7.8725 442,279 117 297
6,150,000 10/12/97 75.00 4,612,500 4,592,873 7.9900 7.9225 426,834 116 296
8,400,000 06/11/97 52.38 4,400,000 4,386,510 8.5100 8.4425 406,361 175 355
6,300,000 08/14/97 69.84 4,400,000 4,382,338 8.3500 8.2825 419,836 116 296
5,510,000 08/06/97 78.95 4,350,000 4,334,325 7.7100 7.6425 372,525 115 355
5,615,000 07/11/97 74.80 4,200,000 4,194,459 8.1000 8.0325 373,337 118 358
5,000,000 09/04/97 80.00 4,000,000 3,986,912 8.1900 8.1225 358,585 115 355
5,700,000 05/30/97 70.18 4,000,000 3,979,181 8.2700 8.2025 361,283 76 352
6,415,000 10/29/97 60.80 3,900,000 3,894,466 7.7400 7.6725 334,958 118 358
5,700,000 06/11/97 63.16 3,600,000 3,579,945 8.8700 8.8025 358,695 114 294
4,350,000 09/03/97 82.07 3,570,000 3,559,007 8.1900 8.1225 336,056 117 297
4,860,000 10/20/97 72.02 3,500,000 3,487,946 7.4950 7.4275 310,240 177 297
4,500,000 05/28/97 77.78 3,500,000 3,453,142 8.3100 8.2425 359,451 232 232
5,100,000 10/14/97 67.65 3,450,000 3,443,693 7.7800 7.7125 306,130 118 322
5,760,000 01/24/97 59.90 3,450,000 3,396,900 9.8500 9.7825 395,413 73 229
4,250,000 10/20/97 80.00 3,400,000 3,394,877 7.4400 7.3725 283,605 118 358
4,500,000 07/17/97 75.56 3,400,000 3,388,921 7.8400 7.7725 310,589 117 297
4,100,000 08/15/97 82.93 3,400,000 3,384,894 7.5900 7.5225 287,798 114 354
4,400,000 11/10/95 77.27 3,400,000 3,332,301 7.7500 7.6825 292,296 94 334
5,000,000 03/26/97 66.00 3,300,000 3,279,012 8.6100 8.5425 346,420 116 236
6,410,000 05/05/97 51.48 3,300,000 3,273,988 8.5500 8.4825 320,205 112 292
4,250,000 09/22/97 75.29 3,200,000 3,195,159 7.4200 7.3525 266,398 118 358
4,600,000 10/09/97 69.57 3,200,000 3,192,844 7.6400 7.5725 287,279 58 298
5,550,000 06/25/97 54.05 3,000,000 2,968,353 7.8500 7.7825 297,766 114 234
4,065,000 07/10/97 72.57 2,950,000 2,946,108 8.1000 8.0325 262,225 118 358
4,200,000 03/31/97 70.24 2,950,000 2,933,913 9.0000 8.9325 297,075 114 294
4,600,000 07/23/97 61.96 2,850,000 2,822,852 8.6800 8.6125 300,703 114 234
3,850,000 10/18/95 75.32 2,900,000 2,810,418 7.7500 7.6825 262,854 94 274
4,000,000 05/20/97 70.00 2,800,000 2,737,075 8.6000 8.5325 332,845 172 172
4,000,000 06/30/97 68.75 2,750,000 2,722,797 8.3750 8.3075 283,776 234 234
3,230,000 07/21/97 78.95 2,550,000 2,537,652 8.5900 8.5225 248,258 115 295
3,850,000 08/14/97 64.94 2,500,000 2,488,475 7.4900 7.4225 221,502 116 296
3,650,000 08/22/97 68.49 2,500,000 2,486,893 7.8400 7.7725 234,939 116 272
3,500,000 06/27/97 71.43 2,500,000 2,474,825 8.2300 8.1625 255,243 234 234
4,250,000 02/16/96 60.12 2,555,000 2,459,359 9.0000 8.9325 275,856 97 217
3,675,000 09/05/97 65.31 2,400,000 2,392,280 7.9200 7.8525 220,759 117 297
3,700,000 06/20/97 64.86 2,400,000 2,384,355 7.9000 7.8325 220,379 114 294
4,000,000 11/29/97 57.13 2,285,000 2,276,350 7.1400 7.0725 214,897 238 238
3,700,000 10/28/97 54.05 2,000,000 1,995,592 7.7300 7.6625 180,964 118 298
2,950,000 10/03/97 67.80 2,000,000 1,995,563 7.6900 7.6225 180,335 118 298
3,100,000 04/22/96 64.52 2,000,000 1,976,226 8.9375 8.8700 192,031 100 340
2,400,000 04/29/97 79.17 1,900,000 1,887,753 7.9700 7.9025 175,521 114 294
2,720,000 07/01/96 67.10 1,825,000 1,797,475 9.4100 9.3425 189,971 103 283
2,675,000 10/21/97 67.29 1,800,000 1,797,200 7.2800 7.2125 147,790 118 358
2,900,000 03/14/96 62.93 1,825,000 1,791,283 9.5625 9.4950 192,292 99 279
3,250,000 03/06/96 55.85 1,815,000 1,777,597 8.8750 8.8075 180,916 99 279
2,900,000 09/11/97 60.34 1,750,000 1,744,425 7.9800 7.9125 161,803 117 297
2,400,000 08/19/97 71.88 1,725,000 1,720,516 8.1000 8.0325 157,540 117 321
2,730,000 05/01/97 62.27 1,700,000 1,693,352 9.0000 8.9325 164,143 113 353
3,100,000 09/12/97 54.84 1,700,000 1,692,801 8.0200 7.9525 157,721 176 296
1,900,000 08/19/97 89.16 1,694,000 1,678,000 7.7100 7.6425 168,517 228 228
2,100,000 06/27/97 76.19 1,600,000 1,592,099 8.4700 8.4025 154,216 115 295
3,100,000 05/02/97 48.39 1,500,000 1,482,724 8.4200 8.3525 155,298 113 233
2,175,000 06/12/97 66.67 1,450,000 1,441,692 8.7800 8.7125 146,961 175 271
2,400,000 08/14/97 54.58 1,310,000 1,301,448 8.4000 8.3325 135,429 116 236
2,450,000 11/06/96 53.06 1,300,000 1,271,487 8.8800 8.8125 157,114 172 172
1,800,000 05/29/96 68.06 1,225,000 1,202,332 8.8750 8.8075 122,106 101 281
1,500,000 10/24/97 79.00 1,185,000 1,182,366 7.5400 7.4725 99,818 117 357
1,700,000 10/18/95 70.59 1,200,000 1,162,808 8.0000 7.9325 111,141 93 273
1,420,000 07/31/97 79.23 1,125,000 1,112,973 7.7400 7.6725 110,745 234 234
1,400,000 06/23/97 71.43 1,000,000 989,930 8.2300 8.1625 102,097 234 234
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
APPRAISED MATURITY BALLOON MAT
VALUE ORIG DATE DATE (1) BALANCE DATE LTV PREPAYMENT PROVISIONS (2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
204,700,000 01/31/97 01/31/05 72,660,836 35.50 LO- 24,Defeasance- 11,YM2 - 41,0% - 6
108,000,000
13,200,000
12,000,000
6,800,000
6,200,000
3,200,000
16,000,000
5,100,000
4,700,000
9,400,000
4,500,000
5,400,000
10,200,000
120,000,000 12/15/97 01/01/08 50,661,460 42.22 LO- 24,Defeasance- 93,0% - 1
74,700,000 12/03/97 01/01/10 41,191,866 55.14 LO- 24,Defeasance- 45,YM1 -66,0% - 7
61,000,000 11/05/97 12/01/04 36,559,866 59.93 LO- 32,YM1 - 29,0% -20
56,200,000 11/07/97 12/01/17 3,162,048 5.63 LO- 44,Defeasance- 72,3% - 6,2.5% -18,2% - 6,1.5% -18,1%
-66,0% - 7
47,645,000 02/28/97 03/01/07 31,569,914 66.26 LO-23, Defeasance- 24,YM1 -54,0% - 7
8,375,000
6,250,000
2,750,000
2,325,000
3,290,000
2,950,000
3,970,000
5,700,000
6,710,000
2,425,000
2,900,000
48,500,000 11/20/97 11/01/09 27,688,015 57.09 LO- 24,Defeasance- 44,YM1 -65,0% - 7
38,000,000 09/22/97 10/01/12 23,464,005 61.75 LO- 79,YM1 - 71,0% -25
37,500,000 12/22/97 01/01/09 23,507,064 62.69 LO- 46,YM1 - 71,0% -13
33,500,000 09/10/97 10/01/07 20,462,369 61.08 LO- 55,YM1 - 53,0% - 7
21,000,000 12/26/97 01/01/08 13,782,577 65.63 LO- 58,YM1 - 53,0% - 7
20,600,000 12/31/97 01/01/08 13,803,361 67.01 LO- 46,YM1 - 65,0% - 7
22,500,000 08/13/97 09/01/07 13,004,661 57.80 LO- 42,YM1 - 65,0% - 7
20,500,000 12/11/97 01/01/08 13,308,315 64.92 LO- 58,YM1 - 53,0% - 7
20,600,000 10/31/97 11/01/07 12,080,481 58.64 LO- 44,YM1 - 65,0% - 7
17,700,000 09/17/97 10/01/09 11,604,085 65.56 LO- 55,YM1 - 59,0% -25
18,000,000 10/02/97 11/01/17 4,462,541 24.79 LO- 84,YM1 -115,0% -37
15,250,000 09/30/97 10/01/09 6,348,332 41.63 LO- 43,YM1 - 59,0% -37
23,000,000 10/07/97 11/01/04 9,005,051 65.84 LO- 32,YM1 - 41,0% - 7
21,000,000 06/27/97 07/01/07 8,212,373 39.11 LO- 52,5% - 12,4% -12,3% -12,2% -12,1% - 5,0% - 7
13,900,000 06/30/97 07/01/12 -- -- LO- 64,7% - 12,6% -12,5% -12,4% -12,3% -12,2% -12,1%
-23,0% -13
11,800,000 11/21/97 12/01/07 7,539,660 63.90 LO- 57,5% - 12,4% -12,3% -12,2% -12,1% - 5,0% - 7
11,300,000 10/01/97 11/01/04 7,505,866 66.42 LO- 44,YM1 - 29,0% - 7
12,300,000 09/15/97 10/01/07 5,652,574 45.96 LO- 43,YM1 - 65,0% - 7
8,500,000 11/28/97 12/01/07 6,163,800 72.52 LO- 45,YM1 - 65,0% - 7
9,400,000 09/30/97 10/01/07 5,127,379 54.55 LO- 43,YM1 - 65,0% - 7
8,200,000 03/17/97 04/01/07 5,316,153 64.83 LO- 37,YM1 - 65,0% - 7
8,700,000 07/21/97 08/01/04 4,841,846 55.65 LO- 29,YM1 - 41,0% - 7
6,800,000 09/25/97 10/01/07 4,595,053 67.57 LO- 55,5% - 12,4% -12,3% -12,2% -12,1% - 5,0% - 7
6,900,000 09/12/97 10/01/07 4,590,300 66.53 LO- 43,YM1 - 65,0% - 7
8,150,000 12/22/97 01/01/13 -- -- LO- 58,YM1 - 83,0% -37
7,487,720 08/29/97 09/01/07 4,086,550 54.58 LO- 42,YM1 - 65,0% - 7
6,600,000 11/24/97 12/01/07 3,870,712 58.65 LO- 45,YM1 - 65,0% - 7
6,150,000 10/31/97 11/01/07 3,724,261 60.56 LO- 44,YM1 - 65,0% - 7
8,400,000 09/30/97 10/01/12 3,436,770 40.91 LO- 43,YM1 -125,0% - 7
6,300,000 10/03/97 11/01/07 3,584,788 56.90 LO- 44,YM1 - 65,0% - 7
5,510,000 09/25/97 10/01/07 3,792,846 68.84 LO- 43,YM1 - 65,0% - 7
5,615,000 12/19/97 01/01/08 3,691,985 65.75 LO- 46,YM1 - 65,0% - 7
5,000,000 09/30/97 10/01/07 3,522,573 70.45 LO- 43,YM1 - 65,0% - 7
5,700,000 06/30/97 07/01/04 3,712,296 65.13 LO- 28,YM1 - 41,0% - 7
6,415,000 12/12/97 01/01/08 3,402,664 53.04 LO- 46,YM1 - 65,0% - 7
5,700,000 08/07/97 09/01/07 2,969,679 52.10 LO- 42,YM1 - 65,0% - 7
4,350,000 11/06/97 12/01/07 2,897,077 66.60 LO- 45,YM1 - 65,0% - 7
4,860,000 11/25/97 12/01/12 2,178,484 44.82 LO- 57,YM1 -113,0% - 7
4,500,000 06/30/97 07/01/17 -- -- LO-112,YM1 - 83,0% -37
5,100,000 12/11/97 01/01/08 2,881,944 56.51 LO- 46,YM1 - 65,0% - 7
5,760,000 03/20/97 04/01/04 2,892,921 50.22 LO- 25,1% - 41,0% - 7
4,250,000 12/05/97 01/01/08 2,947,116 69.34 LO- 46,YM1 - 59,0% -13
4,500,000 11/25/97 12/01/07 2,734,717 60.77 LO- 45,YM1 - 65,0% - 7
4,100,000 08/29/97 09/01/07 2,956,851 72.12 LO- 42,YM1 - 65,0% - 7
4,400,000 12/27/95 01/01/06 2,967,057 67.43 LO- 21,YM1 - 66,0% - 7
5,000,000 10/30/97 11/01/07 2,317,350 46.35 LO- 44,YM1 - 65,0% - 7
6,410,000 06/26/97 07/01/07 2,701,683 42.15 LO- 40,YM1 - 65,0% - 7
4,250,000 12/19/97 01/01/08 2,772,523 65.24 LO- 46,YM1 - 65,0% - 7
4,600,000 12/05/97 01/01/03 2,940,385 63.92 LO- 34,YM1 - 17,0% - 7
5,550,000 08/25/97 09/01/07 2,058,619 37.09 LO- 54,YM1 - 50,0% -10
4,065,000 12/19/97 01/01/08 2,593,179 63.79 LO- 46,YM1 - 65,0% - 7
4,200,000 08/29/97 09/01/07 2,440,808 58.11 LO- 42,YM1 - 65,0% - 7
4,600,000 08/27/97 09/01/07 2,005,484 43.60 LO- 42,YM1 - 65,0% - 7
3,850,000 12/26/95 01/01/06 2,327,112 60.44 LO- 21,YM1 - 66,0% - 7
4,000,000 07/01/97 07/01/12 -- -- LO- 52,YM1 - 83,0% -37
4,000,000 08/28/97 09/01/17 -- -- LO- 78,YM1 -119,0% -37
3,230,000 09/04/97 10/01/07 2,089,668 64.70 LO- 43,YM1 - 65,0% - 7
3,850,000 10/08/97 11/01/07 1,992,405 51.75 LO- 44,YM1 - 65,0% - 7
3,650,000 10/28/97 11/01/07 1,911,628 52.37 LO- 44,YM1 - 65,0% - 7
3,500,000 08/13/97 09/01/17 -- -- LO- 78,YM1 - 95,0% -61
4,250,000 03/29/96 04/01/06 1,814,711 42.70 LO- 24,YM1 - 66,0% - 7
3,675,000 11/13/97 12/01/07 1,934,365 52.64 LO- 45,YM1 - 65,0% - 7
3,700,000 08/28/97 09/01/07 1,933,374 52.25 LO- 42,YM1 - 65,0% - 7
4,000,000 12/19/97 01/01/18 -- -- LO-118,YM1 - 83,0% -37
3,700,000 12/30/97 01/01/08 1,604,067 43.35 LO- 46,YM1 - 65,0% - 7
2,950,000 11/30/97 01/01/08 1,602,389 54.32 LO- 46,YM1 - 65,0% - 7
3,100,000 06/21/96 07/01/06 1,786,582 57.63 LO- 27,YM1 - 66,0% - 7
2,400,000 08/12/97 09/01/07 1,533,331 63.89 LO- 42,YM1 - 65,0% - 7
2,720,000 09/18/96 10/01/06 1,523,962 56.03 LO- 30,YM1 - 66,0% - 7
2,675,000 12/29/97 01/01/08 1,554,646 58.12 LO- 46,YM1 - 65,0% - 7
2,900,000 05/24/96 06/01/06 1,529,040 52.73 LO- 26,YM1 - 66,0% - 7
3,250,000 05/16/96 06/01/06 1,497,386 46.07 LO- 26,YM1 - 66,0% - 7
2,900,000 11/04/97 12/01/07 1,412,638 48.71 LO- 44,YM1 - 66,0% - 7
2,400,000 11/12/97 12/01/07 1,451,885 60.50 LO- 45,YM1 - 65,0% - 7
2,730,000 07/23/97 08/01/07 1,520,307 55.69 LO- 41,YM1 - 65,0% - 7
3,100,000 10/31/97 11/01/12 1,082,355 34.91 LO- 80,YM1 - 71,0% -25
1,900,000 09/18/97 03/02/17 -- -- LO- 79,YM1 -143,0% - 6
2,100,000 09/30/97 10/01/07 1,307,379 62.26 LO- 43,YM1 - 65,0% - 7
3,100,000 07/30/97 08/01/07 1,047,401 33.79 LO- 41,YM1 - 65,0% - 7
2,175,000 09/26/97 10/01/12 842,493 38.74 LO- 79,YM1 - 59,0% -37
2,400,000 10/03/97 11/01/07 914,182 38.09 LO- 44,YM1 - 65,0% - 7
2,450,000 06/25/97 07/01/12 -- -- LO- 76,YM1 -89,0% - 7
1,800,000 07/25/96 08/01/06 1,010,634 56.15 LO- 28,YM1 - 66,0% - 7
1,500,000 11/26/97 12/01/07 1,029,425 68.63 LO- 45,YM1 - 65,0% - 7
1,700,000 11/22/95 12/01/05 969,161 57.01 LO- 20,YM1 - 66,0% - 7
1,420,000 08/29/97 09/01/17 -- -- LO- 78,YM1 -119,0% -37
1,400,000 08/13/97 09/01/17 -- -- LO- 78,YM1 - 95,0% -61
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
APPRAISED 95 NOI 96 NOI 97 NOI 97 NOI
VALUE 95 NOI MONTHS 96 NOI MONTHS 97 NOI MONTHS AS OF DATE UW NOI UW CASHFLOW UW DSCR
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
204,700,000 23,105,934 12 24,705,045 12 12,453,765 6 07/31/97 17,760,597 15,057,445 1.88
108,000,000 14,107,036 12 14,509,947 12 7,199,963 6 07/31/97 8,922,078 7,532,178
13,200,000 1,210,904 12 1,256,214 12 508,148 6 07/31/97 1,102,746 918,572
12,000,000 1,066,857 12 1,363,665 12 745,681 6 07/31/97 1,111,463 898,743
6,800,000 1,296,408 12 1,295,550 12 650,490 6 07/31/97 781,806 615,156
6,200,000 637,622 12 640,642 12 315,990 6 07/31/97 573,838 484,894
3,200,000 170,927 12 274,717 12 88,427 6 07/31/97 252,950 210,830
16,000,000 1,656,420 12 1,828,028 12 911,328 6 07/31/97 1,603,911 1,422,291
5,100,000 (12,739) 12 424,205 12 254,022 6 07/31/97 450,188 396,009
4,700,000 485,271 12 493,259 12 253,986 6 07/31/97 458,666 413,398
9,400,000 1,061,822 12 831,124 12 507,552 6 07/31/97 921,089 796,962
4,500,000 606,399 12 623,074 12 333,438 6 07/31/97 316,030 258,968
5,400,000 457,266 12 469,384 12 224,622 6 07/31/97 449,657 396,989
10,200,000 361,741 12 695,236 12 460,118 6 07/31/97 816,174 712,455
120,000,000 12,024,202 12 13,215,617 12 14,749,826 12 08/31/97 12,896,275 10,955,649 1.98
74,700,000 5,943,618 12 7,106,039 12 7,617,430 12 08/31/97 7,268,144 6,585,988 1.65
61,000,000 5,854,716 12 5,994,320 12 -- -- -- 6,982,088 5,915,348 1.82
56,200,000 -- -- -- -- -- -- -- 5,091,683 4,708,593 1.43
47,645,000 4,899,050 12 4,885,662 12 2,539,053 6 06/30/97 5,372,346 4,980,084 1.59
8,375,000 736,000 12 762,472 12 407,142 6 06/30/97 873,540 817,900
6,250,000 676,176 12 701,177 12 360,425 6 06/30/97 797,432 740,080
2,750,000 263,621 12 287,951 12 196,908 6 06/30/97 310,034 272,370
2,325,000 255,819 12 203,378 12 115,081 6 06/30/97 265,738 245,622
3,290,000 340,082 12 338,534 12 169,935 6 06/30/97 359,156 338,612
2,950,000 323,684 12 307,313 12 146,419 6 06/30/97 384,674 354,714
3,970,000 400,363 12 421,078 12 231,156 6 06/30/97 463,811 435,563
5,700,000 616,129 12 549,563 12 317,603 6 06/30/97 622,714 588,474
6,710,000 671,912 12 734,300 12 386,069 6 06/30/97 722,157 672,937
2,425,000 343,773 12 298,189 12 46,461 6 06/30/97 254,097 217,931
2,900,000 271,491 12 281,707 12 161,854 6 06/30/97 318,994 295,882
48,500,000 4,191,664 12 4,574,606 12 2,871,629 8 08/31/97 4,418,062 4,283,062 1.60
38,000,000 3,468,759 12 3,674,497 12 2,401,582 8 08/31/97 3,603,850 3,441,129 1.26
37,500,000 3,187,893 12 3,138,505 12 2,321,701 9 09/30/97 3,015,141 2,908,568 1.23
33,500,000 3,538,209 12 3,602,024 12 1,712,861 6 06/30/97 3,607,787 3,397,501 1.40
21,000,000 -- -- 691,364 5 1,885,292 12 10/31/97 1,912,073 1,781,019 1.26
20,600,000 1,214,019 12 1,649,779 12 1,446,547 10 10/30/97 1,625,981 1,542,381 1.18
22,500,000 2,020,529 12 2,338,796 12 2,219,161 9 09/30/97 2,545,336 2,154,866 1.40
20,500,000 1,411,858 12 1,400,084 12 1,307,691 10 10/31/97 1,846,621 1,641,527 1.28
20,600,000 2,038,723 12 2,373,746 12 1,251,706 6 06/30/97 2,309,643 2,139,721 1.55
17,700,000 -- -- 1,150,398 12 882,624 7 07/15/97 1,447,636 1,401,236 1.19
18,000,000 1,212,987 12 1,247,155 12 740,669 7 07/31/97 1,280,939 1,259,774 1.17
15,250,000 975,882 12 1,144,764 12 1,413,658 12 06/30/97 1,501,263 1,393,395 1.30
23,000,000 2,018,800 12 2,540,837 12 1,586,897 6 06/30/97 2,019,464 1,684,615 1.78
21,000,000 257,802 12 1,860,903 12 931,712 5 05/30/97 1,722,235 1,484,731 1.51
13,900,000 2,954,682 12 3,292,277 12 2,725,150 9 09/30/97 1,905,550 1,858,300 1.57
11,800,000 530,279 5 1,285,927 12 983,801 9 09/30/97 1,188,061 1,046,137 1.30
11,300,000 -- -- 690,214 9 772,047 9 09/30/97 981,464 860,838 1.23
12,300,000 1,846,078 12 2,005,135 12 1,203,998 7 07/31/97 1,683,500 1,327,927 1.59
8,500,000 -- -- 286,820 12 627,145 12 09/30/97 800,707 766,707 1.29
9,400,000 1,092,354 12 1,007,416 12 596,813 7 07/30/97 1,062,926 963,342 1.59
8,200,000 642,666 12 666,958 12 630,637 9 09/30/97 770,739 735,755 1.33
8,700,000 880,939 12 897,811 12 755,221 9 09/30/97 777,315 758,565 1.50
6,800,000 430,066 12 591,906 12 356,628 7 07/31/97 605,510 581,510 1.31
6,900,000 524,759 12 544,135 12 332,822 7 07/31/97 616,158 588,050 1.25
8,150,000 801,912 12 730,980 12 671,745 9 09/30/97 830,699 771,185 1.31
7,487,720 565,190 12 1,006,229 12 348,742 3 09/30/97 1,046,129 631,139 1.31
6,600,000 599,220 12 662,463 12 452,449 8 08/31/97 635,712 612,884 1.39
6,150,000 -- -- -- -- 401,192 12 09/30/97 601,790 565,415 1.32
8,400,000 498,808 12 823,675 12 209,759 3 09/30/97 706,440 630,894 1.55
6,300,000 901,286 12 808,748 12 428,184 6 06/30/97 734,477 643,292 1.53
5,510,000 469,951 12 518,890 12 233,146 6 06/30/97 472,533 445,206 1.20
5,615,000 581,295 12 519,432 12 245,967 6 06/30/97 583,119 528,091 1.41
5,000,000 505,257 12 537,126 12 402,852 8 08/31/97 524,638 460,092 1.28
5,700,000 469,212 12 509,748 12 533,317 12 05/31/97 503,317 437,392 1.21
6,415,000 258,138 12 405,296 12 424,035 9 09/30/97 485,367 413,175 1.23
5,700,000 205,994 12 292,285 12 176,066 6 06/30/97 534,349 475,897 1.33
4,350,000 579,241 12 644,033 12 439,717 8 08/31/97 576,651 502,207 1.49
4,860,000 430,860 12 501,234 12 423,457 9 09/30/97 465,269 444,769 1.43
4,500,000 533,958 12 520,915 12 237,352 5 05/31/97 511,525 473,725 1.32
5,100,000 468,929 12 516,322 12 362,130 9 09/30/97 472,556 410,792 1.34
5,760,000 462,154 12 694,810 12 603,208 9 09/30/97 819,921 728,603 1.84
4,250,000 396,497 12 449,454 12 358,866 10 10/30/97 374,543 359,274 1.27
4,500,000 494,991 12 466,066 12 473,684 12 09/30/97 428,218 387,718 1.25
4,100,000 369,462 12 394,478 12 213,044 6 06/30/97 432,630 405,630 1.41
4,400,000 458,957 12 450,425 12 372,620 9 09/30/97 441,706 410,206 1.40
5,000,000 321,434 12 473,457 12 756,175 9 09/30/97 673,144 539,335 1.56
6,410,000 -- -- 435,670 12 378,289 9 09/30/97 544,608 493,395 1.54
4,250,000 365,238 12 366,619 12 362,194 11 11/30/97 367,500 341,700 1.28
4,600,000 381,657 12 440,047 12 336,617 10 10/07/97 379,806 351,003 1.22
5,550,000 -- -- -- -- 533,308 11 11/30/97 565,285 494,008 1.66
4,065,000 388,075 12 410,900 12 368,559 11 11/30/97 421,251 376,852 1.44
4,200,000 -- -- 442,696 8 169,672 7 07/31/97 419,344 393,424 1.32
4,600,000 670,945 12 654,518 12 555,155 12 06/30/97 533,407 481,224 1.60
3,850,000 374,896 12 378,170 12 294,431 9 09/30/97 389,603 363,103 1.38
4,000,000 399,806 12 461,480 12 388,851 9 09/30/97 536,432 501,432 1.51
4,000,000 554,132 12 543,092 12 410,661 9 09/30/97 449,004 432,918 1.53
3,230,000 276,038 12 294,521 12 349,485 12 12/31/97 359,653 329,984 1.33
3,850,000 361,783 12 415,733 12 405,519 12 08/31/97 388,828 378,828 1.71
3,650,000 414,502 12 597,662 12 389,801 7 07/31/97 514,200 491,925 2.09
3,500,000 366,010 12 361,758 12 270,882 9 09/30/97 358,628 326,228 1.28
4,250,000 514,728 12 149,416 12 29,744 3 09/30/97 332,068 308,208 1.12
3,675,000 275,141 7 420,008 12 382,057 8 08/31/97 431,784 382,604 1.73
3,700,000 -- -- 321,265 12 244,319 7 07/31/97 366,373 360,123 1.63
4,000,000 378,490 12 359,384 12 348,031 11 11/30/97 330,686 299,298 1.39
3,700,000 -- -- 345,035 12 244,927 9 09/30/97 327,696 271,657 1.50
2,950,000 292,543 12 385,238 12 206,212 10 10/31/97 273,763 247,182 1.37
3,100,000 278,304 12 342,075 12 249,775 9 09/30/97 341,469 303,469 1.58
2,400,000 281,244 12 281,908 12 148,802 6 06/30/97 277,412 245,331 1.40
2,720,000 268,193 12 274,336 12 298,872 10 10/20/97 314,056 275,347 1.45
2,675,000 265,649 12 278,180 12 216,234 10 10/30/97 251,486 245,486 1.66
2,900,000 280,615 12 283,819 12 276,439 10 10/31/97 306,910 271,443 1.41
3,250,000 301,858 12 288,884 12 261,020 9 09/30/97 346,921 292,921 1.62
2,900,000 291,764 12 300,062 12 254,300 10 10/31/97 271,854 256,979 1.59
2,400,000 -- -- 264,960 12 176,640 8 08/31/97 223,451 205,902 1.31
2,730,000 332,302 12 243,005 12 77,205 4 04/30/97 215,067 203,672 1.24
3,100,000 250,632 12 302,971 12 306,006 12 09/30/97 300,423 289,623 1.84
1,900,000 -- -- -- -- 136,025 9 11/30/97 178,646 176,944 1.05
2,100,000 186,682 12 213,565 12 175,476 8 08/31/97 198,340 189,168 1.23
3,100,000 -- 12 -- 12 63,250 3 10/31/97 242,610 227,262 1.46
2,175,000 -- 12 -- 12 73,601 5 05/30/97 197,576 192,046 1.31
2,400,000 268,065 12 251,367 12 327,632 12 07/30/97 273,413 247,767 1.83
2,450,000 111,453 5 285,024 12 196,052 9 09/30/97 310,158 282,735 1.80
1,800,000 176,061 12 200,921 12 136,759 9 09/30/97 200,602 187,602 1.54
1,500,000 142,121 12 144,563 12 148,779 12 09/30/97 142,510 136,910 1.37
1,700,000 169,732 12 234,743 12 130,174 9 09/30/97 231,969 207,969 1.87
1,420,000 153,814 12 172,658 12 92,315 6 06/30/97 184,668 167,868 1.52
1,400,000 122,292 12 132,408 12 107,294 9 09/30/97 134,435 126,335 1.24
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
UPFRONT RESERVES ONGOING MONTHLY RESERVES
------------------------------------------------------------- ------------------------------------------
APPRAISED REPAIR & RATE RESET
VALUE REMEDIATION TI/LC ENVIRONMENTAL OTHER TOTAL REPLACEMENT TAXES INSURANCE TI/LC STEP-UP
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
204,700,000 1,186,100 -- -- 908,000 2,094,100 36,757 1/12 1/12 213,000 10.35%
108,000,000
13,200,000
12,000,000
6,800,000
6,200,000
3,200,000
16,000,000
5,100,000
4,700,000
9,400,000
4,500,000
5,400,000
10,200,000
120,000,000 -- -- -- -- -- -- NA 1/12 -- 7.39%
74,700,000 -- -- -- -- -- 8,763 1/12 1/12 47,481 8.86%
61,000,000 273,750 -- -- 1,000,000 1,273,750 -- 1/12 1/12 -- 9.18%
56,200,000 -- -- -- -- -- -- NA NA --
47,645,000 625,000 -- -- -- 625,000 42,006 1/12 1/12 -- 9.85%
8,375,000
6,250,000
2,750,000
2,325,000
3,290,000
2,950,000
3,970,000
5,700,000
6,710,000
2,425,000
2,900,000
48,500,000 -- -- -- -- -- 10,125 1/12 1/12 -- 8.86%
38,000,000 -- -- -- -- -- 3,016 1/12 1/12 --
37,500,000 14,375 -- -- -- 14,375 2,547 1/12 1/12 --
33,500,000 182,295 347,500 -- -- 529,795 4,682 1/12 1/12 --
21,000,000 -- -- -- -- -- 10,921 1/12 1/12 --
20,600,000 -- -- -- -- -- 6,967 1/12 1/12 --
22,500,000 45,938 -- -- -- 45,938 32,539 1/12 1/12 --
20,500,000 -- -- -- -- -- 1,836 1/12 NA --
20,600,000 30,000 -- -- -- 30,000 2,075 1/12 1/12 --
17,700,000 3,000 -- -- -- 3,000 2,900 1/12 1/12 --
18,000,000 5,625 600,000 -- -- 605,625 1,750 1/12 1/12 --
15,250,000 -- -- -- -- -- 6,250 1/12 NA --
23,000,000 100 -- -- -- 100 27,811 1/12 1/12 --
21,000,000 159,000 -- -- 500,000 659,000 -- 1/12 1/12 --
13,900,000 -- -- 21,120 -- 21,120 3,938 1/12 1/12 --
11,800,000 21,250 -- -- -- 21,250 5,936 1/12 1/12 70,737
11,300,000 4,750 -- -- -- 4,750 2,644 1/12 1/12 --
12,300,000 285,000 -- 300,000 -- 585,000 20,495 1/12 1/12 9,172
8,500,000 -- -- -- 500,000 500,000 2,834 1/12 1/12 --
9,400,000 4,938 -- -- -- 4,938 527 1/12 1/12 --
8,200,000 22,500 -- -- -- 22,500 1,119 1/12 1/12 --
8,700,000 -- -- -- -- -- -- 1/12 1/12 --
6,800,000 25,000 -- -- -- 25,000 -- 1/12 1/12 --
6,900,000 3,256 -- -- -- 3,256 630 1/12 1/12 --
8,150,000 1,938 -- -- -- 1,938 872 1/12 NA --
7,487,720 72,750 -- -- 90,000 162,750 10,360 1/12 1/12 3,250
6,600,000 94,715 -- -- 181,020 275,735 1,902 1/12 1/12 --
6,150,000 -- -- -- -- -- 572 1/12 1/12 2,013
8,400,000 -- -- -- -- -- 1,693 1/12 1/12 4,602
6,300,000 -- -- -- -- -- 7,599 1/12 1/12 --
5,510,000 21,525 -- -- -- 21,525 2,277 1/12 1/12 --
5,615,000 -- -- -- -- -- 669 1/12 1/12 --
5,000,000 -- -- -- -- -- 949 1/12 1/12 4,430
5,700,000 47,938 -- -- -- 47,938 5,494 1/12 1/12 --
6,415,000 -- 40,000 -- -- 40,000 566 1/12 1/12 4,583
5,700,000 175,000 -- -- -- 175,000 857 1/12 NA --
4,350,000 884,869 -- -- 3,500 888,369 5,766 1/12 NA --
4,860,000 20,000 -- -- -- 20,000 1,200 1/12 1/12 --
4,500,000 27,900 -- 5,000 -- 32,900 3,850 1/12 1/12 --
5,100,000 -- -- -- -- -- 2,525 1/12 NA --
5,760,000 -- -- -- -- -- 5,700 1/12 1/12 --
4,250,000 1,844 -- 900 -- 2,744 1,272 1/12 NA --
4,500,000 1,500 -- -- -- 1,500 3,375 1/12 1/12 --
4,100,000 2,750 -- -- -- 2,750 2,250 1/12 1/12 --
4,400,000 7,063 -- -- -- 7,063 2,520 1/12 1/12 --
5,000,000 -- -- 5,000 -- 5,000 1,994 1/12 1/12 4,167
6,410,000 5,125 -- 225,000 -- 230,125 1,726 1/12 1/12 2,541
4,250,000 -- -- -- -- -- 2,150 1/12 1/12 --
4,600,000 -- -- -- -- -- -- NA NA 1,964
5,550,000 -- -- -- -- -- -- NA NA --
4,065,000 5,000 -- -- -- 5,000 974 1/12 1/12 --
4,200,000 2,125 -- -- -- 2,125 1,500 1/12 1/12 660
4,600,000 -- -- -- -- -- 4,349 1/12 1/12 --
3,850,000 24,151 -- -- -- 24,151 2,120 1/12 1/12 --
4,000,000 -- -- -- -- -- -- 1/12 NA --
4,000,000 53,063 -- 95,550 -- 148,613 1,341 1/12 1/12 --
3,230,000 8,938 -- -- -- 8,938 638 1/12 1/12 --
3,850,000 -- -- -- -- -- 900 1/12 1/12 --
3,650,000 -- -- -- -- -- 1,856 1/12 1/12 --
3,500,000 1,700 -- -- -- 1,700 2,700 1/12 1/12 --
4,250,000 10,000 -- -- -- 10,000 3,277 NA 1/12 --
3,675,000 -- -- -- -- -- 4,744 1/12 NA --
3,700,000 -- -- -- -- -- 349 1/12 1/12 --
4,000,000 35,250 -- -- -- 35,250 -- 1/12 1/12 --
3,700,000 13,795 -- -- -- 13,795 1,500 1/12 1/12 --
2,950,000 14,085 -- -- -- 14,085 521 NA NA --
3,100,000 11,625 -- -- -- 11,625 3,167 1/12 1/12 --
2,400,000 15,308 -- -- -- 15,308 1,800 1/12 1/12 --
2,720,000 -- -- -- 125,000 125,000 1,278 1/12 1/12 9,926
2,675,000 3,288 -- -- -- 3,288 500 1/12 1/12 --
2,900,000 9,875 46,500 -- 183,498 239,873 640 1/12 1/12 2,308
3,250,000 106,563 -- -- -- 106,563 4,449 1/12 1/12 --
2,900,000 5,625 -- -- -- 5,625 294 1/12 1/12 --
2,400,000 -- -- -- -- -- -- NA 1/12 --
2,730,000 -- -- -- -- -- 221 1/12 1/12 1,104
3,100,000 19,063 -- -- -- 19,063 1,200 1/12 1/12 --
1,900,000 -- -- -- -- -- 142 NA NA --
2,100,000 3,938 -- -- 12,000 15,938 -- 1/12 1/12 --
3,100,000 -- -- -- -- -- -- 1/12 1/12 --
2,175,000 -- -- -- -- -- 225 1/12 1/12 --
2,400,000 2,094 -- 4,500 -- 6,594 2,137 1/12 1/12 --
2,450,000 -- -- -- -- -- -- 1/12 1/12 --
1,800,000 24,340 -- -- -- 24,340 1,479 1/12 1/12 --
1,500,000 3,500 -- 20,000 -- 23,500 462 1/12 1/12 --
1,700,000 18,388 -- -- -- 18,388 2,000 1/12 1/12 --
1,420,000 37,350 -- -- -- 37,350 1,400 1/12 1/12 --
1,400,000 1,500 -- -- -- 1,500 750 1/12 1/12 --
</TABLE>
(1) For ARD Loans, the Maturity Date listed is the Anticipated Repayment
Date. Final Maturity Dates for ARD Loans are: Kilroy 2/1/2022, Shannon
3/1/2027, 1065 Avenue of Americas 12/1/2027, Crystal Plaza Apartments
12/1/2027 and Four and Five Skyline 1/1/2028. The Crystal Gateway Loan,
though not an ARD Loan, is assumed to have an Anticipated Repayment Date
of January 1, 2008 and a Final Maturity Date of December 1, 2017.
(2) Key: LO=Lock-out Period, 0%=No Prepayment Premium, YM1=greater of 1% or
Yield Maintenance, YM2=greater of 1% or Yield Maintenance based on a
discount rate equal to 25 basis points over the U.S. Treasury rate. For
example, "LO-45, YM1-12, 3%-12, 2%-12, 1%-12, 0%-3" means that as of the
Cut-Off Date, a Mortgage Loan has a 45-month Lock-out Period followed by
a 12 month period where Prepayment Premium is calculated based on Yield
Maintenace, followed by three 12 month periods where the Prepayment
Premium is 3%, 2%, 1%, respectively, of amount prepaid followed by a 3
month period where there is no Prepayment Premium.
(3) Prior to 12/1/98 no TI/LC is collected, after 12/1/98 TI/LC of $6,250 per
month is collected, after 12/1/99 TI/LC of $10,417 per month is
collected, and after 12/1/2001 TI/LC of $19,445 per month is collected.
(4) Amount for use as an Ongoing Replacement Reserve.
(5) Anchor tenant is not part of the Mortgaged Property.
(6) Mortgagee may require Ongoing Replacement Reserves based on a capital
expenditures budget.
(7) Property also contains 97,400 square feet of industrial/office space.
<PAGE>
ANNEX B
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered J.P. Morgan
Commercial Mortgage Finance Corp. Mortgage Pass-Through Certificates, Series
1998-C6 (the "Global Securities") will be available only in book-entry form.
Investors in the Global Securities may hold such Global Securities through
any of DTC, CEDEL or Euroclear. The Global Securities will be tradeable as
home market instruments in both the European and U.S. domestic markets.
Initial settlement and all secondary trades will settle in same day funds.
Capitalized terms used but not defined in this Annex B have the meanings
assigned to them in the Prospectus Supplement and the Prospectus.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to
U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL
and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts
as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to similar issues of pass-through
certificates. Investors' securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payments in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to similar
issues of pass-through certificates in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant
B-1
<PAGE>
or Euroclear Participant at least one business day prior to settlement. CEDEL
or Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of
the Global Securities. After settlement has been completed, the Global
Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the CEDEL
Participant's or Euroclear Participant's account. The Global Securities
credit will appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the Global Securities will accrue from,
the value date (which would be the preceding day when settlement occurred in
New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the CEDEL or Euroclear cash debit will be valued instead as
of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day
funds settlement. The most direct means of doing so is to pre-position funds
for settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to
pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities were
credited to their accounts. However, interest on the Global Securities would
accrue from the value date. Therefore, in many cases the investment income on
the Global Securities earned during that one day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each CEDEL Participant's or Euroclear Participant's particular
cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
CEDEL or Euroclear will instruct the respective Depositary, as appropriate,
to deliver the bonds to the DTC Participant's account against payment.
Payment will include interest accrued on the Global Securities from and
including the last coupon payment date to and excluding the settlement date.
The payment will then be reflected in the account of the CEDEL Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in
the CEDEL Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the CEDEL Participant or Euroclear
Participant have a line of credit with its respective clearing system and
elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred
over that one-day period. If settlement is not completed on the intended
value date (i.e., the trade fails), receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would instead be valued as
of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase Global Securities from DTC Participants for
delivery to CEDEL Participants or Euroclear Participants should note that
these trades would automatically fail on the sale side unless affirmative
action were taken. At least three techniques should be readily available to
eliminate this potential problem:
B-2
<PAGE>
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts)
in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A Beneficial Owner of Global Securities holding securities through CEDEL
or Euroclear (or through DTC if the holder has an address outside the U.S.)
will be subject to the 30% U S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business in the chain of intermediaries between such
Beneficial Owner and the U.S. entity required to withhold tax complies with
applicable certification requirements and (ii) such beneficial owner takes
one of the following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial Owners of
Certificates that are non-U.S. Persons can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (Certificate of
Foreign Status). If the information shown on Form W-8 changes, a new Form
W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Beneficial Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If
the treaty provides only for a reduced rate, withholding tax will be
imposed at that rate unless the filer alternatively files Form W-8. Form
1001 may be filed by the Beneficial Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Beneficial Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom
it holds (the clearing agency, in the case of persons holding directly on
the books of the clearing agency). Form W-8 and Form 1001 are effective
for three calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof or (iii) an estate the
income of which is includable in gross income for United States tax purposes,
regardless of its source or a trust if a court within the United States is
able to exercise primary supervision of the administration of the trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of the trust. This summary does not deal with all
aspects of U.S. Federal income tax withholding that may be relevant to
foreign holders of the Global Securities. Investors are advised to consult
their own tax advisors for specific tax advice concerning their holding and
disposing of the Global Securities.
