<PAGE>
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(2)
(TO PROSPECTUS DATED DECEMBER 18, 1996) Registration File No.: 333-15893
#############################################################################
[MIDLAND LOGO]
#############################################################################
$445,531,000 (APPROXIMATE)
MIDLAND REALTY ACCEPTANCE CORP. (DEPOSITOR)
MIDLAND LOAN SERVICES, L.P. (MASTER SERVICER AND SPECIAL SERVICER)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1996-C2
-----------------------------
The Commercial Mortgage Pass-Through Certificates, Series 1996-C2 (the
"Certificates") will consist of 16 Classes of Certificates, designated as the
Class A-1 Certificates, the Class A-2 Certificates, the Class A-EC
Certificates, the Class B Certificates, the Class C Certificates, the Class D
Certificates, the Class E Certificates, the Class F Certificates, the Class G
(continued on next page)
-----------------------------
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE MORTGAGE LOAN SELLERS, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE TRUSTEE, THE FISCAL AGENT, THE UNDERWRITERS OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE
LOANS ARE INSURED OR GUARANTEED BY THE UNITED STATES GOV ERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-----------------------------
PROSPECTIVE INVESTORS SHOULD REVIEW FULLY THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS, INCLUDING, WITHOUT LIMITATION, THE FACTORS DISCUSSED UNDER
"RISK FACTORS" AT PAGE S-23 IN THIS PROSPECTUS SUPPLEMENT AND PAGE 9 OF THE
PROSPECTUS BEFORE PURCHASING ANY OF THE OFFERED CERTIFICATES.
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL CERTIFICATE RATED FINAL SCHEDULED FINAL
OR NOTIONAL BALANCE PASS-THROUGH DISTRIBUTION DATE DISTRIBUTION DATE
CLASS <F1> RATE <F2> <F3> <F4>
- ------------ --------------------- -------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Class A-1 .. $145,744,000 7.020% January 25, 2029 August 25, 2005
- ------------ --------------------- -------------- ------------------- -------------------
Class A-2 .. $210,167,000 7.233% January 25, 2029 December 25, 2006
- ------------ --------------------- -------------- ------------------- -------------------
Class B ..... $ 30,727,000 7.342% January 25, 2029 December 25, 2006
- ------------ --------------------- -------------- ------------------- -------------------
Class C ..... $ 28,166,000 7.441% January 25, 2029 January 25, 2007
- ------------ --------------------- -------------- ------------------- -------------------
Class D ..... $ 23,045,000 7.636% January 25, 2029 September 25, 2008
- ------------ --------------------- -------------- ------------------- -------------------
Class E ..... $ 7,682,000 8.029% January 25, 2029 October 25, 2008
- ------------ --------------------- -------------- ------------------- -------------------
- -----------------------------------------------------------------------------
<FN>
<F1> Approximate, subject to an upward or downward variance of up to 5%.
<F2> In addition to distributions of principal and interest, holders of
certain Classes of Certificates will be entitled to receive a portion
of the Prepayment Premiums received from the borrowers as described
herein. See "DESCRIPTION OF THE CERTIFICATES--Distributions--Prepayment
Premiums" herein.
<F3> The Rated Final Distribution Date (the "Rated Final Distribution Date")
for each Class of Offered Certificates is the Distribution Date
occurring two years after the latest Assumed Maturity Date of any of
the Mortgage Loans. The "Assumed Maturity Date" of (a) any Mortgage
Loan that is not a Balloon Loan is the maturity date of such Mortgage
Loan and (b) any Balloon Loan is the date on which such Mortgage Loan
would be deemed to mature in accordance with its original amortization
schedule absent its Balloon Payment.
<F4> The "Scheduled Final Distribution Date" with respect to any Class of
Certificates is the Distribution Date on which the final distribution
would occur for such Class of Certificates based on the assumptions
described in "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
</FN>
</TABLE>
The Offered Certificates will be purchased by Prudential Securities
Incorporated, Deutsche Morgan Grenfell Inc. and Llama Company, L.P. (the
"Underwriters") from the Depositor and will be offered by the Underwriters
from time to time to the public in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. Proceeds to the
Depositor from the sale of the Offered Certificates will be approximately
$452,213,965, before deducting certain expenses expected to be approximately
$2,400,000 payable by the Depositor. The Offered Certificates are offered by
the Underwriters, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that delivery of the Offered Certificates
will be made in book-entry form through the Same-Day Funds Settlement System
of The Depository Trust Company ("DTC"), on or about December 23, 1996 (the
"Delivery Date"), against payment therefor in immediately available funds.
PRUDENTIAL SECURITIES INCORPORATED DEUTSCHE MORGAN GRENFELL INC.
LLAMA COMPANY, L.P.
DECEMBER 18, 1996
<PAGE>
(continued from previous page)
Certificates, the Class H Certificates, the Class J Certificates, the Class K
Certificates, the Class L-1 Certificates, the Class L-2 Certificates
(collectively, the "Regular Certificates"), the Class R-I Certificates and
the Class R-II Certificates (together, the "Residual Certificates"). Only the
Class A-1, Class A-2, Class B, Class C, Class D and Class E Certificates (the
"Offered Certificates") are offered hereby.
The Certificates will represent beneficial ownership interests in a trust
fund (the "Trust Fund") to be created by Midland Realty Acceptance Corp. (the
"Depositor"). The Trust Fund will consist primarily of a pool (the "Mortgage
Pool") of 136 fixed-rate mortgage loans (the "Mortgage Loans") secured by
first liens on commercial and multifamily residential properties (each, a
"Mortgaged Property").
The Mortgaged Properties consist of multifamily residential housing,
congregate care facilities, retail properties, office buildings, mini
warehouse facilities, industrial properties, hotels, mobile home parks and
mixed use properties. Ninety-four of the Mortgage Loans were originated by
Midland Loan Services, L.P. ("Midland") and subsequently purchased by Midland
Commercial Financing Corp. ("MCFC"). Twenty-one of the Mortgage Loans were
purchased by German American Capital Corporation ("GACC") from various
unaffiliated mortgage banks or other originators in the secondary market.
GACC is an affiliate of Deutsche Morgan Grenfell Inc. ("DMG"). Seventeen of
the Mortgage Loans were originated by Boston Capital Mortgage Company,
Limited Partnership ("BCMC"), and will be purchased by MCFC immediately prior
to the closing of this offering. BCMC is an affiliate of Llama Company, L.P.
("Llama Company"). MCFC acquired the remaining four Mortgage Loans from other
entities in the secondary market. MCFC and GACC are herein individually
referred to as a "Mortgage Loan Seller" and collectively as the "Mortgage
Loan Sellers." The Mortgage Loans will be sold to the Depositor by the
Mortgage Loan Sellers on or prior to the date of initial issuance of the
Certificates. The characteristics of the Mortgage Loans and the related
Mortgaged Properties are described under "RISK FACTORS" and "DESCRIPTION OF
THE MORTGAGE POOL" herein.
The Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J and Class K Certificates (the "P&I Certificates")
will be entitled to distributions of interest on their respective Certificate
Balances at the applicable Pass-Through Rate for each such Class. The Class
A-EC Certificates will be entitled to distributions of interest at the Class
A-EC Pass-Through Rate on the Class A-EC Notional Balance. The Class L-2
Certificates will be entitled to distributions of interest at the Class L-2
Pass-Through Rate on the Class L-2 Notional Balance. The Class L-1
Certificates are principal only and will not be entitled to distributions of
interest. See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
Distributions of principal and interest, as applicable, on the Regular
Certificates will be made, to the extent of Available Funds, on the 25th day
of each month or, if any such day is not a Business Day, on the next
succeeding Business Day, beginning in January, 1997 (each, a "Distribution
Date"). Distributions allocable to interest on the Certificates will be made
as described under "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
THE RIGHTS OF THE HOLDERS OF THE CLASS B, CLASS C, CLASS D, CLASS E, CLASS F,
CLASS G, CLASS H, CLASS J, CLASS K, CLASS L-1 AND CLASS L-2 CERTIFICATES TO
RECEIVE DISTRIBUTIONS OF PRINCIPAL AND INTEREST WILL BE SUBORDINATE TO SUCH
RIGHTS OF THE HOLDERS OF THE CLASS A-1, CLASS A-2 AND CLASS A-EC CERTIFICATES
(THE "SENIOR CERTIFICATES") (EXCEPT TO THE EXTENT OF ANY CLASS A-EC
SUBORDINATED ADVANCE AMOUNT); THE RIGHTS OF THE HOLDERS OF THE CLASS C, CLASS
D, CLASS E, CLASS F, CLASS G, CLASS H, CLASS J, CLASS K, CLASS L-1 AND CLASS
L-2 CERTIFICATES TO RECEIVE SUCH DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH
RIGHTS OF THE HOLDERS OF THE CLASS B CERTIFICATES; THE RIGHTS OF THE CLASS D,
CLASS E, CLASS F, CLASS G, CLASS H, CLASS J, CLASS K, CLASS L-1 AND CLASS L-2
CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS C CERTIFICATES; THE RIGHTS OF THE CLASS E, CLASS F,
CLASS G, CLASS H, CLASS J, CLASS K, CLASS L-1 AND CLASS L-2 CERTIFICATES TO
RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF THE CLASS D
CERTIFICATES; THE RIGHTS OF THE HOLDERS OF THE CLASS F, CLASS G, CLASS H,
CLASS J, CLASS K, CLASS L-1 AND CLASS L-2 CERTIFICATES TO RECEIVE
DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF THE CLASS E CERTIFICATES;
THE RIGHTS OF THE HOLDERS OF THE CLASS G, CLASS H, CLASS J, CLASS K, CLASS
L-1 AND CLASS L-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE
TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS F CERTIFICATES; THE RIGHTS OF THE
CLASS H, CLASS J, CLASS K, CLASS L-1 AND CLASS L-2 CERTIFICATES TO RECEIVE
DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS
G CERTIFICATES; THE RIGHTS OF THE CLASS J, CLASS K, CLASS L-1 AND CLASS L-2
CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO SUCH RIGHTS OF
THE HOLDERS OF THE CLASS H CERTIFICATES; THE RIGHTS OF THE CLASS K, CLASS L-1
AND CLASS L-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE SUBORDINATE TO
SUCH RIGHTS OF THE HOLDERS OF THE CLASS J CERTIFICATES; AND THE RIGHTS OF THE
CLASS L-1 AND CLASS L-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS WILL BE
SUBORDINATE TO SUCH RIGHTS OF THE HOLDERS OF THE CLASS K CERTIFICATES. CLASS
A-EC SUBORDINATED ADVANCE AMOUNTS WILL BE DISTRIBUTED TO THE CLASS A-EC
CERTIFICATES PRIOR TO ANY DISTRIBUTIONS BEING MADE TO THE RESIDUAL
CERTIFICATES. In addition, each Class of Regular Certificates will have the
benefit of subordination of the Residual Certificates to the extent of any
distributions to which the Residual Certificates would otherwise be entitled.
See "DESCRIPTION OF THE CERTIFICATES--Subordination" herein.
S-2
<PAGE>
The Residual Certificates are not entitled to distributions of interest
or principal.
The yield to maturity on each Class of the Regular Certificates will be
sensitive, and, in the case of the Class A-EC, Class L-1 and Class L-2
Certificates, will be very sensitive, to the amount and timing of debt
service payments (including both voluntary and involuntary prepayments,
defaults and liquidations) on the Mortgage Loans, and payments with respect
to repurchases thereof that are applied in reduction of the Certificate
Balance of such Class (or, in the case of the Class A-EC or Class L-2
Certificates, which reduce the Class A-EC Notional Balance or the Class L-2
Notional Balance, respectively). No representation is made as to the rate of
prepayments on or liquidations of the Mortgage Loans or as to the anticipated
yield to maturity of any Class of Regular Certificates. All of the Mortgage
Loans generally provide that a permitted prepayment must be accompanied by a
Prepayment Premium; provided, however, that the Prepayment Premium
requirement generally expires prior to the maturity date of a Mortgage Loan.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and Conditions of the
Mortgage Loans--Prepayment Provisions" herein. Prepayment Premiums, to the
extent collected, are distributable to the holders of the Regular
Certificates as and to the extent described under "DESCRIPTION OF THE
CERTIFICATES--Distributions--Prepayment Premiums" herein.
The yield to investors on each Class of the Regular Certificates will also
be very sensitive to the timing and magnitude of losses on the Mortgage Loans
due to liquidations to the extent that the Certificate Balances of the Class
or Classes of Certificates that are subordinate to such Class have been
reduced to zero. A loss on any one of the Mortgage Loans included in the
Mortgage Pool could result in a significant loss, and in some cases a
complete loss, of an investor's investment in any Class of the Regular
Certificates. No representation is made as to the rate of liquidations of or
losses on the Mortgage Loans.
The Certificates are being issued pursuant to a Pooling and Servicing
Agreement dated as of December 1, 1996 (the "Pooling and Servicing
Agreement"), by and among the Depositor, Midland Loan Services, L.P., as
servicer (in such capacity, the "Master Servicer") and special servicer (in
such capacity, the "Special Servicer"), LaSalle National Bank, as trustee
(the "Trustee"), and ABN AMRO Bank N.V., as fiscal agent (the "Fiscal
Agent"). The obligations of the Master Servicer with respect to the
Certificates will be limited to its contractual servicing obligations and the
obligation under certain circumstances to make Advances with respect to the
Mortgage Loans. See "THE POOLING AND SERVICING AGREEMENT" herein.
It is a condition to the initial issuance of the Certificates that the
Certificates have the following ratings from Fitch Investors Service, L.P.
("Fitch") and Moody's Investor Services, Inc. ("Moody's" and together with
Fitch, the "Rating Agencies"):
<TABLE>
<CAPTION>
CLASS FITCH MOODY'S
- --------- ----------- -----------
<S> <C> <C>
A-1 AAA Aaa
A-2 AAA Aaa
A-EC AAA Aaa
B AA Aa2
C A A2
D BBB Baa2
E BBB- unrated
F BB+ unrated
G BB unrated
H BB- unrated
J B unrated
K B- unrated
L-1 unrated unrated
L-2 unrated unrated
R-I unrated unrated
R-II unrated unrated
</TABLE>
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely receipt by holders thereof of all payments of
interest to which they are entitled and ultimate receipt of all payments of
principal by the Rated Final Distribution Date. The Rating Agencies' ratings
take into consideration the credit quality of the mortgage pool, structural
and legal aspects associated with the Certificates, and the extent to which
the payment stream in the mortgage pool is adequate to make payments required
under the Certificates. Ratings on mortgage pass-through certificates do not,
however, represent an assessment of the likelihood, timing or frequency of
principal prepayments by borrowers or the degree to which such prepayments
(both voluntary and involuntary) might differ from those originally
anticipated. The security ratings do not address the possibility that
Certificateholders might suffer a lower than anticipated yield. In addition,
ratings on mortgage pass-through certificates do not address the likelihood
of receipt of Prepayment Premiums or the timing of the receipt thereof or the
likelihood of collection by the Master Servicer of Default Interest. In
general, the ratings thus address
S-3
<PAGE>
credit risk and not prepayment risk. As described herein, the amounts payable
with respect to the Class A-EC Certificates consist only of interest. If the
entire pool of Mortgage Loans were to prepay in the initial month, with the
result that the Class A-EC Certificateholders receive only a single month's
interest and thus suffer a nearly complete loss of their investment, all
amounts "due" to such holders will nevertheless have been paid, and such
result is consistent with the "AAA" and "Aaa" ratings received on the Class
A-EC Certificates. Class A-EC Subordinated Advance Amounts, if any, will be
subordinated to the Subordinate Certificates and it is highly unlikely that
any such amounts will actually be received by the holders of the Class A-EC
Certificates. THE RATINGS FOR THE CLASS A-EC CERTIFICATES DO NOT ADDRESS THE
LIKELIHOOD OF THE TIMING OR RECEIPT OF ANY CLASS A-EC SUBORDINATED ADVANCE
AMOUNTS. The Class A-EC Notional Balance upon which interest is calculated is
reduced by the allocation of Realized Losses, scheduled payments on the
Mortgage Loans and prepayments, whether voluntary or involuntary. The rating
does not address the timing or magnitude of reductions of the Class A-EC
Notional Balance, but only the obligation to pay interest timely on the Class
A-EC Notional Balance as so reduced from time to time. Accordingly, the
ratings of the Class A-EC Certificates should be evaluated independently from
similar ratings on other types of securities. See "RISK FACTORS" and
"RATINGS" herein.
Elections will be made to treat designated portions of the Trust Fund
(such portions of the Trust Fund, the "Trust REMICs"), and the Trust REMICs
will qualify, as two separate "real estate mortgage investment conduits"
(each a "REMIC" or, alternatively, "REMIC I" and "REMIC II") for federal
income tax purposes. As described more fully herein, the Class A-1, Class
A-2, Class A-EC, Class B, Class C, Class D, Class E, Class F, Class G, Class
H, Class J, Class K, Class L-1 and Class L-2 Certificates will constitute
"regular interests" in REMIC II, and the Class R-I Certificates and the Class
R-II Certificates will constitute the sole Class of "residual interests" in
REMIC I and REMIC II, respectively. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES," "DESCRIPTION OF THE CERTIFICATES--Delivery, Form and
Denomination" and "ERISA CONSIDERATIONS" herein and "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES," "DESCRIPTION OF THE CERTIFICATES" and "ERISA
CONSIDERATIONS" in the Prospectus.
There is currently no secondary market for the Offered Certificates. The
Underwriters have advised the Depositor that they currently intend to make a
secondary market in the Offered Certificates, but they are under no
obligation to do so. There can be no assurance that such a market will
develop or, if it does develop, that it will continue or will provide
investors with a sufficient level of liquidity of investment. See "RISK
FACTORS--Limited Liquidity" herein.
This Prospectus Supplement does not contain complete information about the
offering of the Offered Certificates. Additional information is contained in
the Prospectus and investors are urged to read both this Prospectus
Supplement and the Prospectus in full. Sales of the Offered Certificates may
not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and Prospectus. This is in addition to the obligation of dealers
acting as underwriters to deliver a Prospectus Supplement and Prospectus with
respect to their unsold allotments and subscriptions.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), with respect to the Offered Certificates. This
Prospectus Supplement and the accompanying Prospectus, which form a part of
the Registration Statement, omit certain information contained in such
Registration Statement pursuant to the rules and regulations of the
Commission. The Registration Statement can be inspected and copied at the
Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W, Washington D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the Web site is
http://www.sec.gov.
S-4
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to read carefully, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and the Prospectus relating to the Offered Certificates in making
their investment decision. The following Executive Summary does not include
all relevant information relating to the Offered Certificates or the Mortgage
Loans, particularly with respect to the risks and special considerations
involved with an investment in the Offered Certificates and is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the Prospectus. Prior to making any investment
decision, a prospective investor should review fully this Prospectus
Supplement and the Prospectus. Capitalized terms used and not otherwise
defined herein have the respective meanings assigned to them in the
Prospectus.
<TABLE>
<CAPTION>
Approximate
Percent of Approximate
Total Credit Support
- ----------- ------------------------------------------------------------------------------------------------- ---------------
<S> <C> <C> <C>
28.5% CLASS A-EC CLASS A-1 Ratings: (AAA/Aaa) 30.5%
- ----------- --------------------------------------------------------------------
41.0% CLASS A-2 Ratings: (AAA/Aaa) 30.5%
- ----------- --------------------------------------------------------------------
6.0% Ratings: CLASS B Ratings: (AA/Aa2) 24.5%
- ----------- (AAA/Aaa) --------------------------------------------------------------------
5.5% CLASS C Ratings: (A/A2) 19.0%
- ----------- --------------------------------------------------------------------
4.5% CLASS D Ratings: (BBB/Baa2) 14.5%
- ----------- --------------------------------------------------------------------
1.5% CLASS E Ratings: (BBB-/Unrated) 13.0%
- ----------- --------------------------------------------------------------------
3.0% Excess CLASS F Ratings: (BB+/Unrated) 10.0%
- ----------- Interest --------------------------------------------------------------------
2.5% on Classes CLASS G Ratings: (BB/Unrated) 7.5%
- ----------- A-1 through --------------------------------------------------------------------
1.0% L-2 CLASS H Ratings: (BB-/Unrated) 6.5%
- ----------- ---------------------------------------------------------------------
2.5% CLASS J Ratings: (B/Unrated) 4.0%
- ----------- ---------------------------------------------------------------------
1.5% CLASS K Ratings: (B-/Unrated) 2.5%
- ----------- ---------------------------------------------------------------------
2.5% CLASS L-2 Interest only CLASS L-1 Principal only
Unrated Unrated
- --------------- ------------------------------------------------------------------------------------------------
Not offered hereby: Classes A-EC, F, G, H, J, K, L-1 and L-2.
Ratings: (Fitch/Moody's)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
INITIAL
AGGREGATE
CERTIFICATE WEIGHTED PRINCIPAL
RATING BY PRINCIPAL % OF PASS-THROUGH AVERAGE LIFE WINDOW (YEARS)
CLASS FITCH/ MOODY'S AMOUNT TOTAL DESCRIPTION RATE (YEARS)<F1> <F1>
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Senior Certificates
-----------------------------------------------------------------------------------------------------------------
0.089-8.672/
A-1 AAA/Aaa $145,744,000 28.5% Fixed Rate 7.020% 5.503/5.503 0.089-8.672
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
8.672-10.006/
A-2 AAA/Aaa $210,167,000 41.0% Fixed Rate 7.233% 9.661/9.661 8.672-10.006
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
A-EC AAA/Aaa<F2> N/A<F3> N/A Excess Interest 1.395%<F4> N/A N/A
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
Subordinate Certificates
-----------------------------------------------------------------------------------------------------------------
10.006-10.006/
B AA/Aa2 $ 30,727,000 6.0% Fixed Rate 7.342% 10.006/10.006 10.006-10.006
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
10.006-10.089/
C A/A2 $ 28,166,000 5.5% Fixed Rate 7.441% 10.052/10.052 10.006-10.089
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
10.089-11.506/
D BBB/Baa2 $ 23,045,000 4.5% Fixed Rate 7.636% 10.697/10.751 10.089-11.756
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
11.506-11.506/
E BBB-/ Unrated $ 7,682,000 1.5% Fixed Rate 8.029% 11.506/11.808 11.756-11.839
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
11.506-11.506/
F BB+/ Unrated $ 15,364,000 3.0% Fixed Rate 7.233% 11.506/11.932 11.839-12.006
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
11.506-11.506/
G BB/Unrated $ 12,803,000 2.5% Fixed Rate 7.233% 11.506/12.051 12.006-12.089
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
11.506-11.506/
H BB-/Unrated $ 5,122,000 1.0% Fixed Rate 7.233% 11.506/12.089 12.089-12.089
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
11.506-11.506/
J B/Unrated $ 12,803,000 2.5% Fixed Rate 7.233% 11.506/12.982 12.089-14.839
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
11.506-11.506/
K B-/Unrated $ 7,682,000 1.5% Fixed Rate 7.233% 11.506/14.919 14.839-14.922
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
11.506-11.506/
L-1 Unrated $ 12,796,998 2.5% Principal Only N/A 11.506/16.302 14.922-24.589
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
L-2 Unrated $ N/A N/A Interest Only 7.233% N/A N/A
- ------- --------------- -------------- ------- -------------- -------------- --------------- --------------
<FN>
<F1> Based respectively on Scenario 2, which assumes a 0% CPR, no defaults
and an Auction in June, 2008, and Scenario 1, which assumes a 0% CPR
and no defaults. See "YIELD AND MATURITY CONSIDERATIONS--Weighted
Average Life" herein.
<F2> The ratings for the Class A-EC Certificates do not address the
likelihood of the timing or receipt of any Class A-EC Subordinated
Advance Amounts. See "DESCRIPTION OF THE CERTIFICATES--Distributions"
herein.
<F3> The Class A-EC Notional Balance is equal to the aggregate Certificate
Balance of the Regular Certificates (other than the Class A-EC and
Class L-2 Certificates).
<F4> Initial Pass-Through Rate. The Pass-Through Rate will be equal to the
excess of the Weighted Average Net Mortgage Rate over the Weighted
Average Pass-Through Rate.
</FN>
</TABLE>
S-6
<PAGE>
Securities:
Senior Certificates ... The Class A-1, Class A-2 and Class A-EC
Certificates.
Subordinate
Certificates ........... The Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K,
Class L-1 and Class L-2 Certificates.
Residual Certificates: The Class R-I and Class R-II Certificates.
Distribution Dates .... The 25th day of each month, or if such 25th
day is not a Business Day, the Business Day
immediately following such day, commencing
in January 1997. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" herein.
Scheduled Final
Distribution Date .....
<TABLE>
<CAPTION>
SCHEDULED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
- --------------------- ----------------------
<S> <C>
Class A-1 ............ August 25, 2005
Class A-2 ............ December 25, 2006
Class A-EC ........... July 25, 2021
Class B .............. December 25, 2006
Class C .............. January 25, 2007
Class D .............. September 25, 2008
Class E .............. October 25, 2008
Class F .............. December 25, 2008
Class G .............. January 25, 2009
Class H .............. January 25, 2009
Class J .............. October 25, 2011
Class K .............. November 25, 2011
Class L-1 ............ July 25, 2021
Class L-2 ............ July 25, 2021
</TABLE>
The Scheduled Final Distribution Dates set
forth above have been determined on the
basis of the assumptions described in
"DESCRIPTION OF THE CERTIFICATES--Scheduled
Final Distribution Date" herein.
Rated Final
Distribution Date .... As to each Class of Certificates, January
25, 2029.
Early Termination ..... The Trust Fund is subject to early
termination if less than 10% of the Initial
Pool Balance remains outstanding. See
"DESCRIPTION OF THE CERTIFICATES--Early
Termination" herein.
Auction Call Date ..... On or after the Distribution Date occurring
in June 2008, the Trust Fund is subject to
early termination pursuant to the auction
procedures described herein. See
"DESCRIPTION OF THE CERTIFICATES--Auction"
herein.
Master Servicer ....... Midland Loan Services, L.P. See "MIDLAND
LOAN SERVICES, L.P." herein.
Special Servicer ...... Midland Loan Services, L.P. See "MIDLAND
LOAN SERVICES, L.P." herein.
Trustee ............... LaSalle National Bank. See "THE POOLING AND
SERVICING AGREEMENT -- The Trustee" herein.
S-7
<PAGE>
Fiscal Agent ......... ABN AMRO Bank N.V. See "THE POOLING AND
SERVICING AGREEMENT--The Fiscal Agent"
herein.
Federal Tax Status .... Elections will be made to treat designated
portions of the Trust Fund as two separate
"real estate mortgage investment conduits"
("REMIC").
ERISA ................. The Class A-1 and Class A-2 Certificates
should qualify for an exemption from the
prohibited transaction provisions of ERISA.
The Subordinate Certificates and the Class
A-EC Certificates may be acquired by
employee benefit plans subject to ERISA only
if an exemption from the prohibited
transaction provisions of ERISA is
applicable. See "ERISA CONSIDERATIONS"
herein and in the Prospectus.
SMMEA ................. None of the Offered Certificates are
mortgage-related securities pursuant to the
Secondary Mortgage Market Enhancement Act of
1984.
DTC Eligibility ....... The Offered Certificates are being delivered
through the facilities of The Depository
Trust Company ("DTC").
Closing Date .......... On or about December 23, 1996.
Structural Summary:
Interest Payments ..... On each Distribution Date, each Class of
Regular Certificates (other than the Class
L-1 Certificates) generally will be entitled
to receive interest distributions in an
amount equal to the Class Interest
Distribution Amount for such Class and
Distribution Date, together with any unpaid
Class Interest Shortfalls remaining from
prior Distribution Dates, in each case to
the extent of Available Funds remaining
after payment to each outstanding Class of
Certificates bearing an earlier sequential
Class designation of (i) the Class Interest
Distribution Amount and any unpaid Class
Interest Shortfall for such Classes, (ii)
the Pooled Principal Distribution Amount for
such Distribution Date for such Classes and
(iii) payment of the unreimbursed amount of
Realized Losses previously allocated to such
Classes (together with interest thereon at
the Pass-Through Rate for such Class). See
"DESCRIPTION OF THE
CERTIFICATES--Distributions" herein.
Notwithstanding the foregoing, in the event
that the Master Servicer's obligation to
make a P&I Advance with respect to one or
more Seriously Delinquent Loans is reduced
as a result of Anticipated Losses (see "THE
POOLING AND SERVICING AGREEMENT--Advances"
herein), then on each Distribution Date the
Class A-EC Certificates' Class Interest
Distribution Amount that is payable pro rata
with the Class A-1 and Class A-2
Certificates will be reduced by the Class
A-EC Subordinated Advance Amount. See
"DESCRIPTION OF THE
CERTIFICATES--Distributions" herein for what
constitutes a Class A-EC Subordinated
Advance Amount. The Class A-EC Subordinated
Advance Amount, plus any unpaid Class A-EC
Subordinated Advance Amounts from prior
Distribution Dates, will be paid prior to
any distributions being made to the Residual
Certificates.
Principal Payments .... The Pooled Principal Distribution Amount for
each Distribution Date will be distributed,
first, to the Class A-1 Certificates, until
the Certificate Balance thereof has been
reduced to zero and thereafter, sequentially
to each other Class of Regular Certificates
(other than the Class A-EC and Class L-2
Certificates), until its Certificate Balance
is reduced to zero, in each case, to the
extent of Available Funds
S-8
<PAGE>
remaining after (i) payment to each
outstanding Class of Certificates having an
earlier sequential Class designation of the
Class Interest Distribution Amount, any
unpaid Class Interest Shortfalls remaining
from prior Distribution Dates and the Pooled
Principal Distribution Amount for each such
Class of Certificates and the unreimbursed
amount of Realized Losses previously
allocated to each such Class of Certificates
(together with interest thereon at the
Pass-Through Rate for such Class) and (ii)
payment of the Class Interest Distribution
Amount and any unpaid Class Interest
Shortfalls remaining from prior Distribution
Dates to such Class (or, with respect to the
Class L-1 Certificates, to the Class L-2
Certificates) and to any other outstanding
Class that is pari passu with such Class.
Credit Enhancement .... The Class A-1, Class A-2 and Class A-EC
Certificates (except to the extent of any
Class A-EC Subordinated Advance Amounts) are
credit enhanced by the Classes of
Subordinate Certificates, which consist of
the Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K,
Class L-1 and Class L-2 Certificates. Each
other Class of Regular Certificates will
likewise be protected by the subordination
offered by the other Classes of Certificates
that bear a later sequential designation.
Class A-EC Subordinated Advance Amounts will
be distributed to the Class A-EC
Certificates prior to any distributions
being made to the Residual Certificates.
Realized Losses of principal and interest
from any Mortgage Loan and certain other
losses experienced by the Trust Fund will
generally be allocated to the Classes of
Regular Certificates (other that the Class
A-EC and Class L-2 Certificates) in reverse
sequential order starting with the Class L-1
Certificates; provided, that Realized Losses
are allocated pro rata to the Class A-1 and
Class A-2 Certificates in accordance with
their respective Certificate Balances.
Realized Losses allocated to the Class L-1
Certificates will reduce the Class L-2
Notional Balance. Realized Losses allocated
to the Regular Certificates (other than the
Class A-EC and Class L-2 Certificates) will
reduce the Class A-EC Notional Balance.
Advances .............. Subject to the limitations described herein,
the Master Servicer is required to make
advances (each such amount, a "P&I Advance")
in respect of delinquent Monthly Payments
(but not Balloon Payments) on the Mortgage
Loans. If the Master Servicer fails to make
an Advance required to be made, the Trustee
shall then be required to make such Advance.
If both the Master Servicer and the Trustee
fail to make such Advance, the Fiscal Agent
shall be required to make such Advance. See
"THE POOLING AND SERVICING
AGREEMENT--Advances" herein.
Collateral Overview:
Loan Details .......... See Annex A hereto for certain
characteristics of the Mortgage Loans on a
loan-by-loan basis. All numerical
information provided herein with respect to
the Mortgage Loans is provided on an
approximate basis. All weighted average
information regarding the Mortgage Loans
reflects weighting of the Mortgage Loans by
their Cut-off Date Principal Balances. The
"Cut-off Date Principal Balance" of each
Mortgage Loan is equal to the unpaid
principal balance thereof as of the Cut-off
Date, after application of all payments of
principal due on or before such date,
whether or not received. See also
"DESCRIPTION OF THE MORTGAGE POOL" for
additional statistical information regarding
the Mortgage Loans.
S-9
<PAGE>
<TABLE>
<CAPTION>
CHARACTERISTICS
- -------------------------------------------
<S> <C>
Aggregate Cut-off Date Principal Balance .. $512,101,998
Number of Mortgage Loans ................... 136
Weighted Average Mortgage Rate ............. 8.74%
Weighted Average Remaining Term to Maturity 120 months
Weighted Average DSCR <F1> ................. 1.36x
Average Mortgage Loan Balance .............. $ 3,765,456
Balloon Mortgage Loans ..................... 97.4%
- ------------------------------
<FN>
<F1> Debt Service Coverage Ratio ("DSCR") is calculated based
on the ratio of Underwritten Cash Flow to the Annual Debt
Service. For more information on the Debt Service Coverage
Ratios, see "DESCRIPTION OF THE MORTGAGE POOL--Certain
Characteristics of the Mortgage Pool" herein.
</FN>
</TABLE>
CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
CUT-OFF DATE PRINCIPAL BALANCE PRINCIPAL BALANCE LOANS
- ---------------------------------- ------------------ ------------------
<S> <C> <C>
$ 500,000 -$ 999,999 ............ 3.0% 18
$ 1,000,000 -$ 1,999,999 ............ 12.4% 43
$ 2,000,000 -$ 2,999,999 ............ 8.7% 18
$ 3,000,000 -$ 3,999,999 ............ 7.7% 12
$ 4,000,000 -$ 4,999,999 ............ 10.6% 12
$ 5,000,000 -$ 5,999,999 ............ 8.2% 8
$ 6,000,000 -$ 6,999,999 ............ 3.8% 3
$ 7,000,000 -$ 7,999,999 ............ 10.4% 7
$ 8,000,000 -$ 8,999,999 ............ 6.7% 4
$ 9,000,000 -$ 9,999,999 ............ 3.7% 2
$10,000,000 -$10,999,999 ............ 8.1% 4
$11,000,000 -$11,999,999 ............ 2.3% 1
$12,000,000 -$12,999,999 ............ 2.4% 1
$16,000,000 -$16,999,999 ............ 3.3% 1
$17,000,000 -$17,999,999 ............ 3.5% 1
$27,000,000 -$27,999,999 ............ 5.3% 1
------------------ ------------------
Total ........................... 100.0% 136
================== ==================
</TABLE>
GEOGRAPHICAL DISTRIBUTION
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
JURISDICTION PRINCIPAL BALANCE LOANS
- ---------------- ------------------ ------------------
<S> <C> <C>
Texas ........... 17.2% 31
California ...... 15.2% 15
Florida ......... 9.9% 14
Colorado ........ 7.0% 5
Michigan ........ 6.1% 9
New York ........ 5.4% 5
Maryland ........ 5.3% 6
Other <F1> ...... 33.9% 51
------------------ ------------------
Total ......... 100.0% 136
================== ==================
- ------------
<FN>
<F1> No other jurisdiction has Mortgage Loans aggregating more
than 4.0% of the Initial Pool Balance.
</FN>
</TABLE>
S-10
<PAGE>
DEBT SERVICE COVERAGE RATIOS <F1>
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
RANGE OF DEBT SERVICE COVERAGE RATIOS PRINCIPAL BALANCE LOANS
- ---------------------------------------- ------------------ ------------------
<S> <C> <C>
1.15-1.19 ............................... 0.9% 2
1.20-1.24 ............................... 6.2% 8
1.25-1.29 ............................... 19.9% 26
1.30-1.34 ............................... 24.0% 33
1.35-1.39 ............................... 28.5% 32
1.40-1.44 ............................... 9.9% 12
1.45-1.49 ............................... 4.0% 6
1.50-1.54 ............................... 1.7% 4
1.55-1.59 ............................... 1.4% 7
1.60-1.64 ............................... 2.0% 4
2.45-2.49 ............................... 1.5% 1
2.70-2.74 ............................... 0.1% 1
------------------ ------------------
Total ................................. 100.0% 136
================== ==================
Weighted Average DSCR ................... 1.36x
- ------------
<FN>
<F1> Calculated based on the ratio of Underwritten Cash Flow to
Annual Debt Service. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Characteristics of the Mortgage Pool" herein
for more information relating to the calculation of debt
service coverage ratios.
</FN>
</TABLE>
LOAN TO VALUE RATIOS
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
RANGE OF LOAN TO VALUE RATIOS PRINCIPAL BALANCE LOANS
- --------------------------------- ------------------ ------------------
<S> <C> <C>
30.0% to less than 35.0% ......... 1.1% 2
35.0% to less than 40.0% ......... 0.4% 2
40.0% to less than 45.0% ......... 2.3% 4
50.0% to less than 55.0% ......... 1.6% 3
55.0% to less than 60.0% ......... 9.9% 18
60.0% to less than 65.0% ......... 10.1% 14
65.0% to less than 70.0% ......... 17.1% 32
70.0% to less than 75.0% ......... 33.9% 43
75.0% to less than 80.0% ......... 21.0% 15
80.0% to less than 85.0% ......... 0.8% 2
85.0% to less than 90.0% ......... 1.8% 1
------------------ ------------------
Total .......................... 100.0% 136
================== ==================
Weighted Average LTV ............. 69.11%
</TABLE>
S-11
<PAGE>
PROPERTY TYPES
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
PROPERTY TYPES PRINCIPAL BALANCE LOANS
- -------------------------- ------------------ ------------------
<S> <C> <C>
Congregate Care ........... 0.9% 1
Hotel ..................... 1.5% 1
Industrial ................ 0.6% 1
Industrial/Warehouse ..... 4.3% 8
Mini Warehouse ............ 0.2% 1
Mixed Use ................. 3.3% 1
Mobile Home Park .......... 0.6% 2
Multifamily ............... 38.7% 58
Office .................... 11.8% 16
Office/R&D ................ 2.9% 2
Office/Retail ............. 2.7% 2
Office/Warehouse .......... 1.2% 4
Retail, Anchored .......... 10.2% 9
Retail, Factory Outlet ... 3.2% 3
Retail, Single Tenant .... 9.5% 14
Retail, Unanchored ........ 8.1% 13
------------------ ------------------
Total ................... 100.0% 136
================== ==================
</TABLE>
MATURITY YEARS
<TABLE>
<CAPTION>
% BY CUT-OFF DATE NUMBER OF MORTGAGE
YEAR PRINCIPAL BALANCE LOANS
- ------------ ------------------ ------------------
<S> <C> <C>
2001 ........ 2.5% 2
2002 ........ 2.3% 2
2003 ........ 7.1% 4
2004 ........ 3.0% 4
2005 ........ 3.7% 4
2006 ........ 53.8% 74
2007 ........ 6.6% 11
2008 ........ 8.9% 18
2009 ........ 4.9% 3
2010 ........ 0.4% 1
2011 ........ 6.1% 11
2016 ........ 0.2% 1
2021 ........ 0.7% 1
------------------ ------------------
Total ..... 100.0% 136
================== ==================
</TABLE>
S-12
<PAGE>
PREPAYMENT LOCKOUT/PREMIUM ANALYSIS <F1>
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT
RESTRICTION ASSUMING NO PREPAYMENTS
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restrictions
- -------------------------------
Lockout ........................ 27.8% 27.9% 27.2% 25.4% 22.2% 10.6% 3.8%
Greater of Yield Maintenance or
Percentage Premium of:
5.00% or greater .............. 33.1 33.1 33.0 32.7 32.7 31.2 31.1
4.00% to 4.99% ................
3.00% to 3.99% ................ 7.4 7.4 8.2 8.0 7.4 7.6 6.0
2.00% to 2.99% ................ 4.9 4.9 4.9 5.8 5.6 6.6 6.8
1.00% to 1.99% ................ 23.4 23.3 23.2 24.0 21.8 26.8 30.8
0.00% to 0.99% ................ 2.5 2.5 2.5 2.7 2.7 8.2 9.7
Total of Yield Maintenance .... 71.2 71.1 71.8 73.3 70.2 80.5 84.3
Total of Yield Maintenance
and Lockout ................... 99.0 99.0 99.0 98.7 92.5 91.1 88.1
Percentage Premium:
5.00% or greater .............. 0.0 0.0 0.0 0.0 0.0 0.5 0.2
4.00 to 4.99% ................. 0.0 0.0 0.0 0.0 0.0 0.9 0.4
3.00 to 3.99% ................. 0.0 0.0 0.0 0.3 6.2 0.0 3.0
2.00 to 2.99% ................. 1.0 1.0 1.0 1.0 1.3 7.3 1.6
1.00 to 1.99% ................. 0.0 0.0 0.0 0.0 0.0 0.3 1.3
Total with Percentage Premium . 1.0 1.0 1.0 1.3 7.5 8.9 6.4
Open ........................... 0.0 0.0 0.0 0.0 0.0 0.0 5.5
Total .......................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
% of Initial PoolBalance <F2> .. 100.0% 98.7% 97.3% 95.8% 94.1% 89.9% 86.0%
- ----------------------
<FN>
<F1> This table sets forth an analysis of the percentage of the declining
balance of the Mortgage Pool that, on December 1, in each of the
years indicated, will be within a Lockout Period or in which
Principal Prepayments must be accompanied by the indicated
Prepayment Premium or yield maintenance charge. See "DESCRIPTION OF
THE MORTGAGE POOL--Certain Terms and Conditions of the Mortgage
Loans--Prepayment Provisions" for the assumptions used in preparing
this table.
<F2> Represents the approximate percentage of the Initial Pool Balance
that will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</FN>
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
2003 2004 2005 2006 2007 2008 2009 2010 2011
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restrictions
- -------------------------------
Lockout ........................ 2.8% 3.0% 3.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Greater of Yield Maintenance or
Percentage Premium of:
5.00% or greater .............. 33.2 26.3 10.0 15.8 8.1 2.6 2.7 0.8 0.0
4.00% to 4.99% ................
