<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-63589
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 7, 1999)
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
Depositor
$709,194,000 (Approximate)
Mortgage Pass-Through Certificates, Series 1999-C7
THE OFFERED CERTIFICATES:
o The trust fund will issue fourteen classes of certificates. Only the
following seven classes of "offered certificates" are offered hereby:
<TABLE>
<CAPTION>
APPROXIMATE INITIAL CLASS BALANCE
CLASS OR NOTIONAL BALANCE PASS-THROUGH RATE
- ---------- --------------------------------- -----------------
<S> <C> <C>
Class A1 $208,000,000 6.180%
Class A2 $356,953,000 6.507%
Class X $801,352,036 (1) WAC
Class B $ 40,067,000 6.658%
Class C $ 40,067,000 WAC
Class D $ 52,087,000 WAC
Class E $ 12,020,000 WAC
</TABLE>
- ------------
(1) Notional amount.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-9 OF THIS
PROSPECTUS SUPPLEMENT AND PAGE 14 IN THE ACCOMPANYING PROSPECTUS.
Neither the offered certificates nor the underlying mortgage loans are
insured or guaranteed by any governmental agency or instrumentality.
The offered certificates will represent interests in the trust fund only.
They will not represent interests in or obligations of the Depositor, any of
its affiliates or any other entity.
This prospectus supplement may be used to offer and sell the offered
certificates only if accompanied by the prospectus dated April 7, 1999.
o The offered certificates will represent beneficial ownership interests in
the trust fund only.
o Interest will be payable monthly, commencing in May 1999.
o Principal payments will also be payable monthly. The outstanding class
with the highest priority of distribution will receive all principal payments
until it is paid in full. This sequential payment will continue until all
classes have their respective class balances reduced to zero.
THE TRUST FUND:
o The trust fund will consist of fixed rate mortgage loans secured by
mortgages or deeds of trust on multifamily or commercial properties.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR
DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR
COMPLETE. 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.
We expect that the delivery of the offered certificates will be made in
book-entry form on or about April 22, 1999.
The proceeds to the Depositor from the initial sale of the offered
certificates will be approximately 99.0% of the initial principal balance
thereof plus accrued interest.
J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc. are acting as
co-lead managers and Chase Securities Inc. is acting as co-manager for the
offering. J.P. Morgan Securities Inc. is sole underwriter of the Class X
Certificates and is the sole bookrunner of all of the offered certificates.
The underwriters will offer the offered certificates to the public in
negotiated transactions at varying prices to be determined at the time of
sale. J.P. Morgan Securities Inc. is required to purchase the offered
certificates from the Depositor, subject to certain conditions. The other
underwriters are not required to sell any specific amount of the offered
certificates but will use their best efforts to sell the offered
certificates. J.P. Morgan Securities Inc. will receive a fee equal to 0.250%
of the initial principal balance of the offered certificates. Each other
underwriter will receive a fee equal to 0.125% of the initial principal
balance of the offered certificates.
J.P. MORGAN & CO.
DEUTSCHE BANK SECURITIES
CHASE SECURITIES INC.
Prospectus Supplement dated April 16, 1999
<PAGE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. JPMORGAN
Mortgage Pass-Through Certificates, Series 1999 - C7
WASHINGTON
4 properties
$27,810,499
3.5% of total
MINNESOTA
13 properties
$38,667,117
4.8% of total
ILLINOIS
16 properties
$67,942,202
8.5% of total
WISCONSIN
2 properties
$10,988,692
1.4% of total
MICHIGAN
14 properties
$64,487,154
8.0% of total
INDIANA
3 properties
$11,444,194
1.4% of total
OHIO
2 properties
$10,062,532
1.3% of total
PENNSYLVANIA
2 properties
$13,902,498
1.7% of total
NEW YORK
2 properties
$8,704,431
1.1% of total
MASSACHUSETTS
6 properties
$22,983,351
2.9% of total
CONNECTICUT
1 property
$1,373,828
0.2% of total
NEW JERSEY
2 properties
$9,798,713
1.2% of total
MARYLAND
7 properties
$83,845,272
10.5% of total
VIRGINIA
1 property
$12,995,538
1.6% of total
NORTH CAROLINA
11 properties
$39,012,437
4.9% of total
SOUTH CAROLINA
4 properties
$20,927,514
2.6% of total
GEORGIA
4 properties
$18,414,864
2.3% of total
FLORIDA
23 properties
$93,765,697
11.7% of total
MISSISSIPPI
1 property
$8,193,057
1.0% of total
LOUISIANA
1 property
$2,981,380
0.4% of total
ARKANSAS
1 property
$4,279,623
0.5% of total
TEXAS
4 properties
$9,416,833
1.2% of total
NEBRASKA
1 property
$2,845,448
0.4% of total
NEW MEXICO
1 property
$1,779,678
0.2% of total
COLORADO
1 property
$20,615,521
2.6% of total
ARIZONA
1 property
$1,664,917
0.2% of total
CALIFORNIA
32 properties
$166,034,415
20.7% of total
NEVADA
3 properties
$15,848,543
2.0% of total
HAWAII
1 property
$10,566,090
1.3% of total
[ ]
(less than) 1.0%
of Initial Pool Balance
[ ]
1.1 - 5.0%
of Initial Pool Balance
[ ]
5.1 - 10.0%
of Initital Pool Balance
[ ]
(greater than) 10.0%
of Initial Pool Balance
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
WE PROVIDE INFORMATION TO YOU ABOUT THE OFFERED CERTIFICATES IN TWO
SEPARATE DOCUMENTS THAT PROGRESSIVELY PROVIDE MORE DETAIL: (A) THE
ACCOMPANYING PROSPECTUS, WHICH PROVIDES GENERAL INFORMATION, SOME OF WHICH
MAY NOT APPLY TO THE OFFERED CERTIFICATES AND (B) THIS PROSPECTUS SUPPLEMENT,
WHICH DESCRIBES THE SPECIFIC TERMS OF THE OFFERED CERTIFICATES. YOU SHOULD
READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS BEFORE INVESTING IN
ANY OF THE OFFERED CERTIFICATES.
You should rely only on the information contained in this prospectus
supplement and accompanying prospectus. If the description of the offered
certificates in the prospectus and in this prospectus supplement varies, you
should rely on the information in this prospectus supplement.
If the terms of your certificates vary between this prospectus supplement
and the accompanying prospectus, you should rely on the information in this
prospectus supplement.
We include cross-references in this prospectus supplement and the
prospectus to captions in these materials where you can find further related
discussions. The table of contents on page ii provides the page numbers on
which these captions are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement and the prospectus are defined under the caption "Index
of Principal Terms" on page S-83 in this prospectus supplement and under the
caption "Index of Principal Terms" beginning on page 103 in the prospectus.
LIMITATIONS ON OFFERS OR SOLICITATIONS
We do not intend this document to be an offer or solicitation:
(A) if used in a jurisdiction in which such offer or solicitation is not
authorized;
(B) if the person making such offer or solicitation is not qualified to do
so; or
(C) if such offer or solicitation is made to anyone to whom it is unlawful
to make such offer or solicitation.
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is
legal to sell these securities. The information in this document may only be
accurate as of the date of this document.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN
THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
i
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
<S> <C> <C>
Executive Summary ................................................................. S-1
Summary Of The Prospectus Supplement .............................................. S-2
Risk Factors ...................................................................... S-9
Description Of The Mortgage Pool .................................................. S-28
Description Of The Certificates ................................................... S-54
Certain Prepayment, Maturity And Yield Considerations ............................. S-64
Master Servicer And Special Servicer .............................................. S-69
Description Of The Pooling And Servicing Agreement ................................ S-73
Use Of Proceeds ................................................................... S-77
Certain Federal Income Tax Consequences ........................................... S-77
State Tax Considerations .......................................................... S-78
ERISA Considerations .............................................................. S-78
Legal Investment .................................................................. S-80
Plan Of Distribution .............................................................. S-80
Legal Matters ..................................................................... S-81
Rating ............................................................................ S-81
Index Of Principal Terms .......................................................... S-83
Annex A: Certain Characteristics of the Mortgage Loans ......................... A-1
Annex B: Certain Characteristics of Multifamily and other Residential Loans ... B-1
Annex C: Certain Characteristics of Office, Industrial and Retail Loans ....... C-1
Annex D: Sales Memorandum....................................................... D-1
Annex E: Trustee Reports ....................................................... E-1
Annex F: Global Clearance, Settlement and Tax Documentation Procedures ........ F-1
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
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 ............................................................... 101
Legal Matters ...................................................................... 102
Financial Information .............................................................. 102
Rating ............................................................................. 102
Index of Principal Terms ........................................................... 103
</TABLE>
ii
<PAGE>
EXECUTIVE SUMMARY
You should read carefully the detailed information appearing elsewhere in
this prospectus supplement and the accompanying prospectus in making your
investment decision. The following executive summary does not include
important information relating to the offered certificates, particularly with
respect to the risks and special considerations involved with an investment
in the offered certificates.
<TABLE>
<CAPTION>
INITIAL
AGGREGATE
RATING BY CERTIFICATE
FITCH/ PRINCIPAL % OF % CREDIT
CLASS S&P AMOUNT TOTAL SUPPORT
- ------- ----------- --------------- -------- ----------
<S> <C> <C> <C> <C>
Offered Certificates
A1 AAA/AAA $208,000,000 25.96% 29.50%
A2 AAA/AAA $356,953,000 44.54% 29.50%
X AAA/AAAr $801,352,036(3) N/A N/A
B AA/AA $ 40,067,000 5.00% 24.50%
C A+/A $ 40,067,000 5.00% 19.50%
D BBB/BBB $ 52,087,000 6.50% 13.00%
E BBB-/BBB- $ 12,020,000 1.50% 11.50%
Private Certificates
F BB/BB $ 38,064,000 4.75% 6.75%
G B/B $ 26,043,000 3.25% 3.50%
H B-/B- $ 4,006,000 0.50% 3.00%
NR UNR $ 24,045,036 3.00% 0%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
INITIAL
PASS- WEIGHTED PRINCIPAL
THROUGH AVERAGE LIFE(2) WINDOW(2)
CLASS DESCRIPTION RATE(1) (YEARS) (MONTHS)
- ------- ------------- --------- --------------- -----------
<S> <C> <C> <C> <C>
Offered Certificates
A1 Fixed 6.180% 5.48 1-105
A2 Fixed 6.507% 9.18 105-113
X WAC (4) N/A N/A
B Fixed 6.658% 9.46 113-114
C WAC (5) 9.48 114-114
D WAC (6) 9.65 114-118
E WAC (6) 9.81 118-118
Private Certificates
F Fixed 6.000%
G Fixed 6.000%
H Fixed 6.000%
NR Fixed 6.000%
</TABLE>
- ------------
(1) 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.
(2) Assumes no prepayments or defaults. See "Certain Prepayment, Maturity
and Yield Considerations -- Weighted Average Life of Offered
Certificates" herein.
(3) Notional amount.
(4) The pass-through rate for the Class X Certificates will be equal to the
weighted average of the remittance rates on the mortgage loans minus
the weighted average of the pass-through rates on all other classes of
certificates. The remittance rates on the mortgage loans will represent
accrued interest on the mortgage loans net of certain servicing and
trustee fees. The initial pass-through rate on the Class X Certificates
will be 0.69826% per annum.
(5) The pass-through rate for the Class C Certificates will be a rate equal
to the weighted average of the remittance rates on the mortgage loans
minus 0.378%.
(6) The pass-through rate will be a rate equal to the weighted average of
the remittance rates on the mortgage loans.
S-1
<PAGE>
SUMMARY OF THE PROSPECTUS SUPPLEMENT
The following summary is a brief description of the main terms of the
offered certificates. For this reason, the summary does not contain all the
information that may be important to you. You will find a detailed
description of the terms of the offered certificates following this summary
and in the prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this prospectus supplement.
TITLE OF CERTIFICATES Mortgage Pass-Through Certificates, Series
1999-C7.
THE PARTIES
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 J.P. Morgan Securities
Inc., one of the underwriters. See "The
Depositor" in the prospectus.
SELLER Morgan Guaranty Trust Company of New York,
an affiliate of the depositor and of J.P.
Morgan Securities Inc., one of the
underwriters.
ORIGINATORS Morgan Guaranty Trust Company of New York
originated all the mortgage loans, except
for two mortgage loans representing
approximately 1.6% of the initial pool
balance.
MASTER SERVICER Midland Loan Services, Inc., a Delaware
corporation. See "Master Servicer and
Special Servicer" herein.
SPECIAL SERVICER Midland Loan Services, Inc., a Delaware
corporation. 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 pool
and certificate information will be
available from the following services:
Bloomberg, Intex, Conquest and The Trepp
Group.
SIGNIFICANT DATES
CUT-OFF DATE April 1, 1999.
DELIVERY DATE On or about April 22, 1999.
DISTRIBUTION DATE The 15th day of each month or, if such 15th
day is not a business day, on the next
succeeding business day, beginning in May
1999.
S-2
<PAGE>
DETERMINATION DATE For any distribution date, the fourth
business day prior to the related
distribution date.
RATED FINAL DISTRIBUTION DATE The distribution date in October 2035.
REMITTANCE PERIOD For any distribution date, the period
beginning on the day after a determination
date in the immediately preceding month (or
the cut-off date, in the case of the first
remittance period) through and including the
related determination date.
THE CERTIFICATES
REGISTRATION OF THE OFFERED
CERTIFICATES The offered certificates initially will be
issued in book-entry form.
Certificateholders acquiring beneficial
ownership interests in the offered
certificates may elect to hold their
book-entry certificate interests either
through The Depository Trust Company, in the
United States, or through Cedelbank or the
Euroclear System, in Europe. See
"Description of the Certificates --
Book-Entry Registration of the Offered
Certificates -- Definitive Certificates" in
this prospectus supplement and in the
prospectus under "Description of the
Certificates -- Book-Entry Registration and
Definitive Certificates".
DENOMINATIONS The certificates will be issuable in
book-entry form 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 LOANS
THE MORTGAGE POOL The trust fund will consist of a mortgage
pool of 145 fixed rate mortgage loans
secured by first liens on fee simple and/or
leasehold interests in multifamily, office,
retail, hospitality, office/retail,
retirement community and congregate care,
industrial, mobile home park,
industrial/office and nursing home
properties, collectively the "mortgaged
properties", located in 29 states. See
"Description of the Mortgage Pool --
General".
S-3
<PAGE>
General Mortgage Loan Characteristics
(as of the Cut-off Date, unless otherwise indicated)
<TABLE>
<CAPTION>
MORTGAGE POOL
---------------
<S> <C>
Initial Pool Balance ................... $801,352,036
Number of Mortgage Loans ............... 145
Number of Mortgaged Properties ......... 164
Average Mortgage Loan Balance .......... $5,526,566
Maximum Mortgage Loan Balance .......... $54,005,058
Minimum Mortgage Loan Balance .......... $451,049
Weighted Average Mortgage Rate ......... 7.22%
Range of Mortgage Rates ................ 6.56%-8.50%
Weighted Average Remaining Term to the
Earlier of Maturity or Anticipated
Repayment Date ........................ 113 months
Range of Remaining Term to the Earlier
of Maturity or Anticipated Repayment
Date .................................. 50-226 months
Percentage of Initial Pool Balance made
up of:
ARD Loans ............................. 30.8%
Fully Amortizing Loans (other than ARD
Loans) ............................... 2.4%
Balloon Loans ......................... 66.7%
Multi-Property Loans .................. 13.6%
Crossed Loans ......................... 5.0%
</TABLE>
For a further description of the mortgage
loans, see "Description of the Mortgage
Pool" herein.
THE CERTIFICATES
THE OFFERED CERTIFICATES Only the Class A1, Class A2, Class B, Class
C, Class D, Class E and Class X 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 The pass-through rates on the Class A1,
OFFERED CERTIFICATES Class A2 and Class B are fixed and are set
forth on the cover hereof. The pass-through
rate on the Class C Certificates will be a
rate equal to the weighted average of the
remittance rates on the mortgage loans minus
0.378%. The pass-through rates on the Class
D and Class E Certificates will be a rate
equal to the weighted average of the
remittance rates on the mortgage loans. The
pass-through rate on the Class X
Certificates is not fixed and will be equal
to the weighted average of the remittance
rates on the mortgage loans minus the
weighted average (by class balance) of the
pass-through rates on all other classes of
certificates. The remittance rates on the
mortgage loans will represent accrued
interest on the mortgage loans net of
certain
S-4
<PAGE>
servicing and trustee fees. The pass-through
rate on the Class X Certificates for the
initial distribution date will be 0.69826%
per annum. The pass-through rate on the
Class C Certificates for the initial
distribution date will be 6.75397% per
annum. The pass-through rate on the Class D
and Class E Certificates for the initial
distribution date will be 7.13197% per
annum.
DISTRIBUTIONS
INTEREST DISTRIBUTIONS ON THE In general, holders of each class of
CERTIFICATES certificates will be entitled to receive on
each distribution date in the order of their
priority, to the extent available,
distributions allocable to interest equal to
the interest accrued during the interest
accrual period on the related class balance
(or notional amount) immediately prior to
such distribution date at the
then-applicable pass-through rate. 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.
Distributions will be made on each
distribution date. The chart below sets
forth the priority of each class for the
payment of interest to each class in
descending order.
Class A1,
Class A2 and Class X
Class B
Class C
Class D
Class E
Private Certificates
See "Description of the Certificates --
Distributions --Interest Distributions on
the Certificates" herein.
S-5
<PAGE>
PRINCIPAL DISTRIBUTIONS ON THE In general, holders of a class of
CERTIFICATES certificates will be entitled to receive on
each distribution date principal in the
order set forth in the chart below, until
the related class balance is reduced to
zero, to the extent available after the
payment of interest for such class of
certificates.
Class A1
Class A2
Class B
Class C
Class D
Class E
Private 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.
P&I ADVANCES Generally, the servicers are required to
make advances for delinquent monthly
payments on the mortgage loans and for
certain other expenses to the extent
described herein. To the extent that a
servicer fails to make any such advance
required of it, the trustee shall make such
required advance as provided in the pooling
and servicing agreement. As more fully
described herein, if either servicer or the
trustee makes such an advance (or any other
advance) it will be entitled to
reimbursement and interest, on such advance.
Such advances will facilitate in making
regular monthly distributions of principal
and interest on the certificates. See
"Description of the Certificates --
Advances" herein.
OTHER CONSIDERATIONS
ALLOCATION OF LOSSES Realized losses on the mortgage loans will
be allocated, first, to the private
certificates, 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
S-6
<PAGE>
thereafter, to the Class A1 and Class A2
Certificates, on a pro rata basis, based on
class balance, in each case until the
related class balance is reduced to zero.
The allocation of losses will reduce the
value of the affected certificates.
SPECIAL PRINCIPAL PAYMENT Certain of the mortgage loans have a
CONSIDERATIONS prepayment premium period and, if certain
voluntary prepayments are made during such
period, a prepayment premium will be
required to be paid during such period. See
"Description of the Mortgage Pool" herein.
Distributions of principal on classes having
an earlier priority of payment will be
directly affected by the rates of
prepayments of the mortgage loans. The
timing of commencement of principal
distributions and the weighted average lives
of classes of certificates will be affected
by the rates of prepayments experienced.
SPECIAL YIELD CONSIDERATIONS A higher than anticipated rate of
prepayments would reduce the aggregate
principal balance of the mortgage loans more
quickly than expected, thereby reducing the
aggregate interest payments with respect to
such mortgage loans. Therefore, a higher
rate of principal prepayments could result
in a lower than expected yield to maturity
on classes of certificates purchased at a
premium. Conversely, a lower than
anticipated rate of principal prepayments
could result in a lower than expected yield
to maturity on classes of certificates
purchased at a discount since payments of
principal with respect to the mortgage loans
would occur later than anticipated.
The yield to investors on the Class X
Certificates will be especially sensitive to
the rate and timing of prepayments, defaults
and liquidations on the mortgage loans and
could result in the failure of investors in
the Class X Certificates to recover their
initial investments. The yield on the Class
X Certificates and any class of offered
certificates with a pass-through rate
subject to the weighted average remittance
rate 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.
CERTAIN FEDERAL INCOME TAX Three separate real estate mortgage
CONSEQUENCES investment conduit 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 for
federal income tax purposes, REMIC I, REMIC
II and REMIC III will each qualify as a real
estate mortgage
S-7
<PAGE>
investment conduit under Sections 860A
through 860G of the Internal Revenue Code of
1986, as amended.
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 Subject to important considerations
described under "ERISA Considerations" in
this prospectus supplement and in the
accompanying prospectus, the Class A1, Class
A2 and Class X Certificates will be eligible
for purchase by persons investing assets of
employee benefit plans or individual
retirement accounts.
RATING The offered certificates are required to
receive the ratings from Fitch IBCA, Inc.,
and Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
indicated in the executive summary. The
ratings on the offered certificates address
the likelihood of the receipt by holders of
offered certificates of distributions of
principal and interest to which they are
entitled. They do not address the likely
actual rate of prepayments. Such rate of
prepayments, if different than originally
anticipated, could adversely affect the
yield realized by holders of the offered
certificates or cause the Class X
Certificateholders to fail to recover their
initial investments.
LEGAL INVESTMENT The Class A1, Class A2, Class X and Class B
Certificates will be "mortgage related
securities" within the meaning of the
Secondary Mortgage Market Enhancement Act of
1984 so long as they are rated in one of the
two highest rating categories by at least
one nationally recognized statistical rating
organization.
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.
THE MORTGAGE LOANS
RISKS ASSOCIATED WITH Commercial and multifamily lending is
COMMERCIAL LENDING MAY BE generally thought to be riskier than
DIFFERENT THAN RESIDENTIAL single-family residential lending for a
LENDING variety of reasons including the likelihood
that larger loans are made to single
borrowers or groups of related mortgagors.
The mortgage loans are secured by the
following income-producing property types:
o multifamily properties;
o office properties;
o retail properties;
o hospitality properties;
o office/retail properties;
o retirement community and congregate care
properties;
o industrial properties;
o mobile home park properties;
o industrial/office properties; and
o nursing home properties.
Repayment of loans secured by commercial and
multifamily properties typically depends on
the cash flow produced by such properties.
The ratio of net cash flow to debt service
of a loan secured by income-producing
property is an important measure of the risk
of default on such a loan. A majority of the
mortgage loans were originated within twelve
months of the cut-off date. Consequently,
the mortgage loans generally do not have a
long-standing payment history.
NET CASH FLOW PRODUCED BY A Payment on each mortgage loan is dependent
MORTGAGED PROPERTY MAY BE primarily on:
INADEQUATE TO REPAY THE
MORTGAGE LOAN o the net operating income of the related
mortgaged property; and
o at maturity (whether at scheduled
maturity or, in the event of a default
under the mortgage loan, upon the
acceleration of such maturity), the
market value of the related mortgaged
property (taking into account any adverse
effect of a foreclosure proceeding on
such market value) or the ability of the
related mortgagor to refinance the
mortgage loan.
If a mortgage loan has a relatively high
loan to value ratio
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or relatively low debt service coverage
ratio, a foreclosure sale is less likely to
provide enough money to satisfy the
outstanding debt. Therefore, the special
servicer may have to modify the mortgage
loans that it is servicing in order to try
to maximize recoveries. However, such
flexibility may not result in a greater
recovery on a net present value basis than
liquidation.
LOANS NOT INSURED OR GUARANTEED The mortgage loans will not be an obligation
of, or be insured or guaranteed by, any
governmental entity, by any private mortgage
insurer, or by the depositor, the
originators, the master servicer, the
special servicer, the trustee or any of
their respective affiliates.
NONRECOURSE LOANS LIMIT THE Each mortgage loan generally is a
REMEDIES AVAILABLE FOLLOWING A nonrecourse loan. If there is a default
MORTGAGOR DEFAULT there will generally only be recourse
against the specific properties and other
assets that have been pledged to secure such
mortgage loan. Even if a mortgage loan
provides for recourse to a mortgagor or its
affiliates, it is unlikely the trust fund
ultimately could recover any amounts not
covered by the mortgaged property.
FUTURE CASH FLOWS AND PROPERTY Commercial and multifamily property values
VALUES ARE NOT PREDICTABLE and cash flows are volatile and may be
insufficient to cover debt service on the
related mortgage loan at any given time. If
the cash flow from a mortgaged property is
reduced (for example, if leases are not
obtained or renewed), the mortgagor may not
be able to repay the loan. Cash flow will
determine the mortgagor's ability to cover
debt service and property values affect the
ability to refinance the property and the
amount of the recovery of proceeds upon
foreclosure. Cash flow and property value
depend upon a number of factors, including:
o national, regional and local economic
conditions;
o local real estate conditions, such as an
oversupply of space similar to the
related mortgaged property;
o changes or weakness in a specific
industry segment;
o the nature of expenses:
o as a percentage of revenue;
o whether expenses are fixed or vary
with revenue; and
o the level of required capital
expenditures for proper maintenance
and demanded by tenants;
o demographic factors;
o changes required by retroactive building
or similar codes;
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<PAGE>
o capable management and adequate
maintenance;
o location;
o with respect to properties with uses
subject to significant regulation,
changes in applicable laws;
o perceptions by prospective tenants and,
if applicable, their customers, of the
safety, convenience, services and
attractiveness of the property;
o the age, construction quality and design
of a particular property; and
o whether the mortgaged properties are
readily convertible to alternative uses.
BAD PROPERTY MANAGEMENT WILL The successful operation of a real estate
LOWER THE PERFORMANCE OF THE project also depends on the performance and
RELATED MORTGAGED PROPERTY viability of the property manager.
Properties deriving revenues primarily from
short-term sources (such as hotels, nursing
homes, self-storage facilities and health
care facilities) generally are more
management intensive than properties leased
to creditworthy tenants under long-term
leases. The property manager is generally
responsible for:
o operating the properties;
o providing building services;
o establishing and implementing the rental
structure;
o managing operating expenses;
o responding to changes in the local
market; and
o advising the mortgagor with respect to
maintenance and capital improvements.
Property managers may not be in a financial
condition to fulfill their management
responsibilities.
Certain of the mortgaged properties are
managed by affiliates of the applicable
mortgagor. If a mortgage loan is in default
or undergoing special servicing, such
relationship could disrupt the management of
the underlying property. This may adversely
affect cash flow. However, the mortgage
loans generally permit the lender to remove
the property manager upon the occurrence of
an event of default, a decline in cash flow
below a specified level or the failure to
satisfy some other specified performance
trigger.
SPECIAL RISKS ASSOCIATED WITH Five of the mortgage loans representing
NURSING HOMES, CONGREGATE CARE approximately 5.5% of the aggregate
PROPERTIES AND RETIREMENT principal balance of the mortgage loans as
COMMUNITIES. of the cut-off date are secured by nursing
homes, congregate care properties and
retirement communities. Mortgage loans
secured by liens on such residential health
care facilities have risks not associated
with loans secured
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<PAGE>
by liens on other types of income-producing
real estate. These risks may lead to adverse
consequences which may have a negative
impact on the payments of the offered
certificates.
Providers of long-term nursing care and
other medical services are subject to
federal and state laws that relate to:
o the adequacy of medical care;
o distribution of pharmaceuticals;
o rate setting;
o equipment;
o personnel;
o operating policies and additions to
facilities and services; and
o 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 bar it from
participation in certain reimbursement
programs. In the event of foreclosure, the
trustee or any other purchaser at a
foreclosure sale may not 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.
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:
o statutory and regulatory changes;
o retroactive rate adjustments;
o administrative rulings;
o policy interpretations;
o delays by fiscal intermediaries; and
o government funding restrictions.
Governmental payors have employed
cost-containment measures that limit
payments to health care providers, and there
are various proposals that could materially
change or curtail those payments. 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. Net
operating income of the mortgaged properties
that receive substantial revenues
S-12
<PAGE>
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. 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.
SPECIAL RISKS ASSOCIATED WITH Eleven of the mortgage loans, representing
HOSPITALITY PROPERTIES approximately 10.1% of the aggregate
principal balance of the mortgage loans as
of the cut-off date, are secured by full
service hotels, limited service hotels,
extended stay hotels or motels. See
"Description of the Mortgage Pool -- Certain
Characteristics of the Mortgage Loans." In
addition to some of the factors discussed
under "--Future Cash Flows and Property
Values are not Predictable" above, the value
and cash flow of such hospitality properties
will depend on the following factors:
o adverse economic conditions; because
hotel rooms generally are rented for
short periods of time, hotels tend to be
more sensitive to adverse economic
conditions and competition than are other
commercial properties;
o the physical condition of such
hospitality property;
o the financial strength and capabilities
of the owner and operator of a hotel;
o financial strength and public perception
of the franchise service mark and the
continued existence of the franchise
license agreement; and
o the continued existence of a liquor
license.
Most of the hospitality properties have
liquor licenses. Some states do not permit
liquor licenses to be held other than by a
natural person. Consequently, liquor
licenses for hospitality properties located
in such jurisdictions are held by an
individual affiliated with the related
mortgagor or manager. Generally, a liquor
license may not be transferred without the
approval of the relevant licensing
authority. In the event of a foreclosure of
a hospitality property, it is unlikely that
the trustee (or master servicer or special
servicer) or purchaser in any such sale
would be entitled to the rights under the
liquor license for such hospitality
property. Such party would be required to
apply in its own name for such license.
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<PAGE>
THE FAILURE OF AN IMPORTANT Six of the mortgage loans, representing
TENANT WILL HAVE A NEGATIVE approximately 3.5% of the aggregate
IMPACT ON RETAIL PROPERTIES principal balance of the mortgage loans as
of the cut-off date, are secured by single
tenant properties. Income from and the
market value of retail, office and
industrial mortgaged properties occupied by
a single tenant would be adversely affected
under the following circumstances:
o if space in such mortgaged properties
could not be leased or relet on terms
comparable to the prior lease;
o if tenants were unable to meet their
lease obligations;
o if a significant tenant were to become a
debtor in a bankruptcy case; and
o if for any other reason rental payments
could not be collected.
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 certain 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.
The success of its anchor tenant is
important to a shopping center property. An
anchor tenant attracts and maintains other
stores and it generates consumer traffic.
The failure of one or more specified
tenants, such as an anchor tenant, to
operate from its premises may give certain
tenants the right to terminate or reduce
rents under their leases.
ADVERSE CONSEQUENCES ASSOCIATED The average principal balance of the
WITH CONCENTRATION OF MORTGAGE mortgage loans as of the cut-off date is
LOANS AND RELATED BORROWERS approximately $5,526,566, which is equal to
approximately 0.7% of the initial pool
balance. Several of the mortgage loans have
principal balances as of the cut-off date
that are substantially higher than the
average principal balance as of the cut-off
date. In addition, there are several groups
of mortgage loans with related mortgagors.
In general, such concentrations can result
in losses that are more severe than would be
the case if the aggregate balance of such
pool were more evenly distributed among the
mortgage loans in such pool. No mortgage
loan represents more than 6.8% of the
initial pool balance and no mortgage loans
with related mortgagors represent in the
aggregate more than 6.8% of the initial pool
balance.
Mortgage loans with the same borrower or
related mortgagors pose certain risks. For
example, if an entity that owns or controls
several mortgaged properties experiences
financial difficulty at one mortgaged
property, it could defer maintenance at
another mortgaged property
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<PAGE>
in order to satisfy current expenses with
respect to the troubled mortgaged property.
Alternatively, it could attempt to avert
foreclosure by filing a bankruptcy petition
that might have the effect of interrupting
monthly payments for an indefinite period on
all of the related mortgage loans.
LIMITATIONS ON THE BENEFITS OF Nineteen of the mortgage loans, representing
CROSS-COLLATERALIZED AND approximately 5.0% of the aggregate
CROSS-DEFAULTED PROPERTIES principal balance of the mortgage loans as
of the cut-off date, are
cross-collateralized and/or cross-defaulted
with other mortgage loans in the mortgage
pool. These arrangements attempt to reduce
the risk that one mortgaged property may not
generate enough net operating income to pay
debt service. Securing a mortgage loan with
multiple properties generally reduces the
risk that the net operating income generated
by such properties will not be sufficient to
pay debt service and result in defaults and
ultimate losses. However, such crossed
mortgaged properties generally will be
managed by the same managers or affiliated
managers or will be subject to the
management of the same borrowers or
affiliated borrowers.
Cross-collateralization arrangements
involving more than one mortgagor could be
challenged as a fraudulent conveyance if:
o one of the mortgagors were to become a
debtor in a bankruptcy case;
o such borrower did not receive fair
consideration or reasonably equivalent
value in exchange for allowing its
mortgaged property to be encumbered and,
among other things; and
o at the time the lien was granted, the
mortgagor was: (A) insolvent, (B)
inadequately capitalized or (C) unable to
pay its debts.
ADVERSE IMPACT OF ADDITIONAL The mortgage loans generally prohibit the
DEBT ON MORTGAGED PROPERTIES mortgagors from incurring any additional
debt that is secured by the related
mortgaged property without the consent of
the mortgagee.
The existence of such other debt could:
o adversely affect the financial viability
of the mortgagors;
o adversely affect the security interest of
the lender in the equipment or other
assets acquired through such financings;
o complicate bankruptcy proceedings; and
o delay foreclosure on the related
mortgaged property.
In cases where one or more junior liens are
imposed on a mortgaged property or the
mortgagor incurs other
S-15
<PAGE>
unsecured indebtedness, the trust fund is
subjected to additional risks, including,
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 a
balloon payment upon the maturity of the
mortgage loan.
TIMING OF PRINCIPAL PREPAYMENTS If principal payments, property releases, or
MAY LEAD TO DIFFERENT ASSET prepayments are made on a mortgage loan, the
CONCENTRATIONS THAN IN THE remaining mortgage pool may be subject to
INITIAL MORTGAGE POOL 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.
THE GEOGRAPHIC CONCENTRATION OF Thirty-two, 23, 7, 16 and 14 of the
MORTGAGED PROPERTIES SUBJECTS mortgaged properties, representing
THE TRUST FUND TO A GREATER approximately 20.7%, 11.7%, 10.5%, 8.5% and
EXTENT TO STATE OR REGIONAL 8.0%, respectively, of the aggregate
CONDITIONS principal balance of the mortgage loans as
of the cut-off date, are located in
California, Florida, Maryland, Illinois and
Michigan, 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.
The concentration of mortgaged properties in
a specific state or region will make the
performance of the mortgage pool as a whole,
more sensitive to the following in the state
or region where the mortgagors and the
mortgaged properties are located:
o economic conditions;
o conditions in the real estate market;
o changes in governmental rules and fiscal
policies;
o acts of God (which may result in
uninsured losses); and
o other factors which are beyond the
control of the mortgagors.
EXERCISE OF LEGAL REMEDIES MAY The mortgage loans may contain a due-on-sale
BE LIMITED FOLLOWING A DEFAULT clause.
ON A MORTGAGE LOAN
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<PAGE>
Such clause permits the holder of the
mortgage loan to accelerate the maturity of
the mortgage loan if the related mortgagor
sells or otherwise transfers or conveys the
related mortgaged property or its interest
in the mortgaged property in violation of
the terms of the mortgage loan. The mortgage
loans may also include a debt-acceleration
clause, which permits the lender to
accelerate the debt upon specified monetary
or non-monetary defaults of the mortgagor.
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 or other sale of a
mortgaged property or refuse to permit the
acceleration of the indebtedness as a result
of a default deemed to be immaterial or if
the exercise of such remedies would be
inequitable or unjust or the circumstances
would render the acceleration
unconscionable.
Certain of the mortgage loans will be
secured by an assignment of leases and rents
from the mortgagor, however, the mortgagor
generally may collect rents for so long as
there is no default. As a result, the trust
fund's rights to such rents will be limited
because:
o it may not have a perfected security
interest in the rent payments until the
master servicer collects them;
o the master servicer may not be entitled
to collect the rent payments without
court action; and
o the bankruptcy of the related mortgagor
could limit the master servicer's ability
to collect the rents.
See "Certain Legal Aspects of Mortgage Loans
and the Leases -- Leases and Rents" in the
prospectus.
ENVIRONMENTAL LAWS MAY Under various federal, state and local
ADVERSELY AFFECT THE VALUE OF environmental laws, ordinances and
AND CASH FLOW FROM A MORTGAGED regulations, a current or previous owner or
PROPERTY operator of real property may be liable for
the costs of cleanup of environmental
contamination 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 contamination. The cost
of any required cleanup and the owner's
liability for these costs are generally not
limited under these laws 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 clean
up contamination on such property, may
adversely affect the owner's or operator's
ability to borrow using such property as
collateral.
Certain environmental laws impose liability
for releases of asbestos into the air. Third
parties may seek recovery from owners or
operators of real property for personal
injury associated with exposure to asbestos.
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<PAGE>
Under some environmental laws, such as the
federal Comprehensive Environmental
Response, Compensation and Liability Act 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 threatened
release of hazardous substances on or from a
mortgagor's property. Such liability may be
imposed on the lender if its agents or
employees 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 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 of each of
the mortgaged properties was performed (in
some cases, prior assessments were updated)
in connection with the initial underwriting
and origination of the mortgage loans. Such
assessments do not generally include
environmental testing. In certain cases,
additional environmental testing was
performed.
The information in such assessments has not
been independently verified by the seller,
the depositor, the servicers, the trustee,
the underwriters, or by any of their
respective affiliates. With respect to a
number of the mortgaged properties, the
assessments revealed the presence or
possible presence of asbestos-containing
materials, radon gas or other environmental
concerns. None of these issues constituted a
material violation of any environmental law
in the judgment of the assessor. In these
cases, the mortgagors agreed to establish
and implement operations and maintenance
programs or had other remediation agreements
or escrows in place.
It is possible that the environmental site
assessments did not reveal all environmental
liabilities, that there are material
environmental liabilities of which neither
the seller nor the depositor are aware or
that the environmental condition of the
mortgaged properties could be affected in
the future by tenants, occupants, or third
parties unrelated to the mortgagors.
Each mortgagor has represented that, except
as described in the environmental reports
referred to above, each mortgaged property
was, or to the best of the mortgagor's
knowledge was, in compliance with applicable
environmental laws and regulations on the
date of the origination of the related
mortgage loan. Each mortgagor has also
represented that, except as described in the
environmental reports, no actions, suits or
proceedings have been commenced or are
pending or, to the best of the mortgagor's
knowledge are threatened, with respect to
any applicable environmental laws. Each
mortgagor has
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<PAGE>
represented that such mortgagor has not
received any notice of violation of any
legal requirement related to the use and
occupancy of any mortgaged property and has
agreed not to use, cause or permit the
presence on the related mortgaged property
of any hazardous materials in a manner which
violates any applicable law.
The principal security for the obligations
under each mortgage loan consists of the
mortgaged property. Therefore, if any of the
representations described in the preceding
paragraph 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 response to
such a breach. In addition, most mortgagors
are structured as single asset entities and
therefore have no assets other than the
mortgaged property.
SPECIAL RISKS ASSOCIATED WITH One hundred nineteen mortgage loans,
BALLOON LOANS representing approximately 66.7% of the
aggregate principal balance of the mortgage
loans as of the cut-off date, are balloon
loans. The balloon 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 are riskier because the ability of
a mortgagor to make a balloon payment 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:
o the level of available mortgage interest
rates at the time of sale or refinancing;
o the mortgagor's equity in the related
mortgaged property;
o the financial condition and operating
history of the mortgagor and the related
mortgaged property;
o tax laws;
o rent control laws (with respect to
certain multifamily properties);
o renewability of operating licenses;
o prevailing general economic conditions;
and
o the availability of credit for commercial
or multifamily real properties.