B-3
<PAGE>
The attached diskette contains two spreadsheet files (the "Spreadsheet
Files") that can be put on a user-specified hard drive or network drive.
These two files are "1998C6.XLW" and "1998C6.WK4". The file "1998C6.XLW" is a
Microsoft Excel(1), Version 4.0 spreadsheet, and the file "1998C6.WK4" is a
Lotus 123(1), Version 4.01 spreadsheet. Each file provides, in electronic
format, certain statistical information that appears under the caption
"Description of the Mortgage Pool--Certain Characteristics of the Mortgage
Loans" in the Prospectus Supplement and in Annex A to the Prospectus
Supplement. Defined terms used in the Spreadsheet Files but not otherwise
defined therein shall have the respective meanings assigned to them in the
Prospectus Supplement. All the information contained in the Spreadsheet Files
are subject to the same limitations and qualifications contained in this
Prospectus Supplement. Prospective investors are strongly urged to read the
Prospectus Supplement in its entirety prior to accessing the Spreadsheet
Files.
- ------------
(1) Microsoft Excel and Lotus 123 are registered trademarks of Microsoft
Corporation and Lotus Development Corporation, respectively.
<PAGE>
PROSPECTUS
Mortgage Pass-Through Certificates
(Issuable in Series)
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
DEPOSITOR
The Certificates offered hereby and by Supplements to this Prospectus (the
"Offered Certificates") will be offered from time to time in one or more
series (each, a "Series"). Each Series of Certificates will represent in the
aggregate the entire beneficial ownership interest in a trust fund (with
respect to any Series, the "Trust Fund") consisting of one or more segregated
pools of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage participations, mortgage pass-through
certificates or other mortgage-backed securities evidencing interests in or
secured by multifamily or commercial mortgage loans (collectively, the
"CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any
Series, collectively, the "Mortgage Assets"). If so specified in the related
Prospectus Supplement, some or all of the Mortgage Loans will include
assignments of the leases of the related Mortgaged Properties (as defined
herein) and/or assignments of the rental payments due from the lessees under
such leases (each type of assignment, a "Lease Assignment"). A significant or
the sole source of payments on certain Commercial Loans (as defined herein)
and, therefore, of distributions on certain Series of Certificates, will be
such rent payments. If so specified in the related Prospectus Supplement, the
Trust Fund for a Series of Certificates may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit
support, or any combination thereof (with respect to any Series,
collectively, "Credit Support"), and currency or interest rate exchange
agreements and other financial assets, or any combination thereof (with
respect to any Series, collectively, "Cash Flow Agreements"). See
"Description of the Trust Funds," "Description of the Certificates" and
"Description of Credit Support."
Each Series of Certificates will consist of one or more classes of
Certificates that may (i) provide for the accrual of interest thereon based
on fixed, variable or floating rates; (ii) be senior or subordinate to one or
more other classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be
entitled to interest distributions, with disproportionately low, nominal or
no principal distributions; (v) provide for distributions of accrued interest
thereon commencing only following the occurrence of certain events, such as
the retirement of one or more other classes of Certificates of such Series;
(vi) provide for distributions of principal sequentially, based on specified
payment schedules or other methodologies; and/or (vii) provide for
distributions based on a combination of two or more components thereof with
one or more of the characteristics described in this paragraph, to the extent
of available funds, in each case as described in the related Prospectus
Supplement. Any such classes may include classes of Offered Certificates. See
"Description of the Certificates."
(Continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" HEREIN AND SUCH INFORMATION AS MAY BE SET FORTH UNDER
THE CAPTION "RISK FACTORS" IN THE RELATED PROSPECTUS SUPPLEMENT BEFORE
PURCHASING ANY OFFERED CERTIFICATE.
Prior to issuance there will have been no market for the Certificates of any
Series and there can be no assurance that a secondary market for any Offered
Certificates will develop or that, if it does develop, it will continue. This
Prospectus may not be used to consummate sales of the Offered Certificates of
any Series unless accompanied by the Prospectus Supplement for such Series.
Offers of the Offered Certificates may be made through one or more different
methods, including offerings through underwriters as more fully described
under "Method of Distribution" herein and in the related Prospectus
Supplement.
FEBRUARY 20, 1998
<PAGE>
(continued from the preceding page)
Principal and interest with respect to Certificates will be distributable
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the related Prospectus Supplement. Distributions on the
Certificates of any Series will be made only from the assets of the related
Trust Fund.
The Certificates of each Series will not represent an obligation of or
interest in the Depositor, any Master Servicer, any Primary Servicer, any
Special Servicer or any of their respective affiliates, except to the limited
extent described herein and in the related Prospectus Supplement. Neither the
Certificates nor any assets in the related Trust Fund will be guaranteed or
insured by any governmental agency or instrumentality or by any other person,
unless otherwise provided in the related Prospectus Supplement. The Assets in
each Trust Fund will be held in trust for the benefit of the holders of the
related Series of Certificates pursuant to a Pooling and Servicing Agreement
and one or more Servicing Agreements, or a Trust Agreement, as more fully
described herein.
The yield on each class of Certificates of a Series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchase and defaults) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described under the caption "Yield
Considerations" herein and in the related Prospectus Supplement. A Trust Fund
may be subject to early termination under the circumstances described herein
and in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof
as a "real estate mortgage investment conduit" for federal income tax
purposes. See also "Certain Federal Income Tax Consequences" herein.
TABLE OF CONTENTS
PAGE
----
Prospectus Supplement......................................... 3
Available Information......................................... 3
Incorporation of Certain Information by Reference ............ 5
Summary of Prospectus......................................... 6
Risk Factors.................................................. 14
Description of the Trust Funds................................ 22
Use of Proceeds............................................... 28
Yield Considerations.......................................... 28
The Depositor................................................. 31
Description of the Certificates............................... 32
Description of the Agreements................................. 39
Description of Credit Support................................. 55
Certain Legal Aspects of the Mortgage Loans and the Leases ... 57
Certain Federal Income Tax Consequences....................... 72
State Tax Considerations...................................... 97
ERISA Considerations.......................................... 97
Legal Investment.............................................. 99
Plan of Distribution.......................................... 100
Legal Matters ................................................ 101
Financial Information......................................... 101
Rating........................................................ 101
Index of Principal Terms...................................... 102
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is
in addition to the obligation of dealers to deliver a Prospectus and
Prospectus Supplement when acting as underwriters and with respect to their
unsold allotments or subscriptions.
2
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and
any Prospectus Supplement with respect hereto do not constitute an offer to
sell or a solicitation of an offer to buy any securities other shall the
Offered Certificates or an offer of the Offered Certificates to any person in
any state or other jurisdiction in which such offer would be unlawful. The
delivery of this Prospectus at any time does not imply that information
herein is correct as of any time subsequent to its date; however, if any
material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement relating
to the Offered Certificates of each Series will, among other things, set
forth with respect to such Certificates, as appropriate: (i) a description of
the class or classes of Certificates, the payment provisions with respect to
each such class and the Pass-Through Rate or method of determining the
Pass-Through Rate with respect to each such class; (ii) the aggregate
principal amount and distribution dates relating to such Series and, if
applicable, the initial and final scheduled distribution dates for each
class; (iii) information as to the assets comprising the Trust Fund,
including the general characteristics of the assets included therein,
including the Mortgage Assets and any Credit Support and Cash Flow Agreements
(with respect to the Certificates of any Series, the "Trust Assets"); (iv)
the circumstances, if any, under which the Trust Fund may be subject to early
termination; (v) additional information with respect to the method of
distribution of such Certificates; (vi) whether one or more REMIC elections
will be made and designation of the regular interests and residual interests;
(vii) the aggregate original percentage ownership interest in the Trust Fund
to be evidenced by each class of Certificates; (viii) information as to any
Master Servicer, any Primary Servicer, any Special Servicer (or provision for
the appointment thereof) and the Trustee, as applicable; (ix) information as
to the nature and extent of subordination with respect to any class of
Certificates that is subordinate in right of payment to any other class; and
(x) whether such Certificates will be initially issued in definitive or
book-entry form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a
part) under the Securities Act of 1933, as amended, with respect to the
Offered Certificates. This Prospectus and the Prospectus Supplement relating
to each Series of Certificates contain summaries of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W, Washington, D.C. 20549, and at its
Regional Offices located as follows: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661; and New York
Regional Office, Seven World Trade Center, New York, New York 10048. The
Commission maintains a Web site at http://www.sec.gov containing reports,
proxy and information statements and other information regarding registrants,
including J.P. Morgan Commercial Mortgage Finance Corp., that file
electronically with the Commission.
To the extent described in the related Prospectus Supplement, some or all
of the Mortgage Loans may be secured by an assignment of the lessors' (i.e.,
the related Mortgagors') rights in one or more leases (each, a "Lease") on
the related Mortgaged Property. Unless otherwise specified in the related
Prospectus Supplement, no Series of Certificates will represent interests in
or obligations of any lessee (each, a "Lessee") under a Lease. If indicated,
however, in the Prospectus Supplement for a given Series, a significant or
the sole source of payments on the Mortgage Loans in such Series, and,
therefore, of distributions on such Certificates, will be rental payments due
from the Lessees under the Leases. Under such circumstances, prospective
investors in the related Series of Certificates may wish to consider
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publicly available information, if any, concerning the Lessees. Reference
should be made to the related Prospectus Supplement for information
concerning the Lessees and whether any such Lessees are subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended.
A Master Servicer or the Trustee will be required to mail to holders of
Definitive Certificates (as defined herein) of each Series periodic unaudited
reports concerning the related Trust Fund. Unless and until Definitive
Certificates are issued, or unless otherwise provided in the related
Prospectus Supplement, such reports will be sent on behalf of the related
Trust Fund to Cede & Co. ("Cede"), as nominee of The Depository Trust Company
("DTC") and registered holder of the Offered Certificates, pursuant to the
applicable Agreement. Such reports may be available to Beneficial Owners (as
defined herein) in the Certificates upon request to their respective DTC
Participants or Indirect Participants (as defined herein). See "Description
of the Certificates--Reports to Certificateholders" and "Description of the
Agreements--Evidence as to Compliance."
The Depositor will file or cause to be filed with the Commission such
periodic reports with respect to each Trust Fund as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations of the Commission thereunder. The Depositor intends to
make a written request to the staff of the Commission that the staff either
(i) issue an order pursuant to Section 12(h) of the Exchange Act exempting
the Depositor from certain reporting requirements under the Exchange Act with
respect to each Trust Fund or (ii) state that the staff will not recommend
that the Commission take enforcement action if the Depositor fulfills its
reporting obligations as described in its written request. If such request is
granted, the Depositor will file or cause to be filed with the Commission as
to each Trust Fund the periodic unaudited reports to holders of the Offered
Certificates referenced in the preceding paragraph; however, because of the
nature of the Trust Funds, it is unlikely that any significant additional
information will be filed. In addition, because of the limited number of
Certificateholders expected for each series, the Depositor anticipates that a
significant portion of such reporting requirements will be permanently
suspended following the first fiscal year for the related Trust Fund.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, 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, a copy of any or all
documents or reports incorporated herein by reference, in each case to the
extent such documents or reports relate to one or more of such classes of
such Offered Certificates, other than the exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Requests to the Depositor should be directed in writing to J.P. Morgan
Commercial Mortgage Finance Corp., c/o J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York 10260-0060, Attention: Secretary. The Depositor
has determined that its financial statements are not material to the offering
of any Offered Certificates.
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SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each
Series of Certificates contained in the Prospectus Supplement to be prepared
and delivered in connection with the offering of such "Series." An Index of
Principal Definitions is included at the end of this Prospectus.
Title of Certificates ......... Mortgage Pass-Through Certificates, issuable
in Series (the "Certificates").
Depositor ..................... J.P. Morgan Commercial Mortgage Finance
Corp., an indirect wholly-owned subsidiary
of J.P. Morgan & Co. Incorporated. See "The
Depositor."
Master Servicer ............... The master servicer (the "Master Servicer"),
if any, for each Series of Certificates,
which may be an affiliate of the Depositor,
will be named in the related Prospectus
Supplement. See "Description of the
Agreements--Collection and Other Servicing
Procedures."
Special Servicer .............. The special servicer (the "Special
Servicer"), if any, for each Series of
Certificates, which may be an affiliate of
the Depositor, will be named, or the
circumstances in accordance with which a
Special Servicer will be appointed will be
described, in the related Prospectus
Supplement. See "Description of the
Agreements--Special Servicers."
Primary Servicer .............. The primary servicer (the "Primary
Servicer"), if any, for each Series of
Certificates, which may be an affiliate of
the Depositor, will be named in the related
Prospectus Supplement. See "Description of
the Agreements--Collection and Other
Servicing Procedures."
Trustee ....................... The trustee (the "Trustee") for each Series
of Certificates will be named in the related
Prospectus Supplement. See "Description of
the Agreements--The Trustee."
The Trust Assets .............. Each Series of Certificates will represent
in the aggregate the entire beneficial
ownership interest in a Trust Fund
consisting primarily of:
(a) Mortgage Assets ......... The Mortgage Assets with respect to each
Series of Certificates will consist of a
pool of multifamily and/or commercial
mortgage loans (collectively, the "Mortgage
Loans") and mortgage participations,
mortgage pass-through certificates or other
mortgage-backed securities evidencing
interests in or secured by Mortgage Loans
(collectively, the "CMBS") or a combination
of Mortgage Loans and CMBS. The Mortgage
Loans will not be guaranteed or insured by
the Depositor or any of its affiliates or,
unless otherwise provided in the Prospectus
Supplement, by any governmental agency or
instrumentality or other
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person. The CMBS may be guaranteed or
insured by an affiliate of the Depositor,
the Federal Home Loan Mortgage Corporation,
the Federal National Mortgage Association,
the Government National Mortgage
Association, or any other person specified
in the related Prospectus Supplement. As
more specifically described herein, the
Mortgage Loans will be secured by first or
junior liens on, or security interests in,
properties consisting of (i) residential
properties consisting of five or more rental
or cooperatively owned dwelling units (the
"Multifamily Properties") or (ii) office
buildings, retail centers, hotels or motels,
nursing homes, congregate care facilities,
industrial properties, mini-warehouse
facilities or self-storage facilities,
mobile home parks, mixed use or other types
of commercial properties (the "Commercial
Properties"). The term "Mortgaged
Properties" shall refer to Multifamily
Properties or Commercial Properties, or
both.
To the extent described in the related
Prospectus Supplement, some or all of the
Mortgage Loans may also be secured by an
assignment of one or more leases (each, a
"Lease") of one or more lessees (each, a
"Lessee") of all or a portion of the related
Mortgaged Properties. Unless otherwise
specified in the related Prospectus
Supplement, a significant or the sole source
of payments on certain Commercial Loans (as
defined herein) will be the rental payments
due under the related Leases. In certain
circumstances, with respect to Commercial
Properties, the material terms and
conditions of the related Leases may be set
forth in the related Prospectus Supplement.
See "Description of the Trust
Funds--Mortgage Loans--Leases" and "Risk
Factors--Limited Assets" herein.
The Mortgaged Properties may be located in
or outside the United States. All Mortgage
Loans will have original terms to maturity
of not more than 40 years. All Mortgage
Loans will have been originated by persons
other than the Depositor, and all Mortgage
Assets will have been purchased, either
directly or indirectly, by the Depositor on
or before the date of initial issuance of
the related Series of Certificates. The
related Prospectus Supplement will indicate
if any such persons are affiliates of the
Depositor.
Each Mortgage Loan may provide for no
accrual of interest or for accrual of
interest thereon at an interest rate (a
"Mortgage Interest Rate") that is fixed over
its term or that adjusts from time to time,
or is partially fixed and partially floating
or that may be converted from a floating to
a fixed Mortgage Interest Rate, or from a
fixed to a floating Mortgage Interest Rate,
from time to time at the Mortgagor's
election, in each case as described in the
related Prospectus Supplement. The floating
Mortgage Interest Rates on the Mortgage
Loans in a Trust Fund may be based on one or
more indices. Each Mortgage Loan may provide
for scheduled payments to maturity, payments
that adjust from time to time to accommodate
changes in the
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<PAGE>
Mortgage Interest Rate or to reflect the
occurrence of certain events, and may
provide for negative amortization or
accelerated amortization, in each case as
described in the related Prospectus
Supplement. Each Mortgage Loan may be fully
amortizing or require a balloon payment due
on its stated maturity date, in each case as
described in the related Prospectus
Supplement. Each Mortgage Loan may contain
prohibitions on prepayment or require
payment of a premium or a yield maintenance
penalty in connection with a prepayment, in
each case as described in the related
Prospectus Supplement. The Mortgage Loans
may provide for payments of principal,
interest or both, on due dates that occur
monthly, quarterly, semi-annually or at such
other interval as is specified in the
related Prospectus Supplement. See
"Description of the Trust Funds--Assets."
(b) Collection Accounts ..... Each Trust Fund will include one or more
accounts established and maintained on
behalf of the Certificateholders into which
the person or persons designated in the
related Prospectus Supplement will, to the
extent described herein and in such
Prospectus Supplement, deposit all payments
and collections received or advanced with
respect to the Mortgage Assets and other
assets in the Trust Fund. Such an account
may be maintained as an interest bearing or
a non-interest bearing account, and funds
held therein may be held as cash or invested
in certain short-term, investment grade
obligations, in each case as described in
the related Prospectus Supplement. See
"Description of the Agreements--Distribution
Account and Other Collection Accounts."
(c) Credit Support .......... If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on the
Mortgage Assets in the related Trust Fund
may be provided to one or more classes of
Certificates of the related Series in the
form of subordination of one or more other
classes of Certificates of such Series,
which other classes may include one or more
classes of Offered Certificates, or by one
or more other types of credit support, such
as a letter of credit, insurance policy,
guarantee, reserve fund or another type of
credit support, or a combination thereof
(any such coverage with respect to the
Certificates of any Series, "Credit
Support"). The amount and types of coverage,
the identification of the entity providing
the coverage (if applicable) and related
information with respect to each type of
Credit Support, if any, will be described in
the Prospectus Supplement for a Series of
Certificates. The Prospectus Supplement for
any Series of Certificates evidencing an
interest in a Trust Fund that includes CMBS
will describe any similar forms of credit
support that are provided by or with respect
to, or are included as part of the trust
fund evidenced by or providing security for,
such CMBS. See "Risk Factors--Credit Support
Limitations" and "Description of Credit
Support."
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<PAGE>
(d) Cash Flow Agreements .... If so provided in the related Prospectus
Supplement, the Trust Fund may include
guaranteed investment contracts pursuant to
which moneys held in the funds and accounts
established for the related Series will be
invested at a specified rate. The Trust Fund
may also include certain other agreements,
such as interest rate exchange agreements,
interest rate cap or floor agreements,
currency exchange agreements or similar
agreements provided to reduce the effects of
interest rate or currency exchange rate
fluctuations on the Mortgage Assets of one
or more classes of Certificates. The
principal terms of any such guaranteed
investment contract or other 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 Prospectus Supplement for
the related Series. In addition, the related
Prospectus Supplement will provide certain
information with respect to the obligor
under any such Cash Flow Agreement. The
Prospectus Supplement for any Series of
Certificates evidencing an interest in a
Trust Fund that includes CMBS will describe
any cash flow agreements that are included
as part of the trust fund evidenced by or
providing security for such CMBS. See
"Description of the Trust Funds--Cash Flow
Agreements."
Description of Certificates ... Each Series of Certificates evidencing an
interest in a Trust Fund that includes
Mortgage Loans as part of its assets will be
issued pursuant to a pooling and servicing
agreement, and each Series of Certificates
evidencing an interest in a Trust Fund that
does not include Mortgage Loans will be
issued pursuant to a trust agreement. The
Mortgage Loans shall be serviced pursuant to
a pooling and servicing agreement and a
servicing agreement. Pooling and servicing
agreements, servicing agreements and trust
agreements are referred to herein as the
"Agreements." Each Series of Certificates
will include one or more classes. Each
Series of Certificates (including any class
or classes of Certificates of such Series
not offered hereby) will represent in the
aggregate the entire beneficial ownership
interest in the Trust Fund. Each class of
Certificates (other than certain Stripped
Interest Certificates, as defined below)
will have a stated principal amount (a
"Certificate Balance") and (other than
certain Stripped Principal Certificates, as
defined below), will accrue interest thereon
based on a fixed, variable or floating
interest rate (a "Pass-Through Rate"). The
related Prospectus Supplement will specify
the Certificate Balance, if any, and the
Pass-Through Rate, if any, for each class of
Certificates or, in the case of a variable
or floating Pass-Through Rate, the method
for determining the Pass-Through Rate.
Distributions on Certificates . Each Series of Certificates will consist of
one or more classes of Certificates that may
(i) provide for the accrual of interest
thereon based on fixed, variable or floating
rates; (ii) be senior (collectively, "Senior
Certificates") or subordinate (collectively,
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<PAGE>
"Subordinate Certificates") to one or more
other classes of Certificates in respect of
certain distributions on the Certificates;
(iii) be entitled to principal
distributions, with disproportionately low,
nominal or no interest distributions
(collectively, "Stripped Principal
Certificates"); (iv) be entitled to interest
distributions, with disproportionately low,
nominal or no principal distributions
(collectively, "Stripped Interest
Certificates"); (v) provide for
distributions of accrued interest thereon
commencing only following the occurrence of
certain events, such as the retirement of
one or more other classes of Certificates of
such Series (collectively, "Accrual
Certificates"); (vi) provide for
distributions of principal sequentially,
based on specified payment schedules or
other methodologies; and/or (vii) provide
for distributions based on a combination of
two or more components thereof with one or
more of the characteristics described in
this paragraph, including a Stripped
Principal Certificate component and a
Stripped Interest Certificate component, to
the extent of available funds, in each case
as described in the related Prospectus
Supplement. Any such classes may include
classes of Offered Certificates. With
respect to Certificates with two or more
components, references herein to Certificate
Balance, notional amount and Pass-Through
Rate refer to the principal balance, if any,
notional amount, if any, and the
Pass-Through Rate, if any, for any such
component.
The Certificates will not be guaranteed or
insured by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person,
unless otherwise provided in the related
Prospectus Supplement. See "Risk
Factors--Limited Assets" and "Description of
the Certificates."
(a) Interest ................ Interest on each class of Offered
Certificates (other than Stripped Principal
Certificates and certain classes of Stripped
Interest Certificates) of each Series will
accrue at the applicable Pass-Through Rate
on the outstanding Certificate Balance
thereof and will be distributed to
Certificateholders as provided in the
related Prospectus Supplement (each of the
specified dates on which distributions are
to be made, a "Distribution Date").
Distributions with respect to interest on
Stripped Interest Certificates may be made
on each Distribution Date on the basis of a
notional amount as described in the related
Prospectus Supplement. Distributions of
interest with respect to one or more classes
of Certificates may be reduced to the extent
of certain delinquencies, losses, prepayment
interest shortfalls, and other contingencies
described herein and in the related
Prospectus Supplement. Stripped Principal
Certificates with no stated Pass-Through
Rate will not accrue interest. See "Risk
Factors--Prepayments and Effect on Average
Life of Certificates and Yields," "Yield
Considerations" and "Description of the
Certificates--Distributions of Interest on
the Certificates."
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<PAGE>
(b) Principal ............... The Certificates of each Series initially
will have an aggregate Certificate Balance
no greater than the outstanding principal
balance of the Mortgage Assets as of, unless
the related Prospectus Supplement provides
otherwise, the close of business on the
first day of the month of formation of the
related Trust Fund (the "Cut-off Date"),
after application of scheduled payments due
on or before such date, whether or not
received. The Certificate Balance of a
Certificate outstanding from time to time
represents the maximum amount that the
holder thereof is then entitled to receive
in respect of principal from future cash
flow on the assets in the related Trust
Fund. Unless otherwise provided in the
related Prospectus Supplement, distributions
of principal will be made on each
Distribution Date to the class or classes of
Certificates entitled thereto until the
Certificate Balances of such Certificates
have been reduced to zero. Unless otherwise
specified in the related 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 or by random selection, as
described in the related Prospectus
Supplement or otherwise established by the
related Trustee. Stripped Interest
Certificates with no Certificate Balance
will not receive distributions in respect of
principal. See "Description of the
Certificates--Distributions of Principal of
the Certificates."
Advances ...................... Unless otherwise provided in the related
Prospectus Supplement, the Primary Servicer,
the Special Servicer or the Master Servicer
(each, a "Servicer") will be obligated as
part of its servicing responsibilities to
make certain advances with respect to
delinquent scheduled payments on the Whole
Loans in such Trust Fund which it deems
recoverable. Any such advances will be made
under and subject to any determinations or
conditions set forth in the related
Prospectus Supplement. Neither the Depositor
nor any of its affiliates will have any
responsibility to make such advances.
Advances made by a Master Servicer are
reimbursable generally from subsequent
recoveries in respect of such Whole Loans
and otherwise to the extent described herein
and in the related Prospectus Supplement. If
and to the extent provided in the Prospectus
Supplement for any "Series," each Servicer
will be entitled to receive interest on its
outstanding advances, payable from amounts
in the related Trust Fund. The Prospectus
Supplement for any Series of Certificates
evidencing an interest in a Trust Fund that
includes CMBS will describe any
corresponding advancing obligation of any
person in connection with such CMBS. See
"Description of the Certificates--Advances
in Respect of Delinquencies."
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 specified therein, under the
circumstances and in the manner set forth
therein. If so provided in the related
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<PAGE>
Prospectus Supplement, upon the reduction of
the Certificate Balance of a specified class
or classes of Certificates by a specified
percentage or amount or on and after a date
specified in such Prospectus Supplement, the
party specified therein will solicit bids
for the purchase of all of the Mortgage
Assets of the Trust Fund, or of a sufficient
portion of such Mortgage Assets to retire
such class or classes, or purchase such
Mortgage Assets at a price set forth in the
related Prospectus Supplement. In addition,
if so provided in the related Prospectus
Supplement, certain classes of Certificates
may be purchased subject to similar
conditions. See "Description of the
Certificates--Termination."
Registration of Certificates .. If so provided in the related Prospectus
Supplement, one or more classes of the
Offered Certificates will initially be
represented by one or more Certificates
registered in the name of Cede & Co., as the
nominee of DTC. No person acquiring an
interest in Offered Certificates so
registered will be entitled to receive a
definitive certificate representing such
person's interest except in the event that
definitive certificates are issued under the
limited circumstances described herein. See
"Risk Factors--Book-Entry Registration" and
"Description of the Certificates--Book-Entry
Registration and Definitive Certificates."
Tax Status of the
Certificates ................ The Certificates of each Series will
constitute either (i) "regular interests"
("REMIC Regular Certificates") or "residual
interests" ("REMIC Residual Certificates")
in a Trust Fund treated as a real estate
mortgage investment conduit ("REMIC") under
Sections 860A through 860G of the Code, or
(ii) interests ("Grantor Trust
Certificates") in a Trust Fund treated as a
grantor trust under applicable provisions of
the Code.
(a) REMIC ................... REMIC Regular Certificates generally will be
treated as debt obligations of the
applicable REMIC for federal income tax
purposes. Certain REMIC Regular Certificates
may be issued with original issue discount
for federal income tax purposes. See
"Certain Federal Income Tax Consequences" in
the Prospectus Supplement.
The Offered Certificates will be treated as
(i) "loans" within the meaning of the assets
described in section 7701(a)(19)(C) of the
Internal Revenue Code of 1986, as amended
(the "Code") and (ii) "real estate assets"
within the meaning of section 856(c)(5)(A)
of the Code, in each case to the extent
described herein and in the related
Prospectus Supplement. See "Certain Federal
Income Tax Consequences" herein and in the
Prospectus.
(b) Grantor Trust ........... If no election is made to treat the Trust
Fund relating to a Series of Certificates as
a REMIC, the Trust Fund will be classified
as a grantor trust and not as an association
taxable as a corporation
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<PAGE>
for federal income tax purposes, and
therefore holders of Certificates will be
treated as the owners of undivided pro rata
interest in the Mortgage Pool or pool of
securities and any other assets held by the
Trust Fund.
Investors are advised to consult their tax
advisors and to review "Certain Federal
Income Tax Consequences" herein and in the
related Prospectus Supplement.
ERISA Considerations .......... A fiduciary of an employee benefit plan or
certain other retirement plans and
arrangements, including individual
retirement accounts, annuities and Keogh
plans, that are subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the
Code and investment managers of a collective
investment fund or separate account in which
such plans, accounts, annuities or
arrangements are invested, should carefully
review with their legal advisors whether the
purchase or holding of Offered Certificates
could give rise to a transaction that is
prohibited or is not otherwise permissible
either under ERISA or Section 4975 of the
Code. See "ERISA Considerations" herein and
in the related Prospectus Supplement.
Certain classes of Certificates may not be
transferred unless the Trustee and the
Depositor are furnished with a letter of
representations or an opinion of counsel to
the effect that such transfer will not
result in a violation of the prohibited
transaction provisions of ERISA and the Code
and will not subject the Trustee, the
Depositor or the Master Servicer to
additional obligations. See "Description of
the Certificates--General" and "ERISA
Considerations."
Legal Investment .............. The related Prospectus Supplement will
specify whether the Offered Certificates
will constitute "mortgage related
securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984.
Investors whose investment authority is
subject to legal restrictions should consult
their own legal advisors to determine
whether and to what extent the Offered
Certificates constitute legal investments
for them. See "Legal Investment" herein and
in the related Prospectus Supplement.
Rating ........................ At the date of issuance, as to each Series,
each class of Offered Certificates will be
rated not lower than investment grade by one
or more nationally recognized statistical
rating agencies (each, a "Rating Agency").
See "Rating" herein and in the related
Prospectus Supplement.
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.
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RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "Risk Factors" in the related Prospectus
Supplement.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any Series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such
Series remain outstanding. Any such secondary market may provide less
liquidity to investors than any comparable market for securities evidencing
interests in single family mortgage loans. The market value of Certificates
will fluctuate with changes in prevailing rates of interest. Consequently,
sale of Certificates by a holder in any secondary market that may develop may
be at a discount from 100% of their original principal balance or from their
purchase price. Furthermore, secondary market purchasers may look only
hereto, to the related Prospectus Supplement and to the reports to
Certificateholders delivered pursuant to the related Agreement as described
herein under the heading "Description of the Certificates--Reports to
Certificateholders," "--Book-Entry Registration and Definitive Certificates"
and "Description of the Agreements--Evidence as to Compliance" for
information concerning the Certificates. Except to the extent described
herein and in the related Prospectus Supplement, Certificateholders will have
no redemption rights and the Certificates are subject to early retirement
only under certain specified circumstances described herein and in the
related Prospectus Supplement. See "Description of the
Certificates--Termination."
LIMITED ASSETS
The Certificates will not represent an interest in or obligation of the
Depositor, any Servicer, or any of their affiliates. The only obligations
with respect to the Certificates or the Mortgage Assets will be the
obligations (if any) of the Depositor (or, if otherwise provided in the
related Prospectus Supplement, the person identified therein as the person
making certain representations and warranties with respect to the Mortgage
Loans, as applicable, the "Warranting Party") pursuant to certain limited
representations and warranties made with respect to the Mortgage Loans. Since
certain representations and warranties with respect to the Mortgage Assets
may have been made and/or assigned in connection with transfers of such
Mortgage Assets prior to the Closing Date, the rights of the Trustee and the
Certificateholders with respect to such representations or warranties will be
limited to their rights as an assignee thereof. Unless otherwise specified in
the related Prospectus Supplement, none of the Depositor, any Servicer or any
affiliate thereof will have any obligation with respect to representations or
warranties made by any other entity. Unless otherwise specified in the
related Prospectus Supplement, neither the Certificates nor the underlying
Mortgage Assets will be guaranteed or insured by any governmental agency or
instrumentality, or by the Depositor, any Servicer or any of their
affiliates. Proceeds of the assets included in the related Trust Fund for
each Series of Certificates (including the Mortgage Assets and any form of
credit enhancement) will be the sole source of payments on the Certificates,
and there will be no recourse to the Depositor or any other entity in the
event that such proceeds are insufficient or otherwise unavailable to make
all payments provided for under the Certificates.
Unless otherwise specified in the related Prospectus Supplement, a Series
of Certificates will not have any claim against or security interest in the
Trust Funds for any other Series. If the related Trust Fund is insufficient
to make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Distribution Account, the Trust Master
Collection Account, Trust Primary Collection Account and Trust REO Account
and any accounts maintained as Credit Support, may be withdrawn under certain
conditions, as described in the related Prospectus Supplement. In the event
of such withdrawal, such amounts will not be available for future payment of
principal of or interest on the Certificates. If so provided in the
Prospectus Supplement for a Series of Certificates consisting of one or more
classes of Subordinate Certificates, on any Distribution Date in respect of
which losses or shortfalls in collections on the Trust Assets have been
incurred, the amount of such losses or shortfalls will be borne first by one
or more
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classes of the Subordinate Certificates, and, thereafter, by the remaining
classes of Certificates in the priority and manner and subject to the
limitations specified in such Prospectus Supplement.
PREPAYMENTS AND EFFECT ON AVERAGE LIFE OF CERTIFICATES AND YIELDS
Prepayments (including those caused by defaults) on the Mortgage Assets in
any Trust Fund generally will result in a faster rate of principal payments
on one or more classes of the related Certificates than if payments on such
Mortgage Assets were made as scheduled. Thus, the prepayment experience on
the Mortgage Assets may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans
varies between pools and from time to time is influenced by a variety of
economic, demographic, geographic, social, tax, legal and other factors.
There can be no assurance as to the rate of prepayment on the Mortgage Assets
in any Trust Fund or that the rate of payments will conform to any model
described herein or in any Prospectus Supplement. If prevailing interest
rates fall significantly below the applicable mortgage interest rates,
principal prepayments are likely to be higher than if prevailing rates remain
at or above the rates borne by the Mortgage Loans underlying or comprising
the Mortgage Assets in any Trust Fund. As a result, the actual maturity of
any class of Certificates could occur significantly earlier than expected. A
Series of Certificates may include one or more classes of Certificates with
priorities of payment and, as a result, yields on other classes of
Certificates, including classes of Offered Certificates, of such Series may
be more sensitive to prepayments on Mortgage Assets. A Series of Certificates
may include one or more classes offered at a significant premium or discount.
Yields on such classes of Certificates will be sensitive, and in some cases
extremely sensitive, to prepayments on Mortgage Assets and, where the amount
of interest payable with respect to a class is disproportionately high, as
compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might, in some prepayment scenarios, fail to
recoup its original investment. A Series of Certificates may include one or
more classes of Certificates, including classes of Offered Certificates, that
provide for distribution of principal thereof from amounts attributable to
interest accrued but not currently distributable on one or more classes of
Accrual Certificates and, as a result, yields on such Certificates will be
sensitive to (a) the provisions of such Accrual Certificates relating to the
timing of distributions of interest thereon and (b) if such Accrual
Certificates accrue interest at a variable or floating Pass-Through Rate,
changes in such rate. See "Yield Considerations" herein and, if applicable,
in the related Prospectus Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Assets will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
Series of Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an
investor purchasing a Certificate at a significant premium might fail to
recoup its initial investment under certain prepayment scenarios. Each
Prospectus Supplement will identify any payment to which holders of Offered
Certificates of the related Series are entitled that is not covered by the
applicable rating.
The amount, type and nature of credit support, if any, established with
respect to a Series of Certificates will be determined on the basis of
criteria established by each Rating Agency rating classes of such "Series."
Such criteria are sometimes based upon an actuarial analysis of the behavior
of mortgage loans in a larger group. Such analysis is often the basis upon
which each Rating Agency determines the amount of credit support required
with respect to each such class. There can be no assurance that the
historical data supporting any such actuarial analysis will accurately
reflect future experience nor any assurance that the data derived from a
large pool of mortgage loans accurately predicts the delinquency, foreclosure
or loss experience of any particular pool of Mortgage Assets. No assurance
can be given that values of any Mortgaged Properties have remained or will
remain at their levels on the respective dates
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of origination of the related Mortgage Loans. Moreover, there is no assurance
that appreciation of real estate values generally will limit loss experiences
on the Mortgaged Properties. If the commercial or multifamily residential
real estate markets should experience an overall decline in property values
such that the outstanding principal balances of the Mortgage Loans underlying
or comprising the Mortgage Assets in a particular Trust Fund and any
secondary financing on the related Mortgaged Properties become equal to or
greater than the value of the Mortgaged Properties, the rates of
delinquencies, foreclosures and losses could be higher than those now
generally experienced by institutional lenders. In addition, adverse economic
conditions (which may or may not affect real property values) may affect the
timely payment by Mortgagors of scheduled payments of principal and interest
on the Mortgage Loans and, accordingly, the rates of delinquencies,
foreclosures and losses with respect to any Trust Fund. To the extent that
such losses are not covered by the Credit Support, if any, described in the
related Prospectus Supplement, such losses will be borne, at least in part,
by the holders of one or more classes of the Certificates of the related
Series. See "Description of Credit Support" and "Rating."
RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single family
property. See "Description of the Trust Funds--Assets." The ability of a
Mortgagor to repay a loan secured by an income-producing property typically
is dependent primarily upon the successful operation of such property rather
than any independent income or assets of the Mortgagor; thus, the value of an
income-producing property is directly related to the net operating income
derived from such property. In contrast, the ability of a Mortgagor to repay
a single family loan typically is dependent primarily upon the Mortgagor's
household income, rather than the capacity of the property to produce income;
thus, other than in geographical areas where employment is dependent upon a
particular employer or an industry, the Mortgagor's income tends not to
reflect directly the value of such property. A decline in the net operating
income of an income-producing property will likely affect both the
performance of the related loan as well as the liquidation value of such
property, whereas a decline in the income of a Mortgagor on a single family
property will likely affect the performance of the related loan but may not
affect the liquidation value of such property. Moreover, a decline in the
value of a Mortgaged Property will increase the risk of loss particularly
with respect to any related junior Mortgage Loan. See "--Junior Mortgage
Loans."
The performance of a mortgage loan secured by an income-producing property
leased by the Mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both;
the risks associated with such loans may be offset by the number of tenants
or, if applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which
recourse may be restricted or unenforceable, as to which, in the event of
Mortgagor default, recourse may be had only against the specific property and
such other assets, if any, as have been pledged to secure the related
Mortgage Loan. With respect to those Mortgage Loans that provide for recourse
against the Mortgagor and its assets generally, there can be no assurance
that such recourse will ensure a recovery in respect of a defaulted Mortgage
Loan greater than the liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual Mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of
single family loans both because the Mortgage Assets in a Trust Fund will
generally consist of a smaller number of loans than would a single family
pool of comparable aggregate unpaid principal balance and because of the
higher principal balance of individual Mortgage Loans. Mortgage Assets in a
Trust Fund may consist of only a single or limited number of Mortgage Loans
and/or relate to Leases to only a single Lessee or a limited number of
Lessees.
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If applicable, certain legal aspects of the Mortgage Loans for a Series of
Certificates may be described in the related Prospectus Supplement. See also
"Certain Legal Aspects of the Mortgage Loans and the Leases" herein.
RISKS ASSOCIATED WITH COMMERCIAL LOANS AND LEASES
If so described in the related Prospectus Supplement, each Mortgagor under
a Commercial Loan may be an entity created by the owner or purchaser of the
related Commercial Property solely to own or purchase such property, in part
to isolate the property from the debts and liabilities of such owner or
purchaser. Unless otherwise specified, each such Commercial Loan will
represent a nonrecourse obligation of the related Mortgagor secured by the
lien of the related Mortgage and the related Lease Assignments. Whether or
not such loans are recourse or nonrecourse obligations, it is not expected
that the Mortgagors will have any significant assets other than the
Commercial Properties and the related Leases, which will be pledged to the
Trustee under the related Agreement. Therefore, the payment of amounts due on
any such Commercial Loans, and, consequently, the payment of principal of and
interest on the related Certificates, will depend primarily or solely on
rental payments by the Lessees. Such rental payments will, in turn, depend on
continued occupancy by, and/or the creditworthiness of, such Lessees, which
in either case may be adversely affected by a general economic downturn or an
adverse change in their financial condition. Moreover, to the extent a
Commercial Property was designed for the needs of a specific type of tenant
(e.g., a nursing home, hotel or motel), the value of such property in the
event of a default by the Lessee or the early termination of such Lease may
be adversely affected because of difficulty in re-leasing the property to a
suitable substitute lessee or, if re-leasing to such a substitute is not
possible, because of the cost of altering the property for another more
marketable use. As a result, without the benefit of the Lessee's continued
support of the Commercial Property, and absent significant amortization of
the Commercial Loan, if such loan is foreclosed on and the Commercial
Property liquidated following a lease default, the net proceeds might be
insufficient to cover the outstanding principal and interest owing on such
loan, thereby increasing the risk that holders of the Certificates will
suffer some loss.
BALLOON PAYMENTS
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-off Date may not be fully amortizing over their terms to maturity and,
thus, will require substantial principal payments (i.e., balloon payments) at
their stated maturity. Mortgage Loans with balloon payments involve a greater
degree of risk because the ability of a Mortgagor to make a balloon payment
typically will depend upon its ability either to timely refinance the loan or
to timely sell the related Mortgaged Property. The ability of a Mortgagor to
accomplish either of these goals will be affected by a number of factors,
including the level of available mortgage interest rates at the time of sale
or refinancing, the Mortgagor's equity in the related Mortgaged Property, the
financial condition and operating history of the Mortgagor and the related
Mortgaged Property, tax laws, rent control laws (with respect to certain
Multifamily Properties and mobile home parks), reimbursement rates (with
respect to certain nursing homes), renewability of operating licenses,
prevailing general economic conditions and the availability of credit for
commercial or multifamily real properties, as the case may be, generally.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case
of liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans
will be greater with respect to junior Mortgage Loans. See "--Risks
Associated with Mortgage Loans and Mortgaged Properties."
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OBLIGOR DEFAULT
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Whole Loans, a Master Servicer or a Special Servicer
will be permitted (within prescribed parameters) to extend and modify Whole
Loans that are in default or as to which a payment default is imminent,
including in particular with respect to balloon payments. In addition, a
Master Servicer or a Special Servicer may receive a workout fee based on
receipts from or proceeds of such Whole Loans. While any such entity
generally will be required to determine that any such extension or
modification is reasonably likely to produce a greater recovery on a present
value basis than liquidation, there can be no assurance that such flexibility
with respect to extensions or modifications or payment of a workout fee will
increase the present value of receipts from or proceeds of Whole Loans that
are in default or as to which a payment default is imminent. Additionally, if
so specified in the related Prospectus Supplement, certain of the Mortgage
Loans included in the Mortgage Pool for a Series may have been subject to
workouts or similar arrangements following periods of delinquency and
default.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of Mortgage Loans made to individuals. The Mortgagor's sophistication
and form of organization may increase the likelihood of protracted litigation
or bankruptcy in default situations.
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for a Series of Certificates will describe any
Credit Support in the related Trust Fund, which may include letters of
credit, insurance policies, guarantees, reserve funds or other types of
credit support, or combinations thereof. Use of Credit Support will be
subject to the conditions and limitations described herein and in the related
Prospectus Supplement. Moreover, such Credit Support may not cover all
potential losses or risks; for example, Credit Support may or may not cover
fraud or negligence by a mortgage loan originator or other parties.