3.00% to 3.99% ................ 6.4 5.1 2.0 6.2 0.0 0.0 0.0 0.0 0.0
2.00% to 2.99% ................ 7.3 7.5 3.7 0.0 0.0 0.0 0.0 0.0 0.0
1.00% to 1.99% ................ 29.0 29.7 17.3 0.0 0.0 0.0 0.0 0.0 0.0
0.00% to 0.99% ................ 10.4 10.8 10.3 20.9 28.3 29.0 49.2 47.7 100.0
Total of Yield Maintenance .... 86.3 79.3 43.3 42.9 36.4 31.6 51.9 48.5 100.0
Total of Yield Maintenance
and Lockout ................... 89.1 82.3 46.4 42.9 36.4 31.6 51.9 48.5 100.0
Percentage Premium:
5.00% or greater .............. 0.0 7.7 17.0 13.0 12.3 0.0 0.0 0.0 0.0
4.00 to 4.99% ................. 0.0 0.0 0.2 13.6 1.8 0.0 0.0 0.0 0.0
3.00 to 3.99% ................. 2.7 1.6 2.2 0.7 12.6 2.9 0.0 0.0 0.0
2.00 to 2.99% ................. 4.7 3.6 5.6 3.8 1.0 7.5 4.5 0.0 0.0
1.00 to 1.99% ................. 0.0 4.4 1.7 0.0 0.0 1.7 12.7 4.3 0.0
Total with Percentage Premium . 7.5 17.3 26.7 31.1 27.7 12.2 17.2 4.3 0.0
Open ........................... 3.4 0.4 26.9 26.0 35.9 56.2 30.9 47.2 0.0
Total .......................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
% of Initial PoolBalance <F2> .. 78.4 73.8 69.5% 22.1% 15.9% 8.8% 5.1% 4.4% 0.7%
- ------------------
<FN>
<F2> Represents the approximate percentage of the Initial Pool Balance
that will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</TABLE>
S-13
<PAGE>
SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and
the Prospectus. Capitalized terms used herein and not otherwise defined
herein have the meanings assigned in the Prospectus. See "INDEX OF
SIGNIFICANT DEFINITIONS" herein and in the Prospectus.
Title of Certificates .. Midland Realty Acceptance Corp. Commercial
Mortgage Pass-Through Certificates, Series
1996-C2 (the "Certificates").
The Certificates ....... $145,744,000 initial aggregate principal
balance ("Certificate Balance") of Class A-1
Certificates;
$210,167,000 initial Certificate Balance of
Class A-2 Certificates;
Class A-EC Certificates;
$30,727,000 initial Certificate Balance of
Class B Certificates;
$28,166,000 initial Certificate Balance of
Class C Certificates;
$23,045,000 initial Certificate Balance of
Class D Certificates;
$7,682,000 initial Certificate Balance of
Class E Certificates;
$15,364,000 initial Certificate Balance of
Class F Certificates;
$12,803,000 initial Certificate Balance of
Class G Certificates;
$5,122,000 initial Certificate Balance of
Class H Certificates;
$12,803,000 initial Certificate Balance of
Class J Certificates;
$7,682,000 initial Certificate Balance of
Class K Certificates;
$12,796,998 initial Certificate Balance of
Class L-1 Certificates;
Class L-2 Certificates;
Class R-I Certificates; and
Class R-II Certificates.
The aggregate initial Certificate Balance of
all Classes of Certificates is subject to a
permitted variance of plus or minus 5% as
described herein. The Certificates will be
issued pursuant to a Pooling and Servicing
Agreement to be dated as of December 1, 1996
(the "Pooling and Servicing Agreement")
among the Depositor, the Master Servicer,
the Special Servicer, the Trustee and the
Fiscal Agent.
ONLY THE CLASS A-1, CLASS A-2, CLASS B,
CLASS C, CLASS D AND CLASS E CERTIFICATES
ARE OFFERED HEREBY.
The Class A-EC, Class F, Class G, Class H,
Class J, Class K, Class L-1, Class L-2,
Class R-I and Class R-II Certificates
(collectively, the "Private Certificates")
have not been registered under the 1933 Act
and are not offered hereby. Accordingly, to
the extent this Prospectus Supplement
contains information regarding the terms of
the Private Certificates, such information
is provided solely because of its relevance
to a prospective purchaser of an Offered
Certificate.
Depositor .............. Midland Realty Acceptance Corp., a Missouri
corporation and a wholly owned subsidiary of
Midland Loan Services, L.P. (the Master
Servicer and the Special Servicer). See "THE
DEPOSITOR" in the Prospectus.
Master Servicer ........ Midland Loan Services, L.P., a Missouri
limited partnership. See "MIDLAND LOAN
SERVICES, L.P." herein.
S-14
<PAGE>
Special Servicer ...... Midland Loan Services, L.P., a Missouri
limited partnership. See "MIDLAND LOAN
SERVICES, L.P." herein.
Trustee ................ LaSalle National Bank, a nationally
chartered bank. See "THE POOLING AND
SERVICING AGREEMENT--The Trustee" herein.
Fiscal Agent ........... ABN AMRO Bank N.V., a Netherlands banking
corporation, and the corporate parent of the
Trustee. See "THE POOLING AND SERVICING
AGREEMENT--The Fiscal Agent" herein.
Cut-off Date ........... December 1, 1996, except with respect to the
Newly Originated Mortgage Loans for which
the Cut-off Date will be the date each such
Mortgage Loan was funded.
Closing Date ........... On or about December 23, 1996.
Distribution Date ...... The 25th day of each month, or if such 25th
day is not a Business Day, the Business Day
immediately following such day, commencing
in January 1997. As used herein, a "Business
Day" is any day other than a Saturday,
Sunday or a day in which banking
institutions in the States of New York,
Missouri or Illinois are authorized or
obligated by law, executive order or
governmental decree to close.
Record Date ............ With respect to each Distribution Date, the
close of business on the last Business Day
of the month preceding the month in which
such Distribution Date occurs.
Interest Accrual Period With respect to any Distribution Date, the
calendar month preceding the month in which
such Distribution Date occurs. Interest for
each Interest Accrual Period is calculated
based on a 360-day year consisting of twelve
30-day months.
Collection Period ...... With respect to each Distribution Date and
any Mortgage Loan, the period beginning on
the day following the Determination Date in
the month preceding the month in which such
Distribution Date occurs (or, in the case of
the Distribution Date occurring in January,
1997 on the day after the Cut-off Date) and
ending on the Determination Date in the
month in which such Distribution Date
occurs.
Determination Date ..... The 17th day of any month, or if such 17th
day is not a Business Day, the Business Day
immediately preceding such 17th day,
commencing in January, 1997.
Due Date ............... With respect to any Collection Period and
Mortgage Loan, the date on which scheduled
payments are due on such Mortgage Loan
(without regard to grace periods), which
date, for the Mortgage Loans, is the first
day of the month.
Denominations .......... The Class A-1, Class A-2, Class B, Class C,
Class D and Class E Certificates will be
issued in minimum denominations of
Certificate Balance or Notional Balance, as
applicable, of $100,000 and integral
multiples of $1,000 in excess thereof and
will be registered in the name of a nominee
of The Depository Trust Company ("DTC" and,
together with any successor depository
selected by the Depositor, the "Depository")
and beneficial interests therein will be
held by investors through the book-entry
facilities of the Depository. The Depositor
has been informed by DTC that its nominee
will be Cede & Co. Beneficial Owners will
hold and transfer their respective ownership
interests in and to such Book-Entry
Certificates through the book-entry
facilities of DTC and will not be entitled
to definitive, fully registered Certificates
except in the limited circumstances set
forth herein. See "DESCRIPTION OF THE
CERTIFICATES--Delivery, Form and
Denomination" herein.
S-15
<PAGE>
Distributions ......... On each Distribution Date, each Class of
Regular Certificates (other than the Class
L-1 Certificates) will be entitled to
receive interest distributions in an amount
equal to the Class Interest Distribution
Amount for such Class and Distribution Date,
together with any unpaid Class Interest
Shortfalls remaining from prior Distribution
Dates, in each case to the extent of
Available Funds, if any, remaining after (i)
payment of the Class Interest Distribution
Amount and any unpaid Class Interest
Shortfalls remaining from prior Distribution
Dates for each other outstanding Class of
Certificates, if any, having an earlier
sequential Class designation, (ii) payment
of the Pooled Principal Distribution Amount
for such Distribution Date to each
outstanding Class of Certificates having an
earlier sequential Class designation and
(iii) payment of the unreimbursed amount of
Realized Losses, if any, up to an amount
equal to the aggregate of such unreimbursed
amount previously allocated to each other
outstanding Class of Certificates having an
earlier sequential Class designation.
References herein to the sequential Class
designation of such Classes of Certificates
means such Classes in alphabetical order;
provided, however, that the Class A-1, Class
A-2 and Class A-EC Certificates will be
treated pari passu (other than with respect
to distributions of principal) and the Class
L-1 and Class L-2 Certificates will be
treated pari passu.
The "Class Interest Distribution Amount"
with respect to any Distribution Date and
any Class of Regular Certificates (other
than the Class L-1 Certificates) is equal to
interest accrued during the related Interest
Accrual Period at the applicable
Pass-Through Rate for such Class and such
Interest Accrual Period on the Certificate
Balance or Notional Balance of such Class;
provided that reductions of the Certificate
Balance or Notional Balance of such Class as
a result of distributions in respect of
principal or the allocation of losses on the
Distribution Date occurring in such Interest
Accrual Period will be deemed to have been
made as of the first day of such Interest
Accrual Period. The Class Interest
Distribution Amount of each Class will be
reduced by its allocable sum of the amount
of any Prepayment Interest Shortfalls not
offset by Prepayment Interest Surplus, the
Servicing Fee and, if the Master Servicer
and the Special Servicer are the same
person, the Special Servicing Fee with
respect to such Distribution Date, all as
provided herein. The Class L-1 Certificates
are principal only certificates and have no
Class Interest Distribution Amount.
The Pooled Principal Distribution Amount for
each Distribution Date will be distributed,
first, to the Class A-1 Certificates, until
the Certificate Balance thereof has been
reduced to zero and thereafter, sequentially
to each other Class of Regular Certificates
(other than the Class A-EC and Class L-2
Certificates, neither of which has a
Certificate Balance and neither of which is
entitled to distributions in respect of
principal) until its Certificate Balance is
reduced to zero, in each case, to the extent
of Available Funds remaining after (i)
payment to each outstanding Class of
Certificates having an earlier sequential
Class designation of the Class Interest
Distribution Amount, any unpaid Class
Interest Shortfalls remaining from prior
Distribution Dates and the Pooled Principal
Distribution Amount for each such Class of
Certificates and the unreimbursed amount of
Realized Losses (together with interest
thereon at the Pass-Through Rate for such
Class) previously allocated to each such
Class of Certificates and (ii) payment of
the Class Interest Distribution Amount and
any unpaid Class Interest Shortfalls
remaining from prior Distribution Dates to
such Class (or, with respect to the Class
L-1 Certificates, to the Class L-2
Certificates) and to any other outstanding
Class that is pari passu with such Class.
The "Pooled Principal Distribution Amount"
for any Distribution Date is equal to the
sum (without duplication), for all Mortgage
Loans, of (i) the principal
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<PAGE>
component of all scheduled Monthly Payments
(other than Balloon Payments) that become
due (regardless of whether received) on the
Mortgage Loans during the related Collection
Period; (ii) the principal component of all
Assumed Scheduled Payments, as applicable,
deemed to become due (regardless of whether
received) during the related Collection
Period with respect to any Mortgage Loan
that is delinquent in respect of its Balloon
Payment; (iii) the Scheduled Principal
Balance of each Mortgage Loan that was
repurchased from the Trust Fund in
connection with the breach of a
representation or warranty or purchased from
the Trust Fund pursuant to the Pooling and
Servicing Agreement, in either case, during
the related Collection Period; (iv) the
portion of Unscheduled Payments allocable to
principal of any Mortgage Loan that was
liquidated during the related Collection
Period; (v) the principal component of all
Balloon Payments received during the related
Collection Period; (vi) all other Principal
Prepayments received in the related
Collection Period; and (vii) any other full
or partial recoveries in respect of
principal, including Insurance Proceeds,
Condemnation Proceeds, Liquidation Proceeds
and Net REO Proceeds.
Notwithstanding the foregoing, in the event
that the Master Servicer's obligation to
make a P&I Advance with respect to one or
more Seriously Delinquent Loans is reduced
as a result of Anticipated Losses (see "THE
POOLING AND SERVICING AGREEMENT--Advances"
herein), then on each Distribution Date the
Class A-EC Certificates' Class Interest
Distribution Amount that is payable pro rata
with the Class A-1 and Class A-2
Certificates will be reduced by the Class
A-EC Subordinated Advance Amount. See
"DESCRIPTION OF THE
CERTIFICATES--Distributions" herein for what
constitutes a Class A-EC Subordinated
Advance Amount. The Class A-EC Subordinated
Advance Amount, plus any unpaid Class A-EC
Subordinated Advance Amounts from prior
Distribution Dates, will be paid prior to
any distributions being made to the Residual
Certificates.
Additional Master Servicer or Special
Servicer compensation, interest on Advances,
extraordinary expenses of the Trust Fund and
other similar items will create a shortfall
in Available Funds, which generally will
result in a Class Interest Shortfall for the
most subordinate Class then outstanding.
See "DESCRIPTION OF THE
CERTIFICATES--Distributions" herein.
Advances ............... Subject to the limitations described herein,
the Master Servicer is required to make
advances (each such amount, a "P&I Advance")
in respect of delinquent Monthly Payments on
the Mortgage Loans. The Master Servicer will
not be required to advance the full amount
of any Balloon Payment not made by the
related borrower on its due date, but will
advance an amount equal to the monthly
payment (or portion thereof not received)
deemed to be due on the Mortgage Loan after
such default, calculated on the original
amortization schedule of such Mortgage Loan
with interest as described herein. Upon
determination of the Anticipated Loss with
respect to any Seriously Delinquent Loan,
the amount of any P&I Advance required to be
made with respect to such Seriously
Delinquent Loan on any Distribution Date
will be an amount equal to the product of
(A) the amount of the P&I Advance that would
be required to be made in respect of such
Seriously Delinquent Loan without regard to
the application of this sentence, multiplied
by (B) a fraction, the numerator of which is
equal to the Scheduled Principal Balance of
such Seriously Delinquent Loan as of the
immediately preceding Determination Date
less the Anticipated Loss and the
denominator of which is such Scheduled
Principal Balance. See "THE POOLING AND
SERVICING AGREEMENT--
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<PAGE>
Advances" herein. If the Master Servicer
fails to make a required P&I Advance, the
Trustee, acting in accordance with the
servicing standard, will be required to make
such P&I Advance, and if the Trustee fails
to make a required P&I Advance, the Fiscal
Agent will be required to make such P&I
Advance. See "THE POOLING AND SERVICING
AGREEMENT--The Fiscal Agent" herein.
Subordination .......... As a means of providing a certain amount of
protection to the holders of the Senior
Certificates (other than to the extent of
any Class A-EC Subordinated Advance Amounts)
against losses associated with delinquent
and defaulted Mortgage Loans, the rights of
the holders of the Subordinate Certificates
to receive distributions of interest and
principal, as applicable, will be
subordinated to such rights of the holders
of the Senior Certificates. Each other Class
of Regular Certificates will likewise be
protected by the subordination offered by
the other Classes of Certificates that bear
a later sequential Class designation. Class
A-EC Subordinated Advance Amounts will not
be distributed to the Class A-EC
Certificates until all amounts owing on the
Subordinate Certificates have been paid;
such amounts will be paid prior to any
distributions being made to the Residual
Certificates. This subordination will be
effected in two ways: (i) by the
preferential right of the holders of a Class
of Certificates to receive, on any
Distribution Date, the amounts of both
interest and principal, as applicable,
distributable in respect of such
Certificates on such Distribution Date prior
to any distribution being made on such
Distribution Date in respect of any Classes
of Certificates subordinate thereto, and
(ii) by the allocation of Realized Losses to
the Certificates in reverse order of their
sequential Class designations, provided that
Realized Losses are allocated pro rata to
the Class A-1 and Class A-2 Certificates in
accordance with their respective Certificate
Balances. In addition, each Class of Regular
Certificates will have the benefit of
subordination of the Residual Certificates
to the extent of any distributions to which
the Residual Certificates would otherwise be
entitled. See "DESCRIPTION OF THE
CERTIFICATES--Subordination" herein. No
other form of credit enhancement is offered
for the benefit of the holders of the
Offered Certificates.
Early Termination ...... Any holder of the Class R-I Certificates
representing more than a 50% Percentage
Interest of the Class R-I Certificates, the
Master Servicer and the Depositor will each
have the option to purchase, at the purchase
price specified herein, all of the Mortgage
Loans, and all property acquired through
exercise of remedies in respect of any
Mortgage Loans, remaining in the Trust Fund,
and thereby effect a termination of the
Trust Fund and early retirement of the then
outstanding Certificates, on any
Distribution Date on which the aggregate
Scheduled Principal Balance of the Mortgage
Loans remaining in the Trust Fund is less
than 10% of the Initial Pool Balance. See
"DESCRIPTION OF THE CERTIFICATES--Early
Termination" herein.
Auction Call Date ...... If the Trust Fund has not been terminated
earlier as described under "DESCRIPTION OF
THE CERTIFICATES--Early Termination" herein,
the Trustee will on the Distribution Date
occurring in March of each year from and
including 2008 and on any date after the
Distribution Date occurring in March 2008 on
which the Trustee receives an unsolicited
bona fide offer to purchase all (but not
less than all) of the Mortgage Loans (each,
an "Auction Valuation Date"), request that
four independent financial advisory or
investment banking or investment brokerage
firms nationally recognized in the field of
real estate analysis and reasonably
acceptable to the Master Servicer provide
the Trustee with an estimated value at which
the Mortgage Loans and all other property
acquired in respect of any
S-18
<PAGE>
Mortgage Loan in the Trust Fund could be
sold pursuant to an auction. If the
aggregate value of the Mortgage Loans and
all other property acquired in respect of
any Mortgage Loan, as determined by the
average of the three highest such estimates,
equals or exceeds the aggregate amount of
the Certificate Balances of all Certificates
outstanding on the Auction Valuation Date,
plus unpaid interest thereon, the
anticipated Auction Fees, unpaid servicing
compensation, unreimbursed Advances
(together with interest thereon at the
Advance Rate) and unpaid Trust Fund
expenses, the Trustee will auction the
Mortgage Loans and such property and thereby
effect a termination of the Trust Fund and
early retirement of the then outstanding
Certificates on or after the Distribution
Date in June 2008. The Trustee will accept
no bid lower than the Minimum Auction Price.
See "DESCRIPTION OF THE
CERTIFICATES--Auction" herein.
Certain Federal Income
Tax Consequences ...... Elections will be made to treat the Trust
REMICs, and the Trust REMICs will qualify,
as two separate real estate mortgage
investment conduits (each, "REMIC I" and
"REMIC II") for federal income tax purposes.
The Class A-1, Class A-2, Class A-EC, Class
B, Class C, Class D, Class E, Class F, Class
G, Class H, Class J, Class K, Class L-1 and
Class L-2 Certificates (collectively, the
"Regular Certificates") will represent
"regular interests" in REMIC II and the
Class R-II Certificates will be designated
as the sole Class of "residual interest" in
REMIC II. Certain uncertificated classes of
interests will represent "regular interests"
in REMIC I and the Class R-I Certificates
will be designated as the sole Class of
"residual interest" in REMIC I.
Because they represent regular interests,
the Regular Certificates generally will be
treated as newly originated debt instruments
for federal income tax purposes. Holders of
the Regular Certificates will be required to
include in income all interest on such
Certificates in accordance with the accrual
method of accounting, regardless of a
Certificateholder's usual method of
accounting. None of the Offered Certificates
are expected to be treated for federal
income tax reporting purposes as having been
issued with original issue discount. For the
purposes of determining the rate of accrual
of market discount, original issue discount
and premium for federal income tax purposes,
it has been assumed that the Mortgage Loans
will prepay at the rate of 0% CPR and that
the Trust Fund will be terminated on the
Distribution Date occurring in June 2008
pursuant to the auction termination
procedure described herein. No
representation is made as to whether the
Mortgage Loans will prepay at that rate or
any other rate or whether the Trust Fund
will be terminated on such date. See
"MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular
Interests--Interest and Acquisition
Discount" in the Prospectus.
Certain Classes of the Offered Certificates
may be treated for federal income tax
purposes as having been issued at a premium.
Whether any holder of such a Class of
Certificates will be treated as holding a
Certificate with amortizable bond premium
will depend on such Certificateholder's
purchase price. Holders of such Classes of
Certificates should consult their own tax
advisors regarding the possibility of making
an election to amortize any such premium.
See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular Interests"
in the Prospectus.
Offered Certificates held by a mutual
savings bank or domestic building and loan
association will represent interests in
"qualifying real property loans" within the
meaning of Section 593(d) of the Code.
Offered Certificates held by a real estate
S-19
<PAGE>
investment trust will constitute "real
estate assets" within the meaning of Section
856(c)(6)(B) of the Code, and income with
respect to Offered Certificates will be
considered "interest on obligations secured
by mortgages on real property or on
interests in property" within the meaning of
Section 856(c)(3)(B) of the Code. Offered
Certificates held by a domestic building and
loan association will generally constitute
"a regular or a residual interest in a
REMIC" with the meaning of Section
7701(a)(19)(C)(xi) of the Code only in the
proportion that the Mortgage Loans are
secured by multifamily apartment buildings.
See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of the REMIC and its
Holders" in the Prospectus.
For further information regarding the
federal income tax consequences of investing
in the Offered Certificates, see "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES--Taxation of
the REMIC" in the Prospectus and "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES" herein.
ERISA Considerations ... The United States Department of Labor has
issued to Prudential Securities Incorporated
an individual prohibited transaction
exemption, Prohibited Transaction Exemption
90-32, which generally exempts from the
application of certain of the prohibited
transaction provisions of Section 406 of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the excise
taxes imposed by Sections 4975(a) and (b) of
the Code and the civil penalties imposed by
502(i) of ERISA, transactions relating to
the purchase, sale and holding of
pass-through certificates such as the Class
A-1 and Class A-2 Certificates by (a)
employee benefit plans and certain other
retirement arrangements, including
individual retirement accounts and Keogh
plans, which are subject to ERISA, the Code
or a governmental plan subject to any
Similar Law (all of which are hereinafter
referred to as "Plans"), (b) collective
investment funds in which such Plans are
invested, (c) other persons acting on behalf
of any such Plan or using the assets of any
such Plan or any entity whose underlying
assets include Plan assets by reason of a
Plan's investment in the entity (within the
meaning of Department of Labor Regulations
Section 2510.3-101) and (d) insurance
companies that are using assets of any
insurance company separate account or
general account in which the assets of such
Plans are invested (or which are deemed
pursuant to ERISA or any Similar Law to
include assets of such Plans) and the
servicing and operation of mortgage pools
such as the Mortgage Pool, provided that
certain conditions are satisfied. See "ERISA
CONSIDERATIONS" herein.
THE SUBORDINATE CERTIFICATES DO NOT MEET THE
REQUIREMENTS OF THE FOREGOING EXEMPTION AND,
ACCORDINGLY, THE SUBORDINATE CERTIFICATES
MAY NOT BE PURCHASED BY OR TRANSFERRED TO,
AND ADDITIONALLY THE CLASS A-EC CERTIFICATES
ARE NOT BEING OFFERED TO, A PLAN OR PERSON
ACTING ON BEHALF OF ANY PLAN OR USING THE
ASSETS OF ANY SUCH PLAN, OTHER THAN AN
INSURANCE COMPANY USING ASSETS OF ITS
GENERAL ACCOUNT UNDER CIRCUMSTANCES IN WHICH
SUCH PURCHASE OR TRANSFER AND SUBSEQUENT
HOLDING OF SUCH CERTIFICATES WOULD NOT
CONSTITUTE OR RESULT IN A PROHIBITED
TRANSACTION. THE RESIDUAL CERTIFICATES MAY
NOT BE PURCHASED BY OR TRANSFERRED TO A
PLAN.
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<PAGE>
Ratings ............... It is a condition to the initial issuance of
the Certificates that the Certificates have
the following ratings:
<TABLE>
<CAPTION>
CLASS FITCH MOODY'S
- --------- ----------- -----------
<S> <C> <C>
A-1 AAA Aaa
A-2 AAA Aaa
A-EC AAA Aaa
B AA Aa2
C A A2
D BBB Baa2
E BBB- unrated
F BB+ unrated
G BB unrated
H BB- unrated
J B unrated
K B- unrated
L-1 unrated unrated
L-2 unrated unrated
R-I unrated unrated
R-II unrated unrated
</TABLE>
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.
The Rating Agencies' ratings on mortgage
pass-through certificates address the
likelihood of the timely receipt by holders
thereof of all payments of interest to which
they are entitled and ultimate receipt of
all payments of principal by the Rated Final
Distribution Date. The Rating Agencies'
ratings take into consideration the credit
quality of the mortgage pool, structural and
legal aspects associated with the
Certificates, and the extent to which the
payment stream in the mortgage pool is
adequate to make payments required under the
Certificates. Ratings on mortgage
pass-through certificates do not, however,
represent an assessment of the likelihood,
timing or frequency of principal prepayments
by borrowers or the degree to which such
prepayments (both voluntary and involuntary)
might differ from those originally
anticipated. The security ratings do not
address the possibility that
Certificateholders might suffer a lower than
anticipated yield. In addition, ratings on
mortgage pass-through certificates do not
address the likelihood of receipt of
Prepayment Premiums or the timing of the
receipt thereof or the likelihood of
collection by the Master Servicer of Default
Interest. In general, the ratings thus
address credit risk and not prepayment risk.
As described herein, the amounts payable
with respect to the Class A-EC Certificates
consist only of interest. If the entire pool
of Mortgage Loans were to prepay in the
initial month, with the result that the
Class A-EC Certificateholders receive only a
single month's interest and thus suffer a
nearly complete loss of their investment,
all amounts "due" to such holders will
nevertheless have been paid, and such result
is consistent with the "AAA" and "Aaa"
ratings received on the Class A-EC
Certificates. The Class A-EC Notional
Balance upon which interest is calculated is
reduced by the allocation of Realized
Losses, scheduled payments on the Mortgage
Loans and prepayments, whether voluntary or
involuntary. Class A-EC Subordinated Advance
Amounts, if any, will be subordinated to the
Subordinate Certificates and it is highly
unlikely that any such amounts will actually
be received by the holders of the Class A-EC
Certificates. THE RATINGS FOR THE CLASS A-EC
CERTIFI-
S-21
<PAGE>
CATES DO NOT ADDRESS THE LIKELIHOOD OF THE
TIMING OR RECEIPT OF ANY CLASS A-EC
SUBORDINATED ADVANCE AMOUNTS. The rating
does not address the timing or magnitude of
reductions of the Class A-EC Notional
Balance, but only the obligation to pay
interest timely on the Class A-EC Notional
Balance as so reduced from time to time.
Accordingly, the ratings of the Class A-EC
Certificates should be evaluated
independently from similar ratings on other
types of securities. See "RISK FACTORS" and
"RATINGS" herein.
Legal Investment ....... The Certificates will not constitute
"mortgage related securities" within the
meaning of the Secondary Mortgage Market
Enhancement Act of 1984. The appropriate
characterization of the Certificates under
various legal investment restrictions, and
thus the ability of investors subject to
these restrictions to purchase the
Certificates, may be subject to significant
interpretative uncertainties. Accordingly,
investors should consult their own legal
advisors to determine whether and to what
extent the Certificates constitute legal
investments for them. See "LEGAL INVESTMENT"
herein and in the Prospectus.
S-22
<PAGE>
RISK FACTORS
Prospective holders of Certificates should consider, among other things,
the factors listed below and in the Prospectus under "RISK FACTORS" in
connection with the purchase of the Certificates.
INVESTMENT IN COMMERCIAL AND MULTIFAMILY MORTGAGE LOANS
Commercial and Multifamily Lending Generally. Commercial and multifamily
lending generally is viewed as exposing a lender to risks which are different
than many of the risks faced in connection with other types of lending, such
as consumer lending. Commercial and multifamily lending generally involves
larger loans, thereby providing lenders with less diversification of risk and
the potential for greater losses resulting from the delinquency and/or
default of individual loans. Many of the Mortgage Loans are non-recourse
obligations of the related borrowers, the repayment of which is often solely
dependent upon the successful operation of the related Mortgaged Properties.
Commercial and multifamily property values and net operating income are
subject to volatility. Many of the Mortgage Loans are also Balloon Loans,
which may pose additional risks associated with both the value of the related
Mortgaged Property and the borrower's ability to obtain financing as of the
maturity of the related Mortgage Loan. A borrower's ability to repay its loan
may be impaired if future operating results are not comparable to historical
operating results. This may occur for a variety of reasons, including an
increase in vacancy rates, a decline in rental rates, an increase in
operating expenses and/or an increase in necessary capital expenditures. The
income from and market value of a Mortgaged Property may also be adversely
affected by such factors as changes in the general economic climate, the
existence of an oversupply of comparable space or a reduction in demand for
real estate in the area, the attractiveness of the property to tenants and
guests and perceptions regarding such property's safety, convenience and
services. Real estate values and income are also affected by such factors as
government regulations and changes in real estate, zoning or tax laws, the
willingness and ability of a property owner to provide capable management,
changes in interest rate levels, the availability of financing and potential
liability under environmental and other laws.
a. Aging and Deterioration of Commercial and Multifamily Properties. The
age, construction quality and design of a particular Mortgaged Property may
affect the occupancy level as well as the rents that may be charged for
individual leases or, in the case of any Hotel Properties, the amounts that
customers may be charged for the occupancy thereof. The effects of poor
construction quality are likely to require the borrower to spend increasing
amounts of money over time for maintenance and capital improvements. Even
Mortgaged Properties that were well constructed and have been well maintained
will require ongoing capital improvements in order for such Mortgaged
Properties to remain competitive in the market and retain tenants and other
occupants.
b. Leases. Repayment of the Mortgage Loans may be affected by the
expiration or termination of occupancy leases and the ability of the related
borrowers to renew such leases with the existing occupants or to relet the
space on economically favorable terms to new occupants, or the existence of a
market which requires a reduced rental rate, substantial tenant improvements
or expenditures or other concessions to a tenant in connection with a lease
renewal. No assurance can be given that leases that expire can be renewed,
that the space covered by leases that expire or are terminated can be leased
in a timely manner at comparable rents or on comparable terms or that the
borrower will have the cash or be able to obtain the financing to fund any
required tenant improvements. Income from and the market value of the
Mortgaged Properties would be adversely affected if vacant space in the
Mortgaged Properties could not be leased for a significant period of time, if
tenants were unable to meet their lease obligations or if, for any other
reason, rental payments could not be collected. Upon the occurrence of an
event of default by a tenant, delays and costs in enforcing the lessor's
rights could occur. If a significant portion of a Mortgaged Property is
leased to a single tenant, the consequences of the failure of the borrower to
relet such portion of such Mortgaged Property in the event that such tenant
vacates the space leased to it (either as a result of the expiration of the
term of the lease or a default by the tenant) or a failure of such tenant to
perform its obligations under the related lease, will be more pronounced than
if such Mortgaged Property were leased to a greater number of tenants. See
"--Tenant Matters" herein. Certain tenants at the Mortgaged Properties may be
entitled to terminate their leases or reduce their rents based upon
negotiated lease provisions, e.g., if an anchor tenant ceases operations at
the related Mortgaged Property. In such cases, there can be no assurance that
the operation of such provisions will not allow such a termination or rent
reduction. A tenant's lease may also be terminated or otherwise affected if
such tenant becomes the subject of a bankruptcy proceeding.
c. Competition. Other multifamily and commercial properties located in the
areas of the Mortgaged Properties compete with the Mortgaged Properties of
similar types to attract customers, tenants and other occupants. Such
properties generally compete on the basis of rental rates, location,
condition and features of the property. If any oversupply of available space
exists in a particular market (either as a result of the building of new
construction or a decrease in the number of
S-23
<PAGE>
customers, tenants or other occupants due to a decline in economic activity
in the area), the rental rates for the Mortgaged Properties may be adversely
affected. Commercial or multifamily properties may also face competition from
other types of property as such properties are converted to competitive uses
in the future. Such conversions may occur based upon future trends in the use
of property by tenants and occupants, e.g., the establishment of more home
based offices and businesses and the conversion of warehouse space for
multifamily use. Increased competition could adversely affect income from and
the market value of the Mortgaged Properties.
d. Quality of Management. The successful operation of the Mortgaged
Properties is also dependent on the performance of the respective property
managers of the Mortgaged Properties. Such property managers are responsible
for responding to changes in the local market, planning and implementing the
rental rate structure, including establishing levels of rent payments, and
advising the related borrower so that maintenance and capital improvements
can be carried out in a timely fashion.
Risks Particular to Mini Warehouse Facilities. Tenant privacy, anonymity
and unsupervised access may heighten environmental risks to a lender making a
loan secured by a Mini Warehouse Property. The environmental site assessments
discussed herein did not include an inspection of the contents of the
self-storage units included in the Mini Warehouse Properties and there is no
assurance that all of the units included in the Mini Warehouse Properties are
free from hazardous substances or other pollutants or contaminants or will
remain so in the future. See "--Environmental Risks" below. Due to the short
term nature of Mini Warehouse leases, Mini Warehouse Properties also may be
subject to more volatility in terms of supply and demand than loans secured
by other types of properties. Additionally, because of the construction
utilized in connection with certain mini warehouse facilities, it might be
difficult or costly to convert such a facility to an alternative use. Thus,
the liquidation value of such Mini Warehouse Properties may be substantially
less than would be the case if the same were readily adaptable to other uses.
Risks Particular to Hotel Properties. The Mortgage Pool contains one
Mortgage Loan which is secured by a Mortgage encumbering a Hotel Property.
Hotel Properties are subject to operating risks common to the hotel industry.
These risks include, among other things, a high level of continuing capital
expenditures to keep necessary furniture, fixtures and equipment updated,
competition from other hotels, increases in operating costs (which increases
may not necessarily in the future be offset by increased room rates),
dependence on business and commercial travelers and tourism, increases in
energy costs and other expenses of travel and adverse effects of general and
local economic conditions. These factors could adversely affect the related
borrower's ability to make payments on any Mortgage Loan secured by a Hotel
Property. Since limited service hotels are relatively quick and inexpensive
to construct and may quickly reflect a positive value, an over-building of
such hotels could occur in any given region, which would likely adversely
affect occupancy and daily room rates. Additionally, the revenues of certain
hotels, particularly those located in regions whose economies depend upon
tourism, may be highly seasonal in nature.
The Hotel Property may present additional risks as compared to the other
property types in that: (i) hotels are typically operated pursuant to
franchise, management and operating agreements that may be terminable by the
franchisor, the manager or the operator; (ii) the transferability of a
hotel's operating, liquor and other licenses to the entity acquiring such
hotel either through purchase or foreclosure is subject to the vagaries of
local law requirements; (iii) the potential difficulty of terminating an
ineffective operator of a Hotel Property subsequent to a foreclosure of such
Hotel Property; and (iv) future occupancy rates may be adversely affected by,
among other factors, any negative perception of such Hotel Property based
upon its historical reputation.
Although the Hotel Property's Holiday Inn franchise expires in December of
1996, the Hotel Property is expected to convert to a Radisson franchise
thereafter. The continuation of franchises is typically subject to specified
operating standards and other terms and conditions. The franchisor
periodically inspects its licensed properties to confirm adherence to its
operating standards. The failure of the Hotel Property to maintain such
standards or adhere to such other terms and conditions could result in the
loss or cancellation of the franchise license. It is possible that the
franchisor could condition the continuation of a franchise license on the
completion of capital improvements or the making of certain capital
expenditures that the related borrower determines are too expensive or are
otherwise unwarranted in light of general economic conditions or the
operating results or prospects of the affected hotels. In that event, the
related borrower may elect to allow the franchise license to lapse. In any
case, if the franchise is terminated, the related borrower may seek to obtain
a suitable replacement franchise or to operate such Hotel Property
independently of a franchise license. The loss of a franchise license could
have a material adverse effect upon the operations or the underlying value of
the hotel covered by the franchise because of the loss of associated name
recognition, marketing support and centralized reservation systems provided
by the franchisor.
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Risks Particular to Congregate Care Facilities. Loans secured by liens on
properties of this type pose additional risks not associated with loans
secured by liens on other types of income-producing real estate. While
congregate care facilities are not typically subject to extensive licensing
requirements, it is possible that such facilities may be subject to increased
governmental regulation and supervision given the growing number of senior
citizens in the general population. Additionally, the operator of a
congregate care facility may face increased operational expenses in providing
tenants with the varied array of personal services required for such facility
to compete with other similar facilities. Some of such competing facilities
may offer services not offered by such operators or may be owned by
non-profit organizations or government agencies supported by endowments,
charitable contributions, tax revenues and other sources not available to
such operators.
Risks Particular to Mobile Home Parks. Mortgage lenders whose loans are
secured by mortgages encumbering Mobile Home Park Properties may be subject
to additional risks not faced by lenders whose loans are secured by other
types of income producing properties. Since the borrower often does not own
the mobile homes located upon the related Mortgaged Property, the borrower
(and the lender subsequent to any foreclosure) may face additional costs and
delays in obtaining evictions of tenants and the removal of mobile homes upon
a default or abandonment by a tenant.
Risks Particular to Industrial Properties. Mortgage Loans secured by an
Industrial Property or an Industrial/Warehouse Property may be adversely
affected by reduced demand for industrial space occasioned by a decline in a
particular industry segment. Furthermore, an Industrial Property or an
Industrial/Warehouse Property that suited the particular needs of a tenant
may be difficult to lease to a future tenant or may become functionally
obsolete relative to newer properties. Given the inherent nature of the
operations which are typically conducted upon Industrial Properties and
Industrial/Warehouse Properties, a lender secured by a lien over such
properties may be subject to increased environmental risks.
No Guaranty. No Mortgage Loan is insured or guarantied by the United
States of America, any governmental agency or instrumentality, any private
mortgage insurer or by the Depositor, the Mortgage Loan Sellers, Midland, the
Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent, the
Underwriters or any of their respective affiliates. However, as more fully
described under "DESCRIPTION OF THE MORTGAGE POOL--General" and
"--Representations and Warranties; Repurchase" herein, MCFC, Midland, GACC
and BCMC will be obligated to repurchase a Mortgage Loan if (i) there is a
defect with respect to the documents relating to such Mortgage Loan or (ii)
certain of their respective representations or warranties concerning such
Mortgage Loan are breached and such defect or breach materially and adversely
affects the interests of the Certificateholders and such defect or breach is
not cured as required. There can be no assurance that MCFC, Midland, GACC or
BCMC will be in a financial position to effect such repurchase. See "MIDLAND
LOAN SERVICES, L.P.," "MORTGAGE LOAN SELLERS" and "BOSTON CAPITAL MORTGAGE
COMPANY, LIMITED PARTNERSHIP" herein.
Limited Recourse. The majority of the Mortgage Loans are non-recourse
loans wherein recourse generally may be had only against the specific
Mortgaged Property securing such Mortgage Loan and such limited other assets
as have been pledged to secure such Mortgage Loan, and not against the
borrower's other assets. Consequently, the payment of each non-recourse
Mortgage Loan is primarily dependent upon the sufficiency of the net
operating income from the related Mortgaged Property and, at maturity, upon
the market value of such Mortgaged Property. See "DESCRIPTION OF THE MORTGAGE
POOL--General" herein.
Concentration of Mortgage Loans and Borrowers. In general, a mortgage pool
with a significant portion of its loans having larger average balances and a
smaller number of loans may be subject to losses that are more severe than
other pools having the same or similar aggregate principal balance and
composed of smaller average loan balances and a greater number of loans. In
all cases, each Investor should carefully consider all aspects of any loans
representing a significant percentage of the outstanding principal balance of
a mortgage pool in order to ensure that such loans are not subject to risks
unacceptable to such Investor. Additionally, a mortgage pool with a high
concentration of Mortgage Loans to the same borrower or related borrowers is
subject to the potential risk that a borrower undergoing financial
difficulties might divert its resources or undertake remedial actions (such
as a bankruptcy) in order to alleviate such difficulties, to the detriment of
the Mortgaged Properties. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Characteristics of the Mortgage Pool--Concentration of Mortgage Loans and
Borrowers" herein.
Tax Considerations Related to Foreclosure. REMIC I might become subject to
federal (and possibly state or local) tax, at the highest marginal corporate
rate (currently 35%), on certain of its net income from the operation and
management of a Mortgaged Property subsequent to the Trust Fund's acquisition
of a Mortgaged Property pursuant to a foreclosure or deed-in-lieu of
foreclosure, thereby reducing net proceeds available for distribution to
Certificateholders. Such taxable net income does not include qualifying
"rents from real property," or any rental income based on the net profits of
a tenant or
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sub-tenant or allocable to a service that is customary in the area and for
the type of property involved. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Regular Interests," "--Taxation of the REMIC" and
"--Taxation of Holders of Residual Certificates" in the Prospectus.
Future Changes in the Composition of the Mortgage Pool. As principal
payments are made on the Mortgage Loans at different rates based upon the
varied amortization schedules and maturities of the Mortgage Loans, or if
prepayments are made on the Mortgage Loans, the Mortgage Pool may be subject
to more concentrated risk with respect to the reduction in both the diversity
of types of Mortgaged Properties and the number of borrowers. Because
principal on the Certificates is payable in sequential order, and no Class
receives principal until the Certificate Balance of the preceding sequential
Class or Classes has been reduced to zero, Classes that have a later
sequential designation are more likely to be exposed to such risk of
concentration than Classes with an earlier sequential priority.