S-19
<PAGE>
ONE ACTION JURISDICTION MAY Several states (including California) have
LIMIT THE ABILITY OF THE laws that prohibit more than one "judicial
SPECIAL SERVICER TO FORECLOSE action" to enforce a mortgage obligation,
ON A MORTGAGED PROPERTY 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 the case of a mortgage 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.
APPRAISALS AND MARKET STUDIES
OF MORTGAGED PROPERTIES An appraisal of the value for each of the
mortgaged properties was made between April
2, 1997 and April 1, 1999. 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. 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.
Another appraiser may have arrived at a
different valuation, even if such appraiser
used the same general approach to, and the
same method of, appraising the property.
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.
CERTAIN PARTIES MAY HAVE A substantial number of the mortgaged
CONFLICTS OF INTEREST WITH properties are managed by property managers
RESPECT TO THE MORTGAGED affiliated with the respective mortgagors.
PROPERTIES These property managers may also manage
additional properties, including properties
that may compete with the mortgaged
properties. Affiliates of the managers
and/or the mortgagors, or the managers
and/or the mortgagors themselves, may also
own other properties, including competing
properties. Therefore, 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.
S-20
<PAGE>
SPECIAL SERVICER MAY TAKE In connection with the servicing of
ACTIONS WHICH ARE ADVERSE TO specially serviced mortgage loans, the
YOU special servicer may take actions with
respect to such mortgage loans that could
adversely affect you. 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.
THE STATUS OF A GROUND LEASE Two mortgage loans, representing
MAY BE UNCERTAIN IN A approximately 4.1% of the aggregate
BANKRUPTCY PROCEEDING 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 either
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
(i.e., continue) or reject (i.e., terminate)
any or all of its ground leases.
In the event of concurrent bankruptcy
proceedings involving the ground lessor and
the ground lessee/mortgagor, either 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.
SPECIAL RISKS ASSOCIATED WITH
ANTICIPATED REPAYMENT DATE
LOANS Nineteen mortgage loans, representing
approximately 30.8% of the aggregate
principal balance of the mortgage loans as
of the cut-off date, are mortgage loans with
anticipated repayment dates. After the
anticipated repayment date, any excess cash
flow will be required to be applied to
payments of principal and interest on such
loan. All of the anticipated repayment date
loans will have substantial principal
balances on their anticipated repayment
date. The failure to pay such loan by the
S-21
<PAGE>
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:
o the level of available mortgage interest
rates at the time of sale or refinancing;
o the mortgagor's equity in the related
mortgaged property;
o the financial condition and operating
history of the mortgagor and the related
mortgaged property;
o tax laws;
o rent control laws (with respect to
certain multifamily properties);
o renewability of operating licenses;
o prevailing general economic conditions;
and
o the availability of credit for commercial
or multifamily real properties.
SPECIAL RISKS ASSOCIATED WITH
ATTORNMENT Some of the tenant leases contain 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 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
S-22
<PAGE>
of insurance proceeds or condemnation
awards), the provisions of the lease will
take precedence over the provisions of the
mortgage.
THE MORTGAGED PROPERTIES MAY Due to changes in applicable building and
NOT BE IN COMPLIANCE WITH zoning ordinances and codes which have come
CURRENT ZONING LAWS into effect after the construction of
improvements on certain of the mortgaged
properties, some 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 of the related mortgagor to
rebuild the premises "as is" in the event of
a substantial casualty loss. Such
limitations may adversely affect the ability
of the mortgagor to meet its mortgage loan
obligations from cash flow. Insurance
proceeds may not be sufficient to pay off
such mortgage loan in full. In addition, if
the mortgaged property were to be repaired
or restored in conformity with then current
law, its value could be less than the
remaining balance on the mortgage loan and
it may produce less revenue than before such
repair or restoration.
INSPECTIONS MADE OF THE The mortgaged properties were inspected by
MORTGAGED PROPERTY MAY HAVE licensed engineers at the time the mortgage
MISSED NECESSARY REPAIRS loans were originated 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.
COMPLIANCE WITH AMERICANS WITH Under the Americans with Disabilities Act of
DISABILITIES ACT MAY RESULT IN 1990, all public accommodations are required
ADDITIONAL LOSSES to meet certain federal requirements related
to access and use by disabled persons. To
the extent the mortgaged properties do not
comply with such laws, the mortgagors may be
required to incur costs to comply with such
laws. In addition, noncompliance could
result in the imposition of fines by the
federal government or an award of damages to
private litigants.
LITIGATION CONCERNS There may be legal proceedings pending and,
from time to time, threatened against the
mortgagors or their affiliates relating to
the business of or arising out of the
ordinary course of business of the
mortgagors and their affiliates. There can
be no assurance that such litigation will
not have a material adverse effect on the
distributions to certificateholders.
S-23
<PAGE>
THE OFFERED CERTIFICATES
ONLY TRUST FUND ASSETS ARE
AVAILABLE TO PAY YOU If the assets of the trust fund are
insufficient to make payments on the offered
certificates, no other assets will be
available for payment of the deficiency. See
"Risk Factors -- Limited Assets" in the
prospectus.
PREPAYMENTS WILL AFFECT YOUR
YIELD Prepayments. The yield to maturity on the
offered certificates will depend on the rate
and timing of principal payments (including
both voluntary prepayments, in the case of
mortgage loans that permit voluntary
prepayment, and involuntary prepayments,
such as prepayments resulting from casualty
or condemnation, defaults and liquidations)
on the mortgage loans and how such payments
are allocated among the offered certificates
entitled to distributions of principal. The
yield to maturity of the Class X
Certificates will be particularly sensitive
to the rate and timing of receipt of
principal since its sole distribution is
interest based upon the aggregate principal
balance of all the certificates.
In addition, upon the occurrence of certain
limited events, a party may be required to
repurchase a mortgage loan from the trust
fund and the money paid would be passed
through to the holders of the certificates
with the same effect as if such mortgage
loan had been prepaid in full (except that
no prepayment premium would be payable with
respect to any such repurchase). No
representation is made as to the anticipated
rate of prepayments (voluntary or
involuntary) on the mortgage loans or as to
the anticipated yield to maturity of any
certificate. See "Certain Prepayment,
Maturity and Yield Considerations" herein
and "Yield Considerations" in the
prospectus.
Yield. In general, if you purchase an
offered certificate at a premium and
principal distributions occur at a rate
faster than you anticipated at the time of
purchase, and no prepayment premiums are
collected, your actual yield to maturity may
be lower than that you assumed at the time
of purchase. In the case of the Class X
Certificates, this could result in the
failure of investors in the Class X
Certificates to recover their initial
investment. Conversely, if you purchase an
offered certificate at a discount and
principal distributions thereon occur at a
rate slower than that you assumed at the
time of purchase, your actual yield to
maturity may be lower than that you assumed
at the time of purchase.
The investment performance of the offered
certificates may be materially different
from what you expected if the rate of
prepayments on the mortgage loans is higher
or lower than what you assumed at the time
of investment. The yield on the Class X
Certificates will be adversely affected if
mortgage loans with higher mortgage interest
rates pay
S-24
<PAGE>
faster than mortgage loans with lower
mortgage interest rates.
Interest Rate Environment. In general,
mortgagors are less likely to prepay if
prevailing interest rates are at or above
the rates borne by such mortgage loans. On
the other hand, mortgagors are more likely
to prepay if prevailing rates fall
significantly below the mortgage rates of
the mortgage loans. Mortgagors are less
likely to prepay mortgage loans with a
lockout period or prepayment premium
provision, to the extent enforceable, than
otherwise identical mortgage loans without
such provisions, with shorter lockout
periods or with lower prepayment premiums.
Premiums. Provisions requiring prepayment
premiums may not be enforceable in some
states and under federal bankruptcy law, and
may constitute interest for usury purposes.
Accordingly, no assurance can be given that
the obligation to pay a prepayment premium
will be enforceable or, if enforceable, that
the foreclosure proceeds will be sufficient
to pay such prepayment premium.
Additionally, although the collateral
substitution provisions related to
defeasance are not intended to be, and do
not have the same effect on the
certificateholders as a prepayment, there
can be no assurance that a court would not
interpret such provisions as requiring a
prepayment premium and thus unenforceable or
usurious under applicable law.
BORROWER DEFAULTS MAY ADVERSELY The aggregate amount of distributions on the
AFFECT YOUR YIELD offered certificates, the yield to maturity
of the offered certificates, the rate of
principal payments on the offered
certificates and the weighted average life
of the offered certificates will be affected
by the rate and timing of delinquencies and
defaults on the mortgage loans.
Delinquencies on the mortgage loans, if the
delinquent amounts are not advanced, may
result in shortfalls in distributions of
interest and/or principal to the offered
certificates for the current month. Any late
payments received on or in respect of the
mortgage loans will be distributed to the
certificates in the priorities described
more fully herein, but no interest will
accrue on such shortfall during the period
of time such payment is delinquent.
If you calculate your anticipated yield
based on an assumed rate of default and an
assumed amount of losses on the mortgage
loans that are lower than the default rate
and the amount of losses actually
experienced, and if such losses are
allocated to your class of certificates,
your actual yield to maturity will be lower
than the yield so calculated and could,
under certain scenarios, be negative. The
timing of any loss on a liquidated mortgage
loan also will affect the actual yield to
maturity of the offered certificates to
which all or a portion of such loss is
allocable, even if the rate of defaults and
severity of losses are consistent with your
expectations. In general, the earlier you
bear a loss,
S-25
<PAGE>
the greater the effect on your yield to
maturity. See "Prepayment and Yield
Considerations."
Even if losses on the mortgage loans are
allocated to a particular class of offered
certificates, such losses may affect the
weighted average life and yield to maturity
of other certificates. Losses on the
mortgage loans, to the extent not allocated
to such class of offered certificates, may
result in a higher percentage ownership
interest evidenced by such certificates than
would otherwise have resulted absent such
loss. The consequent effect on the weighted
average life and yield to maturity of the
offered certificates will depend upon the
characteristics of the remaining mortgage
loans.
DELINQUENCIES WILL ENTITLE As and to the extent described herein, the
SERVICER TO RECEIVE CERTAIN master servicer, the special servicer or the
ADDITIONAL COMPENSATION WHICH trustee, as applicable, will be entitled to
TAKES PRECEDENCE OVER YOUR receive interest on unreimbursed advances
RIGHT TO RECEIVE DISTRIBUTIONS and unreimbursed servicing expenses. The
right of the master servicer, the special
servicer or the trustee, as applicable, to
receive such payments of interest is senior
to the rights of certificateholders to
receive distributions on the offered
certificates and, consequently, may result
in losses being allocated to the offered
certificates that would not have resulted
absent the accrual of such interest. In
addition, the special servicer will receive
a fee equal to 1.00% of collections on any
specially serviced mortgage loan prior to
distributing such collections to the
certificateholders. This will result in
shortfalls which may be allocated to the
offered certificates. See "Master Servicer
and Special Servicer -- Servicing and Other
Compensation and Payment of Expenses."
VOTES OF OTHER Under certain circumstances, the consent or
CERTIFICATEHOLDERS MAY approval of the holders of a specified
ADVERSELY AFFECT YOUR INTERESTS percentage of the aggregate certificate
balance of all outstanding certificates 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 real estate
owned properties and amending the pooling
and servicing agreement in certain
circumstances. See "Description of the
Pooling and Servicing Agreement -- Voting
Rights" herein.
COMPUTERIZED SYSTEMS MAY BE The transition from the year 1999 to the
DISRUPTED BY THE TRANSITION TO year 2000 may disrupt the ability of
THE YEAR 2000 computerized systems of the master servicer,
the special servicer, the trustee, the
mortgagors and other parties to process
information including:
o the collection of payments on the
mortgage loans,
o the servicing of the mortgage loans; and
o the distributions on your certificates.
S-26
<PAGE>
The master servicer, the special servicer,
and the trustee have taken or are taking
steps to address these issues such that
their systems and applications will be year
2000 compliant. If the master servicer, the
special servicer or trustee is unable to
complete such modifications by the year 2000
or if the mortgagors or other third parties
are not year 2000 compliant, the ability of
the master servicer, the special servicer or
the trustee to service the mortgage loans
and make distributions to the
certificateholders, respectively, may be
materially and adversely affected. The
depositor has been advised by the trustee,
the master servicer and the special servicer
that each of them expect to be year 2000
compliant.
S-27
<PAGE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Trust Fund will consist primarily of a pool (the "Mortgage Pool") of
fixed rate mortgage loans (the "Mortgage Loans") with an aggregate principal
balance as of the Cut-off Date, after deducting payments of principal due on
such date, of approximately $801,352,036 (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 a multifamily, office, retail, hospitality, office/retail, retirement
community and congregate care, industrial, mobile home park,
industrial/office and nursing home property (each, 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 provide for scheduled payments of
principal and/or interest (the "Monthly Payments") to be due on the first day
of each month (the "Due Date").
All but two of the Mortgage Loans were originated by the Morgan Guaranty
Trust Company of New York (the "Seller" or "MGT"). Two Mortgage Loans,
representing 1.6% of the Initial Pool Balance, were originated by Chastain
Capital Corporation (together with the Seller, the "Originators"). The Seller
is an affiliate of the Depositor and of J.P. Morgan Securities Inc., one of
the Underwriters.
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, Annex B, Annex C and the Diskette for additional information
with respect to 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 arising from the Mortgaged Property and any other
collateral securing such Mortgage subject only to
S-28
<PAGE>
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.
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
S-29
<PAGE>
below. The totals in the following tables may not add up to 100% due to
rounding. For a Mortgage Loan secured by more than one Mortgaged Property the
balance as of the Cut-off Date of such Mortgage Loan is allocated to each
related Mortgaged Property based on the related appraisal values.
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>
6.5001%-6.7500%......... 10 6.9% $ 85,565,483 10.7%
6.7501%-7.0000%......... 25 17.2 165,743,102 20.7
7.0001%-7.2500%......... 37 25.5 161,168,362 20.1
7.2501%-7.5000%......... 44 30.3 225,876,229 28.2
7.5001%-7.7500%......... 15 10.3 83,611,907 10.4
7.7501%-8.0000%......... 8 5.5 58,562,516 7.3
8.0001%-8.2500%......... 5 3.4 17,843,058 2.2
8.2501%-8.5000%......... 1 0.7 2,981,380 0.4
---------- ------------ --------------- ---------------
Total:.................. 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Mortgage Interest Rate: 7.22%
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.......................... 8 5.5% $ 5,473,708 0.7%
$1,000,001-$2,000,000..................... 29 20 46,819,365 5.8
$2,000,001-$3,000,000..................... 25 17.2 63,246,248 7.9
$3,000,001-$4,000,000..................... 20 13.8 72,250,223 9.0
$4,000,001-$5,000,000..................... 12 8.3 55,033,622 6.9
$5,000,001-$7,500,000..................... 24 16.6 143,491,019 17.9
$7,500,001-$10,000,000.................... 10 6.9 85,919,847 10.7
$10,000,001-$12,500,000................... 5 3.4 57,051,117 7.1
$12,500,001-$15,000,000................... 4 2.8 55,641,569 6.9
$15,000,001-$17,500,000................... 1 0.7 15,427,289 1.9
$17,500,001-$20,000,000................... 2 1.4 36,911,035 4.6
$20,000,001-$25,000,000................... 3 2.1 65,363,710 8.2
$40,000,001-$45,000,000................... 1 0.7 44,718,226 5.6
$50,000,001-$55,000,000................... 1 0.7 54,005,058 6.7
---------- ------------ --------------- ---------------
Total:.................................... 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
Average Principal Balance per Mortgage Loan as of the Cut-off Date:
$5,526,566
Average Principal Balance per Mortgaged Property as of the Cut-off Date:
$4,886,293
Smallest Loan Balance: $451,049
Largest Loan Balance: $54,005,058
S-30
<PAGE>
ORIGINAL TERM TO MATURITY/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
ORIGINAL 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>
60 or less........................... 3 2.1% $ 39,246,416 4.9%
61-84................................ 4 2.8 17,480,728 2.2
85-120............................... 112 77.2 651,060,504 81.2
121-180.............................. 24 16.6 89,634,933 11.2
181-240.............................. 2 1.4 3,929,455 0.5
---------- ------------ --------------- ---------------
Total ............................... 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Original Term to Maturity or Anticipated Repayment Date in
Months: 122
REMAINING TERM TO MATURITY/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
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>
60 or less........................... 3 2.1% $ 39,246,416 4.9%
61-84................................ 4 2.8 17,480,728 2.2
85-120............................... 112 77.2 651,060,504 81.2
121-180.............................. 24 16.6 89,634,933 11.2
181-240.............................. 2 1.4 3,929,455 0.5
---------- ------------ --------------- ---------------
Total ............................... 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Remaining Term to Maturity or Anticipated Repayment Date in
Months: 113
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>
September
1997.......... 1 0.7% $ 1,664,917 0.2%
October 1997 .. 2 1.4 7,831,771 1.0
November 1997 . 4 2.8 39,168,933 4.9
December 1997 . 22 15.2 98,894,901 12.3
January 1998 .. 2 1.4 23,473,558 2.9
February 1998 . 7 4.8 18,363,298 2.3
March 1998..... 5 3.4 12,975,412 1.6
April 1998..... 7 4.8 48,642,782 6.1
May 1998....... 7 4.8 36,172,075 4.5
June 1998...... 16 11.0 52,269,967 6.5
July 1998...... 18 12.4 125,340,350 15.6
August 1998.... 21 14.5 135,974,706 17.0
September
1998.......... 21 14.5 98,715,261 12.3
October 1998 .. 4 2.8 20,245,745 2.5
November 1998 . 4 2.8 18,158,281 2.3
December 1998 . 2 1.4 6,896,251 0.9
January 1999 .. 2 1.4 56,563,829 7.1
---------- ------------ --------------- ---------------
Total ......... 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
S-31
<PAGE>
YEAR OF SCHEDULED MATURITY/ANTICIPATED REPAYMENT 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
YEAR LOANS LOANS DATE DATE
- -------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
2003..... 3 2.1% $ 39,246,416 4.9%
2004..... 1 0.7 3,911,300 0.5
2005..... 3 2.1 13,569,428 1.7
2007..... 4 2.8 32,523,314 4.1
2008..... 105 72.4 557,635,880 69.6
2009..... 4 2.8 73,113,181 9.1
2010..... 1 0.7 3,501,658 0.4
2011..... 1 0.7 2,558,771 0.3
2012..... 1 0.7 1,664,917 0.2
2013..... 20 13.8 69,697,716 8.7
2014..... 1 0.7 2,592,746 0.3
2018..... 1 0.7 1,336,709 0.2
---------- ------------ --------------- ---------------
Total ... 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
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.............. 3 2.5% $ 39,246,416 7.3%
61-84................... 3 2.5 14,722,154 2.8
85-120.................. 95 79.8 428,805,730 80.2
121-180................. 18 15.1 52,020,370 9.7
---------- ------------ --------------- ---------------
Total .................. 119 100.0% $534,794,670 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Original Term to Maturity in Months: 119
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>
60 or less............... 3 2.5% $ 39,246,416 7.3%
61-84.................... 3 2.5 14,722,154 2.8
85-120................... 95 79.8 428,805,730 80.2
121-180.................. 18 15.1 52,020,370 9.7
---------- ------------ --------------- ---------------
Total ................... 119 100.0% $534,794,670 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Remaining Term to Maturity in Months: 109
S-32
<PAGE>
BALLOON MORTGAGE LOANS
REMAINING AMORTIZATION TERM 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 AMORTIZATION TERM IN MONTHS LOANS LOANS DATE DATE
- ------------------------------------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
181-240............................... 7 5.9% $ 18,744,072 3.5%
241-300............................... 59 49.6 202,353,112 37.8
301-360............................... 52 43.7 309,947,915 58
361 or more........................... 1 0.8 3,749,572 0.7
---------- ------------ --------------- ---------------
Total ................................ 119 100.0% $534,794,670 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Remaining Amortization Term to Maturity in Months: 321
ARD 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 TO MATURITY IN MONTHS LOANS LOANS DATE DATE
- ----------------------------------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
72-84............................... 1 5.3% $ 2,758,573 1.1%
85-120.............................. 17 89.5 222,254,774 89.9
121-180............................. 1 5.3 22,136,849 9.0
---------- ------------ --------------- ---------------
Total .............................. 19 100.0% $247,150,197 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Original Term to Anticipated Repayment Date in Months: 125
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>
72-84.................... 1 5.3% $ 2,758,573 1.1%
85-120................... 17 89.5 222,254,774 89.9
121-180.................. 1 5.3 22,136,849 9.0
---------- ------------ --------------- ---------------
Total ................... 19 100.0% $247,150,197 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Remaining Term to Anticipated Repayment Date in Months: 118
ARD MORTGAGE LOANS
REMAINING AMORTIZATION TERM 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 AMORTIZATION TERM IN MONTHS LOANS LOANS DATE DATE
- ------------------------------------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
241-300............................... 8 42.1% $ 63,583,092 25.7%
301-360............................... 11 57.9 183,567,105 74.3
---------- ------------ --------------- ---------------
Total ................................ 19 100.0% $247,150,197 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Remaining Amortization Term in Months: 338
S-33
<PAGE>
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 all scheduled payments due prior
thereto are made and there are no principal prepayments, 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. Because the value of Mortgaged Properties
at the Maturity Date, or, in the case of an ARD Loan, the Anticipated
Repayment Date, may be different than such appraised 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 the value for each of the Mortgaged Properties was made
between April 2, 1997 and April 1, 1999. 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 RATIOS LOANS LOANS DATE DATE
- ----------------------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
50.00% or less.......... 3 2.1% $ 6,377,290 0.8%
50.01%-55.00%........... 7 4.8 15,207,619 1.9
55.01%-60.00%........... 12 8.3 82,366,101 10.3
60.01%-65.00%........... 16 11.0 120,465,857 15.0
65.01%-70.00%........... 26 17.9 137,840,657 17.2
70.01%-75.00%........... 37 25.5 189,926,833 23.7
75.01%-80.00%........... 43 29.7 241,205,675 30.1
80.01%-81.00%(1)........ 1 0.7 7,962,004 1.0
---------- ------------ --------------- ---------------
Total .................. 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Cut-off Date LTV Ratio: 69.94%
(1) Cedar Creek Apartments (Loan Number 25) has an LTV Ratio of 80.02%.
S-34
<PAGE>
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
MORTGAGE MORTGAGE THE CUT-OFF THE CUT-OFF
LTV RATIOS LOANS LOANS DATE DATE
- -------------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
50.00% or
less.......... 36 24.8% $114,495,747 14.3%
50.01%-55.00% . 21 14.5 125,412,477 15.7
55.01%-60.00% . 28 19.3 195,287,080 24.4
60.01%-65.00% . 28 19.3 122,803,056 15.3
65.01%-70.00% . 29 20.0 211,280,131 26.4
70.01%-75.00% . 3 2.1 32,073,546 4.0
---------- ------------ --------------- ---------------
Total ......... 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average Maturity Date/Anticipated Repayment Date LTV Ratio
(excluding fully amortizing Mortgage Loans): 58.41%
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 or Annex A, 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 Cash Flow and UW NOIs used as a basis for calculating the UW DSCRs
presented in the following table and in Annex A attached hereto, 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,
S-35
<PAGE>
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.
UNDERWRITTEN CASH FLOW DEBT SERVICE COVERAGE RATIOS(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
UW DSCR BASED ON UW CASH FLOW LOANS LOANS DATE DATE
- ----------------------------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
1.130x-1.150x(2).............. 3 2.1% $ 8,890,115 1.1%
1.151x-1.200x................. 6 4.1 43,039,740 5.4
1.201x-1.250x................. 16 11.0 58,457,796 7.3
1.251x-1.300x................. 24 16.6 108,095,485 13.5
1.301x-1.400x................. 40 27.6 216,850,315 27.1
1.401x-1.500x................. 22 15.2 127,789,440 15.9
1.501x-1.600x................. 17 11.7 153,055,810 19.1
1.601x-1.700x................. 6 4.1 37,400,289 4.7
1.701x-1.800x................. 5 3.4 33,930,214 4.2
1.801x-1.900x................. 1 0.7 2,279,711 0.3
2.001x-2.100x................. 2 1.4 5,800,624 0.7
2.101x-2.200x................. 3 2.1 5,762,496 0.7
---------- ------------ --------------- ---------------
Total ........................ 145 100.0% $801,352,036 100.0%
========== ============ =============== ===============
</TABLE>
Weighted Average UW DSCR: 1.41x
(1) For Mortgage Loans secured by more than one mortgaged property, the UW
DSCR is computed as the ratio of the total UW Cash Flow to the annual
debt service amount for the respective Mortgage Loan.
(2) The three mortgage loans with a debt service coverage ratio ("DSCR")
below 1.15x are fully amortizing loans. Bavarian Village on the Lake
Apartments (Loan Number 95) has a Cut-off Date principal balance of
$2,592,746, a UW DSCR of 1.14x, and an original amortization term of 192
months, Office Depot (Loan Number 88) has a Cut-off Date principal
balance of $2,795,712, a UW DSCR of 1.14x, and an original amortization
term of 180 months and Maple Tree Plaza (Loan Number 76) has a Cut-off
Date principal balance of $3,501,658, a UW DSCR of 1.13x, and an original
amortization term of 144 months.
S-36
<PAGE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
STATE PROPERTIES PROPERTIES DATE DATE
- -------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
California..... 32 19.5% $166,034,415 20.7%
Florida........ 23 14.0 93,765,697 11.7
Maryland....... 7 4.3 83,845,272 10.5
Illinois....... 16 9.8 67,942,202 8.5
Michigan....... 14 8.5 64,487,154 8.0
North
Carolina...... 11 6.7 39,012,437 4.9
Minnesota...... 13 7.9 38,667,117 4.8
Washington..... 4 2.4 27,810,499 3.5
Massachusetts . 6 3.7 22,983,351 2.9
South
Carolina...... 4 2.4 20,927,514 2.6
Colorado....... 1 0.6 20,615,521 2.6
Georgia........ 4 2.4 18,414,864 2.3
Nevada......... 3 1.8 15,848,543 2.0
Pennsylvania .. 2 1.2 13,902,498 1.7
Virginia....... 1 0.6 12,995,538 1.6
Indiana........ 3 1.8 11,444,194 1.4
Wisconsin...... 2 1.2 10,988,692 1.4
Hawaii......... 1 0.6 10,566,090 1.3
Ohio........... 2 1.2 10,062,532 1.3
New Jersey..... 2 1.2 9,798,713 1.2
Texas.......... 4 2.4 9,416,833 1.2
New York....... 2 1.2 8,704,431 1.1
Mississippi.... 1 0.6 8,193,057 1.0
Arkansas....... 1 0.6 4,279,623 0.5
Louisiana...... 1 0.6 2,981,380 0.4
Nebraska....... 1 0.6 2,845,448 0.4
New Mexico..... 1 0.6 1,779,678 0.2
Arizona........ 1 0.6 1,664,917 0.2
Connecticut.... 1 0.6 1,373,828 0.2
------------ ------------ --------------- ---------------
Total ......... 164 100.0% $801,352,036 100.0%
============ ============ =============== ===============
</TABLE>
PROPERTY TYPES
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
TYPE PROPERTIES PROPERTIES DATE DATE
- ------------------------------------ ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Multifamily.......................... 67 40.9% $242,645,132 30.3%
Office............................... 24 14.6 148,241,525 18.5
Anchored Retail...................... 23 14 137,531,482 17.2
Hotel................................ 11 6.7 80,916,973 10.1
Office/Retail........................ 6 3.7 62,804,541 7.8
Unanchored Retail.................... 19 11.6 44,702,778 5.6
Congregate Care/Retirement
Community........................... 3 1.8 38,485,688 4.8
Industrial........................... 4 2.4 18,087,120 2.3
Mobile Home Park..................... 1 0.6 12,926,896 1.6
Industrial/Office.................... 4 2.4 9,368,108 1.2
Nursing Home......................... 2 1.2 5,641,792 0.7
------------ ------------ --------------- ---------------
Total ............................... 164 100.0% $801,352,036 100.0%
============ ============ =============== ===============
</TABLE>
S-37
<PAGE>
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
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
PROPERTY AGE IN YEARS PROPERTIES PROPERTIES DATE DATE
- --------------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
5 or less............. 15 9.1% $ 74,411,033 9.3%
6-10.................. 25 15.2 142,851,121 17.8
11-15................. 32 19.5 167,739,234 20.9
16-20................. 10 6.1 57,806,829 7.2
21-25................. 10 6.1 25,833,096 3.2
26-30................. 32 19.5 122,047,186 15.2
31 or more............ 40 24.4 210,663,536 26.3
------------ ------------ --------------- ---------------
Total ................ 164 100.0% $801,352,036 100.0%
============ ============ =============== ===============
</TABLE>
Weighted Average Property Age in Years: 27. The Flood Property (Loan Number
2) was built in 1904 and most recently renovated in 1993. The Hotel
Boulderado (Loan Number 5) was built in 1908 and most recently renovated in
1989. Such Mortgaged Properties secure Mortgage Loans representing in the
aggregate 8.2% of the Initial Pool Balance. The weighted average property age
would be 21 years if such Mortgaged Properties were excluded.
- ------------
(1) For Mortgaged Properties constructed in stages, the earliest date was
used.
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
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES PROPERTIES PROPERTIES DATE DATE
- --------------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
80.01%-85.00%......... 1 1.5% $ 7,364,786 2.9%
85.01%-90.00%......... 6 8.8 10,811,954 4.2
90.01%-95.00%......... 15 22.1 64,128,765 25.1
95.01%-100.00%........ 46 67.6 173,266,523 67.8
------------ ------------ --------------- ---------------
Total................. 68 100.0% $255,572,028 100.0%
============ ============ =============== ===============
</TABLE>
Weighted Average Occupancy Percentage: 96.15%
- ------------
(1) See Annex A for the dates as of which occupancy percentages were
calculated for each Mortgaged Property.
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
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES PROPERTIES PROPERTIES DATE DATE
- --------------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
65.01%-70.00%......... 1 2.4% $ 2,476,733 1.4%
80.01%-85.00%......... 2 4.8 8,207,804 4.5
85.01%-90.00%......... 1 2.4 6,738,154 3.7
90.01%-95.00%......... 9 21.4 52,281,399 28.7
95.01%-100.00%........ 29 69.0 112,530,170 61.8
------------ ------------ --------------- ---------------
Total ................ 42 100.0% $182,234,260 100.0%
============ ============ =============== ===============
</TABLE>
Weighted Average Occupancy Percentage: 96.09%
- ------------
(1) See Annex A for the dates as of which occupancy percentages were
calculated for each Mortgaged Property.
S-38
<PAGE>
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
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES PROPERTIES PROPERTIES DATE DATE
- --------------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
60.01%-65.00%......... 1 9.1% $ 4,937,239 6.1%
65.01%-70.00%......... 1 9.1 2,789,231 3.4
70.01%-75.00%......... 3 27.3 15,215,740 18.8
75.01%-80.00%......... 4 36.4 15,222,393 18.8
80.01%-85.00%......... 1 9.1 22,136,849 27.4
85.01%-90.00%......... 1 9.1 20,615,521 25.5
------------ ------------ --------------- ---------------
Total ................ 11 100.0% $80,916,973 100.0%
============ ============ =============== ===============
</TABLE>
Weighted Average Occupancy Percentage: 79.56%
- ------------
(1) See Annex A for the dates as of which occupancy percentages were
calculated for each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES(1)
OFFICE(2)
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES PROPERTIES PROPERTIES DATE DATE
- --------------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
70.01%-75.00%......... 1 3.3% $ 1,331,512 0.6%
80.01%-85.00%......... 1 3.3 2,584,701 1.2
85.01%-90.00%......... 1 3.3 5,228,177 2.5
90.01%-95.00%......... 7 23.3 81,439,448 38.6
95.01%-100.00%........ 20 66.7 120,462,228 57.1
------------ ------------ --------------- ---------------
Total ................ 30 100.0% $211,046,066 100.0%
============ ============ =============== ===============
</TABLE>
Weighted Average Occupancy Percentage: 96.62%
- ------------
(1) See Annex A for the dates as of which occupancy percentages were
calculated for each Mortgaged Property.
(2) Includes Mortgaged Properties categorized as Office/Retail.
S-39
<PAGE>
PHYSICAL OCCUPANCY PERCENTAGES(1)
OTHER(2)
<TABLE>
<CAPTION>
PERCENT BY
AGGREGATE AGGREGATE
NUMBER PERCENT BY PRINCIPAL PRINCIPAL
OF NUMBER OF BALANCE AS OF BALANCE AS OF
MORTGAGED MORTGAGED THE CUT-OFF THE CUT-OFF
OCCUPANCY PERCENTAGES PROPERTIES PROPERTIES DATE DATE
- --------------------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C>
80.01%-85.00%......... 2 15.4% $ 8,906,555 12.4%
85.01%-90.00%......... 2 15.4 14,943,388 20.9
90.01%-95.00%......... 2 15.4 3,146,751 4.4
95.01%-100.00%........ 7 53.8 44,586,014 62.3
------------ ------------ --------------- ---------------
Total ................ 13 100.0% $71,582,709 100.0%
============ ============ =============== ===============
</TABLE>
Weighted Average Occupancy Percentage: 95.06%
- ------------
(1) See Annex A for the dates as of which occupancy percentages were
calculated for each Mortgaged Property.
(2) Includes Mortgaged Properties categorized as Industrial, Nursing Home,
Congregate Care/ Retirement Community and Industrial/Office.
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 all but two of the Mortgage
Loans provide that upon any voluntary principal prepayment of a Mortgage
Loan, after its respective Lock-out Date, 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 April 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>
APRIL APRIL APRIL APRIL
CURRENT 2000 2001 2002 2003
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Lock-Out/Defeasance (1)............. 100.0% 100.0% 99.5% 81.9% 72.9%
YM1: T+0bp; 1% Floor (2) ........... 0.0 0.0 0.5 18.1 22.1
YM2: T+25bp; 1% Floor (2) .......... 0.0 0.0 0.0 0.0 0.0
--------- -------- -------- -------- --------
Total Lock-Out/Defeasance and YM .. 100.0 100.0 100.0 100.0 95.0
7.00%-7.99% (3) .................... 0.0 0.0 0.0 0.0 0.0
6.00%-6.99% (3) .................... 0.0 0.0 0.0 0.0 0.0
5.00%-5.99% (3) .................... 0.0 0.0 0.0 0.0 0.0
4.00%-4.99% (3) .................... 0.0 0.0 0.0 0.0 0.0
3.00%-3.99% (3) .................... 0.0 0.0 0.0 0.0 0.0
2.00%-2.99% (3)..................... 0.0 0.0 0.0 0.0 0.0
1.00%-1.99% (3)..................... 0.0 0.0 0.0 0.0 0.0
0.01%-0.99% (3)..................... 0.0 0.0 0.0 0.0 0.0
No Prepayment Premium............... 0.0 0.0 0.0 0.0 5.0
--------- -------- -------- -------- --------
Total .............................. 100.0 100.0 100.0 100.0 100.0
Aggregate Mortgage Loan Balance
(4)................................ $801.4 $791.2 $780.2 $768.4 $755.6
Percentage of Balance Outstanding .. 100.0% 98.7% 97.4% 95.9% 94.3%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
APRIL APRIL APRIL APRIL APRIL APRIL
2004 2005 2006 2007 2008 2009
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Lock-Out/Defeasance (1)............. 39.4% 33.1% 33.1% 32.4% 39.4% 7.7%
YM1: T+0bp; 1% Floor (2) ........... 59.7 61.0 62.4 63.1 39.8 45.4
YM2: T+25bp; 1% Floor (2) .......... 0.0 2.9 2.9 2.9 3.6 26.0
-------- -------- -------- -------- -------- -------
Total Lock-Out/Defeasance and YM .. 99.0 97.0 98.4 98.4 82.8 79.1
7.00%-7.99% (3) .................... 0.0 0.6 0.0 0.0 0.0 0.0
6.00%-6.99% (3) .................... 0.0 0.0 0.6 0.0 0.0 0.0
5.00%-5.99% (3) .................... 0.0 0.0 0.0 0.6 0.0 0.0
4.00%-4.99% (3) .................... 1.0 0.0 0.0 0.0 0.7 0.0
3.00%-3.99% (3) .................... 0.0 1.0 0.0 0.0 0.0 5.2
2.00%-2.99% (3)..................... 0.0 0.0 1.0 0.0 0.0 0.0
1.00%-1.99% (3)..................... 0.0 0.0 0.0 1.0 0.0 0.0
0.01%-0.99% (3)..................... 0.0 0.0 0.0 0.0 0.0 0.0
No Prepayment Premium............... 0.0 1.4 0.0 0.0 16.5 15.7
-------- -------- -------- -------- -------- -------
Total .............................. 100.0 100.0 100.0 100.0 100.0 100.0
Aggregate Mortgage Loan Balance
(4)................................ $704.9 $687.0 $659.7 $643.6 $502.2 $ 66.4
Percentage of Balance Outstanding .. 88.0% 85.7% 82.3% 80.3% 62.7% 8.3%
</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 the case of 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 will be reflected in the
"Lock-Out/Defeasance" category.
(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 additional, detailed information on
the Mortgage Loans' Prepayment Penalties.
S-41
<PAGE>
BORROWER CONCENTRATION AND RELATED BORROWERS
The eight largest Mortgage Loans or groups of Mortgage Loans by Related
Borrowers by Initial Pool Balance are as follows:
THE MILLS LOAN
The Loan. The largest Mortgage Loan (the "Mills Loan"), which represents
approximately 6.74% of the Initial Pool Balance, was originated by the Seller
on January 26, 1999 and has a principal balance as of the Cut-off Date of
$54,005,058 (Loan Number 1). The Mills Loan is secured by
cross-collateralized and cross-defaulted mortgages, deeds of trust or deeds
to secure debt encumbering six anchored retail centers in New Jersey,
Florida, Illinois, South Carolina and Maryland (2) (collectively, the "Mills
Properties" and individually, a "Mills Property"). The Mills Loan was made to
seven individual borrowers (collectively, the "Mills Borrowers"). Each of the
Mills Borrowers is controlled by The Mills Corporation, a New York Stock
Exchange listed real estate investment company (NYSE symbol: MLS).
The Mills Loan has a remaining amortization term of 358 months and matures
on February 1, 2029. The Mills Loan is an ARD Loan with an Anticipated
Repayment Date of February 1, 2009. The Mills Loan may not be prepaid prior
to November 1, 2008. The Mills Loan may be prepaid, in whole or in part,
without payment of a Prepayment Premium at any time beginning three months
preceding such Anticipated Repayment Date. The Mills Loan is subject to
Defeasance, in whole or in part, at any time after the second anniversary of
the Delivery Date.