A Series of Certificates may include one or more classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although subordination is intended to reduce
the risk to holders of Senior Certificates of delinquent distributions or
ultimate losses, 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 limits with respect to the aggregate amount of claims under any
related Credit Support may be exhausted before the principal of the lower
priority classes of Certificates of such Series has been repaid. As a result,
the impact of significant losses and shortfalls on the Trust Assets may fall
primarily upon those classes of Certificates having a lower priority of
payment. Moreover, if a form of Credit Support covers more than one Series of
Certificates (each, a "Covered Trust"), holders of Certificates evidencing an
interest in a Covered Trust will be subject to the risk that such Credit
Support will be exhausted by the claims of other Covered Trusts.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of 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, other losses or other factors. There can,
however, be no assurance that the loss experience on the related Mortgage
Assets will not exceed such assumed levels. See "--Limited Nature of
Ratings," "Description of the Certificates" and "Description of Credit
Support."
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to
periodic reduction in accordance with a schedule or formula. The Master
Servicer will generally be permitted to reduce, terminate or substitute all
or a portion of the credit enhancement for any Series of Certificates, if the
applicable Rating Agency indicates that the then-current rating thereof will
not be adversely affected. The rating of any Series of Certificates by any
applicable Rating Agency may be lowered following the initial issuance
thereof as a result of the
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downgrading of the obligations of any applicable credit support provider, or
as a result of losses on the related Mortgage Assets substantially in excess
of the levels contemplated by such Rating Agency at the time of its initial
rating analysis. None of the Depositor, the Master Servicer or any of their
affiliates will have any obligation to replace or supplement any credit
enhancement, or to take any other action to maintain any rating of any Series
of Certificates.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the Mortgagor sells,
transfers or conveys the related Mortgaged Property or its interest in the
Mortgaged Property. Mortgages may also include a debt-acceleration clause,
which permits the lender to accelerate the debt upon a monetary or
non-monetary default of the 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.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
Mortgagor typically assigns its right, title and interest as landlord under
the leases on the related Mortgaged Property and the income derived therefrom
to the lender as further security for the related Mortgage Loan, while
retaining a license to collect rents for so long as there is no default. In
the event the Mortgagor defaults, the license terminates and the lender is
entitled to collect rents. Such assignments are typically not perfected as
security interests prior to actual possession of the cash flows. Some state
laws may require that the lender take possession of the Mortgaged Property
and obtain a judicial appointment of a receiver before becoming entitled to
collect the rents. In addition, if bankruptcy or similar proceedings are
commenced by or in respect of the Mortgagor, the lender's ability to collect
the rents may be adversely affected. See "Certain Legal Aspects of the
Mortgage Loans and the Leases--Leases and Rents."
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination
of a 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 the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") a lender may be liable, as
an "owner" or "operator," for costs of addressing releases or threatened
releases of hazardous substances that require remedy at a property, if agents
or employees of the lender have become sufficiently involved in the
operations of the Mortgagor, regardless of whether or not the environmental
damage or threat was caused by a prior owner. A lender also risks such
liability on foreclosure of the mortgage. Each Pooling and Servicing
Agreement will provide that no Servicer, acting on behalf of the Trust Fund,
may acquire title to a Mortgaged Property securing a Mortgage Loan or take
over its operation unless such Servicer has previously determined, based upon
a report prepared by a person who regularly conducts environmental audits,
that: (i) the Mortgaged Property is in compliance with applicable
environmental laws or, if not, that taking such actions as are necessary to
bring the Mortgaged Property in compliance therewith is likely to produce a
greater recovery on a percent value basis, after taking into account any
risks associated therewith, than not taking such actions and (ii) there are
no circumstances present at the Mortgaged Property relating to the use,
management or disposal of any Hazardous Materials (as defined herein) for
which investigation, testing, monitoring, containment, cleanup or remediation
could be required under any federal, state or local law or regulation, or
that, if any Hazardous Materials are present for which such action would be
required, taking such actions with respect to the affected Mortgaged Property
is reasonably likely to produce a greater recovery on a percent value basis,
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after taking into account any risks associated therewith, than not taking
such actions. Any additional restrictions on acquiring title to a Mortgaged
Property may be set forth in the related Prospectus Supplement. See "Certain
Legal Aspects of the Mortgage Loans and the Leases--Environmental
Legislation."
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular series of Certificates may include Mortgage Loans that are past
due or are non-performing. Unless otherwise described in the related
Prospectus Supplement, the servicing of such Mortgage Loans as to which a
specified number of payments are delinquent will be performed by the Special
Servicer; however, the same entity may act as both Master Servicer and
Special Servicer. Credit Support provided with respect to a particular series
of Certificates may not cover all losses related to such delinquent or
nonperforming Mortgage Loans, and investors should consider the risk that the
inclusion of such Mortgage Loans in the Trust Fund may adversely affect the
rate of defaults and prepayments on the Mortgage Assets in such Trust Fund
and the yield on the Certificates of such series.
RISKS ASSOCIATED WITH MORTGAGED PROPERTIES NOT LOCATED IN THE UNITED STATES
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular Series of Certificates may include Mortgage Loans secured by
Mortgaged Properties not located in the United States. The related Prospectus
Supplement will set forth certain material risks associated with such
Mortgage Loans which are different and additional to those associated with
similar properties in the United States including restrictions on enforcement
of the rights of the holder of the related Mortgage Notes, currency exchange
rate fluctuations, currency exchange controls and general trends or
conditions in the related real estate market.
ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject
to ERISA are urged to consult their own counsel regarding consequences under
ERISA of acquisition, ownership and disposition of the Offered Certificates
of any Series.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their
receipt of cash payments, as described in "Certain Federal Income Tax
Consequences--REMICs." Accordingly, under certain circumstances, holders of
Offered Certificates that constitute REMIC Residual Certificates may have
taxable income and tax liabilities arising from such investment during a
taxable year in excess of the cash received during such period. Individual
holders of REMIC Residual Certificates may be limited in their ability to
deduct servicing fees and other expenses of the REMIC. In addition, REMIC
Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of REMIC Residual Certificates, the
taxable income arising in a given year on a REMIC Residual Certificate will
not be equal to the taxable income associated with investment in a corporate
bond or stripped instrument having similar cash flow characteristics and
pre-tax yield. Therefore, the after-tax yield on the REMIC Residual
Certificate may be significantly less than that of a corporate bond or
stripped instrument having similar cash flow characteristics. Additionally,
prospective purchasers of a REMIC Residual Certificate should be aware that
recently finalized regulations provide that REMIC residual interests cannot
be marked to market. See "Certain Federal Income Tax Consequences--REMICs."
CONTROL
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a Series or a similar means of allocating
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decision-making under the related Agreement ("Voting Rights") will be
required to direct, and will be sufficient to bind all Certificateholders of
such Series to, certain actions, including directing the Special Servicer or
the Master Servicer with respect to actions to be taken with respect to
certain Mortgage Loans and REO Properties and amending the related Agreement
in certain circumstances. See "Description of the Agreements--Events of
Default," "--Rights Upon Event of Default," "--Amendment" and "--List of
Certificateholders."
BOOK-ENTRY REGISTRATION
If so provided in the Prospectus Supplement, one or more classes of the
Certificates will be initially represented by one or more certificates
registered in the name of Cede, the nominee for DTC, and will not be
registered in the names of the Beneficial Owners or their nominees. Because
of this, unless and until Definitive Certificates are issued, Beneficial
Owners will not be recognized by the Trustee as "Certificateholders" (as that
term is to be used in the related Agreement). Hence, until such time,
Beneficial Owners will be able to exercise the rights of Certificateholders
only indirectly through DTC and its participating organizations. See
"Description of the Certificates--Book-Entry Registration and Definitive
Certificates."
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DESCRIPTION OF THE TRUST FUNDS
ASSETS
The primary assets of each Trust Fund will include (i) one or more
multifamily and/or commercial mortgage loans (the "Mortgage Loans"), (ii)
mortgage participations, pass-through certificates or other mortgage-backed
securities evidencing interests in or secured by one or more Mortgage Loans
or other similar participations, certificates or securities (collectively,
the "CMBS"), or (iii) a combination of Mortgage Loans and CMBS. As used
herein, "Mortgage Loans" refers to both whole Mortgage Loans and Mortgage
Loans underlying CMBS. Mortgage Loans that secure, or interests in which are
evidenced by, CMBS are herein sometimes referred to as "Underlying Mortgage
Loans." Mortgage Loans that are not Underlying Mortgage Loans are sometimes
referred to as "Whole Loans." Any mortgage participations, pass-through
certificates or other asset-backed certificates in which an CMBS evidences an
interest or which secure an CMBS are sometimes referred to herein also as
CMBS or as "Underlying CMBS." Mortgage Loans and CMBS are sometimes referred
to herein as "Mortgage Assets." No CMBS originally issued in a private
placement will be included as an asset of a Trust Fund until the holding
period provided for under Rule 144(k) promulgated under the Securities Act of
1933, as amended, has expired or such CMBS has been registered under the
Securities Act of 1933, as amended. The Mortgage Assets will not be
guaranteed or insured by J.P. Morgan Commercial Mortgage Finance Corp. (the
"Depositor") or any of its affiliates or, unless otherwise provided in the
Prospectus Supplement, by any governmental agency or instrumentality or by
any other person. Each Mortgage Asset will be selected by the Depositor for
inclusion in a Trust Fund from among those purchased, either directly or
indirectly, from a prior holder thereof (an "Asset Sellers"), which may be an
affiliate of the Depositor and, with respect to Mortgage Assets, which prior
holder may or may not be the originator of such Mortgage Loan or the issuer
of such CMBS.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment only from the assets of the related
Trust Fund and will not be entitled to payments in respect of the assets of
any other trust fund established by the Depositor. If specified in the
related Prospectus Supplement, the assets of a Trust Fund will consist of
certificates representing beneficial ownership interests in another trust
fund that contains the Mortgage Assets.
MORTGAGE LOANS
General
The Mortgage Loans will be secured by liens on, or security interests in,
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 ("Multifamily Properties" and the
related loans, "Multifamily Loans") or (ii) office buildings, retail centers,
hotels or motels, nursing homes, congregate care facilities, industrial
properties, mini-warehouse facilities or self-storage facilities, mobile home
parks, mixed use or other types of commercial properties ("Commercial
Properties" and the related loans, "Commercial Loans") located, unless
otherwise specified in the related Prospectus Supplement, in any one of the
fifty states, the District of Columbia or the Commonwealth of Puerto Rico. To
the extent specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by first mortgages or deeds of trust or other similar
security instruments creating a first lien on Mortgaged Property. Multifamily
Property may include mixed commercial and residential structures and may
include apartment buildings owned by private cooperative housing corporations
("Cooperatives"). The Mortgaged Properties may include leasehold interests in
properties, the title to which is held by third party lessors. The Prospectus
Supplement will specify whether the term of any such leasehold exceeds the
term of the mortgage note by at least ten years. Each Mortgage Loan will have
been originated by a person (the "Originator") other than the Depositor. The
related Prospectus Supplement will indicate if any Originator is an affiliate
of the Depositor. The Mortgage Loans will be evidenced by promissory notes
(the "Mortgage Notes") secured by mortgages or deeds of trust (the
"Mortgages") creating a lien on the Mortgaged Properties. Mortgage Loans will
generally also be secured by an assignment of leases and rents and/or
operating or other cash flow guarantees relating to the Mortgage Loan.
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Leases
To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all
or a portion of such properties. Pursuant to a Lease Assignment, the related
Mortgagor may assign its rights, title and interest as lessor under each
Lease and the income derived therefrom to the related mortgagee, while
retaining a license to collect the rents for so long as there is no default.
If the Mortgagor defaults, the license terminates and the mortgagee or its
agent is entitled to collect the rents from the related Lessee or Lessees for
application to the monetary obligations of the Mortgagor. State law may limit
or restrict the enforcement of the Lease Assignments by a mortgagee until it
takes possession of the related Mortgaged Property and/or a receiver is
appointed. See "Certain Legal Aspects of the Mortgage Loans and the
Leases--Leases and Rents." Alternatively, to the extent specified in the
related Prospectus Supplement, the Mortgagor and the mortgagee may agree that
payments under Leases are to be made directly to a Servicer.
To the extent described in the related Prospectus Supplement, the Leases
may require the Lessees to pay rent that is sufficient in the aggregate to
cover all scheduled payments of principal and interest on the related
Mortgage Loans and, in certain cases, their pro rata share of the operating
expenses, insurance premiums and real estate taxes associated with the
Mortgaged Properties. Certain of the Leases may require the Mortgagor to bear
costs associated with structural repairs and/or the maintenance of the
exterior or other portions of the Mortgaged Property or provide for certain
limits on the aggregate amount of operating expenses, insurance premiums,
taxes and other expenses that the Lessees are required to pay. If so
specified in the related Prospectus Supplement, under certain circumstances
the Lessees may be permitted to set off their rental obligations against the
obligations of the Mortgagors under the Leases. In those cases where payments
under the Leases (net of any operating expenses payable by the Mortgagors)
are insufficient to pay all of the scheduled principal and interest on the
related Mortgage Loans, the Mortgagors must rely on other income or sources
(including security deposits) generated by the related Mortgaged Property to
make payments on the related Mortgage Loan. To the extent specified in the
related Prospectus Supplement, some Commercial Properties may be leased
entirely to one Lessee. In such cases, absent the availability of other
funds, the Mortgagor must rely entirely on rent paid by such Lessee in order
for the Mortgagor to pay all of the scheduled principal and interest on the
related Commercial Loan. To the extent specified in the related Prospectus
Supplement, certain of the Leases may expire prior to the stated maturity of
the related Mortgage Loan. In such cases, upon expiration of the Leases the
Mortgagors will have to look to alternative sources of income, including rent
payment by any new Lessees or proceeds from the sale or refinancing of the
Mortgaged Property, to cover the payments of principal and interest due on
such Mortgage Loans unless the Lease is renewed. As specified in the related
Prospectus Supplement, certain of the Leases may provide that upon the
occurrence of a casualty affecting a Mortgaged Property, the Lessee will have
the right to terminate its Lease, unless the Mortgagor, as lessor, is able to
cause the Mortgaged Property to be restored within a specified period of
time. Certain Leases may provide that it is the lessor's responsibility,
while other Leases provide that it is the Lessee's responsibility, to restore
the Mortgaged Property after a casualty to its original condition. Certain
Leases may provide a right of termination to the related Lessee if a taking
of a material or specified percentage of the leased space in the Mortgaged
Property occurs, or if the ingress or egress to the leased space has been
materially impaired.
Default and Loss Considerations with Respect to the Mortgage Loans
Mortgage loans secured by commercial and multifamily properties are
markedly different from owner-occupied single family mortgage loans. The
repayment of loans secured by commercial or multifamily properties is
typically dependent upon the successful operation of such property rather
than upon the liquidation value of the real estate. Unless otherwise
specified in the Prospectus Supplement, the Mortgage Loans will be
non-recourse loans, which means that, absent special facts, the mortgagee may
look only to the Net Operating Income from the property for repayment of the
mortgage debt, and not to any other of the Mortgagor's assets, in the event
of the Mortgagor's default. Lenders typically look to the Debt Service
Coverage Ratio of a loan secured by income-producing property as an important
measure of the risk of default on such a loan. The "Debt Service Coverage
Ratio" of a Mortgage Loan at any given time is the ratio of the Net Operating
Income for a twelve-month period to the annualized
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scheduled payments on the Mortgage Loan. "Net Operating Income" means, for
any given period, unless otherwise specified in the related Prospectus
Supplement, the total operating revenues derived from a Mortgaged Property
during such period, minus the total operating expenses incurred in respect of
such Mortgaged Property during such period other than (i) non-cash items such
as depreciation and amortization, (ii) capital expenditures and (iii) debt
service on loans secured by the Mortgaged Property. The Net Operating Income
of a Mortgaged Property will fluctuate over time and may be sufficient or
insufficient to cover debt service on the related Mortgage Loan at any given
time.
As the primary component of Net Operating Income, rental income (as well
as maintenance payments from tenant-stockholders of a Cooperative) is 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) retail centers, office buildings and
industrial properties. Commercial Loans may be secured by owner-occupied
Mortgaged Properties or Mortgaged Properties leased to a single tenant.
Accordingly, a decline in the financial condition of the Mortgagor or single
tenant, as applicable, may have a disproportionately greater effect on the
Net Operating Income from such Mortgaged Properties than would be the case
with respect to Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal
property tax rates and other operating expenses, including energy costs;
changes in governmental rules, regulations and fiscal policies, including
environmental legislation; and acts of God may also affect the risk of
default on the related Mortgage Loan. As may be further described in the
related Prospectus Supplement, in some cases leases of Mortgaged Properties
may provide that the Lessee rather than the Mortgagor, is responsible for
payment of some or all of these expenses; however, because leases are subject
to default risks as well when a tenant's income is insufficient to cover its
rent and operating expenses, the existence of such "net of expense"
provisions will only temper, not eliminate, the impact of expense increases
on the performance of the related Mortgage Loan. See "--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities, the income
from which and the operating expenses of which are subject to state and/or
federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of
the property. Low-and moderate-income housing in particular may be subject to
legal limitations and regulations but, because of such regulations, may also
be less sensitive to fluctuations in market rents generally.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a Balloon
Mortgage Loan, for example, the risk of default as a result of the
unavailability of a source of funds to finance the related balloon payment at
maturity on terms comparable to or better than those of such Balloon Mortgage
Loans could be significant even though the related Debt Service Coverage
Ratio is high.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines
in rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio
of a mortgage loan as a measure of risk of loss if a property must be
liquidated upon a default by the Mortgagor.
Appraised values of income-producing properties may be 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
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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 presents analytical challenges. 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. Where more than one of these appraisal methods are used and create
significantly different results, or where a high Loan-to-Value Ratio
accompanies a high Debt Service Coverage Ratio (or vice versa), the analysis
of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Multifamily and Commercial
Loans from single family mortgage loans and provide insight to the risks
associated with income-producing real estate, there is no assurance that such
factors will in fact have been considered by the Originators of the
Multifamily and Commercial Loans, or that, for any of such Mortgage Loans,
they are complete or relevant. See "Risk Factors--Risks Associated with
Mortgage Loans and Mortgaged Properties," "--Balloon Payments," "--Junior
Mortgage Loans," "--Obligor Default" and "--Mortgagor Type."
Loan-to-Value Ratio
The "Loan-to-Value Ratio" of a Mortgage Loan at any given time is the
ratio (expressed as a percentage) of the then outstanding principal balance
of the Mortgage Loan to the Value of the related Mortgaged Property. The
"Value" of a Mortgaged Property, other than with respect to Refinance Loans,
is generally the lesser of (a) the appraised value determined in an appraisal
obtained by the originator at origination of such loan and (b) the sales
price for such property. "Refinance Loans" are loans made to refinance
existing loans. Unless otherwise set forth in the related Prospectus
Supplement, the Value of the Mortgaged Property securing a Refinance Loan is
the appraised value thereof determined in an appraisal obtained at the time
of origination of the Refinance Loan. 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 at origination and will fluctuate from time to time based
upon changes in economic conditions and the real estate market.
Mortgage Loan Information in Prospectus Supplements
Each Prospectus Supplement will contain information, as of the date of
such Prospectus Supplement and to the extent then applicable and specifically
known to the Depositor, with respect to the Mortgage Loans, including (i) the
aggregate outstanding principal balance and the largest, smallest and average
outstanding principal balance of the Mortgage Loans as of the applicable
Cut-off Date, (ii) the type of property securing the Mortgage Loans (e.g.,
Multifamily Property or Commercial Property and the type of property in each
such category), (iii) the weighted average (by principal balance) of the
original and remaining terms to maturity of the Mortgage Loans, (iv) the
earliest and latest origination date and maturity date of the Mortgage Loans,
(v) the weighted average (by principal balance) of the Loan-to-Value Ratios
at origination of the Mortgage Loans, (vi) the Mortgage Interest Rates or
range of Mortgage Interest Rates and the weighted average Mortgage Interest
Rate borne by the Mortgage Loans, (vii) the state or states in which most of
the Mortgaged Properties are located, (viii) information with respect to the
prepayment provisions, if any, of the Mortgage Loans, (ix) the weighted
average Retained Interest, if any, (x) with respect to Mortgage Loans with
floating Mortgage Interest Rates ("ARM Loans"), the index, the frequency of
the adjustment dates, the highest, lowest and weighted average note margin
and pass-through margin, and the maximum Mortgage Interest Rate or monthly
payment variation at the time of any adjustment thereof and over the life of
the ARM Loan and the frequency of such monthly payment adjustments, (xi) the
Debt Service Coverage Ratio either at origination or as of a more recent date
(or both) and (xii) information regarding the payment characteristics of the
Mortgage Loans, including without limitation balloon payment and other
amortization provisions. The related Prospectus Supplement will also contain
certain information available to the Depositor with respect to the provisions
of leases and the nature of tenants of the Mortgaged Properties and other
information referred to in a general manner under "--Mortgage Loans--Default
and Loss Considerations with Respect to the Mortgage Loans" above. If
specific information respecting the Mortgage Loans is not known to the
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Depositor at the time Certificates are initially offered, more general
information of the nature described above will be provided in the Prospectus
Supplement, and specific information will be set forth in a report which will
be available to purchasers of the related Certificates at or before the
initial issuance thereof and will be filed as part of a Current Report on
Form 8-K with the Securities and Exchange Commission within fifteen days
after such initial issuance.
Payment Provisions of the Mortgage Loans
Unless otherwise specified in the related Prospectus Supplement, all of
the Mortgage Loans will (i) have original terms to maturity of not more than
40 years and (ii) provide for payments of principal, interest or both, on due
dates that occur monthly, quarterly or semi-annually or at such other
interval as is specified in the related Prospectus Supplement. Each Mortgage
Loan may provide for no accrual of interest or for accrual of interest
thereon at an interest rate (a "Mortgage Interest Rate") that is fixed over
its term or that adjusts from time to time, or that is partially fixed and
partially floating, or that may be converted from a floating to a fixed
Mortgage Interest Rate, or from a fixed to a floating Mortgage Interest Rate,
from time to time pursuant to an election or as otherwise specified on the
related Mortgage Note, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may provide for scheduled payments to maturity
or payments that adjust from time to time to accommodate changes in the
Mortgage Interest Rate or to reflect the occurrence of certain events, and
may provide for negative amortization or accelerated amortization, in each
case as described in the related Prospectus Supplement. Each Mortgage Loan
may be fully amortizing or require a balloon payment due on its stated
maturity date, in each case as described in the related Prospectus
Supplement. Each Mortgage Loan may contain prohibitions on prepayment (a
"Lock-out Period" and the date of expiration thereof, a "Lock-out Date") or
require payment of a premium or a yield maintenance penalty (a "Prepayment
Premium") in connection with a prepayment, in each case as described in the
related Prospectus Supplement. In the event that holders of any class or
classes of Offered Certificates will be entitled to all or a portion of any
Prepayment Premiums collected in respect of Mortgage Loans, the related
Prospectus Supplement will specify the method or methods by which any such
amounts will be allocated. A Mortgage Loan may also contain provisions
entitling the mortgagee to a share of profits realized from the operation or
disposition of the Mortgaged Property ("Equity Participations"), as described
in the related Prospectus Supplement. In the event that holders of any class
or classes of Offered Certificates will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will specify the
terms and provisions of the Equity Participation and the method or methods by
which distributions in respect thereof will be allocated among such
Certificates.
CMBS
Any CMBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, a trust agreement, an indenture
or similar agreement (a "CMBS Agreement"). A seller (the "CMBS Issuer")
and/or servicer (the "CMBS Servicer") of the underlying Mortgage Loans (or
Underlying CMBS) will have entered into the CMBS Agreement with a trustee or
a custodian under the CMBS Agreement (the "CMBS Trustee"), if any, or with
the original purchaser of the interest in the underlying Mortgage Loans or
CMBS evidenced by the CMBS.
Distributions of any principal or interest, as applicable, will be made on
CMBS on the dates specified in the related Prospectus Supplement. The CMBS
may be issued in one or more classes with characteristics similar to the
classes of Certificates described in this Prospectus. Any principal or
interest distributions will be made on the CMBS by the CMBS Trustee or the
CMBS Servicer. The CMBS Issuer or the CMBS Servicer or another person
specified in the related Prospectus Supplement may have the right or
obligation to repurchase or substitute assets underlying the CMBS after a
certain date or under other circumstances specified in the related Prospectus
Supplement.
Enhancement in the form of reserve funds, subordination or other forms of
credit support similar to that described for the Certificates under
"Description of Credit Support" may be provided with respect to the CMBS. The
type, characteristics and amount of such credit support, if any, will be a
function of certain characteristics of the Mortgage Loans or Underlying CMBS
evidenced by or securing such CMBS
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and other factors and generally will have been established for the CMBS on
the basis of requirements of either any Rating Agency that may have assigned
a rating to the CMBS or the initial purchasers of the CMBS.
The Prospectus Supplement for a Series of Certificates evidencing
interests in Mortgage Assets that include CMBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount or notional amount, as applicable, and type of the CMBS to be included
in the Trust Fund, (ii) the original and remaining term to stated maturity of
the CMBS, if applicable, (iii) whether such CMBS is entitled only to interest
payments, only to principal payments or to both, (iv) the pass-through or
bond rate of the CMBS or formula for determining such rates, if any, (v) the
applicable payment provisions for the CMBS, including, but not limited to,
any priorities, payment schedules and subordination features, (vi) the CMBS
Issuer, CMBS Servicer and CMBS Trustee, as applicable, (vii) certain
characteristics of the credit support, if any, such as subordination, reserve
funds, insurance policies, letters of credit or guarantees relating to the
related Underlying Mortgage Loans, the Underlying CMBS or directly to such
CMBS, (viii) the terms on which the related Underlying Mortgage Loans or
Underlying CMBS for such CMBS or the CMBS may, or are required to, be
purchased prior to their maturity, (ix) the terms on which Mortgage Loans or
Underlying CMBS may be substituted for those originally underlying the CMBS,
(x) the servicing fees payable under the CMBS Agreement, (xi) to the extent
available to the Depositor, the type of information in respect of the
Underlying Mortgage Loans described under "--Mortgage Loans--Mortgage Loan
Information in Prospectus Supplements" above, and the type of information in
respect of the Underlying CMBS described in this paragraph, (xii) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the CMBS and (xiii) whether the CMBS is in
certificated form, book-entry form or held through a depository such as The
Depository Trust Company or the Participants Trust Company.
ACCOUNTS
Each Trust Fund will include one or more accounts established and
maintained on behalf of the Certificateholders into which the person or
persons designated in the related Prospectus Supplement will, to the extent
described herein and in such Prospectus Supplement deposit all payments and
collections received or advanced with respect to the Mortgage Assets and
other assets in the Trust Fund. Such an account may be maintained as an
interest bearing or a non-interest bearing account, and funds held therein
may be held as cash or invested in certain short-term, investment grade
obligations, in each case as described in the related Prospectus Supplement.
See "Description of the Agreement--Distribution Account and Other Collection
Accounts."
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Trust Assets in the
related Trust Fund may be provided to one or more classes of Certificates in
the related Series in the form of subordination of one or more other classes
of Certificates in such Series or by one or more other types of credit
support, such as a letter of credit, insurance policy, guarantee, reserve
fund or another type of credit support, or a combination thereof (any such
coverage with respect to the Certificates of any Series, "Credit Support").
The amount and types of coverage, the identification of the entity providing
the coverage (if applicable) and related information with respect to each
type of Credit Support, if any, will be described in the Prospectus
Supplement for a Series of Certificates. See "Risk Factors--Credit Support
Limitations" and "Description of Credit Support."
CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related Series will be invested at a
specified rate. The Trust Fund may also include certain other agreements,
such as interest rate exchange agreements, interest rate cap or floor
agreements, currency exchange agreements or similar agreements provided to
reduce the effects of interest rate or currency exchange rate fluctuations on
the Mortgage Assets or on one or more classes of Certificates. The principal
terms of any
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such guaranteed investment contract or other 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 Prospectus Supplement
for the related Series. In addition, the related Prospectus Supplement will
provide certain information with respect to the obligor under any such Cash
Flow Agreement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Trust Assets and to pay for
certain expenses incurred in connection with such purchase of Trust Assets
and sale of Certificates. 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.
YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted
average life of the Mortgage Assets in the related Trust Fund (which may be
affected by prepayments, defaults, liquidations or repurchases). See "Risk
Factors."
PASS-THROUGH RATE
Certificates of any class within a Series may have fixed, variable or
floating Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Mortgage Assets 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 such Certificates or, in the case of a
variable or floating Pass-Through Rate, the method of determining the
Pass-Through Rate; the effect, if any, of the prepayment of any Mortgage
Asset on the Pass-Through Rate of one or more classes of Certificates; and
whether the distributions of interest on the Certificates of any class will
be dependent, in whole or in part, on the performance of any obligor under a
Cash Flow Agreement.
The effective yield to maturity to each holder of Certificates entitled to
payments of interest will be below that otherwise produced by the applicable
Pass-Through Rate and purchase price of such Certificate because, while
interest may accrue on each Mortgage Asset during a certain period, the
distribution of such interest will be made on a day which may be several
days, weeks or months following the period of accrual.
TIMING OF PAYMENT OF INTEREST
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution
Date will include interest accrued during the Interest Accrual Period for
such Distribution Date. As indicated above under "--The Pass-Through Rate,"
if the Interest Accrual Period ends on a date other than a Distribution Date
for the related Series, the yield realized by the holders of such
Certificates may be lower than the yield that would result if the Interest
Accrual Period ended on such Distribution Date. In addition, if so specified
in the related Prospectus Supplement, interest accrued for an Interest
Accrual Period for one or more classes of Certificates may be calculated on
the assumption that distributions of principal (and additions to the
Certificate Balance of Accrual Certificates) and allocations of losses on the
Mortgage Assets may be made on the first day of the Interest Accrual Period
for a Distribution Date and not on such Distribution Date. Such method would
produce a lower effective yield than if interest were calculated on the basis
of the actual principal amount outstanding during an Interest Accrual Period.
The Interest Accrual Period for any class of Offered Certificates will be
described in the related Prospectus Supplement.
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PAYMENTS OF PRINCIPAL; PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Mortgage Assets (including principal prepayments on
Mortgage Loans resulting from voluntary prepayments by the Mortgagors,
insurance proceeds, condemnations and involuntary liquidations). Such
payments may be directly dependent upon the payments on Leases underlying
such Mortgage Loans. The rate at which principal prepayments occur on the
Mortgage Loans will be affected by a variety of factors, including, without
limitation, the terms of the Mortgage Loans, the level of prevailing interest
rates, the availability of mortgage credit and economic, demographic,
geographic, tax, legal and other factors. In general, however, if prevailing
interest rates fall significantly below the Mortgage Interest Rates on the
Mortgage Loans comprising or underlying the Mortgage Assets in a particular
Trust Fund, such Mortgage Loans are likely to be the subject of higher
principal prepayments than if prevailing rates remain at or above the rates
borne by such Mortgage Loans. In this regard, it should be noted that certain
Mortgage Assets may consist of Mortgage Loans with different Mortgage
Interest Rates and the stated pass-through or pay-through interest rate of
certain CMBS may be a number of percentage points higher or lower than
certain of the underlying Mortgage Loans. The rate of principal payments on
some or all of the classes of Certificates of a Series will correspond to the
rate of principal payments on the Mortgage Assets in the related Trust Fund
and is likely to be affected by the existence of Lock-out Periods and
Prepayment Premium provisions of the Mortgage Loans underlying or comprising
such Mortgage Assets, and by the extent to which the servicer of any such
Mortgage Loan is able to enforce such provisions. Mortgage Loans with a
Lock-out Period or a Prepayment Premium provision, to the extent enforceable,
generally would be expected to experience a lower rate of principal
prepayments than otherwise identical Mortgage Loans without such provisions,
with shorter Lock-out Periods or with lower Prepayment Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage
Assets, the actual yield to maturity will be lower than that so calculated.
Conversely, if the purchaser of a Certificate offered at a premium calculates
its anticipated yield to maturity based on an assumed rate of distributions
of principal that is slower than that actually experienced on the Mortgage
Assets, the actual yield to maturity will be lower than that so calculated.
In either case, if so provided in the Prospectus Supplement for a Series of
Certificates, the effect on yield on one or more classes of the Certificates
of such Series of prepayments of the Mortgage Assets in the related Trust
Fund may be mitigated or exacerbated by any provisions for sequential or
selective distribution of principal to such classes.
When a full prepayment is made on a Mortgage Loan, the Mortgagor is
charged interest on the principal amount of the Mortgage Loan so prepaid for
the number of days in the month actually elapsed up to the date of the
prepayment. Unless otherwise specified in the related Prospectus Supplement,
the effect of prepayments in full will be to reduce the amount of interest
paid in the following month to holders of Certificates entitled to payments
of interest because interest on the principal amount of any Mortgage Loan so
prepaid will be paid only to the date of prepayment rather than for a full
month. Unless otherwise specified in the related Prospectus Supplement, a
partial prepayment of principal is applied so as to reduce the outstanding
principal balance of the related Mortgage Loan as of the Due Date in the
month in which such partial prepayment is received. As a result, unless
otherwise specified in the related Prospectus Supplement, the effect of a
partial prepayment on a Mortgage Loan will be to reduce the amount of
interest passed through to holders of Certificates in the month following the
receipt of such partial prepayment by an amount equal to one month's interest
at the applicable Pass-Through Rate on the prepaid amount.
The timing of changes in the rate of principal payments on the Mortgage
Assets may significantly affect an investor's actual yield to maturity, even
if the average rate of distributions of principal is consistent with an
investor's expectation. In general, the earlier a principal payment is
received on the Mortgage Assets and distributed on a Certificate, the greater
the effect on such investor's yield to maturity. The effect on an investor's
yield of principal payments occurring at a rate higher (or lower) than the
rate anticipated by the investor during a given period may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
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PREPAYMENTS--MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Mortgage Assets
included in or comprising a Trust Fund and the rate at which payments are
made from any Credit Support or Cash Flow Agreement for the related Series of
Certificates may affect the ultimate maturity and the weighted average life
of each class of such "Series." Prepayments on the Mortgage Loans comprising
or underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes
of the Certificates of the related "Series."
If so provided in the Prospectus Supplement for a Series of Certificates,
one or more classes of Certificates may have a final scheduled Distribution
Date, which is the date on or prior to which the Certificate Balance thereof
is scheduled to be reduced to zero, calculated on the basis of the
assumptions applicable to such Series set forth therein.
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. The weighted average life of a
class of Certificates of a Series will be influenced by the rate at which
principal on the Mortgage Loans comprising or underlying the Mortgage Assets
is paid to such class, which may be in the form of scheduled amortization or
prepayments (for this purpose, the term "prepayment" includes prepayments, in
whole or in part, and liquidations due to default).
In addition, the weighted average life of the Certificates may be affected
by the varying maturities of the Mortgage Loans comprising or underlying the
CMBS. If any Mortgage Loans comprising or underlying the Mortgage Assets in a
particular Trust Fund have actual terms to maturity of less than those
assumed in calculating final scheduled Distribution Dates for the classes of
Certificates of the related Series, one or more classes of such Certificates
may be fully paid prior to their respective final scheduled Distribution
Dates, even in the absence of prepayments. Accordingly, the prepayment
experience of the Mortgage Assets will, to some extent, be a function of the
mix of Mortgage Interest Rates and maturities of the Mortgage Loans
comprising or underlying such Mortgage Assets. See "Description of the Trust
Funds."
Prepayments on loans are also commonly measured relative to a prepayment
standard or model, such as the Constant Prepayment Rate ("CPR") prepayment
model. CPR represents a constant assumed rate of prepayment each month
relative to the then outstanding principal balance of a pool of loans for the
life of such loans.
Neither CPR nor any other prepayment model or assumption purports to be a
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR was
developed based upon historical prepayment experience for single family
loans. Thus, it is likely that prepayment of any Mortgage Loans comprising or
underlying the Mortgage Assets for any Series will not conform to any
particular level of CPR.
The Depositor is not aware of any meaningful publicly available prepayment
statistics for multifamily or commercial mortgage loans.
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 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
Mortgage Loans comprising or underlying the related Mortgage Assets are made
at rates corresponding to various percentages of CPR or at such other rates
specified in such Prospectus Supplement. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and will not be intended to predict
or to provide information that will enable investors to predict the actual
weighted average life of the Certificates. It is unlikely that prepayment of
any Mortgage Loans comprising or underlying the Mortgage Assets for any
Series will conform to any particular level of CPR or any other rate
specified in the related Prospectus Supplement.
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OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
Type of Mortgage Asset
A number of Mortgage Loans may have balloon payments due at maturity, and
because the ability of a Mortgagor to make a balloon payment typically will
depend upon its ability either to refinance the loan or to sell the related
Mortgaged Property, there is a risk that a number of Mortgage Loans having
balloon payments may default at maturity, or that the servicer may extend the
maturity of such a Mortgage Loan in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the Mortgagor or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted Mortgage Loans,
the servicer may, to the extent and under the circumstances set forth in the
related Prospectus Supplement be permitted to modify Mortgage Loans that are
in default or as to which a payment default is imminent. Any defaulted
balloon payment or modification that extends the maturity of a Mortgage Loan
will tend to extend the weighted average life of the Certificates, thereby
lengthening the period of time elapsed from the date of issuance of a
Certificate until it is retired.
Foreclosures and Payment Plans
The number of foreclosures and the principal amount of the Mortgage Loans
comprising or underlying the Mortgage Assets that are foreclosed in relation
to the number and principal amount of Mortgage Loans that are repaid in
accordance with their terms will affect the weighted average life of the
Mortgage Loans comprising or underlying the Mortgage Assets and that of the
related Series of Certificates. 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, may also have an effect upon the payment patterns of particular
Mortgage Loans and thus the weighted average life of the Certificates.
Due-on-Sale and Due-on-Encumbrance Clauses
Acceleration of mortgage payments as a result of certain transfers of or
the creation of encumbrances upon underlying Mortgaged Property is another
factor affecting prepayment rates that may not be reflected in the prepayment
standards or models used in the relevant Prospectus Supplement. A number of
the Mortgage Loans comprising or underlying the Mortgage Assets may include
"due-on-sale" clauses or "due-on-encumbrance" clauses that allow the holder
of the Mortgage Loans to demand payment in full of the remaining principal
balance of the Mortgage Loans upon sale or certain other transfers of or the
creation of encumbrances upon the related Mortgaged Property. With respect to
any Whole Loans, unless otherwise provided in the related Prospectus
Supplement, the Master Servicer, on behalf of the Trust Fund, will be
required to exercise (or waive its right to exercise) any such right that the
Trustee may have as mortgagee to accelerate payment of the Whole Loan in a
manner consistent with the Servicing Standard. See "Certain Legal Aspects of
the Mortgage Loans and the Leases--Due-on-Sale and Due-on-Encumbrance" and
"Description of the Agreements--Due-on-Sale and Due-on-Encumbrance
Provisions."
Single Mortgage Loan or Single Mortgagor
The Mortgage Assets in a particular Trust Fund may consist of a single
Mortgage Loan or obligations of a single Mortgagor or related Mortgagors as
specified in the related Prospectus Supplement. Assumptions used with respect
to the prepayment standards or models based upon analysis of the behavior of
mortgage loans in a larger group will not necessarily be relevant in
determining prepayment experience on a single Mortgage Loan or with respect
to a single Mortgagor.
THE DEPOSITOR
J.P. Morgan Commercial Mortgage Finance Corp., the Depositor, is an
indirect wholly-owned subsidiary of J.P. Morgan & Co. Incorporated and was
incorporated in the State of Delaware on September 19, 1994. The principal
executive offices of the Depositor are located at 60 Wall Street, New York,
New York 10260-0060. Its telephone number is (212) 648-3636.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each Series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in
the Trust Fund created pursuant to the related Agreement. Each Series of
Certificates will consist of one or more classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
floating rates; (ii) be senior (collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate Certificates") to one or more other
classes of Certificates in respect of certain distributions on the
Certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions (collectively,
"Stripped Principal Certificates"); (iv) be entitled to interest
distributions, with disproportionately low, nominal or no principal
distributions (collectively, "Stripped Interest Certificates"); (v) provide
for distributions of accrued interest thereon commencing only following the
occurrence of certain events, such as the retirement of one or more other
classes of Certificates of such Series (collectively, "Accrual
Certificates"); (vi) provide for payments of principal sequentially, based on
specified payment schedules, from only a portion of the Trust Assets in such
Trust Fund or based on specified calculations, to the extent of available
funds, in each case as described in the related Prospectus Supplement; and/or
(vii) provide for distributions based on a combination of two or more
components thereof with one or more of the characteristics described in this
paragraph including a Stripped Principal Certificate component and a Stripped
Interest Certificate component. Any such classes may include classes of
Offered Certificates.
Each class of Offered Certificates of a Series will be issued in minimum
denominations corresponding to the Certificate Balances or, in case of
Stripped Interest Certificates, notional amounts or percentage interests
specified in the related Prospectus Supplement. The transfer of any Offered
Certificates may be registered and such Certificates may be exchanged without
the payment of any service charge payable in connection with such
registration of transfer or exchange, but the Depositor or the Trustee or any
agent thereof may require payment of a sum sufficient to cover any tax or
other governmental charge. One or more classes of Certificates of a Series
may be issued in definitive form ("Definitive Certificates") or in book-entry
form ("Book-Entry Certificates"), as provided in the related Prospectus
Supplement. See "Risk Factors--Book-Entry Registration" and "Description of
the Certificates--Book-Entry Registration and Definitive Certificates."
Definitive Certificates will be exchangeable for other Certificates of the
same class and Series of a like aggregate Certificate Balance, notional
amount or percentage interest but of different authorized denominations. See
"Risk Factors Limited Liquidity" and "Limited Assets."
DISTRIBUTIONS
Distributions on the Certificates of each Series will be made by or on
behalf of the Trustee on each Distribution Date as specified in the related
Prospectus Supplement from the Available Distribution Amount for such Series
and such Distribution Date. Except as otherwise specified in the related
Prospectus Supplement, distributions (other than the final distribution) will
be made to the persons in whose names the Certificates are registered at the
close of business on the last business day of the month preceding the month
in which the Distribution Date occurs (the "Record Date"), and the amount of
each distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the "Determination Date").
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 or by random selection, as described in the
related Prospectus Supplement or otherwise established by the related
Trustee. 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
so notified the Trustee or other person required to make such payments no
later than the date specified in the related Prospectus Supplement (and, if
so provided in the related Prospectus Supplement, holds Certificates in the
requisite amount specified therein), or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register; provided,
however, that the final distribution in retirement of the Certificates
(whether Definitive Certificates or Book-Entry Certificates) will be made
only upon presentation and surrender of the Certificates at the location
specified in the notice to Certificateholders of such final distribution.
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AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Certificates of each Series on each Distribution
Date will be made from the Available Distribution Amount described below, in
accordance with the terms described in the related Prospectus Supplement.
Unless provided otherwise in the related Prospectus Supplement, the
"Available Distribution Amount" for each Distribution Date equals the sum of
the following amounts:
(i) the total amount of all cash on deposit in the related Distribution
Account as of the corresponding Determination Date, including Servicer
advances, net of any scheduled payments due and payable after such
Distribution Date;
(ii) interest or investment income on amounts on deposit in the
Distribution Account, including any net amounts paid under any Cash Flow
Agreements; and
(iii) to the extent not on deposit in the related Distribution Account as
of the corresponding Determination Date, any amounts collected under, from
or in respect of any Credit Support with respect to such Distribution
Date.