Geographic Concentration. Repayments by borrowers and the market values of
the Mortgaged Properties could be affected by economic conditions generally
or in the regions where the borrowers and the Mortgaged Properties are
located, conditions in the real estate markets where the Mortgaged Properties
are located, changes in governmental rules and fiscal policies, natural
disasters (which may result in uninsured losses) and other factors that are
beyond the control of the borrowers. The economy of any state or region in
which a Mortgaged Property is located may be adversely affected to a greater
degree than that of other areas of the country by certain developments
affecting industries concentrated in such state or region. Moreover, in
recent periods, several regions of the United States have experienced
significant downturns in the market value of real estate. To the extent that
general economic or other relevant conditions in states or regions in which
Mortgaged Properties securing significant portions of the aggregate principal
balance of the Mortgage Loans are located decline and result in a decrease in
commercial property, housing or consumer demand in the region, the income
from and market value of the Mortgaged Properties may be adversely affected.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of the
Mortgage Pool--Geographic Concentration" herein.
Environmental Risks. If an adverse environmental condition exists with
respect to a Mortgaged Property, the Trust Fund may be subject to the
following risks: (i) a diminution in the value of a Mortgaged Property or the
inability to foreclose against such Mortgaged Property; (ii) the inability to
lease such Mortgaged Property to potential tenants; (iii) the potential that
the related borrower may default on a Mortgage Loan due to such borrower's
inability to pay high remediation costs or difficulty in bringing its
operations into compliance with environmental laws; or (iv) in certain
circumstances as more fully described below, liability for clean-up costs or
other remedial actions, which liability could exceed the value of such
Mortgaged Property. Additionally, the environmental condition of a Mortgaged
Property may be affected by the operations of tenants and occupants thereof,
and current and future environmental laws, ordinances or regulations, may
impose additional compliance obligations on business operations that can be
met only by significant capital expenditures.
Under certain federal and state laws, the reimbursement of remedial costs
incurred by state and federal regulatory agencies to correct environmental
conditions are secured by a statutory lien over the subject property, which
lien, in some instances, may be prior to the lien of an existing mortgage.
Any such lien arising with respect to a Mortgaged Property would adversely
affect the value of such Mortgaged Property and could make impracticable the
foreclosure by the Special Servicer on such Mortgaged Property in the event
of a default by the related borrower.
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real property, as well as certain
other categories of parties, may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to or in
such property. The cost of any required remediation and the owner's liability
therefor as to any property is generally not limited under applicable
federal, state or local laws, and could exceed the value of the property
and/or the aggregate assets of the owner. Under some environmental laws, a
secured lender (such as the Trust Fund) may be deemed an "owner" or
"operator" of the related Mortgaged Property if the lender is deemed to have
participated in the management of the borrower, regardless of whether the
borrower actually caused the environmental damage. In such cases, a secured
lender may be liable for the costs of any required removal or remediation of
hazardous substances. The Trust Fund's potential exposure to liability for
cleanup costs will increase if the Trust Fund actually takes possession of a
Mortgaged Property or control of its day-to-day operations; such potential
exposure to environmental liability may also increase if a court grants a
petition to appoint a receiver to operate the Mortgaged Property in order to
protect the Trust Fund's collateral. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS--Environmental Risks" in the Prospectus and "DESCRIPTION OF
THE MORTGAGE POOL--Certain Characteristics of the Mortgage
Pool--Environmental Risks" herein.
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The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto on behalf of the Trust Fund or assuming its
operation. Such requirement may effectively preclude enforcement of the
security for the related Note until a satisfactory environmental site
assessment is obtained (or until any required remedial action is thereafter
taken), but will decrease the likelihood that the Trust Fund will become
liable under any environmental law. However, there can be no assurance that
such environmental site assessment will reveal the existence of conditions or
circumstances that would result in the Trust Fund becoming liable under any
environmental law, or that the requirements of the Pooling and Servicing
Agreement will effectively insulate the Trust Fund from potential liability
under environmental laws. See "THE POOLING AND SERVICING
AGREEMENT--Realization Upon Mortgage Loans--Standards for Conduct Generally
in Effecting Foreclosure or the Sale of Defaulted Loans" herein and "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS--Environmental Risks" in the Prospectus.
Other Financing. In general, the borrowers are prohibited from encumbering
the related Mortgaged Property with additional secured debt or the
mortgagee's approval is required for such an encumbrance. However, a
violation of such prohibition may not become evident until the related
Mortgage Loan otherwise defaults. In cases in which one or more subordinate
liens are imposed on a Mortgaged Property or the borrower incurs other
indebtedness, the Trust Fund is subject to additional risks, including,
without limitation, the risks that the necessary maintenance of the Mortgaged
Property could be deferred to allow the borrower to pay the required debt
service on the subordinate financing and that the value of the Mortgaged
Property may fall as a result, and that the borrower may have a greater
incentive to repay the subordinate or unsecured indebtedness first and that
it may be more difficult for the borrower to refinance the Mortgage Loan or
to sell the Mortgaged Property for purposes of making any Balloon Payment
upon the maturity of the Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS--Secondary Financing; Due-on-Encumbrance Provisions" in the
Prospectus and "DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of
the Mortgage Pool--Other Financing" herein.
Bankruptcy of Borrowers. The borrowers may be either individuals or legal
entities. Most of the borrowers which are legal entities are not
bankruptcy-remote entities. The borrowers that are not bankruptcy-remote
entities may be more likely to become insolvent or the subject of a voluntary
or involuntary bankruptcy proceeding because such borrowers may be (a)
operating entities with businesses distinct from the operation of the
property with the associated liabilities and risks of operating an ongoing
business and (b) individuals who may have personal liabilities unrelated to
the property. However, any borrower, even a bankruptcy-remote entity, as
owner of real estate will be subject to certain potential liabilities and
risks as such an owner. No assurance can be given that a borrower will not
file for bankruptcy protection or that creditors of a borrower or a corporate
or individual general partner or member will not initiate a bankruptcy or
similar proceeding against such borrower or corporate or individual general
partner or member. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Foreclosure--Bankruptcy Laws" in the Prospectus.
Limitations of Appraisals and Engineering Reports. In general, appraisals
represent the analysis and opinion of qualified experts and are not
guaranties of present or future value. Moreover, appraisals seek to establish
the amount a willing buyer would pay a willing 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--Certain Characteristics of the Mortgage
Pool" herein for illustrative purposes only. The architectural and
engineering reports represent the analysis of the individual engineers or
site inspectors at or before the origination of the respective Mortgage
Loans, have not been updated since they were originally conducted and may not
have revealed all necessary or desirable repairs, maintenance or capital
improvement items.
Zoning Compliance. The Mortgaged Properties are typically subject to
applicable building and zoning ordinances and codes ("Zoning Laws") affecting
the construction and use of real property. Since the Zoning Laws applicable
to a Mortgaged Property (including, without limitation, density, use, parking
and set back requirements) are generally subject to change by the applicable
regulatory authority at any time, certain of the improvements upon the
Mortgaged Properties may not comply fully with all applicable current and
future Zoning Laws. Such changes may limit the ability of the related
borrower to rehabilitate, renovate and update the premises, and to rebuild or
utilize the premises "as is" in the event of a substantial casualty loss with
respect thereto.
Costs of Compliance with Applicable Laws and Regulations. A borrower may
be required to incur costs to comply with, various existing and future
federal, state or local laws and regulations applicable to the related
Mortgaged Property, e.g.
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Zoning Laws and the Americans with Disabilities Act of 1990. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS--Americans With Disabilities Act" in the
Prospectus. The expenditure of such costs, or the imposition of injunctive
relief, penalties or fines in connection with the borrower's noncompliance
could negatively impact the borrower's cash flow, and consequently, its
ability to pay its Mortgage Loan.
Limitations on Enforceability of Cross-Collateralization. Arrangements
whereby certain of the Mortgage Loans (the "Cross-Collateralized Loans") are
cross-collateralized and cross-defaulted with one or more related
Cross-Collateralized Loans could be challenged as fraudulent conveyances by
creditors of any of the related borrowers or by the representative of the
bankruptcy estate of such borrowers if one or more of such borrowers were to
become a debtor in a bankruptcy case. Generally, under federal and most state
fraudulent conveyance statutes, the incurring of an obligation or the
transfer of property (including the granting of a mortgage lien) by a person
will be subject to avoidance under certain circumstances if the person did
not receive fair consideration or reasonably equivalent value in exchange for
such obligation or transfer and (i) was insolvent or was rendered insolvent
by such obligation or transfer, (ii) was engaged in a business or a
transaction, or was about to engage in a business or a transaction, for which
properties remaining with the person constitute an unreasonably small capital
or (iii) intended to incur, or believed that it would incur, debts that would
be beyond the person's ability to pay as such debts matured. Accordingly, a
lien granted by any such borrower could be avoided if a court were to
determine that (x) such borrower was insolvent at the time of granting the
lien, was rendered insolvent by the granting of the lien, was left with
inadequate capital or was not able to pay its debts as they matured and (y)
the borrower did not, when it allowed its Mortgaged Property to be encumbered
by the liens securing the indebtedness represented by the other
Cross-Collateralized Loans, receive fair consideration or reasonably
equivalent value for pledging such Mortgaged Property for the equal benefit
of the other related borrowers. No assurance can be given that a lien granted
by a borrower on a Cross-Collateralized Loan to secure the Mortgage Loan of
an affiliated borrower, or any payment thereon, would not be avoided as a
fraudulent conveyance. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Characteristics of the Mortgage Pool--Limitations on Enforceability of
Cross-Collateralization" herein for more information regarding the
Cross-Collateralized Loans.
Tenant Matters. Certain of the Mortgaged Properties are leased wholly or
in large part to a single tenant or are wholly or in large part
owner-occupied (each such tenant or owner-occupier, a "Major Tenant"). Any
default by a Major Tenant could adversely affect the related borrower's
ability to make payments on the related Mortgage Loan. There can be no
assurance that any Major Tenant will continue to perform its obligations
under its lease (or, in the case of an owner-occupied Mortgaged Property,
under the related Mortgage Loan documents). See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Characteristics of the Mortgage Pool--Tenant Matters" and
"Annex A" herein.
Ground Leases. Mortgage Loans secured by a Mortgage encumbering a
leasehold interest are subject to certain risks not applicable to a Mortgage
over a fee interest. The most serious of such risks is the potential for the
total loss of the security for the related Mortgage Loan upon the termination
or expiration of the ground lease creating the mortgaged leasehold interest.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Foreclosure--Leasehold
Risks" in the Prospectus and "DESCRIPTION OF THE MORTGAGE POOL--Security for
the Mortgage Loans--Ground Leases" herein.
Risks Associated with Low Income Housing Tax Credits. Certain of the
Mortgaged Properties may be eligible to receive low income housing tax
credits ("Tax Credits") pursuant to the requirements of Section 42 of the
Internal Revenue Code of 1986, as amended (the "Code"). The rent limitations
imposed on such Mortgaged Properties pursuant to the Code may adversely
affect the ability of the applicable borrowers to increase rents to maintain
such Mortgaged Properties in proper condition during periods of rapid
inflation or declining market value of such Mortgaged Properties. In
addition, the income restrictions on tenants imposed by Section 42 of the
Code may reduce the number of eligible tenants in such Mortgaged Properties
and result in a reduction in occupancy rates applicable thereto. In the event
a Mortgaged Property eligible for Tax Credits (a "Tax Credit Project") does
not maintain compliance with the Tax Credit restrictions on tenant income or
rental rates, the owners of the Tax Credit Project may lose the Tax Credits
related to the period of the noncompliance and face the recapture of the
"accelerated portions" of any Tax Credit previously taken, plus interest.
Recapture does not occur if noncompliance is corrected within a "reasonable
period," as determined under the Code. In the event of a foreclosure upon a
Tax Credit Project during the period when tax credits are applicable (the
"Tax Credit Period"), the subsequent owner will be required to ensure
continued compliance with the requirements of Section 42 of the Code, or the
remaining Tax Credits will be no longer be available. See "DESCRIPTION OF THE
MORTGAGE POOL--The Tax Credit Loans."
Litigation. From time to time, there may be legal proceedings pending or
threatened against the borrowers and their affiliates relating to the
business of, or arising out of the ordinary course of business of, the
borrowers and their affiliates. There can be no assurance that any such
litigation will not have a material adverse effect on any borrower's ability
to meet its obligations under the related Mortgage Loan and, thus, on the
distributions to Certificateholders.
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Condemnations. From time to time, there may be Condemnations pending or
threatened against one or more of the Mortgaged Properties. There can be no
assurance that the proceeds payable in connection with a total Condemnation
will be sufficient to restore the related Mortgaged Property or to satisfy
the remaining indebtedness of the related Mortgage Loan. The occurrence of a
partial Condemnation may have a material adverse effect on the continued use
of the affected Mortgaged Property, or on any borrower's ability to meet its
obligations under the related Mortgage Loan. Therefore, no assurance can be
made that the occurrence of any Condemnation will not have a negative impact
upon the distributions to Certificateholders.
REPURCHASE OF MORTGAGE LOANS
As more fully described under "DESCRIPTION OF THE MORTGAGE POOL--General"
and "--Representations and Warranties; Repurchase" herein, MCFC and Midland
will be obligated to repurchase a Midland Mortgage Loan, GACC will be
obligated to repurchase a GACC Mortgage Loan and MCFC and BCMC will be
obligated to repurchase a BCMC Mortgage Loan if (i) there is a defect with
respect to the documents relating to such Mortgage Loan or (ii) certain of
its representations or warranties concerning such Mortgage Loan in the MCFC
Mortgage Loan Purchase Agreement, the GACC Mortgage Loan Purchase Agreement,
the BCMC Mortgage Loan Purchase Agreement or the MCFC/BCMC Mortgage Loan
Purchase Agreement, respectively, are breached, if such defect or breach
materially and adversely affects the interests of the Certificateholders and
such defect or breach is not cured as required. However, there can be no
assurance that either MCFC, Midland, GACC or BCMC, as applicable, will be in
a financial position to effect such repurchase. See "MIDLAND LOAN SERVICES,
L.P.," "MORTGAGE LOAN SELLERS" and "BOSTON CAPITAL MORTGAGE COMPANY, LIMITED
PARTNERSHIP" herein. MCFC, Midland, GACC and BCMC generally will have the
right to require the entity from which they respectively acquired a Mortgage
Loan to repurchase such Mortgage Loan if a representation or warranty in the
agreement pursuant to which MCFC, Midland, GACC or BCMC, as applicable,
acquired such Mortgage Loan is also breached. The ability of Midland to
perform its obligations as Master Servicer and Special Servicer under the
Pooling and Servicing Agreement may be jeopardized if it incurs significant
liabilities for the repurchase of Mortgage Loans as to which there has been a
breach of a representation or warranty.
PREPAYMENT AND YIELD CONSIDERATIONS
Effect of Borrower Defaults and Delinquencies. The aggregate amount of
distributions on the Regular Certificates, the yield to maturity of the
Regular Certificates, the rate of principal payments on the Regular
Certificates and the weighted average life of the Regular Certificates will
be affected by the rate and the timing of delinquencies, defaults, losses or
other shortfalls experienced on the Mortgage Loans. If a purchaser of a
Regular Certificate of any Class calculates its anticipated yield based on an
assumed default rate and amount of losses on the Mortgage Loans that is lower
than the default rate and amount of losses actually experienced and such
additional losses are allocable to such Class of Certificates or, with
respect to the Class A-EC or Class L-2 Certificates, such losses result in a
reduction of the Class A-EC Notional Balance or the Class L-2 Notional
Balance, respectively, such purchaser's actual yield to maturity will be
lower than the anticipated yield calculated and could, under certain extreme
scenarios, be negative. The timing of any loss on a liquidated Mortgage Loan
will also affect the actual yield to maturity of the Regular Certificates to
which a portion of such loss is allocable, even if the rate of defaults and
severity of losses are consistent with an investor's expectations. In
general, the earlier a loss borne by an investor occurs, the greater will be
the effect on such investor's yield to maturity.
Most of the Mortgage Loans are Balloon Loans, which involve a greater risk
of default than self-amortizing loans because the ability of a borrower to
make a Balloon Payment typically will depend upon its ability either to
refinance the related Mortgaged Property or to sell such Mortgaged Property
at a price sufficient to permit the borrower to make the Balloon Payment. The
ability of a borrower to accomplish either of these goals will be affected by
a number of factors at the time of attempted sale or refinancing, including
the level of available mortgage rates, the fair market value of the related
Mortgaged Property, the borrower's equity in the related Mortgaged Property,
the financial condition of the borrower and the operating history of the
related Mortgaged Property, tax laws, prevailing economic conditions and the
availability of credit for multifamily or commercial properties (as the case
may be) generally. See "YIELD AND MATURITY CONSIDERATIONS--Yield
Considerations--Balloon Payments" herein.
Regardless of whether losses ultimately result, prior to the liquidation
of any defaulted Mortgage Loan, delinquencies on the Mortgage Loans may
significantly delay the receipt of payments by the holder of a Regular
Certificate to the extent that Advances or the subordination of another Class
of Certificates does not fully offset the effects of any delinquency or
default. The Available Funds generally consist of, as more fully described
herein, principal and interest on the Mortgage
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Loans actually collected or advanced. The Master Servicer's, the Trustee's or
the Fiscal Agent's obligation, as applicable, to make Advances is limited to
the extent described under "THE POOLING AND SERVICING AGREEMENT--Advances"
herein. In particular, upon determination of the Anticipated Loss with
respect to any Seriously Delinquent Loan, the amount of any P&I Advance
required to be made with respect to such Seriously Delinquent Loan on any
Distribution Date will be an amount equal to the product of (A) the amount of
the P&I Advance that would be required to be made in respect of such
Seriously Delinquent Loan without regard to the application of this sentence,
multiplied by (B) a fraction, the numerator of which is equal to the
Scheduled Principal Balance of such Seriously Delinquent Loan as of the
immediately preceding Determination Date less the Anticipated Loss and the
denominator of which is such Scheduled Principal Balance. If the Master
Servicer makes a reduced P&I Advance with respect to a Seriously Delinquent
Loan, then the Class A-EC Certificates' Class Interest Distribution Amount
will be subordinated to the Subordinate Certificates to the extent of the
Class A-EC Subordinated Advance Amount, if any. In addition, no Advances are
required to be made to the extent that, in the good faith judgment of the
Master Servicer, the Trustee or the Fiscal Agent, as applicable, any such
Advance, if made, would be nonrecoverable from proceeds of the Mortgage Loan
to which such Advance relates. See "THE POOLING AND SERVICING
AGREEMENT--Advances" herein.
Effect of Prepayments and other Unscheduled Payments. The investment
performance of the Certificates may vary materially and adversely from the
investment expectations of investors due to the rate of prepayments on the
Mortgage Loans being higher or lower than anticipated by investors. In
addition, in the event of any repurchase of a Mortgage Loan by a Mortgage
Loan Seller or Midland from the Trust Fund under the circumstances described
under "DESCRIPTION OF THE MORTGAGE POOL--Representations and Warranties;
Repurchase" herein, the repurchase price paid will 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 will 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.
Furthermore, the distribution of Liquidation Proceeds to the Class or Classes
of Certificates then entitled to distributions in respect of principal will
reduce the weighted average lives of such Classes and may reduce or increase
the weighted average life of other Classes of Certificates. See "YIELD AND
MATURITY CONSIDERATIONS" herein.
In general, the yield on Certificates purchased at a premium or at a
discount and the yield on the Class A-EC and Class L-2 Certificates, which
have no Certificate Balances, will be sensitive to the amount and timing of
principal distributions thereon (or of reductions of the respective Notional
Balances). The occurrence of principal distributions at a rate faster than
that anticipated by an investor at the time of purchase will cause the actual
yield to maturity of a Certificate purchased at a premium to be lower than
anticipated. The yield to maturity of the Class A-EC and Class L-2
Certificates will be especially sensitive to the occurrence of high rates of
principal distributions which could result in the failure of the holders of
such Classes to recover fully their initial investments. Conversely, if a
Certificate is purchased at a discount (especially the Class L-1
Certificates) and principal distributions thereon occur at a rate slower than
that assumed at the time of purchase, the investor's actual yield to maturity
will be lower than assumed at the time of purchase.
Effect of Prepayment Premiums. The rate and timing of principal payments
made on a Mortgage Loan will be affected by restrictions on voluntary
prepayments contained in the related Note (e.g., lockout periods and
Prepayment Premiums). All of the Mortgage Loans generally provide that a
permitted prepayment must be accompanied by a Prepayment Premium; provided,
however, that the Prepayment Premium requirement generally expires prior to
the maturity date of a Mortgage Loan. The existence of Prepayment Premiums
generally will result in the Mortgage Loans prepaying at a lower rate.
However, the requirement that a prepayment be accompanied by a Prepayment
Premium may not provide a sufficient economic disincentive to a borrower
seeking to refinance at a more favorable interest rate. In addition, since
holders of the Class A-EC Certificates are anticipated to receive most, if
not all, Prepayment Premiums, potential purchasers of this Class should
especially consider that 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
under applicable state or federal law or, if enforceable, that the
foreclosure proceeds received with respect to a defaulted Mortgage Loan will
be sufficient to make such payment. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Terms and Conditions of the Mortgage Loans--Prepayment
Provisions" herein.
Effect of Interest on Advances, Special Servicing Fees and other Servicing
Expenses. As and to the extent described herein, the Master Servicer, the
Trustee or the Fiscal Agent, as applicable, will be entitled to receive
interest on unreimbursed Advances at the Advance Rate from the date on which
the related Advance is made to the date on which such amounts are reimbursed
(which in no event will be later than the Determination Date following the
date on which funds are available to
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<PAGE>
reimburse such Advance with interest thereon at the Advance Rate). The Master
Servicer's, the Trustee's or the Fiscal Agent's right, as applicable, to
receive such payments of interest is prior to the rights of
Certificateholders to receive distributions on the Regular Certificates and,
consequently, may result in decreased distributions to the Regular
Certificates that would not otherwise have resulted, absent the accrual of
such interest. See "THE POOLING AND SERVICING AGREEMENT--Advances" herein. In
addition, certain circumstances, including delinquencies in the payment of
principal and interest, will result in a Mortgage Loan being specially
serviced. The Special Servicer is entitled to additional compensation for
special servicing activities, including Special Servicing Fees, Disposition
Fees and Workout Fees, which may result in decreased distributions to the
Regular Certificates that would not otherwise have resulted absent such
compensation. See "THE POOLING AND SERVICING AGREEMENT--Special Servicing"
herein.
LIMITED LIQUIDITY
There is currently no secondary market for the Offered Certificates. The
Underwriters have advised the Depositor that they currently intend to make a
secondary market in the Offered Certificates, but they are under no
obligation to do so. Accordingly, there can be no assurance that a secondary
market for the Offered Certificates will develop. Moreover, if a secondary
market does develop, there can be no assurance that it will provide holders
of Offered Certificates with liquidity of investment or that it will continue
for the life of the Offered Certificates. The Offered Certificates will not
be listed on any securities exchange.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 136 multifamily and commercial "whole"
mortgage loans (the "Mortgage Loans"). The Mortgage Loans have an aggregate
Cut-off Date Principal Balance of approximately $512,101,998 (the "Initial
Pool Balance"), subject to a variance of plus or minus 5%. The "Cut-off Date
Principal Balance" of each Mortgage Loan is the unpaid principal balance
thereof as of the Cut-off Date, after application of all payments of
principal due on or before such date, whether or not received. Any
description of the terms and provisions of the Mortgage Loans herein is a
generalized description of the terms and provisions of the Mortgage Loans in
the aggregate. Many of the individual Mortgage Loans have special terms and
provisions that deviate from the generalized, aggregated description.
Generally, each Mortgage Loan is evidenced by a separate promissory note
(collectively the "Notes" and individually a "Note"). Each Mortgage Loan is
secured by a mortgage, deed of trust, deed to secure debt or other similar
security instrument (all of the foregoing are individually a "Mortgage" and
collectively the "Mortgages") that creates a first lien on one or more of a
fee simple estate or a leasehold estate in a real property (a "Mortgaged
Property") improved for multifamily or commercial use. The Mortgaged
Properties consist of properties improved by (a) a congregate care facility
(a "Congregate Care Property," and any Mortgage Loan secured thereby, a
"Congregate Care Loan"); (b) a factory outlet retail facility (a "Factory
Outlet Property" or a "Retail, Factory Outlet Property," and any Mortgage
Loan secured thereby, a "Factory Outlet Loan" or a "Retail, Factory Outlet
Loan"); (c) a hotel (a "Hotel Property," and any Mortgage Loan secured
thereby, a "Hotel Loan"); (d) an industrial property (an "Industrial
Property," and any Mortgage Loan secured thereby, an "Industrial Loan"); (e)
an industrial/warehouse property (an "Industrial/Warehouse Property," and any
Mortgage Loan secured thereby, an "Industrial/Warehouse Loan"); (f) a mini
warehouse facility (a "Mini Warehouse Property," and any Mortgage Loan
secured thereby, a "Mini Warehouse Loan"); (g) a multifamily, office and
retail property (a "Mixed Use Property," and any Mortgage Loan secured
thereby, a "Mixed Use Loan"); (h) a mobile home park (a "Mobile Home Park
Property," and any Mortgage Loan secured thereby, a "Mobile Home Park Loan");
(i) an apartment building or complex consisting of five or more rental units
or a complex of duplex units (a "Multifamily Property," and any Mortgage Loan
secured thereby, a "Multifamily Loan"); (j) an office building (an "Office
Property," and any Mortgage Loan secured thereby, an "Office Loan"); (k) an
office/research facility (an "Office/R&D Property," and any Mortgage Loan
secured thereby, an "Office/R&D Loan"); (l) an office/retail property (an
"Office/Retail Property," and any Mortgage Loan secured thereby, an
"Office/Retail Loan"); (m) an office/warehouse property (an "Office/Warehouse
Property," and any Mortgage Loan secured thereby, an "Office/ Warehouse
Loan"); (n) an anchored retail property (a "Retail, Anchored Property," and
any Mortgage Loan secured thereby, a "Retail, Anchored Loan"); (o) a single
tenant retail property (a "Retail, Single Tenant Property," and any Mortgage
Loan secured thereby, a "Retail, Single Tenant Loan"); or (p) an unanchored
retail property (a "Retail, Unanchored Property," and any Mortgage Loan
secured thereby, a "Retail, Unanchored Loan"). The percentage of the Initial
Pool Balance represented by each type of Mortgaged Property is as follows:
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<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL
PROPERTY TYPE POOL BALANCE NUMBER OF LOANS
- -------------------------- ------------------------ -------------------
<S> <C> <C>
Congregate Care .9% 1
Hotel 1.5% 1
Industrial .6% 1
Industrial/Warehouse 4.3% 8
Mini Warehouse .2% 1
Mixed Use 3.3% 1
Mobile Home Park .6% 2
Multifamily 38.7% 58
Office 11.8% 16
Office/R&D 2.9% 2
Office/Retail 2.7% 2
Office/Warehouse 1.2% 4
Retail, Anchored 10.2% 9
Retail, Factory Outlet 3.2% 3
Retail, Single Tenant 9.5% 14
Retail, Unanchored 8.1% 13
------------------------ -------------------
Total 100.0% 136
</TABLE>
None of the Mortgage Loans is insured or guaranteed by the United States
of America, any governmental agency or instrumentality, any private mortgage
insurer or by the Depositor, MCFC, GACC, BCMC, Midland, the Master Servicer,
the Special Servicer, the Trustee, the Fiscal Agent, the Underwriters or any
of their respective affiliates. Seven of the Mortgage Loans, representing
approximately 1.3% of the Initial Pool Balance, provide for full recourse
against the related borrower, one of the Mortgage Loans, representing 2.1% of
the Initial Pool Balance, has a limited guaranty against the related
borrower, while the remainder of the Mortgage Loans are non-recourse loans.
In the event of a borrower default under a non-recourse Mortgage Loan,
recourse generally may be had only against the specific Mortgaged Property or
Mortgaged Properties securing such Mortgage Loan and such limited other
assets as have been pledged to secure such Mortgage Loan, and not against the
borrower's other assets. However, generally, upon the occurrence of certain
circumstances as set forth in the Mortgage Loan documents, typically
including, without limitation, fraud, intentional misrepresentation, waste,
misappropriation of tenant security deposits or rent, and in some cases
failure to maintain any required insurance or misappropriation of any
insurance proceeds or condemnation awards, recourse generally may be had
against the borrower for damages sustained by the mortgagee. In connection
with at least nine of the Mortgage Loans, representing approximately 1.8% of
the Initial Pool Balance, a guaranty of all or a portion of each such
Mortgage Loan was obtained by the separate originators of such Mortgage Loans
(herein collectively, the "Originators" and individually an "Originator").
Such guaranties are intended to encourage the performance by the related
borrower or the guarantor of the obligations to which the guaranty relates.
However, the guarantors may have limited assets and there can be no assurance
that such guarantors will have sufficient assets to support their respective
obligations under such guaranties. In addition, any action to enforce such
guaranties will likely involve significant expense and delays to the Trust
Fund and may not be enforceable if the related guarantor should become the
subject of a bankruptcy, insolvency, reorganization, moratorium or other
similar proceedings. Furthermore, in some states, actions against guarantors
may be limited by anti-deficiency legislation. The Master Servicer or the
Special Servicer, as applicable, on behalf of the Trustee and the
Certificateholders, will be entitled to enforce the terms of such guaranties.
Ninety-eight of the Mortgage Loans (the "Midland Mortgage Loans"),
representing approximately 60.1% of the Initial Pool Balance, were originated
either by (a) Midland Loan Services, L.P. ("Midland") generally in accordance
with Midland's customary underwriting criteria and practices, with such
exceptions thereto as are customarily acceptable to commercial mortgage
lenders, or (b) unaffiliated entities and subsequently acquired by Midland
after evaluating such Mortgage Loans according to Midland's customary
underwriting criteria and practices, with such exceptions thereto as are
customarily acceptable to commercial mortgage lenders. Midland's underwriting
criteria and practices are described under "--The Midland Mortgage Loan
Program--General," "--Midland's Underwriting Standards" and "--Midland
Underwriting and Closing Procedures" herein. MCFC acquired 97 of the Midland
Mortgage Loans pursuant to a Master Mortgage Loan Purchase Agreement dated as
of June 22, 1994, as amended, between MCFC and Midland. The remaining Midland
Mortgage Loan was acquired by MCFC pursuant to a separate purchase agreement.
Seventeen of the Mortgage Loans (the "BCMC Mortgage Loans"), representing
approximately 10.6% of the Initial Pool Balance were originated either by
BCMC,
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correspondents of BCMC or other entities related to BCMC, generally in
accordance with BCMC's customary underwriting criteria and practices, with
such exceptions thereto as are customarily acceptable to commercial mortgage
lenders. See "--BCMC Underwriting and Closing Procedures" herein. The BCMC
Mortgage Loans will be acquired by MCFC pursuant to a Mortgage Loan Purchase
and Sale Agreement (the "MCFC/BCMC Mortgage Loan Purchase Agreement") to be
dated as of December 23, 1996, between MCFC and BCMC.
Twenty-one of the Mortgage Loans (the "GACC Mortgage Loans"), representing
approximately 29.3% of the Initial Pool Balance, were purchased by GACC from
various originators generally in accordance with GACC's customary
underwriting criteria and practices, with such exceptions thereto as are
customarily acceptable to commercial mortgage lenders. See "--GACC
Underwriting and Closing Procedures" herein. With respect to the GACC
Mortgage Loans, approximately 17.0% of the Initial Pool Balance was
originated by Washington Mortgage Financial Group, approximately 6.1% of the
Initial Pool Balance was originated by Boatmen's National Mortgage, Inc.,
approximately 5.6% of the Initial Pool Balance was originated by Liberty
Mortgage Acceptance Corporation and approximately 0.7% of the Initial Pool
Balance originated by others.
The Depositor will purchase the: (a) Midland Mortgage Loans on or before
the Closing Date from MCFC pursuant to a Mortgage Loan Purchase and Sale
Agreement (the "MCFC Mortgage Loan Purchase Agreement") to be dated as of
December 23, 1996 (the "Loan Purchase Closing Date"), between MCFC and the
Depositor; (b) GACC Mortgage Loans on or before the Closing Date from GACC
pursuant to a Mortgage Loan Purchase and Sale Agreement (the "GACC Mortgage
Loan Purchase Agreement") to be dated as of December 23, 1996, between GACC
and the Depositor; and (c) BCMC Mortgage Loans (together with an assignment
of MCFC's rights and remedies against BCMC under the MCFC/BCMC Mortgage Loan
Purchase Agreement in respect of any breaches by BCMC of representations or
warranties regarding the BCMC Mortgage Loans set forth therein) will be
acquired by the Depositor on or before the Closing Date from MCFC pursuant to
a Mortgage Loan Purchase and Sale Agreement (the "BCMC Mortgage Loan Purchase
Agreement") to be dated as of December 23, 1996, between MCFC and the
Depositor. As described under "DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties; Repurchase" herein, (i) MCFC and
Midland will each be obligated to repurchase a Midland Mortgage Loan in the
event of a breach of a representation or warranty made by MCFC or Midland in
the MCFC Mortgage Loan Purchase Agreement with respect to such Mortgage Loan,
(ii) GACC will be obligated to repurchase a GACC Mortgage Loan in the event
of a breach of a representation or warranty made by GACC in the GACC Mortgage
Loan Purchase Agreement with respect to such Mortgage Loan, (iii) MCFC will
be obligated to repurchase a BCMC Mortgage Loan in the event of a breach of a
representation or warranty made by MCFC in the BCMC Mortgage Loan Purchase
Agreement with respect to such Mortgage Loan, and (iv) BCMC will be obligated
to repurchase a BCMC Mortgage Loan in the event of a breach of a
representation or warranty made by BCMC in the MCFC/BCMC Mortgage Loan
Purchase Agreement with respect to such Mortgage Loan, in each case, if such
breach materially and adversely affects the interests of the
Certificateholders and such breach is not cured. MCFC, Midland, GACC and BCMC
each has only limited assets, and there can be no assurance that either MCFC,
Midland, GACC or BCMC has or will have sufficient assets with which to
fulfill any repurchase obligations that may arise. The Depositor will not
have any obligation to fulfill any repurchase obligation upon the failure of
MCFC, Midland, GACC or BCMC to do so. The Depositor will assign the Mortgage
Loans in the Mortgage Pool, together with the Depositor's rights and remedies
against MCFC, Midland, GACC and BCMC in respect of breaches of
representations or warranties regarding the Mortgage Loans, to the Trustee
pursuant to the Pooling and Servicing Agreement. The Master Servicer and the
Special Servicer will each service the Mortgage Loans pursuant to the Pooling
and Servicing Agreement. See "THE POOLING AND SERVICING AGREEMENT--Servicing
of the Mortgage Loans; Collection of Payments."
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is secured by a Mortgage encumbering the related
borrower's interest in the related Mortgaged Property. Except with respect to
the Mortgage Loan described in "Ground Leases" below, all of the Mortgage
Loans are secured by a first lien encumbering a fee simple interest in the
related Mortgaged Property, subject generally only to (a) liens for real
estate and other taxes and special assessments, (b) covenants, conditions,
restrictions, rights of way, easements and other encumbrances whether or not
of public record as of the date of recording of such Mortgage, and (c) such
other exceptions and encumbrances on the Mortgaged Property as are reflected
in the related title insurance policies. Each Mortgage Loan is also secured
by an assignment of the related borrower's interest in the leases, rents,
issues and profits of the related Mortgaged Property.
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<PAGE>
Seven of the Mortgage Loans, representing approximately 1.3% of the
Initial Pool Balance, provide for full recourse against the related borrower,
one of the Mortgage Loans, representing approximately 2.1% of the Initial
Pool Balance, has a limited guaranty against the related borrower, while the
remainder of the Mortgage Loans are non-recourse loans. However, borrowers
generally have limited assets and there can be no assurance that any borrower
will have sufficient assets to support any such recourse obligations that may
arise. In certain instances, additional collateral may exist in the nature of
letters of credit, the establishment of one or more Reserve Accounts (for one
or more of necessary repairs and replacements, tenant improvements and
leasing commissions, real estate taxes and assessments, insurance premiums,
deferred maintenance and/or scheduled capital improvements or as reserves for
the payment of Monthly Payments and other payments due under the related
Mortgage Loan), grants of security interests in equipment, inventory,
accounts receivable and other personal property, assignments of licenses,
trademarks and/or trade names, one or more guaranties of all or part of the
related Mortgage Loan, the establishment of one or more lockbox collection
accounts for the direct collection of rentals and other income from the
related Mortgaged Property, one or more guaranties with respect to a tenant's
performance of the terms and conditions of such tenant's lease or the
assignment of the proceeds of purchase options. The documents for each
Mortgage Loan typically also provide for the indemnification of the mortgagee
by the related borrower for the presence of any hazardous substances
affecting the Mortgaged Property. However, borrowers generally have limited
assets and there can be no assurance that any borrower will have sufficient
assets to support any such indemnification obligations that may arise. See
"RISK FACTORS--The Mortgage Loans; Investment in Commercial and Multifamily
Mortgage Loans--Environmental Risks" herein.
Ground Leases. One Mortgage Loan, representing approximately 3.3% of the
Initial Pool Balance, is secured by a first lien encumbering only the related
borrower's leasehold interest in the related Mortgaged Property. The related
ground lease expires on April 20, 2040. With respect to such ground lease,
the ground lessor has agreed to afford the mortgagee certain notices and
rights, including without limitation, cure rights with respect to breaches of
such ground lease by the borrower. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Foreclosure--Leasehold Risks" in the Prospectus.
Purchase Options; Rights of First Refusal; Installment Contracts. With
respect to Loan #134, which represents approximately 0.1% of the Initial Pool
Balance, the property developer from whom the borrower acquired the Mortgaged
Property retained both (a) an option to purchase such Mortgaged Property, at
market value on the date of the exercise of such option, conditional upon the
borrower ceasing operations at such Mortgaged Property; and (b) a right of
first refusal with respect to any bona fide offers to purchase the Mortgaged
Property received by the borrower. The terms of the purchase option indicate
that unless the property developer elects to assume the related Mortgage Loan
and takes title subject to the lien of the related Mortgage, such Mortgage
Loan must be satisfied and the Mortgage must be released when such option is
exercised. With respect to Loan #101, which represents approximately 0.3% of
the Initial Pool Balance, the tenant/operator of the Mortgaged Property
possesses an option to purchase such Mortgaged Property upon certain
specified terms and conditions, which option has been specifically
subordinated to the lien of the related Mortgage. With respect to Loan #108,
which represents approximately 0.2% of the Initial Pool Balance, the Housing
Department of the City of Los Angeles possesses a right of first refusal with
respect to any future sale of the related Mortgaged Property. No assurance
can be made that such rights of first refusal would not apply in the context
of a foreclosure of the related Mortgage, and consequently, there may be
additional risks, delays and costs associated with any such foreclosure. See
"RISK FACTORS--Prepayment and Yield Considerations" and "YIELD
CONSIDERATIONS" herein.
With respect to four of the Mortgage Loans, representing approximately
2.8% of the Initial Pool Balance, the related Mortgaged Property is the
subject of an executory installment contract. The related Mortgage was
executed by both the vendor and the vendee under such contract, and encumbers
all of their respective interests in the related Mortgaged Property. The
execution of such Mortgage by the vendee as security for the indebtedness of
the related borrower may be subject to challenge as a fraudulent conveyance.
See "DESCRIPTION OF THE MORTGAGE POOL--Investment in Commercial and
Multifamily Mortgage Loans--Limitations on Enforceability of
Cross-Collateralization" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Installment Contracts" in the Prospectus.
THE MIDLAND MORTGAGE LOAN PROGRAM--GENERAL
The mortgage loan program under which Midland originated its Mortgage
Loans targeted the origination of multi-family and commercial real estate
loans (generally with principal balances ranging from $750,000 to
$15,000,000). To generate a sufficient volume of loan submissions of this
size from a variety of geographic areas, Midland has developed a network of
mortgage bankers, mortgage brokers and commercial bankers who are paid a fee,
at closing, for referrals and any other services they may provide in
connection with the underwriting and closing of such mortgage loans. See
"MIDLAND LOAN SERVICES, L.P." herein.
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<PAGE>
Prudential Securities Incorporated ("PSI") serves as financial advisor to
Midland in connection with the development and operation of the loan
origination program. In this capacity, PSI consults with Midland regarding
loan pricing policy and periodically provides Midland with information on
current yields on those U.S. Treasury securities that are used by Midland to
establish the interest rates on mortgage loans. In addition, PSI assists
Midland in making presentations to the Rating Agencies regarding the mortgage
loans and the Master Servicer's servicing capabilities.
Prudential Securities Credit Corp. ("PSCC"), an affiliate of PSI, provides
warehouse financing to MCFC. In this connection PSCC reviewed the
underwriting of each Mortgage Loan originated by Midland before issuance of a
commitment by Midland to make the loan to the related applicant, and also
reviewed the underwriting conducted by Midland and/or MCFC in connection with
the acquisition of the remaining Midland Mortgage Loans. PSCC's review of
underwriting was independent of the review by Midland's own credit review
committee and was intended only to ensure that all loans funded using the
warehouse financing provided by PSCC met Midland's underwriting guidelines,
with such exceptions thereto as are customarily acceptable to commercial
mortgage lenders, in accordance with Midland's agreement with PSCC.
MIDLAND'S UNDERWRITING STANDARDS
Midland's customary underwriting policies and procedures require an
evaluation of both the prospective borrower and the proposed real estate
collateral. Factors typically analyzed in connection with a prospective
borrower include its credit history, capitalization and overall financial
resources and management skill and experience in the applicable property
type. Factors typically analyzed in connection with a Mortgaged Property
include its historical and anticipated future cash flow; age and condition;
appraised value; gross square footage; net rentable area; gross land area;
number of units, rooms or beds; current tenants' size, identity and any
termination or purchase option rights; property interest to be mortgaged (fee
or leasehold); term, expiration and rental rates under current leases;
projected future leasing commissions and retaining costs; applicable market
rentals for similar properties; historical vacancy rate and credit loss rate;
debt service coverage ratio; and loan to value ratio.
Midland generally analyzed historical and current financial information
regarding a Mortgaged Property provided by a prospective borrower to
determine the initial maximum amount of a proposed Midland Mortgage Loan.