The Properties. The Mills Properties consist of six anchored retail
centers:
<TABLE>
<CAPTION>
LOAN PROPERTY SQUARE
NUMBER NAME LOCATION FOOTAGE
- -------- --------------- ------------------ ---------
<S> <C> <C> <C>
1.1 Butterfield Downers Grove, IL 114,152
Plaza
1.2 Coopers Plaza Edison, NJ 172,386
1.3 Crosswinds St. Petersburg, FL 144,119
Center
1.4 Fashion Place Columbia, SC 147,950
1.5 Germantown Germantown, MD 177,097
Commons
1.6 Montgomery Gaithersburg, MD 117,331
Village
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
LOAN TYPE OF APPRAISED
NUMBER PROPERTY MAJOR TENANTS OCCUPANCY VALUE
- -------- --------------- --------------------- ------------ -------------
<S> <C> <C> <C> <C>
1.1 Anchored RetailAver Paper & Office(1) 100.00% $13,600,000
(International Paper)
Kids R Us(1)
1.2 Anchored Retail Pathmark(2) 100.00%(2) $16,100,000
Service Merchandise
Marshalls(1)
1.3 Anchored Retail Scotty's 100.00% $ 9,300,000
Bed, Bath & Beyond
1.4 Anchored Retail SuperPetz 88.22% $11,600,000
TJ Maxx(1)
Staples(1)
1.5 Anchored Retail Giant(1) 94.92% $25,100,000
Sony Theatre(1)
1.6 Anchored Retail Safeway(1) 93.16% $15,800,000
Seneca Creek Trading
--------------- -------------
TOTAL $91,500,000
</TABLE>
- ------------
(1) The long-term unsecured obligations of such tenant or the parent
thereof is rated investment grade by at least one nationally recognized
statistical rating organization.
(2) Pathmark store is currently dark, but paying rent under the terms of
its lease which expires in October 2019.
Release. A Mills Property may be released from the lien of its Mortgage
provided (a) an amount equal to one hundred twenty-five percent (125%) of the
pro rata release amount of such Mills Property is defeased and (b) after
giving effect to such release, the DSCR for the Mills Properties then
securing the Mills Loan shall be at least 1.40x.
Property Management. The Mills Properties are managed by Management
Associates Limited Partnership, which is affiliated with the Mills Borrowers.
The Mills Loan documents provide that the manager may be terminated upon the
occurrence of an event of default under the Mills Loan or if the DSCR for the
trailing twelve months falls to less than 1.15x.
S-42
<PAGE>
Operating History:
<TABLE>
<CAPTION>
1998 ACTUAL ORIGINATOR'S
1996 ACTUAL 1997 ACTUAL (11/97-10/98) UNDERWRITTEN
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Effective Gross Income............ $10,550,406 $10,470,945 $10,489,058 $10,356,388
Expenses.......................... 2,872,073 2,928,270 2,729,262 3,116,618
------------- ------------- ------------- --------------
NOI............................... $ 7,678,333 $ 7,542,675 $ 7,759,796 $ 7,239,770
============= ============= ============= ==============
UW Cash Flow...................... N/A N/A N/A $ 6,743,365
Occupancy......................... 92.7% 87.0% 96.0%(1) 89.5%
Operating Expense Ratio(2)........ 27.2% 28.0% 26.0% 30.1%
Debt Service Coverage Ratio based
on NOI........................... 1.73x 1.69x 1.74x 1.63x
UW DSCR based on UW Cash Flow .... N/A N/A N/A 1.52x
</TABLE>
- ------------
(1) As of December 1, 1998.
(2) Expenses as a percentage of Effective Gross Income.
Lockbox and Reserves. All rents payable by tenants in the Mills Properties
are paid directly into a lockbox, which is controlled by the Mills Borrowers
until a Trigger Event occurs. A "Trigger Event" is defined as any of the
following: (i) if the DSCR for the trailing twelve months falls below 1.20x,
(ii) if an event of default occurs under the Mills Loan or (iii) January 1,
2009. After a Trigger Event occurs, the lockbox is controlled by the Master
Servicer. Funds in the lockbox account are allocated monthly to a tax and
insurance account, a debt service account, a replacement reserve account and,
from and after a Trigger Event, an operation and maintenance account and a
curtailment account into which all excess cash flow is deposited to prepay
the Mills Loan. Prior to a Trigger Event, all excess cash flow is released to
the Mills Borrowers.
Additional terms and escrows for the Mills Loan are set forth on Annexes A
and C.
THE SHODEEN LOANS
Six of the Mortgage Loans, representing in the aggregate approximately
5.92% of the Initial Pool Balance, are to borrowers affiliated with Kent W.
Shodeen or his family.
Mr. Shodeen owns and manages 27 commercial properties totaling over
380,000 square feet in the western suburbs of Chicago, Illinois. He has been
involved in residential and commercial construction, property management and
ownership for over 35 years.
The borrowing entities for each of these Mortgage Loans are newly created,
single purpose entities. None of these Mortgage Loans are cross-defaulted
with any other Mortgage Loans. Additional information can be found in Annexes
A, B and C.
<TABLE>
<CAPTION>
LOAN # OF
NUMBER PROPERTY NAME PROPERTY TYPE CURRENT BALANCE PROPERTIES CITY STATE
- -------- ------------------ --------------- --------------- ------------ -------------- -------
<S> <C> <C> <C> <C> <C> <C>
10 Brittany Court Multifamily $14,815,846 1 Geneva IL
15 Covington Court Multifamily 11,037,308 1 St. Charles IL
19 Bradbury/One River Various 9,535,979 7 Geneva & St. IL
Center Pool Charles
33 Prairie Street Anchored 6,589,733 1 St. Charles IL
Shopping Center Retail
81 Geneva on the Dam Office/Retail 3,253,164 1 Geneva IL
104 Fox Island Square Office/Retail 2,246,777 1 St. Charles IL
---------------
$47,478,808
===============
</TABLE>
THE FLOOD LOAN
The Loan. The second largest Mortgage Loan (the "Flood Loan"), which
represents approximately 5.58% of the Initial Pool Balance, was originated by
the Seller on July 22, 1998 and has a principal balance
S-43
<PAGE>
as of the Cut-off Date of $44,718,226 (Loan Number 2). The Flood Loan is
secured by a first deed of trust encumbering a landmark building in San
Francisco, California that has a combination of retail and office tenants
(the "Flood Property"). The Flood Loan was made to 870 Market Street
Associates, L.P., a California limited partnership (the "Flood Borrower"),
the general partner of which is Flood Corporation, which is owned in part by
members of the Flood family who are descendants of James L. Flood, the
original developer of the Flood Property.
The Flood Loan has a remaining amortization term of 352 months and matures
in August 2018. The Flood Loan is an ARD Loan with an Anticipated Repayment
Date of August 1, 2008. The Flood Loan may not be prepaid prior to May 1,
2008. The Flood Loan may be prepaid at any time beginning three months
preceding such Anticipated Repayment Date. The Flood Loan is subject to
defeasance, in whole or in part, at any time between August 2001 and May
2008.
The Property. The Flood Property is a 12-story building, with retail
shopping spaces located on the basement, first and second floors and offices
located on the upper floors. It sits on approximately 0.791 acres in San
Francisco's Market Street Corridor. The Flood Property has frontage on
Market, Powell, Ellis and Eddy Streets, with the Powell Street side situated
opposite a cable car turnaround. The building was built in 1904. It suffered
fire damage during the earthquake of 1906, and was altered in 1919, 1936,
1952 and 1993. The building is a registered landmark in the City of San
Francisco and has approximately 100,877 square feet of retail space and
192,360 square feet of office space. The retail space is 100% leased; retail
tenants include The Gap, Venator Group Inc. (d/b/a Footlocker Outlet Store)
and Urban Outfitters. The average rent as of February 5, 1999 for the retail
space is $44.13 per square foot per annum. The office space is approximately
91% leased, with approximately 270 tenants occupying 176,054 square feet. The
average rent as of February 5, 1999 for the office space is $20.46 per square
foot per annum.
The three largest tenants at the Flood Property are:
<TABLE>
<CAPTION>
TENANT SQUARE FEET LEASE EXPIRATION DATE
- ----------------------- ------------- ---------------------
<S> <C> <C>
Footlocker Outlet
Store.................. 45,519 1/31/04
The Gap................. 36,489 9/30/03
Urban Outfitters........ 14,628 9/1/06
</TABLE>
Property Management. The Flood Property is managed by Wilson CornerStore
Properties, an independent property manager that is not affiliated with the
Flood Borrower. The Flood Loan documents provide that the manager may be
terminated upon the occurrence of an event of default under the Flood Loan or
if the net operating income for the Flood Property in any fiscal year
declines by more than 25% from the net operating income of the Flood Property
for the fiscal year immediately preceding the closing date of the Flood Loan.
Operating History:
<TABLE>
<CAPTION>
ORIGINATOR'S
1996 ACTUAL 1997 ACTUAL 1998 ACTUAL UNDERWRITTEN
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Effective Gross Income............... $7,838,400 $8,143,533 $8,471,677 $8,781,424
Expenses ............................ 2,766,603 2,874,184 2,876,083 3,145,970
------------- ------------- ------------- --------------
NOI ................................. $5,071,797 $5,269,349 $5,595,594 $5,635,454
============= ============= ============= ==============
UW Cash Flow ........................ N/A N/A N/A $5,440,957
Occupancy ........................... 97.3% 97.0% 94.3%(1) 95.0%
Operating Expense Ratio(2)........... 35.3% 35.3% 33.9% 35.8%
Debt Service Coverage Ratio based on
NOI ................................ 1.43x 1.48x 1.58x 1.59x
UW DSCR based on UW Cash Flow ...... N/A N/A N/A 1.53x
</TABLE>
- ------------
(1) As of as of February 5, 1999.
(2) Expenses as a percentage of Effective Gross Income.
Lockbox and Reserves. All rents payable by tenants in the Flood Property
are paid directly into a lockbox controlled by the Master Servicer. Funds in
the lockbox account are allocated monthly to a tax
S-44
<PAGE>
and insurance account, a debt service payment account, a recurring
replacement reserve account and, after the Anticipated Repayment Date, an
operating and maintenance expense account and a curtailment reserve account
into which all excess cash flow is deposited to prepay the Flood Loan. Prior
to the Anticipated Repayment Date, provided that no event of default has
occurred, all excess cash flow is released to the Flood Borrower.
Additional terms and escrows for the Flood Loan are as set forth on
Annexes A and C.
THE FITERMAN LOANS
Thirteen of the Mortgage Loans, representing in the aggregate
approximately 3.85% of the Initial Pool Balance, are to borrowers controlled
by Miles Q. Fiterman.
Mr. Fiterman is a private banking client of MGT and has owned and managed
multifamily projects for over 30 years.
The Mortgage Loans were made to two newly created special purpose
entities. Each Mortgage Loan to an entity is cross collateralized and cross
defaulted with other Mortgage Loans to that entity, but not with the Mortgage
Loans to the other entity. Information on these Mortgage Loans follows.
Additional information can be found in Annexes A and B.
<TABLE>
<CAPTION>
CUT-OFF DATE
LOAN PRINCIPAL # OF
NUMBER PROPERTY NAME PROPERTY TYPE BALANCE PROPERTIES CITY STATE
- -------- ------------------- --------------- -------------- ------------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Masada Investments, LLC
54 Crystal Towers Multifamily $ 4,869,164 1 New Hope MN
Trafalgar Square Multifamily 3,534,071 1 Westland MI
75 Estates
86 Lakepointe Multifamily 2,945,059 1 Ypsilanti MI
110 The Arbors Multifamily 1,963,373 1 Bloomington MN
123 Masada Manor Multifamily 1,609,966 1 St. Paul MN
142 Pengelly Multifamily 647,913 1 Flint MI
-------------- ------------ ------------- -------
Total $15,569,545
==============
Hillaway Investments, LLC
71 Metropolitan Towers Multifamily $ 3,769,675 1 Bloomington MN
97 Kings Manor Multifamily 2,503,300 1 New Hope MN
102 Nicollet Courts Multifamily 2,277,512 1 Bloomington MN
112 Larpenteur Village Multifamily 1,943,739 1 St. Paul MN
117 Cedar Glen Multifamily 1,845,570 1 Bloomington MN
125 Cedar Gate Multifamily 1,551,064 1 Bloomington MN
130 Brookdale Towers Multifamily 1,398,903 1 Brooklyn Ctr. MN
-------------- ------------ ------------- -------
Total $15,289,764
==============
Total Fiterman
Loans $30,859,309
==============
</TABLE>
THE PAULIN CREEK LOAN
The Loan. The third largest Mortgage Loan (the "Paulin Creek Loan"), which
represents approximately 2.82% of the Initial Pool Balance, was originated by
the Seller on April 30, 1998 and has a principal balance as of the Cut-off
Date of $22,611,340 (Loan Number 3). The Paulin Creek Loan is secured by a
first deed of trust encumbering a retirement community in Santa Rosa,
California (the "Paulin Creek Property"). The Paulin Creek Loan was made to
The Lodge at Paulin Creek, L.P., a California limited partnership (the
"Paulin Creek Borrower"), the general partner of which is Paulin Creek, Inc.,
a California corporation, which is in turn controlled by MBK Real Estate,
Ltd., the U.S. real estate development and construction company of Mitsui &
Co., Ltd. The unsecured long-term debt of Mitsui & Co., Ltd. is rated A3 by
Moody's Investors Service, Inc.
S-45
<PAGE>
The Paulin Creek Borrower is affiliated with the borrower under Loan
Number 16 (the "Oak Tree Villa Loan") which has a principal balance as of the
Cut-off Date of $10,922,442. Together, the two Mortgage Loans represent
approximately 4.18% of the Initial Pool Balance.
The Paulin Creek Loan has a remaining amortization term of 350 months and
matures on June 1, 2003. The Paulin Creek Loan may not be prepaid prior to
July 1, 2001. On or after July 1, 2001, the Paulin Creek Loan may be prepaid,
in whole but not in part, upon payment of a Prepayment Premium equal to the
greater of (i) 1% of the outstanding principal amount of the Paulin Creek
Loan and (ii) an amount based on a Yield Maintenance calculation. The Paulin
Creek Loan may be prepaid, in whole but not in part, without payment of a
Prepayment Premium at any time beginning three months preceding June 1, 2003.
The Property. The Paulin Creek Property is a 9.13 acre tract improved by a
263,000 square foot, 250 unit residential facility catering to retired
persons known as The Lodge at Paulin Creek located at 2375 Range Avenue in
Santa Rosa, Sonoma County, California and is located about one-half mile from
Highway 101, the primary north-south highway in the region. The building was
built in two phases between 1990 and 1991. All 245 of the rentable units are
currently leased. The remaining 5 units are used for managerial residences
and model and guest units. Each unit includes a small kitchen. The facility
provides a swimming pool and jacuzzi, exercise and recreation rooms and a
self-service laundry.
Property Management. The Paulin Creek Property and the property securing
the Oak Tree Villa Loan are managed by MBK Senior Living Communities, Ltd, an
affiliate of the Paulin Creek Borrower.
Operating History:
<TABLE>
<CAPTION>
1998 ACTUAL ORIGINATOR'S
1996 ACTUAL 1997 ACTUAL (5/98-12/98) UNDERWRITTEN
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Effective Gross Income............... $5,520,101 $5,720,456 $4,029,013 $5,713,194
Expenses ............................ 2,917,582 3,080,629 2,049,953 3,287,742
------------- ------------- ------------- --------------
NOI ................................. $2,602,519 $2,639,827 $1,979,060 $2,425,452
============= ============= ============= ==============
UW Cash Flow ........................ N/A N/A N/A $2,362,952
Occupancy ........................... 100.0% 100.0% 99.2% 95.0%
Operating Expense Ratio(1)........... 52.9% 53.9% 50.9% 57.5%
Debt Service Coverage Ratio based on
NOI ................................ 1.38x 1.40x 1.57x 1.28x
UW DSCR based on UW Cash Flow ...... N/A N/A N/A 1.25x
</TABLE>
- ------------
(1) Expenses as a percentage of Effective Gross Income.
Lockbox and Reserves: The Paulin Creek Loan documents provide for reserves
for taxes, immediate repairs, and ongoing replacements. The Paulin Creek Loan
documents do not require the establishment of a lockbox or cash collateral
account.
Additional terms and escrows for the Paulin Creek Loan are as set forth on
Annexes A and B.
THE MARRIOTT SUITES BETHESDA LOAN
The Loan. The fourth largest Mortgage Loan (the "Marriott Suites Bethesda
Loan"), which represents approximately 2.76% of the Initial Pool Balance, was
originated by the Seller on January 16, 1998 and has a principal balance as
of the Cut-off Date of $22,136,849 (Loan Number 4). The Marriott Suites
Bethesda Loan is secured by a first deed of trust encumbering a leasehold
interest in a hotel property in Bethesda, Maryland (the "Marriott Suites
Bethesda Property").
The Marriott Suites Bethesda Loan was made to Rock Springs Park Hotel
Limited Partnership (the "Marriott Suites Bethesda Borrower"), which is
controlled by the Charles E. Smith Companies. The Charles E. Smith Companies
is one of the largest real estate development, construction, leasing and
management companies in the Washington, D.C. metropolitan area.
S-46
<PAGE>
The Marriott Suites Bethesda Loan has a remaining amortization term of
286 months and matures on February 1, 2023. The Marriott Suites Bethesda Loan
is an ARD Loan with an Anticipated Repayment Date of February 1, 2013. The
Marriott Suites Bethesda Loan may not be prepaid prior to February 1, 2005.
The Marriott Suites Bethesda Loan may be prepaid, in whole but not in part,
on or after February, 2005 upon payment of a Prepayment Premium equal to the
greater of (i) 1% of the outstanding principal amount of the Marriott Suites
Bethesda Loan and (ii) an amount based on a Yield Maintenance calculation
provided that it may be prepaid, in whole but not in part, without payment of
a Prepayment Premium at any time beginning six months preceding February 1,
2013. The Marriott Suites Bethesda Loan is subject to Defeasance, in whole or
in part, at any time between February, 2001 and February, 2005.
The Property. The Marriott Suites Bethesda Property is a 241,326 square
foot, 12-story, 274 room all-suite hotel property in Bethesda, Maryland. The
hotel also includes approximately 2,400 square feet of meeting/banquet space
and has 276 parking spaces in a parking garage. Amenities include a
restaurant, indoor/outdoor swimming pool and exercise facilities. It sits on
a 9.7 acre tract of land on Democracy Boulevard, just west of Georgetown Road
in an office park. The Marriott Suites Bethesda Property is subject to a
ground lease, which expires April 28, 2087, that provides for annual payments
based on a 1997 payment of $267,000, subject to a 5.5% annual escalation
clause. All increases in the ground lease payment above the 1997 base are
subordinate to the Marriott Suites Bethesda Loan. The building was built in
1990. The Marriott Suites Bethesda Property is leased to Marriott Hotel
Service, Inc. ("Marriott") pursuant to a triple-net operating lease (the
"Marriott Lease") at an annual rent equal to (a) 3% of gross sales plus (b)
50% of net cash flow after debt service and escrow requirements. The Marriott
Lease has a term of 35 years and expires in 2025 with two 10-year options.
The Marriott Lease is subordinate to the Mortgage securing the Marriott
Suites Bethesda Loan.
Property Management. The Marriott Suites Bethesda Property is managed by
Marriott.
Operating History:
<TABLE>
<CAPTION>
ORIGINATOR'S
1996 ACTUAL 1997 ACTUAL 1998 ACTUAL UNDERWRITTEN
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Effective Gross Income............... $11,630,619 $12,542,669 $13,796,843 $12,248,838
Expenses............................. 7,750,443 7,684,637 8,094,411 8,136,123
------------- ------------- ------------- --------------
NOI.................................. $ 3,880,176 $ 4,858,032 $ 5,702,432 $ 4,112,715
============= ============= ============= ==============
UW Cash Flow......................... N/A N/A N/A $ 3,525,474
Operating Expense Ratio(1)........... 66.6% 61.3% 58.7% 66.4%
Debt Service Coverage Ratio based on
NOI................................. 1.91x 2.39x 2.81x 2.03x
UW DSCR based on UW Cash Flow ....... N/A N/A N/A 1.74x
</TABLE>
- ------------
(1) Expenses as a percentage of Effective Gross Income.
Lockbox and Reserves. All revenue received by the hotel operator,
Marriott, is paid directly into a lockbox controlled by the Master Servicer.
Funds in the lockbox account are allocated monthly to a tax and insurance
account, a debt service payment account, a recurring replacement reserve
sub-account, an operating and maintenance expense account and, after the
Anticipated Repayment Date, a curtailment reserve account into which all
excess cash flow is deposited to prepay the Marriott Suites Bethesda Loan.
Prior to the Anticipated Repayment Date, provided that no event of default
has occurred, all excess cash flow is released to the Marriott Suites
Bethesda Borrower.
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<PAGE>
Additional terms and escrows for the Marriott Suites Bethesda Loan are as
set forth on Annex A.
HOTEL BOULDERADO LOAN
The Loan. The fifth largest Mortgage Loan (the "Hotel Boulderado Loan"),
which represents approximately 2.57% of the Initial Pool Balance was
originated by the Seller on November 21, 1997, and has a principal balance as
of the Cut-off Date of $20,615,521 (Loan Number 5). The Hotel Boulderado Loan
is secured by a first deed of trust (the "Hotel Boulderado Mortgage")
encumbering the hotel located at 2115 13th Street in Boulder, Colorado. The
Hotel Boulderado Loan was made to Boulderado Hotel, Ltd. L.L.P., a special
purpose entity (the "Hotel Boulderado Borrower"). The Hotel Boulderado
Borrower is owned directly or indirectly by Arthur Wong and Frank B. Day.
The Hotel Boulderado Loan has a remaining amortization term of 284 months
and matures in December 2007. The Hotel Boulderado Loan may not be prepaid
prior to January 1, 2002. On or after January 1, 2002, the Hotel Boulderado
Loan may be prepaid, in whole but not in part, upon payment of a Prepayment
Premium equal to the greater of (i) 1% of the outstanding principal amount of
the Hotel Boulderado Loan an (ii) an amount based on a Yield Maintenance
calculation. The Hotel Boulderado Loan may be prepaid in whole, but not in
part, without payment of a Prepayment Premium at any time six months
preceding December 1, 2007.
The Property. The Hotel Boulderado is a 156 room (152,085 square feet),
full service hotel located in the heart of downtown Boulder adjacent to the
city's central business district and shopping. It is in close proximity to
the University of Colorado and the Rocky Mountains. In 1977, the Hotel
Boulderado was placed on the National Register of Historic places. The August
1997 edition of Lodging Hospitality, a hotel trade magazine, ranked the Hotel
Boulderado 25th in its ranking of the top 400 "center city" hotels in the
United States. The original hotel, consisting of 42 rooms, was completed in
1908 and opened on January 1, 1909. In 1985, Annex I, consisting of 66 rooms,
was completed and a second expansion, Annex II, consisting of 48 rooms was
completed in 1989. The Hotel Boulderado contains three restaurants, two
cocktail lounges, a gift shop, approximately 9,000 square feet of banquet and
conference space, and 110 parking spaces (67 covered). The 12-month average
daily occupancy rate for the calendar year 1998 for the Hotel Boulderado was
86.1% with an average room rate of $139.81. The room mix includes 58 standard
rooms (queen beds), 31 deluxe rooms (king beds), 40 deluxe rooms (two queen
beds), 21 suites and 6 executive king rooms.
Property Management. The Hotel Boulderado is managed by Concept
Restaurant, Inc. which has managed the hotel for 15 years. Concept
Restaurant, Inc. is a privately held restaurant company with multiple
operations in Colorado. Frank B. Day, one of the principals of Hotel
Boulderado Borrower, is the president. The Hotel Boulderado Loan documents
provide that the property manager can be terminated upon the occurrence of an
event of default under the Hotel Boulderado Loan.
Operating History.
<TABLE>
<CAPTION>
ORIGINATOR'S
1996 ACTUAL 1997 ACTUAL 1998 ACTUAL UNDERWRITTEN
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Effective Gross Income .............. $7,422,863 $7,682,633 $7,825,857 $7,648,974
Expenses ............................ 3,599,233 3,961,357 4,007,737 4,465,749
------------- ------------- ------------- --------------
NOI ................................. $3,823,630 $3,721,275 $3,818,120 $3,183,226
============= ============= ============= ==============
UW Cash Flow ........................ N/A N/A N/A $2,880,777
Operating Expense Ratio(1)........... 48.5% 51.6% 51.2% 58.4%
Debt Service Coverage Ratio based on
NOI ................................ 2.00x 1.95x 2.00x 1.67x
UW DSCR based on UW Cash Flow ...... N/A N/A N/A 1.47x
</TABLE>
- ------------
(1) Expenses as a percentage of Effective Gross Income.
S-48
<PAGE>
Lockbox and Reserves. The Hotel Boulderado Loan documents provide for
reserves for taxes, insurance, and on-going replacement. The Hotel Boulderado
Loan documents do not require the establishment of a lockbox or cash
collateral account.
Additional terms and escrows for the Hotel Boulderado Loan are as set
forth on Annex A.
THE 36 SOUTH CHARLES LOAN
The Loan. The sixth largest Mortgage Loan (the "36 South Charles Loan"),
which represents approximately 2.35% of the Initial Pool Balance, was
originated by the Seller on December 11, 1997 and has a principal balance as
of the Cut-off Date of $18,816,306 (Loan Number 6). The 36 South Charles Loan
is secured by a first deed of trust encumbering an office building in
Baltimore, Maryland (the "36 South Charles Property"). The 36 South Charles
Loan was made to Area 16B Associates, Limited Partnership, a Maryland limited
partnership (the "36 South Charles Borrower"), the general partner of which
is 16B, Inc., a Maryland corporation, which is controlled by Bernard Manekin
and A. James Clark, local developers and contractors.
The 36 South Charles Loan has a remaining amortization term of 309 months
and matures on January 1, 2008. The 36 South Charles Loan may not be prepaid
prior to February 1, 2002. On or after February 1, 2002, the 36 South Charles
Loan may be prepaid, in whole but not in part, upon payment of a Prepayment
Premium equal to the greater of (i) 1% of the outstanding principal amount of
the 36 South Charles Loan and (ii) an amount based on a Yield Maintenance
calculation. The 36 South Charles Loan may be prepaid, in whole but not in
part, without payment of a Prepayment Premium at any time six months
preceding January 1, 2008.
The Property. The 36 South Charles Property is a 0.64 acre tract improved
by a 299,667 square foot, 25-story, granite and glass office building located
at 36 South Charles Street in Baltimore, Maryland located in Baltimore's
central business district. The building was built in 1972. The occupancy rate
as of March 25, 1999 was 94.6% with an average rent of $17.01 per square foot
per annum for the office space and $21.94 per square foot per annum for the
retail space
Largest Tenants: The three largest tenants at the 36 South Charles
Property are:
<TABLE>
<CAPTION>
TENANT SQUARE FEET LEASE EXPIRATION DATE
- ----------------- ------------- ---------------------
<S> <C> <C>
Piper & Marbury 185,292 3/31/01
Shapiro & Olander 24,166 12/31/02
Peter Nichols 12,283 6/30/01
</TABLE>
The 36 South Charles Borrower has advised that, while no termination
notice has been given, there is a strong possibility that Piper & Marbury may
be vacating some or all of its space. Piper & Marbury's lease expires in
March 2001. The 36 South Charles Loan provides for an initial escrow of
$1,000,000 and an on-going releasing cost escrow of $10,000 per month which
will grow to $1,400,000 by May 1, 2001 and is capped at such amount. The
funds shall only be released upon the satisfactory renewal of the Piper &
Marbury lease or the reletting of the premises currently occupied by Piper &
Marbury pursuant to an approved lease.
Property Management. The 36 South Charles Property is managed by Manekin
Corporation, which is affiliated with the 36 South Charles Borrower. The 36
South Charles Loan documents provide that the manager may be terminated upon
the occurrence of an event of default under the 36 South Charles Loan.
S-49
<PAGE>
Operating History:
<TABLE>
<CAPTION>
ORIGINATOR'S
1996 ACTUAL 1997 ACTUAL 1998 ACTUAL UNDERWRITTEN
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Effective Gross Income............... $5,758,564 $5,862,153 $6,220,973 $5,909,924
Expenses ............................ 2,688,286 2,644,571 2,602,737 2,704,808
------------- ------------- ------------- --------------
NOI ................................. $3,070,278 $3,217,582 $3,618,236 $3,205,116
============= ============= ============= ==============
UW Cash Flow ........................ N/A N/A N/A $2,442,809
Occupancy ........................... 95.0% 95.0% 94.6%(1) 95.0%
Operating Expense Ratio(2)........... 46.7% 45.1% 41.8% 45.8%
Debt Service Coverage Ratio based on
NOI ................................ 1.85x 1.94x 2.18x 1.93x
UW DSCR based on UW Cash Flow ...... N/A N/A N/A 1.47x
</TABLE>
(1) As of March 25, 1999.
(2) Expenses as a percentage of Effective Gross Income.
Lockbox and Reserves. The 36 South Charles Loan documents require the 36
South Charles Borrower to make monthly payments into a tax and insurance
escrow account and ongoing replacement escrow account in addition to the
above-mentioned on-going releasing cost escrow. The 36 South Charles Loan
documents do not require the establishment of a lockbox or cash collateral
account.
Additional terms and escrows for the 36 South Charles Loan are as set
forth on Annex A.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
ARD Loans. Nineteen of the Mortgage Loans representing approximately 30.8%
of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date are "ARD Loans." 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 borrower thereunder (the
"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."
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
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<PAGE>
revenue from the related Mortgaged Property deposited after the Anticipated
Repayment Date into a Lockbox Account controlled by the Master Servicer.
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
NUMBER LOAN PRINCIPAL BALANCE
- -------- ------------------------------ -----------------
<S> <C> <C>
1 Mills Portfolio $ 54,005,058
2 The Flood Building 44,718,226
4 Marriott Suites Bethesda 22,136,849
7 Plaza 600 18,094,729
10 Brittany Court 14,815,846
13 Batmasian III 12,313,405
15 Covington Court 11,037,308
19 Bradbury/One River Center Pool 9,535,979
22 The Excellence 8,892,185
25 Cedar Creek Apartments 7,962,004
26 Batmasian II 7,944,132
30 Magnolia Place Office Building 7,146,813
33 Prairie Street Shopping Center 6,589,733
45 Batmasian I 5,262,988
57 The Times Square Building 4,662,873
70 Las Tiendas Shopping Center 3,773,555
81 Geneva on the Dam 3,253,164
91 Hillcrest Apartments 2,758,573
104 Fox Island Square 2,246,777
-----------------
Total $247,150,197
=================
</TABLE>
Balloon Mortgage Loans. One hundred nineteen of the Mortgage Loans
representing approximately 66.7% 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. See Annex A for additional information regarding the
Balloon Mortgage Loans.
Crossed Loans. Nineteen Mortgage Loans representing approximately 5.0% 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 Crossed
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<PAGE>
Loans will result in a default under all of the other Mortgage Loans which
are cross-collateralized and cross-defaulted with such Crossed Loan. See
Annex A for additional information regarding the Crossed Loans.
ESCROWS
One hundred thirty-six Mortgage Loans which represent approximately 92.3%
of the Initial Pool Balance, provide for monthly escrows to cover property
taxes on the Mortgaged Properties and 111 of the Mortgage Loans, which
represents approximately 74.8% 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.
One hundred twenty-eight of the Mortgage Loans, which represent
approximately 93.2% of the Initial Pool Balance, also require monthly escrows
to cover ongoing replacements of furniture, fixtures and equipment and/or
capital expenditures.
Thirty-two of the Mortgage Loans, which represent approximately 22.4% 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. Thirty-one of the Mortgage Loans, which represent approximately
9.3% of the Initial Pool Balance, have front-end escrows to cover various
other contingencies.
See Annex A for additional information pertaining to Mortgage Loan
escrows.
UNDERWRITING GUIDELINES AND PROCESS
MGT created guidelines establishing certain procedures with respect to
underwriting the Mortgage Loans, as described more fully below. All of 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.
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
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<PAGE>
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 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 mortgage 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.
With respect to the two Mortgage Loans not originated by MGT, MGT
purchased the two loans as part of a pool of mortgage loans which generally
conformed to the underwriting standards established by MGT.
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.
S-53
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Mortgage Pass-Through Certificates, Series 1999-C7 (the
"Certificates") will be issued pursuant to the Pooling and Servicing
Agreement and will include the following seven classes of Certificates
designated as the Class A1, Class A2 (together with the Class A1
Certificates, 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. 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 A Certificates will evidence approximately an initial 70.5%
undivided interest in the Trust Fund. The Class B Certificates will evidence
approximately an initial 5.0% 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 6.5% undivided interest in the Trust Fund. The Class E Certificates
will evidence approximately an initial 1.5% 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 Persons acquiring beneficial ownership interests in
the Certificates (the "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 Cedelbank or Euroclear System
("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 Cedelbank or the 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.
Cedelbank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedelbank's and
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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.
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 Cedelbank 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 Cedelbank 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
Cedelbank or Euroclear) will be credited during the securities settlement
processing day (which must be a business day for Cedelbank 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 Cedelbank Participant on
such business day. Cash received in Cedelbank or Euroclear as a result of
sales of securities by or through a Cedelbank Participant or Euroclear
Participant to a DTC Participant (other than the depository for Cedelbank or
Euroclear) will be received with value on the DTC settlement date, but will
be available in the relevant Cedelbank 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 Cedelbank 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 Cedelbank
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. Cedelbank Participants or Euroclear Participants may not deliver
instructions directly to the Depositories.
Cedelbank, as a professional depository, holds securities for its
participating organizations ("Cedelbank Participants") and facilitates the
clearance and settlement of securities transactions between Cedelbank
Participants through electronic book-entry changes in accounts of Cedelbank
Participants, thereby eliminating the need for physical movement of
certificates. As a professional depository, Cedelbank 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
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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 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, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the Offered Certificates among
Participants of DTC, Cedelbank 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 May 1999 (each, a
"Distribution Date"). All distributions (other than the final distribution on
any
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Certificate) will be made by the Trustee 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 related Distribution Date
occurs (the "Record Date"). 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 and payments
made by the Master Servicer to cover related Prepayment Interest Shortfalls
(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, (iii) any servicing and trustee compensation or (iv) for
Distribution Dates occurring in February and, if in a year that is not a leap
year, January, the Withheld Amounts (as defined herein) with respect to the
Interest Reserve Loans (as defined herein) to be deposited into the Interest
Reserve Account (as defined herein) and held for future distribution.
Pass-Through Rate on the Offered Certificates. The rate per annum at which
any Class of Certificates accrues interest from time to time is herein
referred to as its "Pass-Through Rate."
The Pass-Through Rates applicable to the Class A1, Class A2 and Class B
Certificates will be fixed and, at all times, will be equal to the
Pass-Through Rate specified for such Class on the cover page hereof. The
Pass-Through Rate applicable to the Class C Certificates for any Distribution
Date will be equal to a rate equal to the excess of the weighted average of
the Remittance Rates on the Mortgage Loans with respect to such Distribution
Date over 0.378% per annum. The Pass-Through Rates applicable to the Class D
and Class E Certificates for any Distribution Date will be equal to a rate
equal to the weighted average of the Remittance Rates on the Mortgage Loans
with respect to such Distribution Date. 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 0.69826% per annum. The Pass-Through Rate
on the Class C Certificates for the initial Distribution Date will be
6.75397% per annum. The Pass-Through Rate on the Class D and Class E
Certificates for the initial Distribution Date will be 7.13197% 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 Master Servicing Fee Rate and the Trustee Fee Rate; provided,
however, that with respect to each Interest Reserve Loan, (i) the Remittance
Rate for the one-month period preceding the Due Dates in (a) January and
February in each year that is not a leap year or (b) February only in each
year that is a leap year will be determined net of the Withheld Amounts and
(ii) the Remittance Rate for the one-month period preceding the Due Date in
March will be determined after taking into account the
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addition of the Withheld Amounts with respect to each such Mortgage Loan.
See "--Interest Reserve Account" herein. For purposes of calculating the
Remittance Rate, the Mortgage Interest Rate for each of the Mortgage Loans
which provide for the computation of interest other than on the basis of a
360-day year consisting of twelve 30-day months (a "30/360 basis") (that is
the basis on which interest on the Certificates accrues) will be adjusted to
reflect that difference.
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, if any, 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). The "Notional Amount" of the Class X Certificates will
equal the aggregate of the 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
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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 calculated assuming a Master Servicing Fee Rate of
0.02% per annum. 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.
Interest Reserve Account. The Trustee will establish and maintain an
"Interest Reserve Account" in the name of the Trustee for the benefit of the
holders of the Certificates. With respect to each Distribution Date occurring
in February and each Distribution Date occurring in any January which occurs
in a year that is not a leap year, there shall be deposited, in respect of
each Mortgage Loan which does not provide for the computation of interest on
a 30/360 basis (the "Interest Reserve Loans"), an amount equal to one day's
interest at the related Mortgage Interest Rate (net of the Master Servicing
Fee payable therefrom) on the respective Stated Principal Balance as of the
immediately preceding Due Date, to the extent a Monthly Payment or P&I
Advance is made in respect thereof (all amounts so deposited in any
consecutive January (if applicable) and February, "Withheld Amounts"). With
respect to each Distribution Date occurring in March, an amount is required
to be withdrawn from the Interest Reserve Account in respect of each Interest
Reserve Loan equal to the related Withheld Amounts from the preceding January
(if applicable) and February, if any, and deposited into the Certificate
Account.
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 date on which the related Mortgage Loan becomes due (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
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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 principal balance thereof reduced by distributions in
reduction thereof and Realized Losses 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 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 Interest Distribution Amount for such
Distribution Date on the Class B Certificates;
(e) to distribution 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 to the Class B Certificates, until the Class Balance
thereof is reduced to zero;
(f) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class C Certificates;
(g) 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;
(h) to the distributions of the Interest Distribution Amount for such
Distribution Date on the Class D Certificates;
(i) 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;
(j) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class E Certificates;
(k) 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;
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(l) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class F Certificates;
(m) 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;
(n) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class G Certificates;
(o) 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;
(p) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class H Certificates;
(q) 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;
(r) to distributions of the Interest Distribution Amount for such
Distribution Date on the Class NR Certificates; and
(s) 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 and Class A2 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 and Class A2 Certificates pro rata based on their respective
Class Balances.
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 6.0%, 6.0%, 6.0% and 6.0%, respectively,
per annum. The aggregate Class Balance for the Class F, Class G, Class H and
Class NR Certificates will equal $92,158,036.
The Class R-I, Class R-II and Class R-III Certificates will not have a
Pass-Through Rate or a Class Balance.
An affiliate of the Depositor intends to purchase and make an investment
in the Other Certificates. The Other Certificates may be sold in whole or in
part by such affiliate at any time and from time to time.
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 Underwriters, 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
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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 and Class
A2 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
compensation with respect to Mortgage Loans which are or have been 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.
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.
COLLATERAL VALUE ADJUSTMENT
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 (iv) the
date on which a borrower declares bankruptcy or (v) 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"),
the Special Servicer will use reasonable efforts to obtain an appraisal 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
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<PAGE>
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 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 Servicer
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.