As described below, the entire Available Distribution Amount will be
distributed among the related Certificates (including any Certificates not
offered hereby) on each Distribution Date, and accordingly will be released
from the Trust Fund and will not be available for any future distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates (other than classes of Stripped Principal
Certificates that have no Pass-Through Rate) may have a different
Pass-Through Rate, which will be a fixed, variable or floating rate at which
interest will accrue on such class or a component thereof (the "Pass-Through
Rate"). The related Prospectus Supplement will specify the Pass-Through Rate
for each class or component or, in the case of a variable or floating
Pass-Through Rate, the method for determining the Pass-Through Rate. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual
Certificates, which will be entitled to distributions of accrued interest
commencing only on the Distribution Date, or under the circumstances,
specified in the related Prospectus Supplement, and any class of Stripped
Principal Certificates that are not entitled to any distributions of
interest) based on the Accrued Certificate Interest for such class and such
Distribution Date, subject to the sufficiency of the portion 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. With respect to each class of Certificates and each Distribution Date
(other than certain classes of Stripped Interest Certificates), "Accrued
Certificate Interest" will be equal to interest accrued for a specified
period on the outstanding Certificate Balance thereof immediately prior to
the Distribution Date, at the applicable Pass-Through Rate, reduced as
described below. Unless otherwise provided in the Prospectus Supplement,
Accrued Certificate Interest on Stripped Interest Certificates will be equal
to interest accrued for a specified period on the outstanding notional amount
thereof immediately prior to each Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. The method of determining the
notional amount for any class of Stripped Interest Certificates will be
described in the related Prospectus Supplement. Reference to notional amount
is solely for convenience in certain calculations and does not represent the
right to receive any distributions of principal. Unless otherwise provided in
the related Prospectus Supplement, the Accrued Certificate Interest on a
Series of Certificates will be reduced in the event of prepayment interest
shortfalls, which are shortfalls in collections of interest for a full
accrual period resulting from prepayments prior to the due date in such
accrual period on the Mortgage Loans comprising or underlying the Mortgage
Assets in the Trust Fund for such Series. The particular manner in which such
shortfalls are to be allocated among some or all of the classes of
Certificates of that Series will be specified in the related Prospectus
Supplement.
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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 Loans comprising or
underlying 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 the Mortgage Loans comprising or underlying the Mortgage
Assets in the related Trust Fund will result in a corresponding increase in
the Certificate Balance of such class. See "Risk Factors--Prepayments and
Effect on Average Life of Certificates and Yields" and "Yield
Considerations."
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The Certificates of each Series, other than certain classes of Stripped
Interest Certificates, will have a "Certificate Balance" which, at any time,
will equal the then maximum amount that the holder will be entitled to
receive in respect of 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 Certificate will be reduced to the extent of
distributions of principal thereon from time to time and, if and to the
extent so provided in the related Prospectus Supplement, by the amount of
losses incurred in respect of the related Mortgage Assets, may be increased
in respect of deferred interest on the related Mortgage Loans to the extent
provided in the related Prospectus Supplement and, in the case of Accrual
Certificates prior to the Distribution Date on which distributions of
interest are required to commence, will be increased by any related Accrued
Certificate Interest. Unless otherwise provided in the related Prospectus
Supplement, the initial aggregate Certificate Balance of all classes of
Certificates of a Series will not be greater than the outstanding aggregate
principal balance of the related Mortgage Assets as of the applicable Cut-off
Date. The initial aggregate Certificate Balance of a Series and each class
thereof will be specified in the related Prospectus Supplement. Unless
otherwise provided in the related Prospectus Supplement, distributions of
principal will be made on each Distribution Date to the class or classes of
Certificates entitled thereto in accordance with the provisions described in
such Prospectus Supplement until the Certificate Balance of such class has
been reduced to zero. Stripped Interest Certificates with no Certificate
Balance are not entitled to any distributions of principal.
COMPONENTS
To the extent specified in the related Prospectus Supplement, distribution
on a class of Certificates may be based on a combination of two or more
different components as described under "--General" above. To such extent,
the descriptions set forth under "--Distributions of Interests on the
Certificates" and "--Distributions of Principal of the Certificates" above
also relate to components of such a class of Certificates. In such case,
reference in such sections to Certificate Balance and Pass-Through Rate refer
to the principal balance, if any, of any such component and the Pass-Through
Rate, if any, on any such component, respectively.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF
EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations that are collected on the
Mortgage Assets in the related Trust Fund will be distributed on each
Distribution Date to the class or classes of Certificates entitled thereto in
accordance with the provisions described in such Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a Series of Certificates
consisting of one or more classes of Subordinate Certificates, on any
Distribution Date in respect of which losses or shortfalls in collections on
the Mortgage Assets have been incurred, the amount of such losses or
shortfalls will be borne first by a class of Subordinate Certificates in the
priority and manner and subject to the limitations specified in such
Prospectus Supplement. See "Description of Credit Support" for a description
of the types of protection that may be included in shortfalls on Mortgage
Assets comprising such Trust Fund.
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ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any Series of Certificates evidencing an interest in a
Trust Fund, unless otherwise provided in the related Prospectus Supplement, a
Servicer or another entity described therein will be required as part of its
servicing responsibilities to advance on or before each Distribution Date its
own funds or funds held in the Distribution Account that are not included in
the Available Distribution Amount for such Distribution Date, in an amount
equal to the aggregate of payments of principal (other than any balloon
payments) and interest (net of related servicing fees and Retained Interest)
that were due on the Whole Loans in such Trust Fund and were delinquent on
the related Determination Date, subject to such Servicer's (or another
entity's) good faith determination that such advances will be reimbursable
from Related Proceeds (as defined below). In the case of a Series of
Certificates that includes one or more classes of Subordinate Certificates
and if so provided in the related Prospectus Supplement, each Servicer's (or
another entity's) advance obligation may be limited only to the portion of
such delinquencies necessary to make the required distributions on one or
more classes of Senior Certificates and/or may be subject to such Servicer's
(or another entity's) good faith determination that such advances will be
reimbursable not only from Related Proceeds but also from collections on
other Trust Assets otherwise distributable on one or more classes of such
Subordinate Certificates. See "Description of Credit Support."
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates
entitled thereto, rather than to guarantee or insure against losses. Unless
otherwise provided in the related Prospectus Supplement, advances of a
Servicer's (or another entity's) funds will be reimbursable only out of
related recoveries on the Mortgage Loans (including amounts received under
any form of Credit Support) respecting which such advances were made (as to
any Mortgage Loan, "Related Proceeds") and, if so provided in the Prospectus
Supplement, out of any amounts otherwise distributable on one or more classes
of Subordinate Certificates of such Series; provided, however, that any such
advance will be reimbursable from any amounts in the Distribution Account
prior to any distributions being made on the Certificates to the extent that
a Servicer (or such other entity) shall determine in good faith that such
advance (a "Nonrecoverable Advance") is not ultimately recoverable from
Related Proceeds or, if applicable, from collections on other Trust Assets
otherwise distributable on such Subordinate Certificates. If advances have
been made by a Servicer from excess funds in the Distribution Account, such
Servicer is required to replace such funds in the Distribution Account on any
future Distribution Date to the extent that funds in the Distribution Account
on such Distribution Date are less than payments required to be made to
Certificateholders on such date. If so specified in the related Prospectus
Supplement, the obligations of a Servicer (or another entity) to make
advances may be secured by a cash advance reserve fund, a surety bond, a
letter of credit or another form of limited guaranty. If applicable,
information regarding the characteristics of, and the identity of any obligor
on, any such surety bond, will be set forth in the related Prospectus
Supplement.
If and to the extent so provided in the related Prospectus Supplement, a
Servicer (or another entity) will be entitled to receive interest at the rate
specified therein on its outstanding advances and will be entitled to pay
itself such interest periodically from general collections on the Trust
Assets prior to any payment to Certificateholders or as otherwise provided in
the related Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for any Series of Certificates evidencing an
interest in a Trust Fund that includes CMBS will describe any corresponding
advancing obligation of any person in connection with such CMBS.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise provided in the Prospectus Supplement, with each
distribution to holders of any class of Certificates of a Series, the Master
Servicer or the Trustee, as provided in the related Prospectus Supplement,
will forward or cause to be forwarded to each such holder, to the Depositor
and to such other parties as may be specified in the related Agreement, a
statement setting forth, in each case to the extent applicable and available:
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(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount of such distribution allocable to (a) Prepayment
Premiums and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by each
Servicer and such other customary information as any such Master Servicer
or the Trustee deems necessary or desirable, or that a Certificateholder
reasonably requests, to enable Certificateholders to prepare their tax
returns;
(v) the aggregate amount of advances included in such distribution, and
the aggregate amount of any unreimbursed advances at the close of business
on such Distribution Date;
(vi) the aggregate principal balance of the Mortgage Assets at the close
of business on such Distribution Date;
(vii) the number and aggregate principal balance of Whole Loans in
respect of which (a) one scheduled payment is delinquent, (b) two
scheduled payments are delinquent, (c) three or more scheduled payments
are delinquent and (d) foreclosure proceedings have been commenced;
(viii) with respect to each Whole Loan that is delinquent two or more
months, (a) the loan number thereof, (b) the unpaid balance thereof, (c)
whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of
any interest accrued and payable on related servicing expenses and related
advances assuming such Mortgage Loan is subsequently liquidated through
foreclosure, (f) whether a notice of acceleration has been sent to the
Mortgagor and, if so, the date of such notice, (g) whether foreclosure
proceedings have been commenced and, if so, the date so commenced and (h)
if such Mortgage Loan is more than three months delinquent and foreclosure
has not been commenced, the reason therefor;
(ix) with respect to any Whole Loan liquidated during the related Due
Period (other than by payment in full), (a) the loan number thereof, (b)
the manner in which it was liquidated and (c) the aggregate amount of
liquidation proceeds received;
(x) with respect to any Whole Loan liquidated during the related Due
Period, (a) the portion of such liquidation proceeds payable or
reimbursable to each Servicer (or any other entity) in respect of such
Mortgage Loan and (b) the amount of any loss to Certificateholders;
(xi) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a)
the loan number of the related Mortgage Loan and (b) the date of
acquisition;
(xii) with respect to each REO Property relating to a Whole Loan and
included in the Trust Fund as of the end of the related Due Period, (a)
the book value, (b) the principal balance of the related Mortgage Loan
immediately following such Distribution Date (calculated as if such
Mortgage Loan were still outstanding taking into account certain limited
modifications to the terms thereof specified in the Agreement), (c) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof and (d) if applicable, the aggregate amount of
interest accrued and payable on related servicing expenses and related
advances;
(xiii) with respect to any such REO Property sold during the related Due
Period (a) the loan number of the related Mortgage Loan, (b) the aggregate
amount of sale proceeds, (c) the portion of such sales proceeds payable or
reimbursable to each Servicer in respect of such REO Property or the
related Mortgage Loan and (d) the amount of any loss to Certificateholders
in respect of the related Mortgage Loan;
(xiv) the aggregate Certificate Balance or notional amount, as the case
may be, of each class of Certificates (including any class of Certificates
not offered hereby) at the close of business on such
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Distribution Date, separately identifying any reduction in such
Certificate Balance due to the allocation of any loss and increase in the
Certificate Balance of a class of Accrual Certificates in the event that
Accrued Certificate Interest has been added to such balance;
(xv) the aggregate amount of principal prepayments made during the
related Due Period;
(xvi) the aggregate Accrued Certificate Interest and unpaid Accrued
Certificate Interest, if any, on each class of Certificates at the close
of business on such Distribution Date;
(xvii) in the case of Certificates with a variable Pass-Through Rate, the
Pass-Through Rate applicable to such Distribution Date, and, if available,
the immediately succeeding Distribution Date, as calculated in accordance
with the method specified in the related Prospectus Supplement;
(xviii) in the case of Certificates with a floating Pass-Through Rate,
for statements to be distributed in any month in which an adjustment date
occurs, the floating Pass-Through Rate applicable to such Distribution
Date and the immediately succeeding Distribution Date as calculated in
accordance with the method specified in the related Prospectus Supplement;
(xix) as to any Series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xx) the aggregate amount of payments by the Mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees
collected during the related Due Period.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts shall be expressed as a dollar amount per minimum
denomination of Certificates or for such other specified portion thereof In
addition, in the case of information furnished pursuant to subclauses (i),
(ii), (xiv), (xvi) and (xvii) above, such amounts shall also be provided with
respect to each component, if any, of a class of Certificates. The Master
Servicer or the Trustee, as specified in the related Prospectus Supplement,
will forward or cause to be forwarded to each holder, to the Depositor and to
such other parties as may be specified in the Agreement, a copy of any
statements or reports received by the Master Servicer or the Trustee, as
applicable, with respect to any CMBS. The Prospectus Supplement for each
Series of Offered Certificates will describe any additional information to be
included in reports to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall
be provided by the Master Servicer or the Trustee pursuant to any
requirements of the Code as are from time to time in force.
Unless and until Definitive Certificates are issued, or unless otherwise
provided in the related Prospectus Supplement, such statements or reports
will be forwarded by the Master Servicer or the Trustee to Cede. Such
statements or reports may be available to Beneficial Owners upon request to
DTC or their respective Participant or Indirect Participant. In addition, the
Trustee shall furnish a copy of any such statement or report to any
Beneficial Owner which requests such copy and certifies to the Trustee or the
Master Servicer, as applicable, that it is the Beneficial Owner of a
Certificate. See "Description of the Certificates--Book-Entry Registration
and Definitive Certificates."
TERMINATION
The obligations created by the Agreements for each Series of Certificates
will terminate upon the payment to Certificateholders of that Series of all
amounts held in the Distribution Account or by any Servicer, if any, or the
Trustee and required to be paid to them pursuant to such Agreements following
the earlier of (i) the final payment or other liquidation of the last
Mortgage Asset subject thereto or the disposition of all property acquired
upon foreclosure of any Whole Loan subject thereto and (ii) the purchase of
all of the assets of the Trust Fund by the party entitled to effect such
termination, under the
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circumstances and in the manner set forth in the related Prospectus
Supplement. In no event, however, will the trust created by the Agreements
continue beyond the date specified in the related Prospectus Supplement.
Written notice of termination of the Agreements will be given to each
Certificateholder, and the final distribution will be made only upon
presentation and surrender of the Certificates at the location to be
specified in the notice of termination.
If so specified in the related Prospectus Supplement, a Series of
Certificates may be subject to optional early termination through the
repurchase of the assets in the related Trust Fund by the party specified
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, the party specified therein will solicit bids
for the purchase of all assets of the Trust Fund, or of a sufficient portion
of such assets to retire such class or classes or purchase such class or
classes at a price set forth in the related Prospectus Supplement, in each
case, under the circumstances and in the manner set forth therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any Series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of a nominee for the depository, The
Depository Trust Company ("DTC").
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participating organizations ("Participants") and
facilitate the clearance and settlement of securities transactions between
Participants through electronic book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants
include J.P. Morgan Securities Inc., securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect 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 Participant, either directly or
indirectly ("Indirect Participants").
Unless otherwise provided in the related Prospectus Supplement, investors
that are not Participants or Indirect Participants but desire to purchase,
sell or otherwise transfer ownership of, or other interests in Book-Entry
Certificates may do so only through Participants and Indirect Participants.
In addition, such investors ("Beneficial Owners") will receive all
distributions on the Book-Entry Certificates through DTC and its
Participants. Under a book-entry format, Beneficial Owners will receive
payments after the related Distribution Date because, while payments are
required to be forwarded to Cede & Co., as nominee for DTC ("Cede"), on each
such date DTC will forward such payments to its Participants which thereafter
will be required to forward them to Indirect Participants or Beneficial
Owners. Unless otherwise provided in the related Prospectus Supplement, the
only "Certificateholder" (as such term is used in the Agreement) will be
Cede, as nominee of DTC, and the Beneficial Owners will not be recognized by
the Trustee as Certificateholders under the Agreements. Beneficial Owners
will be permitted to exercise the rights of Certificateholders under the
related Agreements only indirectly through the Participants who in turn will
exercise their rights through DTC. Under the rules, regulations and
procedures creating and affecting DTC and its operations, DTC is required to
make book-entry transfers among Participants on whose behalf it acts with
respect to the Book-Entry Certificates and is required to receive and
transmit distributions of principal of and interest on the Book-Entry
Certificates. Participants and Indirect Participants with which Beneficial
Owners have accounts with respect to the Book-Entry Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Beneficial Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Beneficial Owner to pledge its interest in the 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 the Book-Entry Certificates, may
be limited due to the lack of a physical certificate evidencing such
interest.
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DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one
or more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited. Under DTC's procedures, DTC will take actions
permitted to be taken by Holders of any class of Book-Entry Certificates
under the Pooling and Servicing Agreement only at the direction of one or
more Participants to whose account the Book-Entry Certificates are credited
and whose aggregate holdings represent no less than any minimum amount of
Voting Rights required therefor. Therefore, Beneficial Owners will only be
able to exercise their Voting Rights to the extent permitted, and subject to
the procedures established, by their Participant and/or Indirect Participant,
as applicable. DTC may take conflicting actions with respect to any action of
Certificateholders of any Class to the extent that Participants authorize
such actions. None of the Servicers, the Depositor, the Trustee or any of
their respective affiliates will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Book-Entry Certificates, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued in fully
registered, certificated form to Beneficial Owners or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i)
the Depositor advises the Trustee in writing that DTC is no longer willing or
able to properly discharge its responsibilities as depository with respect to
the Certificates and the Depositor is unable to locate a qualified successor
or (ii) the Depositor, at its option, elects to terminate the book-entry
system through DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Beneficial
Owners. Upon surrender by DTC of the certificate or certificates representing
the Book-Entry Certificates, together with instructions for reregistration,
the Trustee will issue (or cause to be issued) to the Beneficial Owners
identified in such instructions the Definitive Certificates to which they are
entitled, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as Certificateholders under the Agreement.
DESCRIPTION OF THE AGREEMENTS
The Certificates of each Series evidencing interests in a Trust Fund
including Whole Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, if specified in the related
Prospectus Supplement, a Special Servicer and the Trustee. The Certificates
of each Series evidencing interests in a Trust Fund not including Whole Loans
will be issued pursuant to a Trust Agreement between the Depositor and a
Trustee. The Master Servicer, any Special Servicer and the Trustee with
respect to any Series of Certificates will be named in the related Prospectus
Supplement. In lieu of appointing a Master Servicer, a servicer may be
appointed pursuant to the Pooling and Servicing Agreement for any Trust Fund.
The Mortgage Loans shall be serviced pursuant to the terms of the Pooling and
Servicing Agreement and, unless otherwise specified in the Prospectus
Supplement, a Servicing Agreement among the Depositor (or an affiliate
thereof), a Master Servicer, a Special Servicer and a Primary Servicer. A
manager or administrator may be appointed pursuant to the Trust Agreement for
any Trust Fund to administer such Trust Fund. The provisions of each
Agreement will vary depending upon the nature of the Certificates to be
issued thereunder and the nature of the related Trust Fund. A form of a
Pooling and Servicing Agreement and a form of Servicing Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus is
a part. Any Trust Agreement will generally conform to the form of Pooling and
Servicing Agreement filed herewith, but will not contain provisions with
respect to the servicing and maintenance of Whole Loans. The following
summaries describe certain provisions that may appear in each Agreement. The
Prospectus Supplement for a Series of Certificates will describe any
provision of the Agreements relating to such Series that materially differs
from the description thereof contained in this Prospectus. The summaries do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Agreements for each
Trust Fund and the description of such provisions in the related Prospectus
Supplement. As used herein with respect to any Series, the term "Certificate"
refers to all of the Certificates of that Series, whether or not offered
hereby and by the related Prospectus Supplement,
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unless the context otherwise requires. The Depositor will provide a copy of
the Agreements (without exhibits) relating to any Series of Certificates
without charge upon written request of a holder of a Certificate of such
Series addressed to the Trustee specified in the related Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans included in each Trust Fund were being serviced prior to the
issuance of the related Series of Certificates pursuant to the terms of a
Servicing Agreement by the Master Servicer, the Special Servicer and/or a
Primary Servicer. Unless otherwise specified in the related Prospectus
Supplement, following the issuance of the related Series of Certificates,
such Mortgage Loans will continue to be serviced pursuant to such Servicing
Agreement, together with the related Pooling and Servicing Agreement.
Pursuant to the terms of each Servicing Agreement, a Primary Servicer or a
Special Servicer will service the Mortgage Loans directly and a Master
Servicer may monitor the activities of each Primary Servicer and Special
Servicer. The Depositor shall assign its rights under each Servicing
Agreement to the Trustee for the benefit of the Certificateholders.
ASSIGNMENT OF ASSETS; 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 Trust Assets
to be included in the related Trust Fund, together with all principal and
interest to be received on or with respect to such Trust Assets after the
Cut-off Date, other than principal and interest due on or before the Cut-off
Date and other than any Retained Interest. The Trustee will, concurrently
with such assignment, deliver the Certificates to the Depositor in exchange
for the Trust Assets and the other assets comprising the Trust Fund for such
Series. Each Mortgage Asset will be identified in a schedule appearing as an
exhibit to the related Agreement. Unless otherwise provided in the related
Prospectus Supplement, such schedule will include detailed information (i) in
respect of each Whole Loan included in the related Trust Fund, including
without limitation, the address of the related Mortgaged Property and type of
such property, the Mortgage Interest Rate and, if applicable, the applicable
index, margin, adjustment date and any rate cap information, the original and
remaining term to maturity, the original and outstanding principal balance
and balloon payment, if any, the Value, Loan-to-Value Ratio and the Debt
Service Coverage Ratio as of the date indicated and payment and prepayment
provisions, if applicable, and (ii) in respect of each CMBS included in the
related Trust Fund, including without limitation, the CMBS Issuer, CMBS
Servicer and CMBS Trustee, the pass-through or bond rate or formula for
determining such rate, the issue date and original and remaining term to
maturity, if applicable, the original and outstanding principal amount and
payment provisions, if applicable.
With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to)
certain loan documents, which unless otherwise specified in the related
Prospectus Supplement will include the original Mortgage Note endorsed,
without recourse, in blank or to the order of the Trustee, the original
Mortgage (or a certified copy thereof) with evidence of recording indicated
thereon and an assignment of the Mortgage to the Trustee in recordable form.
Notwithstanding the foregoing, a Trust Fund may include Mortgage Loans where
the original Mortgage Note is not delivered to the Trustee if the Company
delivers to the Trustee or the custodian a copy or a duplicate original of
the Mortgage Note, together with an affidavit certifying that the original
thereof has been lost or destroyed. With respect to such Mortgage Loans, the
Trustee (or its nominee) may not be able to enforce the Mortgage Note against
the related borrower. Unless otherwise provided in the related Prospectus
Supplement, the related Agreements will require that the Depositor or another
party specified therein promptly cause each such assignment of Mortgage to be
recorded in the appropriate public office for real property records, except
in states where, in the opinion of counsel acceptable to the Trustee, such
recording is not required to protect the Trustee's interest in the related
Whole Loan against the claim of any subsequent transferee or any successor to
or creditor of the Depositor, the Master Servicer, the relevant Asset Sellers
or any other prior holder of the Whole Loan.
The Trustee (or a custodian) will review such Whole Loan documents within
a specified period of days after receipt thereof, and the Trustee (or a
custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any
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such document is found to be missing or defective in any material respect,
the Trustee (or such custodian) shall immediately notify the Depositor. If
the Depositor cannot cure the omission or defect within a specified number of
days after receipt of such notice, then unless otherwise specified in the
related Prospectus Supplement, the Depositor will be obligated, within a
specified number of days of receipt of such notice, to repurchase the related
Whole Loan from the Trustee at the Purchase Price or substitute for such
Mortgage Loan. Unless otherwise specified in the related Prospectus
Supplement, this repurchase or substitution obligation constitutes the sole
remedy available to the Certificateholders or the Trustee for omission of, or
a material defect in, a constituent document. To the extent specified in the
related Prospectus Supplement, in lieu of curing any omission or defect in
the Mortgage Asset or repurchasing or substituting for such Mortgage Asset,
the Depositor may agree to cover any losses suffered by the Trust Fund as a
result of such breach or defect.
If so provided in the related Prospectus Supplement, the Depositor will,
as to some or all of the Mortgage Loans, assign or cause to be assigned to
the Trustee the related Lease Assignments. In certain cases, the Trustee, or
Primary Servicer, as applicable, may collect all moneys under the related
Leases and distribute amounts, if any, required under the Lease for the
payment of maintenance, insurance and taxes, to the extent specified in the
related Lease agreement. The Trustee, or if so specified in the Prospectus
Supplement, the Master Servicer, as agent for the Trustee, may hold the Lease
in trust for the benefit of the Certificateholders.
With respect to each CMBS in certificated form, the Depositor will deliver
or cause to be delivered to the Trustee (or the custodian) the original
certificate or other definitive evidence of such CMBS together with bond
power or other instruments, certifications or documents required to transfer
fully such CMBS to the Trustee for the benefit of the Certificateholders.
With respect to each CMBS in uncertificated or book-entry form or held
through a "clearing corporation" within the meaning of the UCC the Depositor
and the Trustee will cause such CMBS to be registered directly or on the
books of such clearing corporation or of a financial intermediary in the name
of the Trustee for the benefit of the Certificateholders. Unless otherwise
provided in the related Prospectus Supplement, the related Agreement will
require that either the Depositor or the Trustee promptly cause any CMBS in
certificated form not registered in the name of the Trustee to be
re-registered, with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement the
Depositor will, with respect to each Whole Loan, make or assign
representations and warranties, as of a specified date (the person making
such representations and warranties, the "Warranting Party") covering, by way
of example, the following types of matters: (i) the accuracy of the
information set forth for such Whole Loan on the schedule of Mortgage Assets
appearing as an exhibit to the related Agreement; (ii) the existence of title
insurance insuring the lien priority of the Whole Loan; (iii) the authority
of the Warranting Party to sell the Whole Loan; (iv) the payment status of
the Whole Loan and the status of payments of taxes, assessments and other
charges affecting the related Mortgaged Property; (v) the existence of
customary provisions in the related Mortgage Note and Mortgage to permit
realization against the Mortgaged Property of the benefit of the security of
the Mortgage; and (vi) the existence of hazard and extended perils insurance
coverage on the Mortgaged Property.
Any Warranting Party, if other than the Depositor, shall be an Asset
Sellers or an affiliate thereof or such other person acceptable to the
Depositor and shall be identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related Series of Certificates evidencing an interest in such
Whole Loan.
Unless otherwise specified in the related Prospectus Supplement, in the
event of a breach of any such representation or warranty, the Warranting
Party will be obligated to reimburse the Trust Fund for losses
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caused by any such breach or either cure such breach or repurchase or replace
the affected Whole Loan as described below. Since the representations and
warranties may not address events that may occur following the date as of
which they were made, the Warranting Party will have a reimbursement, cure,
repurchase or substitution obligation in connection with a breach of such a
representation and warranty only if the relevant event that causes such
breach occurs prior to such date. Such party would have no such obligations
if the relevant event that causes such breach occurs after such date.
Unless otherwise provided in the related Prospectus Supplement, the
Agreements will provide that the Master Servicer and/or Trustee will be
required to notify promptly the relevant Warranting Party of any breach of
any representation or warranty made by it in respect of a Whole Loan that
materially and adversely affects the value of such Whole Loan or the
interests therein of the Certificateholders. If such Warranting Party cannot
cure such breach within a specified period following the date on which such
party was notified of such breach, then such Warranting Party will be
obligated to repurchase such Whole Loan from the Trustee within a specified
period from the date on which the Warranting Party was notified of such
breach, at the Purchase Price therefor.
As to any Whole Loan, unless otherwise specified in the related Prospectus
Supplement, the "Purchase Price" is equal to the sum of the unpaid principal
balance thereof, plus unpaid accrued interest thereon at the Mortgage
Interest Rate from the date as to which interest was last paid to the due
date in the Due Period in which the relevant purchase is to occur, plus
certain servicing expenses that are reimbursable to each Servicer. If so
provided in the Prospectus Supplement for a Series, a Warranting Party,
rather than repurchase a Whole Loan as to which a breach has occurred, will
have the option, within a specified period after initial issuance of such
Series of Certificates, to cause the removal of such Whole Loan from the
Trust Fund and substitute in its place one or more other Whole Loans, in
accordance with the standards described in the related Prospectus Supplement.
If so provided in the Prospectus Supplement for a Series, a Warranting Party,
rather than repurchase or substitute a Whole Loan as to which a breach has
occurred, will have the option to reimburse the Trust Fund or the
Certificateholders for any losses caused by such breach. Unless otherwise
specified in the related Prospectus Supplement, this reimbursement,
repurchase or substitution obligation will constitute the sole remedy
available to holders of Certificates or the Trustee for a breach of
representation by a Warranting Party.
Neither the Depositor (except to the extent that it is the Warranting
Party) nor any Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warranting Party defaults on its obligation to do so, and no
assurance can be given that Warranting Parties will carry out such
obligations with respect to Whole Loans.
Unless otherwise provided in the related Prospectus Supplement the
Warranting Party will, with respect to a Trust Fund that includes CMBS, make
or assign certain representations or warranties, as of a specified date, with
respect to such CMBS, covering (i) the accuracy of the information set forth
therefor on the schedule of Mortgage Assets appearing as an exhibit to the
related Agreement and (ii) the authority of the Warranting Party to sell such
Mortgage Assets. The related Prospectus Supplement will describe the remedies
for a breach thereof.
Each Servicer will make certain representations and warranties regarding
its authority to enter into, and its ability to perform its obligations
under, the related Agreement. A breach of any such representation in a
Pooling and Servicing Agreement of a Master Servicer or Special Servicer
which materially and adversely affects the interests of the
Certificateholders and which continues unremedied for thirty days after the
giving of written notice of such breach to such Servicer by the Trustee or
the Depositor, or to such Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights
(unless otherwise specified in the related Prospectus Supplement), will
constitute an Event of Default under such Pooling and Servicing Agreement. A
breach of any such representation in a Servicing Agreement of a Servicer
which continues unremedied for thirty days after giving notice of such breach
to such Servicer will constitute an Event of Default under such Servicing
Agreement. See "Events of Default" and "Rights Upon Event of Default."
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ACCOUNTS
General
Each Servicer and/or the Trustee will, as to each Trust Fund, establish
and maintain or cause to be established and maintained one or more separate
accounts for the collection of payments on the related Mortgage Assets
(collectively, the "Accounts"), which must be either (i) an account or
accounts the deposits in which are insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance
Corporation ("FDIC") (to the limits established by the FDIC) and the
uninsured deposits in which are otherwise secured such that the
Certificateholders have a claim with respect to the funds on Account or a
perfected first priority security interest against any collateral securing
such funds that is superior to the claims of any other depositors or general
creditors of the institution with which such Account is maintained or (ii)
otherwise maintained with a bank or trust company, and in a manner,
satisfactory to the Rating Agency or Agencies rating any class of
Certificates of such Series. The collateral eligible to secure amounts in an
Account is limited to United States government securities and other
investment grade obligations specified in the Agreement ("Permitted
Investments"). An Account may be maintained as an interest bearing or a
non-interest bearing account and the funds held therein may be invested
pending each succeeding Distribution Date in certain short-term Permitted
Investments. Unless otherwise provided in the related Prospectus Supplement,
any interest or other income earned on funds in an Account will be paid to a
Servicer or its designee as additional servicing compensation. An Account may
be maintained with an institution that is an affiliate of a Servicer provided
that such institution meets the standards imposed by the Rating Agency or
Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, an Account may contain funds relating to
more than one Series of mortgage pass-through certificates and may contain
other funds respecting payments on mortgage loans belonging to a Servicer or
serviced or master serviced by it on behalf of others.
Deposits
Unless otherwise provided in the related Prospectus Supplement, the
Primary Servicer will deposit or cause to be deposited in an Account on a
daily basis, unless otherwise provided in the related Agreement, the
following payments and collections received, or advances made, by the Primary
Servicer:
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Assets;
(ii) all payments on account of interest on the Mortgage Assets,
including any default interest collected, in each case net of any portion
thereof retained by a Servicer as its servicing compensation;
(iii) all proceeds of the hazard, business interruption and general
liability insurance policies to be maintained in respect of each Mortgaged
Property securing a Whole Loan in the Trust Fund (to the extent such
proceeds are not applied to the restoration of the property or released to
the Mortgagor in accordance with the normal servicing procedures of a
Servicer, subject to the terms and conditions of the related Mortgage and
Mortgage Note) and all proceeds of rental interruption policies, if any,
insuring against losses arising from the failure of Lessees under a Lease
to make timely rental payments because of certain casualty events
(collectively, "Insurance Proceeds") and all other amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans in
the Trust Fund, by foreclosure, condemnation or otherwise ("Liquidation
Proceeds"), together with the net proceeds on a monthly basis with respect
to any Mortgaged Properties acquired for the benefit of Certificateholders
by foreclosure or by deed in lieu of foreclosure or otherwise;
(iv) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(v) any amounts representing Prepayment Premiums;
(vi) any amounts received from a Special Servicer;
but excluding any REO Proceeds and penalties or modification fees which may
be retained by the Primary Servicer. REO Proceeds shall be maintained in an
Account by the Special Servicer.
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Once a month the Primary Servicer and the Special Servicer remit funds on
deposit in the Account each maintains together with any P&I Advances to the
Master Servicer for deposit in an Account maintained by the Master Servicer.
Withdrawals
A Servicer may, from time to time, unless otherwise provided in the
related Agreement and described in the related Prospectus Supplement, make
withdrawals from an Account for each Trust Fund for any of the following
purposes:
(i) to reimburse a Servicer for unreimbursed amounts advanced as
described under "Description of the Certificates--Advances in Respect of
Delinquencies," such reimbursement to be made out of amounts received
which were identified and applied by such Servicer as late collections of
interest on and principal of the particular Whole Loans with respect to
which the advances were made;
(ii) to reimburse a Servicer for unpaid servicing fees earned and certain
unreimbursed servicing expenses incurred with respect to Whole Loans and
properties acquired in respect thereof, such reimbursement to be made out
of amounts that represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Whole Loans and properties, and net income
collected on the particular properties, with respect to which such fees
were earned or such expenses were incurred;
(iii) to reimburse a Servicer for any advances described in clause (i)
above and any servicing expenses described in clause (ii) above which, in
the Master Servicer's good faith judgment, will not be recoverable from
the amounts described in clauses (i) and (ii), respectively, such
reimbursement to be made from amounts collected on other Trust Assets or,
if and to the extent so provided by the related Agreement and described in
the related Prospectus Supplement, just from that portion of amounts
collected on other Trust Assets that is otherwise distributable on one or
more classes of Subordinate Certificates, if any, remain outstanding, and
otherwise any outstanding class of Certificates, of the related Series;
(iv) if and to the extent described in the related Prospectus Supplement,
to pay a Servicer interest accrued on the advances described in clause (i)
above and the servicing expenses described in clause (ii) above while such
remain outstanding and unreimbursed;
(v) unless otherwise provided in the related Prospectus Supplement, to
pay a Servicer, as additional servicing compensation, interest and
investment income earned in respect of amounts held in the Account; and
(vi) to make any other withdrawals permitted by the related Agreement and
described in the related Prospectus Supplement.
If and to the extent specified in the Prospectus Supplement amounts may be
withdrawn from any Account to cover additional costs, expenses or liabilities
associated with: the preparation of environmental site assessments with
respect to, and for containment, clean-up or remediation of hazardous wastes
and materials, the proper operation, management and maintenance of any
Mortgaged Property acquired for the benefit of Certificateholders by
foreclosure or by deed in lieu of foreclosure or otherwise, such payments to
be made out of income received on such property; if one or more elections
have been made to treat the Trust Fund or designated portions thereof as a
REMIC, 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"; retaining an independent appraiser or other expert in real estate
matters to determine a fair sale price for a defaulted Whole Loan or a
property acquired in respect thereof in connection with the liquidation of
such Whole Loan or property; and obtaining various opinions of counsel
pursuant to the related Agreement for the benefit of Certificateholders.
Distribution Account
Unless otherwise specified in the related Prospectus Supplement, the
Trustee will, as to each Trust Fund, establish and maintain, or cause to be
established and maintained, one or more separate Accounts
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for the collection of payments from the Master Servicer immediately preceding
each Distribution Date (the "Distribution Account"). The Trustee will also
deposit or cause to be deposited in a Distribution Account the following
amounts:
(i) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related Series of Certificates as
described under "Description of Credit Support";
(ii) any amounts paid under any Cash Flow Agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements";
(iii) all proceeds of any Trust Asset or, with respect to a Whole Loan,
property acquired in respect thereof purchased by the Depositor, any Asset
Sellers or any other specified person, and all proceeds of any Mortgage
Asset purchased as described under "Description of the
Certificates--Termination" (also, "Liquidation Proceeds");
(iv) any other amounts required to be deposited in the Distribution
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
The Trustee may, from time to time, unless otherwise provided in the
related Agreements and described in the related Prospectus Supplement, make a
withdrawal from a Distribution Account to make distributions to the
Certificateholders on each Distribution Date.
Other Collection Accounts
Notwithstanding the foregoing, if so specified in the related Prospectus
Supplement, the Agreement for any Series of Certificates may provide for the
establishment and maintenance of a separate collection account into which the
Master Servicer or any related Primary Servicer or Special Servicer will
deposit on a daily basis the amounts described under "--Deposits" above for
one or more Series of Certificates. Any amounts on deposit in any such
collection account will be withdrawn therefrom and deposited into the
appropriate Distribution Account by a time specified in the related
Prospectus Supplement. To the extent specified in the related Prospectus
Supplement, any amounts which could be withdrawn from the Distribution
Account as described under "--Withdrawals" above, may also be withdrawn from
any such collection account. The Prospectus Supplement will set forth any
restrictions with respect to any such collection account, including
investment restrictions and any restrictions with respect to financial
institutions with which any such collection account may be maintained.
COLLECTION AND OTHER SERVICING PROCEDURES
Primary Servicer
The Primary Servicer is required under each Servicing Agreement to make
reasonable efforts to collect all scheduled payments under the Mortgage Loans
and will follow or cause to be followed such collection procedures as it
would follow with respect to mortgage loans that are comparable to the
Mortgage Loans and held for its own account, provided such procedures are
consistent with (i) the terms of the related Servicing Agreement, (ii)
applicable law and (iii) the general servicing standard specified in the
related Prospectus Supplement or, if no such standard is so specified, its
normal servicing practices (in either case, the "Servicing Standard").
Each Primary Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining (or
causing the Mortgagor or Lessee on each Mortgage or Lease to maintain)
hazard, business interruption and general liability insurance policies (and,
if applicable, rental interruption policies) as described herein and in any
related Prospectus Supplement, and filing and settling claims thereunder;
maintaining escrow or impoundment accounts of Mortgagors for payment of
taxes, insurance and other items required to be paid by any Mortgagor
pursuant to the Mortgage Loan; processing assumptions or substitutions in
those cases where the Primary Servicer has determined not to enforce any
applicable due-on-sale clause; attempting to cure delinquencies; supervising
foreclosures; inspecting and managing Mortgaged Properties under certain
circumstances; and maintaining accounting records relating to the Mortgage
Loans.
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Master Servicer
The Master Servicer shall monitor the actions of the Primary Servicer and
the Special Servicer to confirm compliance with the Agreements.
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer, as servicer of the Mortgage Loans, on behalf of itself, the Trustee
and the Certificateholders, will present claims to the obligor under each
instrument of Credit Support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted Mortgage Loans. See "Description of Credit Support."
If a Master Servicer or its designee recovers payments under any
instrument of Credit Support with respect to any defaulted Mortgage Loan, the
Master Servicer will be entitled to withdraw or cause to be withdrawn from
the Distribution Account out of such proceeds, prior to distribution thereof
to Certificateholders, amounts representing its normal servicing compensation
on such Mortgage Loan, unreimbursed servicing expenses incurred with respect
to the Mortgage Loan and any unreimbursed advances of delinquent payments
made with respect to the Mortgage Loan. See "Hazard Insurance Policies" and
"Description of Credit Support."
Special Servicer
A Mortgagor's failure to make required payments may reflect inadequate
income or the diversion of that income from the service of payments due under
the Mortgage Loan, and may call into question such Mortgagor's ability to
make timely payment of taxes and to pay for necessary maintenance of the
related Mortgaged Property. Unless otherwise provided in the related
Prospectus Supplement, upon the occurrence of any of the following events
(each a "Servicing Transfer Event") with respect to a Mortgage Loan,
servicing for such Mortgage Loan (thereafter, a "Specially Serviced Mortgage
Loan") will be transferred from the Primary Servicer to the Special Servicer:
(a) such Mortgage Loan becomes a defaulted Mortgage Loan,
(b) the occurrence of certain events indicating the possible insolvency
of the Mortgagor,
(c) the receipt by the Primary Servicer of a notice of foreclosure of any
other lien on the related Mortgaged Property,
(d) the Master Servicer or the Primary Servicer determines that a payment
default is imminent,
(e) with respect to a Balloon Mortgage Loan, no assurances have been
given as to the ability of the Mortgagor to make the final payment
thereon, or
(f) the occurrence of certain other events constituting defaults under
the terms of such Mortgage Loan.
The Special Servicer is required to monitor any Mortgage Loan which is in
default, contact the Mortgagor concerning the default, evaluate whether the
causes of the default can be cured over a reasonable period without
significant impairment of the value of the Mortgaged Property, initiate
corrective action in cooperation with the Mortgagor if cure is likely,
inspect the Mortgaged Property and take such other actions as are consistent
with the Servicing Standard. A significant period of time may elapse before
the Special Servicer is able to assess the success of such corrective action
or the need for additional initiatives.
The time within which the Special Servicer makes the initial determination
of appropriate action evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure)
on behalf of the Certificateholders, may vary considerably depending on the
particular Mortgage Loan, the Mortgaged Property, the 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. Under federal
bankruptcy law, the Special Servicer in certain cases may not be permitted to
accelerate a Mortgage Loan or to foreclose on a Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of the Mortgage Loans
and the Leases."
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Any Agreement relating to a Trust Fund that includes Mortgage Loans may
grant to the Master Servicer and/or the holder or holders of certain classes
of Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Mortgage Loan as to which a specified
number of scheduled payments thereunder are delinquent. Any such right
granted to the holder of an Offered Certificate will be described in the
related Prospectus Supplement. The related Prospectus Supplement will also
describe any such right granted to any person if the predetermined purchase
price is less than the Purchase Price described under "Representations and
Warranties; Repurchases."
The Special Servicer may agree to modify, waive or amend any term of any
Specially Serviced Mortgage Loan in a manner consistent with the Servicing
Standard so long as the modification, waiver or amendment will not (i) affect
the amount or timing of any scheduled payments of principal or interest on
the Mortgage Loan or (ii) in its judgment, materially impair the security for
the Mortgage Loan or reduce the likelihood of timely payment of amounts due
thereon. The Special Servicer also may agree to any modification, waiver or
amendment that would so affect or impair the payments on, or the security
for, a Mortgage Loan if, unless otherwise provided in the related Prospectus
Supplement, (i) in its judgment, a material default on the Mortgage Loan has
occurred or a payment default is imminent and (ii) in its judgment, such
modification, waiver or amendment is reasonably likely to produce a greater
recovery with respect to the Mortgage Loan on a present value basis than
would liquidation. The Special Servicer is required to notify the Trustee in
the event of any modification, waiver or amendment of any Mortgage Loan.