This analysis allowed Midland to calculate the initial debt service coverage
ratio and loan-to-value ratio for a proposed Midland Mortgage Loan, based
upon the revenues generally available from the related Mortgaged Property
minus the expenses incurred in operating and maintaining the related
Mortgaged Property, all as adjusted by the actual, historical and market
factors applicable to the property type and location of the related Mortgaged
Property. Except as approved by Midland's credit review committee in
connection with a specific Mortgage Loan, Midland applied its customary
underwriting policies with respect to these ratios and maximum amortization
periods in connection with the Mortgage Loans in the Mortgage Pool originated
by it. Midland's customary underwriting policies for these ratios and maximum
amortization periods are as follows:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
PROPERTY TYPE DSCR MAXIMUM LTV AMORTIZATION PERIOD
- ---------------------- --------- ------------- -------------------
<S> <C> <C> <C>
Congregate Care 1.35 70% 25 years
Hotel 1.40 70% 20 years
Industrial 1.25 75% 25 years
Industrial/Warehouse 1.25 75% 25 years
Mini Warehouse 1.35 70%- 20 years
Mobile Home Park 1.25 75% 20 years
Multifamily 1.20 75% 25 years
Office 1.25 75% 25 years
Office/R&D 1.25 75% 25 years
Office/Retail 1.25 75% 25 years
Office/Warehouse 1.25 75% 25 years
Retail, Anchored 1.25 75% 25 years
Retail, Factory Outlet 1.30 75% 25 years
Retail, Single Tenant 1.25 75% 25 years
Retail, Unanchored 1.30 75% 25 years
</TABLE>
With respect to Mortgage Loans secured by a Mixed Use Property, Midland's
customary underwriting policies require an analysis of the percentage of the
net operating income from each of the varied uses of the related Mixed Use
Property in order to determine the appropriate debt service coverage ratio,
loan-to-value ratio and amortization period.
Actual debt service coverage ratios, loan-to-value ratios and amortization
periods for the Mortgage Loans originated by Midland may and do vary from the
guidelines described above. See "--Certain Characteristics of the Mortgage
Pool" and "Annex A" herein.
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<PAGE>
MIDLAND UNDERWRITING AND CLOSING PROCEDURES
Based on information obtained from Midland, which has not been
independently verified for accuracy or completeness by any of the Depositor,
the Underwriters, the Trustee, the Master Servicer, the Special Servicer or
the Mortgage Loan Sellers, the following is a general summary of the
customary underwriting policies and procedures typically utilized by Midland
in connection with its underwriting of the Midland Mortgage Loans.
The information utilized by Midland to determine whether to issue a
binding loan commitment typically included two or more years of financial
history for the related Mortgaged Property, a site plan, a rent roll, recent
photographs, a fact sheet completed by the prospective borrower detailing
requested loan terms, ownership information, existing debt, zoning and
property improvement information, copies of specified leases, copies of rent
deposits and utility bills for the most recent 12 months, copies of the most
recent property tax bills and insurance premium statements and a listing of
all other income property owned by the principals of the prospective borrower
detailing revenue, expense, debt service, valuation and current encumbrances.
Midland's analysis of the foregoing included any adjustments deemed advisable
by Midland to take into account projected increases or decreases in terms of
revenue and/or expense. Midland also generally performed a site inspection of
the subject Mortgaged Property, investigated (when possible) four lease
comparables and four sales comparables, met the principals of the prospective
borrower (when practicable), and gathered market information through
interviews with property managers, leasing agents, real estate brokers and
appraisers familiar with the subject Mortgaged Property's market area. The
prospective borrower also was typically required to make a cash deposit equal
to 1% of the requested loan balance with Midland concurrently with the
prospective borrower's submission of a formal loan application.
To complete the underwriting of a proposed Mortgage Loan to be originated
by it, Midland derived an estimate of stabilized net cash flow available to
pay debt service. On the revenue side, Midland evaluated the proposed
Mortgaged Property's rental rates in relation to rental rates for similar
properties in the same market. If the proposed Mortgaged Property is leased
to relatively few tenants (e.g., retail, office, light
industrial/industrial), Midland analyzed the terms of each of the major
leases. On the expense side, Midland collected documentation for major
operating expense items, such as taxes, insurance and utilities (and, in the
case of Hotel Properties, franchise and management fees), to ensure that
Midland's assumptions regarding property expenses were realistic and in line
with historical experience. Midland also substantiated the financial
performance of the proposed Mortgaged Property by reference to industry
standards and to the more specialized expertise of local real estate brokers
and appraisers. If the proposed Mortgaged Property was an office building,
retail center or industrial property, Midland analyzed potential roll-over
risk for the purpose of making appropriate assumptions regarding the average
annual investment in tenant improvements and leasing commissions likely to be
required to keep occupancy of the proposed Mortgaged Property at or above the
occupancy level assumed by Midland.
Midland evaluated underwriting information received with respect to a
proposed Mortgage Loan to be originated by it through the use of Midland's
mortgage loan analysis model, and a final underwriting memorandum with
respect to such proposed Mortgage Loan was prepared which summarized proposed
loan terms, described the prospective borrower, and discussed the major
underwriting assumptions, competitive status of the subject Mortgaged
Property, market conditions in the locale of the subject Mortgaged Property
and the strengths, weaknesses and mitigating factors with respect to such
proposed Mortgage Loan. This information was then presented to Midland's
credit review committee for a determination as to whether a binding
commitment for the proposed Mortgage Loan should be issued. The information
provided to Midland's credit review committee regarding a proposed Mortgage
Loan to be originated by it was simultaneously provided to both MCFC and PSCC
for their consideration. Prior to the issuance of a loan commitment, both
MCFC and PSCC were also required to approve the terms of such proposed
Mortgage Loan.
Generally, following acceptance of the commitment by the prospective
borrower, Midland ordered an appraisal, an architectural and engineering
report and a Phase I environmental site assessment. In certain instances,
Midland may have utilized a report prepared by a third party not selected by
Midland but only if the qualifications of such third party were approved by
Midland and the report met Midland's specifications for such a report.
It was a condition of closing in each of Midland's commitments to make a
proposed Mortgage Loan originated by it that Midland receive third-party
reports satisfactory to it. If the appraisal of a proposed Mortgaged Property
did not confirm the minimum debt service coverage ratio and the maximum
loan-to-value ratio specified in Midland's loan commitment, the loan
commitment gave Midland the flexibility to reduce the loan amount in order to
maintain those ratios. If the architectural and engineering report indicated
that critical repairs (equal to or exceeding $10,000 in the aggregate) needed
to be made to the proposed Mortgaged Property, the prospective borrower was
required to make those repairs prior to the closing or Midland held back an
amount sufficient to complete those repairs from the Mortgage Loan proceeds.
All Phase I environmental site
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<PAGE>
assessments were reviewed by McRoberts & Associates, P.C. (the "Environmental
Consultant"), an independent third party environmental attorney retained by
Midland. If the Phase I environmental site assessment indicated the existence
of a potentially material and significant environmentally hazardous condition
and recommended further investigation, the Environmental Consultant prepared
a scope of work for a Phase II assessment and Midland engaged a consultant to
perform the additional work. If either the Phase I or Phase II environmental
site assessment indicated the presence of hazardous material or a significant
environmentally hazardous condition at the proposed Mortgaged Property, the
prospective borrower was required to remediate such condition, provide
environmental insurance in an amount acceptable to Midland, escrow an amount
sufficient to pay the costs of such remediation, provide an indemnity for
such costs from a potentially culpable party, or, if appropriate, implement
an operations and maintenance plan for the management of such condition.
Generally, each completed underwriting file for a Midland Mortgage Loan
contains the following documents:
A Midland Loan Fact Sheet;
Financial statements for the preceding two or more years and the
most recent year-to-date interim statement for the proposed
Mortgaged Property, the prospective borrower, and any proposed
guarantor, co-borrower, general partner of the borrowing entity
and/or limited partner owning 10%--r more of the borrowing entity;
Tax returns for the preceding three years for the prospective
borrower and any proposed guarantor, co-borrower, general partner of
the borrowing entity and/or limited partner owning 10% or more of
the borrowing entity;
A current rent roll, certified by the prospective borrower;
For a proposed Mortgaged Property leased to relatively few tenants
(e.g., retail, office, light industrial/industrial), copies of all
leases;
A copy of any ground lease that may affect the proposed Mortgaged
Property;
A site plan of the proposed Mortgaged Property;
A map of the area in which the proposed Mortgaged Property is
located; and
Pictures of the proposed Mortgaged Property and the surrounding
area.
Midland's closing of the Midland Mortgage Loans was managed by one staff
attorney supervising a team of closing coordinators with responsibility for
processing mortgage loans through closing. Each Midland Mortgage Loan was
documented on Midland's form of mortgage loan documents, which were conformed
by legal counsel to the requirements and customary loan documentation of the
state where the related Mortgaged Property is located.
GACC MORTGAGE LOAN PROGRAM -- GENERAL
The mortgage loan program under which GACC purchased its Mortgage Loans
targeted the origination of multi-family and commercial real estate loans
with principal balances ranging generally from $1,500,000 to $30,000,000.
GACC has developed a network of originators, mortgage bankers and brokers who
are paid a fee for their services and, in some cases, retain servicing for
such Mortgage Loans.
GACC UNDERWRITING AND CLOSING PROCEDURES
Based on information obtained from GACC, which has not been independently
verified for accuracy or completeness by any of the Depositor, the
Underwriters, the Trustee, the Master Servicer, the Special Servicer, Midland
or the other Mortgage Loan Sellers, the following is a general summary of the
customary underwriting policies and procedures typically utilized by GACC in
connection with its underwriting of the GACC Mortgage Loans.
GACC's customary underwriting policies and procedures generally require an
evaluation of the property, including a site inspection, appraisal,
architectural and engineering report and environmental report (third party
reports are generally dated no more than six months prior to the origination
of the related loan). Other factors typically analyzed in connection with a
property include occupancy rates, size, type, location (including trade
area), accessibility and visibility, market presence, property interest to be
mortgaged (fee or leasehold), compliance with applicable laws (including
environmental laws, ADA and zoning), location relative to areas of flood
hazard and potential environmental concerns. The experience, character and
financial strength of borrowers and key principal(s) are evaluated and
considered, as well.
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<PAGE>
The initial maximum amount of a proposed loan is generally determined by
GACC as a result of underwriting procedures which begin with an analysis of
current and historical financial and operating information provided by the
prospective borrower who is seeking the loan. This due diligence analysis of
the economics of a proposed loan is generally based upon a normalized
operating statement which is developed by GACC by using such sources of
information as the actual operating income and expense statements of the
property (generally, a minimum of the two most recent prior years and current
year-to-date income and expense statements are required for each property to
be mortgaged), its rent roll, the actual terms of the leases which have been
reviewed, tax and insurance bills, a review of service contracts, bills and
invoices for certain expenses incurred, comparable market data and
information from an appraisal which has been independently prepared. Gross
Potential Income is underwritten using (a) either the income for the past
twelve months of operation or an annualized current rent roll if the property
is a multifamily property and (b) if it is a commercial property it will be
the lesser of the actual income based on the current rent roll or income that
is calculated using market rental rates. To the extent that other income is
included it must be documented based upon current leases and contracts and
demonstrate a trend in the past operating performance of the property and its
tenants. The underwriting standards typically employed by GACC will generally
require an economic vacancy rate equal to the greater of 5% of gross income,
the sub-market's economic vacancy rate or the property's historical economic
vacancy rate which can be adjusted for current trends if such trends can be
illustrated over time. As a part of its standard due diligence procedures,
GACC will generally include a management fee equal to the greater of 5% of
gross income or the prevailing rate in the market as a part of its pro forma
operating expenses. This is included whether or not the owner of the property
is currently providing for such a fee to be deducted from the property's
income. Additionally, a funded replacement reserve for immediate repairs and
ongoing repairs will be required for all properties. In the case of
commercial properties where GACC deems it appropriate, GACC requires a funded
reserve for leasing commissions and tenant improvements. GACC's underwriting
policies and procedures include certain specific minimum criteria which
proposed properties must achieve. These include occupancy requirements of 90%
for multifamily properties and 85% for commercial properties; debt service
coverage ratios of 1.25x for multifamily properties and 1.30x for commercial
properties and loan to value ratios which generally do not exceed 75%. This
may be exceeded in the case of a superior multifamily property. The actual
occupancy percentages, loan to value ratios, debt service coverage ratios and
other criteria which GACC establishes for its loans may and do vary from the
guidelines which have been described above. See "--Certain Characteristics of
the Mortgaged Pool" herein and "Annex A" hereto.
GACC will also review a variety of issues regarding the proposed
property's tenants. The creditworthiness, the terms of leases, the lease's
expiration dates and the tenant mix are specifically reviewed. Particular
focus is directed at tenants who contribute more than 10% of the income or
occupy in excess of 5,000 square feet. GACC will also prepare a lease
expiration analysis of the proposed property's rent roll.
GACC also requires that the prospective borrower and its key principal(s)
be analyzed. Such analysis includes an evaluation of credit information,
overall financial strength, review of references, past experience and the
amount of equity in the proposed property. The capabilities of the proposed
property's management is evaluated by GACC's review of its experience, the
size of its staff relative to the proposed property, the tenant mix of the
property, management's past performance record, reporting and control
procedures, and accounting and cash management procedures.
BCMC LOAN PROGRAM
BCMC originates multifamily and commercial real estate mortgage loans in
amounts ranging from $1,000,000 to $15,000,000. BCMC works with a nation-wide
network of mortgage brokers. This network allows BCMC to offer a portfolio of
Mortgage Loans that is both geographically diverse and of varied amounts.
BCMC UNDERWRITING AND CLOSING PROCEDURES
Based on information obtained from BCMC, which has not been independently
verified for accuracy or completeness by any of the Depositor, the
Underwriters, the Trustee, the Master Servicer, the Special Servicer, Midland
or the other Mortgage Loan Sellers, the following is a general summary of the
customary underwriting policies and procedures typically utilized by BCMC in
connection with its underwriting of the BCMC Mortgage Loans.
BCMC uses a comprehensive process to determine when to offer a loan
commitment. BCMC's application process includes the collection of three or
more years of financial and operating history for the subject property, a
site plan, a rent roll, recent photographs, year-to-date operating statement,
a detailed loan request, information on existing debt, zoning and property
rehabilitation records, copies of tenant leases, rent deposits and utility
bills for the most recent 12 months, copies
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<PAGE>
of past property tax bills and hazard insurance premium payments, and a
complete financial history of the key principals, including banking
relationships, credit history, valuation of current property owned, and
copies of Federal Income Tax returns. BCMC analyzes this information in order
to make estimations as to expected cash flow.
BCMC conducts a site visit and inspects the prospective Mortgaged
Property, completing a thorough analysis of the surrounding neighborhood and
comparable properties. When practical, BCMC also meets with the prospective
borrower and property managers, and works closely with local real estate
brokers and appraisers to better understand the property's position within
its market. Upon application, the prospective borrower is required to submit
an application fee of between $5,000 and $10,000 as well as funds to complete
the necessary third party reports.
BCMC's underwriting process is geared toward the determination of the
Mortgaged Property's net operating income. This calculation is derived by
evaluating the subject Mortgaged Property's revenue (rental income and other
income) and comparing it to the revenue flow of similar properties in the
market. If the subject Mortgaged Property is leased to multiple tenants, BCMC
analyzes the terms of each individual lease. By looking at each lease, BCMC
can evaluate the potential roll-over risk and estimate annual tenant
improvement costs and leasing commissions that will affect the cash flow.
BCMC also collects information on taxes, insurance, utilities, historic
maintenance repair expenses and management fees (where appropriate). These
items enable BCMC to compile an accurate history of expenses and validate its
underwriting of net operating expenses. BCMC also evaluates projected cash
flow by incorporating the opinion of local real estate brokers and property
appraisers.
BCMC takes the above information and creates a mortgage loan analysis
model and a final underwriting analysis narrative. This narrative includes
the proposed Mortgage Loan terms and major underwriting assumptions, analysis
of both the market and the Mortgaged Property, the history and financial
obligations of the prospective borrowers, along with the strengths,
weaknesses and mitigating factors of the loan.
Prior to completing the narrative analysis and the making of a formal
committee presentation, BCMC orders and reviews an appraisal, an
architectural and engineering report and a Phase I environmental site
assessment. All third party vendors are chosen by BCMC and the reports must
be written to BCMC's standards. If the appraisal of the subject Mortgaged
Property does not confirm the minimum debt service coverage ratio and the
maximum loan-to-value ratio specified in BCMC's loan commitment, BCMC has the
flexibility to reduce the loan amount in order to maintain the underwritten
ratios. BCMC uses architectural and engineering reports to determine the
amount of deferred maintenance and the amount of annual replacement reserves.
BCMC requires that the borrower escrow 150% of the estimated cost of deferred
maintenance at closing. In addition, BCMC requires that replacement reserves
be escrowed on a monthly basis. If the Phase I environmental site assessment
indicates the existence of a potentially material and significant
environmental hazardous condition, the environmental consultant will complete
a Phase II assessment. If either the Phase I or Phase II environmental site
assessment indicates the presence of hazardous conditions, the prospective
borrower is required to remediate those conditions prior to any Mortgage Loan
funding.
In general, each completed underwriting file for a BCMC Mortgage Loan
contains the following documents:
A BCMC loan application, which contains the terms of the prospective
loan;
The prospective borrower's organizational documents;
The prospective borrower's balance sheets and property operating
statements for the past three years;
Tax returns for the general partner/managing member and key principals
for the preceding three years;
A current personal financial statement for all key principals;
A current and year-end rent roll, certified correct by the prospective
borrower;
Copies of all leases;
Copy of the executed property management contract;
Year-to-date operating statement;
Copy of the current real estate tax bill;
Copies of service contracts;
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<PAGE>
Background information and resumes on key principals and management
company;
Copy of the latest month's bank statements showing most recent rental
deposits;
Copy of certificate of occupancy;
Confirmation of zoning;
Site plan;
Appraisal;
Phase I environmental report;
Architectural and engineering report;
Aerial photographs prior to construction and after completion;
Any previous third party reports;
ALTA survey;
Existing title insurance policy;
Last insurance bill; and
Geological maps, topographic maps or flood plain information.
The closing of Mortgage Loans is coordinated by BCMC and is managed by a
closing director. BCMC commissions a select team of attorneys who assist in
the closing process.
Each BCMC Mortgage Loan was made pursuant to BCMC's mortgage loan
documents which conform to the requirements for customary loan documentation
of the state where the subject Mortgaged Property is located.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. The Mortgage Loans provide for Monthly Payments to be due on
the first day of each month.
Mortgage Rates; Calculations of Interest. The Mortgage Loans accrue
interest on the basis of a 360-day year consisting of twelve 30-day months.
Except as set forth below, each Mortgage Loan generally accrues interest at
an annualized rate (a "Mortgage Rate") that is fixed for the entire term of
such Mortgage Loan and does not permit any negative amortization or the
deferral of interest. With respect to one of the Mortgage Loans (Loan #16),
representing approximately 1.5% of the Initial Pool Balance, the related Note
provides that (a) the stated interest rate is to increase by 1/8th of 1%,
with an immediate corresponding adjustment in the regularly scheduled
principal and interest payments, each time the borrower fails to use union
labor in connection with certain work at the Mortgaged Property, and (b) the
principal amount of such Mortgage Loan is to increase by $1,000.00, which
increase is to be added to the applicable Balloon Payment, each time the
borrower fails to deliver timely any required financial statements,
certificates, documents, statements or summaries.
Amortization of Principal. One hundred thirty-one of the Mortgage Loans
(the "Balloon Loans"), which represent approximately 97.4% of the Initial
Pool Balance, provide for monthly payments of principal based on amortization
schedules longer than their remaining terms, thereby leaving substantial
principal amounts due and payable on their respective maturity dates (each
such payment, together with interest on the related Balloon Loan for the
one-month period ending on the day preceding such Balloon Loan's maturity
date, a "Balloon Payment"), unless previously prepaid. Five of the Mortgage
Loans (Loan #41, Loan #46, Loan #76, Loan #95 and Loan #97), which represent
approximately 2.6% of the Initial Pool Balance, have remaining amortization
terms that are the same as their respective remaining terms to maturity. The
weighted average Balloon LTV applicable to the Mortgage Pool is 55.6%. With
respect to 120 of the Mortgage Loans, which represent approximately 87.9% of
the Initial Pool Balance, the Monthly Payments due on January 1, 1997 include
an amount allocable to the amortization of the principal amounts of such
Mortgage Loans. With respect to 16 of the Mortgage Loans, which represent
approximately 12.1% of the Initial Pool Balance (the "Newly Originated
Loans"), the Monthly Payments due on January 1, 1997 are allocable to
interest only on such Mortgage Loans, with the principal amounts thereof
scheduled to commence amortizing effective with the February 1, 1997 Monthly
Payments. The Newly Originated Loans were originated after December 1, 1996.
Accordingly, the Monthly Payment due on January 1, 1997 with respect to each
Newly Originated Loan will represent less than one full month of accrued
interest thereon. To offset any resulting interest shortfall to the
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<PAGE>
Certificateholders, the Depositor will deposit into the Trust Fund on or
before the Closing Date an amount that, when added to the aggregate amount of
Monthly Payments due on the Newly Originated Mortgage Loans on January 1,
1997, will constitute an amount equal to one full month of interest on all
such Newly Originated Loans.
Prepayment Provisions. The imposition of a premium or fee (a "Prepayment
Premium") payable in connection with a voluntary prepayment of each of the
Mortgage Loans is designed primarily to deter a borrower from voluntarily
prepaying the principal amount of its Mortgage Loan. Although certain of the
Mortgage Loans are subject to specified periods following the origination of
such Mortgage Loans wherein no voluntary prepayments are allowed (any such
period, a "Lockout Period"), the Mortgage Loans generally permit each
borrower to voluntarily prepay the entire principal balance of its Mortgage
Loan provided that any applicable Prepayment Premium is paid in connection
therewith; provided, however, that the applicable Prepayment Premium
requirement expires prior to the maturity date of all of the Mortgage Loans.
Voluntary prepayments of less than the full outstanding principal balance of
a Mortgage Loan are generally prohibited. With respect to each of Loan #114
and Loan #132, representing approximately 0.4% of the Initial Pool Balance,
the related borrower is permitted to make voluntary prepayments over either a
20 or 25 year amortization period or a 15 to 25 year amortization period,
respectively, without the payment of Prepayment Premiums.
The Prepayment Premium applicable with respect to the majority of the
Mortgage Loans is generally calculated (a) for a certain period (any such
period, a "Yield Maintenance Period") after the origination of such Mortgage
Loan or the expiration of the applicable Lockout Period, if any, on the basis
of a yield maintenance formula and/or a specified percentage of the amount
prepaid, and (b) after the expiration of the applicable Yield Maintenance
Period, a specified percentage (which percentage may either remain constant
or decline over time) of the amount prepaid. "Annex A" attached hereto
contains more specific information regarding the Prepayment Premiums
applicable to each of the Mortgage Loans.
The Mortgage Loans generally provide that so long as no event of default
then exists, no Prepayment Premium is payable in connection with any
involuntary prepayment resulting from a Casualty or Condemnation. Certain of
the Mortgage Loans may also permit prepayment after an event of default (but
prior to the sale by the mortgagee thereunder of the Mortgaged Property
through foreclosure or otherwise) provided that the related borrower pays the
applicable Prepayment Premium. Certain of the Mortgage Loans may permit the
related borrower to transfer the related Mortgaged Property to a third party
without prepaying the related Mortgage Loan, provided that certain conditions
are satisfied, including, without limitation, an assumption by the transferee
of all of such borrower's obligations in respect of such Mortgage Loan. See
"--'Due-on-Encumbrance' and 'Due-on-Sale' Provisions" herein.
The Depositor makes no representation as to the enforceability of the
provisions of any Mortgage Loan requiring the payment of a Prepayment Premium
or as to the collectability of any Prepayment Premium. See "RISK
FACTORS--Prepayment and Yield Considerations" herein and "CERTAIN LEGAL
ASPECTS OF THE MORTGAGE LOANS--Enforceability of Certain Provisions" in the
Prospectus.
The following "Prepayment Lockout/Premium Analysis" table sets forth an
analysis of the percentage of the declining balance of the Mortgage Pool
that, on December 1 in each of the years indicated, will be within a Lockout
Period or in which Principal Prepayments must be accompanied by the indicated
Prepayment Premium or yield maintenance charge. This table was prepared
generally on the basis of the following assumptions:
(1) That no defaults or prepayments, voluntary or involuntary, occur with
respect to any of the Mortgage Loans; and
(2) That with respect to Loan #16, the stated interest rate does not
adjust at any time during the term of such Mortgage Loan.
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<PAGE>
PREPAYMENT LOCKOUT/PREMIUM ANALYSIS <F1>
PERCENTAGE OF MORTGAGE POOL BY PREPAYMENT
RESTRICTION ASSUMING NO PREPAYMENTS
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001 2002
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restrictions
- -------------------------------
Lockout ........................ 27.8% 27.9% 27.2% 25.4% 22.2% 10.6% 3.8%
Greater of Yield Maintenance or
Percentage Premium of:
5.00% or greater .............. 33.1 33.1 33.0 32.7 32.7 31.2 31.1
4.00% to 4.99% ................
3.00% to 3.99% ................ 7.4 7.4 8.2 8.0 7.4 7.6 6.0
2.00% to 2.99% ................ 4.9 4.9 4.9 5.8 5.6 6.6 6.8
1.00% to 1.99% ................ 23.4 23.3 23.2 24.0 21.8 26.8 30.8
0.00% to 0.99% ................ 2.5 2.5 2.5 2.7 2.7 8.2 9.7
Total of Yield Maintenance .... 71.2 71.1 71.8 73.3 70.2 80.5 84.3
Total of Yield Maintenance
and Lockout ................... 99.0 99.0 99.0 98.7 92.5 91.1 88.1
Percentage Premium:
5.00% or greater .............. 0.0 0.0 0.0 0.0 0.0 0.5 0.2
4.00 to 4.99% ................. 0.0 0.0 0.0 0.0 0.0 0.9 0.4
3.00 to 3.99% ................. 0.0 0.0 0.0 0.3 6.2 0.0 3.0
2.00 to 2.99% ................. 1.0 1.0 1.0 1.0 1.3 7.3 1.6
1.00 to 1.99% ................. 0.0 0.0 0.0 0.0 0.0 0.3 1.3
Total with Percentage Premium . 1.0 1.0 1.0 1.3 7.5 8.9 6.4
Open ........................... 0.0 0.0 0.0 0.0 0.0 0.0 5.5
Total .......................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
% of Initial Pool Balance <F2> . 100.0% 98.7% 97.3% 95.8% 94.1% 89.9% 86.0%
- --------------
<FN>
<F1> This table sets forth an analysis of the percentage of the declining
balance of the Mortgage Pool that, on December 1, in each of the
years indicated, will be within a Lockout Period or in which
Principal Prepayments must be accompanied by the indicated
Prepayment Premium or yield maintenance charge. See "DESCRIPTION OF
THE MORTGAGE POOL--Certain Terms and Conditions of the Mortgage
Loans--Prepayment Provisions" for the assumptions used in preparing
this table.
<F2> Represents the approximate percentage of the Initial Pool Balance
that will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</FN>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
</TABLE>
<TABLE>
<CAPTION>
2003 2004 2005 2006 2007 2008 2009 2010 2011
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restrictions
- -------------------------------
Lockout ........................ 2.8% 3.0% 3.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Greater of Yield Maintenance or
Percentage Premium of:
5.00% or greater .............. 33.2 26.3 10.0 15.8 8.1 2.6 2.7 0.8 0.0
4.00% to 4.99% ................
3.00% to 3.99% ................ 6.4 5.1 2.0 6.2 0.0 0.0 0.0 0.0 0.0
2.00% to 2.99% ................ 7.3 7.5 3.7 0.0 0.0 0.0 0.0 0.0 0.0
1.00% to 1.99% ................ 29.0 29.7 17.3 0.0 0.0 0.0 0.0 0.0 0.0
0.00% to 0.99% ................ 10.4 10.8 10.3 20.9 28.3 29.0 49.2 47.7 100.0
Total of Yield Maintenance .... 86.3 79.3 43.3 42.9 36.4 31.6 51.9 48.5 100.0
Total of Yield Maintenance
and Lockout ................... 89.1 82.3 46.4 42.9 36.4 31.6 51.9 48.5 100.0
Percentage Premium:
5.00% or greater .............. 0.0 7.7 17.0 13.0 12.3 0.0 0.0 0.0 0.0
4.00 to 4.99% ................. 0.0 0.0 0.2 13.6 1.8 0.0 0.0 0.0 0.0
3.00 to 3.99% ................. 2.7 1.6 2.2 0.7 12.6 2.9 0.0 0.0 0.0
2.00 to 2.99% ................. 4.7 3.6 5.6 3.8 1.0 7.5 4.5 0.0 0.0
1.00 to 1.99% ................. 0.0 4.4 1.7 0.0 0.0 1.7 12.7 4.3 0.0
Total with Percentage Premium . 7.5 17.3 26.7 31.1 27.7 12.2 17.2 4.3 0.0
Open ........................... 3.4 0.4 26.9 26.0 35.9 56.2 30.9 47.2 0.0
Total .......................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
% of Initial Pool Balance <F2> . 78.4% 73.8% 69.5% 22.1% 15.9% 8.8% 5.1% 4.4% 0.7%
- -------------
<FN>
<F2> Represents the approximate percentage of the Initial Pool Balance
that will remain outstanding at the indicated date based upon the
assumptions used in preparing this table.
</FN>
</TABLE>
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<PAGE>
"Due-on-Encumbrance" and "Due-on-Sale" Provisions. The Mortgages generally
contain "due-on-encumbrance" clauses that permit the holder of the Mortgage
to accelerate the maturity of the related Mortgage Loan if the borrower
encumbers the related Mortgaged Property without the consent of the
mortgagee. However, in certain of the Mortgage Loans, the related borrower is
allowed, under certain circumstances, to encumber the related Mortgaged
Property with additional liens. See "RISK FACTORS--Investment in Commercial
and Multi-Family Mortgage Loans--Other Financing" herein. The Master Servicer
or the Special Servicer, as applicable, will determine, in a manner
consistent with the servicing standard described herein under "THE POOLING
AND SERVICING AGREEMENT--Servicing of the Mortgage Loans; Collection of
Payments" whether to exercise any right the mortgagee may have under any such
clause to accelerate payment of a Mortgage Loan upon, or to withhold its
consent to, any additional encumbrance of the related Mortgaged Property.
The Mortgages for the Mortgage Loans generally prohibit, without the
mortgagee's prior consent, the borrower from transferring the Mortgaged
Property or allowing a change in ownership, generally defined as, among other
things, (a) a specified percentage (generally ranging from 10% to 50%) change
in the ownership of the borrower, a guarantor or, with respect to certain of
such Mortgage Loans, in the ownership of a general partner of the borrower or
a guarantor, (b) the removal, resignation or change in ownership of any
general partner or managing partner of a borrower, a guarantor or, with
respect to certain of such Mortgage Loans, any general partner of a borrower
or a guarantor, (c) with respect to certain of such Mortgage Loans, the
removal, resignation or change in ownership of the managing agent of the
related Mortgaged Property, or (d) the voluntary or involuntary transfer or
dilution of the controlling interest in the related borrower held by a
specified person; provided, however, that with respect to certain of such
Mortgage Loans, the borrower may be entitled to transfer the Mortgaged
Property or allow a change in ownership if certain conditions are satisfied,
typically including one or more of the following, (i) no event of default has
occurred, (ii) the proposed transferee meets the mortgagee's customary
underwriting criteria, (iii) the Mortgaged Property continues to meet the
mortgagee's customary underwriting criteria, (iv) an acceptable assumption
agreement is executed, and (v) a specified assumption fee (generally 1% to
1.5% of the then outstanding principal balance of the applicable Note) has
been received by the mortgagee. Certain of the Mortgages may also allow
transfers of interests in the related Mortgaged Property in the nature of
residential leases and easements and changes in ownership between partners,
family members, for estate planning purposes, affiliated companies and
certain specified individuals. In the event of any transfer or change in
ownership of the Mortgaged Property in violation of the applicable provisions
of the related Mortgage Loan documents, the related Mortgage Loan documents
generally provide that the mortgagee is permitted to accelerate the maturity
of the related Mortgage Loan. See "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS--Enforceability of Certain Provisions--Due-on-Sale Provisions" in the
Prospectus. The Depositor makes no representation as to the enforceability of
any due-on-sale or due-on-encumbrance provision in any Mortgage Loan which is
the subject of a proceeding under the Bankruptcy Code.
Default Provisions. Except as described below, the related Mortgage Loan
documents generally provide that an event of default will exist if (a) any
regular installment of principal and/or interest is not paid when specified
(generally either (i) upon the date the same is due, or (ii) within a
specified period (generally ranging from 5 days to 30 days) after the date
upon which the same was due or following written notice from the mortgagee of
such failure), or (b) any violation of the conditions described in
"--'Due-on-Encumbrance' and 'Due-on-Sale' Provisions" above occurs.
Additionally, the related Mortgage Loan documents may contain other specified
events of default, including one or more of the following: the borrower's
failure to pay taxes or other charges when due, to keep all required
insurance policies in full force and effect, to cure any material violations
of laws or ordinances affecting the Mortgaged Property or to operate the
related Mortgaged Property according to certain criteria; the imposition of a
mechanic's, materialman's or other lien against the Mortgaged Property; the
institution of a bankruptcy, receivership or similar actions against the
borrower or the Mortgaged Property; unapproved conversion of the related
Mortgaged Property to a condominium or cooperative; defaults under certain
other agreements; defaults under or unapproved modifications to any related
franchise agreement; or material changes to or defaults under any related
management agreement.
Upon the occurrence of an event of default with respect to any Mortgage
Loan, the Master Servicer or the Special Servicer, as applicable, may take
such action as the Master Servicer or the Special Servicer deems advisable to
protect and enforce the rights of the Trustee, on behalf of the
Certificateholders, against the related borrower and in and to the related
Mortgaged Property, subject to the terms of the related Mortgage Loan,
including, without limitation, declaring the entire debt to be immediately
due and payable and/or instituting a proceeding, judicial or non-judicial,
for the complete or partial foreclosure of the Mortgage Loan.
S-43
<PAGE>
Default Interest. All of the Mortgage Loans provide for imposition of a
rate of interest higher than the stated interest rate upon the occurrence of
an event of default by the related borrower ("Default Interest"). The Default
Interest applicable to the Mortgage Loans is generally calculated as either
(a) a specified rate, (b) a specified rate above the stated interest rate of
such Mortgage Loan, or (c) a rate equal to the greater of (i) a specified
rate above the stated interest rate of such Mortgage Loan, or (ii) a
specified rate above a specified base rate (typically the prime rate reported
in The Wall Street Journal). No assurance can be given as to the
enforceability of any provision of any Mortgage Loan requiring the payment of
any Default Interest or as to the collectability of any Default Interest. See
"CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS--Enforceability of Certain
Provisions" in the Prospectus.
Hazard, Liability and other Insurance. Generally, each Mortgage Loan
requires that the related Mortgaged Property be insured (in an amount not
less than the lesser of (a) the full replacement cost of the Mortgaged
Property or (b) the outstanding principal balance of the related Note, but in
any event in an amount sufficient to ensure that the insurer would not deem
the borrower a co-insurer) against loss or damage by fire or other risks and
hazards covered by a standard extended coverage insurance policy. Generally,
each Mortgage Loan also requires that the related borrower obtain and
maintain during the entire term of the Mortgage Loan (a) comprehensive public
liability insurance, typically with a minimum limit of $1,000,000 per
occurrence, (b) if any part of the Mortgaged Property upon which a material
improvement is located lies in a special flood hazard area and for which
flood insurance has been made available, a flood insurance policy in an
amount equal to the lesser of the outstanding principal balance of the
related Note or the maximum limit of coverage available from governmental
sources, (c) if deemed advisable by the Originator, rent loss and/or business
interruption insurance in an amount equal to all rents or estimated gross
revenues from the operation of the Mortgaged Property for a period as
required by the Mortgage, (d) if applicable, insurance against loss or damage
from explosion of steam boilers, air conditioning equipment, high pressure
piping, machinery and equipment, pressure vessels or similar apparatus, and
(e) such other insurance as may from time to time reasonably be required by
the mortgagee. With respect to many of the Mortgage Loans, the related
borrower has satisfied the applicable insurance requirements by obtaining
blanket insurance policies, subject to the review and approval of the same by
the mortgagee, including the amount of insurance and the number of properties
covered by such policies.
Casualty and Condemnation. The related Mortgage Loan documents typically
provide that in the event of damage to the related Mortgaged Property by
reason of fire or other casualty (a "Casualty"), all insurance proceeds will
be paid to the mortgagee and then it is such mortgagee's option as to whether
to apply such proceeds to the outstanding indebtedness of the related
Mortgage Loan, or to allow such proceeds to be applied to the restoration of
the related Mortgaged Property; provided, however, that if certain conditions
are satisfied, the mortgagee may be required to disburse such proceeds in
connection with a restoration of the related Mortgaged Property. These
required conditions typically include one or more of the following: (a) if
the insurance proceeds payable are less than a specified amount, (b) if less
than a specified percentage of the related Mortgaged Property is destroyed or
if the value of the related Mortgaged Property following such Casualty
remains greater than either a specified amount or a specified percentage of
the value of the related Mortgaged Property immediately preceding such
Casualty, (c) if the Casualty affects less than a specified percentage of the
net rentable area of the Mortgaged Property or interrupts less than a
specified percentage of the rentals from the Mortgaged Property, (d) if such
restoration will cost less than a specified amount and if sufficient funds
are available to complete such restoration, (e) if such restoration can be
accomplished within a specified time period, (f) if the restored Mortgaged
Property will adequately secure the related Mortgage Loan, (g) if adequate
income (including rentals and insurance) will be available during the
restoration period and (h) if no event of default then exists. In certain of
the Mortgage Loans, the lease between the related borrower and a tenant of
all or part of the related Mortgaged Property may require the borrower or the
tenant to rebuild the buildings located upon the related Mortgaged Property
in the event of a Casualty, and the related Mortgage Loan documents may
permit the application of insurance proceeds to satisfy such requirement,
regardless of the value of such Mortgaged Property following such Casualty.
Generally, the Mortgage Loans provide that all awards payable to the
borrower in connection with any taking or exercise of the power of eminent
domain with respect to the related Mortgaged Property (a "Condemnation") will
be paid directly to the mortgagee, and then it is such mortgagee's option as
to whether to apply such proceeds to the outstanding indebtedness of the
related Mortgage Loan, or to allow such proceeds to be applied to the
restoration of the related Mortgaged Property; provided, however, that if
certain conditions are satisfied, the mortgagee may be required to disburse
such awards in connection with a restoration of the related Mortgaged
Property. These required conditions typically include one or more of the
following: (a) if the award is less than a specified amount, (b) if less than
a specified percentage of the related Mortgaged Property is taken, (c) if the
Condemnation affects less than a specified percentage of the net rentable
area of the Mortgaged
S-44
<PAGE>
Property or interrupts less than a specified percentage of the rentals from
the Mortgaged Property, (d) if such restoration will cost less than a
specified amount and if sufficient funds are available to complete such
restoration, (e) if such restoration can be accomplished within a specified
time period, (f) if adequate income (including the Condemnation award,
rentals and insurance) will be available during the restoration period, (g)
if no event of default then exists, and (h) if such restoration and repair is
feasible and the related Mortgaged Property will be commercially viable after
such restoration. In certain of the Mortgage Loans, the lease between the
related borrower and a tenant of all or part of the related Mortgaged
Property may require the borrower or the tenant to restore the related
Mortgaged Property in the event of a Condemnation and the related Mortgage
Loan documents may permit the application of condemnation proceeds to satisfy
such requirement.
Financial Reporting. The Mortgages generally contain covenants which
require the related borrower to provide the mortgagee with certain financial
reports regarding such borrower's operations at the related Mortgaged
Property at least upon an annual basis, and generally also require such
reporting upon an interim basis (generally monthly or quarterly) throughout
the fiscal year of the borrower. Such reports typically include information
about one or more of the following regarding such Mortgaged Property: (a)
income and expenses for the period covered by such reports, (b) current
tenancy information, and (c) the financial condition of the borrower and/or
certain specified principals of the borrower. Many of the Mortgages also
require the borrower to pay additional interest of a specified amount with
each Monthly Payment, with such additional interest being rebated, on an
annual basis, to those borrowers who have satisfied all such reporting
requirements. However, in the case of owner-occupied properties, the borrower
typically provides financial information with respect to itself instead of
the Mortgaged Property.
Delinquencies and Modifications. As of the Cut-off Date for each Mortgage
Loan, no Mortgage Loan was more than 30 days delinquent in respect of any
Monthly Payment, and no Mortgage Loan has been modified in any material
manner since its origination in connection with any default or threatened
default on the part of the related borrower. Any future modifications would
be subject to the conditions and requirements contained in the Pooling and
Servicing Agreement.
Borrower Escrows and Reserve Accounts. In a number of the Mortgage Loans,
the related borrower was required, or may under certain circumstances in the
future be required, to establish one or more reserve or escrow accounts (such
accounts, "Reserve Accounts") for necessary repairs and replacements, tenant
improvements and leasing commissions, real estate taxes and assessments,
water and sewer charges, insurance premiums, environmental remediation,
improvements mandated under the Americans with Disabilities Act of 1990,
deferred maintenance and/or scheduled capital improvements or, under certain
specified circumstances, reserves for the payment of regularly scheduled
payments of principal and/or interest ("Monthly Payments") and other payments
due under the related Mortgage Loan. The following table sets forth more
detailed information, as of December 9, 1996, regarding Mortgage Loans for
which a Reserve Account existed on such date.