As a result of calculating Collateral Value Adjustment with respect to a
Mortgage Loan, the P&I Advance for such Mortgage Loan for the Distribution
Date will be reduced, which will have the effect of reducing the amount of
interest available for distribution to the Certificates (other than the Class
A and Class X Certificates) in reverse alphabetical order of the Classes. See
"--Advances" below. In addition, any Collateral Value Adjustment will be
allocated to the Certificates (other than the Class A and Class X
Certificates) in reverse alphabetical order of the Classes for purposes of
determining Voting Rights and the Monitoring Certificateholders. See
"Description of the Pooling and Servicing Agreement--Voting Rights" below and
"Master Servicer and Special Servicer--Responsibilities of the Special
Servicer" below. 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 further reduce
any P&I Advances for the related Mortgage Loan. A higher appraised value will
reverse the Collateral Value Adjustment by the amount of the reported
increase.
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.
Notwithstanding the foregoing, if a Collateral Value Adjustment has been
made with respect to any Mortgage Loan, then, with respect to the
Distribution Date immediately following the date of such determination and
with respect to each subsequent Distribution Date, to the extent such
Collateral Value Adjustment has not been reversed, in the event of subsequent
delinquencies thereon, the interest portion of the P&I Advance in respect of
such Mortgage Loan will be reduced (no reduction to be made in the principal
portion, however) to equal the product of (i) the amount of the interest
portion of such P&I Advance that would otherwise be required to be made for
such Distribution Date without regard to this sentence, multiplied by (ii) a
fraction (expressed as a percentage), the numerator of which is equal to the
Stated Principal Balance of such Mortgage Loan, net of such Collateral Value
Adjustment, and the denominator of which is equal to the Stated Principal
Balance of such Mortgage Loan. See "--Subordination" above.
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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.
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 or in part during
a certain number of years following the origination if accompanied by payment
of a Prepayment Premium. See Annex A hereto 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
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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.
The Pass-Through Rates for the Class A1, Class A2 and Class B Certificates
will be fixed. The Pass-Through Rate for the Class X Certificates for any
Distribution Date will be variable and will be based on the weighted average
Remittance Rates on the Mortgage Loans for such Distribution Date. The
Pass-Through Rate applicable to the Class C Certificates for any Distribution
Date will be a rate equal to the excess of the weighted average of the
Remittance Rates on the Mortgage Loans with respect to such Distribution Date
over 0.378% per annum. The Pass-Through Rates applicable to the Class D and
Class E Certificates for any Distribution Date will be a rate equal to the
weighted average of the Remittance Rates on the Mortgage Loans with respect
to such Distribution Date. Accordingly, the yield on the Offered Certificates
(other than the Class A1, Class A2 and Class B Certificates), to the extent
the related Pass-Through Rate is calculated based on the weighted average of
the Remittance Rates, will be sensitive to changes in the relative
composition of the Mortgage Loans as a result of scheduled amortization,
voluntary prepayments, liquidations of Mortgage Loans following default and
repurchases of Mortgage Loans. Losses or payments of principal on the
Mortgage Loans with higher Remittance Rates could result in a reduction in
the weighted average of the Remittance Rates on the Mortgage Loans reducing
the Pass-Through Rates on such Classes of Offered Certificates.
See "Description of the Certificates--Pass-Through Rates" and "Description
of the Mortgage Pool--Certain Characteristics of the Mortgage Loans" herein.
ARD Loans may be prepaid 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 Interest 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.
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 "Rated Final Distribution Date" for the Certificates will be the
Distribution Date in October 2035, 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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<PAGE>
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 Annex A
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 May 1999; (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 April 22, 1999; and (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.
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 B
-------------------------- -------------------------- --------------------------
DISTRIBUTION
DATE 0% 25% 50% 100% 0% 25% 50% 100% 0% 25% 50% 100%
- ------------------- ----- ----- ----- ------ ----- ----- ----- ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial percentage 100 100 100 100 100 100 100 100 100 100 100 100
April 2000 ......... 95 95 95 95 100 100 100 100 100 100 100 100
April 2001 ......... 90 90 90 90 100 100 100 100 100 100 100 100
April 2002 ......... 84 84 84 84 100 100 100 100 100 100 100 100
April 2003 ......... 78 77 76 60 100 100 100 100 100 100 100 100
April 2004 ......... 54 53 53 50 100 100 100 100 100 100 100 100
April 2005 ......... 45 44 43 35 100 100 100 100 100 100 100 100
April 2006 ......... 32 30 28 27 100 100 100 100 100 100 100 100
April 2007 ......... 24 22 20 19 100 100 100 100 100 100 100 100
April 2008 ......... 0 0 0 0 74 72 69 50 100 100 100 100
April 2009 ......... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average
life in years (2) 5.5 5.4 5.3 5.2 9.2 9.2 9.1 8.8 9.5 9.4 9.4 9.2
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
CLASS C CLASS D CLASS E
-------------------------- -------------------------- --------------------------
DISTRIBUTION
DATE 0% 25% 50% 100% 0% 25% 50% 100% 0% 25% 50% 100%
- ------------------- ----- ----- ----- ------ ----- ----- ----- ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial percentage 100 100 100 100 100 100 100 100 100 100 100 100
April 2000 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2001 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2002 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2003 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2004 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2005 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2006 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2007 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2008 ......... 100 100 100 100 100 100 100 100 100 100 100 100
April 2009 ......... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average
life in years (2) 9.5 9.5 9.5 9.2 9.7 9.6 9.6 9.4 9.8 9.8 9.8 9.6
</TABLE>
- ------------
(1) Prepayments are assumed to occur after the Lock-out/Defeasance 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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<PAGE>
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 (viii) 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. 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
<TABLE>
<CAPTION>
ASSUMED
PURCHASE PRICE
AS A PERCENTAGE ASSUMED
OF THE NOTIONAL PASS-THROUGH RATE
AMOUNT (1) CPR PREPAYMENT ASSUMPTION RATE(2)
- --------------- ------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0% 25% 50% 75% 100%
--------- --------- --------- --------- --------
4.1250% 0.69826% 9.9207% 9.8173% 9.7235% 9.6160% 9.1199%
</TABLE>
- ------------
(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.
(2) Prepayments are assumed to occur after the Lock-out/Defeasance period
and/or Yield Maintenance penalty period.
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
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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 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 Certificates 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
THE MASTER SERVICER AND THE SPECIAL SERVICER
Midland Loan Services, Inc. will be acting as the Master Servicer and the
Special Servicer (together, the "Servicers") under the Pooling and Servicing
Agreement.
Midland Loan Services, L.P. was organized under the laws of Missouri in
1992 as a limited partnership. On April 3, 1998, Midland Loan Services, Inc.
("Midland"), a newly formed, wholly-owned subsidiary of PNC Bank, National
Association, acquired substantially all of the assets of Midland Loan
Services, L.P. Midland is a real estate financial services company that
provides loan servicing and asset management for large pools of commercial
and multifamily real estate assets and that originates commercial real estate
loans. Midland's address is 210 West 10th Street, 6th Floor, Kansas City,
Missouri 64105.
As of February 28, 1999, Midland was servicing approximately 14,200
commercial and multifamily loans with a total principal balance of
approximately $39.5 billion. The collateral for these loans is located in all
50 states, the District of Columbia and Puerto Rico. Approximately 10,700 of
the loans, with a total principal balance of approximately $31.0 billion,
pertain to commercial and multifamily mortgage-backed securities. The
portfolio includes multifamily, office, retail, hospitality and other types
of income producing properties. Midland also services newly-originated loans
and loans acquired in the secondary market for issuers of commercial and
multifamily mortgage-backed securities, financial institutions and private
investors.
Standard & Poor's and Fitch have approved Midland as a master and special
servicer for investment grade-rated commercial and multifamily
mortgage-backed securities. Midland is also a HUD/FHA-approved mortgagee and
a Fannie Mae-approved multifamily loan servicer.
The information set forth above concerning the Master Servicer and the
Special Servicer has been provided by Midland. The Depositor, the
Underwriters, the Trustee and the Seller make no representations or
warranties as to its accuracy.
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 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,
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<PAGE>
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 the
Master 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 to the
extent such insurance is available at commercially reasonable rates 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 accordance with the Servicing Standard; demanding that the
Mortgagor cure delinquencies; inspecting 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.
Midland 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 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
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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 not later than the end of the third
calendar year following the year of acquisition, unless (i) the Internal
Revenue Service grants an extension of time to sell such property or (ii) the
Special Servicer provides to the Trustee an opinion of independent counsel to
the effect that the holding of the property by the Trust Fund subsequent to
the end of the third year following the year in which such acquisition
occured 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 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.
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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 2.0% 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 except as described above, provided, however, the Special
Servicer will implement the last submitted report if 60 days have elapsed
since the Mortgage Loan has become a Specially Serviced Mortgage Loan,
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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Notwithstanding such replacement, the resigning Special Servicer shall be
entitled to receive the Special Servicing Fee for any Mortgage Loan which
became a Specially Serviced Mortgage Loan and was subsequently returned to a
performing status prior to such resignation; provided that if such Mortgage
Loan once again becomes a Specially Serviced Mortgage Loan, the Replacement
Special Servicer shall thereafter be entitled to such fee. The Replacement
Special Servicer shall be entitled to the Special Servicing Fee for all other
Specially Serviced Mortgage Loans.
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 (as defined below) 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 "Basic Master Servicing Fee Rate" will be
0.07% per annum of the then outstanding balance with respect to the Mortgage
Loans. The Master Servicer will also receive as part of its Master Servicing
Fee an additional fee calculated based on the following rates (each, an
"Additional Servicing Fee Rate"): (i) a primary servicing fee rate of 0.07%
per annum with respect to 1.4% of the Mortgage Loans by aggregate principal
balance as of the Cut-off Date, (ii) a primary servicing fee rate of 0.05%
per annum with respect to 28.5% of the Mortgage Loans by aggregate principal
balance as of the Cut-off Date and (iii) a primary servicing fee rate of
0.01% per annum with respect to 4.4% of the Mortgage Loans by aggregate
principal balance as of the Cut-off Date. With respect to each Mortgage Loan,
the sum of the Basic Master Servicing Fee Rate and the related Additional
Servicing Fee Rate, if any, is referred to herein as the "Master Servicing
Fee Rate."
In the event that the initial Master Servicer shall resign or be
terminated as the Master Servicer and a successor Master Servicer shall agree
to perform the services of the Master Servicer for an amount less than the
Master Servicing Fee, no part of any excess of such portion of the Master
Servicing Fee over the amount payable to such successor will be available for
payment to Certificateholders.
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 1.00% of all amounts collected with
respect to any Specially Serviced Mortgage Loan and any Mortgage Loan which
became a Specially Serviced Mortgage Loan and was subsequently returned to
performing status.
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 April 1, 1999 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer,
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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 1999-C7.
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 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 0.0035% per annum
of the outstanding principal balance of the Mortgage Loans (the "Trustee Fee
Rate"). 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 1999-C7.
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THE HEALTHCARE ADVISER
Promptly (but in no event later than five days) after the Trustee is
notified that any of the Mortgage Loans (identified on Annex A as a nursing
home, congregate care facility or retirement community (the "Healthcare
Adviser Loans")) became a Specially Serviced Mortgage Loan, the Trustee will
be required to request the Directing Certificateholder to appoint a
consultant with respect to such Healthcare Adviser Loan and the related
healthcare property (the "Healthcare Adviser"). In the event the Directing
Certificateholder does not appoint a Healthcare Adviser within five days of
such request, the Special Servicer will be obligated to use reasonable
efforts to do so, provided that in no event will the appointment of the
Healthcare Adviser be more than 30 days following the Trustee receiving
notice of the related Healthcare Adviser Loan becoming a Specially Serviced
Mortgage Loan. The Healthcare Adviser will provide the Special Servicer and
the Directing Certificateholder with advice with respect to the Healthcare
Adviser Loan and the related property as long as such Healthcare Adviser Loan
remains a Specially Serviced Mortgage Loan. There will not be a Healthcare
Adviser for a Healthcare Adviser Loan that is not a Specially Serviced
Mortgage Loan.
The Trustee and the Special Servicer will be required to deliver to the
Healthcare Adviser all reports and other information they receive (to the
extent received and routinely prepared by the Master Servicer), with respect
to the related healthcare related properties and Healthcare Adviser Loans.
The Special Servicer will be restricted from taking any material actions with
respect to Healthcare Adviser Loans and the related properties without first
providing notice to, and consulting with, the Healthcare Adviser.
Pursuant to the Pooling and Servicing Agreement, the Healthcare Adviser
will be entitled to receive from the Certificate Account a monthly fee with
respect to the Healthcare Adviser Loans for which it is serving as Healthcare
Adviser (the "Healthcare Adviser Fee"). The Healthcare Adviser Fee will be an
expense of the Trust Fund that is in addition to compensation paid to the
Special Servicer. By its acceptance of a Certificate, each Certificateholder
confirms its understanding that the Healthcare Adviser may advise actions
that favor the interests of one or more Classes of the Certificates over
other Classes of the Certificates, and that the Healthcare Adviser may have
special relationships and interests that conflict with those of Holders of
some Classes of the Certificates.
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 remit to the Trustee for
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.
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
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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. 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. 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 of evidence satisfactory to it 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. 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
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. 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 earlier 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 and at the option of 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, 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
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Agreement, and (2) the aggregate Class Balance of all the Certificates plus
accrued and unpaid interest thereon together with any unreimbursed advances
(including any 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 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 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 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
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<PAGE>
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 plan or
arrangement (including individual retirement accounts and annuities and Keogh
plans) that is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or to Section 4975 of the Code (each, a "Plan"),
or of any collective investment fund or separate account in which such Plans
are invested, should carefully review with its legal advisors whether the
purchase or holding of any Offered Certificate 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 has issued individual exemptions to each of
the Underwriters (Prohibited Transaction Exemption 90-23 (May 17, 1990) to
J.P. Morgan Securities, Inc.; Prohibited Transaction Exemption 97-34 (July
21, 1997) to Deutsche Bank AG and Prohibited Transaction Exemption 90-31
(June 6, 1990) to Chase Manhattan Bank (collectively, the "Exemption")), each
of which generally exempts from the application of the prohibited transaction
provisions of Section 406 of ERISA, and the excise taxes and other penalties
imposed on such prohibited transactions pursuant to Sections 4975(a) and (b)
of the Code and Section 502(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 such exemptions are satisfied. For purposes of this Section "ERISA
Considerations", the term "Underwriter" shall include (a) 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 Offered Certificates.
The Exemption sets forth six general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of Offered
Certificates to be eligible for exemptive relief thereunder. First, the
acquisition of Offered Certificates by 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,
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<PAGE>
the rights and interests evidenced by such Offered Certificates must not be
subordinate to the rights and interests evidenced by other certificates of
the same trust. Third, such 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 Services, 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
Underwriters, the Depositor, the Seller, the Sub-Servicer, the Master
Servicer, the Special Servicer, any insurer 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 Offered Certificates. Fifth, the sum of all payments made to and
retained by the Underwriters must represent not more than reasonable
compensation for underwriting such 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, any Sub-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 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 Offered Certificates. It is
a condition of the issuance of the Class A1 and Class A2 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
and "AAAr" by Standard & Poor's. The Depositor expects that the fourth
general condition set forth above will be satisfied with respect to each of
such classes of Offered Certificates. A fiduciary of a Plan contemplating
purchasing any of such class of Offered 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 Offered
Certificates. Each purchaser purchasing Class A1, Class A2 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 and Class X Certificates; furthermore the Class D and Class E
Certificates are not expected to satisfy the third condition described above.
Because the characteristics of the Class B, Class C, Class D and Class E
Certificates will not meet the requirements of the Exemption and may not meet
the requirements of any other exemption issued under ERISA, the purchase and
holding of the Class B, Class C, Class D and Class E Certificates by a Plan
may result in a prohibited transaction or the imposition of excise taxes or
civil penalties. Consequently, transfers of the Class B, Class C, Class D and
Class E Certificates will not be registered by the Trustee unless the Trustee
receives: (i) a representation from the transferee of such Offered
Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not a Plan or a person
investing on behalf of or using the assets of a Plan to effect such transfer;
(ii) if the purchaser is an insurance company, a representation that the
purchaser is an insurance company which is purchasing such Offered
Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of the Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Offered Certificates are covered under Sections I and III of PTCE 95-60; or
(iii) an opinion of counsel satisfactory to the Trustee that the purchase and
holding of such Offered Certificate by a Plan, any person acting on behalf of
a Plan or using a Plan's assets will not result in the assets of the Trust
Fund being deemed to be "plan assets" and subject to the prohibited
transaction requirements of ERISA and the Code and will not subject the
Trustee to any obligation in addition to those undertaken in the Pooling and
Servicing Agreement. Such representation as described above in (i) or (ii)
shall be deemed to have been made to the Trustee by the transferee's
acceptance of a Class B, Class C, Class D, or Class E Certificate. In the
event that such representation is violated or any attempt to transfer to a
Plan or person acting on behalf of a Plan or using a Plan's assets is
attempted without such opinion of counsel, such attempted transfer or
acquisition shall be void and of no effect.
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<PAGE>
Before purchasing any of such Offered Certificates, a fiduciary of a Plan
should itself confirm (a) that such Offered 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.
Any Plan fiduciary considering whether to purchase any Offered
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. Furthermore, any Plan
fiduciary considering a purchase of Offered Certificates should consider
whether, under the general fiduciary standards of investment prudence and
diversification, such an investment is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio. See "ERISA Considerations" in the Prospectus.
LEGAL INVESTMENT
The Class A1, Class A2, 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 among the Depositor, J.P. Morgan Securities Holdings Inc., J.P.
Morgan Securities Inc., Chase Securities Inc. and Deutsche Bank Securities
Inc. (the "Underwriting Agreement"), the Depositor has agreed to sell to J.P.
Morgan Securities Inc. and J.P. Morgan Securities Inc. has agreed to purchase
from the Depositor the Offered Certificates. Under the Underwriting
Agreement, Deutsche Bank Securities Inc. and Chase Securities Inc. are not
required to sell any specific amount of the Offered Certificates but have
agreed to use their best efforts to sell the Offered Certificates. J.P.
Morgan Securities Inc., Deutsche Bank Securities Inc. and Chase Securities
Inc. are referred to herein as the "Underwriters."
J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc. are acting
as co-lead managers and Chase Securities Inc. is acting as co-manager for the
offering. J.P. Morgan Securities Inc. is the sole underwriter of the Class X
Certificates and is the sole bookrunner of all of the Offered Certificates.
S-80
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The obligations of the Underwriters under the Underwriting Agreement are
subject to certain conditions precedent.
Distribution of the Offered Certificates will be made by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices
to be determined at the time of sale. Proceeds to the Depositor from the
Offered Certificates will be 99.0% of the initial aggregate principal balance
thereof. In connection with the purchase and sale of the Offered
Certificates, (i) each of Deutsche Bank Securities Inc. and Chase Securities
Inc. will receive an underwriting fee equal to 0.125% of the aggregate Class
Balance of the Offered Certificates whether or not it sells any Offered
Certificates and (ii) J.P. Morgan Securities Inc. will receive an
underwriting fee equal to 0.250% of the aggregate Class Balance of the
Offered Certificates.
The Depositor also has been advised by the Underwriters that they
currently expect to make a market in the Offered Certificates; however, they
have no obligation to do so, any market making may be discontinued at any
time, and there can be no assurance that an active public market for the
Offered Certificates will develop, or if it does develop, that it will
continue.
The Depositor has agreed to indemnify the Underwriters against, or make
contributions to the Underwriters 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.
J.P. Morgan Securities Inc. is an affiliate of the Seller and the Depositor.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Brown &
Wood llp, New York, New York. Certain legal matters will be passed upon for
the Underwriters by Cadwalader, Wickersham & Taft, New York, New York.
RATING
It is a condition of the issuance of the Class A1 and Class A2
Certificates that they be rated "AAA" by Fitch IBCA, Inc. ("Fitch") and
Standard & Poor's Ratings Services, 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 and "AAAr" by Standard &
Poor's. Standard & Poor's assigns the additional symbol of "r" to highlight
classes of securities that Standard & Poor's believes may experience high
volatility or high variability in expected returns due to non-credit risks;
however, the absence of an "r" symbol should not be taken as an indication
that a class will exhibit no volatility or variability in total return. 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 "A" by 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.
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.
S-81
<PAGE>
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 or Standard & Poor's pursuant to the
Depositor's request.
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.
S-82
<PAGE>
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
<S> <C>
30/360 basis ........................................... S-58
36 South Charles Borrower .............................. S-49
36 South Charles Loan .................................. S-49
36 South Charles Property .............................. S-49
Adjusted Available Distribution Amount ................. S-58
Adjusted Collateral Value .............................. S-63
Allocation Fraction .................................... S-58
Anticipated Repayment Date ............................. S-50
ARD Loans .............................................. S-50
Asset Strategy Report .................................. S-72
Available Distribution Amount .......................... S-57
Balloon Mortgage Loan .................................. S-51
Balloon Payment ........................................ S-51
Basic Master Servicing Fee Rate ........................ S-73
Beneficial Owner ....................................... S-54
Cede ................................................... S-54
Cedelbank Participants ................................. S-55
Certificate Account .................................... S-75
Certificateholders ..................................... S-54
Certificates ........................................... S-54
Class A Certificates ................................... S-54
Class Balance .......................................... S-60
Class Prepayment Fraction .............................. S-58
Clearance Cooperative .................................. S-55
Code ................................................... S-77
Collateral Value Adjustment ............................ S-63
Collection Account ..................................... S-75
CPR .................................................... S-66
Crossed Loans .......................................... S-51
Cut-off Date ........................................... S-2
Cut-off Date LTV Ratio ................................. S-34
Defaulted Mortgage Loan ................................ S-70
Defeasance ............................................. S-41
Definitive Certificates ................................ S-56
Delivery Date .......................................... S-2
Depositor .............................................. S-2
Depositories ........................................... S-55
Determination Date ..................................... S-3
Directing Certificateholder ............................ S-72
Distribution Date ...................................... S-2, S-56
DSCR ................................................... S-36
DTC .................................................... S-54
DTC Participants ....................................... S-55
DTC Registered Certificates ............................ S-54
Due Date ............................................... S-28
ERISA .................................................. S-78
Euroclear .............................................. S-54
Euroclear Operator ..................................... S-55
Euroclear Participants ................................. S-55
S-83
<PAGE>
Excess Cash Flow ....................................... S-51
Excess Interest ........................................ S-50
FIRREA ................................................. S-34
Fitch .................................................. S-81
Flood Borrower ......................................... S-44
Flood Loan ............................................. S-43
Flood Property ......................................... S-44
Form 8-K ............................................... S-53
Global Securities ...................................... F-1
Healthcare Adviser ..................................... S-75
Healthcare Adviser Fee ................................. S-75
Healthcare Adviser Loans ............................... S-75
Hotel Boulderado Borrower .............................. S-48
Hotel Boulderado Loan .................................. S-48
Hotel Boulderado Mortgage .............................. S-48
Indirect Participants .................................. S-55
Initial Pool Balance ................................... S-28
Interest Accrual Amount ................................ S-58
Interest Distribution Amount ........................... S-58
Interest Reserve Account ............................... S-59
Interest Reserve Loans ................................. S-59
Loan Sale Agreement .................................... S-28
Lock-out Date .......................................... S-40
Lock-out Period ........................................ S-40
Loss Mortgage Loan ..................................... S-62
Marriott ............................................... S-47
Marriott Lease ......................................... S-47
Marriott Suites Bethesda Borrower ...................... S-46
Marriott Suites Bethesda Loan .......................... S-46
Marriott Suites Bethesda Property ...................... S-46
Master Servicer ........................................ S-2
Master Servicing Fee ................................... S-73
Maturity Date .......................................... S-59
Maturity Date/Anticipated Repayment Date LTV Ratio .... S-34
MGT .................................................... S-28
Midland ................................................ S-69
Mills Borrowers ........................................ S-42
Mills Loan ............................................. S-42
Mills Properties ....................................... S-42
Mills Property ......................................... S-42
Monitoring Certificateholders .......................... S-72
Monthly Payments ....................................... S-28
Mortgage ............................................... S-28
Mortgage Interest Rate ................................. S-50
Mortgage Loan File ..................................... S-74
Mortgage Loans ......................................... S-28
Mortgage Note .......................................... S-28
Mortgage Pool .......................................... S-28
Mortgaged Property ..................................... S-28
Mortgagor .............................................. S-50
Most Subordinate Class of Certificates ................. S-76
S-84
<PAGE>
Net Operating Income ................................... S-35
Net Prepayment Premium ................................. S-59
NOI .................................................... S-35
Notional Amount ........................................ S-58
Oak Tree Villa Loan .................................... S-46
Offered Certificates ................................... S-54
Operating Statements ................................... S-35
Originators ............................................ S-28
Other Certificates ..................................... S-61
PAR .................................................... S-53
Participants ........................................... S-55
Pass-Through Rate ...................................... S-57
Paulin Creek Borrower .................................. S-45
Paulin Creek Loan ...................................... S-45
Paulin Creek Property .................................. S-45
Percentage Interest .................................... S-57
P&I Advance ............................................ S-63
Plan ................................................... S-78
Pooling and Servicing Agreement ........................ S-73
Prepayment ............................................. S-64
Prepayment Interest Excess ............................. S-59
Prepayment Interest Shortfall .......................... S-59
Prepayment Premium ..................................... S-40
Principal Distribution Amount .......................... S-59
PTCE 95-60 ............................................. S-79
Rated Final Distribution Date .......................... S-65
Realized Loss .......................................... S-62
Record Date ............................................ S-57
REMIC .................................................. S-77
REMIC Regulations ...................................... S-77
Remittance Period ...................................... S-3
Remittance Rate ........................................ S-57
REO Account ............................................ S-54
REO Property ........................................... S-54
Replacement Special Servicer ........................... S-72
Required Appraisal Date ................................ S-62
Restricted Group ....................................... S-79
Revised Rate ........................................... S-50
Seller ................................................. S-2
Servicers .............................................. S-69
Servicing Standard ..................................... S-70, S-71
Servicing Transfer Event ............................... S-70
SMMEA .................................................. S-80
Special Servicer ....................................... S-2
Special Servicing Fee .................................. S-73
Specially Serviced Mortgage Loan ....................... S-70
Standard & Poor's ...................................... S-81
Stated Principal Balance ............................... S-62
Terms and Conditions ................................... S-56
Trigger Event .......................................... S-43
Trustee ................................................ S-2
S-85
<PAGE>
Trustee Fee Rate ....................................... S-74
Underwriter ............................................ S-78, S-80
Underwriting Agreement ................................. S-80
Underwritten Cash Flow ................................. S-35
Underwritten Cash Flow Debt Service Coverage Ratio .... S-35
Underwritten NOI ....................................... S-35
U.S. Person ............................................ F-3
UW Cash Flow ........................................... S-35
UW DSCR ................................................ S-35
UW NOI ................................................. S-35
Voting Rights .......................................... S-76
Withheld Amounts ....................................... S-59