The Special Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any
mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to
a Mortgaged Property securing a Mortgage Loan by operation of law or
otherwise, if such action is consistent with the Servicing Standard and a
default on such Mortgage Loan has occurred or, in the Special Servicer's
judgment, is imminent. Unless otherwise specified in the related Prospectus
Supplement, the Special Servicer may not acquire title to any related
Mortgaged Property or take any other action that would cause the Trustee, for
the benefit of Certificateholders, or any other specified person to be
considered to hold title to, to be a "mortgagee-in-possession" of, or to be
an "owner" or an "operator" of such Mortgaged Property within the meaning of
certain federal environmental laws, unless the Special Servicer has
previously determined, based on a report prepared by a person who regularly
conducts environmental audits (which report will be an expense of the Trust
Fund), that:
(i) the Mortgaged Property is in compliance with applicable environmental
laws; or if not, that taking such actions as are necessary to bring the
Mortgaged Property in compliance therewith is reasonably likely to produce
a greater recovery on a present value basis, after taking into account any
risks associated therewith, than not taking such actions; and
(ii) and there are no circumstances present at the Mortgaged Property
relating to the use, management or disposal of any hazardous substances,
hazardous materials, wastes, or petroleum-based materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or regulation or
that, if any such materials are present, taking such action with respect
to the affected Mortgaged Property is reasonably likely to produce a
greater recovery on a present value basis, after taking into account any
risks associated therewith, than not taking such actions.
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 within two years of
acquisition, unless (i) the Internal Revenue Service grants an extension of
time to sell such property or (ii) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the
Trust Fund subsequent to two years after its acquisition will not result in
the imposition of a tax on the Trust Fund or cause the Trust Fund to fail to
qualify as a REMIC under the Code at any time that any Certificate is
outstanding. Subject to the foregoing, the Special Servicer will be required
to (i) solicit bids for any Mortgaged Property so acquired in such a manner
as will be reasonably likely to realize a fair price for such property and
(ii) accept the first (and, if multiple bids are contemporaneously received,
the highest) cash bid received from any person that constitutes a fair price.
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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 any of its
obligations with respect to the management and operation of such Mortgaged
Property. Unless otherwise specified in the related Prospectus Supplement,
any such property acquired by the Trust Fund will be managed in a manner
consistent with the management and operation of similar property by a prudent
lending institution.
The limitations imposed by the related Agreement and the REMIC provisions
of the Code (if a REMIC election has been made with respect to the related
Trust Fund) on the operations and ownership of any Mortgaged Property
acquired on behalf of the Trust Fund may result in the recovery of an amount
less than the amount that would otherwise be recovered. See "Certain Legal
Aspects of the Mortgage Loans and the Leases--Foreclosure."
If recovery on a defaulted Mortgage Loan under any related instrument of
Credit Support is not available, the Special Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Mortgage Loan. If the proceeds of any liquidation of the property securing
the defaulted Mortgage Loan are less than the outstanding principal balance
of the defaulted Mortgage Loan plus interest accrued thereon at the Mortgage
Interest Rate plus the aggregate amount of expenses incurred by the Special
Servicer in connection with such proceedings and which are reimbursable under
the Agreement, the Trust Fund will realize a loss in the amount of such
difference. The Special Servicer will be entitled to withdraw or cause to be
withdrawn from a related Account out of the Liquidation Proceeds recovered on
any defaulted Mortgage Loan, prior to the distribution of such Liquidation
Proceeds to Certificateholders, amounts representing its normal servicing
compensation on the Mortgage Loan, unreimbursed servicing expenses incurred
with respect to the Mortgage Loan and any unreimbursed advances of delinquent
payments made with respect to the Mortgage Loan.
If any property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient
to restore the damaged property to a condition sufficient to permit recovery
under the related instrument of Credit Support, if any, the Special Servicer
is not required to expend its own funds to restore the damaged property
unless it determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Mortgage Loan after reimbursement of
the Master Servicer for its expenses and (ii) that such expenses will be
recoverable by it from related Insurance Proceeds or Liquidation Proceeds.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Primary
Servicer to cause the Mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage. Unless otherwise specified in the related Prospectus Supplement,
such coverage will be in general in an amount equal to the amount necessary
to fully compensate for any damage or loss to the improvements on the
Mortgaged Property on a replacement cost basis, but not less than the amount
necessary to avoid the application of any co-insurance clause contained in
the hazard insurance policy. The ability of the Primary Servicer to assure
that hazard insurance proceeds are appropriately applied may be dependent
upon its being named as an additional insured under any hazard insurance
policy and under any other insurance policy referred to below, or upon the
extent to which information in this regard is furnished by Mortgagors. All
amounts collected by the Primary Servicer under any such policy (except for
amounts to be applied to the restoration or repair of the Mortgaged Property
or released to the Mortgagor in accordance with the Primary Servicer's normal
servicing procedures, subject to the terms and conditions of the related
Mortgage and Mortgage Note) will be deposited in a related Account.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by
fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and
civil commotion, subject to the conditions and exclusions specified in each
policy. Although the policies relating to the Whole Loans will be
underwritten by different insurers under different state laws in accordance
with different applicable state forms, and therefore will not contain
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identical terms and conditions, the basic terms thereof are dictated by
respective state laws, and 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 uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the
improvements on the property in order to recover the full amount of any
partial loss. If the insured's coverage falls below this specified
percentage, such clause generally provides that the insurer's liability in
the event of partial loss does not exceed the lesser of (i) the replacement
cost of the improvements less physical depreciation and (ii) such proportion
of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
The Agreements for a Trust Fund that includes Whole Loans will require the
Primary Servicer to cause the Mortgagor on each Whole Loan, or, in certain
cases, the related Lessee, to maintain all such other insurance coverage with
respect to the related Mortgaged Property as is consistent with the terms of
the related Mortgage, which insurance may typically include flood insurance
(if the related Mortgaged Property was located at the time of origination in
a federally designated flood area).
In addition, to the extent required by the related Mortgage, the Primary
Servicer may require the Mortgagor or related Lessee to maintain other forms
of insurance including, but not limited to, loss of rent endorsements,
business interruption insurance and comprehensive public liability insurance.
Any cost incurred by the Master Servicer in maintaining any such insurance
policy will be added to the amount owing under the Mortgage Loan where the
terms of the Mortgage Loan so permit; provided, however, that the addition of
such cost will not be taken into account for purposes of calculating the
distribution to be made to Certificateholders. Such costs may be recovered by
a Servicer from a related Account, with interest thereon, as provided by the
Agreements.
RENTAL INTERRUPTION INSURANCE POLICY
If so specified in the related Prospectus Supplement, the Primary Servicer
or the Mortgagors will maintain rental interruption insurance policies in
full force and effect with respect to some or all of the Leases. Although the
terms of such policies vary to some degree, a rental interruption insurance
policy typically provides that, to the extent that a Lessee fails to make
timely rental payments under the related Lease due to a casualty event, such
losses will be reimbursed to the insured. If so specified in the related
Prospectus Supplement, the Primary Servicer will be required to pay from its
servicing compensation the premiums on the rental interruption policy on a
timely basis. If so specified in the Prospectus Supplement, if such rental
interruption policy is canceled or terminated for any reason (other than the
exhaustion of total policy coverage), the Primary Servicer will exercise its
best reasonable efforts to obtain from another insurer a replacement policy
comparable to the rental interruption policy with a total coverage that is
equal to the then existing coverage of the terminated rental interruption
policy; provided that if the cost of any such replacement policy is greater
than the cost of the terminated rental interruption policy, the amount of
coverage under the replacement policy will, unless otherwise specified in the
related Prospectus Supplement, be reduced to a level such that the applicable
premium does not exceed, by a percentage that may be set forth in the related
Prospectus Supplement, the cost of the rental interruption policy that was
replaced. Any amounts collected by the Primary Servicer under the rental
interruption policy in the nature of insurance proceeds will be deposited in
a related Account.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the related Prospectus Supplement, the
Agreements will require that the Servicers obtain and maintain in effect a
fidelity bond or similar form of insurance coverage (which may provide
blanket coverage) or any combination thereof insuring against loss occasioned
by fraud, theft
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or other intentional misconduct of the officers, employees and agents of such
Servicer. The related Agreements will allow a Servicer to self-insure against
loss occasioned by the errors and omissions of the officers, employees and
agents of the Master Servicer or the Special Servicer so long as certain
criteria set forth in the Agreements are met.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent of
the mortgagee to any sale or other transfer of the related Mortgaged
Property, or due-on-sale clauses entitling the mortgagee to accelerate
payment of the Whole Loan upon any sale or other transfer of the related
Mortgaged Property. Certain of the Whole Loans may contain clauses requiring
the consent of the mortgagee to the creation of any other lien or encumbrance
on the Mortgaged Property or due-on-encumbrance clauses entitling the
mortgagee to accelerate payment of the Whole Loan upon the creation of any
other lien or encumbrance upon the Mortgaged Property. Unless otherwise
provided in the related Prospectus Supplement, the Primary Servicer, on
behalf of the Trust Fund, will exercise any right the Trustee may have as
mortgagee to accelerate payment of any such Whole Loan or to withhold its
consent to any transfer or further encumbrance. Unless otherwise specified in
the related Prospectus Supplement, any fee collected by or on behalf of the
Primary Servicer for entering into an assumption agreement will be retained
by or on behalf of the Primary Servicer as additional servicing compensation.
See "Certain Legal Aspects of the Mortgage Loans and the Leases--Due-on-Sale
and Due-on-Encumbrance."
RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a Series of Certificates will specify
whether there will be any Retained Interest in the Mortgage Assets, and, if
so, the initial owner thereof. If so, the Retained Interest will be
established on a loan-by-loan basis and will be specified on an exhibit to
the related Agreement. A "Retained Interest" in a Mortgage Asset represents a
specified portion of the interest payable thereon. The Retained Interest will
be deducted from Mortgagor payments as received and will not be part of the
related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, each
Servicer's primary servicing compensation with respect to a Series of
Certificates will come from the periodic payment to it of a portion of the
interest payment on each Mortgage Asset. Since any Retained Interest and a
Servicer's primary compensation are percentages of the principal balance of
each Mortgage Asset, such amounts will decrease in accordance with the
amortization of the Mortgage Assets. The Prospectus Supplement with respect
to a Series of Certificates evidencing interests in a Trust Fund that
includes Whole Loans may provide that, as additional compensation, a Servicer
may retain all or a portion of assumption fees, modification fees, late
payment charges or Prepayment Premiums collected from Mortgagors and any
interest or other income which may be earned on funds held in a related
Account.
The Master Servicer may, to the extent provided in the related Prospectus
Supplement, pay from its servicing compensation certain expenses incurred in
connection with its servicing and managing of the Mortgage Assets, including,
without limitation, payment of the fees and disbursements of the Trustee and
independent accountants, payment of expenses incurred in connection with
distributions and reports to Certificateholders, and payment of any other
expenses described in the related Prospectus Supplement. Certain other
expenses, including certain expenses relating to defaults and liquidations on
the Whole Loans and, to the extent so provided in the related Prospectus
Supplement, interest thereon at the rate specified therein, and the fees of
any Special Servicer, may be borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
Each Servicing Agreement will provide that on or before a specified date
in each year, beginning on a date specified therein, a firm of independent
public accountants will furnish a statement to the Trustee to the effect
that, on the basis of the examination by such firm conducted substantially in
compliance with either the Uniform Single Attestation Program for Mortgage
Bankers, the servicing by or on behalf of each Servicer was conducted in
compliance with the terms of such agreements except for any exceptions the
Uniform Single Attestation Program for Mortgage Bankers requires it to
report.
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Each Servicing Agreement will also provide for delivery to the Trustee, on
or before a specified date in each year, of an annual statement signed by an
officer of each Servicer to the effect that such Servicer has fulfilled its
obligations under the Agreement throughout the preceding calendar year or
other specified twelve-month period.
Unless otherwise provided in the related Prospectus Supplement, copies of
such annual accountants' statement and such statements of officers will be
obtainable by Certificateholders and Beneficial Owners without charge upon
written request to the Master Servicer at the address set forth in the
related Prospectus Supplement; provided that such Beneficial Owner shall have
certified to the Master Servicer that it is the Beneficial Owner of a
Certificate.
CERTAIN MATTERS REGARDING EACH SERVICER AND THE DEPOSITOR
The Master Servicer, the Primary Servicer and the Special Servicer, or a
servicer for substantially all the Whole Loans under each Agreement will be
named in the related Prospectus Supplement. Each entity serving as Servicer
(or as such servicer) may be an affiliate of the Depositor and may have other
normal business relationships with the Depositor or the Depositor's
affiliates. Reference herein to a Servicer shall be deemed to be to the
servicer of substantially all of the Whole Loans, if applicable.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that any Servicer may resign from its
obligations and duties thereunder only with the consent of the Trustee, which
may not be unreasonably withheld or upon a determination that its duties
under the Agreement are no longer permissible under applicable law. No such
resignation will become effective until a successor servicer has assumed such
Servicer's obligations and duties under the related Servicing Agreement. If a
Primary Servicer resigns, the Master Servicer shall assume the obligations
thereof.
Unless otherwise specified in the related Prospectus Supplement, each
Servicing Agreement will further provide that none of the Servicers, or any
officer, employee, or agent thereof will be under any liability to the
related Trust Fund or Certificateholders for any action taken, or for
refraining from the taking of any action in accordance with the Servicing
standards set forth in the Servicing Agreement, in good faith pursuant to the
related Servicing Agreement; provided, however, that no Servicer nor any such
person will be protected against any breach of a representation or warranty
made in such Agreement, or against any liability specifically imposed
thereby, or against any liability which would otherwise be imposed by reason
of willful misfeasance, bad faith or negligence in the performance of duties
thereunder or by reason of reckless disregard of obligations and duties
thereunder. Unless otherwise specified in the related Prospectus Supplement,
the Depositor shall be liable only to the extent of its obligations
specifically imposed upon and undertaken by the Depositor. Unless otherwise
specified in the related Prospectus Supplement, each Servicing Agreement will
further provide that each Servicer will be entitled to indemnification by the
related Trust Fund against any loss, liability or expense incurred in
connection with any legal action relating to the related Servicing Agreement
or the Mortgage Loans; provided, however, that such indemnification will not
extend to any loss, liability or expense incurred by reason of misfeasance,
bad faith or negligence in the performance of obligations or duties
thereunder, or by reason of reckless disregard of such obligations or duties.
In addition, each Servicing Agreement will provide that no Servicer will be
under any obligation to appear in, prosecute or defend any legal action which
is not incidental to its responsibilities under the Servicing Agreement and
which in its opinion may involve it in any expense or liability. Any Servicer
may, however, with the consent of the Trustee undertake any such action which
it may deem necessary or desirable with respect to the Agreement and the
rights and duties of the parties thereto and the interests of the
Certificateholders thereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom will be expenses, costs and
liabilities of the Certificateholders, and the Servicer will be entitled to
be reimbursed therefor.
Any person into which a Servicer or the Depositor may be merged or
consolidated, or any person resulting from any merger or consolidation to
which a Servicer or the Depositor is a party, or any person succeeding to the
business of a Servicer or the Depositor will be the successor of such
Servicer or the Depositor, as applicable, under the related Agreements.
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EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement for a Trust
Fund that includes Whole Loans, Events of Default with respect to a Servicer
under the related Agreements will include (i) any failure by such Servicer to
distribute or cause to be distributed to the Trustee, another Servicer or the
Certificateholders, any required payment within one Business Day of the date
due; (ii) any failure by such Servicer to timely deliver a report that
continues unremedied for two days after receipt of notice of such failure has
been given to such Servicer by the Trustee or another Servicer; (iii) any
failure by such Servicer duly to observe or perform in any material respect
any of its other covenants or obligations under the Agreement which continues
unremedied for thirty days after written notice of such failure has been
given to such Servicer; (iv) any breach of a representation or warranty made
by such Servicer under the Agreement which materially and adversely affects
the interests of Certificateholders and which continues unremedied for thirty
days after written notice of such breach has been given to such Servicer; (v)
certain events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings and certain actions by or on behalf of
such Servicer indicating its insolvency or inability to pay its obligations;
and (vi) any failure by such Servicer to maintain a required license to do
business or service the Mortgage Loans pursuant to the related Agreements.
Material variations to the foregoing Events of Default (other than to shorten
cure periods or eliminate notice requirements) will be specified in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the Trustee shall, not later than the later of 60 Days
after the occurrence of any event which constitutes or, with notice or lapse
of time or both, would constitute an Event of Default and five days after
certain officers of the Trustee become aware of the occurrence of such an
event, transmit by mail to the Depositor and all Certificateholders of the
applicable Series notice of such occurrence, unless such default shall have
been cured or waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of Certificates
evidencing not less than 25% of the Voting Rights, the Trustee shall,
terminate all of the rights and obligations of the related Servicer under the
Agreement and in and to the Mortgage Loans (other than as a Certificateholder
or as the owner of any Retained Interest), whereupon the Master Servicer (or
if such Servicer is the Master Servicer, the Trustee) will succeed to all of
the responsibilities, duties and liabilities of such Servicer under the
Agreements (except that if the Trustee is prohibited by law from obligating
itself to make advances regarding delinquent mortgage loans, or if the
related Prospectus Supplement so specifies, then 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, in the event that the Trustee is unwilling or unable so to act,
it may or, at the written request of the holders of Certificates entitled to
at least 25% of the Voting Rights, it shall appoint, or petition a court of
competent jurisdiction for the appointment of, a loan servicing institution
acceptable to the Rating Agency with a net worth at the time of such
appointment of at least $15,000,000 to act as successor to the Master
Servicer under the Agreement. Pending such appointment, the Trustee is
obligated to act in such capacity. The Trustee and any such successor may
agree upon the servicing compensation to be paid, which in no event may be
greater than the compensation payable to the Master Servicer under the
Agreement.
Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however,
that an Event of Default involving a failure to distribute a required payment
to Certificateholders described in clause (i) under "Events of Default" may
be waived only by all of the Certificateholders. Upon any such waiver of an
Event of Default, such Event of Default shall cease to exist and shall be
deemed to have been remedied for every purpose under the Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given
to the Trustee written notice of default and unless the holders of
Certificates evidencing not less than 25% of the Voting Rights have made
written request
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upon the Trustee to institute such proceeding in its own name as Trustee
thereunder and have offered to the Trustee reasonable indemnity, and the
Trustee for sixty days has neglected or refused to institute any such
proceeding. The Trustee, however, is under no obligation to exercise any of
the trusts or powers vested in it by any Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order
or direction of any of the holders of Certificates covered by such 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.
As described under "Description of the Certificates--Book-Entry
Registration and Definitive Certificates," unless and until Definitive
Certificates are issued, Beneficial Owners may only exercise their rights as
owners of Certificates indirectly through DTC, or their respective
Participants and Indirect Participants.
AMENDMENT
Each Agreement may be amended by the parties thereto, without the consent
of any of the holders of Certificates covered by the Agreement, (i) to cure
any ambiguity, (ii) to correct, modify or supplement any provision therein
which may be inconsistent with any other provision therein, (iii) to make any
other provisions with respect to matters or questions arising under the
Agreement which are not inconsistent with the provisions thereof, or (iv) to
comply with any requirements imposed by the Code; provided that such
amendment (other than an amendment for the purpose specified in clause (iv)
above) will not (as evidenced by an opinion of counsel to such effect)
adversely affect in any material respect the interests of any holder of
Certificates covered by the Agreement. Unless otherwise specified in the
related Prospectus Supplement, each Agreement may also be amended by the
Depositor, the Master Servicer, if any, and the Trustee, with the consent of
the holders of Certificates affected thereby evidencing not less than 51% of
the Voting Rights, for any purpose; provided, however, that unless otherwise
specified in the related Prospectus Supplement, no such amendment may (i)
reduce in any manner the amount of or delay the timing of, payments received
or advanced on Mortgage Loans which are required to be distributed on any
Certificate without the consent of the holder of such Certificate, (ii)
adversely affect in any material respect the interests of the holders of any
class of Certificates in a manner other than as described in (i), without the
consent of the holders of all Certificates of such class or (iii) modify the
provisions of such Agreement described in this paragraph without the consent
of the holders of all Certificates covered by such Agreement then
outstanding. However, with respect to any Series of Certificates as to which
a REMIC election is to be made, the Trustee will not consent to any amendment
of the Agreement unless it shall first have received an opinion of counsel to
the effect that such amendment will not result in the imposition of a tax on
the related Trust Fund or cause the related Trust Fund to fail to qualify as
a REMIC at any time that the related Certificates are outstanding.
THE TRUSTEE
The Trustee under each Agreement will be named in the related Prospectus
Supplement. The commercial bank, national banking association, banking
corporation or trust company serving as Trustee may have a banking
relationship with the Depositor and its affiliates and with any Master
Servicer and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Trust Asset or related document and
is not accountable for the use or application by or on behalf of any Servicer
of any funds paid to such Servicer or its designee in respect of the
Certificates or the Trust Assets, or deposited into or withdrawn from any
Account or any other account by or on behalf of any Servicer. If no Event of
Default has occurred and is continuing, the Trustee is required to perform
only those duties specifically required under the related Agreements.
However, upon receipt of the various certificates, reports or other
instruments required to be furnished to it, the Trustee is required to
examine such documents and to determine whether they conform to the
requirements of the Agreements.
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CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Distribution Account for any loss,
liability or expense (including costs and expenses of litigation, and of
investigation, counsel fees, damages, judgments and amounts paid in
settlement) incurred in connection with the Trustee's (i) enforcing its
rights and remedies and protecting the interests, and enforcing the rights
and remedies, of the Certificateholders during the continuance of an Event of
Default, (ii) defending or prosecuting any legal action in respect of the
related Agreement or Series of Certificates, (iii) being the mortgagee of
record with respect to the Mortgage Loans in a Trust Fund and the owner of
record with respect to any Mortgaged Property acquired in respect thereof for
the benefit of Certificateholders, or (iv) acting or refraining from acting
in good faith at the direction of the holders of the related Series of
Certificates entitled to not less than 25% (or such higher percentage as is
specified in the related Agreement with respect to any particular matter) of
the Voting Rights for such Series; provided, however, that such
indemnification will not extend to any loss, liability or expense that
constitutes a specific liability of the Trustee pursuant to the related
Agreement, or to any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the Trustee in the
performance of its obligations and duties thereunder, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a
breach of any representation, warranty or covenant of the Trustee made
therein.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties under
an Agreement by giving written notice thereof to the Depositor, the Master
Servicer, if any, and all Certificateholders. Upon receiving such notice of
resignation, the Depositor is required promptly to appoint a successor
trustee acceptable to the Master Servicer, if any. If no successor trustee
shall have been so appointed and have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a
successor trustee.
If at any time the Trustee shall cease to be eligible to continue as such
under the related Agreements, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then
the Depositor may remove the Trustee and appoint a successor trustee
acceptable to the Master Servicer, if any. Holders of the Certificates of any
Series entitled to at least 51% of the Voting Rights for such Series may at
any time remove the Trustee without cause and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any Series of Certificates, Credit Support may be provided with
respect to one or more classes thereof or the related Mortgage Assets. Credit
Support may be in the form of the subordination of one or more classes of
Certificates, letters of credit, insurance policies, guarantees, the
establishment of one or more reserve funds or another method of Credit
Support described in the related Prospectus Supplement, or any combination of
the foregoing. If so provided in the related Prospectus Supplement, any form
of Credit Support may be structured so as to be drawn upon by more than one
Series to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a
Series of Certificates, the Credit Support will not provide protection
against all risks of loss and will not guarantee repayment of the entire
Certificate Balance of the Certificates and interest thereon. If losses or
shortfalls occur that exceed the amount covered by Credit Support or that are
not covered by Credit Support, Certificateholders will bear their allocable
share of deficiencies. Moreover, if a form of Credit Support covers more than
one Series of Certificates (each, a "Covered Trust"), holders of Certificates
evidencing interests in any of such Covered Trusts will be subject to the
risk that such Credit Support will be exhausted by the claims of other
Covered Trusts prior to such Covered Trust receiving any of its intended
share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a Series, or the related Mortgage Assets, the related
Prospectus Supplement will include a description of (a) the nature and amount
of coverage under such Credit Support, (b) any conditions to payment
thereunder not otherwise described herein, (c) 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 (d) the
material provisions relating to such Credit Support. Additionally, the
related Prospectus Supplement will set forth certain information with respect
to the obligor under any instrument of Credit Support, including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies that exercise primary jurisdiction over the conduct of
its business and (iv) its total assets, and its stockholders' or
policyholders' surplus, if applicable, as of the date specified in the
Prospectus Supplement. 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 of principal and interest
from the Distribution Account on any Distribution Date will be subordinated
to such rights of the holders of Senior Certificates. If so provided in the
related Prospectus Supplement, the subordination of a class may apply only in
the event of (or may be limited to) certain types of losses or shortfalls.
The related Prospectus Supplement will set forth information concerning the
amount of subordination of a class or classes of Subordinate Certificates in
a Series, the circumstances in which such subordination will be applicable
and the manner, if any, in which the amount of subordination will be
effected.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets for a Series are divided into separate groups, each
supporting a separate class or classes of Certificates of a Series, credit
support may be provided by cross-support provisions requiring that
distributions be made on Senior Certificates evidencing interests in one
group of Mortgage Assets prior to distributions on Subordinate Certificates
evidencing interests in a different group of Mortgage Assets within the Trust
Fund. The Prospectus Supplement for a Series that includes a cross-support
provision will describe the manner and conditions for applying such
provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS
If so provided in the Prospectus Supplement for a Series of Certificates,
the Whole Loans in the related Trust Fund will be covered for various default
risks by insurance policies or guarantees. A copy
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of any such material instrument for a Series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within
15 days of issuance of the Certificates of the related Series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a Series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the
"L/C Bank"). Under a letter of credit, the L/C Bank will be obligated to
honor draws thereunder in an aggregate fixed dollar amount, net of
unreimbursed payments thereunder, generally equal to a percentage specified
in the related Prospectus Supplement of the aggregate principal balance of
the Mortgage 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
in the event of only certain types of losses and shortfalls. The amount
available under the letter of credit will, in all cases, be reduced to the
extent of the unreimbursed payments thereunder and may otherwise be reduced
as described in the related Prospectus Supplement. The obligations of the L/C
Bank under the letter of credit for each Series of Certificates will expire
at the earlier of the date specified in the related Prospectus Supplement or
the termination of the Trust Fund. A copy of any such letter of credit for a
Series will be filed with the Commission as an exhibit to a Current Report on
Form 8-K to be filed within 15 days of issuance of the Certificates of the
related Series.
INSURANCE POLICIES 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 and/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 and/or full distributions of
principal on the basis of a schedule of principal distributions set forth in
or determined in the manner specified in the related Prospectus Supplement. A
copy of any such instrument for a Series will be filed with the Commission as
an exhibit to a Current Report on Form 8-K to be filed with the Commission
within 15 days of issuance of the Certificates of the related Series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a Series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more reserve funds in which cash, a
letter of credit, Permitted Investments, a demand note or a combination
thereof will be deposited, in the amounts so specified in such Prospectus
Supplement. The reserve funds for a Series may also be funded over time by
depositing therein a specified amount of the distributions received on the
related Trust Assets as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a Series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely
distributions of principal of and interest on the Certificates. If so
specified in the related Prospectus Supplement, reserve funds may be
established to provide limited protection against only certain types of
losses and shortfalls. Following each Distribution Date amounts in a reserve
fund in excess of any amount required to be maintained therein may be
released from the reserve fund under the conditions and to the extent
specified in the related Prospectus Supplement and will not be available for
further application to the Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus
Supplement. Unless otherwise 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. 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.
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Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purposes for which funds in the Reserve Fund
may be applied to make distributions to Certificateholders and use of
investment earnings from the Reserve Fund, if any.
CREDIT SUPPORT WITH RESPECT TO CMBS
If so provided in the Prospectus Supplement for a Series of Certificates,
the CMBS in the related Trust Fund and/or the Mortgage Loans underlying such
CMBS 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 THE MORTGAGE LOANS AND THE LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties
that are general in nature. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do
not purport to be complete nor to reflect the laws of any particular state,
nor to encompass the laws of all states in which the security for the
Mortgage Loans is situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Mortgage
Loans. See "Description of the Trust Funds--Assets."
GENERAL
All of the Mortgage Loans are loans evidenced by a note or bond and
secured by instruments granting a security interest in real property which
may be mortgages, deeds of trust, security deeds or deeds to secure debt,
depending upon the prevailing practice and law in the state in which the
Mortgaged Property is located. Mortgages, deeds of trust and deeds to secure
debt are herein collectively referred to as "mortgages." Any of the foregoing
types of mortgages will create a lien upon, or grant a title interest in, the
subject property, the priority of which will depend on the terms of the
particular security instrument, as well as separate, recorded, contractual
arrangements with others holding interests in the mortgaged property, the
knowledge of the parties to such instrument as well as the order of
recordation of the instrument in the appropriate public recording office.
However, recording does not generally establish priority over governmental
claims for real estate taxes and assessments and other charges imposed under
governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
real property between two parties--a Mortgagor (the borrower and usually the
owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of
a Mortgagor), a trustee to whom the mortgaged property is conveyed, and a
beneficiary (the lender) for whose benefit the conveyance is made. As used in
this Prospectus, unless the context otherwise requires, "Mortgagor" includes
the trustor under a deed of trust and a grantor under a security deed or a
deed to secure debt. Under a deed of trust, the Mortgagor grants the
property, irrevocably until the debt is paid, in trust, generally with a
power of sale as security for the indebtedness evidenced by the related note.
A deed to secure debt typically has two parties. By executing a deed to
secure debt, the grantor conveys title to, as opposed to merely creating a
lien upon, the subject property to the grantee until such time as the
underlying debt is repaid, generally with a power of sale as security for the
indebtedness evidenced by the related mortgage note. In case the Mortgagor
under a mortgage is a land trust, there would be an additional party because
legal title to the property is held by a land trustee under a land trust
agreement for the benefit of the Mortgagor. At origination of a mortgage loan
involving a land trust, the Mortgagor executes a separate undertaking to make
payments on the mortgage note. The mortgagee's authority under a mortgage,
the trustee's authority under a deed of trust and the grantee's authority
under a deed
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to secure debt are governed by the express provisions of the mortgage, the
law of the state in which the real property is located, certain federal laws
(including, without limitation, the Soldiers' and Sailors' Civil Relief Act
of 1940) and, in some cases, in deed of trust transactions, the directions of
the beneficiary.
INTEREST IN REAL PROPERTY
The real property covered by a mortgage, deed of trust, security deed or
deed to secure debt is most often the fee estate in land and improvements.
However, such an instrument may encumber other interests in real property
such as a tenant's interest in a lease of land or improvements, or both, and
the leasehold estate created by such lease. An instrument covering an
interest in real property other than the fee estate requires special
provisions in the instrument creating such interest or in the mortgage, deed
of trust, security deed or deed to secure debt, to protect the mortgagee
against termination of such interest before the mortgage, deed of trust,
security deed or deed to secure debt is paid. The Sellers will make certain
representations and warranties in the Agreement with respect to the Mortgage
Loans which are secured by an interest in a leasehold estate. Such
representation and warranties will be set forth in the Prospectus Supplement
if applicable.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the Mortgagor assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the lender, while the Mortgagor retains a revocable license to
collect the rents for so long as there is no default. Under such assignments,
the Mortgagor typically assigns its right, title and interest as lessor under
each lease and the income derived therefrom to the mortgagee, while retaining
a license to collect the rents for so long as there is no default under the
mortgage loan documentation. The manner of perfecting the mortgagee's
interest in rents may depend on whether the Mortgagor's assignment was
absolute or one granted as security for the loan. Failure to properly perfect
the mortgagee's interest in rents may result in the loss of substantial pool
of funds, which could otherwise serve as a source of repayment for such loan.
If the Mortgagor 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 UCC; generally these rates are
either assigned by the Mortgagor, which remains entitled to collect such
rates absent a default, or pledged by the Mortgagor, as security for the
loan. In general, the lender must file financing statements in order to
perfect its security interest in the rates and must file continuation
statements, generally every five years, to maintain perfection of such
security interest. Even if the lender's security interest in room rates is
perfected under the UCC, the lender will generally be required to commence a
foreclosure or otherwise take possession of the property in order to collect
the room rates after a default.
Even after a foreclosure, the potential rent payments from the property
may be less than the periodic payments that had been due under the mortgage.
For instance, the net income that would otherwise be generated from the
property may be less than the amount that would have been needed to service
the mortgage debt if the leases on the property are at below-market rents, or
as the result of excessive maintenance, repair or other obligations which a
lender succeeds to as landlord.
Lenders that actually take possession of the property, however, may incur
potentially substantial risks attendant to being a mortgagee in possession.
Such risks include liability for environmental clean-up costs and other risks
inherent in property ownership. See "Environmental Legislation" below.
PERSONALTY
Certain types of Mortgaged Properties, such as hotels, motels and
industrial plants, are likely to derive a significant part of their value
from personal property which does not constitute "fixtures" under applicable
state real property law and, hence, would not be subject to the lien of a
mortgage. Such property is generally pledged or assigned as security to the
lender under the UCC. In order to perfect its security interest therein, the
lender generally must file UCC financing statements and, to maintain
perfection of such security interest, file continuation statements generally
every five years.
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COOPERATIVE LOANS
If specified in the Prospectus Supplement relating to a Series of Offered
Certificate, the Mortgage Loans may also consist of cooperative apartment
loans ("Cooperative Loans") secured by security interests in shares issued by
cooperative housing corporation (a "Cooperative") and in the related
proprietary leases or occupancy agreements granting exclusive rights to
occupy specific dwelling units in the cooperatives' buildings. The security
agreement will create a lien upon, or grant a title interest in, the property
which it covers, the priority of which will depend on the terms of the
particular security agreement as well as the order of recordation of the
agreement in the appropriate recording office. Such a lien or title interest
is not prior to the lien for real estate taxes and assessments and other
charges imposed under governmental police powers.
Each cooperative owns in fee or has a leasehold interest in all the real
property and owns in fee or leases the building and all separate dwelling
units therein. The cooperative is directly responsible for property
management and, in most cases, payment of real estate taxes, other
governmental impositions and hazard and liability insurance. If there is a
blanket mortgage or mortgages on the cooperative apartment building or
underlying land, as is generally the case, or an underlying lease of the
land, as is the case in some instances, the cooperative, as property
Mortgagor, or lessee, as the case may be, is also responsible for meeting
these mortgage or rental obligations. A blanket mortgage is ordinarily
incurred by the cooperative in connection with either the construction or
purchase of the cooperative's apartment building or obtaining of capital by
the cooperative. The interest of the occupant under proprietary leases or
occupancy agreements as to which that cooperative is the landlord are
generally subordinate to the interest of the holder of a blanket mortgage and
to the interest of the holder of a land lease. If the cooperative is unable
to meet the payment obligations (i) arising under a blanket mortgage, the
mortgagee holding a blanket mortgage could foreclose on that mortgage and
terminate all subordinate proprietary leases and occupancy agreements or (ii)
arising under its land lease, the holder of the landlord's interest under the
land lease could terminate it and all subordinate proprietary leases and
occupancy agreements. Also, a blanket mortgage on a cooperative may provide
financing in the form of a mortgage that does not fully amortize, with a
significant portion of principal being due in one final payment at maturity.
The inability of the cooperative to refinance a mortgage and its consequent
inability to make such final payment could lead to foreclosure by the
mortgagee. Similarly, a land lease has an expiration date and the inability
of the cooperative to extend its term or, in the alternative, to purchase the
land could lead to termination of the cooperative's interest in the property
and termination of all proprietary leases and occupancy agreements. In either
event, a foreclosure by the holder of a blanket mortgage or the termination
of the underlying lease could eliminate or significantly diminish the value
of any collateral held by whomever financed the purchase by an individual
tenant stockholder of cooperative shares or, in the case of the Mortgage
Loans, the collateral securing the Cooperative Loans.
The cooperative is owned by tenant-stockholders who, through ownership of
stock or shares in the corporation, receive proprietary lease or occupancy
agreements which confer exclusive rights to occupy specific units. Generally,
a tenant-stockholder of a cooperative must make a monthly payment to the
cooperative representing such tenant-stockholder's pro rata share of the
cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying occupancy rights are financed
through a cooperative share loan evidenced by a promissory note and secured
by an assignment of and a security interest in the occupancy agreement or
proprietary lease and a security interest in the related cooperative shares.
The lender generally takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement and a financing
statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue
for judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or
tenant-stockholder as an individual as provided in the security agreement
covering the assignment of the proprietary lease or occupancy agreement and
the pledge of cooperative shares. See "Foreclosure--Cooperative Loans" below.
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FORECLOSURE
General
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the Mortgagor defaults in payment or performance of its
obligations under the note or mortgage, the mortgagee has the right to
institute foreclosure proceedings to sell the mortgaged property at public
auction to satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary
from state to state. Two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage instrument. There are several other foreclosure
procedures available in some states that are either infrequently used or
available only in certain limited circumstances, such as strict foreclosure.
Judicial Foreclosure
A judicial foreclosure proceeding is conducted in a court having
jurisdiction over the mortgaged property. Generally, the action is initiated
by the service of legal pleadings upon all parties having 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 Limitations on Enforceability of Certain Provisions
United States courts have traditionally imposed general equitable
principles to limit the remedies available to a mortgagee in connection with
foreclosure. These equitable principles are generally designed to relieve the
Mortgagor from the legal effect of mortgage defaults, to the extent that such
effect is 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 and expensive actions to
determine the cause of the Mortgagor's default and the likelihood that the
Mortgagor 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
Mortgagors who are suffering from a temporary financial disability. In other
cases, courts have limited the right of the lender to foreclose if the
default under the mortgage is not monetary, e.g., the Mortgagor failed to
maintain the mortgaged property adequately or the Mortgagor executed a junior
mortgage on the mortgaged property. The exercise by the court of its equity
powers will depend on the individual circumstances of each case presented to
it. Finally, some courts have been faced with the issue of whether federal or
state constitutional provisions reflecting due process concerns for adequate
notice require that a Mortgagor receive notice in addition to
statutorily-prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a
public sale under a mortgage providing for a power of sale does not involve
sufficient state action to afford constitutional protections to the
Mortgagor.
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 require several years to complete. Moreover, as discussed below, a
non-collusive, regularly conducted foreclosure sale may be challenged as a
fraudulent conveyance, regardless of the parties' intent, if a court
determines that the sale was for less than fair consideration and such sale
occurred while the Mortgagor was insolvent (or the Mortgagor was rendered
insolvent as a result of such sale) and within one year (or within the state
statute of limitations if the trustee in bankruptcy elects to proceed under
state fraudulent conveyance law) of the filing of bankruptcy.
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Non-Judicial Foreclosure/Power of Sale
Foreclosure of a deed of trust is generally accomplished by a non-judicial
trustee's sale pursuant to the power of sale granted in the deed of trust. A
power of sale is typically granted in a deed of trust. It may also be
contained in any other type of mortgage instrument. A power of sale allows a
non-judicial public sale to be conducted generally following a request from
the beneficiary/lender to the trustee to sell the property upon any default
by the Mortgagor under the terms of the mortgage note or the mortgage
instrument and after notice of sale is given in accordance with the terms of
the mortgage instrument, as well as applicable state law. In some states,
prior to such sale, the trustee under a deed of trust must record a notice of
default and notice of sale and send a copy to the Mortgagor 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 Mortgagor or junior lienholder may then have the right,
during a reinstatement period required in some states, to cure the default by
paying the entire actual amount in arrears (without acceleration) plus the
expenses incurred in enforcing the obligation. In other states, the Mortgagor
or the junior lienholder is not provided a period to reinstate the loan, but
has only the right to pay off the entire debt to prevent the foreclosure
sale. Generally, the procedure for public sale, the parties entitled to
notice, the method of giving notice and the applicable time periods are
governed by state law and vary among the states. Foreclosure of a deed to
secure debt is also generally accomplished by a non-judicial sale similar to
that required by a deed of trust, except that the lender or its agent, rather
than a trustee, is typically empowered to perform the sale in accordance with
the terms of the deed to secure debt and applicable law.
Public Sale
A third party may be unwilling to purchase a mortgaged property at a
public sale because of the difficulty in determining the value of such
property at the time of sale, due to, among other things, redemption rights
which may exist and the possibility of physical deterioration of the property
during the foreclosure proceedings. For these reasons, it is common for the
lender to purchase the mortgaged property for an amount equal to or less than
the underlying debt and accrued and unpaid interest plus the expenses of
foreclosure. Generally, state law controls the amount of foreclosure costs
and expenses which may be recovered by a lender. Thereafter, subject to the
Mortgagor's right in some states to remain in possession during a redemption
period, if applicable, the lender will become the owner of the property and
have both the benefits and burdens of ownership of the mortgaged property.
For example, the lender will have the obligation to pay debt service on any
senior mortgages, to pay taxes, obtain casualty insurance and to make such
repairs at its own expense as are necessary to render the property suitable
for sale. Frequently, the lender employs a third party management company to
manage and operate the property. 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 costs of management
and operation of those mortgaged properties which are hotels, motels,
restaurants, nursing or convalescent homes or hospitals may be particularly
significant because of the expertise, knowledge and, with respect to nursing
or convalescent homes or hospitals, regulatory compliance, required to run
such operations and the effect which foreclosure and a change in ownership
may have on the public's and the industry's (including franchisors')
perception of the quality of such operations. The lender will commonly obtain
the services of a real estate broker and pay the broker's commission in
connection with the sale of the property. Depending upon market conditions,
the ultimate proceeds of the sale of the property may not equal the lender's
investment in the property. Moreover, a lender commonly incurs substantial
legal fees and court costs in acquiring a mortgaged property through
contested foreclosure and/or bankruptcy proceedings. Furthermore, a few
states require that any environmental contamination at certain types of
properties be cleaned up before a property may be resold. In addition, a
lender may be responsible under federal or state law for the cost of cleaning
up a mortgaged property that is environmentally contaminated. See
"Environmental Legislation." Generally state law controls the amount of
foreclosure expenses and costs, including attorneys' fees, that may be
recovered by a lender.
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A junior mortgagee may not foreclose on the property securing the junior
mortgage unless it forecloses subject to senior mortgages and any other prior
liens, in which case it may be obliged to make payments on the senior
mortgages to avoid their foreclosure. In addition, in the event that the
foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale"
clause contained in a senior mortgage, the junior mortgagee may be required
to pay the full amount of the senior mortgage to avoid its foreclosure.
Accordingly, with respect to those Mortgage Loans which are junior mortgage
loans, if the lender purchases the property the lender's title will be
subject to all senior mortgages, prior liens and certain governmental liens.
The proceeds received by the referee or trustee from the sale are applied
first to the costs, fees and expenses of sale and then in satisfaction of the
indebtedness secured by the mortgage under which the sale was conducted. Any
proceeds remaining after satisfaction of senior mortgage debt are generally
payable to the holders of junior mortgages and other liens and claims in
order of their priority, whether or not the Mortgagor is in default. Any
additional proceeds are generally payable to the Mortgagor. The payment of
the proceeds to the holders of junior mortgages may occur in the foreclosure
action of the senior mortgage or a subsequent ancillary proceeding or may
require the institution of separate legal proceedings by such holders.
In connection with a Series of Certificates for which an election is made
to qualify the Trust Fund, or a portion thereof, as a REMIC, the REMIC
Provisions and the Agreement may require the Master Servicer to hire an
independent contractor to operate any foreclosed property relating to Whole
Loans.
Rights of Redemption
The purposes of a foreclosure action are to enable the mortgagee to
realize upon its security and to bar the Mortgagor, and all persons who have
an interest in the property which is subordinate to the mortgage being
foreclosed, from exercise of their "equity of redemption." The doctrine of
equity of redemption provides that, until the property covered by a mortgage
has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having an interest which is subordinate to that of
the foreclosing mortgagee have an equity of redemption and may redeem the
property by paying the entire debt with interest. In addition, in some
states, when a foreclosure action has been commenced, the redeeming party
must pay certain costs of such action. Those having an equity of redemption
must generally be made parties and joined in the foreclosure proceeding in
order for their equity of redemption to be cut off and terminated.