S-45
<PAGE>
RESERVE ESCROW BALANCES <F1>
<TABLE>
<CAPTION>
LOAN CURR. MONTHLY
NO. PROPERTY NAME RESERVE DESCRIPTION ORIG. RESERVE RESERVE RESERVE
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1 Kennedy Ridge Replacement Reserve $ 0 $ 93,594 $23,950
Completion Reserve $1,543,703 $ 966,451 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
2 Gateway Shopping Center Repair Reserve $ 356,971 $ 433,586 $ 0
Environmental Reserve $ 10,000 $ 10,192 $ 0
Leasing Reserve $1,000,000 $ 68,626 $ 0
Tenant Reserve $ 0 $ 0 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
3 Gentry's Landing Replacement Reserve $ 59,070 $ 59,070 $ 4,535
Capital Improvement Reserve $ 898,104 $ 898,104 $11,552
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
4 Kendall I Place Repair Reserve $ 5,750 $ 12,482 $ 820
Tenant Reserve $ 100,000 $ 122,600 $ 5,000
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
6 Bay Plaza K Mart Rental Reserve $2,757,312 $2,757,312 $ 0
Repair Reserve $ 559 $ 559 $ 559
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
7 Preferred Freezer Tenant Reserve $ 100,000 $ 130,974 $ 2,500
Repair Reserve $ 185,500 $ 23,441 $ 5,670
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
8 Rio Norte Shopping Center Tenant Reserve $ 300,000 $ 300,000 $ 0
COMMENT Earn out for currently vacant local space
- ------ ------------------------------- --------------------------------------------------------------------
9 Val Mesa Medical Building Tenant Reserve $ 125,000 $ 125,098 $25,000
COMMENT Tenant escrow to grow to $225,000.00 to TI work in progress.
- ------ ------------------------------- --------------------------------------------------------------------
10 Lakewood Cove Apartments Repair Reserve $ 193,744 $ 193,744 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
11 Longhorn Pavillion Apartments Replacement Reserve $ 3,800 $ 3,800 $ 3,800
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
12 Cape Cod Factory Outlet Mall Tenant Reserve $ 10,949 $ 10,949 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
15 North Creek Apartments Capital Improvement Reserve $ 428,375 $ 428,375 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
17 Hunter Park Office Plaza Tenant Reserve $ 600,000 $ 600,000 $12,391
Tenant Reserve $ 125,000 $ 125,000 $ 0
COMMENT $125,000.00 covers earnout for 1822 sf now vacant; $600,000.00
to grow to $1,398,000.00 to be disbursed when county lease is renewed
or replaced.
- ------ ------------------------------- --------------------------------------------------------------------
18 Westgate of Laurel Apartments Replacement Reserve $ 0 $ 0 $ 4,542
Repair Reserve $ 6,163 $ 6,163 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
21 Hunter's Ridge Apartments Capital Improvement Reserve $ 17,375 $ 17,375 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
22 Blaustein Building Miscellaneous Reserve $ 500,000 $ 500,000 $ 0
Environmental Reserve $ 2,000 $ 2,001 $ 0
Tenant Reserve $ 0 $ 0 $19,672
COMMENT Miscellaneous reserve for replacement of chiller.
- ------ ------------------------------- --------------------------------------------------------------------
24 Woodhollow Apartments Capital Improvement Reserve $ 22,500 $ 22,500 $ 5,963
Environmental Reserve $ 1,950 $ 1,950 $ 0
Tenant Reserve $ 200,000 $ 200,000 $ 0
COMMENT Tenant reserve released when property achieves stablized occupancy
for 6 consecutive months.
- ------ ------------------------------- --------------------------------------------------------------------
25 Big Curve Shopping Center Tenant Reserve $ 25,000 $ 25,000 $ 5,000
Repair Reserve $ 1,580 $ 1,580 $ 1,580
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
26 Windmill Terrace Apartments Capital Improvement Reserve $ 23,063 $ 23,063 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
27 Armand Place Apartments Capital Improvement Reserve $ 200,000 $ 200,000 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
28 Oakland Valley Apartments Initial Replacement Reserve $ 73,490 $ 73,490 $ 0
Repair Reserve $ 14,108 $ 14,108 $ 0
Replacement Reserve $ 5,833 $ 35,000 $ 5,833
COMMENT Initial replacement reserve is for 8 roofs and 1 HVAC system.
- ------ ------------------------------- --------------------------------------------------------------------
30 Cobblestone Village Apartments Replacement Reserve $ 4,117 $ 8,233 $ 4,117
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
31 Name Office Building Environmental Reserve $ 550 $ 550 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
32 Goodwin Gardens Apartments Environmental Reserve $ 450 $ 450 $ 0
Repair Reserve $ 21,950 $ 21,950 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
34 North Pointe Office Plaza Tenant Reserve $ 134,000 $ 134,000 $ 0
COMMENT Master Lease at $15.25/sf for 9298 sf backed by $134,000, which
can be substituted by LC.
- ------ ------------------------------- --------------------------------------------------------------------
35 The Shoppes at Bellgrade Repair Reserve $ 100,000 $ 76,206 $ 1,000
- ------ ------------------------------- --------------------------------------------------------------------
S-46
<PAGE>
LOAN CURR. MONTHLY
NO. PROPERTY NAME RESERVE DESCRIPTION ORIG. RESERVE RESERVE RESERVE
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
36 Cypress Station Shopping Center Capital Improvement Reserve $450,000 $451,127 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
37 Sundance Apartments Repair Reserve $ 4,120 $ 4,136 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
38 Riggs Plaza Environmental Reserve $ 2,000 $ 0 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
39 Emmett Street & Redstone Hill Environmental Reserve $ 5,000 $ 5,014 $ 0
Capital Improvement Reserve $ 28,688 $ 28,770 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
40 Shadow Valley Apartments Capital Improvement Reserve $ 80,000 $ 80,283 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
41 Casa Devon Apartments Capital Improvement Reserve $ 96,094 $ 96,094 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
41 Casa Devon Apartments Miscellaneous Reserve $ 0 $ 0 $ 894
Replacement Reserve $ 0 $ 217 $3,421
Miscellaneous Reserve $ 0 $ 0 $ 895
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
43 Inter American Transport Equ Repair Reserve $ 0 $ 0 $3,054
Miscellaneous Reserve $ 6,000 $ 6,002 $ 0
Tenant Reserve $ 0 $ 0 $2,000
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
44 Midway Mills Shopping Center Repair Reserve $ 9,070 $ 9,301 $ 0
Tenant Reserve $100,000 $123,020 $2,000
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
45 Desert Shadows Apartments Replacement Reserve $ 4,250 $ 8,500 $4,250
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
46 Cabana Club Apartments Replacement Reserve $ 5,567 $ 27,835 $5,567
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
47 Whispering Hills Apartments Capital Improvements Reserve $ 7,200 $ 7,200 $ 0
Replacement Reserve $ 3,895 $ 7,790 $3,895
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
49 Promenade Shopping Center Repair Reserve $ 14,215 $ 14,215 $ 640
Tenant Reserve $ 28,032 $ 28,032 $2,730
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
50 Dulles Square Shopping Center Environmental Reserve $ 7,500 $ 7,500 $ 0
Tenant Reserve $ 0 $ 0 $7,150
COMMENT Tenant reserve escrow to grow to $200,000, to be disbursed for
renewal and replacement of tenants for space rolling over during first
36 months of loan.
- ------ ------------------------------- --------------------------------------------------------------------
56 The Delphax Building Replacement Reserve $ 320 $ 1,600 $ 320
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
57 New Grand Hotel Repair Reserve $ 3,000 $ 3,000 $ 0
Replacement Reserve $ 1,547 $ 4,641 $1,547
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
59 East Hills Village Shopping Tenant Reserve $ 10,000 $ 10,000 $ 0
Replacement Reserve $ 500 $ 500 $ 500
COMMENT Tenant Improvement escrow is for fit out of Kern School's space
- ------ ------------------------------- --------------------------------------------------------------------
60 Rosedale Towers Office Build Environmental Reserve $ 575 $ 577 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
61 Western Hills Apartments Replacement Reserve $ 3,000 $ 9,000 $3,000
Repair Reserve $ 5,782 $ 0 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
62 Dillon Factory Stores Replacement Reserve $ 160 $ 160 $ 160
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
65 University Business Center Capital Improvement Reserve $ 41,500 $ 41,618 $ 0
Tenant Reserve $172,445 $191,640 $9,345
COMMENT Tenant Escrow to grow to $350,000 and disbursed after GSA Lease
is renewed or replaced.
- ------ ------------------------------- --------------------------------------------------------------------
66 Lucas Creek Apartments Environmental Reserve $ 1,100 $ 1,100 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
67 Fox Creek Apartments Capital Improvement Reserve $128,250 $ 91,225 $3,584
Environmental Reserve $ 575 $ 1 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
68 Spring Hill Apartments I & I Miscellaneous Reserve $ 10,000 $ 10,000 $ 0
Capital Improvement Reserve $ 19,375 $ 19,375 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
69 Forest Place Apartments Repair Reserve $ 19,050 $ 0 $ 0
Replacement Reserve $ 38,617 $ 17,131 $3,417
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
70 Mulberry Row Apartments Initial Replacement Reserve $ 73,500 $ 73,500 $ 0
Repair Reserve $ 14,738 $ 14,738 $ 0
Replacement Reserve $ 2,630 $ 18,410 $2,630
COMMENT Initial replacement reserve is for future roof repairs.
- ------ ------------------------------- --------------------------------------------------------------------
71 Brentwood Terrace Apartments Environmental Reserve $ 550 $ 550 $ 0
Capital Improvement Reserve $189,125 $189,125 $ 0
Environmental Reserve $ 5,000 $ 5,000 $ 0
- ------ ------------------------------- --------------------------------------------------------------------
S-47
<PAGE>
LOAN CURR. MONTHLY
NO. PROPERTY NAME RESERVE DESCRIPTION ORIG. RESERVE RESERVE RESERVE
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
72 580 Cottage Grove Road Tenant Reserve $128,364 $128,591 $ 0
Completion Reserve $ 41,636 $ 41,738 $ 0
COMMENT Tenant Reserve for improvements on unfinished space.
- ------ ------------------------------- --------------------------------------------------------------------
73 Sedgefield Apartments Repair Reserve $ 0 $ 0 $1,000
Environmental Reserve $ 2,000 $ 2,000 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
74 Bullock Habersham Apartments Replacement Reserve $ 2,859 $ 8,614 $2,859
Repair Reserve $ 30,000 $ 0 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
75 North Gaithersburg Shopping Tenant Reserve $ 0 $ 0 $3,333
COMMENT Tenant escrow to grow to $80,000 and disbursed after Reliable
La-Z-Boy lease is renewed or replaced.
- ------ ------------------------------- --------------------------------------------------------------------
78 San Pedro Place Shopping Center Environmental Reserve $ 550 $ 551 $ 0
Capital improvement Reserve $100,000 $100,158 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
80 Central Avenue Industrial Pa Environmental Reserve $ 1,500 $ 1,500 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
81 Hammond Street Apartments Capital Improvement Reserve $ 16,875 $ 0 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
82 Rosenberg Building Apartment Repair Reserve $ 10,500 $ 10,500 $ 0
Replacement Reserve $ 1,408 $ 2,817 $1,408
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
84 5300 Harbor Street Environmental Reserve $ 1,000 $ 1,005 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
84 5300 Harbor Street Capital Improvement Reserve $ 14,580 $ 0 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
85 Cedar Square Shopping Center Replacement Reserve $ 37,695 $ 37,695 $2,695
Tenant Reserve $ 15,000 $ 15,000 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
86 Ames Repair Reserve $ 0 $ 4,529 $ 900
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
87 Water's Edge Apartments Repair Reserve $111,223 $111,223 $ 0
Capital Improvement Reserve $210,808 $210,808 $ 0
Environmental Reserve $ 85,000 $ 85,000 $ 0
COMMENT Environmental reserve for cleanup of diesel fuel spill.
- ------ ------------------------------- --------------------------------------------------------------------
88 The Townhouse Apartments Environmental Reserve $ 2,000 $ 2,001 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
89 Champlain Apartments Replacement Reserve $ 10,884 $ 30,251 $4,842
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
90 2603 Oaklawn Office Environmental Reserve $ 550 $ 551 $ 0
Capital Improvement Reserve $125,000 $125,197 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
91 Carriage Green Apartments Repair Reserve $ 13,590 $ 0 $ 0
Replacement Reserve $ 3,036 $ 9,268 $3,036
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
92 Stafford Station Environmental Reserve $ 2,500 $ 2,500 $ 0
Tenant Reserve $140,000 $140,000 $ 0
COMMENT Tenant Reserve released after 75% of all leases rolling in first
year are renewed or replaced.
- ------ ------------------------------- --------------------------------------------------------------------
93 Shoppes at Gloucester Tenant Reserve $ 0 $ 7,062 $1,000
Repair Reserve $ 0 $ 0 $ 0
COMMENT Repair Reserve is an annual payment due Jan. 1
- ------ ------------------------------- --------------------------------------------------------------------
97 Plainfield Realty Repair Reserve $ 66,875 $ 66,875 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
99 Office Depot Repair Reserve $ 90,000 $ 38,591 $ 500
Tenant Reserve $ 10,000 $ 23,560 $1,000
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
100 Callahan Plaza Tenant Reserve $ 0 $ 0 $ 0
Repair Reserve $ 12,417 $ 12,421 $ 0
COMMENT Tenant Reserve effective with monthly payments years 3, 5-8
- ------ ------------------------------- --------------------------------------------------------------------
102 Frank's Nursery & Craft Store Tenant Reserve $ 19,910 $ 24,917 $ 526
Repair Reserve $ 10,438 $ 11,005 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
104 Frank's Nursery & Craft Store Tenant Reserve $ 19,695 $ 24,632 $ 521
Repair Reserve $ 18,393 $ 18,658 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
105 Franklin School Apartments Replacement Reserve $ 803 $ 2,410 $ 803
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
106 North Georgia Business Center Capital Improvement Reserve $ 35,000 $ 35,000 $ 0
Miscellaneous Reserve $ 10,000 $ 10,000 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
109 Somerset Apartments Environmental Reserve $ 500 $ 3 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
110 Town Center Plaza Tenant Reserve $ 76,000 $ 86,237 $5,100
COMMENT Escrow grows to $178,000 and will be disbursed at $8.75/sf for
each existing tenant which is renewed or replaced.
- ------ ------------------------------- --------------------------------------------------------------------
S-48
<PAGE>
LOAN CURR. MONTHLY
NO. PROPERTY NAME RESERVE DESCRIPTION ORIG. RESERVE RESERVE RESERVE
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
112 Mt. Airy Manor Apartments Replacement Reserve $ 0 $ 0 $1,375
Repair Reserve $ 50,000 $ 50,000 $ 0
Environmental Reserve $ 1,100 $ 1,100 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
116 Buckingham Apartments Environmental Reserve $ 500 $ 3 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
119 Colonial Apartments Capital Improvement Reserve $ 78,000 $ 78,195 $ 0
Environmental Reserve $ 800 $ 802 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
123 Hy-Vee Shopping Center Environmental Reserve $ 550 $ 551 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
124 Frank's Nursery & Craft Store Repair Reserve $ 10,731 $ 10,890 $ 0
Tenant Reserve $ 14,317 $ 17,907 $ 379
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
125 ETI Center Repair Reserve $ 7,500 $ 7,500 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
128 Frank's Nursery & Craft Store Repair Reserve $ 5,763 $ 5,859 $ 0
Tenant Reserve $ 13,618 $ 17,030 $ 360
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
129 Westview Gardens Apartments Repair Reserve $ 33,285 $ 33,380 $ 0
Replacement Reserve $ 0 $ 2,300 $1,150
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
130 Frank's Nursery & Craft Store Repair Reserve $ 2,413 $ 2,462 $ 0
Tenant Reserve $ 12,711 $ 15,897 $ 336
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
131 Wood Haven Apartments Capital Improvement Reserve $ 19,938 $ 19,938 $ 0
Environmental Reserve $ 969 $ 0 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
133 2125 West Spur -HWY 303 Environmental Reserve $ 2,000 $ 2,000 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
134 Frank's Nursery & Crafts Store Tenant Reserve $ 10,877 $ 13,611 $ 288
Repair Reserve $ 12,875 $ 13,017 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
135 Frank's Nursery & Crafts Store Tenant Reserve $ 0 $ 5,957 $ 742
Repair Reserve $ 3,750 $ 3,783 $ 0
- ------ ------------------------------- ---------------------------- ------------- ------------ ---------
$13,511,221 $12,070,553
<FN>
<F1> BALANCES AS OF 12/9/96.
</FN>
</TABLE>
S-49
<PAGE>
THE TAX CREDIT LOANS
Seven Mortgage Loans (Loan #11, Loan #46, Loan #58, Loan #82, Loan #105,
Loan #113 and Loan #118) representing approximately 4.1% of the Initial Pool
Balance (the "Section 42 Mortgage Loans"), are secured by Mortgaged
Properties believed eligible to receive Tax Credits. The Section 42 Mortgage
Loans were originated by BCMC or Midland. All of the Section 42 Mortgage
Loans were underwritten to a Debt Service Coverage Ratio of not less than
1.15x and a Loan to Value Ratio of not greater than 85%.
Background. The Tax Reform Act of 1986 eliminated or restricted most of
the existing federal tax incentives for the production of rental housing
(such as tax-exempt bond financing, accelerated depreciation and deduction of
construction period interest) and replaced them with a federal tax credit for
qualifying property that was acquired, constructed or rehabilitated after
December 31, 1986. The Low Income Housing Tax Credit provisions are set forth
in Section 42 of the Code. The Tax Credit program is administered by the U.S.
Treasury Department. The intent of the Tax Credit Program is to facilitate,
through the tax credit mechanism, the construction or substantial
rehabilitation of affordable multifamily housing with the benefits of this
indirect subsidy flowing to a targeted tenant profile. All of the Mortgaged
Properties relating to the Section 42 Mortgage Loans have been allocated Tax
Credits.
General Rules. Under the Tax Credit provisions, a property owner must
comply with the tenant income restrictions and rental restrictions over a
minimum 15-year compliance period. In addition, agreements governing the
property will normally require an "extended use period" which has the effect
of extending the income and rental restrictions for an additional 15 years.
However, at any time during the last year of the compliance period or at any
time during the extended use period, the property owner may demand that the
related state housing finance agency find a buyer for the property who will
purchase the property subject to the income and rental restrictions and who
will pay enough to both retire any debt on the property and return the
owner's equity investment plus cost-of-living adjustments. If the related
state housing finance agency cannot find such a purchaser within one year of
such demand, the income and rental restrictions cease to apply and rents may
be increased to market rates over a three-year period. In return for agreeing
to these restrictions, the property owner is entitled to receive a Tax Credit
(e.g., a dollar-for-dollar reduction of federal taxes) in each taxable year
over a period of 10 years for a qualified low-income project commencing with
occupancy by qualified tenants.
Income Targeting Test. At the time the project is placed in service, the
property owner must make an irrevocable election of one of two set-aside
rules, either (i) at least 20% of the units must be rented to tenants with
incomes of 50% or less of median income, as adjusted for family size (the
"20-50" set-aside), or (ii) at least 40% of the units must be rented to
tenants with incomes of 60% or less of median income, as adjusted for family
size (the "40-60" set-aside). The aggregate number of Tax Credits the owner
is entitled to is based upon the percentage of total units made available to
qualified tenants. See "--Value of Tax Credits" below.
The applicable set-aside requirement must be met on an annual basis over
the 15-year compliance periods with tenant income each year measured against
the income limit applicable for that year. Most owners have elected the 40-60
set-aside rule and designated 100% of the units for tenants that qualify
under the income requirements.
Once qualified, tenant income can rise to 140% of the applicable income
limitation for that year without disqualification of the tenant. The
provisions allow the income of an existing tenant to exceed the 140% limit
without disqualification if the next available rental unit of comparable size
is rented (or made available) to a tenant qualifying at 60% of the median
income (or 50% for the 20-50 set-aside projects). In practice, there is no
income limit for existing tenants who initially met the applicable income
requirements in a housing project eligible for Tax Credits (a "Tax Credit
Project") for which the owner has elected to rent 100% of the units thereof
to qualified tenants. A majority of the Section 42 Mortgage Loans are secured
by Mortgaged Properties where the related borrower had elected to rent 100%
of the units to qualified tenants.
Rental Requirements. The Tax Credit provisions require that gross rent for
each low-income unit not exceed 30% of the annual HUD median income, adjusted
for the household size expected to occupy the particular unit. The gross
rental charged for a unit must take into account an allowance for utilities.
If utilities are paid by the tenant, then the maximum allowable Tax Credit
rent is reduced according to utility allowances, as provided in regulations
of the Internal Revenue Service (the "IRS").
Value of Tax Credits. The number of Tax Credits received by the owner of a
qualified project will depend largely on the "qualified basis," which is the
portion of the project's "eligible basis" attributable to low-income units.
In general, qualified basis is the eligible basis times the percentage of
total rental units (up to a maximum of 100%) rented to or made
S-50
<PAGE>
available to qualifying tenants. Eligible basis is essentially project cost
(exclusive of land). Qualified basis can change from year to year during the
relevant period when tax credits are applicable (the "Tax Credit Period") if
owners elect to make more (or fewer) rental units available to qualifying
tenants. Accordingly, the number of Tax Credits received from year to year
could vary.
The number of Tax Credits available to the owner of the property each year
is equal to the "annual tax credit percentage" times the qualified basis. The
annual tax credit percentage available to a particular property is generally
determined when the property is placed in service and will not change
thereafter. In 1987, the "annual tax credit percentage" for new construction
was 9% and the annual tax credit percentage for acquisition of existing
buildings was 4%. In subsequent years, the IRS has published monthly factors
to compute the annual tax credit percentage for projects placed in service
that month. These annual percentages approximate 9% and 4%.
For example, for a newly-constructed Tax Credit Project, Tax Credits equal
to approximately 9% of the project's qualified basis would be available for
each year of the Tax Credit Period. Thus, the aggregate number of Tax Credits
available over the Tax Credit Period would equal approximately 90% of the
project's qualified basis, which for projects which are (and remain) 100% Tax
Credit qualified, may approximate almost 90% of the project cost (excluding
the cost of land). However, when investors consider the amount of funds they
are willing to contribute as limited partners to a partnership which owns a
Tax Credit Project, they generally consider (among other factors) the timing
of the receipt of Tax Credits (future Tax Credits have lower present values).
Accordingly, investor capital contributions for 9% projects generally
approximate 45-50% of the aggregate number of Tax Credits allocated to a
property.
Compliance and Recapture of Tax Credits. Tax Credit compliance over the
15-year compliance period is based on whether tenants qualify. This is
determined by reviewing tenant income (adjusted for family size) in relation
to the HUD median income for the area as described above under "--Income
Targeting Test."
In the event a Tax Credit Project does not maintain compliance with the
Tax Credit restrictions on tenant income or rental rates, the owners of the
Tax Credit Project may lose the Tax Credits related to the period of the
noncompliance and face the partial recapture of previously taken Tax Credits.
The loss of Tax Credits, and the possibility of recapture of Tax Credits
already taken, may provide significant incentive for project owners to keep
the Tax Credit Project in compliance. Additionally, in many cases, it may be
economically prudent for project owners to subsidize poorly performing
projects as opposed to permitting a default on a Section 42 Mortgage Loan
secured by the Tax Credit Project. As the Tax Credits flow to the owner of
the Tax Credit Project, a default on a Section 42 Mortgage Loan that leads to
a foreclosure would result in the prior owners losing any future Tax Credits
and the potential recapture of a portion of any Tax Credits already taken as
discussed in the following paragraph. Additionally, in the event of a
foreclosure upon a Tax Credit Project during the Tax Credit Period, the
subsequent owner will be entitled to the remaining Tax Credits in the same
manner as the original owner of the Tax Credit Project, subject to continued
compliance with Section 42 of the Code. Accordingly, the resale value of the
Tax Credit Project during such Tax Credit Period may be enhanced by the
existence of the Tax Credits. In the event of a foreclosure sale during such
period, prospective purchasers may assign a value to the remaining Tax
Credits and reflect such value in the price they are willing to pay to
acquire the Tax Credit Project. Conventional valuation analysis, such as that
based upon net operating income, does not recognize this value. Thus, the
true value may be understated. However, the actual value assigned by
prospective purchasers to the Tax Credits will depend on the remaining term
of the Tax Credit Period, the prevailing market for Tax Credit properties and
other economic factors, and no assurance can be given that the existence of
Tax Credits will generate any increase in the value of the related Mortgaged
Properties. All the Section 42 Mortgage Loans are secured by liens on related
Mortgaged Properties which have been allocated Tax Credits.
Under certain circumstances, a property owner is subject to the recapture
of the "accelerated portions" of any Tax Credit previously taken, plus
interest. Because the Tax Credits are taken over a 10-year period while the
Section 42 compliance period is 15 years, one-third of the Tax Credit taken
in years 1 through 10 is considered "accelerated" and is subject to
recapture. If the non-compliance events occur in years 11 through 15, the
total accelerated portion (which equals one-third of the total Tax Credits
taken) is reduced pro rata each subsequent year. Additionally, if a project
as a whole fails to meet the minimum requirements (e.g., the 20-50 or 40-60
set-aside, whichever is elected), there is recapture of 100% of the
accelerated portion of the Tax Credits taken in each preceding year.
Recapture does not occur if noncompliance is corrected within a "reasonable
period," as determined under the Code.
In substantially all cases, the Tax Credits were allocated to the
Mortgaged Properties securing the Section 42 Mortgage Loans based upon most
of the units therein being held available or occupied by individuals whose
income is 60% or less of the area median gross income for the area in which
the related Mortgaged Properties is located. Under Section 42 of the
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Code, the rent that can be charged for the qualified units must be restricted
on the basis of unit size (or number of occupants in pre-1990 properties) and
area median income. In addition, to avoid a recapture of a portion of the Tax
Credits previously taken by a borrower, the Mortgaged Properties securing the
Section 42 Mortgage Loans must meet the income and rental requirements for at
least 15 years.
BCMC received, with respect to each Mortgaged Property securing the
Section 42 Mortgage Loans, evidence as to (i) the number of Tax Credits, (ii)
the "eligible basis," (iii) the "qualified basis," (iv) the "date placed in
service," and (v) compliance with the Tax Credit regulations to date. As part
of the documents related to the origination of each Mortgage Loan, the
Originator also received a copy of the Tax Credit agreement with the
applicable state or local housing finance agency.
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CERTAIN CHARACTERISTICS OF THE MORTGAGE POOL
Concentration of Mortgage Loans and Borrowers. Several of the Mortgage
Loans have Cut-off Date Principal Balances that are substantially higher than
the average Cut-off Date Principal Balance. The largest single Mortgage Loan
(Loan #1) has a Cut-off Date Principal Balance that represents approximately
5.3% of the Initial Pool Balance. The five largest individual Mortgage Loans
have Cut-off Date Principal Balances that represent in the aggregate
approximately 16.8% of the Initial Pool Balance.
The Mortgage Pool consists of 136 Mortgage Loans to 129 separate
borrowers. Nine of the Mortgage Loans were made to a borrower which was also
the borrower in one or more of the other Mortgage Loans. Twenty-nine of the
Mortgage Loans were made to borrowers that are affiliated with the borrower
of another Mortgage Loan. However, no set of Mortgage Loans made to a single
borrower or to a single group of affiliated borrowers constitutes more than
approximately 2.9% of the Initial Pool Balance. Eleven Mortgage Loans
(representing approximately 3.3% of the Initial Pool Balance) are
cross-collateralized and cross-defaulted with one or more other Mortgage
Loans to the related borrower or to a related affiliated borrower. See
"--Limitations on Enforceability of Cross-Collateralization" herein. The
following table sets forth more detailed information regarding Mortgage Loans
made to a single borrower or to a single group of affiliated borrowers. The
column entitled "%" in such table sets forth the approximate percentage of
the Initial Pool Balance represented by each identified group of Mortgage
Loans.
<TABLE>
<CAPTION>
LOAN RELATIONSHIP OF CROSS-COLLATERALIZED AND
NUMBERS % BORROWERS CROSS-DEFAULTED
- ---------------------------- -------- ------------------- ----------------------------
<S> <C> <C> <C>
Loan #28 and Loan #70 1.5% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #11, Loan #58, Loan #82 2.9% Affiliated Entities No
and Loan #105
- ---------------------------- -------- ------------------- ----------------------------
Loan #30, Loan #45 and Loan 2.5% Affiliated Entities No
#47
- ---------------------------- -------- ------------------- ----------------------------
Loan #102, Loan #104, Loan 1.3% Same Borrower Yes
#124, Loan #128, Loan #130,
Loan #134 and Loan #135
- ---------------------------- -------- ------------------- ----------------------------
Loan #96, Loan #109 and Loan 0.7% Affiliated Entities No
#116
- ---------------------------- -------- ------------------- ----------------------------
Loan #68 and Loan #106 0.7% Same Borrower Yes
- ---------------------------- -------- ------------------- ----------------------------
Loan #31, Loan #78 1.4% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #18, Loan #60 and Loan 2.3% Affiliated Entities No
#110
- ---------------------------- -------- ------------------- ----------------------------
Loan #24 and Loan #38 2.1% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #21 and Loan #73 1.9% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #48 and Loan #57 1.3% Affiliated Entities Yes
- ---------------------------- -------- ------------------- ----------------------------
Loan #22 and Loan #125 1.6% Affiliated Entities No
- ---------------------------- -------- ------------------- ----------------------------
Loan #67 and Loan #71 0.9% Affiliated No
Entities
- ---------------------------- -------- ------------------- ----------------------------
Loan #113 and Loan #118 0.4% Affiliated No
Entities
- ---------------------------- -------- ------------------- ----------------------------
</TABLE>
Geographic Concentration. The Mortgaged Properties are located in 23
states. Thirty-one of the Mortgage Loans, which represent approximately 17.2%
of the Initial Pool Balance, are secured by liens on Mortgaged Properties
located in Texas; 15 of the Mortgage Loans, which represent approximately
15.2% of the Initial Pool Balance, are secured by liens on Mortgaged
Properties located in California; 14 of the Mortgage Loans, which represent
approximately 9.9% of the Initial Pool
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Balance, are secured by liens on Mortgaged Properties located in Florida; 5
of the Mortgage Loans, which represent approximately 7.0% of the Initial Pool
Balance, are secured by liens on Mortgaged Properties located in Colorado; 9
of the Mortgage Loans, which represent approximately 6.1% of the Initial Pool
Balance, are secured by liens on Mortgaged Properties located in Michigan; 5
of the Mortgage Loans, which represent approximately 5.4% of the Initial Pool
Balance, are secured by liens on Mortgaged Properties located in New York;
and 6 of the Mortgage Loans, which represent approximately 5.3% of the
Initial Pool Balance, are secured by liens on Mortgaged Properties located in
Maryland. The remaining Mortgaged Properties are located throughout 16 other
states, with no more than 4.0% of the Initial Pool Balance being secured by
Mortgaged Properties located in any such individual jurisdiction.
Environmental Risks. Except as discussed below, (a) environmental site
assessments with respect to the Mortgaged Properties generally were obtained
either by (i) the Originator within 12 months of the respective origination
dates of the Mortgage Loans, or (ii) the Mortgage Loan Seller or BCMC, as
applicable, within 12 months of the respective dates such Mortgage Loans were
acquired by such Mortgage Loan Seller or BCMC, as applicable, and (b) the
Mortgaged Properties have been subject to environmental site assessments
within 24 months preceding the Cut-off Date.
Other than as described below, the environmental site assessments did not
reveal the existence of conditions or circumstances respecting the Mortgaged
Properties securing any Mortgage Loan that would constitute or result in a
material violation of applicable environmental law, impose a material
constraint on the operation of such Mortgaged Properties, require any
material change in the use thereof, require any material clean-up, remedial
action or other response with respect to hazardous materials on or affecting
such Mortgaged Properties under any applicable environmental law, with the
exception of conditions or circumstances (a) that such assessments indicated
could be cleaned up, remediated or brought into compliance with applicable
environmental law by the taking of certain actions and (b) either for which
(i) a hold-back or other escrow of funds in an amount not less than the cost
of taking such clean-up, remediation or compliance actions as estimated in
such assessments has been created, (ii) an environmental insurance policy in
an amount satisfactory to the Originator has been obtained by the related
borrower or an indemnity for such costs has been obtained from a potentially
culpable party or (iii) such clean up, remediation or compliance actions have
been completed in compliance with applicable environmental law prior to the
closing of such Mortgage Loan. With respect to one Mortgage Loan (Loan #67),
representing approximately 0.5% of the Initial Pool Balance, the related
Mortgaged Property is within the boundaries of an active LUST site related to
an adjacent property. The borrower was required to obtain acceptable
environmental insurance for a minimum period of 5 years. With respect to one
Mortgage Loan (Loan #87), representing approximately 0.3% of the Initial Pool
Balance, the related Mortgaged Property was contaminated with diesel fuel
spilled thereon. The borrower was required to deposit $85,000 of the Mortgage
Loan proceeds in escrow with the lender to ensure remediation. With respect
to one Mortgage Loan (Loan #2), representing approximately 3.5% of the
Initial Pool Balance, the related Mortgaged Property was contaminated by
gasoline products emanating from a service station located on the Mortgaged
Property, and is subject to ongoing monitoring by applicable regulatory
authorities. Mobil Oil Corporation has agreed to remediate any contamination
caused by Mobil's operation of the service station, if and to the extent
required by the governmental agency exercising jurisdiction over this matter.
With respect to one Mortgage Loan (Loan #4), representing approximately 2.4%
of the Initial Pool Balance, the related Mortgaged Property is contaminated
by drycleaning solvents emanating from a dry cleaners located on a property
adjacent to the Mortgaged Property. A representative of the Florida
Department of Environmental Protection has confirmed by letter that such
adjacent property has been accepted into Florida's Drycleaning Solvent
Cleanup Program, and that such Program will pay all remediation costs,
including those affecting other properties, resulting from the contamination
existing upon such adjacent property. With respect to one Mortgage Loan (Loan
#43), representing approximately 0.9% of the Initial Pool Balance the soil
and the groundwater at the related Mortgaged Property are contaminated by
petroleum products that originated from abandoned underground storage tanks
that have been removed in accordance with Florida DEP requirements. The
property has been accepted into the Florida DEP Program which places the
responsibility of cost of any clean-up action upon the Florida DEP, should
any be required. With respect to one Mortgage Loan (Loan #91), representing
approximately 0.3% of the Initial Pool Balance, the soil and the groundwater
at the related Mortgaged Property are contaminated by petroleum products
originating from an unknown offsite source. The Phase I environmental
consultant identified no current or former uses of petroleum products on the
related Mortgaged Property. In addition, BCMC was orally advised by a
representative of the Michigan Department of Environmental Quality that Amoco
Corporation is conducting groundwater tests at its service station located
upgradient from the related Mortgaged Property.
Investors should understand that the results of the environmental site
assessments do not constitute an assurance or guaranty by the Underwriters,
the Depositor, the Originators, the Mortgage Loan Sellers, Midland, the
borrowers, any environmental consultants or any other person as to the
absence or extent of the existence of any environmental condition
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on the Mortgaged Properties that could result in environmental liability.
Given the scope of the environmental site assessments, an environmental
condition that affects a Mortgaged Property may not be discovered or its
severity revealed during the course of the assessment. Further, no assurance
can be given that future changes in applicable environmental laws, the
development or discovery of presently unknown environmental conditions at the
Mortgaged Properties or the deterioration of existing conditions will not
require material expenses for remediation or other material liabilities.
Other Financing. The related Mortgage Loan documents generally prohibit
subordinate financing without the mortgagee's prior consent. With respect to
15 of the Mortgage Loans, representing approximately 9.5% of the Initial Pool
Balance, the related Mortgage Loan documents allow the borrower, under
certain specified circumstances, to either maintain an existing subordinate
mortgage encumbering the related Mortgaged Properties, or to grant such a
subordinate mortgage in the future. Generally, prior to any such subordinate
mortgage being allowed, certain conditions specified in the related Mortgage
Loan documents must be satisfied. Such conditions may include one or more of
the following: (a) the purpose, amount, term and amortization period of the
proposed subordinate debt, together with the identity of the subordinate
lender and the terms of the subordinate loan documents, must be acceptable to
the senior mortgagee; (b) pursuant to either the specific terms of the
subordinate mortgage or a separate recorded agreement obtained from such
subordinate lender, the subordinate mortgage must be unconditionally
subordinated to the related Mortgage Loan documents, and the subordinate
lender is also typically prohibited from exercising any remedies against the
borrower without the senior mortgagee's consent and from receiving any
payments on such subordinate debt if, for the immediately prior 12 months,
either (i) the aggregate debt service coverage ratio for such Mortgage Loan
and such subordinate debt is less than a specified ratio, or (ii) the
aggregate loan to value ratio for such Mortgage Loan and such subordinate
debt is greater than a specified ratio; (c) the subordinate debt must be
non-recourse; and (d) acceptable economic conditions regarding the related
Mortgaged Property must exist as of the effective date of such subordinate
financing, typically including (i) an aggregate debt service coverage ratio
for such Mortgage Loan and such subordinate debt equal to or exceeding a
specified ratio, and/or (ii) an aggregate loan to value ratio for such
Mortgage Loan and such subordinate debt of less than a specified ratio.
Zoning Compliance. The Originator generally received assurances that all
of the improvements located upon each respective Mortgaged Property complied
with all Zoning Laws in all respects material to the continued use of the
related Mortgaged Property, or that such improvements qualified as permitted
non-conforming uses.
Property Tax Abatement. Two Mortgaged Properties (representing
approximately 2.1% of the Initial Pool Balance) are currently exempt from
real property taxes in an amount equal to the percentage portion of the
related Mortgaged Property which is rented to lower income households;
provided, however, that in order for such exemption to continue, the related
Mortgaged Property must be: (a) owned and operated by a religious, hospital,
scientific or charitable fund, foundation or corporation (including a limited
partnership in which the managing general partner is an eligible nonprofit
organization) which is eligible for and receives Tax Credits pursuant to
Section 42 of the Code; (b) used exclusively for rental housing and related
facilities; and (c) 20% or more occupied by tenants which qualify as "low
income households" and whose rent does not exceed a statutorily prescribed
rate.
Limitations on Enforceability of Cross-Collateralization. Eleven of the
Mortgage Loans (the "Cross-Collateralized Loans"), each of which was made to
a borrower that is affiliated with the borrower under another Mortgage Loan
or is the borrower under another Mortgage Loan, are cross-collateralized and
cross-defaulted with one or more related Cross-Collateralized Loans. This
arrangement is designed to reduce the risk that the inability of an
individual Mortgaged Property securing a Cross-Collateralized Loan to
generate net operating income sufficient to pay debt service thereon will
result in defaults (and ultimately losses). The arrangement is based on the
belief that the risk of default is reduced by making the collateral pledged
to secure each related Cross-Collateralized Loan available to support debt
service on, and principal repayment of, the aggregate indebtedness evidenced
by the related Cross-Collateralized Loans. See "--Concentration of the
Mortgage Loans and Borrowers" herein for more information regarding the
Cross-Collateralized Loans.
Tenant Matters. Certain additional information regarding Major Tenants is
set forth in "Annex A" herein. Generally, Major Tenants do not have
investment-grade credit ratings. Many Major Tenants occupy their respective
leased premises pursuant to leases which require them to pay all applicable
real property taxes, maintain insurance over the improvements thereon and
maintain the physical condition of such improvements.
Other Information. The following tables and "Annex A" set forth certain
information with respect to the Mortgage Loans and the Mortgaged Properties,
which was primarily derived from financial statements supplied by each
borrower for its related Mortgaged Property. The financial statements
supplied by the borrowers in most cases are unaudited and were not prepared
in accordance with generally accepted accounting principles. "Net Operating
Income" and "Cash Flow" do not
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represent the net operating income and cash flow reflected on the borrowers'
financial statements. The differences between "Net Operating Income" and
"Cash Flow" determined by MCFC, GACC and BCMC and net operating income and
cash flow reflected on the borrowers' financial statements represent the
adjustments made by MCFC, GACC and BCMC described below, which adjustments
generally were intended to increase the level of consistency between the
financial statements provided by the borrowers. However, such adjustments
were subjective in nature and were not made in a uniform manner nor in
accordance with generally accepted accounting principles. "Underwritten NOI"
and "Underwritten Cash Flow" are pro forma numbers prepared by the Mortgage
Loan Sellers or BCMC, as applicable, to reflect their assessment of the
market based performance of the related Mortgaged Property. Neither the
Depositor nor the Underwriters have made any attempt to verify the accuracy
of the financial statements supplied by the borrowers or the accuracy or
appropriateness of the adjustments discussed below that were made by the
Mortgage Loan Sellers or BCMC, as applicable, to determine "Net Operating
Income," "Cash Flow," "Underwritten NOI" and "Underwritten Cash Flow."
THE NUMBERS REPRESENTING "NET OPERATING INCOME," "CASH FLOW,"
"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 A 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," "CASH
FLOW," "UNDERWRITTEN NOI" AND "UNDERWRITTEN CASH FLOW" SET FORTH HEREIN
INTENDED TO REPRESENT SUCH FUTURE NET CASH FLOW.
All of the Mortgaged Properties were appraised at the request of the
Originator of the related Mortgage Loan by a state certified appraiser or an
appraiser belonging to the Appraisal Institute. The purpose of each appraisal
was to provide an opinion of the fair market value of the related Mortgaged
Property. None of the Depositor, the Mortgage Loan Sellers Midland, BCMC, the
Master Servicer, the Special Servicer, the Underwriters, the Trustee, the
Fiscal Agent or any other entity has prepared or obtained a separate
independent appraisal or reappraisal, unless such person was the Originator
of the related Mortgage Loan. There can be no assurance that another
appraiser would have arrived at the same opinion of value. No representation
is made that any Appraised Value would approximate either the value that
would be determined in a current appraisal of the related Mortgage Property
or the amount that would be realized upon a sale. Accordingly, investors
should not place undue reliance on the Loan-to-Value Ratios set forth herein.