Yield Maintenance ...................................... S-41
</TABLE>
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<TABLE>
<CAPTION>
Loan
Number Property Name Property Address Property City
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Mills Portfolio Various Various
1.1 Butterfield Plaza 1330-1418 Butterfield Road Downers Grove
1.2 Coopers Plaza Route 73 & Coopers Road Edison
1.3 Crosswinds Center 2000-2060 66th Street St. Petersburg
1.4 Fashion Place 2730 Decler Boulevard Columbia
1.5 Germantown Commons Middlebrook Road @ Route 118 Germantown
1.6 Montgomery Village 9607-9679 Lost Knife Road Gaithersburg
2 The Flood Building 870 Market Street San Francisco
3 The Lodge at Paulin Creek 2375 Range Avenue Santa Rosa
4 Marriott Suites Bethesda 6711 Democracy Doulevard Bethesda
5 Hotel Boulderado 2115 13th Street Boulder
6 36 South Charles 36 South Charles Street Baltimore
7 Plaza 600 600 Stewart Street Seattle
8 US Properties Pool 1 Various Various
8.1 Crossroads Apartments 926 Cleveland Street Greenville
8.2 Colonial Place Apartments 1307 Springmont Charlotte
8.3 Park Fairfax Apartments 108 Park Fairfax Charlotte
9 Southland Mall 6060 South Westnedge Avenue Portage
10 Brittany Court 390 Brittany Court Geneva
11 Parkridge Two 10803-10815 Parkridge Boulevard Reston
12 Caribbees Mobile Home Park 411 Lewis Road San Jose
13 Batmasian III Various Various
13.1 President's Walk Apartments 1625 N. Congress Ave West Palm Beach
13.2 Tivoli Terrace Apartments 920 Rich Drive Deerfield
13.3 Delary Beach Retail 8-432-E Atlantic Avenue & 6-20 SE 5th Street Delray Beach
14 MCI-Atlanta Building Royal 400 Office Park Alpharetta
15 Covington Court 1690 Covington Court Saint Charles
16 Oak Tree Villa 100 Lockewood Lane Scotts Valley
17 Kukui Marketplace 4303 Nawiliwili Road Lihue, Island of Kauai
18 Boardwalk at Alafaya, Phase II 11801 Boardwalk Drive Orlando
19 Bradbury/One River Center Pool Various Various
19.1 Saddlebrook Professional Center 1400-1700 Lincoln Highway St. Charles
19.2 One River Center 10 W State St. Geneva
19.3 Bradbury Place 1795-1803 West State Street Geneva
19.4 Williamsburg Professional Office 401-417 Williamsburg Geneva
19.5 Herrington Station Shopping Center 300-328 Crescent Place Geneva
19.6 Blockbuster Video Store 1505-2073 Lincoln Highway St. Charles
19.7 Amoco Ground Lease 1505-2073 Lincoln Highway St. Charles
20 330 Whitney Avenue 330 Whitney Avenue Holyoke
21 Wildwoods at Lake Johnson 1200 Trillium Circle Raleigh
22 The Excellence 5005 Excellent Blvd. Tampa
23 Plaza I & II Buildings 713 & 715 Pear Orchard Road Jackson
24 Commerce Town Center 3050 Union Lake Road Commerce Township
25 Cedar Creek Apartments 4394 Okemos Road Okemos
26 Batmasian II Various Various
26.1 Riverway House Apartments 352, 360 and 364 Riverway Boston
26.2 Stoneham House Apartments 180-122 Central St. Stoneham
27 Pinebrook Apartments 35995 Fremont Boulevard Fremont
28 Days Inn Horsham 245 Easton Road Horsham
29 10010 Junction Road 10010 Junction Drive Annapolis Junction
30 Magnolia Place Office Building 145 South Magnolia Avenue Orlando
31 Arbor Glen Apartments 295 Arbor Glen road East Lansing
32 Shoppers Square Mall 237 East Plumb Lane Reno
33 Prairie Street Shopping Center 2075 Prairie St. Charles
34 Muirwood Village 101 Muirwood Drive Sandusky
35 Valley Green Corporate Center 7111 Valley Green Road Fort Washington
36 North Pilot Road 840 North Pilot Road Las Vegas
37 Hickory Square Apartments 1939 Shagbark Lane Imlay City
38 Lake Gibson Apartments 5233 US Hwy 98 N. Lakeland
39 River's Cove Apartments 11392 Division Rd. Germantown
40 The Centre at Stirling & Palm 9850-10000 Stirling Rd. Cooper City
41 Lake Club Apartments 1500 South Busse Road Mount Prospect
42 Oakbrook Walk 1519 SW 13th Street Gainesville
43 Deer Creek Village Center 7890-7930 Haven Ave Rancho Cucamonga
44 Provident Bank Building 114 Lexington B Avenue Baltimore
45 Batmasian I Various Oceanside
45.1 Casa Vista 2325 Pasea de Laura Oceanside
45.2 Westwood Village Apartments 2502 Oceanside Oceanside
46 Holiday Inn Express / Janesville Conf Cntr 3100 Wellington Place Janesville
47 UTEC Building 1313 Fifth Street SE Minneapolis
48 Courtyard by Marriott 2700 Little Rock Road Charlotte
49 Kuder Estates 5000 Kuder Lane Warsaw
50 Variel Court Office Plaza 6330 & 6340 Variel Avenue Woodland Hills
51 Cliff Lake Center 1960 & 1980 Cliff Lake Road Eagan
52 Sunnycrest Chalet 1925 Sunnycrest Drive Fullerton
53 Holiday Inn 5820 South Franklin Street Michigan City
54 Crystal Towers 5701 Quebec Avenue North New Hope
55 Amherst Commerce Park 4248 Ridge Lea Road Amherst
56 Park Place Apartments 5820 Murray Avenue Hanahan
57 The Times Square Building 414 Olive Way Seattle
58 Country Suites by Carlson 155 Coon Rapids Boulevard Coon Rapids
59 Plaza El Toro El Toro Road & Muirland Boulevard Lake Forest
60 Banacki Portfolio Various Various
60.1 Mt. Morris Town Center 11956 N. Saginaw Street Mt. Morris
60.2 Ferndale Retail Center 750 W. Nine Mile Road Ferndale
60.3 Bristol Wood Plaza 1348 E Bristol Road Burton
61 Biscayne Harbour Shopping Center 18199 Biscayne Blvd Aventura
62 Shackleford Corporate Center 4201 S Shackleford Road Little Rock
63 Topanga Terrace Convalescent Center &
Topanga West Guest Home 22125 Roscoe Boulevard Canoga Park
64 3211 Scott Blvd 3211 Scott Blvd Santa Clara
65 St. John's Plaza 3275 Garden St. Titusville
66 Meadow Mill Building 3600 Clipper Mill Road Baltimore
67 305 Regent St. 305 Regent St. Portchester
68 Northridge 400 8607 Roberts Drive Atlanta
69 Town Square Shopping Center 343-351 Morristown Road Old Bridge
70 Las Tiendas Shopping Center 6800-6880 West 12th Avenue Hialeah
71 Metropolitan Towers 2324 East Old Shakopee Road Bloomington
72 Royal Oak Colony 3645 Barna Avenue Titusville
73 Miller Plaza 5625-5895 SW 137th Ave Hollywood
74 Cedars Edge Center 6250 South Cedar Street Lansing
75 Trafalgar Square Estates 33210 Trafalgar Lane Westland
76 Maple Tree Plaza 2790 North Maple Avenue Zanesville
77 Ricchiazzi Industrial Buildings 4424-4604 4th Avenue South Seattle
78 Heritage Plaza SEC Sunnyslope Rd. & Airline Hwy. Hollister
79 Monte Sierra Apartments 1901 Montecito Avenue Mountain View
80 Fairfield Inn - Arrowood 319 Sharon Amity Road Charlotte
81 Geneva on the Dam One North River Lane Geneva
82 Valley View Apartments 28301 Encanto Drive Sun City
83 Watt Executive Plaza 3800 Watt Avenue Sacramento
84 Microtel Inn - Sulphur, LA 2619 S. Ruth St. Sulphur
85 South Huntington Avenue Apartments 46-82 South Huntington Avenue Boston
86 Lakepointe 5900 Bridge Road Ypsilanti
87 St. Joesph Medical & Chicago Plaza Medical 78th Street & 25th Street Omaha
88 Office Depot Stemmons Highway Dallas
89 Fairfield Inn 3033 Cloverleaf Parkway Kannapolis
90 Salem Walk Apartments 1016 Stassney Lane Austin
91 Hillcrest Apartments 12300-56 S. Bishop St., 1437-45 W. 23rd St Calumet Park
92 Heritage Plaza Shopping Center 14615-14836 Telegraph Road Redford
93 Cloverdale Regency Apartments 345 South Cloverdale Avenue Los Angeles
94 Orchard Plaza 2325 S. Virginia Street Reno
95 Bavarian Village on the Lake Apartments 8863 Dixie Highway Clarkson
96 Colonial Court Shopping Center 1111-1155 Milwaukee Avenue Riverwood
97 Kings Manor 4215 Rhode Island Road New Hope
98 Plaza East Shopping Center U.S. Highway 74 & U.S. Highway 76 Wilmington
99 Shoppes At Westburry 9510-9580 SW 137th Avenue Miami
100 Market Plaza Shopping Center 3940 West Market Street Greensboro
101 Raynham Health Care 1215 Broadway Raynham
102 Nicollet Courts 8916 Nicollet Avenue South Bloomington
103 The Renaissance Center 901 Center Park Drive Charlotte
104 Fox Island Square One West Illinois St. Charles
105 El Camino Medical Buiding 515 South Drive Mountain View
106 Rutherford Square Shopping Center 436 - 482 Charlotte Road Rutherfordton
107 Logan Park Apartments 38304 Logan Drive Fremont
108 Branchwood Apartments 200 Branchwood Drive Goose Creek
109 Millbrae Theater Building 39, 41, 49 El Camino Millbrae
110 The Arbors 30-50 West 93rd Street Bloomington
111 Meadow Park Shopping Center 2625 South Loop 35 Alvin
112 Larpenteur Village 190 West Larpenteur Avenue St. Paul
113 Lampson Village Apartments 11450 Lampson Avenue Garden Grove
114 One San Jose Place One San Jose Place Jacksonville
115 Summer Place Apartments 1474 Hillcrest Drive San Antonio
116 Bay Vista Office Park Various Clearwater
117 Cedar Glen 9100 Old Cedar Avenue South Bloomington
118 34th Street Plaza 2001-2134 34th Street Gainesville
119 Days Inn 3201 W Hwy. 66 (I-40 at Exit 16) Gallup
120 Las Cascades Apartments 4333 E. Indian School Road Phoenix
121 Inland Commerce Park 1620 N Mamer Road, Bldg. B Spokane
122 Bell Gardens Convalescent Center 5648 Gotham Street Bell Gardens
123 Masada Manor 180 West Larpenteur Villa St. Paul
124 Rolling Hills Townhomes 315 Ashbrook Avenue Salisbury
125 Cedar Gate 8300 Old Cedar Avenue South Bloomington
126 100 Filbert Street 100 Filbert Street Oakland
127 Summerwind Apartments 1303 E. 127th Avenue Tampa
128 Pinebrook Commons Shopping Center 4708-4874 Cortez Road West Bradenton
129 Marbella Apartments 12406 N. 15th Street Tampa
130 Brookdale Towers 6925 Humboldt Avenue North Brooklyn Center
131 17 Ferris / 12 North Taylor 17 Ferris / 12 North Taylor Norwalk
132 11081 Rose 11081 Rose Los Angeles
133 1420 Oakhurst Avenue 1420 South Oakhurst Drive Los Angeles
134 Arlington Revco 6005 East Washington Street Indianapolis
135 Sussex Square Apartments 4341 Cascade Road, S.W. Atlanta
136 18558 Roscoe Blvd. 18558 Roscoe Blvd. Northridge
137 Taft Villa Apartments 1725 North 16th Avenue Hollywood
138 Garden Court Apartments 4060 Janice Drive East Point
139 Willow Farm Apartments 104 Norton Ave. Easton,
140 11525 Rochester Ave 11525 Rochester Los Angeles
141 1820 Bentley Avenue 1820 Bentley Avenue Los Angeles
142 Pengelly 4029 Pengelly Road Flint
143 3686 South Centinela Ave 3686 South Centinela Ave Los Angeles
144 9023 Alcott Street 9023 Alcott Street Los Angeles
145 944 6th Street 944 6th Street Santa Monica
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Property Year Year # of Units/
State Zip Code Property Type Built Renovated Sq Ft
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Various Various Anchored Retail Various 873,035
IL 60515 Anchored Retail 1983 1989 114,152
NJ 08043 Anchored Retail 1993 172,386
FL 33710 Anchored Retail 1971, 1984 144,119
SC 29206 Anchored Retail 1986 147,950
MD 20874 Anchored Retail 1982 1986 177,097
MD 20877 Anchored Retail 1983 117,331
CA 94102 Office/Retail 1904 1993 293,237
CA 95403 Congregate Care/Retirement Community 1990-1991 250
MD 20817 Hotel 1990 274
CO 30302 Hotel 1908, 1985, 1989 1982-1989 156
MD 21201 Office 1972 299,667
WA 98101 Office 1969 1989 198,733
Various Various Multifamily Various Various 532
SC 29601 Multifamily 1971 258
NC 28208 Multifamily 1974 1995 136
NC 28208 Multifamily 1971 138
MI 49081 Anchored Retail 1962 1975, 1995 255,524
IL 60134 Multifamily 1990-1991 226
VA 20191 Office 1985 98,255
CA 95111 Mobile Home Park 1960, 1970 440
FL Various Various Various 279/14,650
FL 33401 Multifamily 1983 59
FL 33441 Multifamily 1988 220
FL 33444 Unanchored Retail 1955 14,650
GA 30328 Office 1997-1998 108,512
IL 60174 Multifamily 1987-1988 208
CA 95066 Congregate Care/Retirement Community 1988 200
HI 96766 Anchored Retail 1994 142,152
FL 32801 Multifamily 1997-1998 120
IL Various Various Various 93,366
IL 60174 Office 1989-1990 15,075
IL 60134 Office/Retail 1995 22,549
IL 60134 Office 1996-1997 25,756
IL 60135 Office 1989, 1991 15,000
IL 60134 Unanchored Retail 1985 5,450
IL 60174 Unanchored Retail 1990 6,536
IL 60174 Unanchored Retail NAV 3,000
MA 10140 Office 1989 136,448
NC 27606 Multifamily 1984 1997 219
FL 33617 Multifamily 1994-1996 165
MS 39211 Office 1987, 1989 107,052
MI 48382 Anchored Retail 1988 92,429
MI 48864 Multifamily 1968 1996, 1997 256
MA Various Multifamily Various 147
MA 22101 Multifamily 1935 75
MA 22180 Multifamily 1963 72
CA 94536 Multifamily 1969 150
PA 19044 Hotel 1987 171
MD 20701 Office 1988 102,516
FL 32801 Office 1963 1996 93,906
MI 48823 Multifamily 1989 180
NV 89502 Anchored Retail 1963-1967, 1977, 1994 128,079
IL 60174 Anchored Retail 1979-1981 76,404
OH 44870 Multifamily 1990, 1993 200
PA 19034 Office 1988 80,240
NV 89119 Industrial 1991-1994 150,000
MI 48444 Multifamily 1988-1991 200
FL 33809 Multifamily 1989 220
WI 53022 Multifamily 1989, 1990, 1992 112
FL 33024 Office/Retail 1988 63,458
IL 60056 Multifamily 1966 168
FL 32608 Multifamily 1987- 1989 118
CA 91730 Anchored Retail 1987 90,745
MD 21202 Office 1928 1995-1997 92,172
CA Various Multifamily 1973 Various 160
CA 92056 Multifamily 1973 60
CA 92054 Multifamily 1973 100
WI 53546 Hotel 1994 142
MN 55414 Office 1924 1987 132,943
NC 28208 Hotel 1997 90
IN 46580 Multifamily 1998 144
CA 91367 Office 1974, 1981 1988 59,770
MN 55122 Unanchored Retail 1988 74,097
CA 92635 Congregate Care/Retirement Community 1988 132
IN 46360 Hotel 1965-1990 1996-1997 164
MN 55428 Multifamily 1970 140
NY 14226 Office 1968-1971 274,175
SC 29406 Multifamily 1973 1996 305
WA 98101 Office/Retail 1916 1982, 1993 54,883
MN 55433 Hotel 1986-1994 114
CA 92630 Anchored Retail 1973 53,284
MI Various Unanchored Retail Various Various 73,976
MI 48458 Unanchored Retail 1980-1992 32,244
MI 48220 Unanchored Retail 1993 15,500
MI 48529 Unanchored Retail 1988, 1991 26,232
FL 33160 Unanchored Retail 1981 1996 44,624
AR 72204 Industrial 1992-1997 177,550
CA 91304 Nursing Home 1968, 1970 190
CA 95054 Office 1978 34,611
FL 32796 Anchored Retail 1985 124,844
MD 21211 Industrial/Office 1877, 1960's 1990 185,602
NY 10573 Industrial 1970 1995 95,000
GA 30350 Office 1990 48,481
NJ 07747 Anchored Retail 1992 38,899
FL 33014 Unanchored Retail 1962-1975 1989 51,115
MN 55420 Multifamily 1969 108
FL 32780 Multifamily 1968 183
FL 33021 Unanchored Retail 1982 1996 49,302
MI 48911 Unanchored Retail 1985 70,165
MI 48185 Multifamily 1971-1972 132
OH 43701 Anchored Retail 1990 75,111
WA 98134 Industrial 1956-1967 86,249
CA 95023 Anchored Retail 1969, 1985, 1986 1985 54,086
CA 94043 Multifamily 1962 77
NC 28211 Hotel 1997 83
IL 60134 Office/Retail 1880, 1980 1980 42,622
CA 92586 Multifamily 1987 108
CA 95821 Office 1984 62,783
LA 70663 Hotel 1977 99
MA 22120 Multifamily 1940's 1974 108
MI 48197 Multifamily 1972-1974 141
NE 68114 Office 1963, 1985 1993 39,891
TX 75207 Anchored Retail 1998 30,000
NC 28083 Hotel 1996 84
TX 78745 Multifamily 1984 122
IL 60827 Multifamily 1964 156
MI 48239 Unanchored Retail 1987 46,400
CA 90036 Multifamily 1990 36
NV 89502 Unanchored Retail 1989-1991 31,013
MI 49105 Multifamily 1972 1990 81
IL 60601 Unanchored Retail 1993 38,655
MN 55428 Multifamily 1968 87
NC 28103 Unanchored Retail 1978 1993, 1994 90,850
FL 33186 Unanchored Retail 1989 33,506
NC 27410 Unanchored Retail 1973 72,420
MA 02767 Office 1985 22,000
MN 55420 Multifamily 1971 85
NC 28217 Industrial/Office 1989 49,591
IL 60174 Office/Retail 1880's 1975 30,119
CA 94040 Office 1979 17,800
NC 28139 Anchored Retail 1989 54,010
CA 94536 Multifamily 1968 36
SC 29445 Multifamily 1986 96
CA 94030 Anchored Retail 1940 1995 10,050
MN 55420 Multifamily 1970 55
TX 77511 Anchored Retail 1977-1980 126,521
MN 55113 Multifamily 1969 82
CA 92860 Multifamily 1973 56
FL 32257 Office 1984-1998 41,918
TX 78228 Multifamily 1984 159
FL 34620 Office 1988, 1990 39,150
MN 55425 Multifamily 1967 64
FL 32608 Anchored Retail 1983 34,810
NM 87301 Hotel 1990 74
AZ 85018 Multifamily 1974 156
WA 99216 Industrial/Office 1997 30,562
CA 90201 Nursing Home 1970 1985 135
MN 55420 Multifamily 1968 48
NC 28147 Multifamily 1974 1991 61
MN 55425 Multifamily 1967 48
CA 94595 Industrial/Office 1917-1963 1989 72,127
FL 33612 Multifamily 1973 1991 132
FL 34210 Unanchored Retail 1986 33,341
FL 33612 Multifamily 1972 132
MN 55430 Multifamily 1968 50
CT 06854 Multifamily 1968-1969 36
CA 90034 Multifamily 1970 31
CA 90035 Multifamily 1968 30
IN 46219 Anchored Retail 1997 10,722
GA 30331 Multifamily 1974 88
CA 91324 Multifamily 1972 46
FL 33020 Multifamily 1968 44
GA 30344 Multifamily 1971 86
MA 02375 Multifamily 1975-1976 24
CA 90025 Multifamily 1971 15
CA 90025 Multifamily 1972 14
MI 48507 Multifamily 1971 47
CA 90066 Multifamily 1964 20
CA 90035 Multifamily 1965 11
CA 90403 Multifamily 1969 9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OCCUPANCY CUT-OFF CROSSED
OCCUPANCY PERCENTAGE APPRAISED APPRAISAL ORIGINAL ORIGINAL DATE LOAN
PERCENTAGE AS OF DATE (1) VALUE DATE LTV BALANCE BALANCE GROUP (2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
96.05 12/1/98 91,500,000 Various 59.13 54,100,000 54,005,058
100.00 12/1/98 13,600,000 9/23/98 69.49 9,450,000
100.00 12/1/98 16,100,000 9/22/98 37.27 6,000,000
100.00 12/1/98 9,300,000 9/30/98 59.14 5,500,000
88.22 12/1/98 11,600,000 9/22/98 58.19 6,750,000
94.92 12/1/98 25,100,000 9/25/98 63.75 16,000,000
93.16 12/1/98 15,800,000 9/25/98 65.82 10,400,000
94.30 2/5/99 70,000,000 6/30/98 64.29 45,000,000 44,718,226
99.20 12/31/98 29,500,000 3/27/98 77.19 22,770,000 22,611,340
84.50 1998 Avg. 36,000,000 10/2/97 62.50 22,500,000 22,136,849
86.10 1998 Avg. 30,000,000 10/1/97 70.00 21,000,000 20,615,521
94.57 3/25/99 27,900,000 11/18/97 68.46 19,100,000 18,816,306
99.30 12/31/98 25,175,000 7/20/98 72.29 18,200,000 18,094,729
88.21 12/31/98 19,900,000 7/14/98 77.99 15,520,000 15,427,289
84.20 12/31/98 9,500,000 7/14/98 77.99 7,409,045
94.10 12/31/98 5,000,000 7/14/98 77.99 3,899,498
89.90 12/31/98 5,400,000 7/14/98 77.99 4,211,457
100.00 9/30/98 19,400,000 7/16/98 77.32 15,000,000 14,903,288
97.50 1998 Avg. 18,670,000 6/12/98 79.81 14,900,000 14,815,846
100.00 2/9/99 17,700,000 9/23/97 74.29 13,150,000 12,995,538
99.30 12/31/98 20,300,000 6/23/98 64.04 13,000,000 12,926,896
98.90/100.00 Various 17,570,000 Various 70.57 12,400,000 12,313,405
100.00 12/31/98 2,720,000 1/29/98 70.57 1,919,636
98.60 3/12/99 13,000,000 1/28/98 70.57 9,174,730
100.00 12/31/98 1,850,000 2/9/98 70.57 1,305,634
100.00 11/25/98 16,100,000 6/19/98 76.40 12,300,000 12,211,872
97.00 1998 Avg. 13,900,000 6/12/98 79.86 11,100,000 11,037,308
87.00 12/31/98 15,690,000 3/27/98 70.11 11,000,000 10,922,442
100.00 9/30/98 14,350,000 8/25/97 74.91 10,750,000 10,566,090
99.60 9/25/98 14,500,000 7/10/98 68.50 9,931,813 9,833,862
88.32 12/31/98 12,175,000 Various 78.73 9,585,000 9,535,979
95.62 12/31/98 1,900,000 6/24/98 78.73 1,495,811
96.34 12/31/98 2,800,000 7/2/98 78.73 2,204,353
81.36 12/31/98 3,300,000 6/24/98 78.73 2,597,988
70.21 12/31/98 1,700,000 6/24/98 78.73 1,338,357
97.28 12/31/98 625,000 7/1/98 78.73 492,043
100.00 12/31/98 1,000,000 7/1/98 78.73 787,269
100.00 12/31/98 850,000 7/1/98 78.73 669,179
99.20 1/15/99 14,000,000 9/10/98 64.29 9,000,000 8,960,818
93.20 2/10/99 12,125,000 5/6/98 74.23 9,000,000 8,935,630
96.40 1/31/99 11,600,000 7/20/98 77.03 8,935,000 8,892,185
99.21 1/15/99 10,500,000 5/4/98 78.57 8,250,000 8,193,057
95.70 9/1/98 10,600,000 4/6/98 77.36 8,200,000 8,134,393
93.75 12/31/98 9,950,000 8/26/98 80.40 8,000,000 7,962,004
100.00 12/31/98 10,450,000 1/28/98 76.56 8,000,000 7,944,132
100.00 12/31/98 5,550,000 1/28/98 76.56 4,248,804
100.00 12/31/98 4,900,000 1/28/98 76.56 3,751,196
99.30 11/11/98 11,400,000 2/11/98 66.67 7,600,000 7,527,788
72.50 1998 Avg. 10,550,000 9/23/97 71.09 7,500,000 7,373,083
100.00 3/1/99 9,600,000 9/23/98 75.00 7,200,000 7,178,332
100.00 9/30/98 10,900,000 6/12/98 66.06 7,200,000 7,146,813
91.67 9/30/98 8,700,000 3/2/98 80.46 7,000,000 6,935,386
93.80 9/30/98 8,750,000 5/28/98 77.14 6,750,000 6,705,520
97.42 12/31/98 8,600,000 7/1/98 77.03 6,625,000 6,589,733
95.50 2/8/99 8,280,000 5/29/98 79.71 6,600,000 6,560,874
98.00 1/11/99 8,800,000 4/9/97 75.00 6,600,000 6,529,416
100.00 12/7/98 8,600,000 7/22/98 75.58 6,500,000 6,464,783
93.00 9/30/98 8,000,000 11/17/97 77.38 6,190,000 6,112,805
95.00 9/22/98 8,000,000 5/26/98 75.00 6,000,000 5,962,345
99.10 1998 Avg. 7,780,000 8/10/98 74.10 5,765,000 5,736,695
91.80 9/30/98 7,800,000 10/15/97 74.36 5,800,000 5,730,423
95.83 12/31/98 7,550,000 4/1/99 76.16 5,750,000 5,712,634
99.00 12/31/98 7,850,000 6/2/98 70.06 5,500,000 5,466,333
82.00 9/14/98 7,300,000 9/1/98 75.00 5,475,000 5,449,855
100.00 12/31/98 9,300,000 11/18/97 59.14 5,500,000 5,405,466
97.50 12/31/98 7,200,000 2/12/98 73.61 5,300,000 5,262,988
100.00 12/31/98 3,050,000 2/12/98 73.61 2,245,139
96.00 3/11/99 4,150,000 2/12/98 73.61 3,054,861
76.50 1998 Avg. 8,000,000 6/19/98 66.25 5,300,000 5,251,997
86.80 8/21/98 8,640,000 11/18/97 61.92 5,350,000 5,228,177
79.20 1998 Avg. 7,300,000 9/16/98 71.64 5,230,000 5,209,338
93.75 1/1/99 7,000,000 7/13/98 74.29 5,200,000 5,170,246
100.00 4/6/99 9,650,000 4/23/98 53.89 5,200,000 5,164,160
94.40 12/15/98 7,900,000 9/19/97 65.82 5,200,000 5,143,618
84.60 9/30/98 7,300,000 4/7/98 68.49 5,000,000 4,951,906
64.62 T12 ending 5/98 6,800,000 6/18/98 73.53 5,000,000 4,937,239
94.30 2/10/99 6,200,000 11/18/97 80.00 4,960,000 4,869,164 1
93.80 3/1/99 8,600,000 9/8/97 56.40 4,850,000 4,783,961
94.10 11/6/98 6,300,000 12/1/97 76.51 4,820,000 4,767,311 5
96.30 12/31/98 7,200,000 7/20/98 65.14 4,690,000 4,662,873
72.90 YTD 9/30/98 6,350,000 5/22/98 72.44 4,600,000 4,563,055
100.00 12/31/98 6,600,000 11/15/97 68.18 4,500,000 4,469,618
96.08 12/31/98 6,000,000 4/1/98 75.00 4,500,000 4,386,203
91.00 12/31/98 2,200,000 4/1/98 75.00 1,650,000
100.00 12/31/98 1,500,000 4/1/98 75.00 1,125,000
100.00 12/31/98 2,300,000 4/1/98 75.00 1,725,000
93.00 12/31/98 6,000,000 1/12/98 73.33 4,400,000 4,341,724
100.00 3/11/99 5,800,000 8/19/98 74.14 4,300,000 4,279,623
90.00 1998 Avg. 5,500,000 4/30/98 73.91 4,065,000 4,020,946
100.00 12/31/98 6,900,000 9/1/98 57.97 4,000,000 3,974,027
98.60 3/22/99 5,000,000 11/5/97 80.00 4,000,000 3,955,556
84.60 2/15/99 6,600,000 5/22/98 60.61 4,000,000 3,954,649
100.00 12/31/98 5,400,000 9/1/97 74.07 4,000,000 3,920,471
100.00 11/5/98 5,285,000 9/4/97 74.93 3,960,000 3,911,300
100.00 12/31/98 5,100,000 8/4/98 75.00 3,825,000 3,809,242
100.00 2/4/99 5,100,000 8/6/98 74.51 3,800,000 3,773,555
100.00 2/10/99 4,800,000 11/18/97 80.00 3,840,000 3,769,675 2
95.60 9/30/98 4,800,000 7/29/98 78.33 3,760,000 3,749,572
100.00 12/29/98 4,850,000 9/15/98 74.74 3,625,000 3,616,649
100.00 9/30/98 5,150,000 7/31/98 69.90 3,600,000 3,575,338
96.20 2/10/99 4,650,000 11/18/97 77.42 3,600,000 3,534,071 1
90.41 8/25/98 4,800,000 9/30/98 74.58 3,580,000 3,501,658
100.00 12/31/98 4,700,000 7/1/98 73.40 3,450,000 3,422,244
97.34 12/31/98 4,600,000 7/15/98 75.00 3,450,000 3,421,080
97.30 12/31/98 5,600,000 11/11/97 61.43 3,440,000 3,375,137
71.90 1998 Avg. 4,700,000 11/24/98 70.00 3,290,000 3,279,603
91.41 12/31/98 4,300,000 7/2/98 76.05 3,270,000 3,253,164
98.10 10/26/98 4,300,000 2/4/98 75.81 3,260,000 3,233,352
100.00 2/5/99 5,440,000 5/14/98 59.74 3,250,000 3,219,882
77.00 YTD 9/30/98 4,300,000 10/5/98 69.77 3,000,000 2,981,380
100.00 12/31/98 4,300,000 12/1/97 69.77 3,000,000 2,956,425
95.70 2/10/99 3,800,000 11/15/97 78.95 3,000,000 2,945,059 1
100.00 2/15/99 4,120,000 8/20/98 70.39 2,900,000 2,845,448
100.00 12/31/98 3,800,000 8/14/98 75.00 2,850,000 2,795,712
68.00 1998 Avg. 4,500,000 9/16/98 62.22 2,800,000 2,789,231
96.70 9/30/98 3,770,000 7/27/98 74.27 2,800,000 2,786,253
87.20 12/31/98 3,500,000 10/2/97 80.00 2,800,000 2,758,573
84.80 12/31/98 4,400,000 1/23/98 63.64 2,800,000 2,757,949
100.00 9/30/98 3,500,000 3/20/98 77.14 2,700,000 2,682,069
95.49 3/10/99 3,800,000 7/10/98 71.05 2,700,000 2,678,240
93.83 9/30/98 3,350,000 2/6/98 80.00 2,680,000 2,592,746
96.90 1/6/99 4,975,000 8/17/98 51.57 2,565,400 2,558,771
98.90 2/10/99 3,200,000 11/18/97 79.69 2,550,000 2,503,300 2
68.60 12/31/98 6,200,000 7/23/97 40.32 2,500,000 2,476,733
98.20 9/30/98 3,875,000 7/15/98 61.94 2,400,000 2,389,704
100.00 12/31/98 3,100,000 8/13/97 75.00 2,325,000 2,284,223
100.00 12/31/98 5,000,000 5/1/98 46.00 2,300,000 2,279,711
98.80 2/10/99 2,900,000 11/18/97 80.00 2,320,000 2,277,512 2
100.00 3/11/99 3,600,000 8/18/97 63.89 2,300,000 2,256,900
94.40 7/22/98 3,100,000 7/2/98 73.06 2,265,000 2,246,777
100.00 12/31/98 3,200,000 3/24/98 67.19 2,150,000 2,132,323
100.00 2/12/99 2,900,000 10/8/97 74.14 2,150,000 2,130,064
100.00 12/31/98 3,450,000 8/13/98 60.87 2,100,000 2,083,883
99.00 1/4/99 2,850,000 12/1/97 72.98 2,080,000 2,057,263 5
100.00 1/13/99 3,100,000 6/15/98 64.52 2,000,000 1,984,402
100.00 2/10/99 2,500,000 11/18/97 80.00 2,000,000 1,963,373 1
92.08 12/31/98 3,800,000 5/13/98 52.63 2,000,000 1,948,694
95.10 2/10/99 2,500,000 11/18/97 79.20 1,980,000 1,943,739 2
89.30 9/30/98 2,800,000 1/31/98 69.64 1,950,000 1,925,854
93.80 2/9/99 3,100,000 7/23/98 61.29 1,900,000 1,890,592
96.86 9/30/98 2,700,000 5/6/98 70.37 1,900,000 1,886,174
100.00 9/30/98 2,800,000 12/4/97 67.86 1,900,000 1,875,225
90.60 2/10/99 2,350,000 11/18/97 80.00 1,880,000 1,845,570 2
100.00 12/31/98 3,350,000 7/1/97 55.22 1,850,000 1,824,810
76.67 1st 6 Mos. 1998 3,000,000 8/5/98 60.00 1,800,000 1,779,678
95.50 9/30/98 3,065,000 4/2/97 55.46 1,700,000 1,664,917
100.00 3/10/99 2,360,000 1/21/98 69.92 1,650,000 1,630,654
94.77 YTD 9/30/98 3,400,000 7/27/98 48.09 1,635,000 1,620,846
97.90 2/10/99 2,050,000 11/18/97 80.00 1,640,000 1,609,966 1
96.70 12/31/98 2,070,000 8/31/98 77.29 1,600,000 1,588,212
100.00 2/10/99 2,050,000 11/18/97 77.07 1,580,000 1,551,064 2
94.80 12/31/98 2,800,000 5/12/98 55.36 1,550,000 1,525,905
94.70 12/28/98 2,300,000 6/9/98 65.22 1,500,000 1,486,510
96.70 1/22/99 2,250,000 5/2/98 66.67 1,500,000 1,485,030
94.70 12/28/98 2,600,000 12/20/97 57.69 1,500,000 1,478,629
100.00 2/10/99 2,100,000 11/18/97 67.86 1,425,000 1,398,903 2
100.00 12/31/98 2,100,000 4/30/98 66.05 1,387,000 1,373,828
100.00 11/1/98 1,900,000 1/26/98 71.58 1,360,000 1,348,191
96.70 11/1/98 2,290,000 1/19/98 58.95 1,350,000 1,338,073
100.00 12/31/98 1,750,000 6/16/97 78.29 1,370,000 1,336,709
94.30 12/31/98 2,300,000 11/24/97 58.70 1,350,000 1,316,504
97.80 11/1/98 1,510,000 1/21/98 75.83 1,145,000 1,134,884
97.70 11/30/98 1,360,000 1/28/98 79.41 1,080,000 1,062,430
95.35 11/9/98 1,500,000 11/24/97 66.67 1,000,000 975,188
87.50 12/31/98 1,100,000 5/1/98 77.27 850,000 842,265
93.30 11/1/98 1,270,000 1/20/98 64.96 825,000 817,711
100.00 11/1/98 1,100,000 1/20/98 60.45 665,000 659,125 3
85.10 2/10/99 850,000 11/18/97 77.65 660,000 647,913 1
100.00 11/1/98 800,000 1/23/98 70.63 565,000 560,094 4
100.00 11/1/98 1,020,000 1/19/98 51.47 525,000 520,362 3
88.90 11/1/98 760,000 1/20/98 59.87 455,000 451,049 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RELATED NET MORTGAGE REMAINING REMAINING
LOAN MORTGAGE MORTGAGE INTEREST RATE ANNUAL DEBT TERM AMORTIZATION
GROUP (3) INTEREST RATE INTEREST RATE (4) ACCRUAL BASIS (5) SERVICE (MONTHS) (MONTHS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7.3000 7.2265 ACT/360 4,450,726 118 358
6.8800 6.7565 ACT/360 3,549,220 112 352
B 7.3800 7.3065 ACT/360 1,888,132 50 350
7.6900 7.6065 30/360 2,028,764 166 286
7.7800 7.7065 30/360 1,908,395 104 284
7.5600 7.4365 30/360 1,661,074 105 309
E 6.7200 6.5965 ACT/360 1,412,186 113 353
6.5700 6.4965 ACT/360 1,185,750 113 353
6.7500 6.6765 ACT/360 1,167,477 112 352
A 6.8300 6.7565 ACT/360 1,169,217 113 353
7.4500 7.3665 30/360 1,097,963 105 345
6.8500 6.7265 ACT/360 1,022,204 113 353
D 7.1100 7.0365 ACT/360 1,062,152 114 294
7.2700 7.1465 30/360 1,008,895 123 351
A 6.8300 6.7565 ACT/360 871,028 113 353
B 7.3300 7.2565 ACT/360 907,646 50 350
7.7800 7.7065 30/360 976,916 165 285
7.1400 7.0665 30/360 853,026 112 292
A 7.2800 7.2065 ACT/360 786,981 113 353
6.7500 6.6765 30/360 700,486 115 355
6.7500 6.6265 ACT/360 700,486 75 351
F 6.8100 6.7365 ACT/360 699,709 114 354
7.4200 7.3465 ACT/360 686,807 110 350
7.2600 7.1365 30/360 671,929 110 350
6.8500 6.7265 ACT/360 629,049 114 354
D 7.1100 7.0365 ACT/360 685,259 114 294
6.8800 6.8065 30/360 599,424 109 349
7.8500 7.7765 30/360 685,715 105 285
7.1500 7.0265 ACT/360 583,551 116 356
7.7400 7.6665 ACT/360 652,037 113 293
7.0300 6.9065 30/360 560,548 109 349
7.0800 7.0065 30/360 543,254 112 352
A 7.1000 7.0265 ACT/360 534,265 113 353
7.1200 6.9965 ACT/360 533,318 112 352
7.9300 7.8565 30/360 577,281 105 345
7.0200 6.9465 ACT/360 519,984 113 353
7.1400 7.0165 30/360 501,190 105 345
6.8700 6.7965 ACT/360 472,748 112 352
6.7000 6.6265 ACT/360 446,403 114 354
7.6900 7.6165 30/360 495,740 104 344
7.1600 7.0365 ACT/360 466,497 51 351
6.9800 6.8565 ACT/360 438,213 112 352
7.0000 6.9265 ACT/360 437,104 114 354
7.7500 7.6765 30/360 498,517 105 285
D 7.1100 7.0365 ACT/360 453,984 114 294
7.2600 7.1865 ACT/360 460,115 112 292
8.0750 8.0015 30/360 539,995 167 227
G 8.1000 7.9565 ACT/360 488,557 116 296
6.7700 6.6465 ACT/360 405,555 113 353
6.9100 6.8365 ACT/360 411,384 171 351
7.8600 7.7865 30/360 451,794 105 345
7.3000 7.2265 30/360 435,619 112 292
7.4400 7.3665 ACT/360 481,157 113 233
C 7.3400 7.2665 30/360 433,672 105 285
7.7500 7.6265 30/360 439,601 108 288
7.0500 6.9765 30/360 386,755 107 347
E 6.7200 6.5965 ACT/360 363,909 113 353
7.2600 7.1865 ACT/360 399,345 113 293
7.6800 7.6065 30/360 405,399 114 294
7.2200 7.1465 30/360 492,033 172 172
7.3500 7.2765 30/360 385,050 109 289
6.8600 6.7365 ACT/360 338,458 114 354
7.3100 7.2365 30/360 354,473 111 291
6.7500 6.6765 30/360 331,638 115 295
7.1500 7.0765 30/360 343,861 111 291
7.0200 6.8965 30/360 339,867 111 291
7.6600 7.5865 30/360 359,726 103 283
7.8900 7.7665 30/360 345,048 67 343
6.8000 6.6765 ACT/360 299,234 115 355
F 7.1300 7.0565 ACT/360 326,083 114 294
C 7.3400 7.2665 30/360 335,746 105 285
7.2500 7.1765 ACT/360 296,198 114 414
I 7.3600 7.2865 ACT/360 299,999 117 357
7.2200 7.1465 ACT/360 311,418 114 294
C 7.3400 7.2665 30/360 314,762 105 285
7.4300 7.3065 30/360 451,701 139 139
7.2500 7.1765 ACT/360 299,242 113 293
7.0100 6.9365 ACT/360 292,871 113 293
7.1500 7.0765 30/360 295,720 165 285
G 8.0300 7.8865 ACT/360 305,498 117 297
A 7.2500 7.1765 ACT/360 267,686 113 353
J 7.1500 7.0765 30/360 264,219 110 350
7.1300 7.0565 ACT/360 278,887 112 292
8.5000 8.3765 ACT/360 312,416 116 236
6.8100 6.7365 30/360 243,172 107 311
C 7.3400 7.2665 30/360 262,302 105 285
7.0000 6.9265 ACT/360 312,792 174 174
6.8600 6.7865 ACT/360 304,729 174 174
G 8.2500 8.1065 ACT/360 264,919 116 296
6.7000 6.6265 ACT/360 216,813 114 354
7.8200 7.7465 30/360 262,699 73 265
7.1200 7.0465 30/360 240,056 108 288
7.0400 6.9665 30/360 216,429 112 352
K 7.2400 7.1665 ACT/360 233,981 113 293
6.8600 6.7365 30/360 276,345 181 181
7.2500 7.1765 ACT/360 222,515 142 298
C 7.3400 7.2665 30/360 222,956 105 285
7.5100 7.4365 30/360 221,892 112 292
7.3000 7.2265 ACT/360 197,444 114 354
7.6200 7.5465 30/360 208,361 105 285
K 6.9800 6.9065 30/360 194,719 113 293
C 7.3400 7.2665 30/360 202,847 105 285
7.6300 7.5565 30/360 206,301 104 284
A 7.2500 7.1765 ACT/360 196,459 113 293
7.1200 6.9965 30/360 173,732 110 350
7.4700 7.3965 30/360 179,868 168 348
6.5600 6.4865 ACT/360 171,098 114 294
7.0500 6.9765 30/360 166,899 107 347
7.4300 7.3565 ACT/360 176,267 113 293
C 7.3400 7.2665 30/360 174,868 105 285
7.0500 6.9265 30/360 216,390 172 172
C 7.3400 7.2665 30/360 173,119 105 285
J 7.1500 7.0765 30/360 167,632 110 290
7.0400 6.9665 30/360 152,302 114 354
6.9900 6.9165 ACT/360 154,801 112 328
7.4500 7.3265 30/360 167,749 73 289
C 7.3400 7.2665 30/360 164,376 105 285
I 7.7500 7.6265 30/360 167,683 108 288
7.0000 6.9265 ACT/360 167,465 114 234
7.8100 7.7365 30/360 154,892 162 282
7.5000 7.4265 30/360 146,320 110 290
6.8200 6.7465 ACT/360 136,425 113 293
C 7.3400 7.2665 30/360 143,391 105 285
6.8000 6.6765 ACT/360 133,262 114 294
C 7.3400 7.2665 30/360 138,145 105 285
7.0700 6.9465 30/360 144,988 112 232
L 7.3000 7.1765 ACT/360 130,686 112 292
7.3200 7.2465 ACT/360 130,918 111 291
L 7.4600 7.3865 30/360 132,550 108 288
C 7.3400 7.2665 30/360 124,593 105 285
6.9900 6.9165 ACT/360 117,530 112 292
H 7.6000 7.4765 30/360 118,711 171 315
H 7.5000 7.3765 30/360 116,759 171 315
8.1800 8.1065 30/360 139,358 226 226
M 7.3500 7.2765 30/360 129,024 167 227
H 7.5000 7.3765 30/360 99,029 171 315
7.1400 7.0665 30/360 92,759 107 287
M 7.3500 7.2765 30/360 95,574 167 227
6.7800 6.7065 30/360 70,666 113 293
H 7.5000 7.3765 30/360 71,353 171 315
H 7.5000 7.3765 30/360 57,515 171 315
C 7.3400 7.2665 30/360 57,706 105 285
H 7.6000 7.4765 30/360 49,317 171 315
H 7.5000 7.3765 30/360 45,406 171 315
H 7.6000 7.4765 30/360 39,716 171 315
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MATURITY ARD FINAL BALLOON MAT DATE LOCK-OUT
ORIG DATE DATE (6) MATURITY DATE BALANCE LTV (7) END DATE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/26/99 2/1/09 2/1/29 47,542,457 51.96 3/31/01
7/22/98 8/1/08 8/1/18 39,126,234 55.89 7/31/01
4/30/98 6/1/03 21,662,733 73.43 6/30/01
1/16/98 2/1/13 2/1/23 14,124,445 39.23 1/31/01
11/21/97 12/1/07 16,864,657 56.22 12/31/01
12/11/97 1/1/08 15,870,012 56.88 1/31/02
8/26/98 9/1/08 9/1/28 15,753,815 62.58 3/31/01
8/4/98 9/1/08 13,378,699 67.23 8/31/01
7/29/98 8/1/08 12,996,281 66.99 8/31/01
8/20/98 9/1/08 9/1/28 12,935,909 69.29 9/30/03
12/11/97 1/1/08 11,400,935 64.41 1/31/03
8/13/98 9/1/08 11,292,448 55.63 9/30/03
9/14/98 10/1/08 10/1/13 9,954,396 56.66 10/31/01
6/30/98 7/1/09 10,376,204 64.45 7/31/03
8/19/98 9/1/08 9/1/28 9,636,818 69.33 9/30/03
5/12/98 6/1/03 10,459,242 66.66 6/30/01
11/28/97 1/1/13 6,774,641 47.21 1/31/03
7/31/98 8/1/08 7,840,251 54.07 4/30/08
8/21/98 9/1/08 9/1/28 8,420,766 69.16 9/30/03
10/16/98 11/1/08 7,677,090 54.84 10/31/01
6/16/98 7/1/05 8,248,425 68.03 7/31/02
9/4/98 10/1/08 10/1/28 7,753,848 66.84 8/31/01
5/22/98 6/1/08 7,275,281 69.29 6/30/03
5/8/98 6/1/08 7,079,060 66.78 6/30/03
9/25/98 10/1/08 10/1/28 6,949,953 69.85 10/31/03
9/21/98 10/1/08 10/1/13 6,422,191 61.46 10/31/01
4/10/98 5/1/08 6,503,214 57.05 5/31/03
12/31/97 1/1/08 6,034,020 57.19 1/31/04
11/5/98 12/1/08 6,304,730 65.67 12/31/03
9/1/98 9/1/08 9/1/18 5,889,958 54.04 2/29/08
4/1/98 5/1/08 6,011,098 69.09 5/31/03
7/24/98 8/1/08 5,803,191 66.32 8/31/03
8/21/98 9/1/08 9/1/28 5,793,155 67.36 9/30/03
7/31/98 8/1/08 5,775,178 69.75 8/31/03
12/31/97 1/1/08 5,781,448 65.70 1/31/02
8/31/98 9/1/08 5,671,892 65.95 9/30/03
12/23/97 1/1/08 5,329,149 66.61 1/31/04
7/17/98 8/1/08 5,215,428 65.19 8/31/03
9/15/98 10/1/08 4,987,943 64.11 10/31/03
11/20/97 12/1/07 5,054,959 64.81 12/31/01
6/11/98 7/1/03 5,457,043 72.28 7/31/01
7/2/98 8/1/08 4,794,896 61.08 8/31/03
9/24/98 10/1/08 4,775,490 65.42 10/31/03
12/19/97 1/1/08 4,413,487 47.46 1/31/03
9/14/98 10/1/08 10/1/13 4,254,701 59.09 10/31/01
7/29/98 8/1/08 4,274,533 53.43 8/31/03
2/2/98 3/1/13 2,215,384 25.64 3/31/05
11/24/98 12/1/08 4,323,790 59.23 12/31/02
8/31/98 9/1/08 4,507,221 64.39 9/30/01
6/25/98 7/1/13 3,963,882 41.08 7/31/01
12/23/97 1/1/08 4,548,423 57.57 1/31/02
7/2/98 8/1/08 3,964,421 54.31 8/31/03
8/20/98 9/1/08 3,457,611 50.85 9/30/03
12/30/97 1/1/08 3,936,988 63.50 1/31/02
3/30/98 4/1/08 3,891,894 45.25 4/30/02
2/27/98 3/1/08 4,141,009 65.73 3/31/03
8/26/98 9/1/08 9/1/28 4,059,637 56.38 3/31/01
8/13/98 9/1/08 3,709,310 58.41 9/30/03
9/10/98 10/1/08 3,604,430 54.61 10/31/02
7/31/98 8/1/13 8/31/04
4/29/98 5/1/08 3,493,436 58.22 5/31/02
9/28/98 10/1/08 3,736,607 64.42 10/31/03
6/8/98 7/1/08 3,223,953 58.62 7/31/04
10/29/98 11/1/08 3,123,083 45.26 10/31/01
6/29/98 7/1/08 3,158,506 63.17 7/31/02
6/25/98 7/1/08 3,147,100 47.68 7/31/03
10/7/97 11/1/07 3,202,254 59.30 11/30/01
10/8/97 11/1/04 3,656,645 69.19 11/30/00
10/9/98 11/1/08 3,318,006 65.06 11/30/03
9/9/98 10/1/08 10/1/23 3,052,426 59.85 9/30/01
12/30/97 1/1/08 3,047,990 63.50 1/31/02
9/30/98 10/1/08 3,471,784 72.33 10/31/03
12/31/98 1/1/09 3,191,001 65.79 1/31/03
9/28/98 10/1/08 2,899,792 56.31 10/31/03
12/30/97 1/1/08 2,857,491 61.45 1/31/02
10/9/98 11/1/10 11/30/01
8/31/98 9/1/08 2,781,133 59.17 9/30/03
8/18/98 9/1/08 2,760,619 60.01 9/30/03
12/31/97 1/1/13 2,108,379 37.65 1/31/03
12/17/98 1/1/09 2,713,898 57.74 1/31/03
8/21/98 9/1/08 9/1/28 2,870,592 66.76 9/30/03
5/8/98 6/1/08 2,807,276 65.29 6/30/03
7/6/98 8/1/08 2,610,725 47.99 8/31/03
11/13/98 12/1/08 2,152,445 50.06 12/31/03
2/19/98 3/1/08 2,445,151 56.86 3/31/02
12/30/97 1/1/08 2,381,243 62.66 1/31/02
9/14/98 10/1/13 53,193 1.29 10/31/01
9/22/98 10/1/13 50,366 1.33 10/31/06
11/24/98 12/1/08 2,324,730 51.66 12/31/02
9/15/98 10/1/08 2,422,593 64.26 10/31/03
4/22/98 5/1/05 5/1/17 2,394,106 68.40 5/31/02
3/25/98 4/1/08 2,209,117 50.21 4/30/03
7/24/98 8/1/08 2,319,110 66.26 8/31/01
8/25/98 9/1/08 2,175,875 57.26 9/30/03
4/23/98 5/1/14 5/31/06
1/22/99 2/1/11 1,915,892 38.51 2/29/04
12/30/97 1/1/08 2,024,056 63.25 1/31/02
7/16/98 8/1/08 1,993,471 32.15 8/31/02
9/15/98 10/1/08 2,109,828 54.45 10/31/01
12/15/97 1/1/08 1,859,350 59.98 1/31/02
8/25/98 9/1/08 1,807,552 36.15 9/30/03
12/30/97 1/1/08 1,841,493 63.50 1/31/02
11/14/97 12/1/07 1,839,842 51.11 12/31/01
8/21/98 9/1/08 9/1/23 1,825,874 58.90 9/30/03
5/19/98 6/1/08 1,850,142 57.82 6/30/03
3/23/98 4/1/13 1,619,889 55.86 4/30/05
9/25/98 10/1/08 1,656,769 48.02 10/31/03
2/27/98 3/1/08 1,786,991 62.70 3/31/03
8/3/98 9/1/08 1,621,079 52.29 9/30/03
12/30/97 1/1/08 1,587,494 63.50 1/31/02
7/15/98 8/1/13 8/31/04
12/30/97 1/1/08 1,571,621 62.86 1/31/02
5/8/98 6/1/08 1,539,771 54.99 6/30/03
9/8/98 10/1/08 1,631,966 52.64 10/31/01
7/23/98 8/1/08 1,609,528 59.61 8/31/03
4/13/98 5/1/05 1,660,220 59.29 5/31/03
12/30/97 1/1/08 1,492,245 63.50 1/31/02
3/18/98 4/1/08 1,484,537 44.31 4/30/02
9/28/98 10/1/08 1,225,369 40.85 10/31/03
9/23/97 10/1/12 1,072,721 35.00 10/31/04
5/13/98 6/1/08 1,315,340 55.73 6/30/03
8/27/98 9/1/08 1,300,517 38.25 9/30/03
12/30/97 1/1/08 1,301,746 63.50 1/31/02
9/18/98 10/1/08 1,272,032 61.45 10/31/01
12/30/97 1/1/08 1,254,121 61.18 1/31/02
7/7/98 8/1/08 1,037,382 37.05 8/31/03
7/21/98 8/1/08 1,211,252 52.66 8/31/03
6/3/98 7/1/08 1,212,208 53.88 7/31/04
3/4/98 4/1/08 1,194,483 45.94 4/30/02
12/30/97 1/1/08 1,131,090 53.86 1/31/02
7/1/98 8/1/08 1,109,343 52.83 8/31/03
6/12/98 7/1/13 932,695 49.09 7/31/04
6/12/98 7/1/13 922,067 40.26 7/31/04
1/30/98 2/1/18 2/28/05
2/27/98 3/1/13 538,498 23.41 3/31/05
6/12/98 7/1/13 782,051 51.79 7/31/04
2/27/98 3/1/08 852,561 62.69 3/31/03
2/27/98 3/1/13 398,887 26.59 3/31/05
8/25/98 9/1/08 664,227 60.38 9/30/03
6/12/98 7/1/13 563,488 44.37 7/31/04
6/12/98 7/1/13 454,204 41.29 7/31/04
12/30/97 1/1/08 523,874 61.63 1/31/02
6/12/98 7/1/13 387,479 48.43 7/31/04
6/12/98 7/1/13 358,583 35.16 7/31/04
6/12/98 7/1/13 312,042 41.06 7/31/04
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DEFEASANCE YM YM 96 NOI
END DATE END DATE PROVISION (8) FIXED PENALTIES (9) 96 NOI MONTHS 97 NOI
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/31/08 7,678,333 12 7,542,675
1,284,741 12 1,172,459
1,618,266 12 1,638,997
732,410 12 713,086
741,256 12 768,411
2,053,232 12 2,093,692
1,248,428 12 1,156,030
4/30/08 5,071,797 12 5,269,349
2/28/03 YM1 2,602,519 12 2,639,827
1/31/05 7/31/12 YM2 3,880,176 12 4,858,032
5/31/07 YM1 3,823,630 12 3,721,275
6/30/07 YM1 3,070,278 12 3,217,582
5/31/08 1,593,447 12 1,891,081
4/30/08 1,578,602 12 1,598,210
771,568 12 793,778
393,566 12 431,793
413,468 12 372,639
4/30/08 1,659,871 12 1,778,546
5/31/08 YM1 1,454,735 12 1,484,089