The equity of redemption is a common-law (non-statutory) right which
exists prior to completion of the foreclosure, is not waivable by the
Mortgagor, must be exercised prior to foreclosure sale and should be
distinguished from the post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage,
the Mortgagor and foreclosed junior lienors are given a statutory period in
which to redeem the property from the foreclosure sale. In some states,
statutory redemption may occur only upon payment of the foreclosure sale
price. In other states, redemption may be authorized if the former Mortgagor
pays only a portion of the sums due. The effect of a statutory right of
redemption is to diminish the ability of the lender to sell the foreclosed
property. The exercise of a right of redemption would defeat the title of any
purchaser from a foreclosure sale or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to maintain the property and pay the expenses of ownership until the
redemption period has expired. In some states, a post-sale statutory right of
redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Under the REMIC Provisions currently in effect, property acquired by
foreclosure generally must not be held for more than two years. Unless
otherwise provided in the related Prospectus Supplement, with respect to a
Series of Certificates for which an election is made to qualify the Trust
Fund or a part thereof as a REMIC, the Agreement will permit foreclosed
property to be held for more than two years if the Internal Revenue Service
grants an extension of time within which to sell such property or independent
counsel renders an opinion to the effect that holding such property for such
additional period is permissible under the REMIC Provisions.
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Anti-Deficiency Legislation
Some or all of the Mortgage Loans may be nonrecourse loans, as to which
recourse may be had only against the specific property securing the related
Mortgage Loan and a personal money judgment may not be obtained against the
Mortgagor. Even if a mortgage loan by its terms provides for recourse to the
Mortgagor, some states impose prohibitions or limitations on such recourse.
For example, statutes in some states limit the right of the lender to obtain
a deficiency judgment against the Mortgagor following foreclosure or sale
under a deed of trust. A deficiency judgment would be a personal judgment
against the former Mortgagor equal to the difference between the net amount
realized upon the public sale of the real property and the amount due to the
lender.
Some states require the lender to exhaust the security afforded under a
mortgage by foreclosure in an attempt to satisfy the full debt before
bringing a personal action against the Mortgagor. In certain other states,
the lender has the option of bringing a personal action against the Mortgagor
on the debt without first exhausting such security; however, in some of these
states, the lender, following judgment on such personal action, may be deemed
to have elected a remedy and may be precluded from exercising remedies with
respect to the security. In some cases, a lender will be precluded from
exercising any additional rights under the note or mortgage if it has taken
any prior enforcement action. Consequently, the practical effect of the
election requirement, in those states permitting such election, is that
lenders will usually proceed against the security first rather than bringing
a personal action against the Mortgagor. Finally, other statutory provisions
limit any deficiency judgment against the former Mortgagor following a
judicial sale to the excess of the outstanding debt over the fair market
value of the property at the time of the public sale. The purpose of these
statutes is generally to prevent a lender from obtaining a large deficiency
judgment against the former Mortgagor as a result of low or no bids at the
judicial sale.
Leasehold Risks
Mortgage Loans may be secured 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 creating the leasehold estate could terminate,
leaving the leasehold mortgagee without its security. 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. This risk may be minimized if the ground lease
contains certain provisions protective of the mortgagee, but the ground
leases that secure Mortgage Loans may not contain some of these protective
provisions, and mortgages may not contain the other protections discussed in
the next paragraph. Protective ground lease provisions include the right of
the leasehold mortgagee to receive notices from the ground lessor of any
defaults by the Mortgagor; the right to cure such defaults, with adequate
cure periods; if a default is not susceptible of cure by the leasehold
mortgagee, the right to acquire the leasehold estate through foreclosure or
otherwise; the ability of the ground lease to be assigned to and by the
leasehold mortgagee or purchaser at a foreclosure sale and for the
concomitant release of the ground lessee's liabilities thereunder; and the
right of the leasehold mortgagee to enter into a new ground lease with the
ground lessor on the same terms and conditions as the old ground lease in the
event of a termination thereof.
In addition to the foregoing protections, a leasehold mortgagee may
require that the ground lease or leasehold mortgage prohibit the ground
lessee from treating the ground lease as terminated in the event of the
ground lessor's bankruptcy and rejection of the ground lease by the trustee
for the debtor-ground lessor. As further protection, a leasehold mortgage may
provide for the assignment of the debtor-ground lessee's right to reject a
lease pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as
amended (Title 11 of the United States Code) (the "Bankruptcy Code"),
although the enforceability of such clause has not been established. Without
the protections described above, a leasehold mortgagee may lose the
collateral securing its leasehold mortgage. In addition, terms and conditions
of a leasehold mortgage are subject to the terms and conditions of the ground
lease. Although certain rights given to a ground lessee can be limited by the
terms of a leasehold mortgage, 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.
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Cooperative Loans
The cooperative shares owned by the tenant-stockholder and pledged to the
lender are, in almost all cases, subject to restrictions on transfer as set
forth in the Cooperative's Certificate of Incorporation and By-laws, as well
as the proprietary lease or occupancy agreement, and may be cancelled by the
cooperative for failure by the tenant-stockholder to pay rent or other
obligations or charges owed by such tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permits the Cooperative to terminate such lease or agreement in the an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder under the
proprietary lease or occupancy agreement will usually constitute a default
under the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement is terminated, the Cooperative will recognize the lender's lien
against proceeds from the sale of the Cooperative apartment, subject,
however, to the Cooperative's right to sums due under such proprietary lease
or occupancy agreement. The total amount owed to the Cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure on
a Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender
is not limited in any rights it may have to dispossess the
tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the UCC and the
security agreement relating to those shares. Article 9 of the UCC requires
that a sale be conducted in a "commercially reasonable" manner. Whether a
foreclosure sale has been conducted in a "commercially reasonable" manner
will depend on the facts in each case. In determining commercial
reasonableness, a court will look to the notice given the debtor and the
method, manner, time, place and terms of the foreclosure. Generally, a sale
conducted according to the usual practice of banks selling similar collateral
will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy
the indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to
reimbursement is subject to the right of the Cooperatives to receive sums due
under the proprietary lease or occupancy agreement. If there are proceeds
remaining, the lender must account to the tenant-stockholder for the surplus.
Conversely, if a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the deficiency.
In the case of foreclosure on a building which was converted from a rental
building to a building owned by a Cooperative under a non-eviction plan, some
states require that a purchaser at a foreclosure sale take the property
subject to rent control and rent stabilization laws which apply to certain
tenants who elected to remain in the building was so converted.
BANKRUPTCY LAWS
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)
are automatically stayed upon the filing of the bankruptcy petition, and,
usually, 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.
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Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage secured
by property of the debtor may be modified under certain circumstances. In
many jurisdictions, the outstanding amount of the loan secured by the real
property 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, which reduction may result
from a reduction in the rate of interest and/or the alteration of the
repayment schedule (with or without affecting the unpaid principal balance of
the loan), and/or an extension (or reduction) of the final maturity date.
Some courts with federal bankruptcy jurisdiction have approved plans, based
on the particular facts of the reorganization case, that effected the curing
of a mortgage loan default by paying arrearages over a number of years. Also,
under federal bankruptcy law, a bankruptcy court may permit a debtor through
its rehabilitative plan to de-accelerate a secured loan and to reinstate the
loan even though the lender accelerated the mortgage loan and final judgment
of foreclosure had been entered in state court (provided no sale of the
property had yet occurred) prior to the filing of the debtor's petition. This
may be done even if the full amount due under the original loan is never
repaid.
Federal bankruptcy law provides generally that rights and obligation under
an unexpired lease of the debtor/lessee may not be terminated or modified at
any time after the commencement of a case under the Bankruptcy Code solely on
the basis of a provision in the lease to such effect or because of certain
other similar events. This prohibition on so-called "ipso facto clauses"
could limit the ability of the Trustee for a Series of Certificates to
exercise certain contractual remedies with respect to the Leases. In
addition, Section 362 of the Bankruptcy Code operates as an automatic stay
of, among other things, any act to obtain possession of property from a
debtor's estate, which may delay a Trustee's exercise of such remedies for a
related Series of Certificates in the event that a related Lessee or a
related Mortgagor becomes the subject of a proceeding under the Bankruptcy
Code. For example, a mortgagee would be stayed from enforcing a Lease
Assignment by a Mortgagor related to a Mortgaged Property if the related
Mortgagor was in a bankruptcy proceeding. The legal proceedings necessary to
resolve the issues could be time-consuming and might result in significant
delays in the receipt of the assigned rents. Similarly, the filing of a
petition in bankruptcy by or on behalf of a Lessee of a Mortgaged Property
would result in a stay 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. Rents and other
proceeds of a Mortgage Loan may also escape an assignment thereof if the
assignment is not fully perfected under state law prior to commencement of
the bankruptcy proceeding. See "--Leases and Rents" above.
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the
lease and retain it or assign it to a third party or (b) reject the lease. If
the lease is assumed, the trustee in bankruptcy on behalf of the lessee, or
the lessee as debtor-in-possession, or the 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, however, as the lessor may be forced to
continue under the lease with a lessee that is a poor credit risk or an
unfamiliar tenant if the lease was assigned, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, such
rejection generally constitutes a breach of the executory contract or
unexpired lease immediately before the date of filing the petition. As a
consequence, the other party or parties to such lease, such as the Mortgagor,
as lessor under a Lease, would have only an unsecured claim against the
debtor for damages resulting from such breach, which could adversely affect
the security for the related Mortgage Loan. In addition, pursuant to Section
502(b)(6) of the Bankruptcy Code, a lessor's damages for lease rejection in
respect of future rent installments are limited to the rent reserved by the
lease, without acceleration, for the greater of one year or 15%, not to
exceed three years, of the remaining term of the lease.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the
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alternative, the lessee may remain in possession of the leasehold for the
balance of such term and for any renewal or extension of such term that is
enforceable by the lessee under applicable nonbankruptcy law. The Bankruptcy
Code provides that if a lessee elects to remain in possession after such a
rejection of a lease, the lessee may offset against rents reserved under the
lease for the balance of the term after the date of rejection of the lease,
and any such renewal or extension thereof, any damages occurring after such
date caused by the nonperformance of any obligation of the lessor under the
lease after such date. To the extent provided in the related Prospectus
Supplement, the Lessee will agree under certain Leases to pay all amounts
owing thereunder the Master Servicer without offset. To the extent that such
a contractual obligation remains enforceable against the Lessee, the Lessee
would not be able to avail itself of the rights of offset generally afforded
to lessees of real property under the Bankruptcy Code.
In a bankruptcy or similar proceeding of a Mortgagor, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the Mortgagor, or made directly by the related Lessee, under
the related Mortgage Loan to the Trust Fund. Payments on long-term debt may
be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may
have the power to grant liens senior to the lien of a mortgage, and analogous
state statutes and general principles of equity may also provide a Mortgagor
with means to halt a foreclosure proceeding or sale and to force a
restructuring of a mortgage loan on terms a lender would not otherwise
accept. Moreover, the laws of certain states also give priority to certain
tax liens over the lien of a mortgage or deed of trust. Under the Bankruptcy
Code, if the court finds that actions of the mortgagee have been
unreasonable, the lien of the related mortgage may be subordinated to the
claims of unsecured creditors.
To the extent described in the related Prospectus Supplement, certain of
the Mortgagors may be partnerships. The laws governing limited partnerships
in certain states provide that the commencement of a case under the
Bankruptcy Code with respect to a general partner will cause a person to
cease to be a general partner of the limited partnership, unless otherwise
provided in writing in the limited partnership agreement. This provision may
be construed as an "ipso facto" clause and, in the event of the general
partner's bankruptcy, may not be enforceable. To the extent described in the
related Prospectus Supplement, certain limited partnership agreements of the
Mortgagors may provide that the commencement of a case under the Bankruptcy
Code with respect to the related general partner constitutes an event of
withdrawal (assuming the enforceability of the clause is not challenged in
bankruptcy proceedings or, if challenged, is upheld) that might trigger the
dissolution of the limited partnership, the winding up of its affairs and the
distribution of its assets, unless (i) at the time there was at least one
other general partner and the written provisions of the limited partnership
permit the business of the limited partnership to be carried on by the
remaining general partner and that general partner does so or (ii) the
written provisions of the limited partnership agreement permit the limited
partner to agree within a specified time frame (often 60 days) after such
withdrawal to continue the business of the limited partnership and to the
appointment of one or more general partners and the limited partners do so.
In addition, the laws governing general partnerships in certain states
provide that the commencement of a case under the Bankruptcy Code or state
bankruptcy laws with respect to a general partner of such partnerships
triggers the dissolution of such partnership, the winding up of its affairs
and the distribution of its assets. Such state laws, however, may not be
enforceable or effective in a bankruptcy case. The dissolution of a
Mortgagor, the winding up of its affairs and the distribution of its assets
could result in an acceleration of its payment obligation under a related
Mortgage Loan, which may reduce the yield on the related Series of
Certificates in the same manner as a principal prepayment.
In addition, the bankruptcy of the general partner of a Mortgagor that is
a partnership may provide the opportunity for a trustee in bankruptcy for
such general partner, such general partner as a debtor-in-possession, or a
creditor of such general partner to obtain an order from a court
consolidating the assets and liabilities of the general partner with those of
the Mortgagor pursuant to the doctrines of
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substantive consolidation or piercing the corporate veil. In such a case, the
respective Mortgaged Property, for example, would become property of the
estate of such bankrupt general partner. Not only would the Mortgaged
Property be available to satisfy the claims of creditors of such general
partner, but an automatic stay would apply to any attempt by the Trustee to
exercise remedies with respect to such Mortgaged Property. However, such an
occurrence should not affect the Trustee's status as a secured creditor with
respect to the Mortgagor or its security interest in the Mortgaged Property.
ENVIRONMENTAL LEGISLATION
Real property pledged as security to a lender may be subject to unforeseen
environmental liabilities. Of particular concern may be those Mortgaged
Properties which are, or have been, the site of manufacturing, industrial or
disposal activity. Such environmental liabilities may give rise to (i) a
diminution in value of property securing any Mortgage Loan, (ii) limitation
on the ability to foreclose against such property or (iii) in certain
circumstances as more fully described below, liability for clean up costs or
other remedial actions, which liability could exceed the value of the
principal balance of the related Mortgage Loan or of such Mortgaged Property.
Under the laws of many states, contamination on a property may give rise
to a lien on the property for cleanup costs. In several states, such a lien
has priority over all existing liens (a "superlien") including those of
existing mortgages; in these states, the lien of a mortgage contemplated by
this transaction may lose its priority to such a superlien.
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), a lender may be liable either
to the government or to private parties for cleanup costs on a property
securing a loan, even if the lender does not cause or contribute to the
contamination. CERCLA imposes strict, as well as joint and several, liability
on several classes of potentially responsible parties, including current
owners and operators of the property, regardless of whether they caused or
contributed to the contamination. Many states have laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators. 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 exemption for
holders of a security interest such as a secured lender applies only in
circumstances where the lender acts to protect its security interest in the
contaminated facility or property. Thus, if a lender's activities encroach on
the actual management of such facility or property, the lender faces
potential liability as an "owner or operator" under CERCLA. Similarly, when a
lender forecloses and takes title to a contaminated facility or property
(whether it holds the facility or property as an investment or leases it to a
third party), the lender may incur potential CERCLA liability.
Whether actions taken by a lender would constitute such participation in
the management of a facility or property, so that the lender loses the
protection of this "second creditor exclusion," has been a matter of judicial
interpretation of the statutory language, and court decisions have
historically been inconsistent. In 1990, the United States Court of Appeals
for the Eleventh Circuit suggested, in United States v. Fleet Factors Corp.,
that the mere capacity of the lender to influence a borrower's decisions
regarding disposal of hazardous substances was sufficient participation in
the management of the borrower's business to deny the protection of the
secured creditor exclusion to the lender, regardless of whether the lender
actually exercised such influence. Other judicial decisions did not interpret
the secured creditor exclusion as narrowly as did the Eleventh Circuit.
This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996
(the "Asset Conservation Act"), which took effect on September 30, 1996. The
Asset Conservation Act provides that in order to be deemed to have
participated in the management of a secured property, a lender must actually
participate in the operational affairs of the property or of the borrower.
The Asset Conservation Act also provides that participation in the management
of the property does not include "merely having the capacity to influence, or
unexercised right to control" operations. Rather, a lender will lose the
protection of the secured creditor exclusion only if it exercises
decision-making control over the borrower's environmental
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compliance and hazardous substance handling and disposal practices, or
assumes day-to-day management of all operational functions of the secured
property.
The secured-creditor exemption does not protect a lender from liability
under CERCLA in cases where the lender arranges for disposal of hazardous
substances or for transportation of hazardous substances. The definition of
"hazardous substances" under CERCLA specifically excludes petroleum products,
and the secured-creditor exemption does not govern liability for cleanup
costs under federal laws other than CERCLA, in particular Subtitle I of the
federal Resource Conservation and Recovery Act ("RCRA"), which regulates
underground petroleum (other than heating oil) storage tanks. However, the
EPA has adopted a lender liability rule for underground storage tanks under
Subtitle I of RCRA. Under such rule, a holder of a security interest in an
underground storage tank or real property containing an underground storage
tank is not considered an operator of the underground storage tank as long as
petroleum is not added to, stored in or dispensed from the tank. 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 protections for
secured creditors.
If a lender is or becomes liable, it may bring an action for contribution
against the owner or operator who created the environmental hazard, but that
person or entity may be bankrupt or otherwise judgment proof. It is possible
that cleanup costs could become a liability of the Trust Fund and occasion a
loss to Certificateholders in certain circumstances described above if such
remedial costs were incurred.
The related Agreement will provide that the Special Servicer, acting on
behalf of the Trustee, may not acquire title to a Mortgaged Property or take
over its operation unless the Special Servicer has previously determined,
based on a report prepared by a person who regularly conducts environmental
assessments, that: (i) such Mortgaged Property is in compliance with
applicable environmental laws, or, if not, that taking such actions as are
necessary to bring the Mortgaged Property in compliance therewith is likely
to produce a greater recovery on a present value basis, after taking into
account any risks associated therewith, than not taking such actions and (ii)
there are no circumstances present at the Mortgaged Property relating to the
use, management or disposal of any Hazardous Materials for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any federal, state or local law or regulation. This
requirement effectively precludes enforcement of the security for the related
Mortgage Note until a satisfactory environmental inquiry is undertaken, or
that, if any Hazardous Materials are present for which such action could be
required, taking such actions with respect to the affected Mortgaged Property
is reasonably likely to produce a greater recovery on a present value basis,
after taking into account any risks associated therewith, than not taking
such actions, reducing the likelihood that a given Trust Fund will become
liable for any condition or circumstance that may give rise to any
environmental claim (an "Environmental Hazard Condition") affecting a
Mortgaged Property, but making it more difficult to realize on the security
for the Mortgage Loan. However, there can be no assurance that any
environmental assessment obtained by the Special Servicer will detect all
possible Environmental Hazard Conditions, that any estimate of the costs of
effecting compliance at any Mortgaged Property and the recovery thereon will
be correct, or that the other requirements of the Agreement, even if fully
observed by the Master Servicer or Special Servicer, as the case may be, will
in fact insulate a given Trust Fund from liability for Environmental Hazard
Conditions. Any additional restrictions on acquiring titles to a Mortgaged
Property may be set forth in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Depositor generally will not have determined whether environmental
assessments have been conducted with respect to the Mortgaged Properties
relating to the Mortgage Loans included in the Mortgage Pool for a Series,
and it is likely that any environmental assessments which would have been
conducted with respect to any of the Mortgaged Properties would have been
conducted at the time of the origination of the related Mortgage Loans and
not thereafter. If specified in the related Prospectus Supplement, a
Warranting Party will represent and warrant that based on an environmental
audit commissioned by Warranting Party, as of the date of the origination of
a Mortgage Loan, the related Mortgaged Property is not affected by a
Disqualifying Condition (as defined below). No such person will however, be
responsible for any Disqualifying Condition which may arise on a Mortgaged
Property after the date of origination of the related Mortgage
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Loan, whether due to actions of the Mortgagor, the Master Servicer, the
Primary Servicer, the Special Servicer or any other person. It may not always
be possible to determine whether a Disqualifying Condition arose prior or
subsequent to the date of the origination of the related Mortgage Loan.
A "Disqualifying Condition" is defined generally as a condition which
would reasonably be expected to (1) constitute or result in a violation of
applicable environmental laws, (2) require any expenditure material in
relation to the principal balance of the related Mortgage Loan to achieve or
maintain compliance in all material respects with any applicable
environmental laws, or (3) require substantial cleanup, remedial action or
other extraordinary response under any applicable environmental laws in
excess of a specified escrowed amount.
"Hazardous Materials" are generally defined under several federal and
state statutes, and include dangerous toxic or hazardous pollutants,
chemicals, wastes or substances, including, without limitation, those so
identified pursuant to CERCLA, and specifically including, asbestos and
asbestos containing materials, polychlorinated biphenyls, radon gas,
petroleum and petroleum products and urea formaldehyde.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain due-on-sale and
due-on-encumbrance clauses. These clauses generally provide that the lender
may accelerate the maturity of the loan if the Mortgagor sells or otherwise
transfers or encumbers the mortgaged property. Certain of these clauses may
provide that, upon an attempted breach thereof by the Mortgagor of an
otherwise non-recourse loan, the Mortgagor becomes personally liable for the
mortgage debt. The enforceability of due-on-sale clauses has been the subject
of legislation or litigation in many states and, in some cases, the
enforceability of these clauses was limited or denied. However, with respect
to certain loans the Garn-St Germain Depository Institutions Act of 1982
preempts state constitutional, statutory and case law that prohibits the
enforcement of due-on-sale clauses and permits lenders to enforce these
clauses in accordance with their terms subject to certain limited exceptions.
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer, on behalf of the Trust Fund, will determine whether to exercise any
right the Trustee may have as mortgagee to accelerate payment of any such
Mortgage Loan or to withhold its consent to any transfer or further
encumbrance in a manner consistent with the Servicing Standard.
In addition, under federal bankruptcy laws, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.
SUBORDINATE FINANCING
Where the Mortgagor encumbers mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. First, the
Mortgagor may have difficulty servicing and repaying multiple loans. In
addition, if the junior loan permits recourse to the Mortgagor (as junior
loans often do) and the senior loan does not, a Mortgagor may be more likely
to repay sums due on the junior loan than those on the senior 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 Mortgagor 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 Mortgagor is additionally burdened.
Third, if the Mortgagor 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, PREPAYMENT CHARGES AND 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
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provide for prepayment fees or yield maintenance penalties if the obligation
is paid prior to maturity or prohibit such prepayment for a specified period.
In certain states, there are or may be specific limitations upon the late
charges which a lender may collect from a Mortgagor for delinquent payments.
Certain states also limit the amounts that a lender may collect from a
Mortgagor as an additional charge if the loan is prepaid. The enforceability,
under the laws of a number of states of provisions providing for prepayment
fees or 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 Interest Rates, may increase the likelihood of
refinancing or other early retirements of the Mortgage Loans.
ACCELERATION ON DEFAULT
Unless otherwise specified in the related Prospectus Supplement, some of
the Mortgage Loans included in the Mortgage Pool for a Series will include a
"debt-acceleration" clause, which permits the lender to accelerate the full
debt upon a monetary or nonmonetary default of the Mortgagor. The courts of
all states will enforce clauses providing for acceleration in the event of a
material payment default after giving effect to any appropriate notices. The
equity courts of the state, however, may refuse to foreclose 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.
Furthermore, in some states, the Mortgagor may avoid foreclosure and
reinstate an accelerated loan by paying only the defaulted amounts and the
costs and attorneys' fees incurred by the lender in collecting such defaulted
payments.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V"), provides that state usury
limitations shall not apply to certain types of residential (including
multifamily but not other commercial) first mortgage loans originated by
certain lenders after March 31, 1980. A similar federal statute was in effect
with respect to mortgage loans made during the first three months of 1980.
The statute 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.
The Depositor has been advised by counsel that a court interpreting Title
V would hold that residential first mortgage loans that are originated on or
after January 1, 1980 are subject to federal preemption. Therefore, in a
state that has not taken the requisite action to reject application of Title
V or to adopt a provision limiting discount points or other charges prior to
origination of such mortgage loans, any such limitation under such state's
usury law would not apply to such mortgage loans.
In any state in which application of Title V has been expressly rejected
or a provision limiting discount points or other charges is adopted, no
Mortgage Loan originated after the date of such state action will 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 shall 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 Mortgagor's counsel
has rendered an opinion that such choice of law provision would be given
effect.
Statutes differ in their provisions as to the consequences of a usurious
loan. One group of statutes requires the lender to forfeit the interest due
above the applicable limit or impose a specified penalty. Under this
statutory scheme, the borrower may cancel the recorded mortgage or deed of
trust upon paying its debt with lawful interest, and the lender may
foreclose, but only for the debt plus lawful interest. A second group of
statutes is more severe. A violation of this type of usury law results in the
invalidation of the transaction, thereby permitting the borrower to cancel
the recorded mortgage or deed of trust without any payment or prohibiting the
lender from foreclosing.
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CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES
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 Mortgage Property which could, together
with the possibility of limited alternative uses for a particular Mortgaged
Property (e.g., a nursing or convalescent home or hospital), result in a
failure to realize the full principal amount of the related Mortgage Loan.
Mortgages on Mortgaged Properties which are owned by the Mortgagor under a
condominium form of ownership are subject to the declaration, by-laws and
other rules and regulations of the condominium association. Mortgaged
Properties which are hotels or motels may present additional risk in that
hotels and motels are typically operated pursuant to franchise, management
and operating agreements which may be terminable by the operator, and the
transferability of the hotel's operating, liquor and other licenses to the
entity acquiring the hotel either through purchases or foreclosure is subject
to the vagaries of local law requirements. In addition, Mortgaged Properties
which are multifamily residential properties may be subject to rent control
laws, which could impact the future cash flows of such properties.
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 Mortgagor 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 Mortgagor as owner of 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 Mortgagor of complying with the
requirements of the ADA may be subject to more stringent requirements than
those to which the Mortgagor is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a Mortgagor who enters military service after the
origination of such Mortgagor's Mortgage Loan (including a Mortgagor 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 Mortgagor's active duty
status, unless a court orders otherwise upon application of the lender. The
Relief Act applies to Mortgagors 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 Mortgagors who enter military service (including
reservists who are called to active duty) after origination of the related
Mortgage Loan, no information can be provided as to the number of loans that
may be affected by the Relief Act. Application of the Relief Act would
adversely affect, for an indeterminate period of time, the ability of any
servicer to collect full amounts of interest on certain of the Mortgage
Loans. Any shortfalls in interest collections resulting from the application
of the 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 servicer to foreclose on an affected Mortgage Loan
during the Mortgagor's period of active duty status, and, under certain
circumstances, during an additional three month period thereafter. Thus, in
the event that such a Mortgage Loan goes into default, there may be delays
and losses occasioned thereby.
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FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984 (the
"Crime Control Act"), the government may seize the property even before
conviction. The government must publish notice of the forfeiture proceeding
and may give notice to all parties "known to have an alleged interest in the
property," including the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before
commission of the crime upon which the forfeiture is based, or (ii) the
lender was, at the time of execution of the mortgage, "reasonably without
cause to believe" that the property was used in, or purchased with the
proceeds of, illegal drug or RICO activities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered
Certificates is based on the advice of Brown & Wood llp, counsel to the
Depositor. This summary is based on laws, regulations, including the REMIC
regulations promulgated by the Treasury Department (the "REMIC Regulations"),
rulings and decisions now in effect or (with respect to regulations)
proposed, all of which are subject to change either prospectively or
retroactively. Brown & Wood llp will deliver an opinion to the Depositor that
the information set forth under this caption, "Certain Federal Income Tax
Consequences," to the extent that it constitutes matters of law or legal
conclusions, is correct in all material respects. This summary does not
address the federal income tax consequences of an investment in Certificates
applicable to all categories of investors, some of which (for example, banks
and insurance companies) may be subject to special rules. Prospective
investors should consult their tax advisors regarding the federal, state,
local and any other tax consequences to them of the purchase, ownership and
disposition of Certificates.
GENERAL
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust Fund relating to
a particular Series of Certificates as a REMIC under the Code. The Prospectus
Supplement for each Series of Certificates will specify whether a REMIC
election will be made.
GRANTOR TRUST FUNDS
If a REMIC election is not made, Brown & Wood llp will deliver its opinion
that the Trust Fund will not be classified as an association taxable as a
corporation and that each such Trust Fund will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Code. In this case,
owners of Certificates will be treated for federal income tax purposes as
owners of a portion of the Trust Fund's assets as described below.
A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES
Characterization. The Trust Fund may be created with one class of Grantor
Trust Certificates. In this case, each Grantor Trust Certificateholder will
be treated as the owner of a pro rata undivided interest in the interest and
principal portions of the Trust Fund represented by the Grantor Trust
Certificates and will be considered the equitable owner of a pro rata
undivided interest in each of the Mortgage Assets in the Pool. Any amounts
received by a Grantor Trust Certificateholder in lieu of amounts due with
respect to any Mortgage Asset because of a default or delinquency in payment
will be treated for federal income tax purposes as having the same character
as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the
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entire income from the Mortgage Loans in the Trust Fund represented by
Grantor Trust Certificates, including interest, original issue discount
("OID"), if any, prepayment fees, assumption fees, any gain recognized upon
an assumption and late payment charges received by the Master Servicer. Under
Code Sections 162 or 212 each Grantor Trust Certificateholder will be
entitled to deduct its pro rata share of servicing fees, prepayment fees,
assumption fees, any loss recognized upon an assumption and late payment
charges retained by the Master Servicer, provided that such amounts are
reasonable compensation for services rendered to the Trust Fund. Grantor
Trust Certificateholders that are individuals, estates or trusts will be
entitled to deduct their share of expenses as itemized deductions only to the
extent such expenses plus all other Code Section 212 expenses exceed two
percent of its adjusted gross income. In addition, the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross income exceeds the applicable amount (which amount will be
adjusted for inflation) will be reduced by the lesser of (i) 3% of the excess
of adjusted gross income over the applicable amount or (ii) 80% of the amount
of itemized deductions otherwise allowable for such taxable year. A Grantor
Trust Certificateholder using the cash method of accounting must take into
account its pro rata share of income and deductions as and when collected by
or paid to the Master Servicer. A Grantor Trust Certificateholder using an
accrual method of accounting must take into account its pro rata share of
income and deductions as they become due or are paid to the Master Servicer,
whichever is earlier. If the servicing fees paid to the Master Servicer are
deemed to exceed reasonable servicing compensation, the amount of such excess
could be considered as an ownership interest retained by the Master Servicer
(or any person to whom the Master Servicer assigned for value all or a
portion of the servicing fees) in a portion of the interest payments on the
Mortgage Assets. The Mortgage Assets would then be subject to the "coupon
stripping" rules of the Code discussed below.
Unless otherwise specified in the related Prospectus Supplement, as to
each Series of Certificates Brown & Wood llp will have advised the Depositor
that:
(i) a Grantor Trust Certificate owned by a "domestic building and loan
association" within the meaning of Code Section 7701(a)(19) representing
principal and interest payments on Mortgage Assets will be considered to
represent "loans . . . secured by an interest in real property which is .
. . residential property" within the meaning of Code Section
7701(a)(19)(C)(v), to the extent that the Mortgage Assets represented by
that Grantor Trust Certificate are of a type described in such Code
section;
(ii) a Grantor Trust Certificate owned by a real estate investment trust
representing an interest in Mortgage Assets will be considered to
represent "real estate assets" within the meaning of Code Section
856(c)(5)(A), and interest income on the Mortgage Assets will be
considered "interest on obligations secured by mortgages on real property"
within the meaning of Code Section 856(c)(3)(B), to the extent that the
Mortgage Assets represented by that Grantor Trust Certificate are of a
type described in such Code section; and
(iii) a Grantor Trust Certificate owned by a REMIC will represent
"obligation[s] . . . which [are] principally secured by an interest in
real property" within the meaning of Code Section 860G(a)(3).
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application
of Code Section 593(d) to any taxable year beginning after December 31, 1995.
Stripped Bonds and Coupons. Certain Trust Funds may consist of Government
Securities which constitute "stripped bonds" or "stripped coupons" as those
terms are defined in Section 1286 of the Code, and, as a result, such assets
would be subject to the stripped bond provisions of the Code.
Under these rules, such Government Securities are treated as having
original issue discount based on the purchase price and the stated redemption
price at maturity of each Security. As such, Grantor Trust Certificateholders
would be required to include in income their pro rata share of the original
issue discount on each Government Security recognized in any given year on an
economic accrual basis even if the Grantor Trust Certificateholder is a cash
method taxpayer. Accordingly, the sum of the income includible to the Grantor
Trust Certificateholder in any taxable year may exceed amounts actually
received during such year.
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Premium. The price paid for a Grantor Trust Certificate by a holder will
be allocated to such holder's undivided interest in each Mortgage Asset based
on each Mortgage Asset's relative fair market value, so that such holder's
undivided interest in each Mortgage Asset will have its own tax basis. A
Grantor Trust Certificateholder that acquires an interest in Mortgage Assets
at a premium may elect to amortize such premium under a constant interest
method, provided that the underlying mortgage loans with respect to such
Mortgage Assets were originated after September 27, 1985. Premium allocable
to mortgage loans originated on or before September 27, 1985 should be
allocated among the principal payments on such mortgage loans and allowed as
an ordinary deduction as principal payments are made. Amortizable bond
premium will be treated as an offset to interest income on such Grantor Trust
Certificate. The basis for such Grantor Trust Certificate will be reduced to
the extent that amortizable premium is applied to offset interest payments.
It is not clear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Code Section 171. A
Certificateholder that makes this election for a Certificate that is acquired
at a premium will be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that
such Certificateholder acquires during the year of the election or
thereafter.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a Grantor Trust Certificate acquired at a premium
should recognize a loss if a Mortgage Loan (or an underlying mortgage loan
with respect to a Mortgage Asset) prepays in full, equal to the difference
between the portion of the prepaid principal amount of such Mortgage Loan (or
underlying mortgage loan) that is allocable to the Certificate and the
portion of the adjusted basis of the Certificate that is allocable to such
Mortgage Loan (or underlying mortgage loan). If a reasonable prepayment
assumption is used to amortize such premium, it appears that such a loss
would be available, if at all, only if prepayments have occurred at a rate
faster than the reasonable assumed prepayment rate. It is not clear whether
any other adjustments would be required to reflect differences between an
assumed prepayment rate and the actual rate of prepayments.
On December 30, 1997 the IRS issued finalized regulations (the
"Amortizable Bond Premium Regulations") dealing with amortizable bond
premium. These regulations specifically do not apply to prepayable debt
instruments subject to Code Section 1272(a)(6) such as the Securities. Absent
further guidance from the IRS, the Trustee intends to account for amortizable
bond premium in the manner described above. Prospective purchasers of the
Securities should consult their tax advisors regarding the possible
application of the Amortizable Bond Premium Regulations.
Original Issue Discount. The Internal Revenue Service (the "IRS") has
stated in published rulings that, in circumstances similar to those described
herein, the special rules of the Code relating to original issue discount
("OID") (currently Code Sections 1271 through 1273 and 1275) and Treasury
regulations issued on January 27, 1994, under such Sections (the "OID
Regulations"), will be applicable to a Grantor Trust Certificateholder's
interest in those Mortgage Assets meeting the conditions necessary for these
sections to apply. Rules regarding periodic inclusion of OID income are
applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate Mortgagors (other than individuals) originated
after July 1, 1982, and mortgages of individuals originated after March 2,
1984. Such OID could arise by the financing of points or other charges by the
originator of the mortgages in an amount greater than a statutory de minimis
exception to the extent that the points are not currently deductible under
applicable Code provisions or are not for services provided by the lender.
OID generally must be reported as ordinary gross income as it accrues under a
constant interest method. See "--Multiple Classes of Grantor Trust
Certificates--Accrual of Original Issue Discount" below.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Mortgage Assets may be subject to the market discount
rules of Code Sections 1276 through 1278 to the extent an undivided interest
in a Mortgage Asset is considered to have been purchased at a "market
discount." Generally, the amount of market discount is equal to the excess of
the portion of the principal amount of such Mortgage Asset allocable to such
holder's undivided interest over such holder's tax basis in such interest.
Market discount with respect to a Grantor Trust Certificate will be
considered to be zero if the amount allocable to the Grantor Trust
Certificate is less than 0.25% of the Grantor Trust Certificate's
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stated redemption price at maturity multiplied by the weighted average
maturity remaining after the date of purchase. Treasury regulations
implementing the market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the application of
these rules and the advisability of making any of the elections allowed under
Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986 shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at
the time of such payment. The amount of accrued market discount for purposes
of determining the tax treatment of subsequent principal payments or
dispositions of the market discount bond is to be reduced by the amount so
treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described
in the relevant legislative history will apply. Under those rules, the holder
of a market discount bond may elect to accrue market discount either on the
basis of a constant interest rate or according to one of the following
methods. If a Grantor Trust Certificate is issued with OID, the amount of
market discount that accrues during any accrual period would be equal to the
product of (i) the total remaining market discount and (ii) a fraction, the
numerator of which is the OID accruing during the period and the denominator
of which is the total remaining OID at the beginning of the accrual period.
For Grantor Trust Certificates issued without OID, the amount of market
discount that accrues during a period is equal to the product of (i) the
total remaining market discount and (ii) a fraction, the numerator of which
is the amount of stated interest paid during the accrual period and the
denominator of which is the total amount of stated interest remaining to be
paid at the beginning of the accrual period. For purposes of calculating
market discount under any of the above methods in the case of instruments
(such as the Grantor Trust Certificates) that provide for payments that may
be accelerated by reason of prepayments of other obligations securing such
instruments, the same prepayment assumption applicable to calculating the
accrual of OID will apply. Because the regulations described above have not
been issued, it is impossible to predict what effect those regulations might
have on the tax treatment of a Grantor Trust Certificate purchased at a
discount or premium in the secondary market.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to
purchase or carry such Grantor Trust Certificate purchased with market
discount. For these purposes, the de minimis rule referred 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.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method for Certificates acquired on or after April
4, 1994. If such an election were to be made with respect to a Grantor Trust
Certificate with market discount, the Certificateholder would be deemed to
have made an election to include in income currently market discount with
respect to all other debt instruments having market discount that such
Certificateholder acquires during the year of the election or thereafter.
Similarly, a Certificateholder that makes this election for a Certificate
that is acquired at a premium will be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such Certificateholder owns or acquires. See "--Regular
Certificates--Premium" herein. The election to accrue interest, discount and
premium on a constant yield method with respect to a Certificate is
irrevocable.
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B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES
1. Stripped Bonds and Stripped Coupons
Pursuant to Code Section 1286, the separation of ownership of the right to
receive some or all of the interest payments on an obligation from ownership
of the right to receive some or all of the principal payments results in the
creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. For purposes of Code Sections
1271 through 1288, Code Section 1286 treats a stripped bond or a stripped
coupon as an obligation issued on the date that such stripped interest is
created. If a Trust Fund is created with two classes of Grantor Trust
Certificates, one class of Grantor Trust Certificates may represent the right
to principal and interest, or principal only, on all or a portion of the
Mortgage Assets (the "Stripped Bond Certificates"), while the second class of
Grantor Trust Certificates may represent the right to some or all of the
interest on such portion (the "Stripped Coupon Certificates").
Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the Mortgage Asset principal
balance) or the Certificates are initially sold with a de minimis discount
(assuming no prepayment assumption is required), any non de minimis discount
arising from a subsequent transfer of the Certificates should be treated as
market discount. The IRS appears to require that reasonable servicing fees be
calculated on a Mortgage Asset by Mortgage Asset basis, which could result in
some Mortgage Assets being treated as having more than 100 basis points of
interest stripped off. See "--Non-REMIC Certificates" and "Multiple Classes
of Grantor Trust Certificates--Stripped Bonds and Stripped Coupons" herein.
Although not entirely clear, a Stripped Bond Certificate generally should
be treated as an interest in Mortgage Assets issued on the day such
Certificate is purchased for purposes of calculating any OID. Generally, if
the discount on a Mortgage Asset is larger than a de minimis amount (as
calculated for purposes of the OID rules) a purchaser of such a Certificate
will be required to accrue the discount under the OID rules of the Code. See
"--Non-REMIC Certificates" and "--Single Class of Grantor Trust
Certificates--Original Issue Discount" herein. However, a purchaser of a
Stripped Bond Certificate will be required to account for any discount on the
Mortgage Assets as market discount rather than OID if either (i) the amount
of OID with respect to the Mortgage Assets is treated as zero under the OID
de minimis rule when the Certificate was stripped or (ii) no more than 100
basis points (including any amount of servicing fees in excess of reasonable
servicing fees) is stripped off of the Trust Fund's Mortgage Assets. Pursuant
to Revenue Procedure 91-49, issued on August 8, 1991, purchasers of Stripped
Bond Certificates using an inconsistent method of accounting must change
their method of accounting and request the consent of the IRS to the change
in their accounting method on a statement attached to their first timely tax
return filed after August 8, 1991.
The precise tax treatment of Stripped Coupon Certificates is substantially
uncertain. The Code could be read literally to require that OID computations
be made for each payment from each Mortgage Asset. However, based on the
recent IRS guidance, it appears that all payments from a Mortgage Asset
underlying a Stripped Coupon Certificate should be treated as a single
installment obligation subject to the OID rules of the Code, in which case,
all payments from such Mortgage Asset would be included in the Mortgage
Asset's stated redemption price at maturity for purposes of calculating
income on such certificate under the OID rules of the Code.
It is unclear under what circumstances, if any, the prepayment of Mortgage
Assets will give rise to a loss to the holder of a Stripped Bond Certificate
purchased at a premium or a Stripped Coupon Certificate. If such 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 Certificate, it appears
that no loss will be available as a result of any particular prepayment
unless prepayments occur at a rate faster than the assumed prepayment rate.
However, if such Certificate is treated as an interest in discrete Mortgage
Assets, or if no prepayment assumption is used, then when a Mortgage Asset is
prepaid, the holder of such Certificate should be able to recognize a loss
equal to the portion of the adjusted issue price of such Certificate that is
allocable to such Mortgage Asset.
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Holders of Stripped Bond Certificates and Stripped Coupon Certificates are
urged to consult with their own tax advisors regarding the proper treatment
of these Certificates for federal income tax purposes.
Treatment of Certain Owners. Several Code sections provide beneficial
treatment to certain taxpayers that invest in Mortgage Assets of the type
that make up the Trust Fund. With respect to these Code sections, no specific
legal authority exists regarding whether the character of the Grantor Trust
Certificates, for federal income tax purposes, will be the same as that of
the underlying Mortgage Assets. While Code Section 1286 treats a stripped
obligation as a separate obligation for purposes of the Code provisions
addressing OID, it is not clear whether such characterization would apply
with regard to these other Code sections. Although the issue is not free from
doubt, based on policy considerations, each class of Grantor Trust
Certificates, unless otherwise specified in the related Prospectus
Supplement, should be considered to represent "real estate assets" within the
meaning of Code Section 856(c)(6)(B) and "loans . . . secured by, an interest
in real property which is . . . residential real property" within the meaning
of Code Section 7701(a)(19)(C)(v), and interest income attributable to
Grantor Trust Certificates should be considered to represent "interest on
obligations secured by mortgages on real property" within the meaning of Code
Section 856(c)(3)(B), provided that in each case the underlying Mortgage
Assets and interest on such Mortgage Assets qualify for such treatment.
Prospective purchasers to which such characterization of an investment in
Certificates is material should consult their own tax advisors regarding the
characterization of the Grantor Trust Certificates and the income therefrom.
Grantor Trust Certificates will be "obligation[s] . . . which [are]
principally secured, directly or indirectly, by an interest in real property"
within the meaning of Code Section 860G(a)(3).