Debt service coverage ratios are used by lenders of loans secured by
income producing property to measure the ratio of (a) cash currently
generated by a property that is available for debt service (that is, cash
that remains after payment of operating expenses) to (b) required debt
service payments. However, debt service coverage ratios only measure the
current, or recent, ability of a property to service mortgage debt. If a
property is not expected to have a stable operating cash flow (for instance,
if it is subject to material leases that are scheduled to expire during the
loan term and that provide for above-market rents, may be difficult to
replace, or both) a debt service coverage ratio may not be a reliable
indicator of a property's ability to service the mortgage debt over the
entire remaining loan term. In addition, a debt service coverage ratio may
not adequately reflect the significant amounts of cash that a property owner
may be required to expend to pay for capital improvements, and for tenant
improvements and leasing commissions when expiring leases are replaced. For
the reasons discussed above, the Debt Service Coverage Ratios presented
herein are limited in their usefulness in predicting the future ability of a
Mortgaged Property to generate sufficient cash flow to repay the related
Mortgage Loan. Accordingly, no assurance can be given, and no representation
is made, that the Debt Service Coverage Ratios accurately reflect that
ability.
For purposes of the tables and "Annex A":
(1) "Net Operating Income" or "NOI" is revenue derived from the use and
operation of the Mortgaged Property (consisting primarily of rental
income) less operating expenses (such as utilities, general administrative
expenses, management fees, advertising, repairs and maintenance) and less
fixed expenses (such as insurance and real estate taxes). NOI generally
does not reflect capital expenditures, replacement reserves, interest
expense, income taxes and non-cash items such as depreciation or
amortization. The Mortgage Loan Sellers and BCMC, as applicable, adjusted
items of revenue and expense shown on the borrower financial statements in
order to reflect the historical operating results for a Mortgaged Property
on a normalized basis (e.g., adjusting for the payment of two years of
real estate taxes in a single year). Revenue was generally adjusted to
eliminate items not related to the operation of the Mortgaged Property, to
eliminate security deposits and to eliminate non-recurring items. Expense
was generally adjusted to eliminate distributions to owners, items of
expense not related to the operation of the Mortgaged Property,
non-recurring items, such as capital expenditures, and refunds of security
deposits. The Mortgage Loan Sellers and BCMC, as applicable, made the
adjustments based upon their review of the borrowers' financial
statements, their experience in originating loans and, in some cases,
conversations with borrowers. The adjustments were subjective in nature
and were not uniform for each Mortgaged Property.
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(2) "Cash Flow" means, with respect to any Mortgage Loan, the NOI for
the related Mortgaged Property decreased by tenant improvements, leasing
commissions and other non-recurring expenditures, as appropriate.
(3) "Underwritten NOI" means, with respect to any Mortgage Loan, the NOI
for the related Mortgage Property as determined by the applicable Mortgage
Loan Seller and BCMC, as applicable, in accordance with its underwriting
guidelines for similar properties. Although there are differences in the
underwriting guidelines of the Mortgage Loan Sellers and BCMC, as
applicable, the nature and types of adjustments made by each of them were
generally the same. Revenue generally is calculated as follows. Rental
revenue is calculated using the lower of actual or market rental rates,
with a vacancy rate equal to the higher of the Mortgaged Property's
historical rate, the market rate or an assumed vacancy rate. Other
revenues, such as parking fees, are included only if sustainable. Certain
revenues, such as application fees and lease termination fees, are not
included. Operating and fixed expenses generally are adjusted to reflect
the higher of the Mortgaged Property's average expenses or a midrange
industry norm for expenses on similar properties in similar locations
(generally adjusted upward to account for inflation), a market rate
management fee and an annual reserve for replacement of capital items.
(4) "Underwritten Cash Flow" means, with respect to any Mortgage Loan,
the Underwritten NOI for such Mortgage Loan decreased by an amount that
the applicable Mortgage Loan Seller and BCMC, as applicable, has
determined to be an appropriate allowance for average annual tenant
improvements and leasing commissions based upon its respective
underwriting guidelines.
(5) "Appraised Value" means, for each of the Mortgaged Properties, the
appraised value of such property as determined by an appraisal thereof
made not more than nine months prior to the origination date of the
related Mortgage Loan and reviewed by the Originator of such Mortgage
Loan.
(6) "Annual Debt Service" means, for any Mortgage Loan, the current
annual debt service (including interest allocable to payment of the
Servicing Fee and principal) payable with respect to such Mortgage Loan
during the 12-month period commencing on the Cut-off Date (assuming no
principal prepayments occur).
(7) "Debt Service Coverage Ratio," "Underwritten DSCR" or "DSCR" means,
with respect to any Mortgage Loan, (a) the Underwritten Cash Flow for the
related Mortgaged Property divided by (b) the Annual Debt Service for such
Mortgage Loan.
(8) "Loan-to-Value Ratio," "Appraised LTV" or "LTV" means, with respect
to any Mortgage Loan, the principal balance of such Mortgage Loan as of
the Cut-off Date divided by the Appraised Value of the Mortgaged Property
securing such Mortgage Loan.
(9) "Balloon LTV" for any Mortgage Loan is calculated in the same manner
as LTV, except that the Balloon Amount is used instead of the Cut-off Date
principal balance.
(10) "Balloon Amount" or "Balloon Balance" for each Mortgage Loan is
equal to the principal amount, if any, due at maturity, taking into
account scheduled amortization, assuming no prepayments or defaults.
(11) "Occupancy Rate" means the percentage of gross leasable area, rooms,
units, beds, pads or sites of a Mortgaged Property that are leased or
occupied. Occupancy rates are calculated based upon the most recent rent
information received by the applicable Mortgage Loan Seller and BCMC, as
applicable.
(12) "Property Age" means, with respect to the related Mortgaged Property
(or Mortgaged Properties), the difference between the Cut-off Date year
(1996) and the year in which the oldest Mortgaged Property securing a
Mortgage Loan was initially constructed.
(13) "Effective Age" means, with respect to the related Mortgaged
Property (or Mortgaged Properties), the difference between the Cut-off
Date year (1996) and the more recent of the year in which the oldest
Mortgaged Property securing a Mortgage Loan was either initially
constructed or renovated.
(14) "Remaining Term to Maturity" generally means the number of months
remaining from the Cut-off Date until the maturity of a mortgage loan. The
method for calculating the "Remaining Term to Maturity" for any Mortgage
Loan is determined by subtracting (a) the number of Due Dates from and
including the first payment date to and including the Cut-off Date from
(b) the number of Due Dates from and including the first payment date to
and including the original scheduled maturity date for such Mortgage Loan.
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(15) "Remaining Amortization Term" for any Mortgage Loan is calculated
as the original amortization term of the related Mortgaged Loan (based
upon such Mortgage Loan's original balance, interest rate and monthly
payment) less the number of Due Dates from and including the first payment
date to and including the Cut-off Date.
(16) The "Year Renovated" is based upon information contained in an
appraisal or engineering report of the related Mortgaged Property or other
written evidence provided by the borrower.
(17) The "Occupancy Percentage" and "Occupancy Date" for each Mortgage
Loan are based upon rent information received by the applicable Mortgage
Loan Seller from the related borrower. The "Occupancy Percentage" and
"Occupancy Date" for the Hotel Property are based upon operating
information received by MCFC from the related borrower.
(18) All calculations of any applicable Lockout Period, Yield Maintenance
Period or Prepayment Premium for a Mortgage Loan are determined based upon
such Mortgage Loan's first scheduled payment date.
(19) "Weighted Average Maturity" means the weighted average of the
Remaining Terms to Maturity of the Mortgage Loans.
(20) Due to rounding, percentages may not add to 100% and amounts may not
add to the indicated total.
S-58
<PAGE>
RANGE OF CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
RANGE OF CUT-OFF BALANCES BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000-$ 999,999 $ 15,519,093 3.0% 18 13.2% 9.05% 1.47 116
$ 1,000,000-$ 1,999,999 $ 63,268,540 12.4% 43 31.6% 8.97% 1.35 133
$ 2,000,000-$ 2,999,999 $ 44,521,926 8.7% 18 13.2% 8.92% 1.34 124
$ 3,000,000-$ 3,999,999 $ 39,434,555 7.7% 12 8.8% 8.87% 1.41 137
$ 4,000,000-$ 4,999,999 $ 54,279,133 10.6% 12 8.8% 8.89% 1.33 110
$ 5,000,000-$ 5,999,999 $ 42,130,499 8.2% 8 5.9% 8.77% 1.33 125
$ 6,000,000-$ 6,999,999 $ 19,342,184 3.8% 3 2.2% 8.74% 1.35 107
$ 7,000,000-$ 7,999,999 $ 53,191,836 10.4% 7 5.1% 8.95% 1.49 132
$ 8,000,000-$ 8,999,999 $ 34,467,251 6.7% 4 2.9% 8.60% 1.36 116
$ 9,000,000-$ 9,999,999 $ 18,804,859 3.7% 2 1.5% 8.43% 1.28 148
$10,000,000-$10,999,999 $ 41,234,628 8.1% 4 2.9% 8.83% 1.31 107
$11,000,000-$11,999,999 $ 11,700,000 2.3% 1 0.7% 8.44% 1.35 120
$12,000,000-$12,999,999 $ 12,339,021 2.4% 1 0.7% 8.54% 1.26 75
$16,000,000-$16,999,999 $ 16,890,000 3.3% 1 0.7% 8.47% 1.29 120
$17,000,000-$17,999,999 $ 17,686,288 3.5% 1 0.7% 8.59% 1.40 76
$27,000,000-$27,999,999 $ 27,292,186 5.3% 1 0.7% 7.61% 1.36 110
-------------- -------------- ----------- --------- ---------- ---------- ----------
AVG BALANCE $3,765,456 $512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY LOAN BALANCE
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the
ranges of Cut-Off Balances set forth in the above table, the Aggregate Cut-Off
Date Principal Balance and number of Mortgage Loans for each such range.
S-59
<PAGE>
GEOGRAPHIC DISTRIBUTION OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
PROPERTY LOCATION BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ----------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
AZ $ 15,767,835 3.1% 7 5.1% 8.96% 1.33 134
CA $ 78,086,449 15.2% 15 11.0% 8.87% 1.43 128
CO $ 36,075,606 7.0% 5 3.7% 7.95% 1.37 115
CT $ 11,789,335 2.3% 3 2.2% 8.83% 1.32 118
FL $ 50,881,050 9.9% 14 10.3% 8.76% 1.31 129
GA $ 5,761,251 1.1% 3 2.2% 8.79% 1.48 133
MA $ 20,636,346 4.0% 4 2.9% 8.90% 1.39 128
MD $ 27,265,744 5.3% 6 4.4% 9.04% 1.34 126
MI $ 31,062,911 6.1% 9 6.6% 9.16% 1.35 121
MN $ 9,967,329 1.9% 7 5.1% 8.88% 1.40 113
MO $ 18,588,450 3.6% 2 1.5% 8.52% 1.28 120
MT $ 2,273,665 0.4% 2 1.5% 8.96% 1.31 212
NJ $ 14,290,446 2.8% 4 2.9% 8.83% 1.39 90
NM $ 5,898,226 1.2% 2 1.5% 8.65% 1.28 94
NV $ 11,750,000 2.3% 2 1.5% 8.24% 1.35 120
NY $ 27,657,272 5.4% 5 3.7% 8.87% 1.36 118
OK $ 8,277,753 1.6% 4 2.9% 8.71% 1.29 130
OR $ 1,099,380 0.2% 1 0.7% 8.85% 1.34 179
PA $ 20,531,536 4.0% 3 2.2% 8.70% 1.38 82
TX $ 87,890,568 17.2% 31 22.8% 8.73% 1.36 121
UT $ 2,884,950 0.6% 1 0.7% 9.18% 1.16 142
VA $ 12,098,791 2.4% 4 2.9% 8.91% 1.41 113
WA $ 11,567,106 2.3% 2 1.5% 8.09% 1.30 76
-------------- -------------- ----------- --------- ---------- ---------- ----------
$512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY STATE
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the Property
Locations set forth in the above table, the Aggregate Cut-Off Date Principal
Balance and number of Mortgage Loans for each such range.
S-60
<PAGE>
RANGE OF DSCRS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
DSCR(X) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- -------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1.15-1.19 $ 4,721,995 0.9% 2 1.5% 9.17% 1.16 151
1.20-1.24 $ 31,744,907 6.2% 8 5.9% 8.91% 1.21 155
1.25-1.29 $101,700,910 19.9% 26 19.1% 8.89% 1.27 113
1.30-1.34 $122,781,340 24.0% 33 24.3% 8.81% 1.32 122
1.35-1.39 $145,795,577 28.5% 32 23.5% 8.54% 1.36 115
1.40-1.44 $ 50,751,885 9.9% 12 8.8% 8.65% 1.42 104
1.45-1.49 $ 20,315,474 4.0% 6 4.4% 8.76% 1.47 124
1.50-1.54 $ 8,636,176 1.7% 4 2.9% 9.04% 1.51 133
1.55-1.59 $ 6,926,409 1.4% 7 5.1% 8.70% 1.57 106
1.60-1.64 $ 10,202,374 2.0% 4 2.9% 8.67% 1.63 184
2.45-2.49 $ 7,850,184 1.5% 1 0.7% 9.00% 2.46 108
2.70-2.74 $ 674,768 0.1% 1 0.7% 9.28% 2.72 112
-------------- -------------- ----------- --------- ---------- ---------- ----------
$512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY DSCR
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges of
DSCR set forth in the above table, the Aggregate Cut-Off Date Principal Balance
and number of Mortgage Loans for each such range.
S-61
<PAGE>
RANGE OF LTVS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
RANGE OF LTV BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------------ -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
30.0% to less than
35.0% $ 5,720,404 1.1% 2 1.5% 9.20% 1.47 139
35.0% to less than
40.0% $ 1,997,322 0.4% 2 1.5% 8.84% 1.40 149
40.0% to less than
45.0% $ 11,622,290 2.3% 4 2.9% 8.97% 2.16 109
50.0% to less than
55.0% $ 8,031,169 1.6% 3 2.2% 8.61% 1.58 208
55.0% to less than
60.0% $ 50,878,274 9.9% 18 13.2% 8.81% 1.41 112
60.0% to less than
65.0% $ 51,583,775 10.1% 14 10.3% 8.84% 1.37 115
65.0% to less than
70.0% $ 87,801,694 17.1% 32 23.5% 8.93% 1.34 122
70.0% to less than
75.0% $173,660,213 33.9% 43 31.6% 8.79% 1.33 114
75.0% to less than
80.0% $107,643,384 21.0% 15 11.0% 8.39% 1.31 120
80.0% to less than
85.0% $ 4,158,614 0.8% 2 1.5% 9.19% 1.20 171
85.0% to less than
90.0% $ 9,004,859 1.8% 1 0.7% 8.79% 1.21 179
-------------- -------------- ----------- --------- ---------- ---------- ----------
WTD AVG LTV 69.11% $512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY LTV
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges of
LTV set forth in the above table, the Aggregate Cut-Off Date Principal Balance
and number of Mortgage Loans for each such range.
S-62
<PAGE>
TYPES OF MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
PROPERTY TYPE BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ---------------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Congregate Care $ 4,475,000 0.9% 1 0.7% 8.48% 1.42 60
Hotel $ 7,850,184 1.5% 1 0.7% 9.00% 2.46 108
Industrial $ 3,200,000 0.6% 1 0.7% 8.90% 1.31 84
Industrial/Warehouse $ 22,194,151 4.3% 8 5.9% 9.01% 1.36 91
Mini Warehouse $ 1,250,000 0.2% 1 0.7% 9.18% 1.44 144
Mixed Use $ 16,890,000 3.3% 1 0.7% 8.47% 1.29 120
Mobile Home Park $ 2,939,559 0.6% 2 1.5% 8.85% 1.48 119
Multifamily $198,371,700 38.7% 58 42.6% 8.53% 1.33 129
Office $ 60,343,447 11.8% 16 11.8% 9.08% 1.31 125
Office/R & D $ 14,839,628 2.9% 2 1.5% 8.67% 1.36 118
Office/Retail $ 13,939,021 2.7% 2 1.5% 8.62% 1.29 80
Office/Warehouse $ 6,348,226 1.2% 4 2.9% 8.88% 1.31 116
Retail, Anchored $ 52,394,340 10.2% 9 6.6% 8.62% 1.38 108
Retail, Factory Outlet $ 16,613,612 3.2% 3 2.2% 8.76% 1.37 133
Retail, Single Tenant $ 48,764,394 9.5% 14 10.3% 9.02% 1.40 123
Retail, Unanchored $ 41,688,736 8.1% 13 9.6% 9.08% 1.37 117
-------------- -------------- ----------- --------- ---------- ---------- ----------
$512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY PROPERTY TYPE
[GRAPHIC OMITTED]
The omitted material is a pie chart that depicts for each of the types
of Mortgaged Properties set forth in the above table, the Aggregate Cut-Off
Date Principal Balance and number of Mortgage Loans for each such range.
S-63
<PAGE>
RANGE OF MATURITY YEARS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
YEAR OF MATURITY BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ---------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2001 $ 12,870,000 2.5% 2 1.5% 8.03% 1.35 60
2002 $ 11,681,040 2.3% 2 1.5% 8.86% 1.37 71
2003 $ 36,166,844 7.1% 4 2.9% 8.72% 1.33 77
2004 $ 15,285,000 3.0% 4 2.9% 8.45% 1.34 84
2005 $ 18,738,569 3.7% 4 2.9% 8.95% 1.82 106
2006 $275,406,172 53.8% 74 54.4% 8.73% 1.35 117
2007 $ 33,546,000 6.6% 11 8.1% 8.60% 1.38 121
2008 $ 45,344,982 8.9% 18 13.2% 9.08% 1.35 143
2009 $ 24,916,000 4.9% 3 2.2% 8.65% 1.38 144
2010 $ 1,837,045 0.4% 1 0.7% 9.15% 1.15 166
2011 $ 31,354,893 6.1% 11 8.1% 8.86% 1.25 178
2016 $ 1,273,665 0.2% 1 0.7% 9.22% 1.30 238
2021 $ 3,681,789 0.7% 1 0.7% 8.49% 1.64 295
-------------- -------------- ----------- --------- ---------- ---------- ----------
$512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY MATURITY YEAR
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges
of Maturity Years set forth in the above table, the Aggregate Cut-Off Date
Principal Balance and number of Mortgage Loans for each such range.
S-64
<PAGE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE WEIGHTED
CUT-OFF DATE PCT BY AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
RANGE OF MORTGAGE RATES BALANCE PRINCIPAL BALANCE LOANS BY NUMBER RATE DSCR MATURITY
- ----------------------- -------------- ----------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
7.50%-7.74% $ 27,292,186 5.3% 1 0.7% 7.61% 1.36 110
7.75%-7.99% $ 8,395,000 1.6% 1 0.7% 7.79% 1.31 60
8.00%-8.24% $ 26,750,000 5.2% 4 2.9% 8.12% 1.35 112
8.25%-8.49% $ 79,349,859 15.5% 15 11.0% 8.45% 1.37 129
8.50%-8.74% $ 82,745,052 16.2% 24 17.6% 8.61% 1.37 106
8.75%-8.99% $142,209,228 27.8% 38 27.9% 8.87% 1.34 128
9.00%-9.24% $ 99,898,919 19.5% 34 25.0% 9.15% 1.40 123
9.25%-9.49% $ 33,370,816 6.5% 12 8.8% 9.38% 1.34 119
9.50%-9.74% $ 12,090,938 2.4% 7 5.1% 9.60% 1.32 118
-------------- ----------------- ----------- --------- ---------- ---------- ----------
$512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY MORTGAGE RATE
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges
of Mortgage Rates set forth in the above table, the Aggregate Cut-Off Date
Principal Balance and number of Mortgage Loans for each such range.
S-65
<PAGE>
RANGE OF REMAINING TERM OF AMORTIZATION (IN MONTHS)
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
AMORT (IN MONTHS) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------------ -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
108 to less than
120 $ 1,989,559 0.4% 1 0.7% 8.82% 1.53 119
168 to less than
180 $ 24,937,908 4.9% 4 2.9% 8.73% 1.37 103
180 to less than
192 $ 1,500,000 0.3% 1 0.7% 8.63% 1.31 180
192 to less than
204 $ 2,509,778 0.5% 1 0.7% 9.44% 1.32 117
228 to less than
240 $ 37,238,198 7.3% 14 10.3% 8.95% 1.64 105
240 to less than
252 $ 16,685,000 3.3% 7 5.1% 8.76% 1.36 139
264 to less than
276 $ 1,100,000 0.2% 1 0.7% 8.92% 1.28 180
276 to less than
288 $ 16,890,539 3.3% 3 2.2% 9.00% 1.32 111
288 to less than
300 $133,067,044 26.0% 45 33.1% 9.09% 1.33 122
300 to less than
312 $129,697,605 25.3% 36 26.5% 8.65% 1.38 120
348 to less than
360 $ 92,826,365 18.1% 16 11.8% 8.53% 1.29 131
360 to less than
372 $ 53,660,000 10.5% 7 5.1% 8.22% 1.34 108
-------------- -------------- ----------- --------- ---------- ---------- ----------
WTD AVG TERM 300 $512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY REMAINING AMORTIZATION
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges
of Remaining Term of Amortization set forth in the above table, the Aggregate
Cut-Off Date Principal Balance and number of Mortgage Loans for each such range.
S-66
<PAGE>
RANGE OF PROPERTY AGE (IN YEARS)
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF PROPERTY PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
AGE (IN YEARS) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ----------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
0 to 4 yrs $ 84,069,710 16.4% 19 14.0% 8.92% 1.32 133
5 to 9 yrs $ 74,460,827 14.5% 21 15.4% 8.90% 1.37 117
10 to 14 yrs $100,956,311 19.7% 29 21.3% 8.58% 1.35 119
15 to 19 yrs $ 36,693,287 7.2% 15 11.0% 8.90% 1.33 130
20 to 24 yrs $ 81,928,788 16.0% 20 14.7% 8.36% 1.34 111
25 to 29 yrs $ 65,574,790 12.8% 14 10.3% 8.89% 1.52 115
30 to 34 yrs $ 32,366,890 6.3% 5 3.7% 8.60% 1.31 125
35 to 39 yrs $ 11,971,768 2.3% 6 4.4% 9.12% 1.34 102
40 to 44 yrs $ 1,770,466 0.3% 1 0.7% 9.33% 1.36 141
45 to 49 yrs $ 4,617,925 0.9% 1 0.7% 9.20% 1.35 117
50 to 54 yrs $ 10,299,239 2.0% 1 0.7% 8.83% 1.37 71
65 to 69 yrs $ 1,396,337 0.3% 1 0.7% 9.06% 1.43 179
70 to 74 yrs $ 1,837,045 0.4% 1 0.7% 9.15% 1.15 166
80 to 84 yrs $ 1,273,665 0.2% 1 0.7% 9.22% 1.30 238
85 to 89 yrs $ 2,884,950 0.6% 1 0.7% 9.18% 1.16 142
-------------- -------------- ----------- --------- ---------- ---------- ----------
WTD AVG AGE 17.62 $512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY PROPERTY AGE
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges
of Property Age set forth in the above table, the Aggregate Cut-Off Date
Principal Balance and number of Mortgage Loans for each such range.
S-67
<PAGE>
RANGE OF EFFECTIVE PROPERTY AGE (IN YEARS)
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
RANGE OF EFFECTIVE PROPERTY PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
AGE (IN YEARS) BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- --------------------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
0 to 4 yrs $179,133,483 35.0% 43 31.6% 8.70% 1.33 126
5 to 9 yrs $137,018,262 26.8% 31 22.8% 8.83% 1.42 104
10 to 14 yrs $109,401,540 21.4% 27 19.9% 8.58% 1.35 121
15 to 19 yrs $ 30,413,729 5.9% 13 9.6% 8.88% 1.36 123
20 to 24 yrs $ 16,760,690 3.3% 10 7.4% 9.01% 1.33 121
25 to 29 yrs $ 16,930,337 3.3% 5 3.7% 8.94% 1.43 155
30 to 34 yrs $ 13,834,045 2.7% 3 2.2% 8.67% 1.33 132
35 to 39 yrs $ 6,839,446 1.3% 3 2.2% 9.30% 1.30 110
40 to 44 yrs $ 1,770,466 0.3% 1 0.7% 9.33% 1.36 141
-------------- -------------- ----------- --------- ---------- ---------- ----------
WTD AVG AGE 9.06 $512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
DISTRIBUTION BY EFFECTIVE PROPERTY AGE
[GRAPHIC OMITTED]
The omitted material is a bar graph that depicts for each of the ranges
of Effective Age set forth in the above table, the Aggregate Cut-Off Date
Principal Balance and number of Mortgage Loans for each such range.
S-68
<PAGE>
RANGE OF LOAN ORIGINATION YEARS
<TABLE>
<CAPTION>
AGGREGATE PCT BY WEIGHTED
CUT-OFF DATE AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
PRINCIPAL CUT-OFF DATE MORTGAGE PERCENT MORTGAGE AVERAGE AVERAGE
YEAR OF ORIGINATION BALANCE PRINCIPAL LOANS BY NUMBER RATE DSCR MATURITY
- ------------------- -------------- -------------- ----------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1995 $ 28,494,609 5.6% 5 3.7% 8.93% 1.67 92
1996 $483,607,390 94.4% 131 96.3% 8.73% 1.34 121
-------------- -------------- ----------- --------- ---------- ---------- ----------
$512,101,998 100.0% 136 100.0% 8.74% 1.36 120
</TABLE>
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted at the close of business on the Cut-off Date, as adjusted for
scheduled principal payments due on the Mortgage Loans on or before the
Cut-off Date. Prior to the issuance of the Certificates, one or more Mortgage
Loans may be removed from the Mortgage Pool if the Depositor deems such
removal necessary or appropriate or if it is prepaid. A limited number of
other mortgage loans may be included in the Mortgage Pool prior to the
issuance of the Certificates, unless including such mortgage loans would
materially alter the characteristics of the Mortgage Pool as described
herein. Accordingly, the range of Mortgage Rates and maturities, as well as
the other characteristics of the Mortgage Loans constituting the Mortgage
Pool at the time the Certificates are issued may vary from those described
herein.
A Current Report on Form 8-K (the "Form 8-K") will be filed, together with
the Pooling and Servicing Agreement, with the Securities and Exchange
Commission within 15 days after the initial issuance of the Certificates. The
Form 8-K will be available to the Certificateholders promptly after its
filing. In the event that Mortgage Loans are removed from or added to the
Mortgage Pool as set forth in the preceding paragraph, such removal or
addition will be noted in the Form 8-K.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor will assign to the
Trustee for the benefit of Certificateholders certain representations and
warranties made by each of MCFC and Midland in the MCFC Mortgage Loan
Purchase Agreement, by GACC in the GACC Mortgage Loan Purchase Agreement, by
MCFC in the BCMC Mortgage Loan Purchase Agreement and by BCMC in the
MCFC/BCMC Mortgage Loan Purchase Agreement. In (a) the MCFC Mortgage Loan
Purchase Agreement, MCFC and Midland will each represent and warrant (with
respect only to the Midland Mortgage Loans and subject to certain specified
exceptions, including, without limitation, those exceptions described below),
in favor of the Depositor as of the Loan Purchase Closing Date or such other
date specified in the related representation or warranty, among other things,
substantially as set forth below; (b) the GACC Mortgage Loan Purchase
Agreement, GACC will represent and warrant (with respect only to the GACC
Mortgage Loans and subject to certain specified exceptions, including,
without limitation, those exceptions described below), in favor of the
Depositor as of the Loan Purchase Closing Date or such other date specified
in the related representation or warranty, among other things, substantially
as set forth below; (c) the BCMC Mortgage Loan Purchase Agreement, MCFC will:
(i) represent and warrant (with respect only to the BCMC Mortgage Loans and
subject to certain specified exceptions, including, without limitation, those
exceptions described below), in favor of the Depositor as of the Loan
Purchase Closing Date or such other date specified in the related
representation or warranty, among other things, substantially as set forth
below; and (ii) assign to the Depositor certain representations and
warranties regarding the BCMC Mortgage Loans made by BCMC in favor of MCFC
pursuant to the MCFC/BCMC Mortgage Loan Purchase Agreement, which assigned
representations and warranties, with respect only to each of the BCMC
Mortgage Loans and subject to certain specified exceptions, including,
without limitation, those exceptions described below, will provide, among
other things, as of the Loan Purchase Closing Date (unless another date is
specified) substantially as set forth below:
(1) The information set forth in the Mortgage Loan Schedule attached
thereto is true, complete and correct in all material respects.
(2) No Mortgage Loan was, as of the Cut-off Date, delinquent with respect
to any required Monthly Payment (inclusive of any applicable grace or cure
period), and no such delinquency (in excess of 30 days beyond any applicable
grace or cure period) has occurred within the last twelve months.
(3) As of the date of its origination, each Mortgage Loan either complied
with, or was exempt from, applicable state or federal laws, regulations and
requirements pertaining to usury, and to the best of Mortgage Loan Seller's
and Midland's knowledge, the related Originator complied in all material
respects with all other federal, state or local laws applicable to its
origination.
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(4) The proceeds of such Mortgage Loan have been fully disbursed, and
there is no requirement for future advances thereunder.
(5) Each related Mortgage Loan document is the legal, valid and binding
obligation of the related borrower or other party executing such Mortgage
Loan document, enforceable in accordance with its terms, there is no valid
offset, defense or counterclaim to any Mortgage Loan, and to the Mortgage
Loan Seller's knowledge, no default, breach, violation or event of
acceleration exists under the related Mortgage or the related Note.
(6) The Mortgage Loan Seller is the sole owner and holder of such Mortgage
Loan, has full right and authority to sell and assign such Mortgage Loan, and
the Mortgage Loan Seller's execution and delivery of an assignment of the
related Mortgage and endorsement and delivery of the related Note validly
conveys all of its right, title and interest in such Mortgage Loan free and
clear of encumbrances of any nature.
(7) The related Mortgage Loan documents create a valid first lien on the
related Mortgaged Property (not including personal property) and a valid
first priority assignment of all leases of the related Mortgaged Property,
subject only to (A) the lien of current real estate taxes and special
assessments not yet delinquent or accruing interest or penalties, (B)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record, (C) senior leases and subleases pertaining to such
Mortgaged Property, and (D) other matters (excepting any mechanics' and
materialmen's liens or liens in the nature thereof) to which like properties
are commonly subject (all of the foregoing collectively the "Permitted
Encumbrances"). Uniform Commercial Code financing statements have been filed
or recorded as necessary to perfect the Mortgage Loan Seller's security
interest in personal property constituting a part of the Mortgaged Property
and in which a security interest can be perfected by the filing of such
financing statements.
(8) To the Mortgage Loan Seller's and Midland's knowledge, the related
Mortgage and the related Note have not been materially impaired, waived,
modified, satisfied, canceled or subordinated, and neither the related
Mortgaged Property nor the related borrower has been released from such
Mortgage in any manner which would materially impair the security provided by
such Mortgage.
(9) The Mortgage Loan Seller has not, directly or indirectly, advanced
funds to, or, to the Mortgage Loan Seller's and Midland's knowledge, received
any payment of any amount required under the related Note or the related
Mortgage from a person other than the related borrower.
(10) To the Mortgage Loan Seller's and Midland's knowledge, there are no
condemnation proceedings pending or threatened with respect to any Mortgaged
Property which would materially and adversely affect the value of such
Mortgaged Property, and no Mortgaged Property has been materially damaged.
(11) The related Mortgage is insured by a title insurance policy or a
specimen policy or a "marked-up" title insurance commitment issued in
connection with the closing of such Mortgage Loan (a "Title Policy") in an
amount not less than the stated principal amount of such Mortgage Loan to be
a valid first lien on the related Mortgaged Property (not including personal
property or fixtures), subject only to Permitted Encumbrances. Such Title
Policy contains only those exceptions for encroachments, boundary and other
survey matters and for easements not shown by the public records as are
customarily accepted by prudent commercial mortgage lenders in the related
jurisdiction. No material encroachments exist with respect to the related
Mortgaged Property. No claims have been made by the Mortgage Loan Seller or
Midland under such Title Policy, and to the Mortgage Loan Seller's and
Midland's knowledge, the coverage of such Title Policy has not been
materially impaired.
(12) Each Mortgaged Property is insured by a fire and extended perils
insurance policy, a business interruption or rental continuation insurance
policy, a comprehensive general liability policy and, if any material
improvement on such Mortgaged Property is located in a designated special
flood hazard area, a flood insurance policy.
(13) Based upon a survey, the Title Policy and other documents contained
in the related Mortgage File, at the time of origination of each Mortgage
Loan, the related borrower had sufficient rights with respect to amenities
and ingress and egress identified in an appraisal of the related Mortgaged
Property as being critical to the appraised value thereof, and adequate
utility services were available at such Mortgaged Property, none of which is
subject to revocation as a result of a foreclosure or a change in ownership
of an adjacent property.
(14) With respect to each Mortgage Loan secured in whole or in part by a
leasehold interest in the related Mortgaged Property, other than a mortgage
loan also secured by a fee interest in the same Mortgaged Property:
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(A) to the Mortgage Loan Seller's knowledge, the lease creating such
leasehold interest is in full force and effect, without any existing
defaults and unmodified in any material manner except pursuant to written
instruments contained in the Mortgage File, such lease or a memorandum
thereof has been recorded, and the effective term of such lease extends
not less than 10 years beyond the term of the related Mortgage Loan;
(B) the related borrower is permitted to mortgage and sublease its
leasehold interest, and except as may be indicated in the related Title
Policy, the related Mortgage is a first priority lien over such leasehold
interest;
(C) the mortgaged leasehold interest may be transferred in a foreclosure
of the related Mortgage or a conveyance in lieu thereof, and thereafter
may be transferred, upon notice to, but without the consent of, the
related lessor (or, if any such consent is required, either (1) it has
been previously obtained or (2) it is not to be unreasonably withheld)
provided that such lease has not been terminated and all amounts owed
thereunder have been paid;
(D) the related lessor has agreed, in writing: (1) to provide the
mortgagee with a notice of any default by the related borrower under such
lease, and a cure period equal to the time provided to such lessee under
such lease; and (2) that such Ground Lease may not be modified or
terminated without the mortgagee's consent; and
(E) The related Mortgage Loan documents and such lease provide that any
insurance or condemnation proceeds with respect to a partial loss or
taking of the related Mortgaged Property will be applied to the
restoration of such Mortgaged Property or to the related Mortgage Loan.
(15) With respect to each Mortgage Loan secured by both a leasehold and a
fee interest in all or a portion of the related Mortgaged Property, such
related fee interest is subordinate to the lien of the related Mortgage and,
except as approved by the related Originator or the Mortgage Loan Seller, any
right of the related fee owner to cure a default by the borrower under the
related Mortgage is limited to no more than a (A) 30 day period, after notice
is given to such fee owner, to cure monetary defaults, and (B) 60 day period,
after such notice, to cure other defaults or, alternatively, to commence
proceedings to recover possession of such Mortgaged Property plus a
reasonable cure period after recovery of possession if such proceedings are
pursued in good faith and with due diligence.
(16) The related Mortgaged Property is not collateral or security for the
payment or performance of any obligations owed to the Mortgage Loan Seller
other than one or more of the Mortgage Loans, and to the Mortgage Loan
Seller's knowledge, any obligations owed to any other person except for (a)
security interests in personal property and fixtures, (b) Loan #12, Loan #20,
Loan #34, Loan #42, Loan #46, Loan #50, Loan #64, Loan #66, Loan #71, Loan
#73, Loan #81, Loan #96, Loan #109, Loan #111 and Loan #116 (each of which
permits subordinate financing under the limited circumstances set forth in
the related Mortgage Loan documents),and (c) Loan #19, Loan #61, Loan #74 and
Loan #91 (in which each related Mortgaged Property is subject to an
installment contract which is subject and subordinate to the related Mortgage
Loan).
(17) Each Mortgage Loan is a "qualified mortgage" for purposes of Section
860G of the Code.
(18) A Phase I Environmental Report and, if recommended by the Phase I
Environmental Report, a Phase II Environmental Report was obtained with
respect to the related Mortgaged Property, and, such Environmental Report(s)
did not indicate the existence of conditions which would constitute a
material violation of applicable environmental law or require clean-up or
other remedial action with respect to hazardous materials with the exception
of conditions which could be brought into compliance with applicable
environmental law or remediated by the taking of certain actions for which a
sufficient escrow of funds has been established, an environmental insurance
policy or an indemnity for costs has been obtained or such compliance actions
or remediation was completed prior to origination of such Mortgage Loan;
provided, however, that with respect to: (a) Loan #2, the related Mortgaged
Property was contaminated by gasoline products emanating from a service
station located on the Mortgaged Property, and is subject to ongoing
monitoring by applicable regulatory authorities (Mobil Oil Corporation has
agreed to remediate any contamination caused by Mobil's operation of the
service station, if and to the extent required by the governmental agency
exercising jurisdiction over this matter); (b) Loan #4, the related Mortgaged
Property is contaminated by dry cleaning solvents emanating from a dry
cleaners located on a property adjacent to the Mortgaged Property. A
representative of the Florida Department of the Environmental Protection has
confirmed by letter that such adjacent property has been accepted into
Florida's Drycleaning Solvent Cleanup Program, and that such Program will pay
all remediation costs, including those affecting other properties, resulting
from the contamination existing upon such adjacent property; (c) Loan #43,
the soil and groundwater at the related Mortgaged Property are contaminated
by petroleum products that originated from abandoned underground storage
tanks that have been removed in accordance with the Florida DEP requirements.
The Mortgaged Property has been accepted into the Florida DEP Program
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which places the responsibility of the cost of any clean-up action upon the
Florida DEP, should any be required; and (d) Loan #91, the groundwater at the
related Mortgaged Property is contaminated with hydrocarbons originating from
an unknown offsite source. The Phase I environmental consultant identified no
current or fomer uses of petroleum products on the related Mortgaged
Property. In addition, BCMC was orally advised by a representative of the
Michigan Department of Environmental Quality that Amoco Corporation is
conducting groundwater tests of its service station located upgradient from
the related Mortgaged Property. Other than with respect to any conditions
identified in such Environmental Report(s), the Mortgage Loan Seller is
without knowledge of any significant failure of the related Mortgaged
Property to comply with applicable environmental law or any actual or
threatened significant release of hazardous materials in respect of such
Mortgaged Property in violation of applicable environmental law.
(19) To the best of the Mortgage Loan Seller's and Midland's knowledge,
the related Mortgaged Property complies, in all material respects, with all
laws and regulations pertaining to the zoning, use and occupancy thereof
(excluding applicable environmental laws which is addressed in (18) above)
and all applicable insurance requirements, except such non-compliance (A)
which does not materially and adversely affect the value or intended use of
such Mortgaged Property, (B) which was specifically included in the
determination of such Mortgaged Property's Appraised Value, or (C) for which
a Reserve Account has been established to pay the estimated costs to correct
such non-compliance.
(20) The related Mortgage Loan documents provide for recourse against the
related borrower for damages sustained in connection with fraud, intentional
misrepresentations or misappropriation of tenant security deposits or rent.
The related Mortgage Loan documents contain an indemnity from the related
borrower for damages resulting from violations of applicable environmental
laws.
(21) The Reserve Account, if any, with respect to each Mortgage Loan
contains all amounts required by the terms of the Mortgage Loan documents to
be on deposit therein as of such date, and all such amounts are being
transferred to the Depositor as of such date.
(22) For each Mortgage that is a deed of trust or trust deed, a duly
qualified trustee either (A) has been designated or (B) may be substituted
for the currently designated trustee in accordance with applicable law.
(23) Such Mortgage Loan is a whole loan, and the related Mortgage Loan
documents do not provide for any (A) equity participation by the Mortgage
Loan Seller (excepting, however, Loan #11, Loan #46, Loan #58, Loan #82 and
Loan #105, in which BCMC has an equity participation), (B) negative
amortization or (C) contingent interest based upon the cash flow of the
related Mortgaged Property. The Mortgage Loan Seller has no ownership
interest in such Mortgaged Property or the related borrower; excepting,
however, Loan #11, Loan #46, Loan #58, Loan #82 and Loan #105, in which BCMC
has an ownership interest in each related Mortgaged Property and each related
borrower.
(24) Based upon applicable laws, rules and regulations, no tax,
governmental assessment or any installment thereof affecting such Mortgaged
Property (excluding any related personal property) due and owing prior to the
Cut-off Date and which might give rise to a lien superior to the related
Mortgage, has become delinquent such that (A) such taxing authority may
commence proceedings to collect such tax, assessment or installment or (B)
any interest or penalties have commenced to accrue thereon.
(25) The related Mortgage Loan documents contain customary and enforceable
provisions adequate for the practical realization by the holder thereof of
its remedies against the related Mortgaged Property, including, as
applicable, judicial or non-judicial foreclosure.
(26) A tenant estoppel was obtained from all tenants whose leases covered
more than 10% (20% for any such Mortgage Loan with an original balance less
than or equal to $2,500,000) of the net leasable area of the related
Mortgaged Property, and based upon such estoppel, no defaults with respect to
any such lease existed as of the date of such estoppel; excepting, however,
that no tenant estoppels were obtained for two tenants on Loan #62. To the
Mortgage Loan Seller's and Midland's knowledge, no default or any condition
which, but for the passage of time or the giving of notice, or both, would
result in such a default, exists with respect to such leases.
(27) The related Mortgage Loan documents contain: (A) a representation,
warranty or covenant that the related borrower will not use, cause or permit
to exist any violation of Environmental Law with respect to the related
Mortgaged Property; or (B) an indemnity with respect to any such violation in
favor of the mortgagee.
(28) The related Mortgaged Property has been inspected on behalf of the
related Originator or Mortgage Loan Seller within the last 12 months.
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(29) The related Mortgage Loan documents prohibit the related borrower
from encumbering the related Mortgaged Property without the prior written
consent of the mortgagee thereunder; excepting, however: Loan #12, Loan #20,
Loan #34, Loan #42, Loan #46, Loan #50, Loan #64, Loan #66, Loan #71, Loan
#73, Loan #81, Loan #96, Loan #109, Loan #111 and Loan #116, each of which
permits subordinate financing under the limited circumstances set forth in
the related Mortgage.