6/30/07 YM1 1,643,711 12 335,567
5/31/08 YM1 1,656,855 12 1,747,020
9/30/03 6/30/08 YM1 428,930 12 1,751,847
251,875 12 262,324
1,289,802
177,055 12 199,721
12/31/08 YM1
5/31/08 YM1 1,111,612 12 1,110,439
2/28/03 YM1 739,424 12 1,203,355
12/31/09 YM1 1,297,386 12
467,864
5/31/08 YM1 1,143,156
183,198 12 208,591
241,162 12 319,801
11,500 4 195,580
166,202 12 175,938
36,531 12 47,075
101,747 12 107,292
41,522 12 88,879
7/31/08 937,280 12 1,100,820
3/31/05 YM1 1,127,712 12 988,865
6/30/08 567,870 12 1,101,325
11/30/07 YM1 985,609 12 929,439
11/30/07 YM1 1,159,831 12 1,076,748
6/30/08 YM1 234,546 12 615,941
9/30/03 6/30/08 YM1 1,050,788 12 1,103,492
554,254 12 576,758
496,534 12 526,734
10/31/07 YM1 770,323 12 852,368
4%-12,3%-12,2%-12,1%-5,0%-6 1,474,431 12 1,523,494
8/31/08 YM1 630,741 12 907,497
1,104,502 12 1,077,624
10/31/07 YM1 807,631 12 783,939
1/31/08 YM1 812,648 12 901,609
5/31/08 YM1 858,516 12 752,080
4/30/08 YM1 790,923 12 826,197
6/30/07 YM1 613,654 12 1,065,838
5/31/08 YM1 716,316 12 783,197
6/30/07 YM1 737,292 12
4/30/08 YM1 704,691 12 768,679
6/30/08 YM1 606,353 12 645,221
5/31/07 YM1 803,437 12 794,835
3/31/03 YM1 629,156 12 611,385
4/30/08 YM1 403,248 12 720,759
6/30/08 YM1 764,264 12 607,544
6/30/07 YM1 955,592 12 1,065,334
9/30/03 6/30/08 YM1 310,931 12 717,261
310,931 12 312,982
404,279
4/30/08 YM1 863,658 12 933,861
7%-12,6%-12,5%-12,4%-12,3%-12,2%-12,1%-11,0%-12 937,902 12 894,917
8/31/08 360,688
5/31/08
6/30/12 1,040,181 12 987,759
6/30/07 YM1 750,884 12 684,999
1/31/08 YM1 437,247 12 685,344
5/31/08 844,462 12 1,138,011
6/30/07 YM1 543,361 12 648,679
9/30/07 YM1 832,574 12 829,501
8/31/07 YM1 495,170 12 645,037
5/31/08 564,528 12 612,244
2/29/08 YM1 808,098 12 794,113
3/31/08 YM1 565,804 12 563,027
7/31/10 YM1 576,261 12 742,531
184,023 12 307,708
200,178 12 205,171
192,060 12 229,652
10/31/07 YM1 530,213 12 548,431
6/30/08 YM1 420,894
3/31/08 YM1 639,036 12 967,367
4/30/08 409,266 12 458,370
12/31/07 YM1 585,501 12 577,357
12/31/07 YM1 701,582 12 590,391
4/30/07 YM1 456,091 12 525,041
4/30/04 YM1 445,838 12 431,618
7/31/08 YM1 495,082 12 535,192
6/30/08 275,527 12 405,576
6/30/07 YM1 426,530 12 506,721
6/30/08 YM1 407,332 12 470,755
9/30/08 455,789 12 487,199
6/30/08 YM1 493,800 12 479,478
6/30/07 YM1 401,956 12 485,589
10/31/09 513,972 12 564,574
5/31/08 YM1 471,587 12 84,465
5/31/08 YM1 332,479
6/30/12 YM1 429,786 12 431,244
9/30/08
5/31/08 YM1 357,893 12 361,812
11/30/07 YM1 352,685 12 386,615
1/31/08 YM1 525,749 12 513,978
8/31/08 321,049
8/31/07 YM1 380,756 12 414,849
6/30/07 YM1 317,649 12 451,151
9/30/06 6/30/13 YM1 441,802 12 449,424
3/31/13 YM1
8/31/08 61,596 5 496,028
6/30/08 YM1 310,086
4/30/05 375,738 12 422,443
9/30/07 YM1 426,093 12 414,923
4/30/08 YM1 270,862 12 275,184
5/31/08 YM1 304,465 12 376,686
4/30/11 YM1 358,469 12 345,152
10/31/10 YM1 414,048 12 454,933
6/30/07 YM1 320,623 12 342,152
1/31/08 YM1 568,615 12 544,524
6/30/08 272,747 12 369,707
6/30/07 YM1 243,642 12 288,649
2/29/08 YM1 507,130 12 509,493
6/30/07 YM1 237,725 12 270,669
5/31/07 YM1 336,872 12 205,450
5/31/08 YM1 230,526 12 233,728
11/30/07 YM1 170,085 12 261,500
3/31/10 YM1 275,068 12 281,727
6/30/08 YM1 242,910 12 281,514
8/31/07 YM1 189,796 12 295,966
5/31/08 YM1 215,933 12 259,320
6/30/07 YM1 230,597 12 232,149
7/31/12 YM1 389,381 12 397,592
6/30/07 YM1 226,252 12 265,109
11/30/07 YM1 254,909 12 258,224
6/30/08 229,710 12 244,884
4/30/08 YM1 218,524 12 271,424
10/31/04 YM1 291,407 12 276,132
6/30/07 YM1 228,978 12 250,722
9/30/07 YM1 288,739 12 349,517
6/30/08 YM1 367,356 12 393,756
3/31/12 YM1 314,485 12 346,693
11/30/07 YM1 228,542
2/29/08 YM1 555,670 12 729,434
6/30/07 YM1 178,535 12 194,158
6/30/08 211,185 12 240,163
6/30/07 YM1 183,857 12 209,690
1/31/08 YM1 286,029 12 239,538
4/30/08 YM1 180,969 12 206,465
12/31/07 YM1 196,695
9/30/07 YM1 208,074 12 218,872
6/30/07 YM1 183,115 12 179,339
1/31/08 YM1 212,427 12 217,129
6/30/11 YM1 149,066 12 194,750
6/30/11 YM1 171,764 12 165,280
1/31/15 YM1 177,458
2/28/11 YM1 184,744 12 212,219
6/30/11 YM1 130,501 12 160,556
8/31/07 YM1 141,760 12 135,318
2/28/11 YM1 154,811 12 182,986
2/29/08 YM1 88,838 12 96,733
6/30/11 YM1 102,496 12 104,056
6/30/11 YM1 85,226 12 86,579
6/30/07 YM1 50,356 12 74,813
6/30/11 YM1 66,426 12 75,700
6/30/11 YM1 66,841 12 63,493
6/30/11 YM1 55,319 12 58,452
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
97 NOI 98 NOI 98 NOI AS
MONTHS 98 NOI (10) MONTHS OF DATE UW NOI UW CASH FLOW UW DSCR
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12 7,759,796 12 10/31/98 7,239,769 6,743,365 1.52
12 1,184,415 12 10/31/98 1,218,934 1,143,763
12 1,687,849 12 10/31/98 1,138,737 1,060,342
12 518,114 12 10/31/98 724,264 645,688
12 873,399 12 10/31/98 876,863 798,223
12 2,166,315 12 10/31/98 1,991,230 1,882,624
12 1,329,704 12 10/31/98 1,289,741 1,212,725
12 5,595,594 12 12/31/98 5,635,454 5,440,957 1.53
12 1,979,060 8 12/31/98 2,425,452 2,362,952 1.25
12 5,702,432 12 12/31/98 4,112,715 3,525,474 1.74
12 3,818,120 12 12/31/98 3,183,226 2,800,777 1.47
12 3,618,236 12 12/31/98 3,205,116 2,442,809 1.47
12 2,175,476 12 12/31/98 2,187,082 1,866,371 1.32
12 12/31/98 1,710,975 1,597,989 1.35
12 702,415 12 12/31/98 861,861 803,811
12 203,367 6 12/31/98 404,812 377,476
12 317,713 12 12/31/98 444,302 416,702
12 1,146,980 9 9/30/98 1,724,615 1,580,886 1.35
12 1,521,438 12 12/31/98 1,439,613 1,388,763 1.19
12 1,565,706 12 12/31/98 1,521,862 1,399,466 1.27
12 1,869,026 12 12/31/98 1,675,866 1,649,466 1.61
12 1,826,419 12 12/31/98 1,585,182 1,481,424 1.39
12 248,101 12 12/31/98 229,234 211,940
12 1,341,685 12 12/31/98 1,162,592 1,099,068
12 236,633 12 12/31/98 193,356 170,416
344,428 3 9/30/98 1,308,516 1,206,432 1.20
12 1,128,670 12 12/31/98 1,110,776 1,058,984 1.22
12 1,226,307 12 12/31/98 1,244,056 1,190,356 1.31
1,132,369 9 9/30/98 1,197,308 1,174,325 1.20
4 1,259,162 12 12/31/98 1,299,526 1,251,476 1.47
12 1,122,304 12 12/31/98 1,107,271 1,013,554 1.29
12 189,917 12 12/31/98 190,174 166,370
12 287,012 12 12/31/98 247,233 223,916
12 287,006 12 12/31/98 296,748 276,834
12 126,296 12 12/31/98 145,469 129,228
12 65,928 12 12/31/98 52,831 48,333
12 110,797 12 12/31/98 118,956 114,893
12 55,348 12 12/31/98 55,860 53,980
12 1,190,228 12 12/31/98 1,059,271 869,237 1.24
12 1,034,415 12 12/31/98 1,069,886 1,026,086 1.46
12 1,140,222 12 12/31/98 1,005,867 964,617 1.38
12 763,591 8 12/31/98 1,044,894 891,491 1.30
12 375,473 3 12/31/98 1,013,725 946,101 1.41
12 818,345 11 12/31/98 917,250 853,250 1.36
12 1,154,841 12 12/31/98 1,038,603 994,130 1.45
12 608,207 12 12/31/98 549,174 529,379
12 546,634 12 12/31/98 489,429 464,751
12 976,230 11 11/30/98 865,355 835,355 1.39
12 1,614,038 12 12/31/98 1,311,178 1,129,422 1.65
12 559,980 9 9/30/98 905,254 785,340 1.35
12 875,463 9 9/30/98 993,800 859,291 1.32
12 608,605 9 9/30/98 789,400 745,775 1.33
12 620,795 9 9/30/98 753,224 703,537 1.30
12 711,957 12 12/31/98 673,389 638,633 1.20
12 818,215 12 12/31/98 750,800 705,800 1.32
12 924,175 12 12/31/98 904,394 720,616 1.25
12 662,820 9 9/30/98 755,734 678,411 1.30
630,826 9 9/30/98 693,042 653,042 1.30
12 569,917 9 9/30/98 732,128 688,128 1.46
12 357,903 7 7/31/98 660,020 628,660 1.41
12 506,758 9 9/30/98 742,090 693,649 1.40
12 284,291 6 12/31/98 658,436 617,842 1.32
12 405,589 6 12/31/98 707,667 659,759 1.51
12 530,545 8 8/31/98 645,496 598,045 1.37
12 1,085,575 12 12/31/98 942,272 762,075 1.53
12 817,967 12 12/31/98 730,546 698,546 1.54
12 321,439 12 12/31/98 282,010 270,010
12 496,528 12 12/31/98 448,536 428,536
12 684,733 9 9/30/98 889,020 767,574 1.67
11 686,268 9 9/30/98 760,205 696,457 1.29
12 821,739 12 12/31/98 803,007 708,663 1.45
813,784 12 12/31/98 680,933 644,933 1.59
12 336,949 6 12/31/98 795,137 653,810 1.59
12 852,646 12 12/31/98 749,496 662,773 1.47
12 518,020 9 9/30/98 723,036 687,244 1.58
12 918,077 9 9/30/98 973,597 813,785 1.69
12 723,593 12 12/31/98 565,301 530,301 1.22
12 741,521 12 12/31/98 811,787 576,311 1.31
12 352,138 7 10/31/98 570,576 494,326 1.28
12 679,553 12 12/31/98 622,288 558,990 1.54
12 619,723 9 9/30/98 747,332 683,332 1.71
12 603,746 12 12/31/98 571,298 522,580 1.29
12 748,345 12 12/31/98 650,522 578,074 1.17
12 284,727 12 12/31/98 236,660 211,469
12 195,682 12 12/31/98 167,391 152,182
12 267,936 12 12/31/98 246,471 214,423
12 608,065 12 12/31/98 545,179 499,313 1.30
12 216,064 4 12/31/98 575,494 501,661 1.48
12 1,014,739 12 12/31/98 774,629 727,129 2.05
12 484,305 12 12/31/98 540,717 458,245 1.38
12 579,742 12 12/31/98 536,408 471,709 1.37
12 785,124 12 12/31/98 696,042 572,372 1.68
12 879,343 12 12/31/98 680,756 644,258 1.79
12 344,981 9 9/30/98 514,785 456,852 1.32
12 504,798 10 12/31/98 484,859 457,561 1.53
12 248,591 6 6/30/98 441,224 405,028 1.24
12 406,196 9 9/30/98 468,309 441,309 1.31
12 356,125 9 9/30/98 447,946 402,196 1.36
12 489,955 11 11/30/98 458,493 421,780 1.41
12 321,723 9 9/30/98 499,886 430,852 1.38
12 485,900 12 12/31/98 453,015 426,615 1.36
12 331,208 8 8/31/98 541,006 512,307 1.13
12 424,332 12 12/31/98 427,612 394,435 1.32
12 410,129 12 12/31/98 402,761 368,569 1.26
12 531,170 12 12/31/98 458,689 439,689 1.49
499,503 12 10/31/98 482,336 440,836 1.44
12 430,034 12 12/31/98 380,122 336,930 1.26
12 300,476 9 9/30/98 357,318 335,718 1.27
12 380,750 8 12/31/98 446,903 395,528 1.42
12 534,499 12 9/30/98 501,664 439,020 1.41
12 576,475 12 12/31/98 434,587 402,187 1.65
12 510,127 12 12/31/98 384,850 356,650 1.36
12 477,738 12 12/31/98 482,964 411,776 1.32
66,821 3 12/31/98 350,433 347,433 1.14
12 441,628 12 9/30/98 414,585 368,097 1.39
12 272,844 9 9/30/98 353,151 327,043 1.51
12 333,653 12 12/31/98 352,032 313,032 1.19
12 379,835 9 9/30/98 390,267 353,559 1.47
12 208,061 9 9/30/98 284,481 267,527 1.24
12 287,983 10 12/31/98 327,779 303,416 1.30
12 231,699 9 9/30/98 334,059 313,809 1.14
12 416,093 11 11/30/98 357,478 310,048 1.39
12 360,724 12 12/31/98 318,471 296,286 1.33
12 600,898 12 12/31/98 530,351 467,525 2.11
12 244,998 9 9/30/98 347,408 312,358 1.58
12 331,272 12 12/31/98 326,620 268,498 1.29
12 506,977 12 12/31/98 432,702 369,206 1.90
12 313,231 12 12/31/98 266,888 243,238 1.20
12 372,966 12 12/31/98 367,991 306,751 1.49
12 334,719 12 12/31/98 306,566 271,430 1.38
12 326,440 12 12/31/98 301,695 267,230 1.54
12 264,643 12 12/31/98 267,636 240,107 1.33
12 343,819 12 12/31/98 282,196 273,196 1.60
12 135,487 9 12/31/98 247,646 223,646 1.34
12 253,748 9 12/31/98 233,715 220,228 1.25
12 271,604 12 12/31/98 236,143 221,018 1.26
12 312,275 12 12/31/98 371,187 300,637 1.39
12 300,606 12 12/31/98 260,821 240,321 1.39
12 147,249 9 9/30/98 229,203 209,638 1.25
12 217,580 12 12/31/98 297,131 237,233 1.56
12 218,871 9 9/30/98 267,353 227,594 1.47
12 227,941 9 9/30/98 253,677 208,443 1.24
12 272,994 12 12/31/98 227,998 211,998 1.29
12 355,032 12 12/31/98 333,475 301,149 1.80
12 476,380 12 12/31/98 377,935 342,300 2.04
12 374,821 9 9/30/98 372,165 330,669 2.13
12 255,095 12 12/31/98 241,205 226,809 1.55
12 553,425 9 9/30/98 324,978 291,228 2.13
12 225,567 12 12/31/98 195,224 183,224 1.28
12 64,776 3 12/31/98 203,040 188,061 1.41
12 223,808 12 12/31/98 190,148 177,668 1.29
12 270,825 12 12/31/98 283,231 228,545 1.58
12 103,425 6 12/31/98 202,506 165,816 1.27
12 148,490 6 9/30/98 255,131 229,452 1.75
12 205,353 12 12/31/98 206,133 170,108 1.28
12 211,828 12 12/31/98 183,090 170,590 1.37
12 99,257 6 12/31/98 183,960 174,960 1.49
12 138,894 9 9/30/98 155,295 147,824 1.25
12 161,444 9 9/30/98 161,188 153,718 1.32
12 183,955 12 12/31/98 177,458 175,850 1.26
12 235,013 12 12/31/98 189,326 168,826 1.31
12 140,169 9 9/30/98 133,482 120,970 1.22
12 96,898 10 12/31/98 127,750 115,551 1.25
12 102,337 9 9/30/98 136,926 115,526 1.21
12 129,614 12 12/31/98 108,216 100,416 1.42
12 71,853 9 9/30/98 100,897 96,937 1.36
12 63,520 9 9/30/98 78,086 74,642 1.30
12 89,727 12 12/31/98 80,507 71,107 1.23
12 52,196 9 9/30/98 64,758 59,298 1.20
12 53,010 9 9/30/98 60,659 57,491 1.27
12 35,962 9 9/30/98 50,490 47,907 1.21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UPFRONT RESERVES
- -------------------------------------------------------------------------------
REPAIR &
REMEDIATION TI/LC ENVIRONMENTAL OTHER TOTAL
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
17,644 17,644
1,000,000 1,000,000
336,750 336,750
5,000 5,000
19,620 19,620
19,456 19,456
10,156 10,156
1,500 1,500
13,400 13,400
290,000 290,000
13,000 13,000
1,438 1,438
76,243 76,243
37,000 37,000
1,812 1,812
22,875 22,875
150,000 150,000
394,291 394,291
4,937 162,000 166,937
31,250 31,250
500 500
37,500 37,500
14,988 14,988
708,962 708,962
25,645 25,645
12,500 800,000 812,500
25,000 150,000 31,100 206,100
7,313 7,313
655 100,000 100,655
5,875 5,875
1,750 1,750
2,300 2,300
90,000 90,000
150,000 150,000
453,000 100,000 553,000
24,688 48,000 72,688
2,875 50,000 52,875
11,625 11,625
500,000 3,000 503,000
50,000 50,000
1,875 55,000 1,000 57,875
500,000 500,000
2,125 60,000 62,125
10,125 10,125
7,052 7,052
6,625 2,000 8,625
42,150 66,600 108,750
875 875
232,200 232,200
45,400 45,400
81,250 100,000 181,250
28,100 28,600 56,700
31,375 2,000 33,375
4,939 4,939
750 750
45,000 45,000
7,088 7,088
1,375 1,375
100,000 100,000
7,052 7,052
69,398 69,398
42,750 2,400 45,150
4,575 4,575
2,000 2,000
9,188 9,188
19,275 19,275
938 938
3,800 1,619 5,419
9,144 9,144
2,150 2,150
625 2,000 2,625
25,300 19,626 44,926
380,000 380,000
3,313 1,000 4,313
7,313 7,313
2,000 2,000
10,163 27,690 37,853
3,250 3,250
1,250 1,250
37,381 100,000 137,381
2,150 2,150
875 875
2,000 2,000
3,875 3,875
26,062 600 26,662
20,330 550,000 570,330
4,000 4,000
3,146 3,146
4,875 4,875
14,942 14,942
14,940 14,940
69,000 896 69,896
28,199 28,199
5,625 5,625
69,375 664 70,039
7,125 7,125
9,970 1,500 11,470
8,888 13,500 22,388
2,000 2,000
27,000 27,000
8,274 8,274
22,666 22,666
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ONGOING MONTHLY RESERVES
- --------------------------------------------------------------------------------------------------
REPLACEMENT TI/LC (12) ENVIRONMENTAL OTHER TAXES (11) INSURANCE (11)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11,021 1/12 1/12
4,887 1/12 1/12
4,594 1/12
1/12
27,381 1/12
4,988 10,000 1/12 1/12
4,325 1/12 1/12
9,373 1/12 1/12
3,194 1/12 1/12
4,238 1/12 1/12
1,635 1/12
2,200 1/12 1/12
7,336 1,310 1/12 1/12
904 1,356
4,316 1/12 1/12
4,167 1/12 1/12
1,214 1/12
4,004 1/12
1,349 1/12 1/12
2,500 1/12 1/12
3,567 1/12 1/12
3,438 1/12
2,417 8,500 1/12 1/12
1,155 5,529 1/12 1/12
4,518 1/12
3,706 1/12 1/12
2,500 1/12 1/12
15,146 1/12 1/12
1,695 1/12
1,562 1/12 1/12
3,635 1/12 1/12
1,626 2,515 1/12 1/12
1,393 4,500 1/12 1/12
3,750 1/12 1/12
1,370 4,000 1/12 1/12
1,506 1/12
3,083 1/12 1/12
3,667 1/12
2,333 1/12 1/12
854 1/12 1/12
1/12 1/12
3,992 1/12 1/12
756 1/12 1/12
438
2,667 1/12 1/12
7,523 1/12 1/12
1,608 1/12 1/12
7,862
1/12
1,321 1/12
655 1/12
2,983 1/12 1/12
13,045 1/12 1/12
2,333 1/12 1/12
5,521 14,102 1/12 1/12
6,990 1/12 1/12
240 1/12 1/12
4,167 1/12 1/12
666 4,000 1/12 1/12
1,242 4,795 1/12 1/12
825 2,929 1/12 1/12
1,480 1/12 1/12
3,571 1/12 1/12
575
2,176 4,684 542 1/12 1/12
3,005 1/12 1/12
808 4,036 1/12 1/12
620 1/12 1/12
1,014 1/12
1,800 1/12 1/12
3,813 1/12 1/12
616 1/12 1/12
1,450 1/12 1/12
2,200 1/12 1/12
933 1/12
1,186 1/12 1/12
947 1/12
1,267 1/12 1/12
3,458
493 1/12 1/12
1,800 1/12 1/12
531 1/12
1,261 1/12 1/12
2,700 1/12 1/12
2,350 1/12 1/12
1/12
3,874
2,176 1/12 1/12
3,250 1/12 1/12
580 1/12
1,412 1/12 1/12
513 1/12 1/12
1,688 1/12
483 1/12 1/12
1,849 1/12 1/12
1,514 2,000 1/12
705 1/12 1/12
1,421 2,500 1/12 1/12
716 4,575 1/12
1,433 1/12 1/12
1,283 3,864 1/12 1/12
471 1/12 1/12
448 1/12 1/12
675 1,619 1/12 1/12
750 1/12 1/12
2,000 1/12 1/12
168 956 1/12 1/12
917 1/12 1/12
1,672 1/12 1/12
1,428 1/12 1/12
1,638 1/12 1/12
873 1/12 1/12
3,313 1/12 1/12
798 3,000 1/12 1/12
1,067 1/12 1/12
440 1/12
2,966 1/12 1/12
1/12
410 1/12
1/12
800 1/12 1/12
1,284 1/12 1/12
1,040 1/12 1/12
1,970 1/12 1/12
3,058 1/12 1/12
861 1/12 1/12
3,025 1/12 1/12
833 1/12 1/12
750 1/12 1/12
1/12 1/12
1/12 1/12
134 1/12 1/12
1,708 896 1/12 1/12
1/12 1/12
1,017 1/12 1/12
1,735 664 1/12 1/12
650 1/12 1/12
1/12 1/12
1/12 1/12
783 1/12 1/12
1/12 1/12
1/12 1/12
1/12 1/12
</TABLE>
<PAGE>
CERTAIN CHARACTERISTICS OF MULTIFAMILY AND OTHER RESIDENTIAL LOANS
<TABLE>
<CAPTION>
ORIGINAL/
LOAN PROPERTY ALLOCATED
NUMBER PROPERTY NAME PROPERTY CITY STATE ZIP CODE BALANCE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 The Lodge at Paulin Creek Santa Rosa CA 95403 22,770,000
8.1 Crossroads Apartments Greenville SC 29601 7,409,045
8.2 Colonial Place Apartments Charlotte NC 28208 3,899,498
8.3 Park Fairfax Apartments Charlotte NC 28208 4,211,457
10 Brittany Court Geneva IL 60134 14,900,000
- -----------------------------------------------------------------------------------------------------------------------------------
12 Caribbees Mobile Home Park San Jose CA 95111 13,000,000
13.1 President's Walk Apartments West Palm Beach FL 33401 1,919,636
13.2 Tivoli Terrace Apartments Deerfield FL 33441 9,174,730
15 Covington Court Saint Charles IL 60174 11,100,000
16 Oak Tree Villa Scotts Valley CA 95066 11,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
18 Boardwalk at Alafaya, Phase II Orlando FL 32801 9,931,813
21 Wildwoods at Lake Johnson Raleigh NC 27606 9,000,000
22 The Excellence Tampa FL 33617 8,935,000
25 Cedar Creek Apartments Okemos MI 48864 8,000,000
26.1 Riverway House Apartments Boston MA 22101 4,248,804
- -----------------------------------------------------------------------------------------------------------------------------------
26.2 Stoneham House Apartments Stoneham MA 22180 3,751,196
27 Pinebrook Apartments Fremont CA 94536 7,600,000
31 Arbor Glen Apartments East Lansing MI 48823 7,000,000
34 Muirwood Village Sandusky OH 44870 6,600,000
37 Hickory Square Apartments Imlay City MI 48444 6,190,000
- -----------------------------------------------------------------------------------------------------------------------------------
38 Lake Gibson Apartments Lakeland FL 33809 6,000,000
39 River's Cove Apartments Germantown WI 53022 5,765,000
41 Lake Club Apartments Mount Prospect IL 60056 5,750,000
42 Oakbrook Walk Gainesville FL 32608 5,500,000
45.1 Casa Vista Oceanside CA 92056 2,245,139
- -----------------------------------------------------------------------------------------------------------------------------------
45.2 Westwood Village Apartments Oceanside CA 92054 3,054,861
49 Kuder Estates Warsaw IN 46580 5,200,000
52 Sunnycrest Chalet Fullerton CA 92635 5,000,000
54 Crystal Towers New Hope MN 55428 4,960,000
56 Park Place Apartments Hanahan SC 29406 4,820,000
- -----------------------------------------------------------------------------------------------------------------------------------
63 Topanga Terrace Convalescent Center & Topanga West Guest Home Canoga Park CA 91304 4,065,000
71 Metropolitan Towers Bloomington MN 55420 3,840,000
72 Royal Oak Colony Titusville FL 32780 3,760,000
75 Trafalgar Square Estates Westland MI 48185 3,600,000
79 Monte Sierra Apartments Mountain View CA 94043 3,440,000
- -----------------------------------------------------------------------------------------------------------------------------------
82 Valley View Apartments Sun City CA 92586 3,260,000
85 South Huntington Avenue Apartments Boston MA 22120 3,000,000
86 Lakepointe Ypsilanti MI 48197 3,000,000
90 Salem Walk Apartments Austin TX 78745 2,800,000
91 Hillcrest Apartments Calumet Park IL 60827 2,800,000
- -----------------------------------------------------------------------------------------------------------------------------------
93 Cloverdale Regency Apartments Los Angeles CA 90036 2,700,000
95 Bavarian Village on the Lake Apartments Clarkson MI 49105 2,680,000
97 Kings Manor New Hope MN 55428 2,550,000
102 Nicollet Courts Bloomington MN 55420 2,320,000
107 Logan Park Apartments Fremont CA 94536 2,100,000
- -----------------------------------------------------------------------------------------------------------------------------------
108 Branchwood Apartments Goose Creek SC 29445 2,080,000
110 The Arbors Bloomington MN 55420 2,000,000
112 Larpenteur Village St. Paul MN 55113 1,980,000
113 Lampson Village Apartments Garden Grove CA 92860 1,950,000
115 Summer Place Apartments San Antonio TX 78228 1,900,000
- -----------------------------------------------------------------------------------------------------------------------------------
117 Cedar Glen Bloomington MN 55425 1,880,000
120 Las Cascades Apartments Phoenix AZ 85018 1,700,000
122 Bell Gardens Convalescent Center Bell Gardens CA 90201 1,635,000
123 Masada Manor St. Paul MN 55420 1,640,000
124 Rolling Hills Townhomes Salisbury NC 28147 1,600,000
- -----------------------------------------------------------------------------------------------------------------------------------
125 Cedar Gate Bloomington MN 55425 1,580,000
127 Summerwind Apartments Tampa FL 33612 1,500,000
129 Marbella Apartments Tampa FL 33612 1,500,000
130 Brookdale Towers Brooklyn Center MN 55430 1,425,000
131 17 Ferris / 12 North Taylor Norwalk CT 06854 1,387,000
- -----------------------------------------------------------------------------------------------------------------------------------
132 11081 Rose Los Angeles CA 90034 1,360,000
133 1420 Oakhurst Avenue Los Angeles CA 90035 1,350,000
135 Sussex Square Apartments Atlanta GA 30331 1,350,000
136 18558 Roscoe Blvd. Northridge CA 91324 1,145,000
137 Taft Villa Apartments Hollywood FL 33020 1,080,000
- -----------------------------------------------------------------------------------------------------------------------------------
138 Garden Court Apartments East Point GA 30344 1,000,000
139 Willow Farm Apartments Easton, MA 02375 850,000
140 11525 Rochester Ave Los Angeles CA 90025 825,000
141 1820 Bentley Avenue Los Angeles CA 90025 665,000
142 Pengelly Flint MI 48507 660,000
- -----------------------------------------------------------------------------------------------------------------------------------
143 3686 South Centinela Ave Los Angeles CA 90066 565,000
144 9023 Alcott Street Los Angeles CA 90035 525,000
145 944 6th Street Santa Monica CA 90403 455,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INITIAL POOL STUDIOS I BEDROOM 2 BEDROOMS
-----------------------------------------------------------------------------------
BALANCE AVG. RENT AVG. RENT AVG. RENT
PER UNIT UTILITIES PAID BY TENANT # OF UNITS PER MO ($) # OF UNITS PER MO ($) # OF UNITS PER MO ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
90,445 45 1,650 177 2,000 26 2,450
28,546 Electricity 82 447 100 531
28,501 Electricity 96 471 40 617
30,336 Electricity, Gas 56 505 81 633
65,557 Electricity, Gas 36 795 190 876
- ----------------------------------------------------------------------------------------------------------------------------------
29,379 Electricity, Gas, Water 5 460
32,309 Electricity, Gas 47 580 12 687
41,412 Electricity, Gas 1 615 219 750
53,064 Electricity, Gas 62 740 146 809
54,612 104 1,670 96 2,025
- ----------------------------------------------------------------------------------------------------------------------------------
81,949
40,802 Electricity, Water 66 628 131 748
53,892 18 488 30 660
31,102 Electricity 64 535 136 612
56,255 Electricity 24 632 36 803 15 1,012
- ----------------------------------------------------------------------------------------------------------------------------------
51,736 Electricity 6 603 36 747 30 851
50,185 4 592 106 750 40 875
38,530 Electricity, Gas 36 646 144 748
32,804 Electricity 88 404 112 539
30,564 Electricity 56 509 120 559
- ----------------------------------------------------------------------------------------------------------------------------------
27,102 Electricity 96 495 124 604
51,220 Electricity 84 857
34,004 Electricity, Gas 12 600 110 680 46 850
46,325 Electricity 118 936
37,158 Electricity 42 575 18 725
- ----------------------------------------------------------------------------------------------------------------------------------
30,335 Electricity, Gas 40 475 40 565 20 685
35,904 Electricity 4 550 140 641
37,514 88 1,450 40 2,000
34,780 Electricity 2 410 30 555 108 662
15,631 Electricity, Gas 112 360 128 410
- ----------------------------------------------------------------------------------------------------------------------------------
21,163 112 158 78
34,904 Electricity 2 555 70 625 36 748
20,489 Electricity, Gas 56 425 100 503
26,773 Electricity 44 494 88 590
43,833 Electricity, Gas 34 700 43 850
- ----------------------------------------------------------------------------------------------------------------------------------
29,938 Electricity, Gas 108 536
27,374 Electricity 28 585 80 642
20,887 36 539 104 612
22,838 Electricity, Gas 98 496 24 664
17,683 Electricity 48 358 62 450 46 614
- ----------------------------------------------------------------------------------------------------------------------------------
74,502 Electricity, Gas 4 690 4 850 28 1,150
32,009 Electricity, Gas, Water 33 625 48 776
28,774 Electricity 6 427 36 523 45 623
26,794 Electricity 15 453 48 525 22 599
57,886 Electricity, Gas 20 1,070
- ----------------------------------------------------------------------------------------------------------------------------------
21,430 Electricity 50 475
35,698 Electricity 37 664 18 739
23,704 Electricity 2 424 53 474 26 585
34,390 Electricity 19 453 10 512 27 733
11,863 Electricity 56 284 102 335 1 310
- ----------------------------------------------------------------------------------------------------------------------------------
28,837 Electricity 16 521 48 599
10,673 21 366 110 473 25 595
12,006 74
33,541 Electricity 25 596 23 692
26,036 Electricity, Gas 14 410 30 500
- ----------------------------------------------------------------------------------------------------------------------------------
32,314 Electricity 24 563 24 678
11,261 Electricity 96 330 36 430
11,202 Electricity, Gas, Water 96 345 36 445
27,978 Electricity 8 498 42 607
38,162 Electricity, Water 30 690 6 800
- ----------------------------------------------------------------------------------------------------------------------------------
43,490 13 741 18 879
44,602 Electricity 19 816 11 964
14,960 Electricity, Gas 24 450 56 510
24,671 Electricity 24 520 16 775
24,146 42 450 2 655
- ----------------------------------------------------------------------------------------------------------------------------------
11,339 Electricity, Gas 24 395 60 465
35,094 Electricity 24 775
54,514 1 650 5 781 9 1,001
47,080 9 771 5 977
13,785 Electricity 47 377
- ----------------------------------------------------------------------------------------------------------------------------------
28,005 Electricity 18 565 2 721
47,306 Electricity 1 670 10 945
50,117 2 724 6 774
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
3 BEDROOMS 4 BEDROOMS
- -------------------------------------------------------------------
AVG. RENT AVG. RENT ELEVATOR
# OF UNITS PER MO ($) # OF UNITS PER MO ($) (Y/N)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
2 2,760 Y
76 611 N
N
1 740 N
N
- -------------------------------------------------------------------
N
N
N
N
Y
- -------------------------------------------------------------------
120 1,500 N
22 930 N
102 901 15 1,160 Y
56 810 N
N
- -------------------------------------------------------------------
N
N
N
N
24 659 N
- -------------------------------------------------------------------
N
28 958 N
N
N
N
- -------------------------------------------------------------------
N
N
Y
N
65 510 N
- -------------------------------------------------------------------
N
N
27 675 N
N
N
- -------------------------------------------------------------------
N
N
1 710 Y
N
N
- -------------------------------------------------------------------
Y
N
N
N
16 1,195 N
- -------------------------------------------------------------------
46 575 N
N
1 749 N
N
N
- -------------------------------------------------------------------
N
N
N
N
17 600 N
- -------------------------------------------------------------------
N
N
N
N
N
- -------------------------------------------------------------------
N
Y
8 625 N
6 875 Y
Y
- -------------------------------------------------------------------
2 575 N
N
N
N
N
- -------------------------------------------------------------------
N
Y
1 1,470 N
</TABLE>
<PAGE>
CERTAIN CHARACTERISTICS OF MULTIFAMILY AND OTHER RESIDENTIAL LOANS
<TABLE>
<CAPTION>
ORIGINAL/
LOAN PROPERTY ALLOCATED
NUMBER PROPERTY NAME PROPERTY CITY STATE ZIP CODE BALANCE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.1 Butterfield Plaza Downers Grove IL 60515 9,450,000
1.2 Coopers Plaza Edison NJ 08043 6,000,000
1.3 Crosswinds Center St. Petersburg FL 33710 5,500,000
1.4 Fashion Place Columbia SC 29206 6,750,000
1.5 Germantown Commons Germantown MD 20874 16,000,000
- -----------------------------------------------------------------------------------------------------------------------------
1.6 Montgomery Village Gaithersburg MD 20877 10,400,000
2 The Flood Building San Francisco CA 94102 45,000,000
6 36 South Charles Baltimore MD 21201 19,100,000
7 Plaza 600 Seattle WA 98101 18,200,000
9 Southland Mall Portage MI 49081 15,000,000
- -----------------------------------------------------------------------------------------------------------------------------
11 Parkridge Two Reston VA 20191 13,150,000
13.3 Delary Beach Retail Delray Beach FL 33444 1,305,634
14 MCI-Atlanta Building Alpharetta GA 30328 12,300,000
17 Kukui Marketplace Lihue, Island of Kauai HI 96766 10,750,000
19.1 Saddlebrook Professional Center St. Charles IL 60174 1,495,811
- -----------------------------------------------------------------------------------------------------------------------------
19.2 One River Center Geneva IL 60134 2,204,353
19.3 Bradbury Place Geneva IL 60134 2,597,988
19.4 Williamsburg Professional Office Geneva IL 60135 1,338,357
19.5 Herrington Station Shopping Center Geneva IL 60134 492,043
19.6 Blockbuster Video Store St. Charles IL 60174 787,269
- -----------------------------------------------------------------------------------------------------------------------------
19.7 Amoco Ground Lease St. Charles IL 60174 669,179
20 330 Whitney Avenue Holyoke MA 10140 9,000,000
23 Plaza I & II Buildings Jackson MS 39211 8,250,000
24 Commerce Town Center Commerce Township MI 48382 8,200,000
29 10010 Junction Road Annapolis Junction MD 20701 7,200,000
- -----------------------------------------------------------------------------------------------------------------------------
30 Magnolia Place Office Building Orlando FL 32801 7,200,000
32 Shoppers Square Mall Reno NV 89502 6,750,000
33 Prairie Street Shopping Center St. Charles IL 60174 6,625,000
35 Valley Green Corporate Center Fort Washington PA 19034 6,600,000
36 North Pilot Road Las Vegas NV 89119 6,500,000
- -----------------------------------------------------------------------------------------------------------------------------
40 The Centre at Stirling & Palm Cooper City FL 33024 5,800,000
43 Deer Creek Village Center Rancho Cucamonga CA 91730 5,475,000
44 Provident Bank Building Baltimore MD 21202 5,500,000
47 UTEC Building Minneapolis MN 55414 5,350,000
50 Variel Court Office Plaza Woodland Hills CA 91367 5,200,000
- -----------------------------------------------------------------------------------------------------------------------------
51 Cliff Lake Center Eagan MN 55122 5,200,000
55 Amherst Commerce Park Amherst NY 14226 4,850,000
57 The Times Square Building Seattle WA 98101 4,690,000
59 Plaza El Toro Lake Forest CA 92630 4,500,000
60.1 Mt. Morris Town Center Mt. Morris MI 48458 1,650,000
- -----------------------------------------------------------------------------------------------------------------------------
60.2 Ferndale Retail Center Ferndale MI 48220 1,125,000
60.3 Bristol Wood Plaza Burton MI 48529 1,725,000
61 Biscayne Harbour Shopping Center Aventura FL 33160 4,400,000
62 Shackleford Corporate Center Little Rock AR 72204 4,300,000
64 3211 Scott Blvd Santa Clara CA 95054 4,000,000
- -----------------------------------------------------------------------------------------------------------------------------
65 St. John's Plaza Titusville FL 32796 4,000,000
66 Meadow Mill Building Baltimore MD 21211 4,000,000
67 305 Regent St. Portchester NY 10573 4,000,000
68 Northridge 400 Atlanta GA 30350 3,960,000
69 Town Square Shopping Center Old Bridge NJ 07747 3,825,000
- -----------------------------------------------------------------------------------------------------------------------------
70 Las Tiendas Shopping Center Hialeah FL 33014 3,800,000
73 Miller Plaza Hollywood FL 33021 3,625,000
74 Cedars Edge Center Lansing MI 48911 3,600,000
76 Maple Tree Plaza Zanesville OH 43701 3,580,000
77 Ricchiazzi Industrial Buildings Seattle WA 98134 3,450,000
- -----------------------------------------------------------------------------------------------------------------------------
78 Heritage Plaza Hollister CA 95023 3,450,000
81 Geneva on the Dam Geneva IL 60134 3,270,000
83 Watt Executive Plaza Sacramento CA 95821 3,250,000
87 St. Joesph Medical & Chicago Plaza Medical Omaha NE 68114 2,900,000
88 Office Depot Dallas TX 75207 2,850,000
- -----------------------------------------------------------------------------------------------------------------------------
92 Heritage Plaza Shopping Center Redford MI 48239 2,800,000
94 Orchard Plaza Reno NV 89502 2,700,000
96 Colonial Court Shopping Center Riverwood IL 60601 2,565,400
98 Plaza East Shopping Center Wilmington NC 28103 2,500,000
99 Shoppes At Westburry Miami FL 33186 2,400,000
- -----------------------------------------------------------------------------------------------------------------------------
100 Market Plaza Shopping Center Greensboro NC 27410 2,325,000
101 Raynham Health Care Raynham MA 02767 2,300,000
103 The Renaissance Center Charlotte NC 28217 2,300,000
104 Fox Island Square St. Charles IL 60174 2,265,000
105 El Camino Medical Buiding Mountain View CA 94040 2,150,000
- -----------------------------------------------------------------------------------------------------------------------------
106 Rutherford Square Shopping Center Rutherfordton NC 28139 2,150,000
109 Millbrae Theater Building Millbrae CA 94030 2,000,000
111 Meadow Park Shopping Center Alvin TX 77511 2,000,000
114 One San Jose Place Jacksonville FL 32257 1,900,000
116 Bay Vista Office Park Clearwater FL 34620 1,900,000
- -----------------------------------------------------------------------------------------------------------------------------
118 34th Street Plaza Gainesville FL 32608 1,850,000
121 Inland Commerce Park Spokane WA 99216 1,650,000
126 100 Filbert Street Oakland CA 94595 1,550,000
128 Pinebrook Commons Shopping Center Bradenton FL 34210 1,500,000
134 Arlington Revco Indianapolis IN 46219 1,370,000
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INITIAL POOL LARGEST TENANT
---------------------------------------------------------------
Balance
per Sq Ft Name Sq Ft
- -------------------------------------------------------------------------------
<S> <C> <C>
82.64 Avery Paper Products (International Paper) 21,007
34.74 Pathmark 64,926
38.10 Scotty's 56,949
45.54 SuperPetz 26,458
90.19 Giant 46,756
- -------------------------------------------------------------------------------
88.48 Safeway 36,405
152.50 Footlocker 45,519
62.79 Piper & Marbury 185,292
91.05 Canadian Consulate 19,098
58.32 Kohl's 81,146
- -------------------------------------------------------------------------------
132.26 Iridium 77,400
88.50 G. Ortiz; Halstead&Rosell; Finishing 1,500
Touches;A&A Antiques; Shining
Through; Splendid Blended
112.54 MCI 108,512
74.33 KMART 119,293
98.72 David Hemmer, MD 2,206
- -------------------------------------------------------------------------------
97.26 Dean Witter 4,500
100.35 Chicago Title Insurance Co. 10,238
88.77 Country Mutual Insurance 3,860
89.82 Geneva Dairy 1,700
119.84 Blockbuster 6,536
- -------------------------------------------------------------------------------
221.92 Amoco 3,000
65.67 Pioneer Management 25,826
76.53 MS Diversified & subsidiaries 47,592
88.01 A.I. Danman 15,600
70.02 GSA 33,488
- -------------------------------------------------------------------------------
76.11 Orange County Public Utlities 45,662
52.35 Sav-On Drugs 27,076
86.25 Jewel 64,408
81.37 McNeil-PPC, Inc. 26,520
43.10 Mikohn Gaming 85,000
- -------------------------------------------------------------------------------
90.30 Richard J. Wilbur 4,802
60.06 Brunswick 36,025
58.65 Provident Bank 92,172
39.33 Nature Conservancy 11,193
86.40 Internal Revenue Service 19,244
- -------------------------------------------------------------------------------
69.42 Northwest Fabrics 11,833
17.45 Citicorp 88,500
84.96 Mithun 22,267
83.88 Ralphs Grocery 23,800
49.88 Towne Center Pharmacy 9,000
- -------------------------------------------------------------------------------
70.75 Proclean 7,000
64.10 Proclean 7,400
97.30 Olive Garden 7,900
24.10 Brandon Moving & Storage 22,500
114.82 Cad Design 8,432
- -------------------------------------------------------------------------------
31.68 Walmart 55,990
21.31 MM Athletic Club 27,450
41.27 Eber Brothers Wine & Liquor 95,000
80.68 Browning Ferris Industries 24,346
97.93 CVS 7,921
- -------------------------------------------------------------------------------
73.82 Auto Zone 13,724
73.36 Popular Discount 8,380
50.96 MC Sporting Goods 18,975
46.62 Big Bear Supermarket 43,850
39.68 Mail Movers, Inc. 33,862
- -------------------------------------------------------------------------------
63.25 Rite Aid 25,000
76.33 Riverwalk Restaurant 12,694
51.29 SAIC 31,945
71.33 Prairie Medical 17,480
93.19 Office Depot 30,000
- -------------------------------------------------------------------------------
59.44 Pet Supplies Plus 8,800
86.36 Tropical LLC 5,955
66.20 Grand National Bank 9,600
27.26 Dan River Factory Outlet 7,517
71.32 Kinder Babez Academy 6,440
- -------------------------------------------------------------------------------
31.54 Aron Rents 43,380
103.62 Blue Cross of Massachusetss 22,000
45.51 US Census Bureau 21,144
74.60 Erik & Me Restauant 5,417
119.79 Camino Medical Group 6,409
- -------------------------------------------------------------------------------
39.44 Food Lion 30,280
197.45 Hollywood Video 7,470
15.40 Helig-Meyers 26,324
45.10 The Loop 3,600
47.90 Jeweler's Financial 30,000
- -------------------------------------------------------------------------------
52.42 Hollywood Video 8,450
53.36 Inland Construction 14,896
21.16 Fisher Berkeley Coporation 18,000
44.54 Wood You 9,200
124.67 CVS 10,722
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SECOND LARGEST TENANT
- ----------------------------------------------------------------------------------------------
LEASE EXP. LEASE EXP.