2. Grantor Trust Certificates Representing Interests in Loans Other Than
ARM Loans
The original issue discount rules of Code Sections 1271 through 1275 will
be applicable to a Certificateholder's interest in those Mortgage Assets as
to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount in income are
applicable to mortgages of corporations originated after May 27, 1969,
mortgages of noncorporate Mortgagors (other than individuals) originated
after July 1, 1982, and mortgages of individuals originated after March 2,
1984. Under the OID Regulations, such original issue discount could arise by
the charging of points by the originator of the mortgage in an amount greater
than the statutory de minimis exception, including a payment of points that
is currently deductible by the borrower under applicable Code provisions, or
under certain circumstances, by the presence of "teaser" rates on the
Mortgage Assets. OID on each Grantor Trust Certificate must be included in
the owner's ordinary income for federal income tax purposes as it accrues, in
accordance with a constant interest method that takes into account the
compounding of interest, in advance of receipt of the cash attributable to
such income. The amount of OID required to be included in an owner's income
in any taxable year with respect to a Grantor Trust Certificate representing
an interest in Mortgage Assets other than Mortgage Assets with interest rates
that adjust periodically ("ARM Loans") likely will be computed as described
below under "--Accrual of Original Issue Discount." The following discussion
is based in part on the OID Regulations and in part on the provisions of the
Tax Reform Act of 1986 (the "1986 Act"). The OID Regulations generally are
effective for debt instruments issued on or after April 4, 1994, but may be
relied upon as authority with respect to debt instruments, such as the
Grantor Trust Certificates, issued after December 21, 1992. Alternatively,
proposed Treasury regulations issued December 21, 1992 may be treated as
authority for debt instruments issued after December 21, 1992 and prior to
April 4, 1994, and proposed Treasury regulations issued in 1986 and 1991 may
be treated as authority for instruments issued before December 21, 1992. In
applying these dates, the issue date of the Mortgage Assets should be used,
or, in the case of Stripped Bond Certificates or Stripped Coupon
Certificates, the date such Certificates are acquired. The holder of a
Certificate should be aware, however, that neither the proposed OID
Regulations nor the OID Regulations adequately address certain issues
relevant to prepayable securities.
Under the Code, the Mortgage Assets underlying the Grantor Trust
Certificate will be treated as having been issued on the date they were
originated with an amount of OID equal to the excess of such Mortgage Asset's
stated redemption price at maturity over its issue price. The issue price of
a Mortgage Asset is generally the amount lent to the mortgagee, which may be
adjusted to take into account certain
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loan origination fees. The stated redemption price at maturity of a Mortgage
Asset is the sum of all payments to be made on such Mortgage Asset other than
payments that are treated as qualified stated interest payments. The accrual
of this OID, as described below under "--Accrual of Original Issue Discount,"
will, unless otherwise specified in the related Prospectus Supplement,
utilize the original yield to maturity of the Grantor Trust Certificate
calculated based on a reasonable assumed prepayment rate for the mortgage
loans underlying the Grantor Trust Certificates (the "Prepayment
Assumption"), and will take into account events that occur during the
calculation period. The Prepayment Assumption will be determined in the
manner prescribed by regulations that have not yet been issued. The
legislative history of the 1986 Act (the "Legislative History") provides,
however, that the regulations will require that the Prepayment Assumption be
the prepayment assumption that is used in determining the offering price of
such Certificate. No representation is made that any Certificate will prepay
at the Prepayment Assumption or at any other rate. The prepayment assumption
contained in the Code literally only applies to debt instruments
collateralized by other debt instruments that are subject to prepayment
rather than direct ownership interests in such debt instruments, such as the
Certificates represent. However, no other legal authority provides guidance
with regard to the proper method for accruing OID on obligations that are
subject to prepayment, and, until further guidance is issued, the Master
Servicer intends to calculate and report OID under the method described
below.
Accrual of Original Issue Discount. Generally, the owner of a Grantor
Trust Certificate must include in gross income the sum of the "daily
portions," as defined below, of the OID on such Grantor Trust Certificate for
each day on which it owns such Certificate, including the date of purchase
but excluding the date of disposition. In the case of an original owner, the
daily portions of OID with respect to each component generally will be
determined as set forth under the OID Regulations. A calculation will be made
by the Master Servicer or such other entity specified in the related
Prospectus Supplement of the portion of OID that accrues during each
successive monthly accrual period (or shorter period from the date of
original issue) that ends on the day in the calendar year corresponding to
each of the Distribution Dates on the Grantor Trust Certificates (or the day
prior to each such date). This will be done, in the case of each full month
accrual period, by (i) adding (a) the present value at the end of the accrual
period (determined by using as a discount factor the original yield to
maturity of the respective component under the Prepayment Assumption) of all
remaining payments to be received under the Prepayment Assumption on the
respective component and (b) any payments included in the state redemption
price at maturity received during such accrual period, and (ii) subtracting
from that total the "adjusted issue price" of the respective component at the
beginning of such accrual period. The adjusted issue price of a Grantor Trust
Certificate at the beginning of the first accrual period is its issue price;
the adjusted issue price of a Grantor Trust Certificate at the beginning of a
subsequent accrual period is the adjusted issue price at the beginning of the
immediately preceding accrual period plus the amount of OID allocable to that
accrual period reduced by the amount of any payment other than a payment of
qualified stated interest made at the end of or during that accrual period.
The OID accruing during such accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each
day in the period. With respect to an initial accrual period shorter than a
full monthly accrual period, the daily portions of OID must be determined
according to an appropriate allocation under any reasonable method.
Original issue discount generally must be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest as it accrues rather than when received. However,
the amount of original issue discount includible in the income of a holder of
an obligation is reduced when the obligation is acquired after its initial
issuance at a price greater than the sum of the original issue price and the
previously accrued original issue discount, less prior payments of principal.
Accordingly, if such Mortgage Assets acquired by a Certificateholder are
purchased at a price equal to the then unpaid principal amount of such
Mortgage Asset, no original issue discount attributable to the difference
between the issue price and the original principal amount of such Mortgage
Asset (i.e., points) will be includible by such holder. Other original issue
discount on the Mortgage Assets (e.g., that arising from a "teaser" rate)
would still need to be accrued.
3. Grantor Trust Certificates Representing Interests in ARM Loans
The OID Regulations do not address the treatment of instruments, such as
the Grantor Trust Certificates, which represent interests in ARM Loans.
Additionally, the IRS has not issued guidance
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under the Code's coupon stripping rules with respect to such instruments. In
the absence of any authority, the Master Servicer will report OID on Grantor
Trust Certificates attributable to ARM Loans ("Stripped ARM Obligations") to
holders in a manner it believes is consistent with the rules described above
under the heading "--Grantor Trust Certificates Representing Interests in
Loans Other Than ARM Loans" and with the OID Regulations. In general,
application of these rules may require inclusion of income on a Stripped ARM
Obligation in advance of the receipt of cash attributable to such income.
Further, the addition of interest deferred by reason of negative amortization
("Deferred Interest") to the principal balance of an ARM Loan may require the
inclusion of such amount in the income of the Grantor Trust Certificateholder
when such amount accrues. Furthermore, the addition of Deferred Interest to
the Grantor Trust Certificate's principal balance will result in additional
income (including possibly OID income) to the Grantor Trust Certificateholder
over the remaining life of such Grantor Trust Certificates.
Because the treatment of Stripped ARM Obligations is uncertain, investors
are urged to consult their tax advisors regarding how income will be
includible with respect to such Certificates.
C. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE
Sale or exchange of a Grantor Trust Certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the Grantor Trust Certificate.
Such adjusted basis generally will equal the seller's purchase price for the
Grantor Trust Certificate, increased by the OID included in the seller's
gross income with respect to the Grantor Trust Certificate, and reduced by
principal payments on the Grantor Trust Certificate previously received by
the seller. Such gain or loss will be capital gain or loss to an owner for
which a Grantor Trust Certificate is a "capital asset" within the meaning of
Code Section 1221, and will be long-term or short-term depending on whether
the Grantor Trust Certificate has been owned for the long-term capital gain
holding period (generally more than one year). The Taxpayer Relief Act of
1997 reduces the maximum rates on long-term capital gains recognized on
capital assets held by individual taxpayers for more than eighteen months as
of the date of disposition (and would further reduce the maximum rates on
such gains in the year 2001 and thereafter for certain individual taxpayers
who meet specified conditions). Prospective investors should consult their
own tax advisors concerning these tax law changes.
Grantor Trust Certificates will be "evidences of indebtedness" within the
meaning of Code Section 582(c)(1), so that gain or loss recognized from the
sale of a Grantor Trust Certificate by a bank or a thrift institution to
which such section applies will be treated as ordinary income or loss.
D. NON-U.S. PERSONS
Generally, to the extent that a Grantor Trust Certificate evidences
ownership in underlying Mortgage Assets that were issued on or before July
18, 1984, interest or OID paid by the person required to withhold tax under
Code Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as
defined below) or (ii) a Grantor Trust Certificateholder holding on behalf of
an owner that is not a U.S. Person will be subject to federal income tax,
collected by withholding, at a rate of 30% or such lower rate as may be
provided for interest by an applicable tax treaty. Accrued OID recognized by
the owner on the sale or exchange of such a Grantor Trust Certificate also
will be subject to federal income tax at the same rate. Generally, such
payments would not be subject to withholding to the extent that a Grantor
Trust Certificate evidences ownership in Mortgage Assets issued after July
18, 1984, by natural persons if such Grantor Trust Certificateholder complies
with certain identification requirements (including delivery of a statement,
signed by the Grantor Trust Certificateholder under penalties of perjury,
certifying that such Grantor Trust Certificateholder is not a U.S. Person and
providing the name and address of such Grantor Trust Certificateholder).
Additional restrictions apply to Mortgage Assets of where the Mortgagor is
not a natural person in order to qualify for the exemption from withholding.
The term "U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof (other than a
partnership that is not treated as a United States person under any
applicable Treasury regulations), an estate whose income is subject to U.S.
federal income tax regardless of its source
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of income, or a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust. Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such date, that elect to continue
to be treated as United States persons also will be a U.S. Holder.
E. INFORMATION REPORTING AND BACKUP WITHHOLDING
The Master Servicer will furnish or make available, within a reasonable
time after the end of each calendar year, to each person who was a
Certificateholder at any time during such year, such information as may be
deemed necessary or desirable to assist Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
Certificates as nominees on behalf of beneficial owners. If a holder,
beneficial owner, financial intermediary or other recipient of a payment on
behalf of a beneficial owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that
such person has not reported all interest and dividend income required to be
shown on its federal income tax return, 31% backup withholding may be
required with respect to any payments. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
F. NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding,
backup withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1998, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
REMICS
The Trust Fund relating to a Series of Certificates may elect to be
treated as a REMIC. Qualification as a REMIC requires ongoing compliance with
certain conditions. Although a REMIC is not generally subject to federal
income tax (see, however "--Taxation of Owners of REMIC Residual
Certificates" and "--Prohibited Transactions" below), if a Trust Fund with
respect to which a REMIC election is made fails to comply with one or more of
the ongoing requirements of the Code for REMIC status during any taxable
year, including the implementation of restrictions on the purchase and
transfer of the residual interests in a REMIC as described below under
"Taxation of Owners of REMIC Residual Certificates," the Code provides that a
Trust Fund will not be treated as a REMIC for such year and thereafter. In
that event, such entity may be taxable as a separate corporation, and the
related Certificates (the "REMIC Certificates") may not be accorded the
status or given the tax treatment described below. While the Code authorizes
the Treasury Department to issue regulations providing relief in the event of
an inadvertent termination of the status of a trust fund as a REMIC, 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 REMIC's income for the period in which the requirements for such
status are not satisfied. With respect to each Trust Fund that elects REMIC
status, Brown & Wood llp will deliver its opinion generally to the effect
that, under then existing law and assuming compliance with all provisions of
the related Pooling and Servicing Agreement, such Trust Fund will qualify as
a REMIC, and the related Certificates will be considered to be regular
interests ("REMIC Regular Certificates") or a sale class of residual
interests ("REMIC Residual Certificates") in the REMIC. The related
Prospectus Supplement for each Series of Certificates will indicate whether
the Trust Fund will make a REMIC election and whether a class of Certificates
will be treated as a regular or residual interest in the REMIC.
A "qualified mortgage" for REMIC purposes is any obligation (including
certificates of participation in such an obligation) that is principally
secured by an interest in real property and that is transferred to the REMIC
within a prescribed time period in exchange for regular or residual interests
in the REMIC.
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In general, with respect to each Series of Certificates for which a REMIC
election is made, (i) Certificates held by a thrift institution taxed as a
"domestic building and loan association" will constitute assets described in
Code Section 7701(a)(19)(C); (ii) Certificates held by a real estate
investment trust will constitute "real estate assets" within the meaning of
Code Section 856(c)(6)(B); and (iii) interest on Certificates held by a real
estate investment trust will be considered "interest on obligations secured
by mortgages on real property" within the meaning of Code Section
856(c)(3)(B). If less than 95% of the REMIC's assets are assets qualifying
under any of the foregoing Code sections, the Certificates will be qualifying
assets only to the extent that the REMIC's assets are qualifying assets. In
addition, payments on Mortgage Assets held pending distribution on the REMIC
Certificates will be considered to be real estate assets for purposes of Code
Section 856(c).
Tiered REMIC Structures. For certain Series of Certificates, two separate
elections may be made to treat designated portions of the related Trust Fund
as REMICs (respectively, the "Subsidiary REMIC" and the "Master REMIC") for
federal income tax purposes. Upon the issuance of any such Series of
Certificates, Brown & Wood llp, counsel to the Depositor, will deliver its
opinion generally to the effect that, assuming compliance with all provisions
of the related Agreement, the Master REMIC as well as any Subsidiary REMIC
will each qualify as a REMIC, and the REMIC Certificates issued by the Master
REMIC and the Subsidiary REMIC, respectively, 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.
Only REMIC Certificates, other than the residual interest in the
Subsidiary REMIC, issued by the Master REMIC will be offered hereunder. The
Subsidiary REMIC and the Master REMIC will be treated as one REMIC solely for
purposes of determining whether the REMIC Certificates will be (i) "real
estate assets" within the meaning of Section 856(c)(6)(B) of the Code; (ii)
"loans secured by an interest in real property" under Section 7701(a)(19)(C)
of the Code; and (iii) whether the income on such Certificates is interest
described in Section 856(c)(3)(B) of the Code.
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application
of Code Section 593(d) to any taxable year beginning after December 31, 1995.
A. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt
instruments issued by the REMIC and not as ownership interests in the REMIC
or its assets. Moreover, holders of REMIC Regular Certificates that otherwise
report income under a cash method of accounting will be required to report
income with respect to REMIC Regular Certificates under an accrual method.
Original Issue Discount and Premium. The REMIC Regular Certificates may be
issued with OID. Generally, such OID, if any, will equal the difference
between the "stated redemption price at maturity" of a REMIC Regular
Certificate and its "issue price." Holders of any class of Certificates
issued with OID will be required to include such OID in gross income for
federal income tax purposes as it accrues, in accordance with a constant
interest method based on the compounding of interest as it accrues rather
than in accordance with receipt of the interest payments. The following
discussion is based in part on the OID Regulations and in part on the
provisions of the 1986 Act. Holders of REMIC Regular Certificates (the "REMIC
Regular Certificateholders") should be aware, however, that the OID
Regulations do not adequately address certain issues relevant to prepayable
securities, such as the REMIC Regular Certificates.
Rules governing OID are set forth in Code Sections 1271 through 1273 and
1275. These rules require that the amount and rate of accrual of OID be
calculated based on the Prepayment Assumption and the anticipated
reinvestment rate, if any, relating to the REMIC Regular Certificates and
prescribe a method for adjusting the amount and rate of accrual of such
discount where the actual prepayment rate differs from the Prepayment
Assumption. Under the Code, the Prepayment Assumption must be determined in
the manner prescribed by regulations, which regulations have not yet been
issued. The Legislative History
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provides, however, that Congress intended the regulations to require that the
Prepayment Assumption be the prepayment assumption that is used in
determining the initial offering price of such REMIC Regular Certificates.
The Prospectus Supplement for each Series of REMIC Regular Certificates will
specify the Prepayment Assumption to be used for the purpose of determining
the amount and rate of accrual of OID. No representation is made that the
REMIC Regular Certificates will prepay at the Prepayment Assumption or at any
other rate.
In general, each REMIC Regular Certificate will be treated as a single
installment obligation issued with an amount of OID equal to the excess of
its "stated redemption price at maturity" over its "issue price." The issue
price of a REMIC Regular Certificate is the first price at which a
substantial amount of REMIC Regular Certificates of that class are first sold
to the public (excluding bond houses, brokers, underwriters or wholesalers).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial
issuance (the "Closing Date"), the issue price for such class will be treated
as the fair market value of such class on the Closing Date. The issue price
of a REMIC Regular Certificate also includes the amount paid by an initial
Certificateholder for accrued interest that relates to a period prior to the
issue date of the REMIC Regular Certificate. The stated redemption price at
maturity of a REMIC Regular Certificate includes the original principal
amount of the REMIC Regular Certificate, but generally will not include
distributions of interest if such distributions constitute "qualified stated
interest." Qualified stated interest generally means interest payable at a
single fixed rate or qualified variable rate (as described below) provided
that such interest payments are unconditionally payable at intervals of one
year or less during the entire term of the REMIC Regular Certificate.
Interest is payable at a single fixed rate only if the rate appropriately
takes into account the length of the interval between payments. Distributions
of interest on REMIC Regular Certificates with respect to which Deferred
Interest will accrue will not constitute qualified stated interest payments,
and the stated redemption price at maturity of such REMIC Regular
Certificates includes all distributions of interest as well as principal
thereon.
Where the interval between the issue date and the first Distribution Date
on a REMIC Regular Certificate is longer than the interval between subsequent
Distribution Dates, the greater of any original issue discount (disregarding
the rate in the first period) and any interest foregone during the first
period is treated as the amount by which the stated redemption price at
maturity of the Certificate exceeds its issue price for purposes of the de
minimis rule described below. The OID Regulations suggest that all interest
on a long first period REMIC Regular Certificate that is issued with non-de
minimis OID, as determined under the foregoing rule, will be treated as OID.
Where the interval between the issue date and the first Distribution Date on
a REMIC Regular Certificate is shorter than the interval between subsequent
Distribution Dates, interest due on the first Distribution Date in excess of
the amount that accrued during the first period would be added to the
Certificates stated redemption price at maturity. REMIC Regular
Certificateholders should consult their own tax advisors to determine the
issue price and stated redemption price at maturity of a REMIC Regular
Certificate.
Under the de minimis rule, OID on a REMIC Regular Certificate will be
considered to be zero if such OID is less than 0.25% of the stated redemption
price at maturity of the REMIC Regular Certificate multiplied by the weighted
average maturity of the REMIC Regular Certificate. For this purpose, the
weighted average maturity of the REMIC Regular Certificate is computed as the
sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until each distribution in
reduction of stated redemption price at maturity is scheduled to be made by a
fraction, the numerator of which is the amount of each distribution included
in the stated redemption price at maturity of the REMIC Regular Certificate
and the denominator of which is the stated redemption price at maturity of
the REMIC Regular Certificate. Although currently unclear, it appears that
the schedule of such distributions should be determined in accordance with
the Prepayment Assumption. The Prepayment Assumption with respect to a Series
of REMIC Regular Certificates will be set forth in the related Prospectus
Supplement. Holders generally must report de minimis OID pro rata as
principal payments are received, and such income will be capital gain if the
REMIC Regular Certificate is held as a capital asset. However, accrual method
holders may elect to accrue all de minimis OID as well as market discount
under a constant interest method.
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The Prospectus Supplement with respect to a Trust Fund may provide for
certain REMIC Regular Certificates to be issued at prices significantly
exceeding their principal amounts or based on notional principal balances
(the "Super-Premium Certificates"). The income tax treatment of such REMIC
Regular Certificates is not entirely certain. For information reporting
purposes, the Trust Fund intends to take the position that the stated
redemption price at maturity of such REMIC Regular Certificates is the sum of
all payments to be made on such REMIC Regular Certificates determined under
the Prepayment Assumption, with the result that such REMIC Regular
Certificates would be issued with OID. The calculation of income in this
manner could result in negative original issue discount (which delays future
accruals of OID rather than being immediately deductible) when prepayments on
the Mortgage Assets exceed those estimated under the Prepayment Assumption.
If the Super Premium Certificates were treated as contingent payment
obligations, it is unclear how holders of those Certificates would report
income or recover their basis. In the alternative, the IRS could assert that
the stated redemption price at maturity of such REMIC Regular Certificates
should be limited to their principal amount (subject to the discussion below
under "--Accrued Interest Certificates"), so that such REMIC Regular
Certificates would be considered for federal income tax purposes to be issued
at a premium. If such a position were to prevail, the rules described below
under "--Taxation of Owners of REMIC Regular Certificates--Premium" would
apply. It is unclear when a loss may be claimed for any unrecovered basis for
a Super-Premium Certificate. It is possible that a holder of a Super-Premium
Certificate may only claim a loss when its remaining basis exceeds the
maximum amount of future payments, assuming no further prepayments or when
the final payment is received with respect to such Super-Premium Certificate.
The Internal Revenue Service (the "IRS") recently issued final regulations
(the "Contingent Regulations") governing the calculation of OID on
instruments having contingent interest payments. The Contingent Regulations
specifically do not apply for the purposes of calculating OID on debt
instruments subject to Code Section 1272(a)(6), such as the REMIC Regular
Certificates. Additionally, the OID Regulations do not contain provisions
specifically interpreting Code Section 1272(a)(6). Until the Treasury issues
guidance to the contrary, the Trustee intends to base its computation on Code
Section 1272(a)(6) and the OID Regulations as described in this Prospectus.
However, because no regulatory guidance currently exists under Code Section
1272(a)(6), there can be no assurance that such methodology represents the
correct manner of calculating OID.
Under the REMIC Regulations, if the issue price of a REMIC Regular
Certificate (other than REMIC Regular Certificate based on a notional amount)
does not exceed 125% of its actual principal amount, the interest rate is not
considered disproportionately high. Accordingly, such REMIC Regular
Certificate generally should not be treated as a Super-Premium Certificate
and the rules described below under "--REMIC Regular Certificates--Premium"
should apply. However, it is possible that holders of REMIC Regular
Certificates issued at a premium, even if the premium is less than 25% of
such Certificate's actual principal balance, will be required to amortize the
premium under an original issue discount method or contingent interest method
even though no election under Code Section 171 is made to amortize such
premium.
Generally, a REMIC Regular Certificateholder must include in gross income
the "daily portions," as determined below, of the OID that accrues on a REMIC
Regular Certificate for each day a Certificateholder holds the REMIC Regular
Certificate, including the purchase date but excluding the disposition date.
In the case of an original holder of a REMIC Regular Certificate, a
calculation will be made of the portion of the OID that accrues during each
successive period (an "accrual period") that ends on the day in the calendar
year corresponding to a Distribution Date (or if Distribution Dates are on
the first day or first business day of the immediately preceding month,
interest may be treated as payable on the last day of the immediately
preceding month) and begins on the day after the end of the immediately
preceding accrual period (or on the issue date in the case of the first
accrual period). This will be done, in the case of each full accrual period,
by (i) adding (a) the present value at the end of the accrual period
(determined by using as a discount factor the original yield to maturity of
the REMIC Regular Certificates as calculated under the Prepayment Assumption)
of all remaining payments to be received on the REMIC Regular Certificates
under the Prepayment Assumption and (b) any payments included in the stated
redemption price at maturity received during such accrual period, and (ii)
subtracting from that
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total the adjusted issue price of the REMIC Regular Certificates at the
beginning of such accrual period. The adjusted issue price of a REMIC Regular
Certificate at the beginning of the first accrual period is its issue price;
the adjusted issue price of a REMIC Regular Certificate at the beginning of a
subsequent accrual period is the adjusted issue price at the beginning of the
immediately preceding accrual period plus the amount of OID allocable to that
accrual period and reduced by the amount of any payment other than a payment
of qualified stated interest made at the end of or during that accrual
period. The OID accrued during an accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each
day in the accrual period. The calculation of OID under the method described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in a given accrual period to reflect the fact that prepayments
are occurring faster or slower than under the Prepayment Assumption. With
respect to an initial accrual period shorter than a full accrual period, the
daily portions of OID may be determined according to an appropriate
allocation under any reasonable method.
A subsequent purchaser of a REMIC Regular Certificate issued with OID who
purchases the REMIC Regular Certificate at a cost less than the remaining
stated redemption price at maturity will also be required to include in gross
income the sum of the daily portions of OID on that REMIC Regular
Certificate. In computing the daily portions of OID for such a purchaser (as
well as an initial purchaser that purchases at a price higher than the
adjusted issue price but less than the stated redemption price at maturity),
however, the daily portion is reduced by the amount that would be the daily
portion for such day (computed in accordance with the rules set forth above)
multiplied by a fraction, the numerator of which is the amount, if any, by
which the price paid by such holder for that REMIC Regular Certificate
exceeds the following amount: (a) the sum of the issue price plus the
aggregate amount of OID that would have been includible in the gross income
of an original REMIC Regular Certificateholder (who purchased the REMIC
Regular Certificate at its issue price), less (b) any prior payments included
in the stated redemption price at maturity, and the denominator of which is
the sum of the daily portions for that REMIC Regular Certificate for all days
beginning on the date after the purchase date and ending on the maturity date
computed under the Prepayment Assumption. A holder who pays an acquisition
premium instead may elect to accrue OID by treating the purchase as a
purchase at original issue.
Variable Rate REMIC Regular Certificates. REMIC Regular Certificates may
provide for interest based on a variable rate. Interest based on a variable
rate will constitute qualified stated interest and not contingent interest
if, generally, (i) such interest is unconditionally payable at least
annually, (ii) the issue price of the debt instrument does not exceed the
total noncontingent principal payments and (iii) interest is based on a
"qualified floating rate," an "objective rate," a combination of a single
fixed rate and one or more "qualified floating rates," one "qualified inverse
floating rate," or a combination of "qualified floating rates" that do not
operate in a manner that significantly accelerates or defers interest
payments on such REMIC Regular Certificate.
The amount of OID with respect to a REMIC Regular Certificate bearing a
variable rate of interest will accrue in the manner described above under
"--Original Issue Discount and Premium" by assuming generally that the index
used for the variable rate will remain fixed throughout the term of the
Certificate. Appropriate adjustments are made for the actual variable rate.
Although unclear at present, the Depositor intends to treat interest on a
REMIC Regular Certificate that is a weighted average of the net interest
rates on Mortgage Loans as qualified stated interest.
In such case, the weighted average rate used to compute the initial
pass-through rate on the REMIC Regular Certificates will be deemed to be the
index in effect through the life of the REMIC Regular Certificates. It is
possible, however, that the IRS may treat some or all of the interest on
REMIC Regular Certificates with a weighted average rate as taxable under the
rules relating to obligations providing for contingent payments. Such
treatment may effect the timing of income accruals on such REMIC Regular
Certificates.
Election to Treat All Interest as OID. The OID Regulations permit a
Certificateholder to elect to accrue all interest, discount (including de
minimis market or original issue discount) and premium in income as interest,
based on a constant yield method. If such an election were to be made with
respect
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to a REMIC Regular Certificate with market discount, the Certificateholder
would be deemed to have made an election to include in income currently
market discount with respect to all other debt instruments having market
discount that such Certificateholder acquires during the year of the election
or thereafter. Similarly, a Certificateholder that makes this election for a
Certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such Certificateholder owns or acquires. See
"--REMIC Regular Certificates--Premium" herein. The election to accrue
interest, discount and premium on a constant yield method with respect to a
Certificate is irrevocable.
Market Discount. A purchaser of a REMIC Regular Certificate may also be
subject to the market discount provisions of Code Sections 1276 through 1278.
Under these provisions and the OID Regulations, "market discount" equals the
excess, if any, of (i) the REMIC Regular Certificate's stated principal
amount or, in the case of a REMIC Regular Certificate with OID, the adjusted
issue price (determined for this purpose as if the purchaser had purchased
such REMIC Regular Certificate from an original holder) over (ii) the price
for such REMIC Regular Certificate paid by the purchaser. A Certificateholder
that purchases a REMIC Regular Certificate at a market discount will
recognize income upon receipt of each distribution representing amounts
included in such certificate's stated redemption price at maturity. In
particular, under Section 1276 of the Code such a holder generally will be
required to allocate each such distribution first to accrued market discount
not previously included in income, and to recognize ordinary income to that
extent. A Certificateholder may elect to include market discount in income
currently as it accrues rather than including it on a deferred basis in
accordance with the foregoing. If made, 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.
Market discount with respect to a REMIC Regular Certificate will be
considered to be zero if the amount allocable to the REMIC Regular
Certificate is less than 0.25% of such REMIC Regular Certificate's stated
redemption price at maturity multiplied by such REMIC Regular Certificate's
weighted average maturity remaining after the date of purchase. If market
discount on a REMIC Regular Certificate is considered to be zero under this
rule, the actual amount of market discount must be allocated to the remaining
principal payments on the REMIC Regular Certificate, and gain equal to such
allocated amount will be recognized when the corresponding principal payment
is made. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any
of the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain on disposition of a market discount bond
acquired by the taxpayer after October 22, 1986, shall be treated as ordinary
income to the extent that it does not exceed the accrued market discount at
the time of such payment. The amount of accrued market discount for purposes
of determining the tax treatment of subsequent principal payments or
dispositions of the market discount bond is to be reduced by the amount so
treated as ordinary income.
The Code also grants authority to the Treasury Department to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury, rules described in
the Legislative History will apply. Under those rules, the holder of a market
discount bond may elect to accrue market discount either on the basis of a
constant interest method rate or according to one of the following methods.
For REMIC Regular Certificates issued with OID, the amount of market discount
that accrues during a period is equal to the product of (i) the total
remaining market discount and (ii) a fraction, the numerator of which is the
OID accruing during the period and the denominator of which is the total
remaining OID at the beginning of the period. For REMIC Regular Certificates
issued without OID, the amount of market discount that accrues during a
period is equal to the product of (a) the total remaining market discount and
(b) a fraction, the numerator of which is the amount of stated interest paid
during the accrual period and the denominator of which is the total amount of
stated interest remaining to be paid at the beginning of the period. For
purposes of calculating market discount under any of the above
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methods in the case of instruments (such as the REMIC Regular Certificates)
that provide for payments that may be accelerated by reason of prepayments of
other obligations securing such instruments, the same Prepayment Assumption
applicable to calculating the accrual of OID will apply.
A holder who acquired a REMIC Regular Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to
purchase or carry such Certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during
such taxable year and is, in general, allowed as a deduction not later than
the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year
or thereafter, the interest deferral rule described above will not apply.
Premium. A purchaser of a REMIC Regular Certificate that purchases the
REMIC Regular Certificate at a cost (not including accrued qualified stated
interest) greater than its remaining stated redemption price at maturity will
be considered to have purchased the REMIC Regular Certificate at a premium
and may elect to amortize such premium under a constant yield method. A
Certificateholder that makes this election for a Certificate that is acquired
at a premium will be deemed to have made an election to amortize bond premium
with respect to all debt instruments having amortizable bond premium that
such Certificateholder acquires during the year of the election or
thereafter. It is not clear whether the Prepayment Assumption would be taken
into account in determining the life of the REMIC Regular Certificate for
this purpose. However, the Legislative History states that the same rules
that apply to accrual of market discount (which rules require use of a
Prepayment Assumption in accruing market discount with respect to REMIC
Regular Certificates without regard to whether such Certificates have OID)
will also apply in amortizing bond premium under Code Section 171. The Code
provides that amortizable bond premium will be allocated among the interest
payments on such REMIC Regular Certificates and will be applied as an offset
against such interest payment.
On June 27, 1996 the IRS issued proposed regulations (the "Amortizable
Bond Premium Regulations") dealing with amortizable bond premium. These
regulations specifically do not apply to prepayable debt instruments subject
to Code Section 1272(a)(6) such as the Securities. Absent further guidance
from the IRS, the Trustee intends to account for amortizable bond premium in
the manner described above. Prospective purchasers of the Securities should
consult their tax advisors regarding the possible application of the
Amortizable Bond Premium Regulations.
Deferred Interest. Certain classes of REMIC Regular Certificates may
provide for the accrual of Deferred Interest with respect to one or more ARM
Loans. Any Deferred Interest that accrues with respect to a class of REMIC
Regular Certificates will constitute income to the holders of such
Certificates prior to the time distributions of cash with respect to such
Deferred Interest are made. It is unclear, under the OID Regulations, whether
any of the interest on such Certificates will constitute qualified stated
interest or whether all or a portion of the interest payable on such
Certificates must be included in the stated redemption price at maturity of
the Certificates and accounted for as OID (which could accelerate such
inclusion). Interest on REMIC Regular Certificates must in any event be
accounted for under an accrual method by the holders of such Certificates
and, therefore, applying the latter analysis may result only in a slight
difference in the timing of the inclusion in income of interest on such REMIC
Regular Certificates.
Effects of Defaults and Delinquencies. Certain Series of Certificates may
contain one or more classes of Subordinated Certificates, and in the event
there are defaults or delinquencies on the Mortgage Assets, amounts that
would otherwise be distributed on the Subordinated Certificates may instead
be distributed on the Senior Certificates. Subordinated Certificateholders
nevertheless will be required to report income with respect to such
Certificates under an accrual method without giving effect to delays and
reductions in distributions on such Subordinated Certificates attributable to
defaults and delinquencies on the Mortgage Assets, except to the extent that
it can be established that such amounts are uncollectible. As a result, the
amount of income reported by a Subordinated Certificateholder in any period
could significantly exceed the amount of cash distributed to such holder in
that period. The holder
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will eventually be allowed a loss (or will be allowed to report a lesser
amount of income) to the extent that the aggregate amount of distributions on
the Subordinated Certificate is reduced as a result of defaults and
delinquencies on the Mortgage Assets. Timing and characterization of such
losses is discussed in "--REMIC Regular Certificates--Treatment of Realized
Losses" below.
Sale, Exchange or Redemption. If a REMIC Regular Certificate is sold,
exchanged, redeemed or retired, the seller will recognize gain or loss equal
to the difference between the amount realized on the sale, exchange,
redemption, or retirement and the seller's adjusted basis in the REMIC
Regular Certificate. Such adjusted basis generally will equal the cost of the
REMIC Regular Certificate to the seller, increased by any OID and market
discount included in the seller's gross income with respect to the REMIC
Regular Certificate, and reduced (but not below zero) by payments included in
the stated redemption price at maturity previously received by the seller and
by any amortized premium. Similarly, a holder who receives a payment that is
part of the stated redemption price at maturity of a REMIC Regular
Certificate will recognize gain equal to the excess, if any, of the amount of
the payment over the holder's adjusted basis in the REMIC Regular
Certificate. A REMIC Regular Certificateholder who receives a final payment
that is less than the holder's adjusted basis in the REMIC Regular
Certificate will generally recognize a loss. Except as provided in the
following paragraph and as provided under "--Market Discount" above, any such
gain or loss will be capital gain or loss, provided that the REMIC Regular
Certificate is held as a "capital asset" (generally, property held for
investment) within the meaning of Code Section 1221.
Gain from the sale or other disposition of a REMIC Regular Certificate
that might otherwise be capital gain will be treated as ordinary income to
the extent that such gain does not exceed the excess, if any, of (i) the
amount that would have been includible in such holder's income with respect
to the REMIC Regular Certificate had income accrued thereon at a rate equal
to 110% of the AFR as defined in Code Section 1274(d) determined as of the
date of purchase of such REMIC Regular Certificate, over (ii) the amount
actually includible in such holder's income.
The Certificates will be "evidences of indebtedness" within the meaning of
Code Section 582(c)(1), so that gain or loss recognized from the sale of a
REMIC Regular Certificate by a bank or a thrift institution to which such
Section applies will be ordinary income or loss.
The REMIC Regular Certificate information reports will include a statement
of the adjusted issue price of the REMIC Regular Certificate at the beginning
of each accrual period. In addition, the reports will include information
necessary to compute the accrual of any market discount that may arise upon
secondary trading of REMIC Regular Certificates. Because exact computation of
the accrual of market discount on a constant yield method would require
information relating to the holder's purchase price which the REMIC may not
have, it appears that the information reports will only require information
pertaining to the appropriate proportionate method of accruing market
discount.
Accrued Interest Certificates. Certain of the REMIC Regular Certificates
("Payment Lag Certificates") may provide for payments of interest based on a
period that corresponds to the interval between Distribution Dates but that
ends prior to each such Distribution Date. The period between the Closing
Date for Payment Lag Certificates and their first Distribution Date may or
may not exceed such interval. Purchasers of Payment Lag Certificates for
which the period between the Closing Date and the first Distribution Date
does not exceed such interval could pay upon purchase of the REMIC Regular
Certificates accrued interest in excess of the accrued interest that would be
paid if the interest paid on the Distribution Date were interest accrued from
Distribution Date to Distribution Date. If a portion of the initial purchase
price of a REMIC Regular Certificate is allocable to interest that has
accrued prior to the issue date ("pre-issuance accrued interest") and the
REMIC Regular Certificate provides for a payment of stated interest on the
first payment date (and the first payment date is within one year of the
issue date) that equals or exceeds the amount of the pre-issuance accrued
interest, then the REMIC Regular Certificates' issue price may be computed by
subtracting from the issue price the amount of pre-issuance accrued interest,
rather than as an amount payable on the REMIC Regular Certificate. However,
it is unclear under this method how the OID Regulations treat interest on
Payment Lag Certificates.
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Therefore, in the case of a Payment Lag Certificate, the Trust Fund intends
to include accrued interest in the issue price and report interest payments
made on the first Distribution Date as interest to the extent such payments
represent interest for the number of days that the Certificateholder has held
such Payment Lag Certificate during the first accrual period.
Investors should consult their own tax advisors concerning the treatment
for federal income tax purposes of Payment Lag Certificates.
Non-Interest Expenses of the REMIC. Under temporary Treasury regulations,
if the REMIC is considered to be a "single-class REMIC," a portion of the
REMIC's servicing, administrative and other non-interest expenses will be
allocated as a separate item to those REMIC Regular Certificateholders that
are "pass-through interest holders." Certificateholders that are pass-through
interest holders should consult their own tax advisors about the impact of
these rules on an investment in the REMIC Regular Certificates. See
"Pass-Through of Non-Interest Expenses of the REMIC" under "--Taxation of
Owners of REMIC Residual Certificates" below.
Treatment of Realized Losses. Although not entirely clear, it appears that
holders of REMIC Regular Certificates that are corporations should in general
be allowed to deduct as an ordinary loss any loss sustained during the
taxable year on account of any such Certificates becoming wholly or partially
worthless, and that, in general, holders of Certificates that are not
corporations should be allowed to deduct as a short-term capital loss any
loss sustained during the taxable year on account of any such Certificates
becoming wholly worthless. Although the matter is not entirely clear,
non-corporate holders of Certificates may be allowed a bad debt deduction at
such time that the principal balance of any such Certificate is reduced to
reflect realized losses resulting from any liquidated Mortgage Assets. The
Internal Revenue Service, however, could take the position that non-corporate
holders will be allowed a bad debt deduction to reflect realized losses only
after all Mortgage Assets remaining in the related Trust Fund have been
liquidated or the Certificates of the related Series have been otherwise
retired. Potential investors and holders of the Certificates are urged to
consult their own tax advisors regarding the appropriate timing, amount and
character of any loss sustained with respect to such Certificates, including
any loss resulting from the failure to recover previously accrued interest or
discount income. Special loss rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Such
taxpayers are advised to consult their tax advisors regarding the treatment
of losses on Certificates.
Non-U.S. Persons. Generally, payments of interest (including any payment
with respect to accrued OID) on the REMIC Regular Certificates to a REMIC
Regular Certificateholder who is not a U.S. Person and is not engaged in a
trade or business within the United States will not be subject to federal
withholding tax if (i) such REMIC Regular Certificateholder does not actually
or constructively own 10 percent or more of the combined voting power of all
classes of equity in the Issuer; (ii) such REMIC Regular Certificateholder is
not a controlled foreign corporation (within the meaning of Code Section 957)
related to the Issuer; and (iii) such REMIC Regular Certificateholder
complies with certain identification requirements (including delivery of a
statement, signed by the REMIC Regular Certificateholder under penalties of
perjury, certifying that such REMIC Regular Certificateholder is a foreign
person and providing the name and address of such REMIC Regular
Certificateholder). If a REMIC Regular Certificateholder is not exempt from
withholding, distributions of interest to such holder, including
distributions in respect of accrued OID, may be subject to a 30% withholding
tax, subject to reduction under any applicable tax treaty.
Further, a REMIC Regular Certificate will not be included in the estate of
a non-resident alien individual and will not be subject to United States
estate taxes. However, Certificateholders who are non-resident alien
individuals should consult their tax advisors concerning this question.
REMIC Regular Certificateholders who are not U.S. Persons and persons
related to such holders should not acquire any REMIC Residual Certificates,
and holders of REMIC Residual Certificates (the "REMIC Residual
Certificateholder") and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates without consulting their
tax advisors as to the possible adverse tax consequences of doing so.
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Information Reporting and Backup Withholding. The Master Servicer will
furnish or make available, within a reasonable time after the end of each
calendar year, to each person who was a REMIC Regular Certificateholder at
any time during such year, such information as may be deemed necessary or
desirable to assist REMIC Regular Certificateholders in preparing their
federal income tax returns, or to enable holders to make such information
available to beneficial owners or financial intermediaries that hold such
REMIC Regular Certificates on behalf of beneficial owners. If a holder,
beneficial owner, financial intermediary or other recipient of a payment on
behalf of a beneficial owner fails to supply a certified taxpayer
identification number or if the Secretary of the Treasury determines that
such person has not reported all interest and dividend income required to be
shown on its federal income tax return, 31% backup withholding may be
required with respect to any payments. Any amounts deducted and withheld from
a distribution to a recipient would be allowed as a credit against such
recipient's federal income tax liability.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued new regulations (the "New Regulations") which make certain
modifications to the withholding, backup withholding and information
reporting rules described above. The New Regulations attempt to unify
certification requirements and modify reliance standards. The New Regulations
will generally be effective for payments made after December 31, 1998,
subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
B. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
Allocation of the Income of the REMIC to the REMIC Residual
Certificates. The REMIC will not be subject to federal income tax except with
respect to income from prohibited transactions and certain other
transactions. See "--Prohibited Transactions and Other Taxes" below. Instead,
each original holder of a REMIC Residual Certificate will report on its
federal income tax return, as ordinary income, its share of the taxable
income of the REMIC for each day during the taxable year on which such holder
owns any REMIC Residual Certificates. The taxable income of the REMIC for
each day will be determined by allocating the taxable income of the REMIC for
each calendar quarter ratably to each day in the quarter. Such a holder's
share of the taxable income of the REMIC for each day will be based on the
portion of the outstanding REMIC Residual Certificates that such holder owns
on that day. The taxable income of the REMIC will be determined under an
accrual method and will be taxable to the holders of REMIC Residual
Certificates without regard to the timing or amounts of cash distributions by
the REMIC. Ordinary income derived from REMIC Residual Certificates will be
"portfolio income" for purposes of the taxation of taxpayers subject to the
limitations on the deductibility of "passive losses." As residual interests,
the REMIC Residual Certificates will be subject to tax rules, described
below, that differ from those that would apply if the REMIC Residual
Certificates were treated for federal income tax purposes as direct ownership
interests in the Certificates or as debt instruments issued by the REMIC.
A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests (that is, a fast-pay, slow-pay structure) may generate such
a mismatching of income and cash distributions (that is, "phantom income").