(30) No Mortgage Loan or group of Mortgage Loans made to a borrower or to
affiliated borrowers accounted for more than 5% of the Initial Pool Balance;
excepting, however, Loan #1, which represents approximately 5.3% of the
Initial Pool Balance.
Each of such representations and warranties, to the extent related to the
enforceability of any document or as to offsets, defenses, counterclaims or
rights of rescission, is qualified to the extent that: (1) enforcement may be
limited (A) by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally, (B) by general
principles of equity (regardless of whether such enforcement is considered in
a proceeding in equity or at law) and (C) by any applicable anti-deficiency
law or statute; and (2) such document may contain certain provisions which
may be unenforceable in accordance with their terms, in whole or in part.
The Pooling and Servicing Agreement requires that the Custodian, the
Master Servicer, the Special Servicer or the Trustee notify MCFC, Midland,
GACC and BCMC, as applicable, upon its becoming aware of any breach of
certain representations or warranties made by (a) MCFC or Midland in the MCFC
Mortgage Loan Purchase Agreement, (b) GACC in the GACC Mortgage Loan Purchase
Agreement , (c) MCFC in the BCMC Mortgage Loan Purchase Agreement and (d)
BCMC in the MCFC/BCMC Mortgage Loan Purchase Agreement, as applicable, or
that any document required to be included in the Mortgage File does not
conform to the requirements of the Pooling and Servicing Agreement, which in
the case of any such defect or breach materially and adversely affects the
interests of the Certificateholders. The MCFC Mortgage Loan Purchase
Agreement, the GACC Mortgage Loan Purchase Agreement, the BCMC Mortgage Loan
Purchase Agreement and the MCFC/BCMC Mortgage Loan Purchase Agreement each
provide that, within 85 days after notice of such breach from the Custodian,
the Master Servicer, the Special Servicer or the Trustee, MCFC (but only with
respect to those Mortgage Loans acquired by the Depositor pursuant to the
MCFC Mortgage Loan Purchase Agreement), GACC (but only with respect to those
Mortgage Loans acquired by the Depositor pursuant to the GACC Mortgage Loan
Purchase Agreement), MCFC (but only with respect to those Mortgage Loans
acquired by the Depositor to the BCMC Mortgage Loan Purchase Agreement) and
BCMC (but only with respect to those Mortgage Loans acquired by the Depositor
to the MCFC/BCMC Mortgage Loan Purchase Agreement) will either (a) repurchase
such Mortgage Loan at its outstanding principal balance (less any Advances
previously made on account of principal), plus accrued interest from the Due
Date as to which interest was last paid or was advanced up to the Due Date in
the month following the month in which such repurchase occurs (less any
Advances previously made on account of interest), the amount of any
unreimbursed Advances, together with interest thereon at the Advance Rate,
relating to such Mortgage Loan, the amount of any unpaid servicing
compensation and Trust Fund expenses allocable to such Mortgage Loan and the
amount of any expenses reasonably incurred by the Master Servicer or the
Trustee in respect of such repurchase obligation (such price, the "Repurchase
Price") or (b) promptly cure such breach in all material respects, provided,
however, if such defect or breach cannot be cured within such 85 day period,
so long as MCFC, Midland, GACC or BCMC, as applicable, has commenced and is
diligently proceeding with the cure of such breach, such 85 day period will
be extended for an additional 90 days; provided, further, that no such
extension will be applicable unless MCFC, Midland, GACC or BCMC, as
applicable, delivers to the Depositor (or its successor in interest) an
officer's certificate (i) describing the measures being taken to cure such
breach and (ii) stating that MCFC, Midland, GACC or BCMC, as applicable,
believes such breach will be cured within such 90 days. Without limiting the
generality of the provisions described above, if a Mortgage Loan fails to
constitute a "qualified mortgage" within the meaning of the REMIC provisions
of the Code by reason of the breach of a representation, warranty or covenant
or by reason of missing or defective documentation, then no extension of the
85 day period in the preceding sentence will apply. In the event MCFC fails
to cure or repurchase any Midland Mortgage Loan which MCFC is obligated to
cure or repurchase (x) based upon a breach of a representation or warranty
with regard to a Mortgage Loan in the MCFC Mortgage Loan Purchase Agreement,
or (y) because such Midland Mortgage Loan fails to constitute a "qualified
mortgage" within the meaning of the REMIC provisions of the Code by reason of
a breach of such representation or warranty within the applicable period
described in the preceding two sentences, Midland shall cure or repurchase
such Mortgage Loan at the Repurchase Price within two Business Days after the
expiration of such applicable period.
The obligations of MCFC, Midland, GACC or BCMC, as applicable, to
repurchase or cure constitute the sole remedies available to holders of
Certificates or the Trustee for a breach of a representation or warranty with
regard to a Mortgage Loan by MCFC, Midland, GACC or BCMC. Other than as
specifically described in the preceding paragraph, neither MCFC,
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Midland, GACC, BCMC, the Special Servicer, the Master Servicer (unless
Midland is the Master Servicer and is otherwise obligated as described
herein) nor the Depositor will be obligated to purchase a Mortgage Loan if
any of MCFC, Midland, GACC or BCMC defaults on their respective obligations
to repurchase or cure, and no assurance can be given that MCFC, Midland, GACC
or BCMC, as applicable, will fulfill their respective obligations. If such
obligations are not met, as to a Mortgage Loan that is not a "qualified
mortgage," REMIC I and REMIC II may be disqualified.
MIDLAND LOAN SERVICES, L.P.
Midland Loan Services, L.P. ("Midland") was organized under the laws of
the State of Missouri in 1992 as a limited partnership. 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. Midland will serve
as the Master Servicer and the Special Servicer for the Trust Fund under the
Pooling and Servicing Agreement. In addition, Midland was the Originator with
respect to 94 of the Mortgage Loans.
As of October 31, 1996, Midland and its affiliates were responsible for
the servicing of approximately 11,900 commercial and multifamily loans with
an aggregate principal balance of approximately $12.58 billion, the
collateral for which is located in all 50 states, Puerto Rico and the
District of Columbia. With respect to such loans, approximately 10,900 loans
with an aggregate principal balance of approximately $9.78 billion pertain to
commercial and multifamily mortgage-backed securities. Property type
concentrations within the portfolio include multifamily, office, retail,
hotel/motel and other types of income producing properties. Midland and its
affiliates also provide commercial loan servicing for newly-originated loans
and loans acquired in the secondary market on behalf of issuers of commercial
and multifamily mortgage-backed securities, financial institutions and
private investors.
Midland and its affiliates provide asset management and disposition
services for commercial and multifamily mortgage-backed securities
transactions, private investors and the Resolution Trust Corporation. As of
June 30, 1996, Midland and its affiliates have provided such services for a
portfolio of approximately 7,153 assets with book values of $6.7 billion.
Midland and its affiliates have liquidated, disposed of or otherwise resolved
approximately 6,474 assets with book values of approximately $5.2 billion.
Since 1994, Midland has been originating commercial and multifamily
mortgage loans for the purpose of disposing of such mortgage loans in
securitization transactions such as this offering. As of November 21, 1996,
Midland has originated or issued commitments for 345 commercial and
multifamily mortgage loans, with an aggregate original principal balance of
approximately $849 million, including 94 of the Mortgage Loans, with an
aggregate original principal balance of approximately $293 million, included
in the Mortgage Pool. See "DESCRIPTION OF THE MORTGAGE POOL--The Midland
Mortgage Loan Program--General" herein.
Midland has been approved as a master and special servicer for investment
grade commercial and multifamily mortgage-backed securities by Fitch and
Standard & Poor's Rating Services, a division of The McGraw-Hill Companies,
Inc. ("S&P"). Midland is ranked "Above Average" as a commercial mortgage
servicer and asset manager by S&P, and "Acceptable" as a master servicer and
"Above Average" as a special servicer by Fitch. S&P rates commercial mortgage
servicers and special servicers in one of five rating categories: Strong,
Above Average, Average, Below Average and Weak. Fitch rates special servicers
in one of five categories: Superior, Above Average, Average, Below Average
and Unacceptable. Fitch rates master servicers as Acceptable or Unacceptable.
The information concerning Midland set forth above has been provided by
Midland and none of the Depositor, the Trustee or the Underwriters makes any
representation or warranty as to the accuracy thereof.
MORTGAGE LOAN SELLERS
Midland Commercial Financing Corp. ("MCFC") is a Missouri corporation and
a special purpose subsidiary of Midland, formed for the purpose of holding
mortgage loans such as the Mortgage Loans from the time of origination
thereof through the time of securitization or other disposition thereof. MCFC
does not currently have, nor is it expected in the future to have, any
significant net worth. However, as described in more detail in "DESCRIPTION
OF THE MORTGAGE POOL--General" and "--Representations and Warranties;
Repurchase," Midland will have a repurchase obligation with respect to the
Midland Mortgage Loans in the event MCFC fails to cure or repurchase any
Midland Mortgage Loan that MCFC is obligated to cure or repurchase pursuant
to the MCFC Mortgage loan Purchase Agreement.
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German American Capital Corporation, a Maryland corporation ("GACC"), is
a wholly-owned subsidiary of Deutsche Bank North America Holding Corp., which
in turn is a wholly-owned subsidiary of Deutsche Bank AG, a German
corporation. GACC is also an affiliate of DMG. GACC engages primarily in the
business of purchasing and holding mortgage loans and mortgage-backed
securities pending securitization, repackaging or other disposition. GACC
also acts from time to time as the originator of mortgage loans. Although
GACC purchases and sells mortgage loans and mortgage-backed securities for
its own account, it does not underwrite, deal or act as a broker in
connection with any such loans or securities.
The information concerning MCFC and GACC set forth above has been provided
by MCFC and GACC, respectively, and none of the Depositor, the Trustee or the
Underwriters makes any representation or warranty as to the accuracy thereof.
BOSTON CAPITAL MORTAGE COMPANY, LIMITED PARTNERSHIP
Boston Capital Mortgage Company, Limited Partnership ("BCMC") is a
Massachusetts limited partnership. The partnership is comprised of two
general partners, Boston Capital Mortgage Corporation and Llama Mortgage
Services Corporation, an affiliate of Llama Company. BCMC was formed for the
purpose of soliciting, originating, underwriting and holding mortgage loans
from the time of origination. BCMC is registered as an approved
seller/servicer with the Federal National Mortgage Association and the U.S.
Department of Housing and Urban Development. As described in the sections
entitled "DESCRIPTION OF THE MORTGAGE POOL--General" and "--Representations
and Warranties; Repurchase," BCMC will have a repurchase obligation with
respect to the BCMC Mortgage Loans as set forth in the MCFC/BCMC Mortgage
Loan Purchase Agreement.
The information concerning BCMC set forth above has been provided by BCMC,
and none of the Depositor, the Mortgage Loan Sellers, the Trustee or the
Underwriters makes any representation or warranty as to the accuracy thereof.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of 16 Classes to be designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class A-EC Certificates, the
Class B Certificates, the Class C Certificates, the Class D Certificates, the
Class E Certificates, the Class F Certificates, the Class G Certificates, the
Class H Certificates, the Class J Certificates, the Class K Certificates, the
Class L-1 Certificates, the Class L-2 Certificates, the Class R-I
Certificates and the Class R-II Certificates. ONLY THE CLASS A-1, CLASS A-2,
CLASS B, CLASS C, CLASS D AND CLASS E CERTIFICATES ARE OFFERED HEREBY. The
Pooling and Servicing Agreement will be included as part of the Form 8-K to
be filed with the Commission within 15 days after the Closing Date. See "THE
POOLING AND SERVICING AGREEMENT" herein and "DESCRIPTION OF THE CERTIFICATES"
and "SERVICING OF THE MORTGAGE LOANS" in the Prospectus for important
additional information regarding the terms of the Pooling and Servicing
Agreement and the Certificates.
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting primarily of: (i) the Mortgage
Loans, all scheduled payments of interest and principal due after the Cut-off
Date (whether or not received) 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 Account,
the Distribution Account and any account established in connection with REO
Properties (an "REO Account"); (iv) the rights of the mortgagee under all
insurance policies with respect to the Mortgage Loans; (v) the Depositor's
rights and remedies under the MCFC Mortgage Loan Purchase Agreement, the GACC
Mortgage Loan Purchase Agreement, the BCMC Mortgage Loan Purchase Agreement
and the MCFC/BCMC Mortgage Loan Purchase Agreement; and (vi) all of the
mortgagee's right, title and interest in the Reserve Accounts.
The Certificate Balance of any Class of Certificates outstanding at any
time represents the maximum amount that the holders thereof are entitled to
receive as distributions allocable to principal from the cash flow on the
Mortgage Loans and the other assets in the Trust Fund. The respective
Certificate Balance of each Class of Certificates will in each case be
reduced by amounts actually distributed on such Class that are allocable to
principal and by any Realized Losses allocated to such Class. The Class A-EC
and Class L-2 Certificates are interest only Certificates, have no
Certificate Balances and are not entitled to distributions in respect of
principal. The Class L-1 Certificates are principal only certificates and are
not entitled to distributions in respect of interest.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Regular Certificates will
be made on the 25th day of each month or, if such day is not a Business Day,
then on the next succeeding Business Day, commencing in January, 1997 (each,
a "Distribution Date"). All distributions (other than the final distribution
on any Certificate) will be made by the Trustee to the persons in whose names
the Certificates are registered at the close of business on the last Business
Day of the month preceding the month in which such Distribution Date occurs
(the "Record Date"). Such distributions will be made (i) by wire transfer of
immediately available funds to the account specified by the Certificateholder
at a bank or other entity having appropriate facilities therefor, if such
Certificateholder (a) is DTC or its nominee or (b) provides the Trustee with
wiring instructions no less than five Business Days prior to the related
Record Date and is the registered owner of Certificates the aggregate
Certificate Balance or Notional Balance of which is at least $5,000,000 or
otherwise (ii) by check mailed to such Certificateholder. The "Class A-EC
Notional Balance" as of any date is equal to the aggregate Certificate
Balance of the Regular Certificates (other than the Class A-EC and Class L-2
Certificates). The "Class L-2 Notional Balance" as of any date is equal to
the Certificate Balance of the Class L-1 Certificates. The Class A-EC and
Class L-2 Notional Balances are referred to herein generally as "Notional
Balances." 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 Regular Certificate is equal to
the initial denomination thereof as of the Closing Date divided by the
initial Certificate Balance (or, with respect to the Class A-EC and Class L-2
Certificates, the initial Class A-EC Notional Balance or initial Class L-2
Notional Balance) of the related Class.
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The aggregate distribution to be made on the Regular Certificates on any
Distribution Date will equal the Available Funds. The "Available Funds" for a
Distribution Date will be the sum of all previously undistributed Monthly
Payments or other receipts on account of principal and interest on or in
respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Master Servicer in the related Collection
Period, including all P&I Advances made by the Master Servicer, the Trustee
or the Fiscal Agent, as applicable, in respect of such Distribution Date,
plus all other amounts required to be placed in the Collection Account by the
Master Servicer pursuant to the Pooling and Servicing Agreement allocable to
the Mortgage Loans, but excluding the following:
(a) amounts permitted to be used to reimburse the Master Servicer, the
Trustee or the Fiscal Agent, as applicable, for previously unreimbursed
Advances and interest thereon as described herein under "THE POOLING AND
SERVICING AGREEMENT--Advances";
(b) those portions of each payment of interest which represent the
applicable servicing compensation;
(c) all amounts in the nature of late fees, late charges and similar
fees, NSF check charges, loan modification fees, extension fees, loan
service transaction fees, demand fees, beneficiary statement charges,
assumption fees and similar fees, which the Master Servicer or the Special
Servicer, as applicable, is entitled to retain as additional servicing
compensation;
(d) all amounts representing scheduled Monthly Payments due after the Due
Date in the related Collection Period (such amounts to be treated as
received on the Due Date when due);
(e) that portion of (i) amounts received in connection with the
liquidation of Specially Serviced Mortgage Loans, by foreclosure,
trustee's sale or otherwise, (ii) amounts received in connection with a
sale of a Specially Serviced Mortgage Loan or REO Property in accordance
with the terms of the Pooling and Servicing Agreement, (iii) amounts
(other than Insurance Proceeds) received in connection with the taking of
a Mortgaged Property by exercise of the power of eminent domain or
condemnation ("Condemnation Proceeds"; clauses (i), (ii) and (iii) are
collectively referred to as "Liquidation Proceeds") or (iv) proceeds of
the insurance policies (to the extent such proceeds are not to be applied
to the restoration of the property or released to the borrower in
accordance with the normal servicing procedures of the Master Servicer or
the related sub-servicer, subject to the terms and conditions of the
related Mortgage and Note) ("Insurance Proceeds") with respect to a
Mortgage Loan that represents any unpaid servicing compensation to which
the Master Servicer or Special Servicer is entitled;
(f) all amounts representing certain expenses reimbursable to the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent and other
amounts permitted to be retained by the Master Servicer or the Special
Servicer or withdrawn by the Master Servicer from the Collection Account
pursuant to the terms of the Pooling and Servicing Agreement;
(g) Prepayment Premiums received in the related Collection Period;
(h) any interest or investment income on funds on deposit in the
Collection Account or in Permitted Investments in which such funds may be
invested; and
(i) Default Interest received in the related Collection Period with
respect to a Mortgage Loan that is in default with respect to its Balloon
Payment.
The "Monthly Payment" with respect to any Mortgage Loan for any
Distribution Date (other than any REO Mortgage Loan) is the scheduled monthly
payment of principal and interest, excluding any Balloon Payment, which is
payable by the related borrower on the related Due Date. The Monthly Payment
with respect to an REO Mortgage Loan for any Distribution Date is the monthly
payment that would otherwise have been payable on the related Due Date had
the related Note not been discharged (after giving effect to any extension or
other modification), determined as set forth in the Pooling and Servicing
Agreement.
"Unscheduled Payments" are all Liquidation Proceeds, Condemnation Proceeds
and Insurance Proceeds payable under the Mortgage Loans, the Repurchase Price
of any Mortgage Loans that are repurchased or purchased pursuant to the
Pooling and Servicing Agreement and any other payments under or with respect
to the Mortgage Loans not scheduled to be made, including Principal
Prepayments, but excluding Prepayment Premiums.
"Prepayment Premiums" are payments received on a Mortgage Loan as the
result of a Principal Prepayment thereon, not otherwise due thereon in
respect of principal or interest, which are intended to be a disincentive to
prepayment.
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"Net REO Proceeds" with respect to any REO Property and any related
Mortgage Loan are all revenues received by the Special Servicer with respect
to such REO Property or REO Mortgage Loan that do not constitute Liquidation
Proceeds, net of any insurance premiums, taxes, assessments and other costs
and expenses permitted to be paid from the related REO Account pursuant to
the Pooling and Servicing Agreement.
"Principal Prepayments" are payments of principal made by a borrower on a
Mortgage Loan which are received in advance of the scheduled Due Date for
such payments and which are not accompanied by an amount of interest
representing the full amount of scheduled interest due on any date or dates
in any month or months subsequent to the month of prepayment.
The "Collection Period" with respect to a Distribution Date is the period
beginning on the day following the Determination Date in the month preceding
the month in which such Distribution Date occurs (or, in the case of the
Distribution Date occurring in January, 1997 on the day after the Cut-off
Date) and ending on the Determination Date in the month in which such
Distribution Date occurs.
"Determination Date" means the 17th day of any month, or if such 17th day
is not a Business Day, the Business Day immediately preceding such 17th day,
commencing in January, 1996.
"Default Interest" with respect to any Mortgage Loan is interest accrued
on such Mortgage Loan at the excess of the Default Rate over the Mortgage
Rate.
The "Default Rate" with respect to any Mortgage Loan is the annual rate at
which interest accrues on such Mortgage Loan following any event of default
on such Mortgage Loan including a default in the payment of a Monthly Payment
or a Balloon Payment.
Priorities. As used below in describing the priorities of distribution of
Available Funds for each Distribution Date, the terms set forth below will
have the following meanings.
"Anticipated Loss Subordination Amount," for any Distribution Date and any
Seriously Delinquent Mortgage Loan for which the Master Servicer has made a
reduced P&I Advance for such Distribution Date as a result of an Anticipated
Loss, is an amount equal to the product of (i) the Anticipated Loss for such
Seriously Delinquent Loan and (ii) the excess of Net Mortgage Rate for such
Mortgage Loan over the Weighted Average Pass-Through Rate as of the first day
of the related Interest Accrual Period. See "THE POOLING AND SERVICING
AGREEMENT--Advances" for a discussion of what constitutes a Seriously
Delinquent Loan and how Anticipated Losses are calculated.
"Class A-EC Subordinated Advance Amount" with respect to any Distribution
Date is an amount equal to the sum of the Anticipated Loss Subordination
Amounts for such Distribution Date.
"Class Interest Distribution Amount" with respect to any Distribution Date
and any of the P&I Certificates will equal interest for the related Interest
Accrual Period at the applicable Pass-Through Rate for such Class of
Certificates for such Interest Accrual Period on the Certificate Balance of
such Class. With respect to any Distribution Date and the Class A-EC
Certificates, the "Class Interest Distribution Amount" will equal the product
of the Class A-EC Pass-Through Rate and the Class A-EC Notional Balance. The
Class L-1 Certificates are principal only Certificates and have no Class
Interest Distribution Amount. With respect to any Distribution Date and the
Class L-2 Certificates, the "Class Interest Distribution Amount" will equal
the product of the Class L-2 Pass-Through Rate and the Class L-2 Notional
Balance. For purposes of determining any Class Interest Distribution Amount,
any distributions in reduction of Certificate Balance (and any resulting
reductions in Notional Balance) as a result of allocations of Realized Losses
on the Distribution Date occurring in such Interest Accrual Period will be
deemed to have been made as of the first day of such Interest Accrual Period.
Notwithstanding the foregoing, the Class Interest Distribution Amount for
each Class of Certificates otherwise calculated as described above will be
reduced by such Class's pro rata share of any Prepayment Interest Shortfall
not offset by Prepayment Interest Surplus, the Servicing Fee and, if the
Master Servicer and the Special Servicer are the same person, the Special
Servicing Fee with respect to such Distribution Date (pro rata according to
each respective Class's Class Interest Distribution Amount determined without
regard to this sentence).
"Class A-EC Notional Balance" means, as of any date of determination, an
amount equal to the aggregate Certificate Balance of the Regular Certificates
(other than the Class A-EC Certificates and the Class L-2 Certificates).
"Class A-EC Pass-Through Rate" with respect to any Interest Accrual Period
is a per annum rate equal to the excess of the Weighted Average Net Mortgage
Rate over the Weighted Average Pass-Through Rate.
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"Prepayment Interest Shortfall" with respect to any Distribution Date and
any Mortgage Loan as to which a Principal Prepayment was made by the related
borrower during the related Collection Period is the amount by which (i) 30
full days of interest at the related Net Mortgage Rate on the Scheduled
Principal Balance of such Mortgage Loan in respect of which interest would
have been due in the absence of such Principal Prepayment on the Due Date
next succeeding the date of such Principal Prepayment exceeds (ii) the amount
of interest received from the related borrower in respect of such Mortgage
Loan during such Collection Period. Such shortfall may result because
interest on a Principal Prepayment is paid by the related borrower only to
the date of prepayment or because no interest is paid on a Principal
Prepayment, to the extent that such Principal Prepayment is applied to reduce
the principal balance of the related Mortgage Loan as of the Due Date
preceding the date of prepayment. Prepayment Interest Shortfalls with respect
to each Distribution Date (to the extent not offset as provided in the
following two sentences) will be allocated to each Class of Certificates pro
rata based on such Class's Class Interest Distribution Amount (without taking
into account the amount of Prepayment Interest Shortfalls to such Class on
such Distribution Date) for such Distribution Date. The amount of any
Prepayment Interest Shortfall with respect to any Distribution Date will be
offset by the Master Servicer first by the amount of any Prepayment Interest
Surplus and then up to an amount equal to the aggregate Servicing Fees to
which the Master Servicer would otherwise be entitled on such Distribution
Date (excluding the portion representing the Trustee's Fees and Rating Agency
surveillance fees). If the Master Servicer and the Special Servicer are the
same person, any remaining Prepayment Interest Shortfall after the
application of the prior sentence will be offset by the aggregate Special
Servicing Fees to which the Special Servicer would otherwise be entitled to
on such Distribution Date.
"Prepayment Interest Surplus" with respect to any Distribution Date and
any Mortgage Loan as to which a Principal Prepayment was made by the related
borrower during the related Collection Period is the amount by which (i) the
amount of interest received from the related borrower in respect of such
Mortgage Loan during such Collection Period exceeds (ii) 30 full days of
interest at the related Net Mortgage Rate on the Scheduled Principal Balance
of such Mortgage Loan in respect of which interest would have been due in the
absence of such Principal Prepayment on the Due Date next succeeding the date
of such Principal Prepayment. The Master Servicer will be entitled to retain
any Prepayment Interest Surplus as additional servicing compensation to the
extent not required to offset Prepayment Interest Shortfalls as described in
the preceding paragraph.
The "Pass-Through Rate" for any Class of Regular Certificates is the per
annum rate at which interest accrues on the Certificates of such Class during
any Interest Accrual Period. The Pass-Through Rates on the Certificates will
be as follows:
<TABLE>
<CAPTION>
CLASS PASS-THROUGH RATE
- ----------- -----------------
<S> <C>
Class A-1 . 7.020%
Class A-2 . 7.233%
Class B .... 7.342%
Class C .... 7.441%
Class D .... 7.636%
Class E .... 8.029%
Class F .... 7.233%
Class G .... 7.233%
Class H .... 7.233%
Class J .... 7.233%
Class K .... 7.233%
Class L-2 . 7.233%
</TABLE>
The Pass-Through Rate on the Class A-EC Certificates during any Interest
Accrual Period will be the Class A-EC Pass-Through Rate. Class L-1
Certificates are principal only certificates and are not entitled to
distributions in respect of interest.
The "Weighted Average Net Mortgage Rate" for any Interest Accrual Period
is a per annum rate equal to the weighted average of the Net Mortgage Rates
as of the first day of such Interest Accrual Period. The "Net Mortgage Rate"
for each Mortgage Loan is the Mortgage Rate for such Mortgage Loan (in the
absence of a default) minus the Servicing Fee Rate.
The "Weighted Average Pass-Through Rate" for any Interest Accrual Period
is a per annum rate equal to the weighted average of the Pass-Through Rates
for the Regular Certificates (other than the Class A-EC Certificates) as of
the first day of such Interest Accrual Period. For purposes of computing the
"Weighted Average Pass-Through Rate" the Class L-1 and Class L-2 Certificates
shall be deemed to be a single Class that has both a principal component and
an interest component.
The "Interest Accrual Period" with respect to any Distribution Date is the
calendar month preceding the month in which such Distribution Date occurs.
Interest for each Interest Accrual Period is calculated based on a 360-day
year consisting of twelve 30-day months.
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<PAGE>
"Class Interest Shortfall" means on any Distribution Date for any Class
of Certificates, the excess, if any, of the amount of interest required to be
distributed to the holders of such Class of Certificates on such Distribution
Date over the amount of interest actually distributed to such holders. No
interest will accrue on unpaid Class Interest Shortfalls.
The "Pooled Principal Distribution Amount" for any Distribution Date will
be equal to the sum of (without duplication):
(i) the principal component of all scheduled Monthly Payments (other than
Balloon Payments) that become due (regardless of whether received) on the
Mortgage Loans during the related Collection Period;
(ii) the principal component of all Assumed Scheduled Payments, as
applicable, deemed to become due (regardless of whether received) during
the related Collection Period with respect to any Balloon Loan that is
delinquent in respect of its Balloon Payment;
(iii) the Scheduled Principal Balance of each Mortgage Loan that was,
during the related Collection Period, repurchased from the Trust Fund in
connection with the breach of a representation or warranty as described
herein under "DESCRIPTION OF THE MORTGAGE POOL--Representations and
Warranties; Repurchase" or purchased from the Trust Fund as described
herein under "DESCRIPTION OF THE MORTGAGE POOL--Early Termination" and
"--Auction";
(iv) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan that was liquidated during the related Collection Period;
(v) the principal component of all Balloon Payments received during the
related Collection Period;
(vi) all other Principal Prepayments received in the related Collection
Period; and
(vii) any other full or partial recoveries in respect of principal,
including Insurance Proceeds, Liquidation Proceeds, Condemnation Proceeds
and Net REO Proceeds.
The "Assumed Scheduled Payment" is an amount deemed due in respect of (i)
any Mortgage Loan that is delinquent in respect of its Balloon Payment and
(ii) any REO Mortgage Loan, which will be equal to the Monthly Payment that
would have been due on the Mortgage Loan in accordance with the terms of the
related Note if (a) the maturity date for such Mortgage Loan had not
occurred, (b) the related Mortgaged Property had not become an REO Property,
such Mortgage Loan was still outstanding and no acceleration of the Mortgage
Loan had occurred, and (c) in the case of any Mortgage Loan that provided for
amortization of principal prior to its maturity date, principal continued to
amortize on the same amortization schedule.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
On each Distribution Date, holders of each Class of Certificates will
receive distributions, up to the amount of Available Funds, in the amounts
and in the order of priority (the "Available Funds Allocation") set forth
below:
(i) First, to the Class A-1 Certificates, Class A-2 Certificates and
Class A-EC Certificates, pro rata in accordance with the Class Interest
Distribution Amount of each (excluding any Class A-EC Subordinated Advance
Amounts for such Distribution Date), up to an amount equal to the Class
Interest Distribution Amount of each such Class for such Distribution Date
(excluding any Class A-EC Subordinated Advance Amounts for such
Distribution Date);
(ii) Second, to the Class A-1 Certificates, Class A-2 Certificates and
Class A-EC Certificates, pro rata in accordance with the Class Interest
Shortfall of each (excluding any Class Interest Shortfalls on the Class
A-EC Certificates attributable to Class A-EC Subordinated Advance
Amounts), up to an amount equal to the aggregate unpaid Class Interest
Shortfalls previously allocated to such Class on any previous Distribution
Dates and not paid (excluding any Class Interest Shortfalls on the Class
A-EC Certificates attributable to Class A-EC Subordinated Advance
Amounts);
(iii) Third, to the Class A-1 Certificates, in reduction of the
Certificate Balance thereof, the Pooled Principal Distribution Amount for
such Distribution Date, until the Certificate Balance thereof is reduced
to zero;
(iv) Fourth, after the Certificate Balance of the Class A-1 Certificates
has been reduced to zero, to the Class A-2 Certificates, in reduction of
the Certificate Balance thereof, the Pooled Principal Distribution Amount
for such Distribution Date, until the Certificate Balance thereof is
reduced to zero;
(v) Fifth, to the Class A-1 Certificates and Class A-2 Certificates, pro
rata, for the unreimbursed amounts of Realized Losses, if any, together
with interest thereon at the Pass-Through Rate of such Class from the date
on which
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<PAGE>
such unreimbursed Realized Loss was allocated (or the date on which
interest was last paid) to, but not including, the Distribution Date on
which distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class A-1
Certificates and Class A-2 Certificates and interest thereon, provided
that any distribution pursuant to this subparagraph shall be deemed to be
distributed first in respect of any such interest and then in respect of
any such unreimbursed Realized Loss;
(vi) Sixth, to the Class B Certificates, up to an amount equal to the
Class Interest Distribution Amount of such Class for such Distribution
Date;
(vii) Seventh, to the Class B Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously allocated to such
Class on any previous Distribution Dates and not paid;
(viii) Eighth, after the Certificate Balance of the Class A-2
Certificates has been reduced to zero, to the Class B Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(ix) Ninth, to the Class B Certificates, for the unreimbursed amounts of
Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class B Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
(x) Tenth, to the Class C Certificates, up to an amount equal to the
Class Interest Distribution Amount of such Class for such Distribution
Date;
(xi) Eleventh, to the Class C Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously allocated to such
Class on any previous Distribution Dates and not paid;
(xii) Twelfth, after the Certificate Balance of the Class B Certificates
has been reduced to zero, to the Class C Certificates, in reduction of the
Certificate Balance thereof, the Pooled Principal Distribution Amount for
such Distribution Date less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause, until the Certificate
Balance thereof is reduced to zero;
(xiii) Thirteenth, to the Class C Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class C Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
(xiv) Fourteenth, to the Class D Certificates, up to an amount equal to
the Class Interest Distribution Amount of such Class for such Distribution
Date;
(xv) Fifteenth, to the Class D Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls previously allocated to such
Class on any previous Distribution Dates and not paid;
(xvi) Sixteenth, after the Certificate Balance of the Class C
Certificates has been reduced to zero, to the Class D Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xvii) Seventeenth, to the Class D Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount
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<PAGE>
equal to the aggregate of such unreimbursed Realized Losses previously
allocated to the Class D Certificates and interest thereon, provided that
any distribution pursuant to this subparagraph shall be deemed to be
distributed first in respect of any such interest and then in respect of
any such unreimbursed Realized Loss;
(xviii) Eighteenth, to the Class E Certificates, up to an amount equal to
the Class Interest Distribution Amount of such Class for such Distribution
Date;
(xix) Nineteenth, to the Class E Certificates, up to an amount equal to
the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xx) Twentieth, after the Certificate Balance of the Class D Certificates
has been reduced to zero, to the Class E Certificates, in reduction of the
Certificate Balance thereof, the Pooled Principal Distribution Amount for
such Distribution Date less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause, until the Certificate
Balance thereof is reduced to zero;
(xxi) Twenty-First, to the Class E Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class E Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
(xxii) Twenty-Second, to the Class F Certificates, up to an amount equal
to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxiii) Twenty-Third, to the Class F Certificates, up to an amount equal
to the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xxiv) Twenty-Fourth, after the Certificate Balance of the Class E
Certificates has been reduced to zero, to the Class F Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxv) Twenty-Fifth, to the Class F Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class F Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
(xxvi) Twenty-Sixth, to the Class G Certificates, up to an amount equal
to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxvii) Twenty-Seventh, to the Class G Certificates, up to an amount
equal to the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class on any previous Distribution Dates and not paid;
(xxviii) Twenty-Eighth, after the Certificate Balance of the Class F
Certificates has been reduced to zero, to the Class G Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxix) Twenty-Ninth, to the Class G Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class G Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
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<PAGE>
(xxx) Thirtieth, to the Class H Certificates, up to an amount equal to
the Class Interest Distribution Amount of such Class for such Distribution
Date;
(xxxi) Thirty-First, to the Class H Certificates, up to an amount equal
to the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xxxii) Thirty-Second, after the Certificate Balance of the Class G
Certificates has been reduced to zero, to the Class H Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxxiii) Thirty-Third, to the Class H Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class H Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
(xxxiv) Thirty-Fourth, to the Class J Certificates, up to an amount equal
to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxxv) Thirty-Fifth, to the Class J Certificates, up to an amount equal
to the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xxxvi) Thirty-Sixth, after the Certificate Balance of the Class H
Certificates has been reduced to zero, to the Class J Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xxxvii) Thirty-Seventh, to the Class J Certificates, for the
unreimbursed amounts of Realized Losses, if any, together with interest
thereon at the Pass-Through Rate of such Class from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class J
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xxxviii) Thirty-Eighth, to the Class K Certificates, up to an amount
equal to the Class Interest Distribution Amount of such Class for such
Distribution Date;
(xxxix) Thirty-Ninth, to the Class K Certificates, up to an amount equal
to the aggregate unpaid Class Interest Shortfalls previously allocated to
such Class on any previous Distribution Dates and not paid;
(xl) Fortieth, after the Certificate Balance of the Class J Certificates
has been reduced to zero, to the Class K Certificates, in reduction of the
Certificate Balance thereof, the Pooled Principal Distribution Amount for
such Distribution Date less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause, until the Certificate
Balance thereof is reduced to zero;
(xli) Forty-First, to the Class K Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Certificates from the date on which such
unreimbursed Realized Loss was allocated (or the date on which interest
was last paid) to, but not including, the Distribution Date on which
distributions in respect of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount equal to the aggregate of
such unreimbursed Realized Losses previously allocated to the Class K
Certificates and interest thereon, provided that any distribution pursuant
to this subparagraph shall be deemed to be distributed first in respect of
any such interest and then in respect of any such unreimbursed Realized
Loss;
(xlii) Forty-Second, to the Class L-2 Certificates, up to an amount equal
to the Class Interest Distribution Amount of such Class for such
Distribution Date;
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(xliii) Forty-Third, to the Class L-2 Certificates, up to an amount
equal to the aggregate unpaid Class Interest Shortfalls previously
allocated to such Class on any previous Distribution Dates and not paid;
(xliv) Forty-Fourth, after the Certificate Balance of the Class K
Certificates has been reduced to zero, to the Class L-1 Certificates, in
reduction of the Certificate Balance thereof, the Pooled Principal
Distribution Amount for such Distribution Date less the portion thereof
distributed on such Distribution Date pursuant to any preceding clause,
until the Certificate Balance thereof is reduced to zero;
(xlv) Forty-Fifth, to the Class L-1 Certificates, for the unreimbursed
amounts of Realized Losses, if any, together with interest thereon at the
Pass-Through Rate of such Class from the date on which such unreimbursed
Realized Loss was allocated (or the date on which interest was last paid)
to, but not including, the Distribution Date on which distributions in
respect of such unreimbursed Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the aggregate of such unreimbursed
Realized Losses previously allocated to the Class L-1 Certificates and
interest thereon, provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed first in respect of any
such interest and then in respect of any such unreimbursed Realized Loss;
and
(xlvi) Forty-Sixth, to the Class A-EC Certificates, up to an amount equal
to the Class A-EC Subordinated Advance Amount for such Distribution Date,
plus the aggregate unpaid Class A-EC Subordinated Advance Amounts from any
previous Distribution Dates; and
(xlvii) Forty-Seventh, any remaining funds shall be distributed to the
Residual Certificates.
All references to pro rata in the preceding clauses shall mean pro rata
based on the amount distributable pursuant to such clause.
Additional Master Servicer or Special Servicer compensation, interest on
Advances, extraordinary expenses of the Trust Fund and other similar items
will create a shortfall in Available Funds, which generally will result in a
Class Interest Shortfall for the most subordinate Class then outstanding.
Distributions of Principal on the Class A-1 and Class A-2. Notwithstanding
anything to the contrary herein or in the Pooling and Servicing Agreement, on
each Distribution Date prior to the earlier of (i) the Senior Principal
Distribution Cross-Over Date and (ii) the final Distribution Date in
connection with the termination of the Trust Fund, all distributions of
principal to the Class A-1 Certificates and the Class A-2 Certificates will
be paid, first, to holders of the Class A-1 Certificates until the
Certificate Balance of such Certificates is reduced to zero, and thereafter,
to holders of the Class A-2 Certificates until the Certificate Balance of
such Certificates is reduced to zero. On each Distribution Date on and after
the Senior Principal Distribution Cross-Over Date, and in any event on the
final Distribution Date in connection with the termination of the Trust Fund,
distributions of principal on the Class A-1 Certificates and the Class A-2
Certificates will be paid to holders of such two Classes of Certificates, pro
rata in accordance with their respective Certificate Balances outstanding
immediately prior to such Distribution Date, until the Certificate Balance of
each such Class of Certificates is reduced to zero.
The "Senior Principal Distribution Cross-Over Date" will be the first
Distribution Date as of which the aggregate Certificate Balance of the Class
A-1 Certificates and Class A-2 Certificates outstanding immediately prior
thereto exceeds the sum of (i) the aggregate Scheduled Principal Balance of
the Mortgage Loans that will be outstanding immediately following such
Distribution Date and (ii) the portion of the Available Distribution Amount
for such Distribution Date that will remain after the distribution of
interest to be made on the Class A-1 and Class A-2 Certificates on such
Distribution Date has been made.
Prepayment Premiums. All of the Mortgage Loans generally provide that a
prepayment be accompanied by the payment of a Prepayment Premium for all or a
portion of the period during which such prepayments are permitted.
Any Prepayment Premiums calculated with reference to a yield maintenance
formula ("Yield Maintenance Charges") received in the related Collection
Period will be distributed to the holders of the Certificates outstanding on
such Distribution Date, in the following amounts and order of priority:
(i) to each of the Class A-1, Class A-2, Class B, Class C, Class D and
Class E Certificates, an amount equal to the product of (A) a fraction,
the numerator of which is the amount distributed as principal to such
Class on such Distribution Date, and the denominator of which is the total
amount distributed as principal to all Classes of Certificates on such
Distribution Date, (B) the Base Interest Fraction for the related
principal payment and such Class of Offered Certificates and (C) the
aggregate amount of Yield Maintenance Charges collected on such principal
prepayment during the related Collection Period; and
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(ii) any remaining Prepayment Premiums following the distribution in
clause (i) immediately above, to the Class A-EC Certificates.
Any Prepayment Premiums that are not Yield Maintenance Charges received in
the related Collection Period will be distributed to the holders of the Class
A-EC Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any Class of Offered Certificates is a
fraction (A) the numerator of which is the greater of (x) zero and (y) the
difference between the Pass-Through Rate on such Class of Offered
Certificates and the discount rate used in calculating the Yield Maintenance
Charge with respect to such Principal Prepayment and (B) the denominator of
which is the difference between the Mortgage Rate on the related Mortgage
Loan and the discount rate used in calculating the Yield Maintenance Charge
with respect to such Principal Prepayment; provided, however, that under no
circumstances shall the Base Interest Fraction be greater than one. If the
discount rate used in calculating the Yield Maintenance Charge with respect
to any Principal Prepayment is greater than the Mortgage Rate on the related
Mortgage Loan, then the Base Interest Fraction shall equal zero.
Notwithstanding the foregoing, Prepayment Premiums will be distributed on
any Distribution Date only to the extent they are received in respect of the
Mortgage Loans in the related Collection Period.
Default Interest with Respect to Balloon Payments. Default Interest
received with respect to a Mortgage Loan that is in default with respect to
its Balloon Payment will be distributed on such Distribution Date to the
holders of the Class of Certificates that is entitled to distributions in
respect of principal on such Distribution Date; provided that if more than
one Class of Certificates is entitled to distributions in respect of
principal on such Distribution Date, the amount of such Default Interest will
be allocated among such Classes pro rata in accordance with their respective
Certificate Balances immediately prior to said Distribution Date.