DATE NAME SQ FT DATE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11/7/00 Kids R Us 20,926 1/31/13
10/31/19 Service Merchandise 57,271 1/20/05
12/19/03 Bed, Bath & Beyond 36,926 1/31/09
4/16/05 TJ Maxx (BBB+) 24,300 5/31/01
4/30/12 Sony Theatre 17,195 2/17/07
- ----------------------------------------------------------------------------------------------
1/18/03 Seneca Creek Trading 12,770 5/31/03
1/31/04 Gap 36,489 9/30/03
3/31/01 Shapiro & Olander 24,166 12/31/02
3/31/05 Kibble & Prentice 16,836 12/31/98
1/30/16 TJ Maxx 30,000 10/12/04
- ----------------------------------------------------------------------------------------------
9/14/04 Atlantic Realvest LLC 19,153 5/31/03
6/14/99; 1/19/00; Haitian Art; Rando; 6/15/00 1,200 1/31/99
5/31/00; 10/31/99;
8/31/00; 6/15/00
6/30/08 NAP NAP
11/30/19 Borders Inc 15,239 2/28/05
5/31/99 Michelle P. Thatcher, M.D. 1,844 6/30/00
- ----------------------------------------------------------------------------------------------
5/31/02 McWin Inc 3,026 10/31/00
8/14/06 Baird & Warner 5,760 7/31/07
12/31/02 Dr. Mardi Tingzon 1,200 8/31/99
3/31/00 Cardiff Bros 1,400 5/31/99
7/31/00 NAP NAP
- ----------------------------------------------------------------------------------------------
11/30/01 NAP NAP
12/30/99 Visiting Nurses 19,246 4/30/03
6/30/99, 4/30/02, Upshaw, Williams, Biggers Attorneys 9,204 12/31/02
5/31/02, 10/31/02
12/1/03 Rite Aid 11,550 8/30/03
12/31/99 Harleysville Mutual Ins. Co. 16,548 3/31/00
- ----------------------------------------------------------------------------------------------
9/30/01 Independent Banker's Bank 16,840 11/30/98
10/31/04 Marshalls 26,250 9/30/99
1/29/00 John's Cleaners 2,147 2/28/02
7/31/98 & 10/31/02 Prime Bank 15,896 11/30/99
7/31/04 Jerr-Dan 65,000 7/31/00
- ----------------------------------------------------------------------------------------------
10/30/02 Draizin Dental Associates 3,944 9/30/99
12/31/99 The Game Room 6,300 9/30/99
12/16/02 NAP NAP
8/31/99 Northern Lights 5,532 8/31/99
6/30/07 Ikon Office Solutions 13,259 8/24/99
- ----------------------------------------------------------------------------------------------
11/30/00 Golf America of Eagan 6,606 5/31/02
6/1/08 AFPS 64,800 3/1/00
5/31/99 & 3/31/00 Think New Ideas 18,542 5/31/99
12/1/00 Bicycles, ect 4,320 12/1/98
12/31/07 Proclean 7,600 12/31/98
- ----------------------------------------------------------------------------------------------
12/2/03 Blockbuster Video 6,500 9/1/00
5/24/00 Panorama Video 6,000 7/14/01
6/30/02 United National Bank 5,000 12/31/01
6/30/02 Family Life Ministries 19,750 4/30/01
5/31/03 Smith Dennis 7,508 2/28/00
- ----------------------------------------------------------------------------------------------
9/30/04 Publix 38,520 5/30/06
10/31/02 Caliber Learning Network 17,782 8/31/04
6/30/05 NAP NAP
12/1/00 Brockway 24,135 3/1/00
1/31/03 Party & Play USA 4,005 8/31/03
- ----------------------------------------------------------------------------------------------
5/1/02 First Union 9,916 6/1/01
7/31/07 Firestone 6,240 1/31/01
5/31/01 Ingham Regional Medical Center 8,360 11/30/00
8/15/10 Revco 8,000 6/30/01
11/30/04 LeDuc Packaging 25,040 12/20/02
- ----------------------------------------------------------------------------------------------
12/31/10 Ace Hardware 7,500 7/31/02
1/31/02 Fluid Management 4,465 8/31/99
9/30/02 Trans Cal Associates 10,372 7/31/03
M-T-M UHC Management 8,350 12/31/99
8/31/13 NAP NAP
- ----------------------------------------------------------------------------------------------
8/30/04 Healthsouth Corporation 7,275 1/31/00
2/2/04 Q's Billards 3,650 5/15/00
12/31/98 Furniture Show 5,455 4/30/01
5/15/01 West Marine Products, Inc 5,998 4/30/05
12/31/02 NAS Restaurant 2,500 12/31/02
- ----------------------------------------------------------------------------------------------
6/30/01 Golds Gym 20,440 9/30/04
5/15/04 NAP NAP
1/1/03 Qualex 14,142 6/1/07
8/31/03 Geneva Leasing Associates 2,681 7/31/99
6/30/07 Leonard & Maria Fu, D.D.S. 2,340 4/30/05
- ----------------------------------------------------------------------------------------------
12/10/09 CVS 8,450 1/1/05
11/30/05 Laitron Computer 1,340 2/28/99
4/9/08 Weiners 22,500 7/31/02
3/31/99 Otis Smith Foundation 3,360 10/31/01
12/31/03 Annsworth Montess 9,150 11/30/03
- ----------------------------------------------------------------------------------------------
9/15/01 Aquatropics 3,510 12/31/00
3/30/11 Strata Inc. 4,683 2/28/02
12/1/00 East Bay Conservation Corp 15,000 8/1/00
10/31/03 Coco Bello Trattoria 4,650 11/30/03
8/31/17 NAP NAP
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THIRD LARGEST TENANT
- ------------------------------------------------------------------------------
Lease Exp.
Name Sq Ft Date
- ------------------------------------------------------------------------------
<S> <C> <C>
Gateway 2000 10,000 12/31/03
Marshalls 35,236 1/31/10
Marshalls 27,100 1/31/05
Staples 22,500 9/30/05
Magic Cue Billards 11,900 8/7/06
- ------------------------------------------------------------------------------
Cosmetic Center 7,638 3/31/03
Urban Outfitters 14,628 9/1/06
Peter Nichols 12,283 6/30/01
Hargis Engineers 10,483 10/31/99
Barnes & Noble 25,500 1/31/11
- ------------------------------------------------------------------------------
Mini Gourmet 1,703 8/31/07
Dash of Whimsey; M. Bartoo 950 2/28/99
NAP NAP
Payless Shoe Source 4,120 1/8/05
Orthopedic Spine & Surgery, 1,800 5/31/01
Centegra Horizons, McKenna
- ------------------------------------------------------------------------------
Bronzino's 2,410 10/31/05
Self Funded Plans 1,728 9/30/02
Dr. James Heffernan; Dr. Kambiz Noruzi 1,200 4/30/99; 7/31/01
Depot Express 1,000 4/30/99
NAP NAP
- ------------------------------------------------------------------------------
NAP NAP
Data Profit 13,739 8/30/99
First South PCA 7,921 3/31/00
Fashion Bug 8,400 1/31/99
LL Funding, Corporation 10,591 8/31/03
- ------------------------------------------------------------------------------
Rush, Marshall, Reber, Garbri 8,290 4/30/00
Sheplers 16,350 5/31/99
Baskin Robbins 1,093 12/31/01
Daller, Greenberg & Dietrich 11,324 8/14/02
NAP NAP
- ------------------------------------------------------------------------------
AAA Realty 3,420 5/31/99
West Tech Computers 5,140 12/31/06
NAP NAP
MN Tapp 4,292 6/30/99
Maritz Travel 11,461 8/31/99
- ------------------------------------------------------------------------------
Edgcumbe Montessori, inc. 4,406 4/30/02
Ultra Scan 12,085 11/1/98
Washington Mutual 3,220 12/31/98
ET Pharmacy 3,277 4/1/00
Genesys 3,372 12/31/98
- ------------------------------------------------------------------------------
Papa Romanos & Hong Kong 1 1,000 10/31/03
Tropi - Tan 2,460 2/2/00
Colwell Banker 4,800 6/30/01
Church at Rock Creek 19,200 4/30/00
Shinko 4,728 2/28/00
- ------------------------------------------------------------------------------
Eckard Drugs 10,355 9/28/05
Stone Mill 9,800 2/28/10
NAP NAP
NAP NAP
Pizza Huts of Monmouth County 3,674 12/31/11
- ------------------------------------------------------------------------------
Eckerds 8,870 5/1/08
Futuro Market 5,790 12/31/01
Haddad's Gift, Inc 6,190 2/28/01
Renters Choice 2,400 9/30/98
Arctic Ice Cream 12,559 9/30/01
- ------------------------------------------------------------------------------
CSK Auto, Inc 7,500 8/31/07
Merlin Muffler 4,424 6/30/99
Zumbrun Law Firm 3,947 12/31/02
Excel 4,815 9/30/05
NAP NAP
- ------------------------------------------------------------------------------
Rent a Flick; Paging Network 3,600 3/31/05; 4/30/99
American Savings Bank 3,569 3/18/01
Jimmy's Charhouse 5,200 9/30/03
Blockbuster Video 5,582 9/30/00
El Pollo Tropical & Circle A 2,132 12/31/99
- ------------------------------------------------------------------------------
Taste of Italy 2,250 11/30/00
NAP NAP
CBS Process Control Div 8,945 3/31/01
Bull & Bear 2,325 10/31/00
Renal Medical Center 1,684 12/31/99
- ------------------------------------------------------------------------------
Family Dollar 6,000 12/24/99
Great Clips 1,240 2/25/01
Dollar General 10,500 9/30/02
Tool Kit 2,112 3/31/99
NAP NAP
- ------------------------------------------------------------------------------
Joes Deli 2,100 11/30/97
Alpine Electric 4,438 3/30/11
Energy Interactive Inc 12,600 10/1/05
State Farm Insurance 2,475 3/31/09
NAP NAP
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX D
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-C7
$709,194,000
J.P. MORGAN & CO.
DEUTSCHE BANK SECURITIES
CHASE SECURITIES INC.
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 1
<PAGE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-C7
$709,194,000
J.P. MORGAN: Brian Baker (trading) (212) 648-1413
Andrew Taylor (trading) (212) 648-1413
Thomas Doherty (structuring) (212) 648-1413
Patrick Corcoran (research) (212) 648-6130
Michael Glover (product manager) (212) 648-0258
DEUTSCHE BANK SECURITIES: Justin Kennedy (trading) (212) 469-3867
Scott Waynebern (trading) (212) 469-7730
CHASE SECURITIES: Scott Davidson (trading) (212) 834-3813
David McNamara (trading) (212) 834-3813
Andreas Christopoulos (trading) (212) 834-3813
Joan Rogers (research) (212) 834-3704
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 2
<PAGE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-C7
$709,194,000
TRANSACTION OVERVIEW
<TABLE>
<CAPTION>
LOAN AVG.
RATING CURRENT EXPECTED TO LIFE PRINCIPAL
(FITCH/ SIZE % OF CREDIT VALUE (YRS) WINDOW COUPON PRICE PRICE ERISA 4/
CLASS S&P) ($) 1 TOTAL SUPPORT (%) 2 3 (MONTHS) 3 DESCRIPTION ($) TALK SMMEA
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 AAA/AAA $208,000,000 26.0% 29.50 48.7% 5.48 1-105 Fixed Yes/Yes
A-2 AAA/AAA 356,953,000 44.5 29.50 48.7 9.18 105-113 Fixed Yes/Yes
X AAA/AAAr 801,352,036 5.40 5 WAC Yes/Yes
B AA/AA 40,067,000 5.0 24.50 52.2 9.46 113-114 Fixed No/Yes
C A+/A 40,067,000 5.0 19.50 55.6 9.48 114-114 WAC - No/No
Fixed Sprd
D BBB/BBB 52,087,000 6.5 13.00 60.1 9.65 114-118 WAC No/No
E BBB-/BBB- 12,020,000 1.5 11.50 61.1 9.81 118-118 WAC No/No
RETAINED CLASSES 6 92,158,036 6 11.5 Fixed No/No
TOTAL $801,352,036 100.0% 69.9%7
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Approximate, subject to change
2 The sum of the principal balance of each bond and the bonds senior to it,
other than Class X, divided by the aggregate appraised value of the
properties collateralizing the mortgage loan pool
3 Assumes a prepayment rate of 0% CPR, optional redemption is not
exercised, and a closing date of April 22, 1999
4 ERISA eligibility is subject to certain limitations described in the
prospectus supplement under "Certain ERISA Considerations"
5 Implied average life
6 Includes Classes F, G, H, and NR
7 Weighted average from collateral
MORTGAGE POOL CHARACTERISTICS
The mortgage pool consists of 145 fixed rate mortgage loans secured by one or
more first liens on fee simple and for two instances leasehold interests in
multifamily, retail, office, hotel and other commercial properties located in
29 states. The three largest geographic concentrations are California (20.7%),
Florida (11.7%) and Maryland (10.5%). The mortgage loans will have an initial
pool balance of $801,352,036 and individual principal balances as of the
Cut-off Date of at least $451,049 but not more than $54,005,058 with an average
principal balance of approximately $5,526,566. The mortgage pool has a weighted
average loan-to-value of 69.94% and a weighted average debt service coverage
ratio of 1.41x.
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 3
<PAGE>
DEAL SUMMARY
LEAD MANAGER J.P. Morgan & Co.
CO-LEAD MANAGER Deutsche Bank Securities
CO-MANAGER Chase Securities Inc.
PRICING SPEED 0% CPR
DEPOSITOR J.P. Morgan Commercial Mortgage
Finance Corp., an indirect
wholly-owned limited purpose
finance subsidiary of J.P.
Morgan & Co. Incorporated and an
affiliate of J.P. Morgan
Securities Inc. ("JPMSI"), the
Underwriter.
ORIGINATOR 98.39% of the mortgage loans
were originated by Morgan
Guaranty Trust Company of New
York and 1.61% were purchased
MASTER SERVICER Midland Loan Services Inc.
SPECIAL SERVICER Midland Loan Services Inc.
TRUSTEE State Street Bank and Trust
Company
TRUSTEE WEBSITE corporatetrust.statestreet.com
RATING AGENCIES Fitch IBCA
Standard & Poor's Rating Services
--------------------------------
LEGAL STATUS All offered certificates are
public
CUT-OFF DATE April 1, 1999
SETTLEMENT DATE On or about April 22, 1999
DELIVERY DTC and Euroclear
RATED FINAL MATURITY DATE October 2035
MONTHLY DISTRIBUTION DATES Pays monthly on the 15th day of
every month or, if any such 15th
day is not a business day, then
the next succeeding business day
FIRST PAYMENT DATE May 17, 1999, 14 day delay
OPTIONAL REDEMPTION When pool pays down to 1% of
original pool balance
DEAL INFORMATION / ANALYTICS Bloomberg, Conquest, Intex, and
The Trepp Group
ERISA ELIGIBLE Classes A1, A2, and X
SMMEA ELIGIBLE Classes A1, A2, X, and B
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 4
<PAGE>
STRUCTURAL OVERVIEW
o Interest payments will be pro rata to Classes A1, A2 and X and then
interest will be paid sequentially to Classes B, C, D, E, F, G, H, and NR
o The Class A1, A2, B, F, G, H, and NR Certificates will have a fixed
coupon. The Class C Certificates will have a weighted average coupon minus
a fixed spread. The Class D and E Certificates will have a weighted
average coupon. The Class X Certificates will receive the net interest on
the pool less the interest paid on the other certificates
o All Classes offered will pay interest on a 30/360 basis
o The Class X Certificates will have the same interest priority as Class A1
and A2 Certificates
o Principal payments will be paid sequentially to Class A1, A2, B, C, D, E,
F, G, H and NR Certificates, until each class is retired. The Class X
Certificates do not have a class balance and are therefore not entitled to
any principal distributions
o Losses will be born by the Classes in reverse sequential order, from Class
NR up to Class B and then pro-rata to Classes A1 and A2
o If the principal balance of the mortgage pool is less than or equal to the
aggregate bond balance of Classes A1 and A2 bonds the principal will be
allocated pro rata to Classes A1 and A2
o Prepayment premiums received will be allocated first to the interest
bearing Certificates, according to a specified formula, with any remaining
amount paid to the Class X Certificates. For the amount payable to any
interest-bearing Class, the formula is as follows:
[OBJECT OMITTED]
o The deal will provide for the standard collateral value adjustment feature
for problem or delinquent loans. Generally, when a loan becomes 90 days
delinquent, the special servicer obtains a new appraisal. To the extent
any such adjustment is not reversed, the interest portion of any P&I
Advance will be reduced in proportion to such adjustment.
COLLATERAL CHARACTERISTICS
PRINCIPAL BALANCE $801,352,036
NUMBER OF LOANS 145
NUMBER OF MORTGAGED PROPERTIES 164
AVG. PRINCIPAL BALANCE
PER LOAN $5,526,566
PER PROPERTY $4,886,293
W.A. MORTGAGE RATE 7.221%
W.A. REMAINING TERM 113.4 months
W.A. UNDERWRITTEN DSCR 1.41x
W.A. CUT-OFF DATE LTV RATIO 69.9%
W.A. SEASONING 9.0 months
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 5
<PAGE>
AVERAGE LIFE SENSITIVITIES
PREPAYMENT SPEEDS (CPR)1
AVERAGE LIFE (YEARS)
<TABLE>
<CAPTION>
------------- ------------- ------------- ------------- -------------
CLASS 0% 25% 50% 75% 100%
- ---------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
A1 5.48 5.39 5.32 5.27 5.16
A2 9.18 9.15 9.13 9.08 8.81
B 9.46 9.44 9.42 9.40 9.19
C 9.48 9.48 9.48 9.47 9.23
D 9.65 9.62 9.59 9.57 9.38
E 9.81 9.81 9.81 9.76 9.56
X 2 5.40 5.32 5.26 5.20 5.00
</TABLE>
1 Assumes no prepayment during the lockout and yield maintenance periods and
optional redemptions are not exercised
2 Implied average life
PREPAYMENT PROTECTION
PERCENTAGE OF MORTGAGE LOANS BY OUTSTANDING PRINCIPAL BALANCE AS OF THE CUT-OFF
DATE THAT HAVE PREPAYMENT LOCKOUTS OR PENALTIES (ASSUMING NO PREPAYMENTS)
<TABLE>
<CAPTION>
CURRENT 4/00 4/01 4/02 4/03 4/04 4/05 4/06 4/07 4/08 4/09
- ------------------------------- ---------- ------- -------- ------- -------- ------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lockout/Defeasance 100.0 100.0 99.5 81.9 72.9 39.4 33.1 33.1 32.4 39.4 7.7
Yield Maintenance 1 1 0.0 0.0 0.5 18.1 22.1 59.7 61.0 62.4 63.1 39.8 45.4
Yield Maintenance 2 2 0.0 0.0 0.0 0.0 0.0 0.0 2.9 2.9 2.9 3.6 26.0
Total Lockout and YM 100.0 100.0 100.0 100.0 95.0 99.0 97.0 98.4 98.4 82.8 79.1
7.00% - 7.99% 3 0.0 0.0 0.0 0.0 0.0 0.0 0.6 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 0.6 0.0 0.0 0.0
5.00% - 5.99% 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.6 0.0 0.0
4.00% - 4.99% 3 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.7 0.0
3.00% - 3.99% 3 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 5.2
2.00% - 2.99% 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0
1.00% - 1.99% 3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0
No Prepayment Premium 0.0 0.0 0.0 0.0 5.0 0.0 1.4 0.0 0.0 16.5 15.7
- ------------------------------- -------- ------- -------- ------- -------- ------- -------- -------- ------- -------- -------
TOTAL 4 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
- ------------------------------- -------- ------- -------- ------- -------- ------- -------- -------- ------- -------- -------
AGGREGATE MORTGAGE BALANCE ($) 801.4 791.2 780.2 768.4 755.6 704.9 687.0 659.7 643.7 502.2 66.4
% OF CUT-OFF DATE BALANCE 100.0 98.7 97.4 95.9 94.3 88.0 85.7 82.3 80.3 62.7 8.3
</TABLE>
1 T+0bp; 1% floor
2 T+25bp; 1% floor
3 The mortgage requires a prepayment premium equal to the indicated
percentage of the amount prepaid
4 Total may sum to greater than 100.0 due to rounding
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 6
<PAGE>
COLLATERAL SUMMARY
In the following tables, Principal Balance refers to
Aggregate Cut-off Date Principal Balance
PROPERTY TYPES
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL
PROPERTY TYPE PROPERTIES PRINCIPAL BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Multifamily 67 $242,645,132 30.3%
Office 24 148,241,525 18.5
Anchored Retail 23 137,531,482 17.2
Hotel 11 80,916,973 10.1
Office/Retail 6 62,804,541 7.8
Unanchored Retail 19 44,702,778 5.6
Congregate Care/Retirement Community 3 38,485,688 4.8
Industrial 4 18,087,120 2.3
Mobile Home Park 1 12,926,896 1.6
Industrial/Office 4 9,368,108 1.2
Nursing Home 2 5,641,792 0.7
- -------------------------------------------------------------------------------------------------------
TOTAL 164 $801,352,036 100.0%
- -------------------------------------------------------------------------------------------------------
</TABLE>
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
NUMBER OF % OF PRINCIPAL
STATE PROPERTIES PRINCIPAL BALANCE ($) BALANCE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California 32 $166,034,415 20.7%
Florida 23 93,765,697 11.7
Maryland 7 83,845,272 10.5
Illinois 16 67,942,202 8.5
Michigan 14 64,487,154 8.0
North Carolina 11 39,012,437 4.9
Minnesota 13 38,667,117 4.8
Washington 4 27,810,499 3.5
Massachusetts 6 22,983,351 2.9
South Carolina 4 20,927,514 2.6
Colorado 1 20,615,521 2.6
Georgia 4 18,414,864 2.3
Nevada 3 15,848,543 2.0
Pennsylvania 2 13,902,498 1.7
Virginia 1 12,995,538 1.6
Other 23 94,099,414 11.7
- ------------------------------------------------------------------------------------------------------
TOTAL 164 $801,352,036 100.0%
- ------------------------------------------------------------------------------------------------------
</TABLE>
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 7
<PAGE>
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
% OF PRINCIPAL
DSCR (X) NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.13 - 1.15 1 3 $8,890,115 1.1%
1.16 - 1.20 6 43,039,740 5.4
1.21 - 1.25 16 58,457,796 7.3
1.26 - 1.30 24 108,095,485 13.5
1.31 - 1.40 40 216,850,315 27.1
1.41 - 1.50 22 127,789,440 15.9
1.51 - 1.60 17 153,055,810 19.1
1.61 - 1.70 6 37,400,289 4.7
1.71 - 1.80 5 33,930,214 4.2
1.81 - 1.90 1 2,279,711 0.3
2.01 - 2.10 2 5,800,624 0.7
2.11 - 2.20 3 5,762,496 0.7
- -------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- -------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE 1.41X
</TABLE>
1 The three mortgage loans with debt service coverage ratios below 1.15x
are Bavarian Village on the Lake Apartments ($2,592,746, 1.14x), Office
Depot ($2,795,712, 1.14x) and Maple Tree Plaza ($3,501,658, 1.13x). Each
loan is fully amortizing on a short amortization schedule.
LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
% OF PRINCIPAL
LTV (%) NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than or equal to 50.00 3 $6,377,290 0.8%
50.01 - 55.00 7 15,207,619 1.9
55.01 - 60.00 12 82,366,101 10.3
60.01 - 65.00 16 120,465,857 15.0
65.01 - 70.00 26 137,840,657 17.2
70.01 - 75.00 37 189,926,833 23.7
75.01 - 80.00 43 241,205,675 30.1
80.01 - 81.00 1 7,962,004 1.0
- -------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- -------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE 69.94%
</TABLE>
1 The mortgage loan with a loan-to-value greater than 80.00% is Cedar Creek
Apartments ($7,962,004, 80.02%)
REMAINING TERM TO MATURITY/ARD
<TABLE>
<CAPTION>
REMAINING TERM TO % OF PRINCIPAL
MATURITY/ARD (MONTHS) NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than or equal to 60 3 $39,246,416 4.9%
61 - 84 4 17,480,728 2.2
85 - 120 112 651,060,504 81.2
121 - 180 24 89,634,933 11.2
181 - 240 2 3,929,455 0.5
- -------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- -------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE 113.4 MONTHS
</TABLE>
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 8
<PAGE>
MONTH AND YEAR OF ORIGINATION
<TABLE>
<CAPTION>
% OF PRINCIPAL
MONTH AND YEAR NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 1997 1 $1,664,917 0.2%
October 1997 2 7,831,771 1.0
November 1997 4 39,168,933 4.9
December 1997 22 98,894,901 12.3
January 1998 2 23,473,558 2.9
February 1998 7 18,363,298 2.3
March 1998 5 12,975,412 1.6
April 1998 7 48,642,782 6.1
May 1998 7 36,172,075 4.5
June 1998 16 52,269,967 6.5
July 1998 18 125,340,350 15.6
August 1998 21 135,974,706 17.0
September 1998 21 98,715,261 12.3
October 1998 4 20,245,745 2.5
November1998 4 18,158,281 2.3
December 1998 2 6,896,251 0.9
January 1999 2 56,563,829 7.1
- -------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- -------------------------------------------------------------------------------------------------------
</TABLE>
YEAR OF MATURITY/ARD
<TABLE>
<CAPTION>
% OF PRINCIPAL
YEAR NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2003 3 $39,246,416 4.9%
2004 1 3,911,300 0.5
2005 3 13,569,428 1.7
2007 4 32,523,314 4.1
2008 105 557,635,880 69.6
2009 4 73,113,181 9.1
2010 1 3,501,658 0.4
2011 1 2,558,771 0.3
2012 1 1,664,917 0.2
2013 20 69,697,716 8.7
2014 1 2,592,746 0.3
2018 1 1,336,709 0.2
- -------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- -------------------------------------------------------------------------------------------------------
</TABLE>
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 9
<PAGE>
MORTGAGE INTEREST RATES
<TABLE>
<CAPTION>
% OF PRINCIPAL
MORTGAGE INTEREST RATES (%) NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6.5001 - 6.7500 10 $85,565,483 10.7%
6.7501 - 7.0000 25 165,743,102 20.7
7.0001 - 7.2500 37 161,168,362 20.1
7.2501 - 7.5000 44 225,876,229 28.2
7.5001 - 7.7500 15 83,611,907 10.4
7.7501 - 8.0000 8 58,562,516 7.3
8.0001 - 8.2500 5 17,843,058 2.2
8.2501 - 8.5000 1 2,981,380 0.4
- ------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- ------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE 7.22%
</TABLE>
PRINCIPAL BALANCES
<TABLE>
<CAPTION>
% OF PRINCIPAL
PRINCIPAL BALANCE ($) NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
500,001 - 1,000,000 8 $5,473,708 0.7%
1,000,001 - 2,000,000 29 46,819,365 5.8
2,000,001 - 3,000,000 25 63,246,248 7.9
3,000,001 - 4,000,000 20 72,250,223 9.0
4,000,001 - 5,000,000 12 55,033,622 6.9
5,000,001 - 7,500,000 24 143,491,019 17.9
7,500,001 - 10,000,000 10 85,919,847 10.7
10,000,001 - 12,500,000 5 57,051,117 7.1
12,500,001 - 15,000,000 4 55,641,569 6.9
15,000,001 - 17,500,000 1 15,427,289 1.9
17,500,001 - 20,000,000 2 36,911,035 4.6
20,000,001 - 25,000,000 3 65,363,710 8.2
40,000,001 - 45,000,000 1 44,718,226 5.6
50,000,001 - 55,000,000 1 54,005,058 6.7
- ------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- ------------------------------------------------------------------------------------------------------
AVERAGE PER LOAN $5,526,566
AVERAGE PER PROPERTY $4,886,293
</TABLE>
MORTGAGE LOAN TYPE
<TABLE>
<CAPTION>
% OF PRINCIPAL
MORTGAGE LOAN TYPE NUMBER OF LOANS PRINCIPAL BALANCE ($) BALANCE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balloon 119 $534,794,670 66.7%
ARD 19 247,150,197 30.8
Fully Amortizing 7 19,407,169 2.4
- -------------------------------------------------------------------------------------------------------
TOTAL 145 $801,352,036 100.0%
- -------------------------------------------------------------------------------------------------------
</TABLE>
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 10
<PAGE>
MILLS PORTFOLIO
<PAGE>
LOAN INFORMATION
- --------------------------------------------------------------
PRINCIPAL BALANCE
ORIGINAL $54,100,000
CUT-OFF DATE $54,005,058
ORIGINATION DATE January 26, 1999
INTEREST RATE 7.300%
AMORTIZATION 360
HYPERAMORTIZATION After the Anticipated
Repayment Date, interest
increases to 9.300%. All
excess cashflow is used
first to pay interest,
second to reduce the
outstanding principal, and
third to pay any accrued
interest.