This mismatching may be caused by the use of certain required tax accounting
methods by the REMIC, variations in the prepayment rate of the underlying
Mortgage Assets and certain other factors. Depending upon the structure of a
particular transaction, the aforementioned factors may significantly reduce
the after-tax yield of a REMIC Residual Certificate to a REMIC Residual
Certificateholder. Investors should consult their own tax advisors concerning
the federal income tax treatment of a REMIC Residual Certificate and the
impact of such tax treatment on the after-tax yield of a REMIC Residual
Certificate.
A subsequent REMIC Residual Certificateholder also will report on its
federal income tax return amounts representing a daily share of the taxable
income of the REMIC for each day that such REMIC Residual Certificateholder
owns such REMIC Residual Certificate. Those daily amounts generally would
equal the amounts that would have been reported for the same days by an
original REMIC Residual Certificateholder, as described above. The
Legislative History indicates that certain adjustments may be appropriate to
reduce (or increase) the income of a subsequent holder of a REMIC Residual
Certificate
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that purchased such REMIC Residual Certificate at a price greater than (or
less than) the adjusted basis such REMIC Residual Certificate would have in
the hands of an original REMIC Residual Certificateholder. See "--Sale or
Exchange of REMIC Residual Certificates" below. It is not clear, however,
whether such adjustments will in fact be permitted or required and, if so,
how they would be made. The REMIC Regulations do not provide for any such
adjustments.
Taxable Income of the REMIC Attributable to Residual Interests. The
taxable income of the REMIC will reflect a netting of (i) the income from the
Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed
to the REMIC for interest and OID on the REMIC Regular Certificates and,
except as described above under "--Taxation of Owners of REMIC Regular
Certificates--Non-Interest Expenses of the REMIC," other expenses. REMIC
taxable income is generally determined in the same manner as the taxable
income of an individual using the accrual method of accounting, except that
(i) the limitations on deductibility of investment interest expense and
expenses for the production of income do not apply, (ii) all bad loans will
be deductible as business bad debts, and (iii) the limitation on the
deductibility of interest and expenses related to tax-exempt income will
apply. The REMIC's gross income includes interest, original issue discount
income, and market discount income, if any, on the Mortgage Loans, reduced by
amortization of any premium on the Mortgage Loans, plus income on
reinvestment of cash flows and reserve assets, plus any cancellation of
indebtedness income upon allocation of realized losses to the REMIC Regular
Certificates. Note that the timing of cancellation of indebtedness income
recognized by REMIC Residual Certificateholders resulting from defaults and
delinquencies on Mortgage Assets may differ from the time of the actual loss
on the Mortgage Asset. The REMIC's deductions include interest and original
issue discount expense on the REMIC Regular Certificates, servicing fees on
the Mortgage Loans, other administrative expenses of the REMIC and realized
losses on the Mortgage Loans. The requirement that REMIC Residual
Certificateholders report their pro rata share of taxable income or net loss
of the REMIC will continue until there are no Certificates of any class of
the related Series outstanding.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate tax basis in its assets equal to the sum of the issue
prices of the REMIC Regular Certificates and the REMIC Residual Certificates
(or, if a class of Certificates is not sold initially, its fair market
value). Such aggregate basis will be allocated among the Mortgage Assets and
other assets of the REMIC in proportion to their respective fair market
value. A Mortgage Asset will be deemed to have been acquired with discount or
premium to the extent that the REMIC's basis therein is less than or greater
than its principal balance, respectively. Any such discount (whether market
discount or OID) 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 OID on the REMIC Regular
Certificates. The REMIC expects to elect under Code Section 171 to amortize
any premium on the Mortgage Assets. Premium on any Mortgage Asset to which
such election applies would be amortized under a constant yield method. It is
not clear whether the yield of a Mortgage Asset would be calculated for this
purpose based on scheduled payments or taking account of the Prepayment
Assumption. Additionally, such an election would not apply to the yield with
respect to any underlying mortgage loan originated on or before September 27,
1985. Instead, premium with respect to such a mortgage loan would be
allocated among the principal payments thereon and would be deductible by the
REMIC as those payments become due.
The REMIC will be allowed a deduction for interest and OID on the REMIC
Regular Certificates. The amount and method of accrual of OID will be
calculated for this purpose in the same manner as described above with
respect to REMIC Regular Certificates except that the 0.25% per annum de
minimis rule and adjustments for subsequent holders described therein will
not apply.
A REMIC Residual Certificateholder will not be permitted to amortize the
cost of the REMIC Residual Certificate as an offset to its share of the
REMIC's taxable income. However, REMIC taxable income will not include cash
received by the REMIC that represents a recovery of the REMIC's basis in its
assets, and, as described above, the issue price of the REMIC Residual
Certificates will be added to the issue price of the REMIC Regular
Certificates in determining the REMIC's initial basis in its assets. See
"--Sale or Exchange of REMIC Residual Certificates" below. For a discussion
of possible adjustments to income of a subsequent holder of a REMIC Residual
Certificate to reflect any difference
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between the actual cost of such REMIC Residual Certificate to such holder and
the adjusted basis such REMIC Residual Certificate would have in the hands of
an original REMIC Residual Certificateholder, see "--Allocation of the Income
of the REMIC to the REMIC Residual Certificates" above.
Net Losses of the REMIC. The REMIC will have a net loss for any calendar
quarter in which its deductions exceed its gross income. Such net loss would
be allocated among the REMIC Residual Certificateholders in the same manner
as the REMIC's taxable income. The net loss allocable to any REMIC Residual
Certificate will not be deductible by the holder to the extent that such net
loss exceeds such holder's adjusted basis in such REMIC Residual Certificate.
Any net loss that is not currently deductible by reason of this limitation
may only be used by such REMIC Residual Certificateholder to offset its share
of the REMIC's taxable income in future periods (but not otherwise). The
ability of REMIC Residual Certificateholders that are individuals or closely
held corporations to deduct net losses may be subject to additional
limitations under the Code.
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Certificate should be aware that the IRS recently finalized regulations (the
"Mark-to-Market Regulations") which provide that a REMIC Residual Certificate
acquired after January 3, 1995 cannot be marked-to-market.
Pass-Through of Non-Interest Expenses of the REMIC. As a general rule, all
of the fees and expenses of a REMIC will be taken into account by holders of
the REMIC Residual Certificates. In the case of a single class REMIC,
however, the expenses and a matching amount of additional income will be
allocated, under temporary Treasury regulations, among the REMIC Regular
Certificateholders and the REMIC Residual Certificateholders on a daily basis
in proportion to the relative amounts of income accruing to each
Certificateholder on that day. In general terms, a single class REMIC is one
that either (i) would qualify, under existing Treasury regulations, as a
grantor trust if it were not a REMIC (treating all interests as ownership
interests, even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and is structured with the
principal purpose of avoiding the single class REMIC rules. Unless otherwise
stated in the applicable Prospectus Supplement, the expenses of the REMIC
will be allocated to holders of the related REMIC Residual Certificates in
their entirety and not to holders of the related REMIC Regular Certificates.
In the case of individuals (or trusts, estates or other persons that
compute their income in the same manner as individuals) who own an interest
in a REMIC Regular Certificate or a REMIC Residual Certificate directly or
through a pass-through interest holder that is required to pass miscellaneous
itemized deductions through to its owners or beneficiaries (e.g., a
partnership, an S corporation or a grantor trust), such expenses will be
deductible under Code Section 67 only to the extent that such expenses, plus
other "miscellaneous itemized deductions" of the individual, exceed 2% of
such individual's adjusted gross income. In addition, Code Section 68
provides that the amount of itemized deductions otherwise allowable for an
individual whose adjusted gross income exceeds a certain amount (the
"Applicable Amount") will be reduced by the lesser of (i) 3% of the excess of
the individual's adjusted gross income over the Applicable Amount or (ii) 80%
of the amount of itemized deductions otherwise allowable for the taxable
year. The amount of additional taxable income recognized by REMIC Residual
Certificateholders who are subject to the limitations of either Code Section
67 or Code Section 68 may be substantial. Further, holders (other than
corporations) subject to the alternative minimum tax may not deduct
miscellaneous itemized deductions in determining such holders' alternative
minimum taxable income. The REMIC is required to report to each pass-through
interest holder and to the IRS such holder's allocable share, if any, of the
REMIC's non-interest expenses. The term "pass-through interest holder"
generally refers to individuals, entities taxed as individuals and certain
pass-through entities, but does not include real estate investment trusts.
REMIC Residual Certificateholders that are pass-through interest holders
should consult their own tax advisors about the impact of these rules on an
investment in the REMIC Residual Certificates.
Excess Inclusions. A portion of the income on a REMIC Residual Certificate
(referred to in the Code as an "excess inclusion") for any calendar quarter
will be subject to federal income tax in all events. Thus, for example, an
excess inclusion (i) may not be offset by any unrelated losses, deductions or
loss carryovers of a REMIC Residual Certificateholder; (ii) will be treated
as "unrelated business taxable
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income" within the meaning of Code Section 512 if the REMIC Residual
Certificateholder is a pension fund or any other organization that is subject
to tax only on its unrelated business taxable income (see "--Tax-Exempt
Investors" below); and (iii) is not eligible for any reduction in the rate of
withholding tax in the case of a REMIC Residual Certificateholder that is a
foreign investor. See "--Non-U.S. Persons" below.
With respect to any REMIC Residual Certificateholder, the excess
inclusions for any calendar quarter is the excess, if any, of (i) the income
of such REMIC Residual Certificateholder for that calendar quarter from its
REMIC Residual Certificate over (ii) the sum of the "daily accruals" (as
defined below) for all days during the calendar quarter on which the REMIC
Residual Certificateholder holds such REMIC Residual Certificate. For this
purpose, the daily accruals with respect to a REMIC Residual Certificate are
determined by allocating to each day in the calendar quarter its ratable
portion of the product of the "adjusted issue price" (as defined below) of
the REMIC Residual Certificate at the beginning of the calendar quarter and
120 percent of the "Federal long-term rate" in effect at the time the REMIC
Residual Certificate is issued. For this purpose, the "adjusted issue price"
of a REMIC Residual Certificate at the beginning of any calendar quarter
equals the issue price of the REMIC Residual Certificate, increased by the
amount of daily accruals for all prior quarters, and decreased (but not below
zero) by the aggregate amount of payments made on the REMIC Residual
Certificate before the beginning of such quarter. The "federal long-term
rate" is an average of current yields on Treasury securities with a remaining
term of greater than nine years, computed and published monthly by the IRS.
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 Code Section
857(b)(2), excluding any net capital gain), will be allocated among the
shareholders of such trust in proportion to the dividends received by 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. Regulated investment companies, common trust
funds and certain cooperatives are subject to similar rules.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess
inclusion income from REMIC residual certificates that have "significant
value" within the meaning of the REMIC Regulations, effective for taxable
years beginning after December 31, 1995, except with respect to residual
certificates continuously held by a thrift institution since November 1,
1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum
taxable income for such residual holder is determined without regard to the
special rule that taxable income cannot be less than excess inclusions.
Second, a residual holder's alternative minimum taxable income for a tax year
cannot be less than excess inclusions for the year. Third, the amount of any
alternative minimum tax net operating loss deductions must be computed
without regard to any excess inclusions. These rules are effective for tax
years beginning after December 31, 1986, unless a residual holder elects to
have such rules apply only to tax years beginning after August 20, 1996.
Payments. Any distribution made on a REMIC Residual Certificate to a REMIC
Residual Certificateholder will be treated as a non-taxable return of capital
to the extent it does not exceed the REMIC Residual Certificateholder's
adjusted basis in such REMIC Residual Certificate. To the extent a
distribution exceeds such adjusted basis, it will be treated as gain from the
sale of the REMIC Residual Certificate.
Sale or Exchange of REMIC Residual Certificates. If a REMIC Residual
Certificate is sold or exchanged, the seller will generally recognize gain or
loss equal to the difference between the amount realized on the sale or
exchange and its adjusted basis in the REMIC Residual Certificate (except
that the recognition of loss may be limited under the "wash sale" rules
described below). A holder's adjusted basis in a REMIC Residual Certificate
generally equals the cost of such REMIC Residual Certificate to such REMIC
Residual Certificateholder, increased by the taxable income of the REMIC that
was included in the income of such REMIC Residual Certificateholder with
respect to such REMIC Residual Certificate,
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and decreased (but not below zero) by the net losses that have been allowed
as deductions to such REMIC Residual Certificateholder with respect to such
REMIC Residual Certificate and by the distributions received thereon by such
REMIC Residual Certificateholder. In general, any such gain or loss will be
capital gain or loss provided the REMIC Residual Certificate is held as a
capital asset. However, REMIC Residual Certificates will be "evidences of
indebtedness" within the meaning of Code Section 582(c)(1), so that gain or
loss recognized from sale of a REMIC Residual Certificate by a bank or thrift
institution to which such Section applies would be ordinary income or loss.
Except as provided in Treasury regulations yet to be issued, if the seller
of a REMIC Residual Certificate reacquires such REMIC Residual Certificate,
or acquires any other REMIC Residual Certificate, any residual interest in
another REMIC or similar interest in a "taxable mortgage pool" (as defined in
Code Section 7701(i)) during the period beginning six months before, and
ending six months after, the date of such sale, such sale will be subject to
the "wash sale" rules of Code Section 1091. In that event, any loss realized
by the REMIC Residual Certificateholder on the sale will not be deductible,
but, instead, will increase such REMIC Residual Certificateholder's adjusted
basis in the newly acquired asset.
PROHIBITED TRANSACTIONS AND OTHER TAXES
The Code imposes a tax on REMICs equal to 100% of the net income derived
from "prohibited transactions" (the "Prohibited Transactions Tax"). In
general, subject to certain specified exceptions, a prohibited transaction
means the disposition of a Mortgage Asset, the receipt of income from a
source other than a Mortgage Asset 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 Assets for temporary
investment pending distribution on the Certificates. It is not anticipated
that the Trust Fund for any Series of Certificates will engage in any
prohibited transactions in which it would recognize a material amount of net
income.
In addition, certain contributions to a Trust Fund as to which an election
has been made to treat such Trust Fund as a REMIC made after the day on which
such Trust Fund issues all of its interests could result in the imposition of
a tax on the Trust Fund equal to 100% of the value of the contributed
property (the "Contributions Tax"). No Trust Fund for any Series of
Certificates will accept contributions that would subject it to such tax.
In addition, a Trust Fund as to which an election has been made to treat
such Trust Fund as a REMIC may also be subject to federal income tax at the
highest corporate rate on "net income from foreclosure property," determined
by reference to the rules applicable to real estate investment trusts. "Net
income from foreclosure property" generally means income from foreclosure
property other than qualifying income for a real estate investment trust.
Where any Prohibited Transactions Tax, Contributions Tax, tax on net
income from foreclosure property or state or local income or franchise tax
that may be imposed on a REMIC relating to any Series of Certificates arises
out of or results from (i) a breach of the related Master Servicer's,
Trustee's or Sellers' obligations, as the case may be, under the related
Agreement for such Series, such tax will be borne by such Master Servicer,
Trustee or Sellers, as the case may be, out of its own funds or (ii) the
Sellers' obligation to repurchase a Mortgage Loan, such tax will be borne by
the Sellers. In the event that such Master Servicer, Trustee or Sellers, as
the case may be, fails to pay or is not required to pay any such tax as
provided above, such tax will be payable out of the Trust Fund for such
Series and will result in a reduction in amounts available to be distributed
to the Certificateholders of such Series.
LIQUIDATION AND TERMINATION
If the REMIC adopts a plan of complete liquidation, within the meaning of
Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in
the REMIC's final tax return a date on which such adoption is deemed to
occur, and sells all of its assets (other than cash) within a 90-day period
beginning on such date, the REMIC will not be subject to any Prohibited
Transaction Tax, provided that the REMIC credits or distributes in
liquidation all of the sale proceeds plus its cash (other than the amounts
retained to meet claims) to holders of Regular and REMIC Residual
Certificates within the 90-day period.
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The REMIC will terminate shortly following the retirement of the REMIC
Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis
in the REMIC Residual Certificate exceeds the amount of cash distributed to
such REMIC Residual Certificateholder in final liquidation of its interest,
then it would appear that the REMIC Residual Certificateholder would be
entitled to a loss equal to the amount of such excess. It is unclear whether
such a loss, if allowed, will be a capital loss or an ordinary loss.
ADMINISTRATIVE MATTERS
Solely for the purpose of the administrative provisions of the Code, the
REMIC generally will be treated as a partnership and the REMIC Residual
Certificateholders will be treated as the partners. Certain information will
be furnished quarterly to each REMIC Residual Certificateholder who held a
REMIC Residual Certificate on any day in the previous calendar quarter.
Each REMIC Residual Certificateholder is required to treat items on its
return consistently with their treatment on the REMIC's return, unless the
REMIC Residual Certificateholder either files a statement identifying the
inconsistency or establishes that the inconsistency resulted from incorrect
information received from the REMIC. The IRS may assert a deficiency
resulting from a failure to comply with the consistency requirement without
instituting an administrative proceeding at the REMIC level. The REMIC does
not intend to register as a tax shelter pursuant to Code Section 6111 because
it is not anticipated that the REMIC will have a net loss for any of the
first five taxable years of its existence. Any person that holds a REMIC
Residual Certificate as a nominee for another person may be required to
furnish the REMIC, in a manner to be provided in Treasury regulations, with
the name and address of such person and other information.
TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be
subject to such tax on that portion of the distributions received on a REMIC
Residual Certificate that is considered an excess inclusion. See "--Taxation
of Owners of REMIC Residual Certificates--Excess Inclusions" above.
RESIDUAL CERTIFICATE PAYMENTS NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S. Persons
(see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S. Persons"
above) are treated as interest for purposes of the 30% (or lower treaty rate)
United States withholding tax. Amounts distributed to holders of REMIC
Residual Certificates should qualify as "portfolio interest," subject to the
conditions described in "--Taxation of Owners of REMIC Regular Certificates"
above, but only to the extent that the underlying mortgage loans were
originated after July 18, 1984. Furthermore, the rate of withholding on any
income on a REMIC Residual Certificate that is excess inclusion income will
not be subject to reduction under any applicable tax treaties. See
"--Taxation of Owners of REMIC Residual Certificates--Excess Inclusions"
above. If the portfolio interest exemption is unavailable, such amount will
be subject to United States withholding tax when paid or otherwise
distributed (or when the REMIC Residual Certificate is disposed of) under
rules similar to those for withholding upon disposition of debt instruments
that have OID. The Code, however, grants the Treasury Department authority to
issue regulations requiring that those amounts be taken into account earlier
than otherwise provided where necessary to prevent avoidance of tax (for
example, where the REMIC Residual Certificates do not have significant
value). See "--Taxation of Owners of REMIC Residual Certificates--Excess
Inclusions" above. If the amounts paid to REMIC Residual Certificateholders
that are not U.S. persons are effectively connected with their conduct of a
trade or business within the United States, the 30% (or lower treaty rate)
withholding will not apply. Instead, the amounts paid to such non-U.S. Person
will be subject to U.S. federal income taxation at regular graduated rates.
For special restrictions on the transfer of REMIC Residual Certificates, see
"--Tax-Related Restrictions on Transfers of REMIC Residual Certificates"
below.
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REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their
tax advisors as to the possible adverse tax consequences of such acquisition.
TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES
Disqualified Organizations. An entity may not qualify as a REMIC unless
there are reasonable arrangements designed to ensure that residual interests
in such entity are not held by "disqualified organizations" (as defined
below). Further, a tax is imposed on the transfer of a residual interest in a
REMIC to a "disqualified organization." The amount of the tax equals the
product of (A) an amount (as determined under the REMIC Regulations) equal to
the present value of the total anticipated "excess inclusions" with respect
to such interest for periods after the transfer and (B) the highest marginal
federal income tax rate applicable to corporations. The tax is imposed on the
transferor unless the transfer is through an agent (including a broker or
other middleman) for a disqualified organization, in which event the tax is
imposed on the agent. The person otherwise liable for the tax shall be
relieved of liability for the tax if the transferee furnished to such person
an affidavit that the transferee is not a disqualified organization and, at
the time of the transfer, such person does not have actual knowledge that the
affidavit is false. A "disqualified organization" means (A) the United
States, any State, possession or political subdivision thereof, any foreign
government, any international organization or any agency or instrumentality
of any of the foregoing (provided that such term does not include an
instrumentality if all its activities are subject to tax and, except for
FHLMC, a majority of its board of directors is not selected by any such
governmental agency), (B) any organization (other than certain farmers'
cooperatives) generally exempt from federal income taxes unless such
organization is subject to the tax on "unrelated business taxable income" and
(C) a rural electric or telephone cooperative.
A tax is imposed on a "pass-through entity" (as defined below) holding a
residual interest in a REMIC if at any time during the taxable year of the
pass-through entity a disqualified organization is the record holder of an
interest in such entity. The amount of the tax is equal to the product of (A)
the amount of excess inclusions for the taxable year allocable to the
interest held by the disqualified organization and (B) the highest marginal
federal income tax rate applicable to corporations. The pass-through entity
otherwise liable for the tax, for any period during which the disqualified
organization is the record holder of an interest in such entity, will be
relieved of liability for the tax if such record holder furnishes to such
entity an affidavit that such record holder is not a disqualified
organization and, for such period, the pass-through entity does not have
actual knowledge that the affidavit is false. For this purpose, a
"pass-through entity" means (i) a regulated investment company, real estate
investment trust or common trust fund, (ii) a partnership, trust or estate
and (iii) certain cooperatives. Except as may be provided in Treasury
regulations not yet issued, any person holding an interest in a pass-through
entity as a nominee for another will, with respect to such interest, be
treated as a pass-through entity. The tax on pass-through entities is
generally effective for periods after March 31, 1988, except that in the case
of regulated investment companies, real estate investment trusts, common
trust funds and publicly-traded partnerships the tax shall apply only to
taxable years of such entities beginning after December 31, 1988.
In order to comply with these rules, the Agreement will provide that no
record or beneficial ownership interest in a REMIC Residual Certificate may
be purchased, transferred or sold, directly or indirectly, without the
express written consent of the Master Servicer. The Master Servicer will
grant such consent to a proposed transfer only if it receives the following:
(i) an affidavit from the proposed transferee to the effect that it is not a
disqualified organization and is not acquiring the REMIC Residual Certificate
as a nominee or agent for a disqualified organization and (ii) a covenant by
the proposed transferee to the effect that the proposed transferee agrees to
be bound by and to abide by the transfer restrictions applicable to the REMIC
Residual Certificate.
Noneconomic REMIC Residual Certificates. The REMIC Regulations disregard,
for federal income tax purposes, any transfer of a Noneconomic REMIC Residual
Certificate to a "U.S. Person," as defined above, unless no significant
purpose of the transfer is to enable the transferor to impede the assessment
or collection of tax. A Noneconomic REMIC Residual Certificate is any REMIC
Residual Certificate
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(including a REMIC Residual Certificate with a positive value at issuance)
unless, at the time of transfer, taking into account the Prepayment
Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents, (i) the
present value of the expected future distributions on the REMIC Residual
Certificate at least equals the product of the present value of the
anticipated excess inclusions and the highest corporate income tax rate in
effect for the year in which the transfer occurs and (ii) the transferor
reasonably expects that the transferee will receive distributions from the
REMIC at or after the time at which taxes accrue on the anticipated excess
inclusions in an amount sufficient to satisfy the accrued taxes. A
significant purpose to impede the assessment or collection of tax exists if
the transferor, at the time of the transfer, either knew or should have known
that the transferee would be unwilling or unable to pay taxes due on its
share of the taxable income of the REMIC. A transferor is presumed not to
have such knowledge if (i) the transferor conducted a reasonable
investigation of the transferee and (ii) the transferee acknowledges to the
transferor that the residual interest may generate tax liabilities in excess
of the cash flow and the transferee represents that it intends to pay such
taxes associated with the residual interest as they become due. If a transfer
of a Noneconomic REMIC Residual Certificate is disregarded, the transferor
would continue to be treated as the owner of the REMIC Residual Certificate
and would continue to be subject to tax on its allocable portion of the net
income of the REMIC.
Foreign Investors. The REMIC Regulations provide that the transfer of a
REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign
person" will be disregarded for federal income tax purposes. This rule
appears to apply to a transferee who is not a U.S. Person unless such
transferee's income in respect of the REMIC Residual Certificate is
effectively connected with the conduct of a United States trade or business.
A REMIC Residual Certificate is deemed to have a tax avoidance potential
unless, at the time of transfer, the transferor reasonably expects that the
REMIC will distribute to the transferee amounts that will equal at least 30
percent of each excess inclusion, and that such amounts will be distributed
at or after the time the excess inclusion accrues and not later than the end
of the calendar year following the year of accrual. If the non-U.S. Person
transfers the REMIC Residual Certificate to a U.S. Person, the transfer will
be disregarded, and the foreign transferor will continue to be treated as the
owner, if the transfer has the effect of allowing the transferor to avoid tax
on accrued excess inclusions. The provisions in the REMIC Regulations
regarding transfers of REMIC Residual Certificates that have tax avoidance
potential to foreign persons are effective for all transfers after June 30,
1992. The Agreement will provide that no record of beneficial ownership
interest in a REMIC Residual Certificate may be transferred, directly or
indirectly, to a non-U.S. Person unless such person provides the Trustee with
a duly completed I.R.S. Form 4224 and the Trustee consents to such transfer
in writing.
Any attempted transfer or pledge in violation of the transfer restrictions
shall be absolutely null and void and shall vest no rights in any purported
transferee. Investors in REMIC Residual Certificates are advised to consult
their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
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STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences," potential investors should consider the
state income tax consequences of the acquisition, ownership, and disposition
of the Offered Certificates. State income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state. Therefore, potential
investors should consult their own tax advisors with respect to the various
tax consequences of investments in the Offered Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans subject to ERISA
("Plans") and on persons who are parties in interest or disqualified persons
("parties in interest") with respect to such Plans. Certain employee benefit
plans, such as governmental plans and church plans (if no election has been
made under Section 410(d) of the Code), are not subject to the restrictions
of ERISA, and assets of such plans may be invested in the Certificates
without regard to the ERISA considerations described below, subject to other
applicable federal and state law. However, any such governmental or church
plan which is qualified under Section 401(a) of the Code and exempt from
taxation under Section 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
PROHIBITED TRANSACTIONS
General
Section 406 of ERISA prohibits parties in interest with respect to a Plan
from engaging in certain transactions involving a Plan and its assets unless
a statutory or administrative exemption applies to the transaction. Section
4975 of the Code imposes certain excise taxes (or, in some cases, a civil
penalty may be assessed pursuant to Section 502(i) of ERISA) on parties in
interest which engage in nonexempt prohibited transactions.
The United States Department of Labor ("Labor") has issued a final
regulation (29 C.F.R. Section 2510.3-101) containing rules for determining
what constitutes the assets of a Plan. This regulation provides that, as a
general rule, the underlying assets and properties of corporations,
partnerships, trusts and certain other entities in which a Plan makes an
"equity investment" will be deemed for purposes of ERISA to be assets of the
Plan unless certain exceptions apply.
Under the terms of the regulation, the Trust may be deemed to hold plan
assets by reason of a Plan's investment in a Certificate; such plan assets
would include an undivided interest in the Mortgage Loans and any other
assets held by the Trust. In such an event, the Depositor, the Servicers, the
Trustee and other persons, in providing services with respect to the assets
of the Trust, may be parties in interest, subject to the fiduciary
responsibility provisions of Title I of ERISA, including the prohibited
transaction provisions of Section 406 of ERISA (and of Section 4975 of the
Code), with respect to transactions involving such assets unless such
transactions are subject to a statutory or administrative exemption.
The regulations contain a de minimis safe-harbor rule that exempts any
entity from plan assets status as long as the aggregate equity investment in
such entity by Plans is not significant. For this purpose, equity
participation in the entity will be significant if immediately after any
acquisition of any equity interest in the entity, "benefit plan investors" in
the aggregate, own at least 25% of the value of any class of equity interest.
"Benefit plan investors" are defined as Plans as well as employee benefit
plans not subject to ERISA (e.g., governmental plans). The 25% limitation
must be met with respect to each class of certificates, regardless of the
portion of total equity value represented by such class, on an ongoing basis.
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Availability of Underwriter's Exemption for Certificates
Labor has granted to J.P. Morgan Securities Inc. Prohibited Transaction
Exemption 90-23 (the "Exemption"), which exempts from the application of the
prohibited transaction rules transactions relating to: (1) the acquisition,
sale and holding by Plans of certain certificates representing an undivided
interest in certain asset-backed pass-through trusts, with respect to which
J.P. Morgan Securities Inc. or any of its affiliates is the sole underwriter
or the manager or co-manager of the underwriting syndicate; and (2) the
servicing, operation and management of such asset-backed pass-through trusts,
provided that the general conditions and certain other conditions set forth
in the Exemption are satisfied.
General Conditions of the Exemption. Section II of the Exemption sets
forth the following general conditions which must be satisfied before a
transaction involving the acquisition, sale and holding of the Certificates
or a transaction in connection with the servicing, operation and management
of the Trust Fund may be eligible for exemptive relief thereunder:
(1) The acquisition of the Certificates by a Plan is on terms (including
the price for such Certificates) that are at least as favorable to the
investing Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) The rights and interests evidenced by the Certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by
other certificates of the Trust Fund;
(3) The Certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest rating
categories from any of Duff & Phelps Inc., Fitch Investors Service, Inc.,
Moody's Investors Service, Inc. and Standard & Poor's Ratings Group;
(4) The Trustee is not an affiliate of the Underwriters, the Depositor,
the Servicers, any borrower whose obligations under one or more Mortgage
Loans constitute more than 5% of the aggregate unamortized principal
balance of the assets in the Trust, or any of their respective affiliates
(the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of the Certificates represents not more
than reasonable compensation for underwriting such Certificates; the sum
of all payments made to and retained by the Depositor pursuant to the sale
of the Mortgage Loans to the Trust represents not more than the fair
market value of such Mortgage Loans; the sum of all payments made to and
retained by the Servicers represent not more than reasonable compensation
for the Servicers' services under the Agreements and reimbursement of the
Servicer's reasonable expenses in connection therewith; and
(6) The Plan investing in the Certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933 as amended.
Before purchasing a Certificate, a fiduciary of a Plan should itself
confirm (a) that the Certificates constitute "certificates" for purposes of
the Exemption and (b) that the specific and general conditions set forth in
the Exemption and the other requirements set forth in the Exemption would be
satisfied.
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of
ERISA and the Code to such investment. Among other things, before purchasing
any Certificates, a fiduciary of a Plan subject to the fiduciary
responsibility provisions of ERISA or an employee benefit plan subject to the
prohibited transaction provisions of the Code should make its own
determination as to the availability of the exemptive relief provided in the
Exemption, and also consider the availability of any other prohibited
transaction exemptions. The Prospectus Supplement with respect to a Series of
Certificates may contain additional information regarding the application of
the Exemption, PTCE 83-1, or any other exemption, with respect to the
Certificates offered thereby.
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LEGAL INVESTMENT
The Prospectus Supplement for each Series of Offered Certificates will
identify those classes of Offered Certificates, if any, which constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Such classes will constitute "mortgage
related securities" for so long as they are rated in one of the two highest
rating categories by at least one nationally recognized statistical rating
organization (the "SMMEA Certificates"). As "mortgage related securities,"
the SMMEA Certificates will constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business
entities (including, but not limited to, state chartered savings banks,
commercial banks, savings and loan associations and insurance companies, as
well as trustees and state government employee retirement systems) 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. Alaska, Arkansas, Colorado,
Connecticut, Delaware, Florida, Georgia, Illinois, Kansas, Maryland,
Michigan, Missouri, Nebraska, New Hampshire, New York, North Carolina, Ohio,
South Dakota, Utah, Virginia and West Virginia enacted legislation, on or
before the October 4, 1991 cutoff established by SMMEA for such enactments,
limiting to varying extents the ability of certain entities (in particular,
insurance companies) to invest in mortgage related securities, in most cases
by requiring the affected investors to rely solely upon existing state law,
and not SMMEA. Accordingly, the investors affected by such legislation will
be authorized to invest in SMMEA Certificates only to the extent provided in
such legislation. Accordingly, investors whose investment authority is
subject to legal restrictions should consult their own legal advisors to
determine whether and to what extent the Offered Certificates constitute
legal investments for them.
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 with "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. 24 (Seventh), subject in each case to such regulations as
the applicable federal regulatory authority may prescribe.
Institutions where investment activities are subject to legal investment
laws or regulations or review by certain regulatory authorities may be
subject to restrictions on investment in certain classes of Offered
Certificates. Any financial institution which is subject to the jurisdiction
of the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation ("FDIC"), the
Office of Thrift Supervision ("OTS"), the National Credit Union
Administration ("NCUA") or other federal or state agencies with similar
authority should review any applicable rules, guidelines and regulations
prior to purchasing any Offered Certificate. The Federal Financial
Institutions Examination Council, for example, has issued a Supervisory
Policy Statement on Securities Activities effective February 10, 1992 (the
"Policy Statement"). The Policy Statement has been adopted by the Comptroller
of the Currency, the Federal Reserve Board, the FDIC, the OTS and the NCUA
(with certain modifications), with respect to the depository institutions
that they regulate. The Policy Statement prohibits depository institutions
from investing in certain "high-risk mortgage securities" (including
securities such as certain classes of Offered Certificates), except under
limited circumstances, and sets forth certain investment practices deemed to
be unsuitable for regulated institutions. The NCUA issued final regulations
effective December 2, 1991 that restrict and in some instances prohibit the
investment by federal credit unions in certain types of mortgage related
securities.
In September 1993 the National Association of Insurance Commissioners
released a draft model investment law (the "Model Law") which sets forth
model investment guidelines for the insurance industry. Institutions subject
to insurance regulatory authorities may be subject to restrictions on
investment similar to those set forth in the Model Law and other
restrictions.
If specified in the related Prospectus Supplement, other classes of
Offered Certificates offered pursuant to this Prospectus will not constitute
"mortgage related securities" under SMMEA. The
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appropriate characterization of this Offered Certificate 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.
Notwithstanding SMMEA, there may be other restrictions on the ability of
certain investors, including depository institutions, either to purchase any
Offered Certificates or to purchase Offered Certificates representing more
than a special percentage of the investors' assets.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a Series as "mortgage related securities" under SMMEA, the
Depositor will make no representations as to the proper characterization of
the Certificates for legal investment or financial institution regulatory
purposes, or as to the ability of particular investors to purchase any
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 Certificates) may adversely affect the liquidity of
the Certificates.
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 and
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Certificates or
to purchase Offered Certificates representing more than a specified
percentage of the investor's assets. Investors should consult their own legal
advisors in determining whether and to what extent the Offered Certificates
constitute legal investments for such investors.
PLAN OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Certificates
may be effected from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices to be determined at the time of sale or at the time of commitment
therefor. If so specified in the related Prospectus Supplement, the Offered
Certificates will be distributed in a firm commitment underwriting, subject
to the terms and conditions of the underwriting agreement, by J.P. Morgan
Securities Inc. ("JPMSI") acting as underwriter with other underwriters, if
any, named therein. In such event, the Prospectus Supplement may also specify
that the underwriters will not be obligated to pay for any Offered
Certificates agreed to be purchased by purchasers pursuant to purchase
agreements acceptable to the Depositor. In connection with the sale of
Offered Certificates, underwriters may receive compensation from the
Depositor or from purchasers of Offered Certificates in the form of
discounts, concessions or commissions. The Prospectus Supplement will
describe any such compensation paid by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by JPMSI acting as agent or in some cases as
principal with respect to Offered Certificates that it has previously
purchased or agreed to purchase. If JPMSI acts as agent in the sale of
Offered Certificates, JPMSI will receive a selling commission with respect to
such Offered Certificates, depending on market conditions, expressed as a
percentage of the aggregate Certificate Balance or notional amount of such
Offered Certificates as of the Cut-off Date. The exact percentage for each
Series of Certificates will be disclosed in the related Prospectus
Supplement. To the extent that JPMSI elects to purchase Offered Certificates
as principal, JPMSI may realize losses or profits based upon the difference
between its purchase price and the sales price. The Prospectus Supplement
with respect to any Series offered other than through underwriters will
contain information regarding the nature of such offering and any agreements
to be entered into between the Depositor and purchasers of Offered
Certificates of such Series.
The Depositor will indemnify JPMSI and any underwriters against certain
civil liabilities, including liabilities under the Securities Act of 1933, or
will contribute to payments JPMSI and any underwriters may be required to
make in respect thereof.
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In the ordinary course of business, JPMSI and the Depositor may engage in
various securities and financing transactions, including repurchase
agreements to provide interim financing of the Depositor's mortgage loans
pending the sale of such mortgage loans or interests therein, including the
Certificates.
Offered Certificates will be sold primarily to institutional investors.
Purchasers of Offered Certificates, including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 in connection with reoffers
and sales by them of Offered Certificates. Certificateholders should consult
with their legal advisors in this regard prior to any such reoffer or sale.
As to each Series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any non-investment grade class may be initially retained by the Depositor,
and may be sold by the Depositor at any time in private transactions.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the
Depositor by Brown & Wood llp, New York, New York.
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 he included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in
one of the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage
loans and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood
of principal prepayments by Mortgagors or of the degree by which such
prepayments might differ from those originally anticipated. As a result,
certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped interest certificates in extreme cases might
fail to recoup their initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Each security rating should be evaluated independently
of any other security rating.
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INDEX OF PRINCIPAL TERMS
1986 Act .......................................................... 77
Accounts .......................................................... 43
Accrual Certificates .............................................. 10, 32
accrual period .................................................... 83
Accrued Certificate Interest ...................................... 33
ADA ............................................................... 71
Agreements ........................................................ 9
Amortizable Bond Premium Regulations .............................. 74, 86
Applicable Amount ................................................. 91
ARM Loans ......................................................... 25, 77
Asset Conservation Act ............................................ 67
Asset Sellers ..................................................... 22
Available Distribution Amount ..................................... 33
Balloon Mortgage Loans ............................................ 17
Bankruptcy Code ................................................... 63
Beneficial Owners ................................................. 38
Book-Entry Certificates ........................................... 32
Cash Flow Agreement ............................................... 9, 28
Cash Flow Agreements .............................................. 1
Cede .............................................................. 4, 38
CERCLA ............................................................ 19, 67
Certificate ....................................................... 39
Certificate Balance ............................................... 9, 34
Certificateholder ................................................. 38
Certificateholders ................................................ 21
Certificates ...................................................... 6
Closing Date ...................................................... 82
CMBS .............................................................. 1, 6, 22
CMBS Agreement .................................................... 26
CMBS Issuer ....................................................... 26
CMBS Servicer ..................................................... 26
CMBS Trustee ...................................................... 26
Code .............................................................. 12
Commercial Loans .................................................. 22
Commercial Properties ............................................. 7, 22
Commission ........................................................ 3
Contingent Regulations ............................................ 83
Contributions Tax ................................................. 93
Cooperative ....................................................... 59
Cooperative Loans ................................................. 59
Cooperatives ...................................................... 22
Covered Trust ..................................................... 18, 55
CPR ............................................................... 30
Credit Support .................................................... 1, 8, 27
Crime Control Act ................................................. 72
Cut-off Date ...................................................... 11
daily portions .................................................... 83
Debt Service Coverage Ratio ....................................... 23
Deferred Interest ................................................. 79
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Definitive Certificates ........................................... 32, 39
Depositor ......................................................... 22
Determination Date ................................................ 32
Disqualifying Condition ........................................... 69
Distribution Account .............................................. 45
Distribution Date ................................................. 10
DTC ............................................................... 4, 38
Environmental Hazard Condition .................................... 68
Equity Participations ............................................. 26
ERISA ............................................................. 13, 97
excess servicing .................................................. 76
Exchange Act ...................................................... 4
Exemption ......................................................... 98
FDIC .............................................................. 43, 99
Grantor Trust Certificates ........................................ 12
Hazardous Materials ............................................... 69
Indirect Participants ............................................. 38
Insurance Proceeds ................................................ 43
IRS ............................................................... 74, 83
JPMSI ............................................................. 100
Labor ............................................................. 97
L/C Bank .......................................................... 56
Lease ............................................................. 3, 7
Lease Assignment .................................................. 1
Legislative History ............................................... 78
Lessee ............................................................ 3, 7
Liquidation Proceeds .............................................. 43, 45
Loan-to-Value Ratio ............................................... 25
Lock-out Date ..................................................... 26
Lock-out Period ................................................... 26
Mark-to-Market Regulations ........................................ 91
Master REMIC ...................................................... 81
Master Servicer ................................................... 6
Model Law ......................................................... 99
Mortgage Assets ................................................... 1, 22
Mortgage Interest Rate ............................................ 7, 26
Mortgage Loans .................................................... 1, 6, 22
Mortgage Notes .................................................... 22
Mortgaged Properties .............................................. 7
Mortgages ......................................................... 22
Mortgagor ......................................................... 57
Multifamily Loans ................................................. 22
Multifamily Properties ............................................ 7, 22
NCUA .............................................................. 99
Net Operating Income .............................................. 24
New Regulations ................................................... 80, 89
Nonrecoverable Advance ............................................ 35
Offered Certificates .............................................. 1
OID ............................................................... 73, 74
OID Regulations ................................................... 74
Originator ........................................................ 22
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OTS ............................................................... 99
Participants ...................................................... 38
parties in interest ............................................... 97
Pass-Through Rate ................................................. 9, 33
Payment Lag Certificates .......................................... 87
Permitted Investments ............................................. 43
Plans ............................................................. 97
Policy Statement .................................................. 99
pre-issuance accrued interest ..................................... 87
Prepayment Assumption ............................................. 78
Prepayment Premium ................................................ 26
Primary Servicer .................................................. 6
Prohibited Transactions Tax ....................................... 93
Purchase Price .................................................... 42
qualified mortgage ................................................ 80
Rating Agency ..................................................... 13
RCRA .............................................................. 68
Record Date ....................................................... 32
Refinance Loans ................................................... 25
Related Proceeds .................................................. 35
Relief Act ........................................................ 71
REMIC ............................................................. 12
REMIC Certificates ................................................ 80
REMIC Regular Certificateholders .................................. 81
REMIC Regular Certificates ........................................ 12, 80
REMIC Regulations ................................................. 72
REMIC Residual Certificateholder .................................. 88
REMIC Residual Certificates ....................................... 12, 80
Restricted Group .................................................. 98
Retained Interest ................................................. 50
RICO .............................................................. 72
Senior Certificates ............................................... 9, 32
Series ............................................................ 1, 15, 30
Servicer .......................................................... 11
Servicing Standard ................................................ 45
Servicing Transfer Event .......................................... 46
SMMEA ............................................................. 99
SMMEA Certificates ................................................ 99
Special Servicer .................................................. 6
Specially Serviced Mortgage Loan .................................. 46
Stripped ARM Obligations .......................................... 79
Stripped Bond Certificates ........................................ 76
Stripped Coupon Certificates ...................................... 76
Stripped Interest Certificates .................................... 10, 32
Stripped Principal Certificates ................................... 10, 32
Subordinate Certificates .......................................... 10, 32
Subsidiary REMIC .................................................. 81
Super-Premium Certificates ........................................ 83
Title V ........................................................... 70
Trust Assets ...................................................... 3
Trust Fund ........................................................ 1
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Trustee ........................................................... 6
UCC ............................................................... 38
Underlying CMBS ................................................... 22
Underlying Mortgage Loans ......................................... 22
U.S. Person ....................................................... 79
Value ............................................................. 25
Voting Rights ..................................................... 21
Warranting Party .................................................. 14, 41
Whole Loans ....................................................... 22
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