ANTICIPATED REPAYMENT DATE February 1, 2009
MATURITY DATE February 1, 2029
BORROWER/SPONSOR Coopers Crossing Assoc.
(MLP) L.P., Crosswinds
Center of St. Petersburg
Assoc. (MLP) L.P., Fashion
Place Assoc. of IL No. 1
(MLP) L.P., Fashion Place
Assoc. L.P., Germantown
Development Assoc. (MLP)
L.P., Montgomery Village
Assoc. (MLP) L.P., and
Montgomery Village Ground
(MLP) L.P., each a special
purpose entity directly or
indirectly owned by The
Mills Limited Partnership
CALL PROTECTION Prepayment locked out until
the third month preceding
the Anticipated Repayment
Date. U.S. Treasury
defeasance allowed, in
whole or part, on or after
April 1, 2001.
REMOVAL OF PROPERTY MANAGER Lender has the right to
remove the property manager
if there is an event of a
default, the DSCR falls
below 1.15x or the debt is
not repaid on or before the
Anticipated Repayment Date.
The Lender must approve any
replacement
COLLECTION ACCOUNT Springing Lockbox;
Triggered either by the
DSCR falling below 1.20x in
any twelve month period or
failure to repay the debt
by the Anticipated
Repayment Date
MEZZANINE LOANS/PREFERRED None
EQUITY
<PAGE>
PROPERTY INFORMATION
- --------------------------------------------------------------
SINGLE ASSET/PORTFOLIO Portfolio of 6 assets
PROPERTY TYPE Anchored Retail
LOCATION Illinois, New Jersey,
Florida, South Carolina,
Maryland (2 properties)
YEARS BUILT 1971-1993
THE COLLATERAL Six anchored retail centers
located in five states with
a total of 873,035 sq. ft.
of NRA
Square
Footage Major Tenants
-----------------------------
BUTTERFIELD PLAZA 114,152 Avery Paper
Downers Grove, IL Products, Kids
R Us, Gateway
2000
COOPERS PLAZA 172,386 Pathmark,
Edison, NJ Service
Merchandise,
Marshalls,
CROSSWINDS CENTER 144,119 Scotty's, Bed,
St. Petersburg, FL Bath & Beyond,
Marshalls
FASHION PLACE 147,950 SuperPetz, TJ
Columbia, SC Maxx, Staples
GERMANTOWN COMMONS 177,097 Giant, Sony
Germantown, MD Theatre, Magic
Cue Billiards
MONTGOMERY VILLAGE 117,331 Safeway, Seneca
Gaithersburg, MD Creek Trading,
Cosmetic Center
PROPERTY MANAGEMENT Management Associates, L.P.
OCCUPANCY AS OF 12/1/981 96.1%
NET OPERATING INCOME $7,770,673
TTM ENDING 10/31/98
UNDERWRITTEN NET CASH FLOW $6,743,365
APPRAISED VALUE $91,500,000
APPRAISAL DATE September 22-30, 1998
CUT-OFF DATE
LOAN PER SQUARE FOOT $61.86
LTV 59.02%
DSCR 1.52x
- --------------------------------------------------------------
1 Weighted average occupancy
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 11
<PAGE>
THE FLOOD BUILDING
LOAN INFORMATION
- --------------------------------------------------------------
PRINCIPAL BALANCE
ORIGINAL $45,000,000
CUT-OFF DATE $44,718,226
ORIGINATION DATE July 22, 1998
INTEREST RATE 6.880%
AMORTIZATION 360
HYPERAMORTIZATION After the Anticipated
Repayment Date, interest
increases to 8.880%. All
excess cashflow is used
first to reduce the
outstanding principal,
second to pay interest and
third to pay any accrued
interest
ANTICIPATED REPAYMENT DATE August 1, 2008
MATURITY DATE August 1, 2018
BORROWER/SPONSOR 870 Market Street
Associates, L.P., a special
purpose entity indirectly
or directly owned and
controlled by Flood
Corporation
CALL PROTECTION Prepayment locked out until
the third month preceding
the Anticipated Repayment
Date. U.S. Treasury
defeasance allowed, in
whole or part, on or after
August 1, 2001
REMOVAL OF PROPERTY MANAGER Lender has the right to
remove the property manager
at any time for cause or upon
event of default under the loan.
The Lender must approve any replacement
COLLECTION ACCOUNT Hard Lockbox; Prior to the
Anticipated Repayment Date
and provided there is no
event of default, all
excess cash is released to
the Borrower
MEZZANINE LOANS/PREFERRED None
EQUITY
- --------------------------------------------------------------
<PAGE>
PROPERTY INFORMATION
- --------------------------------------------------------------
SINGLE ASSET/PORTFOLIO Single asset
PROPERTY TYPE Office/Retail
LOCATION 870 Market Street
San Francisco, California
YEARS BUILT/RENOVATED 1904 / 1993
THE COLLATERAL This San Francisco landmark
has 293,237 square feet of
NRA and is located in the
Union Square CBD. The
space mix is approximately
65% office and 35% retail.
Major tenants include
Footlocker, The Gap, and
Urban Outfitters.
PROPERTY MANAGEMENT Wilson Cornerstone
Properties
OCCUPANCY AS OF 2/5/99 94.3%
NET OPERATING INCOME $5,595,594
YEAR ENDING 12/31/98
UNDERWRITTEN NET CASH FLOW $5,440,957
APPRAISED VALUE $70,000,000
APPRAISAL DATE June 30, 1998
CUT-OFF DATE
LOAN PER SQUARE FOOT $152.50
LTV 63.88%
DSCR 1.53x
- --------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 12
<PAGE>
THE LODGE AT PAULIN CREEK
LOAN INFORMATION
- --------------------------------------------------------------
PRINCIPAL BALANCE
ORIGINAL $22,770,000
CUT-OFF DATE $22,611,340
ORIGINATION DATE April 30, 1998
INTEREST RATE 7.380%
AMORTIZATION 360 months
HYPERAMORTIZATION No
ANTICIPATED REPAYMENT DATE NA
MATURITY DATE June 1, 2003
BORROWER/SPONSOR The Lodge at Paulin Creek,
L.P., a special purpose entity
indirectly or directly owned and
controlled by MBK Senior Living
Communities, Ltd., a subsidiary of
Mitsui & Co.
CALL PROTECTION Prepayment locked out for
three years. On or after
July 1, 2001 a prepayment
premium of the greater of
yield maintenance or 1% of
the outstanding principal
balance is required. No
prepayment restrictions
three months prior to the
Maturity Date
REMOVAL OF PROPERTY MANAGER Lender has the right to
remove the property manager
upon an event of default
under the loan. The Lender
must approve any replacement
COLLECTION ACCOUNT None
MEZZANINE LOANS/PREFERRED None
EQUITY
- --------------------------------------------------------------
<PAGE>
PROPERTY INFORMATION
- --------------------------------------------------------------
SINGLE ASSET/PORTFOLIO Single asset
PROPERTY TYPE Congregate Care / Retirement Community
LOCATION 2375 Range Avenue
Santa Rosa, California
YEARS BUILT/RENOVATED 1990-1991
THE COLLATERAL This 250-unit retirement
living facility consists of
four 2- and 3- story wood
frame and sided structures
and resides on a 9.13-acre
site. In addition to the
living units there is a
22,250 square foot building
which connects the four
living units via an
enclosed walkways
PROPERTY MANAGEMENT MBK Senior Living
Communities
OCCUPANCY AS OF 12/31/98 99.2%
NET OPERATING INCOME $1,979,060
8 MONTHS ENDING 12/31/98
UNDERWRITTEN NET CASH FLOW $2,362,952
APPRAISED VALUE $29,500,000
APPRAISAL DATE March 27, 1998
CUT-OFF DATE
LOAN PER UNIT $90,445.36
LTV 76.65%
DSCR 1.25x
- --------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 13
<PAGE>
MARRIOTT SUITES BETHESDA
LOAN INFORMATION
- --------------------------------------------------------------
PRINCIPAL BALANCE
ORIGINAL $22,500,000
CUT-OFF DATE $22,136,849
ORIGINATION DATE January 16, 1998
INTEREST RATE 7.690%
AMORTIZATION 300 months
HYPERAMORTIZATION After the Anticipated
Repayment Date, interest
increases to 9.690%.
All excess cashflow is
used first to reduce the
outstanding principal,
second to pay interest
and third to pay any
accrued interest
ANTICIPATED REPAYMENT DATE February 1, 2013
MATURITY DATE February 1, 2023
BORROWER/SPONSOR Rock Springs Park Hotel,
L.P., a special purpose
entity, sponsored by the
Charles E. Smith
organization
CALL PROTECTION Prepayment locked out for
seven years. U.S. Treasury
defeasance is allowed, in
whole or part, on or after
February 1, 2001. A
prepayment premium of the
greater of yield
maintenance at T+25bp or 1%
of the outstanding
principal balance is
required on or after
February 1, 2005. No
prepayment restrictions six
months prior to the
Maturity Date
REMOVAL OF PROPERTY MANAGER Lender has the right to
remove the property manager
upon an event of default
under the loan. The Lender
must approve any replacement
COLLECTION ACCOUNT Hard Lockbox; Prior to the
Anticipated Repayment Date
and provided there is no
event of default, all
excess cash is released to
the Borrower
MEZZANINE LOANS/PREFERRED None
EQUITY
- --------------------------------------------------------------
<PAGE>
PROPERTY INFORMATION
- --------------------------------------------------------------
SINGLE ASSET/PORTFOLIO Single asset
PROPERTY TYPE Hotel
LOCATION 6711 Democracy Boulevard
Bethesda, Maryland
YEARS BUILT/RENOVATED 1990
THE COLLATERAL This twelve story, 274 king
suites full service hotel
is located approximately
six miles north of
Washington, D.C. The
property includes
functional meeting and
banquet space, an
indoor/outdoor pool, two
restaurants, a sports bar,
and an exercise room.
PROPERTY MANAGEMENT Marriott
OCCUPANCY AS OF 1998 AVG. 84.5%
NET OPERATING INCOME $5,702,432
YEAR ENDING 12/31/98
UNDERWRITTEN NET CASH FLOW $3,525,474
APPRAISED VALUE $36,000,000
APPRAISAL DATE October 2, 1997
CUT-OFF DATE
LOAN PER UNIT $80,791.42
LTV 61.49%
DSCR 1.74x
- --------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 14
<PAGE>
HOTEL BOULDERADO
LOAN INFORMATION
- --------------------------------------------------------------
PRINCIPAL BALANCE
ORIGINAL $21,000,000
CUT-OFF DATE $20,615,521
ORIGINATION DATE November 21, 1997
INTEREST RATE 7.780%
AMORTIZATION 300 months
HYPERAMORTIZATION No
ANTICIPATED REPAYMENT DATE NA
MATURITY DATE December 1, 2007
BORROWER/SPONSOR Boulderado Hotel, Ltd.
L.L.P., a special purpose
entity, directly or
indirectly owned by Arthur
Wong and Frank B. Day,
Trustee and sole
beneficiary of The Sunset
Trust
CALL PROTECTION Prepayment locked out for
three years. On or after a
January 1, 2002, a
prepayment premium of the
greater of yield
maintenance or 1% of the
outstanding principal
balance is required. No
prepayment restrictions six
months prior to the
Maturity Date
REMOVAL OF PROPERTY MANAGER Lender has the right to
remove the property manager
upon an event of default
under the loan. The Lender
must approve any replacement
COLLECTION ACCOUNT None
MEZZANINE LOANS/PREFERRED None
EQUITY
- --------------------------------------------------------------
<PAGE>
PROPERTY INFORMATION
- --------------------------------------------------------------
SINGLE ASSET/PORTFOLIO Single asset
PROPERTY TYPE Hotel
LOCATION 2115 13th Street
Boulder, Colorado
YEARS BUILT/RENOVATED 1908, 1985, 1989
THE COLLATERAL Designated a 5-star
establishment, this 156
room historical luxury
hotel was landmarked in
1977. The hotel is located
in the heart of downtown
Boulder adjacent to the CBD
and shopping. It is in
close proximity to the
University of Colorado and
the Rocky Mountains
PROPERTY MANAGEMENT Concept Restaurant, Inc.
OCCUPANCY AS OF 1998 AVG. 86.1%
NET OPERATING INCOME $3,818,120
YEAR ENDING 12/31/98
UNDERWRITTEN NET CASH FLOW $2,800,777
APPRAISED VALUE $30,000,000
APPRAISAL DATE October 1, 1997
CUT-OFF DATE
LOAN PER UNIT $132,150.77
LTV 68.72%
DSCR 1.47x
- --------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 15
<PAGE>
COLLATERAL PERFORMANCE OF PREVIOUS JPMC TRANSACTIONS
<TABLE>
<CAPTION>
30 TO 90 DAYS DELINQUENT1
---------------------------------------
# OF LOANS SECURITIZED LOAN % OF TOTAL
DEAL PRICING DATE AT ISSUANCE BALANCE ($000) BALANCE BALANCE # OF LOANS FORECLOSURE LOSSES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C1 Jul-95 36 $172,165 $0 0.00% 0 0 0
C2 Jan-96 91 304,650 7,605 2 3.17 1 0 0
C3 Jun-96 124 400,936 0 0.00 0 0 0
C4 Jan-97 127 406,985 0 0.00 0 0 0
C5 Sep-97 93 3 401,244 3 4,901 4 1.25 2 0 0
C6 Mar-98 91 796,414 0 0.00 0 0 0
MC2 5 Jun-98 25 6 138,896 6 0 0.00 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 587 $2,621,301 $12,506 0.51% 3 0 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 As of March 1999 remittances
2 Delinquent loan is secured by a medical office building in Salt Lake
City, UT. The tenant, Bonneville Health Systems, Inc. ("BHS"), stopped
paying rent in August 1997 due to financial difficulties. Alpine Medical
Group, a medical consulting firm, is currently evaluating a potential
acquisition of BHS. Since November 1998, Alpine has been paying to the
borrower monthly rent of $75,000, an amount that covers the current debt
service.
3 Represents J.P. Morgan's contribution to the total pool
4 The first delinquent loan is secured by a corporate apartment building in
Atlanta, GA. The collateral property has suffered in the last year due to
the construction of two competing properties and the re-routing of the
access road to the subject property.
The second delinquent loan is secured by a limited service hotel located
in Altavista, VA. The loan is currently 30 days delinquent.
5 Mortgage Capital Funding, Inc., Multifamily/Commercial Mortgage
Pass-Through Certificates, Series 1998-MC2
6 Represents J.P. Morgan's contribution to the pool
J.P. Morgan Commercial Mortgage Finance Corp, Series 1999-C7 Page 16
<PAGE>
<TABLE>
ANNEX E
[STATE STREET LOGO] J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. W.A.C.
MORTGAGE PASS-THROUGH CERTIFICATES W.A.M.
SERIES 1999-C7 PAYMENT DATE
RECORD DATE
TRUSTEE'S REPORT TO CERTIFICATEHOLDERS
PAYMENT SUMMARY
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Current
Pass-Through Interest Fitch/S&P Original Beginning Principal Interest Total Ending
Class CUSIP Rate Type Rating ** Balance Balance Paid Paid Paid Balance
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS:
--------------------------------------------------------------------
DISTRIBUTIONS PER CERTIFICATE
- -----------------------------------------------------------------------------
Beginning Principal Interest Ending
Class Certificate Factor Distribution Distribution Certificate Factor
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
STATE STREET This report has been prepared by or based on information furnished to State Street Bank and Trust Company
Serving Institutional ("State Street") by one or more third parties (e.g.,Servicer, Master Servicer, etc.).State Street shall not
Investors Worldwide have and does not undertake responsibility for the accuracy or completeness of information provided by such
third parties, and makes no representations or warranties with respect to the accuracy or completeness
thereof or the sufficiency thereof for any particular purpose. State Street has not independently verified
information received from third parties, and shall have no liability for any inaccuracies therein or caused
thereby.
</TABLE>
<PAGE>
<TABLE>
[STATE STREET LOGO] J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. W.A.C.
MORTGAGE PASS-THROUGH CERTIFICATES W.A.M.
SERIES 1999-C7 PAYMENT DATE
RECORD DATE
TRUSTEE'S REPORT TO CERTIFICATEHOLDERS
PRINCIPAL DETAIL
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Total
Principal Realized Cumulative Cumulative
Beginning Scheduled Unscheduled Other Principal/ Distribution Losses/ Appraisal Ending Realized Appraisal
Class Balance Principal Principal Cash Adjustments Amount Balance Adj. Reduction Amt. Balance Losses Reduction
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS:
-----------------------------------------------------------------------------------------------------------------------------
INTEREST DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued Beg. Current Additional
Certificate Unpaid Prepayment Interest Trust Fund Prepayment Additional Total Interest Cumulative Unpaid
Class Interest Interest Int. Shortfall Shortfalls Expenses Premiums Adjustments Distr. Amount Interest Shortfall
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS:
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
[STATE STREET LOGO] J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. W.A.C.
MORTGAGE PASS-THROUGH CERTIFICATES W.A.M.
SERIES 1999-C7 PAYMENT DATE
RECORD DATE
TRUSTEE'S REPORT TO CERTIFICATEHOLDERS
BOND CLASS RATING, SUBORDINATION LEVEL AND MATURITIES:
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Ratings Original Current Last Original Current Orig. Class Maturity
Class As Of Date Rating Rating Rating Subordination Level Sub.Level @ 0% CPR
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
DELINQUENCIES One Month Two Months Three+Months Foreclosures Total
---------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
# of Loans 0 0 0 0 0
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Ending APB $0.00 $0.00 $0.00 $0.00 $0.00
- ----------------------------------------------------------------------------------------
TWELVE MONTH SUMMARY OF PREPAYMENTS AND
PREPAYMENT PENALTIES: SUBORDINATION:
- ------------------------------------------------------ -----------------------------------------------------------
MONTH/YEAR PREPAYMENTS PENALTIES ORIGINAL CURRENT
---------- ----------- --------- CLASS SUBORDINATION SUBORDINATION
----- ------------- -------------
- ------------------------------------------------------ -----------------------------------------------------------
-------------------------------
APPRAISAL REDUCTIONS: Current Total Cum.Total
-------------------------------
- -------------------------------------------------------------------------------------------------------
Loan # 0 0 0 0 0 0
- -------------------------------------------------------------------------------------------------------
Amount $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
[STATE STREET LOGO] J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. W.A.C.
MORTGAGE PASS-THROUGH CERTIFICATES W.A.M.
SERIES 1999-C7 PAYMENT DATE
RECORD DATE
TRUSTEE'S REPORT TO CERTIFICATEHOLDERS
<CAPTION>
OTHER INFORMATION
==========================================================================================================================
AVAILABLE DISTRIBUTION AMOUNT
COLLATERAL INFORMATION: CLOSING BEG ENDING
COLL. BALANCE COLL. BALANCE COLL. BALANCE
------------- ------------- -------------
<S> <C> <C> <C>
LOAN COUNT
Aggregate amount of P&I Advances made during current period:
SERVICING FEES:
---------------
Aggregate Amount of servicing compensation paid to Master Servicer
Aggregate Amount of servicing compensation paid to Trustee:
Additional Special Servicing Fee
AGGREGATE AMOUNT OF: Additional Trust Fund Expenses Mortgage Loans that
have been paid in full: Mortgage Loans that have been paid at their
Maturity Date: Prepayment Penalties paid on the Mortgage Loans:
--------------------------------------------------------------------------------------------------------------------------
SPEED HISTORY CPR%*
------------- -----
1 month 0.00%
3 month 0.00%
6 month 0.00%
12 month N/A
Life 0.00%
* Principal received within 1 month of maturity is not considered
prepayment in the calculation of CPR.
==========================================================================================================================
</TABLE>
<PAGE>
<TABLE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C7
Distribution of Current Scheduled Principal Balances
<CAPTION>
- -----------------------------------------------------------------------------------------------
Current Weighted Averages
Scheduled # of Aggregate % Tot ----------------------------------
Principal Mtg Sched Prin Sched Mnths Mort
Balance Loans Balance Bal DSCR to Mat Rate
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<1,000,000.00
1,000,000.00+
2,000,000.00+
3,000,000.00+
4,000,000.00+
5,000,000.00+
5,999,999.91+
7,000,000.00+
8,000,000.00+
9,000,000.00+
10,000,000.00+
15,000,000.00+
20,000,000.00+
- -----------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------
DISTRIBUTION OF CURRENT MORTGAGE INTEREST RATES
- -----------------------------------------------------------------------------------------------
Current Weighted Averages
Mortgage # of Aggregate % Tot ----------------------------------
Interest Mtg Sched Prin Sched Mnths Mort
Rate Loans Balance Bal DSCR to Mat Rate
- -----------------------------------------------------------------------------------------------
<6.75%
7.00% +
7.25% +
7.50% +
7.75% +
8.00% +
8.25% +
8.50% +
8.75% +
- -----------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------
STATE STREET CORPORATE TRUST
WEB: CORPORATETRUST.STATESTREET.COM
PAYMENT DATE
REPORT #
DISTRIBUTION OF STATES BY BALANCE
- -----------------------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot ---------------------------------------
Mtg Sched Prin Sched Mnths Mort
States Loans Balance Bal DSCR to Mat Rate
- -----------------------------------------------------------------------------------------------------------
California
Florida
Maryland
Illinois
Michigan
North Carolina
Minnesota
Washington
Massachusetts
South Carolina
Colorado
Georgia
Nevada
Pennsylvania
Virginia
Indiana
Wisconsin
Hawaii
Ohio
New Jersey
Texas
New York
Mississippi
Arkansas
Louisiana
Nebraska
New Mexico
Arizona
Connecticut
- -----------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------
DISTRIBUTION OF PROPERTY TYPE
- -----------------------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot ---------------------------------------
Property Mtg Sched Prin Sched Mnths Mort
Types Loans Balance Bal DSCR to Mat Rate
- -----------------------------------------------------------------------------------------------------------
Multifamily
Office
Anchored Retail
Hotel
Office/Retail
Unanchored Retail
Congregate Care
Industrial
Mobile Home Park
Industrial/Office
Nursing Home
- -----------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C7
DISTRIBUTION OF REMAINING STATED TERM (BALLOON LOANS ONLY)
<CAPTION>
- -------------------------------------------------------------------------------------------
Remaining Weighted Averages
Stated # of Aggregate % Tot -------------------------------------
Term Mtg Sched Prin Sched Mnths Mort
(Months) Loans Balance Bal DSCR to Mat Rate
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<60
60+
96+
132+
180+
240+
- -------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------
DIST. OF REMAINING STATED TERM (FULLY AMORTIZING LOANS ONLY)
- -------------------------------------------------------------------------------------------
Remaining Weighted Averages
Stated # of Aggregate % Tot -------------------------------------
Term Mtg Sched Prin Sched Mnths Mort
(Months) Loans Balance Bal DSCR to Mat Rate
- -------------------------------------------------------------------------------------------
<60
60+
96+
132+
180+
240+
- -------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------
DISTRIBUTION OF REMAINING STATED TERM (ALL LOANS)
- -------------------------------------------------------------------------------------------
Remaining Weighted Averages
Stated # of Aggregate % Tot -------------------------------------
Term Mtg Sched Prin Sched Mnths Mort
(Months) Loans Balance Bal DSCR to Mat Rate
- -------------------------------------------------------------------------------------------
0+
60+
96+
132+
180+
240+
- -------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------
STATE STREET CORPORATE TRUST
WEB: CORPORATETRUST.STATESTREET.COM
PAYMENT DATE
REPORT #
DISTRIBUTION OF REMAINING AMORTIZATION TERM
- ----------------------------------------------------------------------------------------------
Weighted Averages
Original # of Aggregate % Tot -------------------------------------
Amortization Mtg Sched Prin Sched Mnths Mort
Term Loans Balance Bal DSCR to Mat Rate
- ----------------------------------------------------------------------------------------------
<60
60+
120+
180+
240+
300+
360+
- ----------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------
DISTRIBUTION OF SEASONING
- ----------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot -------------------------------------
Seasoning Mtg Sched Prin Sched Mnths Mort
(months) Loans Balance Bal DSCR to Mat Rate
- ----------------------------------------------------------------------------------------------
<13
13-24
25-36
37-48
49-60
61-120
121+
- ----------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------
DISTRIBUTION OF ORIGINAL TERM TO STATED MATURITY
- ----------------------------------------------------------------------------------------------
Weighted Averages
Original # of Aggregate % Tot -------------------------------------
Term to Mtg Sched Prin Sched Mnths Mort
Maturity Loans Balance Bal DSCR to Mat Rate
- ----------------------------------------------------------------------------------------------
0+
50+
100+
150+
200+
250+
300+
400+
- ----------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP.
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C7
DISTRIBUTION OF LOAN TO VALUE RATIO
<CAPTION>
- -----------------------------------------------------------------------------------------------
Weighted Averages
Most # of Aggregate % Tot -------------------------------------
Recent Mtg Sched Prin Sched Mnths Mort
LTV Loans Balance Bal DSCR to Mat Rate
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Not Populated
<50.01
50.01 +
55.01 +
60.01 +
65.01 +
70.01 +
75.01 +
80.01+
- -----------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------
DISTRIBUTION OF AMORTIZATION TYPE
- -----------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot -------------------------------------
Amortization Mtg Sched Prin Sched Mnths Mort
Type Loans Balance Bal DSCR to Mat Rate
- -----------------------------------------------------------------------------------------------
Balloon
Fully Amortizing
ARD
- -----------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------
STATE STREET CORPORATE TRUST
WEB: CORPORATETRUST.STATESTREET.COM
PAYMENT DATE
REPORT #
DISTRIBUTION OF MOST RECENT DEBT SERVICE COVERAGE RATIO
- -----------------------------------------------------------------------------------------------
Weighted Averages
# of Aggregate % Tot -------------------------------------
Mtg Sched Prin Sched Mnths Mort
DSCR Loans Balance Bal DSCR to Mat Rate
- -----------------------------------------------------------------------------------------------
Not populated
<1.20x
1.20x +
1.25x +
1.30x +
1.35x +
1.40x +
1.45x +
1.50x +
1.55x +
1.60x +
1.70x +
1.80x +
- -----------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. STATE STREET CORPORATE TRUST
Mortgage Pass-Through Certificates WEB: CORPORATETRUST.STATESTREET.COM
Series 1999-C7 PAYMENT DATE
SERVICER WATCH LIST
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Short Name Scheduled Paid Comment/
Prospectus (When Property Loan Thru Maturity LTM* Reason on
ID Appropriate) Type City State Balance Date Date DSCR Watch List
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
List all loans on watch list and reason sorted in decending balance order.
- ------------------------------------------------------------------------------------------------------------------------------------
Total: $
- ------------------------------------------------------------------------------------------------------------------------------------
*LTM - Last 12 months either trailing or last annual
</TABLE>
<PAGE>
<TABLE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. STATE STREET CORPORATE TRUST
MORTGAGE PASS-THROUGH CERTIFICATES WEB: CORPORATETRUST.STATESTREET.COM
SERIES 1999-C7 PAYMENT DATE
REPORT
DELINQUENCY/PREPAYMENT REPORTING HISTORY: ROLLING 24 MONTHS
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Delinq 1 Month Delinq 2 Months Delinq 3+ Months Foreclosure/Bank REO Modifications Specially Serviced Prepayments
Dist ------------------------------------------------------------------------------------------------------------------------------
Date # Bal # Bal # Bal # Bal # Bal # Bal # Bal # Bal
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. STATE STREET CORPORATE TRUST
MORTGAGE PASS-THROUGH CERTIFICATES WEB: CORPORATETRUST.STATESTREET.COM
SERIES 1999-C7 PAYMENT DATE
REPORT
DELINQUENT LOAN STATUS REPORT
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Other
Short Name Paid Total P&I Total Advances
Prospectus (When Thru Advances Expenses (Taxes & Total Transfer Resolution Foreclosure Workout
ID Appropriate) Date To Date To Date Escrow) Exposure Date Date Date Strategy Comments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30 DAYS DELINQUENT
60 DAYS DELINQUENT
90 + DAYS DELINQUENT
CURRENT & AT SPECIAL SERVICER
- ------------------------------------------------------------------------------------------------------------------------------------
* Workout Strategy should match the CSSA Loan file using abreviated words in place of a code number such as (FCL - In Foreclosure,
MOD - Modification, DPO - Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan, TBD - To Be Determined etc...). It
is possible to combine the status codes if the loan is going in more than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
</TABLE>
<PAGE>
<TABLE>
J.P. MORGAN COMMERCIAL MORTGAGE FINANCE CORP. STATE STREET CORPORATE TRUST
MORTGAGE PASS-THROUGH CERTIFICATES WEB: CORPORATETRUST.STATESTREET.COM
SERIES 1999-C7 PAYMENT DATE
REPORT
LOAN LEVEL DETAIL
=====================================================================================================
CLOSING TERMS CURRENT TERMS
=====================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Paid
Offer Property Sched Note Maturity Sched Note Maturity Sched Prepay/ Prepay Thru Prepmt Transfer Loan
Control# Type City State Bal Rate Date Bal Rate Date P&I Liquid/adj Date Date Premium Date Status
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
totals
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Status:
A = Payment not rec'd. but still in grace period, B = Late payment, but less than 1mo., 0 = Current, 1 = 1 mo. delinquent, 2 = 2mo.
delinquent, 3 = Three or more mo. delinquent 4 = Assumed scheduled payment (performing matured balloon), 7 = Foreclosure, 9 = REO
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX F
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
1999-C7 (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, Cedelbank 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 F have the meanings
assigned to them in the Prospectus Supplement and the Prospectus.
Secondary market trading between investors holding Global Securities
through Cedelbank 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 Cedelbank or Euroclear and DTC
Participants holding Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of
Cedelbank 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, Cedelbank 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 Cedelbank 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 Cedelbank and/or Euroclear Participants. Secondary market
trading between Cedelbank Participants or Euroclear Participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
Trading between DTC seller and Cedelbank or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
to the account of a Cedelbank Participant or a Euroclear Participant, the
purchaser will send instructions to Cedelbank or Euroclear through a
F-1
<PAGE>
Cedelbank Participant or Euroclear Participant at least one business day
prior to settlement. Cedelbank 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 Cedelbank 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 Cedelbank
or Euroclear cash debit will be valued instead as of the actual settlement
date.
Cedelbank 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 Cedelbank or
Euroclear. Under this approach, they may take on credit exposure to Cedelbank
or Euroclear until the Global Securities are credited to their accounts one
day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank 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, Cedelbank 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 Cedelbank 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 Cedelbank 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 Cedelbank or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedelbank 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 Cedelbank or Euroclear through a Cedelbank Participant or
Euroclear Participant at least one business day prior to settlement. In these
cases, Cedelbank 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 Cedelbank
Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the Cedelbank 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 Cedelbank 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 Cedelbank Participant's or Euroclear Participant's account would
instead be valued as of the actual settlement date. Finally, day traders that
use Cedelbank or Euroclear and that purchase Global Securities from DTC
Participants for delivery to Cedelbank 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:
F-2
<PAGE>
(a) borrowing through Cedelbank or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedelbank 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 Cedelbank 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 Cedelbank Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A Beneficial Owner of Global Securities holding securities through
Cedelbank 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.
F-3
<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.
APRIL 7, 1999
<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
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
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.......................................... 101
Legal Matters ................................................ 102
Financial Information......................................... 102
Rating........................................................ 102
Index of Principal Terms...................................... 103
</TABLE>
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
3
<PAGE>
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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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 or 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 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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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
other retirement plan or arrangement,
including individual retirement accounts,
annuities and Keogh plans, that is subject
to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code and an investment
manager of a collective investment fund or
separate account in which such plans,
accounts, annuities or arrangements are
invested, should carefully review with its
legal advisors whether the purchase or
holding of Offered Certificates could give
rise to a transaction that is prohibited or
is not otherwise 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 fair market value based on the most recent appraisal obtained by a
Servicer, (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;
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(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 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
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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 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.
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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.
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
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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, 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
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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 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.
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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 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
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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."
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 generally, among others 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;
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(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.
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
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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 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
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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 accordance with the Servicing Standard; attempting to cure
delinquencies; supervising foreclosures; inspecting Mortgaged Properties
under certain circumstances; and maintaining accounting records relating to
the Mortgage Loans.
Master Servicer
Unless otherwise specified in the related Prospectus Supplement, 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.
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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."
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.
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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 not later than the end of the
third calendar year following the year of acquisition, unless (i) the
Internal Revenue Service grants an extension of time to sell such property or
(ii) the Trustee receives an opinion of independent counsel to the effect
that the holding of the property by the Trust Fund subsequent to the end of
the third year following the year in which such acquisition occurred 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 or 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 the first (and, if multiple bids are
contemporaneously received, the highest) cash bid or offer received from any
person that constitutes a fair price.
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 Servicers 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 with interest thereon.
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.
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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
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
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may provide blanket coverage) or any combination thereof insuring against
loss occasioned by fraud, theft or other intentional misconduct of the
officers and employees 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 in all material respects 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
which remains uncured as specified in the Agreement. 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 three calendar years
following the year of acquisition. Unless otherwise provided in the related
Prospectus Supplement, with respect to a Series of Certificates for which an
election is made to qualify the Trust Fund or a part thereof as a REMIC, the
Agreement will permit foreclosed property to be held 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).
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 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.
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E. INFORMATION REPORTING AND BACKUP WITHHOLDING
The Master Servicer or Trustee 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, 1999, 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.
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
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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 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.
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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.
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
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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 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
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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 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.
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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 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
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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.
The IRS has issued final 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 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
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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. 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
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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.
Information Reporting and Backup Withholding. The Master Servicer or
Trustee 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.
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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, 1999,
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 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
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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 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.
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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 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
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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, 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.
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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.
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
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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.
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
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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 (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
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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"),
and Section 4975 of the Code impose certain restrictions on employee benefit
plans subject to ERISA and on certain other retirement plans and arrangements
(including, but not limited to individual retirement accounts and Keogh
plans) ("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 or Section 4975 of the Code, 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, regulatory 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, any insurer of the Mortgage Assets 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, regulatory 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
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interest in the entity, "benefit plan investors" in the aggregate, own 25% or
more of the value of any class of equity interest (excluding from the
calculation the value of equity interests held by persons who have
discretionary authority or control with respect to the assets of the entity
(or held by affiliates of such persons)). "Benefit plan investors" are
defined as Plans as well as employee benefit plans not subject to ERISA
(e.g., governmental plans) and entities whose underlying assets include plan
assets by reason of Plan investment in such entities. To fit within this safe
harbor, benefit plan investors must own less than 25% of each class of
certificates, regardless of the portion of total equity value represented by
such class, on an ongoing basis.
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.
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 IBCA, Inc., Moody's
Investors Service, Inc. and Standard & Poor's Ratings Group (each, a
"Rating Agency");
(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.
The Trust Fund must also meet the following requirements:
(i) the corpus of the Trust Fund must consist solely of assets of the
type that have been included in other investment pools;
(ii) certificates evidencing interests in such other investment pools
must have been rated in one of the three highest rating categories of a
Rating Agency for at least one year prior to the Plan's acquisition of the
Certificates; and
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(iii) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of the Certificates.
On July 21, 1997, Labor published in the Federal Register an amendment to
the Exemption, which extends exemptive relief to certain mortgage-backed and
asset-backed securities transactions using pre-funding accounts for trusts
issuing pass-through certificates. The amendment generally allows mortgage
loans or other secured receivables (the "Obligations") supporting payments to
certificateholders, and having a value equal to no more than twenty-five
percent (25%) of the total principal amount of the certificates being offered
by the trust, to be transferred to the trust within a 90-day or three-month
period following the closing date (the "Pre-Funding Period"), instead of
requiring that all such Obligations be either identified or transferred on or
before the Closing Date. The relief is available when certain conditions are
met.
Moreover, the Exemption provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when any person who has
discretionary authority or renders investment advice with respect to the
investment of plan assets causes a Plan to acquire certificates in a trust,
provided that, among other requirements: (i) such person (or its affiliate)
is an obligor with respect to five percent or less of the fair market value
of the obligations or receivables contained in the trust; (ii) the Plan is
not a plan with respect to which any member of the Restricted Group is the
"plan sponsor" (as defined in Section 3(16)(B) of ERISA); (iii) in the case
of an acquisition in connection with the initial issuance of certificates, at
least fifty percent of each class of certificates in which Plans have
invested is acquired by persons independent of the Restricted Group and at
least fifty percent of the aggregate interest in the trust fund is acquired
by persons independent of the Restricted Group; (iv) a Plan's investment in
certificates of any class does not exceed twenty-five percent of all of the
certificates of that class outstanding at the time of the acquisition; and
(v) immediately after the acquisition, no more than twenty-five percent of
the assets of any Plan with respect to which such person has discretionary
authority or renders investment advice are invested in certificates
representing an interest in one or more trusts containing assets sold or
serviced by the same entity. The Exemption does not apply to Plans sponsored
by any member of the Restricted Group.
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.
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
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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 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
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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.
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.
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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
<TABLE>
<CAPTION>
<S> <C>
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
benefit plan investors ................... 98
Book-Entry Certificates .................. 32
Cash Flow Agreement ...................... 9, 28
Cash Flow Agreements ..................... 1
Cede ..................................... 4, 38
CERCLA ................................... 19, 67
Certificate .............................. 40
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
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Deferred Interest ........................ 79
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, 100
Grantor Trust Certificates ............... 12
Hazardous Materials ...................... 69
Indirect Participants .................... 38
Insurance Proceeds ....................... 43
IRS ...................................... 74, 83
JPMSI .................................... 101
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 ................................ 100
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 ..................................... 100
Net Operating Income ..................... 24
New Regulations .......................... 80, 89
Nonrecoverable Advance ................... 35
Obligations .............................. 99
Offered Certificates ..................... 1
OID ...................................... 73, 74
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OID Regulations .......................... 74
Originator ............................... 22
OTS ...................................... 100
Participants ............................. 38
parties in interest ...................... 97
Pass-Through Rate ........................ 9, 33
Payment Lag Certificates ................. 87
Permitted Investments .................... 43
Plans .................................... 97
Policy Statement ......................... 100
Pre-Funding Period ....................... 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, 98
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 ............... 82
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Title V .................................. 70
Trust Assets ............................. 3
Trust Fund ............................... 1
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
</TABLE>
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