Realized Losses. The Certificate Balance of the Regular Certificates
(other than the Class A-EC and Class L-2 Certificates) will be reduced
without distribution on any Distribution Date as a write-off to the extent of
any Realized Loss with respect to such Distribution Date. As referred to
herein, the "Realized Loss" with respect to any Distribution Date will mean
the amount, if any, by which (i) the aggregate Certificate Balance after
giving effect to distributions made on such Distribution Date exceeds (ii)
the aggregate Scheduled Principal Balance of the Mortgage Loans as of the Due
Date in the month in which such Distribution Date occurs. Any such write-offs
will be applied to the Classes of Certificates in the following order, until
each is reduced to zero: first, to the Class L-1 Certificates, second, to the
Class K Certificates, third, to the Class J Certificates, fourth, to the
Class H Certificates, fifth, to the Class G Certificates, sixth, to the Class
F Certificates, seventh, to the Class E Certificates, eighth, to the Class D
Certificates, ninth, to the Class C Certificates, tenth, to the Class B
Certificates and finally to the Class A-1 and Class A-2 Certificates, pro
rata in accordance with their respective Certificate Balances immediately
prior to said Distribution Date. Any amounts recovered in respect of any
amounts previously written off as Realized Losses will be distributed to the
Classes of Certificates in reverse order of allocation of Realized Losses
thereto. Realized Losses allocated to the Class L-1 Certificates will reduce
the Class L-2 Notional Balance. Realized Losses allocated to the Regular
Certificates (other than the Class A-EC and Class L-2 Certificates) will
reduce the Class A-EC Notional Balance.
Notwithstanding anything to the contrary contained herein or in the
Pooling and Servicing Agreement, the aggregate amount distributable to each
Class will be reduced by the aggregate amount of any indemnification payments
made to any person under the Pooling and Servicing Agreement, such reduction
to be allocated among such Classes pro rata, based upon the respective
amounts so distributable without taking into account the provision of this
paragraph. Such reduction amounts otherwise distributable to a Class shall be
allocated first in respect of interest and second in respect of principal.
For purposes of determining Class Interest Shortfalls and Certificate
Balances, the amount of any such reduction so allocated to a Class shall be
deemed to have been distributed to such Class. See "SERVICING OF THE MORTGAGE
LOANS--Certain Matters With Respect to the Master Servicer, the Special
Servicer, the Trustee and the Depositor" in the Prospectus.
The "Scheduled Principal Balance" of any Mortgage Loan as of any Due Date
will be the principal balance of such Mortgage Loan as of such Due Date,
after giving effect to (i) any Principal Prepayments, non-premium prepayments
or other unscheduled recoveries of principal and any Balloon Payments
received during the related Collection Period and (ii) all payments in
respect of principal, if any, due on or before such Due Date (other than a
Balloon Payment, but including the principal portion of any Assumed Scheduled
Payment, if applicable), irrespective of any delinquency in payment by the
borrower. The Scheduled Principal Balance of any REO Mortgage Loan is equal
to the principal balance thereof outstanding on the date that the related
Mortgaged Property became an REO Property minus any Net REO Proceeds
allocated to
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principal on such REO Mortgage Loan and reduced by the principal component of
Monthly Payments due thereon on or before such Due Date. With respect to any
Mortgage Loan, from and after the date on which the Master Servicer makes a
determination that it has recovered all amounts that it reasonably expects to
be finally recoverable (a "Final Recovery Determination"), the Scheduled
Principal Balance thereof will be zero.
SCHEDULED FINAL DISTRIBUTION DATE
The "Scheduled Final Distribution Date" with respect to any Class of
Certificates is the Distribution Date on which the aggregate Certificate
Balance or aggregate Notional Balance, as the case may be, of such Class of
Certificates would be reduced to zero based on the assumptions set forth
below. Such Distribution Date shall in each case be as follows:
<TABLE>
<CAPTION>
SCHEDULED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
- --------------------- ---------------------------
<S> <C>
Class A-1 ............ August 25, 2005
Class A-2 ............ December 25, 2006
Class A-EC ........... July 25, 2021
Class B .............. December 25, 2006
Class C .............. January 25, 2007
Class D .............. September 25, 2008
Class E .............. October 25, 2008
Class F .............. December 25, 2008
Class G .............. January 25, 2009
Class H .............. January 25, 2009
Class J .............. October 25, 2011
Class K .............. November 25, 2011
Class L-1 ............ July 25, 2021
Class L-2 ............ July 25, 2021
</TABLE>
The Scheduled Final Distribution Dates set forth above (the "Scheduled
Final Distribution Dates") were calculated without regard to any delays in
the collection of Balloon Payments and without regard to a reasonable
liquidation time with respect to any Mortgage Loans that may be delinquent.
Accordingly, in the event of defaults on the Mortgage Loans, the actual final
Distribution Date for one or more Classes of the Certificates may be later,
and could be substantially later, than the related Scheduled Final
Distribution Date(s).
In addition, the Scheduled Final Distribution Dates set forth above were
calculated assuming no prepayments (involuntary or voluntary), no Auction, no
Early Termination, no defaults, no modifications and no extensions. Since the
rate of payment (including prepayments) of the Mortgage Loans can be expected
to exceed the scheduled rate of payments, and could exceed such scheduled
rate by a substantial amount, the actual final Distribution Date for one or
more Classes of the Certificates may be earlier, and could be substantially
earlier, than the related scheduled Final Distribution Date(s). The rate of
payments (including prepayments) on the Mortgage Loans will depend on the
characteristics of the Mortgage Loans, as well as on the prevailing level of
interest rates and other economic factors, and no assurance can be given as
to actual payment experience.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Senior Certificates (except with respect to Class A-EC Subordinated
Advance Amounts) against losses associated with delinquent and defaulted
Mortgage Loans, the rights of the holders of the Subordinate Certificates to
receive distributions of interest and principal, as applicable, will be
subordinated to such rights of the holders of the Senior Certificates. Each
Class of the Regular Certificates with a lower class designation will
likewise be protected by the subordination of all Classes of Certificates
with yet lower Class designations. This subordination will be effected in two
ways: (i) by the preferential right of the holders of a Class of Certificates
to receive on any Distribution Date the amounts of interest and principal, as
applicable, distributable in respect of such Certificates on such date prior
to any distribution being made on such Distribution Date in respect of any
Classes of Certificates subordinate thereto and (ii) by the allocation of
Realized Losses, first, to the Class L-1 Certificates, second, to the Class K
Certificates, third, to the Class J certificates, fourth, to the Class H
Certificates, fifth, to the Class G Certificates, sixth, to the Class F
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Certificates, seventh, to the Class E Certificates, eighth, to the Class D
Certificates, ninth, to the Class C Certificates, tenth, to the Class B
Certificates, and, finally, to the Class A-1 and Class A-2 Certificates, pro
rata, in each case in reduction of the Certificate Balance of such Class
until the Certificate Balance thereof is reduced to zero. Class A-EC
Subordinated Advance Amounts will be distributed to the Class A-EC
Certificates prior to any distributions being made to the Residual
Certificates. In addition, each Class of Regular Certificates will have the
benefit of subordination of the Residual Certificates to the extent of any
distributions to which the Residual Certificates would otherwise be entitled.
No other form of credit enhancement will be available for the benefit of the
holders of the Offered Certificates.
ADDITIONAL RIGHTS OF THE RESIDUAL CERTIFICATES
The Residual Certificates will remain outstanding for as long as the Trust
Fund exists. Holders of the Residual Certificates are not entitled to
distributions in respect of principal, interest or Prepayment Premiums.
Holders of the Residual Certificates are not expected to receive any
distributions until after the Certificate Balances of all other Classes of
Certificates have been reduced to zero and only to the extent of any
Available Funds remaining on any Distribution Date and remaining assets of
the REMICs, if any, on the final Distribution Date for the Certificates,
after distributions in respect of any accrued but unpaid interest on the
Certificates and after distributions in reduction of principal balance have
reduced the principal balances of the Certificates to zero.
A HOLDER OF A GREATER THAN 50% PERCENTAGE INTEREST OF THE CLASS R-I
CERTIFICATES MAY, UNDER CERTAIN CIRCUMSTANCES, PURCHASE THE REMAINING ASSETS
OF THE TRUST FUND, THEREBY EFFECTING THE TERMINATION OF THE TRUST REMICS. SEE
"--EARLY TERMINATION" HEREIN.
EARLY TERMINATION
The holder of the Class R-I Certificates representing greater than a 50%
Percentage Interest of the Class R-I Certificates, and, if such holder does
not exercise its option, the Master Servicer and the Depositor, will have the
option to purchase all of the Mortgage Loans and all property acquired in
respect of any Mortgage Loan remaining in the Trust Fund, and thereby effect
termination of the Trust Fund and early retirement of the then outstanding
Certificates, on any Distribution Date on which the aggregate Scheduled
Principal Balance of the Mortgage Loans remaining in the Trust Fund is less
than 10% of the aggregate principal balance of such Mortgage Loans as of the
Cut-off Date. The purchase price payable upon the exercise of such option on
such a Distribution Date will be an amount equal to not less than the greater
of (i) the sum of (A) 100% of the outstanding principal balance of each
Mortgage Loan included in the Trust Fund as of the last day of the month
preceding such Distribution Date (less any Advances previously made on
account of principal); (B) the fair market value of all other property
included in the Trust Fund as of the last day of the month preceding such
Distribution Date, as determined by an independent appraiser as of a date not
more than 30 days prior to the last day of the month preceding such
Distribution Date; (C) all unpaid interest accrued on such principal balance
of each such Mortgage Loan (including any Mortgage Loan as to which title to
the related Mortgaged Property has been acquired) at the Mortgage Rate to the
last day of the month preceding such Distribution Date (less any Advances
previously made on account of interest); and (D) unreimbursed Advances with
interest thereon at the Advance Rate, unpaid servicing compensation and
unpaid Trust Fund expenses; or (ii) the aggregate fair market value of the
Mortgage Loans, and all other property acquired in respect of any Mortgage
Loan in the Trust Fund, on the last day of the month preceding such
Distribution Date, as determined by an independent appraiser as of a date not
more than 30 days prior to the last day of the month preceding such
Distribution Date, together with one month's interest thereon at the related
Mortgage Rate plus disposition expenses. See "--Additional Rights of the
Residual Certificates" herein.
AUCTION
On each of (i) the Distribution Date occurring in March of each year from
and including 2008 and (ii) any date after the Distribution Date occurring in
March 2008 on which the Trustee receives an unsolicited bona fide offer to
purchase all (but not less than all) of the Mortgage Loans (each, an "Auction
Valuation Date"), the Trustee will request that four independent financial
advisory or investment banking or investment brokerage firms nationally
recognized in the field of real estate analysis and reasonably acceptable to
the Master Servicer provide the Trustee with an estimated value at which the
Mortgage Loans and all other property acquired in respect of any Mortgage
Loan in the Trust Fund could be sold pursuant to an auction. If the average
of the three highest such estimates received equals or exceeds the aggregate
amount of the Certificate Balances of all Certificates outstanding on the
Auction Valuation Date, plus unpaid interest thereon, the anticipated Auction
Fees, unpaid servicing compensation, unreimbursed Advances (together with
interest thereon at the Advance Rate) and
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unpaid Trust Fund expenses, the Trustee will conduct an auction of the
Mortgage Loans. The Trustee will, in such case, appoint an auction agent to
solicit offers from prospective purchasers, who must meet certain
requirements described in the Pooling and Servicing Agreement, to purchase
all (but not less than all) of the Mortgage Loans and such property, for a
price not less than an amount equal to the aggregate amount of the
Certificate Balances of all Certificates outstanding as of the close of
business on the closing date (the "Auction Closing Date"), plus unpaid
interest thereon, the Auction Fees, unpaid servicing compensation,
unreimbursed Advances (together with interest thereon at the Advance Rate)
and unpaid Trust Fund expenses (the "Minimum Auction Price"). The Auction
Closing Date shall be no earlier than the Distribution Date in June 2008. In
determining the aggregate Certificate Balances of all Certificates, all
Certificates owned by or on behalf of the Depositor, a property manager, the
Master Servicer, the Special Servicer, the Trustee, a borrower or any
affiliate thereof will be included.
If the Trustee receives no bids that are qualified pursuant to the terms
of the Pooling and Servicing Agreement, the Trust Fund will not be terminated
pursuant to these auction procedures. If the Trustee receives qualified bids,
the Trustee will accept the highest of such bids, notify the Depositor, the
Master Servicer and the Special Servicer of the adoption of a plan of
complete liquidation and will sell the Mortgage Loans and such property to
the successful bidder on or before the Remittance Date immediately preceding
the third Distribution Date following the Auction Valuation Date (or such
later Distribution Date determined by the auction agent appointed in
accordance with the immediately preceding paragraph), but, in either event,
no later than the Distribution Date which immediately precedes the date which
is 90 days following the date of adoption of a plan of complete liquidation
by the Trustee. Such sale will effect a termination of the Trust Fund and an
early retirement of the then outstanding Certificates. The Trustee will be
entitled to be reimbursed from the Collection Account for expenses that it or
any auction agent incurs in connection with an auction, including all fees
and reasonable expenses of legal counsel and other professionals ("Auction
Fees").
Any auction will be conducted in accordance with auction procedures to be
developed by the auction agent in connection with such auction, provided that
such procedures will include at a minimum provisions substantially to the
effect that: (i) no due diligence of the Master Servicer's, the Special
Servicer's or the Trustee's records with respect to the Mortgage Loans may be
conducted by any bidder prior to being notified that it has submitted the
highest bid; (ii) the auction agent is entitled to require that the highest
bidder provide a non-refundable good faith deposit sufficient to reimburse
the Trustee and the auction agent for all expenses in connection with the
evaluation of such bid and in connection with such highest bidder's due
diligence; (iii) each bidder may be required to enter into a confidentiality
agreement with the Master Servicer, the Special Servicer, the auction agent
and the Trustee prior to being permitted to conduct due diligence; (iv)
borrowers on any of the Mortgage Loans will be prohibited from submitting
bids; and (v) in the event that the highest bidder withdraws, the next
highest bidder will be permitted to conduct due diligence of the Master
Servicer's, the Special Servicer's or the Trustee's records with respect to
the Mortgage Loans as if it were the highest bidder.
DELIVERY, FORM AND DENOMINATION
Book-Entry Certificates. No Person acquiring a Class A-1, Class A-2, Class
B, Class C, Class D and Class E Certificate (each such Certificate, a
"Book-Entry Certificate") will be entitled to receive a physical certificate
representing such Certificate, except under the limited circumstances
described below. Absent such circumstances, the Book-Entry Certificates will
be registered in the name of a nominee of DTC and beneficial interests
therein will be held by investors ("Beneficial Owners") through the
book-entry facilities of DTC, as described herein, in denominations of
$100,000 initial Certificate Balance or Notional Balance and integral
multiples of $1,000 in excess thereof, except one certificate of each such
Class may be issued that represents a different initial Certificate Balance
or Notional Balance to accommodate the remainder of the initial Certificate
Balance or Notional Balance of such Class. The Depositor has been informed by
DTC that its nominee will be Cede & Co. Accordingly, Cede & Co. is expected
to be the holder of record of the Book-Entry Certificates.
No Beneficial Owner of a Book-Entry Certificate will be entitled to
receive a definitive Certificate (a "Definitive Certificate") representing
such person's interest in the Book-Entry Certificates, except as set forth
below. Unless and until Definitive Certificates are issued to Beneficial
Owners in respect of the Book-Entry Certificates under the limited
circumstances described herein, all references to actions taken by
Certificateholders or holders will, in the case of the Book-Entry
Certificates, refer to actions taken by DTC upon instructions from its
participants, and all references herein to distributions, notices, reports
and statements to Certificateholders or holders will, in the case of the
Book-Entry Certificates, refer to distributions, notices, reports and
statements to DTC or Cede & Co., as the case may be, for distribution to
Beneficial Owners in accordance with DTC procedures. DTC may discontinue
providing its services as securities depository with respect to the
Book-Entry Certificates at any time by giving reasonable notice to the
Trustee. Under such circumstances, in the event
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that a successor securities depository is not obtained, certificates are
required to be printed and delivered. The Trustee, the Master Servicer, the
Special Servicer, the Fiscal Agent and the Certificate Registrar may for all
purposes, including the making of payments due on the Book-Entry
Certificates, deal with DTC as the authorized representative of the
Beneficial Owners with respect to such Certificates for the purposes of
exercising the rights of Certificateholders under the Pooling and Servicing
Agreement.
The Depository Trust Company. 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 New York
Uniform Commercial Code and a "clearing agency" registered pursuant to
Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities for its participating organizations
("Participants") and to facilitate the clearance and settlement of securities
transactions among Participants through electronic computerized book-entry
charges in Participants' accounts, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(including the Underwriters), banks, trust companies and clearing
corporations and certain other organizations. The Rules applicable to DTC and
its participants are on file with the Securities and Exchange Commission.
Indirect access to the DTC system also is available to banks, brokers,
dealers, trust companies and other institutions that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the
Book-Entry Certificates on DTC's records. The ownership interest of each
Beneficial Owner is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected
to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Book-Entry Certificates are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the Certificates except in the
event that use of the book-entry system for the Book-Entry Certificates is
discontinued. Neither the Certificate Registrar nor the Trustee will have any
responsibility to monitor or restrict the transfer of ownership interests in
Book-Entry Certificates through the book-entry facilities of DTC.
To facilitate subsequent transfers, all Book-Entry Certificates deposited
by Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of Book-Entry Certificates with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Book-Entry Certificates; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Book-Entry Certificates are
credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers. Beneficial Owners will not be recognized as
Certificateholders, as such term is used in the Pooling and Servicing
Agreement, by the Trustee or any paying agent (each, a "Paying Agent")
appointed by the Trustee. Beneficial Owners will be permitted to exercise the
rights of Certificateholders only indirectly through DTC and its
Participants.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Beneficial Owner to pledge Book-Entry Certificates to persons or entities
that do not participate in the DTC system, or to otherwise act with respect
to such Book-Entry Certificates, may be limited due to lack of a definitive
Certificate for such Book-Entry Certificates. In addition, under a book-entry
format, Beneficial Owners may experience delays in their receipt of payments,
since distributions will be made by the Trustee or a Paying Agent on behalf
of the Trustee to Cede & Co., as nominee for DTC.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Book-Entry Certificates. Under its usual procedures, DTC mails an Omnibus
Proxy to the Trustee as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on that record
date (identified in a listing attached to the Omnibus Proxy). DTC may take
conflicting actions with respect to Percentage Interests or Voting Rights to
the extent that Participants whose holdings of Book-Entry Certificates
evidence such Percentage Interests or Voting Rights authorize divergent
action.
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Neither the Depositor, the Trustee, the Master Servicer, the Special
Servicer, the Fiscal Agent, nor any Paying Agent will have any responsibility
for any aspect of the records relating to, or payments made on account of,
beneficial ownership interests of the Book-Entry Certificates registered in
the name of Cede & Co., as nominee for DTC, or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests. In
the event of the insolvency of DTC, a Participant or an Indirect Participant
in whose name Book-Entry Certificates are registered, the ability of the
Beneficial Owners of such Book-Entry Certificates to obtain timely payment
may be impaired. In addition, in such event, if the limits of applicable
insurance coverage by the Securities Investor Protection Corporation are
exceeded or if such coverage is otherwise unavailable, ultimate payment of
amounts distributable with respect to such Book-Entry Certificates may be
impaired.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Depositor believes to be reliable,
but the Depositor takes no responsibility for the accuracy thereof.
Physical Certificates. The Class A-EC, Class F, Class G, Class H, Class J,
Class K, Class L-1, Class L-2, Class R-I and Class R-II Certificates will be
issued in fully registered certificated form only. The Class A-EC, Class F,
Class G, Class H, Class J, Class K, Class L-1 and Class L-2 Certificates will
be issued in denominations of $100,000 initial Certificate Balance or
Notional Balance, as applicable, and integral multiples of $1 in excess
thereof, except one Certificate of each such Class may be issued that
represents a different initial Certificate Balance or Notional Balance to
accommodate the remainder of the initial Certificate Balance or Notional
Balance. The Residual Certificates will be issued in definitive, physical,
registered form in Percentage Interests of 5% and integral multiples of a 1%
Percentage Interest in excess thereof.
Book-Entry Certificates will be converted to Definitive Certificates and
reissued to Beneficial Owners or their nominees, rather than to DTC or its
nominee, only if (i)(A) the Depositor advises the Certificate Registrar in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to any Class of the Book-Entry
Certificates and (B) the Depositor is unable to locate a qualified successor
or (ii) the Depositor, at its option, advises the Trustee and Certificate
Registrar that it elects to terminate the book-entry system through DTC with
respect to any Class of the Book-Entry Certificates.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Certificate Registrar will be required to notify all affected
Beneficial Owners through DTC of the availability of Definitive Certificates.
Upon surrender by DTC of the physical certificates representing the affected
Book-Entry Certificates and receipt of instructions for re-registration, the
Certificate Registrar will reissue the Book-Entry Certificates as Definitive
Certificates to the Beneficial Owners. Upon the issuance of Definitive
Certificates for purposes of evidencing ownership of the Class A-1, Class
A-2, Class B, Class C, Class D or Class E Certificates, the registered
holders of such Definitive Certificates will be recognized as
Certificateholders under the Pooling and Servicing Agreement and,
accordingly, will be entitled directly to receive payments on, and exercise
Voting Rights with respect to, and to transfer and exchange such Definitive
Certificates.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee or the Certificate Registrar in accordance with the
terms of the Pooling and Servicing Agreement.
REGISTRATION AND TRANSFER
Subject to the restrictions on transfer and exchange set forth in the
Pooling and Servicing Agreement, the holder of any Definitive Certificate may
transfer or exchange the same in whole or part (in a principal amount equal
to the minimum authorized denomination or any integral multiple thereof) by
surrendering such Definitive Certificate at the corporate trust office of the
certificate registrar appointed pursuant to the Pooling and Servicing
Agreement (the "Certificate Registrar") or at the office of any transfer
agent, together with an executed instrument of assignment and transfer in the
case of transfer and a written request for exchange in the case of exchange.
In exchange for any Definitive Certificate properly presented for transfer or
exchange with all necessary accompanying documentation, the Certificate
Registrar will, within five Business Days of such request if made at the
corporate trust office of the Certificate Registrar, or within ten Business
Days if made at the office of a transfer agent (other than the Certificate
Registrar), execute and deliver at such corporate trust office or the office
of the transfer agent, as the case may be, to the transferee (in the case of
transfer) or holder (in the case of exchange) or send by first class mail at
the risk of the transferee (in the case of transfer) or holder (in the case
of exchange) to such address as the transferee or holder, as applicable, may
request, a Definitive Certificate or Definitive Certificates, as the case may
require, for a like aggregate Certificate Balance or Notional Balance, as
applicable, and in such authorized denomination or denominations as may be
requested. The presentation for transfer or exchange of any Definitive
Certificate will not be valid unless made at the corporate trust office of
the Certificate Registrar or at the office of a transfer agent by the
registered holder
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in person, or by a duly authorized attorney-in-fact. The Certificate
Registrar may decline to accept any request for an exchange or registration
of transfer of any Definitive Certificate during the period of 15 days
preceding any Distribution Date.
No fee or service charge will be imposed by the Certificate Registrar for
its services in respect of any registration of transfer or exchange referred
to herein; provided, however, that in connection with the transfer of Private
Certificates to certain institutional accredited investors, the Certificate
Registrar will be entitled to be reimbursed by the transferor for any costs
incurred in connection with such transfer. The Certificate Registrar may
require payment by each transferor of a sum sufficient to pay any tax,
expense or other governmental charge payable in connection with any such
transfer.
For a discussion of certain transfer restrictions, see "ERISA
CONSIDERATIONS" herein.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Regular Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) the rate,
timing and amount of distributions on such Certificate. The rate, timing and
amount of distributions on any Regular Certificate will in turn depend on,
among other things, (i) the rate and timing of principal payments (including
voluntary prepayments, involuntary prepayments resulting from defaults and
liquidations or other dispositions of the Mortgage Loans and Mortgaged
Properties or the application of insurance or condemnation proceeds and/or
the purchase of the Mortgage Loans as described under "DESCRIPTION OF THE
MORTGAGE POOL--Representations and Warranties; Repurchase" and "DESCRIPTION
OF THE CERTIFICATES--Early Termination" and "--Auction") and the extent to
which such amounts are to be applied in reduction of the Certificate Balance
(or Notional Balance) of the Class of Certificates to which such Certificate
belongs, (ii) the rate, timing and severity of Realized Losses on the
Mortgage Loans and the extent to which such losses are allocable in reduction
of the Certificate Balance (or Notional Balance) of the Class of Certificates
to which such Certificate belongs and (iii) with respect to the Class A-EC
Certificates, the Pass-Through Rate as in effect from time to time.
Rate and Timing of Principal Payments. The yield to holders of the Regular
Certificates purchased at a discount or premium will be affected by the rate
and timing of principal payments made in reduction of the Certificate Balance
of such Certificates. As described herein, the Pooled Principal Distribution
Amount for each Distribution Date generally will be distributable in its
entirety in respect of the Class A-1 Certificates until the Certificate
Balance thereof is reduced to zero, and will thereafter be distributable in
its entirety to each remaining Class of Regular Certificates, sequentially in
order of Class designation, in each case until the Certificate Balance of
each such Class of Certificates is, in turn, reduced to zero. Consequently,
the rate and timing of principal payments made in reduction of the
Certificate Balance of the Regular Certificates will be directly related to
the rate and timing of principal payments on or in respect of the Mortgage
Loans, which will in turn be affected by the amortization schedules thereof,
the dates on which Balloon Payments are due and the rate and timing of
Principal Prepayments and other unscheduled collections thereon (including,
for this purpose, collections made in connection with liquidations of
Mortgage Loans due to defaults, Casualties or Condemnations affecting the
Mortgaged Properties or purchases of Mortgage Loans out of the Trust Fund in
the manner described under "DESCRIPTION OF THE MORTGAGE POOL--Representations
and Warranties; Repurchase" and "DESCRIPTION OF THE CERTIFICATES--Early
Termination" and "--Auction" herein). Prepayments and, assuming the
respective stated maturity dates therefor have not occurred, liquidations and
purchases of the Mortgage Loans will result in distributions on the Regular
Certificates (other than the Class A-EC and Class L-2 Certificates) of
amounts that would otherwise have been distributed over the remaining terms
of the Mortgage Loans. Defaults on the Mortgage Loans, particularly at or
near their stated maturity dates, may result in significant delays in
payments of principal on the Mortgage Loans and, accordingly, on the Regular
Certificates while work-outs are negotiated, foreclosures are completed or
bankruptcy proceedings are resolved. The yield to investors in the
Subordinate Certificates will be very sensitive to the timing and magnitude
of losses on the Mortgage Loans due to liquidations following a default, and
will also be very sensitive to delinquencies in payment. In addition, the
Special Servicer has the option, subject to certain limitations, to extend
the maturity of Mortgage Loans following a default in the payment of a
Balloon Payment. See "THE POOLING AND SERVICING AGREEMENT--Servicing of the
Mortgage Loans; Collection of Payments" and "--Realization Upon Mortgage
Loans" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Foreclosure"
in the Prospectus.
The rate and timing of principal payments and defaults and the severity of
losses on the Mortgage Loans may be affected by a number of factors,
including, without limitation, the terms of the Mortgage Loans (for example,
the provisions requiring
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the payment of Prepayment Premiums and amortization terms that require
Balloon Payments), prevailing interest rates, the market value of the
Mortgaged Properties, the demographics and relative economic vitality of the
areas in which the Mortgaged Properties are located, the general supply and
demand for such facilities (and their uses) in such areas, the quality of
management of Mortgaged Properties, the servicing of the Mortgage Loans,
federal and state tax laws (which are subject to change) and other
opportunities for investment.
The rate of prepayment on the Mortgage Pool is likely to be affected by
the amount of any required Prepayment Premiums and the borrowers' ability to
refinance their related Mortgaged Loans. If prevailing market interest rates
for mortgage loans of a comparable type, term and risk level have decreased
enough to offset any required Prepayment Premium, a borrower may have an
increased incentive to refinance its Mortgage Loan for purposes of either (i)
converting to another fixed rate loan with a lower interest rate and thereby
"locking in" such rate or (ii) taking advantage of an initial "teaser rate"
on an adjustable rate mortgage loan (that is, a mortgage interest rate below
that which would otherwise apply if the applicable index and gross margin
were applied). However, the ability of a borrower to refinance its Mortgage
Loan will be affected not only by prevailing market rates, but also by the
current market value of the Mortgage Property. See "RISK FACTORS--Prepayment
and Yield Considerations" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Enforceability of Certain Provisions" in the Prospectus.
In addition, some borrowers may sell Mortgaged Properties in order to
realize their equity therein, to meet cash flow needs or to make other
investments.
If the markets for commercial and multifamily real estate should
experience an overall decline in property values such that the outstanding
balances of the Mortgage Loans exceed the value of the respective Mortgaged
Properties, a borrower under a non-recourse loan may have a decreased
incentive to fund operating cash flow deficits and, as a result, actual
losses may be higher than those originally anticipated by investors.
Neither the Depositor nor any of the Mortgage Loan Sellers makes any
representation as to the particular factors that will affect the rate and
timing of prepayments and defaults on the Mortgage Loans, as to the relative
importance of such factors, as to the percentage of the principal balance of
the Mortgage Loans that will be prepaid or as to which a default will have
occurred as of any date or as to the overall rate of prepayment, default or
principal payment on the Mortgage Loans.
The extent to which the yield to maturity of any Class of Regular
Certificates may vary from the anticipated yield will depend upon the degree
to which they are purchased at a discount or premium and when, and to what
degree, payments of principal on the Mortgage Loans are in turn distributed
in reduction of the Certificate Balance of such Certificates. An investor
should consider, in the case of any Regular Certificate purchased at a
discount, especially the Class L-1 Certificates, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in
an actual yield to such investor that is lower than the anticipated yield
and, in the case of any Regular Certificate purchased at a premium (or the
Class A-EC and Class L-2 Certificates, which have no Certificate Balances),
the risk that a faster than anticipated rate of principal payments could
result in an actual yield to such investor that is lower than the anticipated
yield. In general, the earlier a payment of principal on the Mortgage Loans
is distributed in reduction of the Certificate Balance of any Regular
Certificate purchased at a discount or premium (or, in the case of the Class
A-EC and Class L-2 Certificates, applied in reduction of the Notional
Balance), the greater will be the effect on an investor's yield to maturity.
As a result, the effect on an investor's yield of principal payments on the
Mortgage Loans occurring at a rate higher (or lower) than the rate
anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of such
principal payments. Because the rate of principal payments on the Mortgage
Loans will depend on future events and a variety of factors (as described
more fully below), no assurance can be given as to such rate or the rate of
Principal Prepayments in particular. The Depositor is not aware of any
relevant publicly available or authoritative statistics with respect to the
historical prepayment experience of a large group of commercial and/or
multifamily loans comparable to the Mortgage Loans. See "RISK
FACTORS--Prepayment and Yield Considerations" herein.
The amounts payable with respect to the Class L-1 Certificates derive only
from principal payments on the Mortgage Loans. As a result, the yield on the
Class L-1 Certificates will be adversely affected by slower than expected
payments of principal (including prepayments, defaults and liquidations) on
the Mortgage Loans.
Balloon Payments. Most of the Mortgage Loans are Balloon Loans that will
have substantial payments (that is, Balloon Payments) due at their stated
maturities, unless previously prepaid. The ability of the borrowers to pay
the Balloon Payment at the maturity of the Balloon Loans will depend on their
ability to sell or refinance the Mortgaged Properties, which, in turn,
depends on a number of factors, many of which are beyond the control of such
borrowers. Such factors include the level of
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interest rates and general economic conditions at the time of sale or
refinancing and changes in federal, state or local laws, including tax laws,
environmental laws and safety standards. The Certificates are subject to the
risk of default by the borrowers in making the required Balloon Payments. If
any borrower with respect to any of such Balloon Loans is unable to make the
applicable Balloon Payment when due, the average life of the Certificates
will be longer than expected. See the Range of Maturity Years Table in
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of the Mortgage
Pool--Other Information" herein for additional information regarding maturity
dates of the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Regular Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Shortfalls in
Available Funds resulting from shortfalls in collections of amounts payable
on the Mortgage Loans (to the extent not advanced) or additional Master
Servicer or Special Servicer compensation, interest on Advances,
extraordinary Trust Fund expenses or other similar items will generally be
borne: first, by the holders of the Class L-1 Certificates, to the extent of
amounts otherwise distributable thereto; second, by the holders of the Class
K Certificates, to the extent of amounts otherwise distributable thereto;
third, by the holders of the Class J Certificates, to the extent of amounts
otherwise distributable thereto; fourth, by the holders of the Class H
Certificates, to the extent of amounts otherwise distributable thereto;
fifth, by the holders of the Class G Certificates, to the extent of amounts
otherwise distributable thereto; sixth, by the holders of the Class F
Certificates, to the extent of amounts otherwise distributable thereto;
seventh, by the holders of the Class E Certificates to the extent of amounts
otherwise distributable thereto; eighth, by the holders of the Class D
Certificates, to the extent of amounts otherwise distributable thereto;
ninth, by the holders of the Class C Certificates, to the extent of amounts
otherwise distributable thereto; tenth, by the holders of the Class B
Certificates; and, last, by the holders of the Class A-1 and Class A-2
Certificates on a pro-rata basis. The amount of any such shortfall generally
will be distributable to holders of such Class on subsequent Distribution
Dates, to the extent of Available Funds on such Distribution Dates. Any such
shortfall will not bear interest, however, and will therefore negatively
affect the yield to maturity of such Class of Certificates for so long as it
is outstanding.
Realized Losses will be allocated, as and to the extent described herein,
to the Classes of Certificates (in reduction of the Certificate Balance of
each such Class) in reverse order of their Class designation. As a result, a
loss on any one of the Mortgage Loans could result in a significant loss, or
in some cases a complete loss, of an investors's investment in any Class of
the Subordinate Certificates. Consequently prospective investors should
perform their own analysis of the expected timing and severity of Realized
Losses prior to investing in any Subordinate Certificate. Even if losses on
the Mortgage Loans are not borne by an investor in any Class, such losses may
affect the weighted average life and yield to maturity of such investor's
Certificates. The allocation of Realized Losses to the Regular Certificates
(other than the Class A-EC and Class L-2 Certificates) will reduce the
Notional Balance of the Class A-EC Certificates.
Pass-Through Rate. Because the Class A-EC Pass-Through Rate is equal to
the excess, if any, of the Weighted Average Net Mortgage Rate over the
Weighted Average Pass-Through Rate, the Class A-EC Pass-Through Rate will be
sensitive to changes in both the Weighted Average Net Mortgage Rate and the
Weighted Average Pass-Through Rate. The Weighted Average Pass-Through Rate
will fluctuate based on the relative sizes of the Certificate Balances of the
Regular Certificates (other than the Class A-EC and Class L-2 Certificates,
which do not have Certificate Balances).
The Weighted Average Net Mortgage Rate will fluctuate over the life of the
Class A-EC Certificates as a result of scheduled amortization, voluntary
prepayments and liquidations of Mortgage Loans. If principal payments,
including voluntary and involuntary Principal Prepayments, are made on a
Mortgage Loan with a relatively high Net Mortgage Rate at a rate faster than
the rate of principal payments on the Mortgage Pool as a whole, the
Pass-Through Rate applicable to the Class A-EC Certificates will be adversely
affected. Accordingly, the yield on each such Class of Certificates will be
sensitive to changes in the outstanding principal balances of the Mortgage
Loans as a result of scheduled amortization, voluntary prepayments and
liquidations of Mortgage Loans.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until, at the earliest, the 25th day of the
month following the month in which interest accrued on the Certificates, the
effective yield to the holders of the Regular Certificates will be lower than
the yield that would otherwise be produced by the applicable Pass-Through
Rate and purchase prices (assuming such prices did not account for such
delay).
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution to the
investor of each dollar distributed in reduction of principal balance or
notional balance of such security. The weighted average life of the Regular
Certificates will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid, which may be in the form of
scheduled amortization, Balloon Payments, prepayments or liquidations.
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Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant
Prepayment Rate" or "CPR" model. The CPR model represents an assumed constant
rate of prepayment each month, expressed as an annual rate, relative to the
then outstanding principal balance of a pool of mortgage loans for the life
of such mortgage loans. CPR of "0%" assumes that no Mortgage Loan is prepaid
by a borrower before maturity, while CPRs "2%" and "4%" assume that
prepayments on the Mortgage Loans are made by borrowers at those CPRs. CPR
does not purport to be either an historical description of the prepayment
experience of any pool of mortgage loans or a prediction of the anticipated
rate of prepayment of any mortgage loans, including the Mortgage Loans to be
included in the Trust Fund.
The tables set forth below have been prepared on the basis of certain
assumptions as described below regarding the characteristics of the Mortgage
Loans that are expected to be included in the Mortgage Pool as described
under "DESCRIPTION OF THE MORTGAGE POOL" herein and the performance thereof.
The tables assume, among other things, that: (i) as of the date of issuance
of the Regular Certificates, the Mortgage Loans (except as set forth herein)
provide for a Monthly Payment of principal and interest that would fully
amortize the remaining principal balance of such Mortgage Loan using the
Monthly Payments in the amounts set forth in Annex A hereto, commencing on
the first day of the month immediately following the month in which such
issuance occurs, with, if such Mortgage Loan is a Balloon Loan, the Monthly
Payments in the amounts set forth in Annex A hereto and a principal payment
in the amount that would reduce the principal balance of such Balloon Loan to
zero on the maturity date set forth in Annex A; (ii) none of Midland nor any
of the Mortgage Loan Sellers will repurchase any Mortgage Loan and none of
the Master Servicer, the Special Servicer, the Depositor or the holders of
the Class R-I Certificates exercises its option to purchase Mortgage Loans
and thereby cause a termination of the Trust Fund; (iii) there are no
delinquencies or Realized Losses on the Mortgage Loans; (iv) no Prepayment
Premiums are paid with respect to any Mortgage Loan; (v) payments on the
Certificates will be made on the 25th day of each month, commencing in
January, 1997 (notwithstanding that any such day is not a Business Day); (vi)
there are no additional ongoing Trust Fund expenses payable out of the Trust
Fund other than the Servicing Fee; (vii) the Regular Certificates will be
purchased on the Closing Date; (viii) that no defaults occur with respect to
any of the Mortgage Loans; (ix) that all of the Mortgage Loans accrue
interest based upon a 360-day year composed of twelve 30-day months; (x) that
all Mortgage Loans that have a maturity date other than the first day of a
month make their final payment on the first day of the month following the
month of maturity; (xi) that the number of scheduled payments for each Newly
Originated Mortgage Loan is equal to the actual number of payments plus one,
with the first such payment consisting of interest only and the remaining
payments consisting of principal and interest; and (xii) that with respect to
Loan #16, the stated interest rate does not adjust at any time during the
term of such Mortgage Loan.
The actual performance of the Mortgage Loans will differ from the
assumptions used in calculating the tables set forth below, which are
hypothetical in nature and are provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios. Any
difference between such assumptions and the actual performance of the
Mortgage Loans, or actual prepayment or loss experience, will affect the
percentages of initial Certificate Balance outstanding over time and the
weighted average lives of the Classes of Regular Certificates.
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of each Class of Regular Certificates, and
set forth the percentages of the initial Certificate Balance or Notional
Balance of each such Class of Regular Certificates that would be outstanding
after each of the Distribution Dates shown based on the assumptions described
above and the following additional assumptions for each of the designated
scenarios (the "Scenarios"). In the case of Scenario 1, it was assumed that
none of the Mortgage Loans prepay prior to their maturity date and that there
are no defaults. In the case of Scenario 2, the prepayment assumptions set
forth in Scenario 1 were assumed and it was further assumed that the Trust
Fund will be terminated pursuant to an auction on the Distribution Date
occurring in June 2008. In the case of Scenario 3 and Scenario 4, it was
assumed that the Mortgage Loans prepay prior to their maturity date at a rate
equal to 2% CPR and 4% CPR, respectively, and that there are no defaults and
that it was further assumed that the Trust Fund will be terminated pursuant
to an auction on the Distribution Date occurring in June 2008. See
"DESCRIPTION OF THE CERTIFICATES--Auction" herein.
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PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS B
SCENARIO SCENARIO SCENARIO
-------------------------- -------------------------- -----------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ----------------------- ----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ........ 100 100 100 100 100 100 100 100 100 100 100 100
December 1997 .......... 96 96 91 86 100 100 100 100 100 100 100 100
December 1998 .......... 91 91 81 71 100 100 100 100 100 100 100 100
December 1999 .......... 85 85 71 57 100 100 100 100 100 100 100 100
December 2000 .......... 79 79 60 43 100 100 100 100 100 100 100 100
December 2001 .......... 64 64 42 21 100 100 100 100 100 100 100 100
December 2002 .......... 51 51 24 0 100 100 100 100 100 100 100 100
December 2003 .......... 24 24 0 0 100 100 97 79 100 100 100 100
December 2004 .......... 8 8 0 0 100 100 84 65 100 100 100 100
December 2005 .......... 0 0 0 0 95 95 72 51 100 100 100 100
December 2006 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2007 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2008 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2009 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2010 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2011 .......... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
<F1> .................. 5.5 5.5 4.2 3.4 9.7 9.7 9.1 8.5 10.0 10.0 10.0 10.0
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS C CLASS D CLASS E
SCENARIO SCENARIO SCENARIO
------------------------------ ------------------------------ -----------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ----------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ........ 100 100 100 100 100 100 100 100 100 100 100 100
December 1997 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 1998 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 1999 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 2000 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 2001 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 2002 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 2003 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 2004 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 2005 .......... 100 100 100 100 100 100 100 100 100 100 100 100
December 2006 .......... 56 56 0 0 100 100 92 28 100 100 100 100
December 2007 .......... 0 0 0 0 32 32 0 0 100 100 11 0
December 2008 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2009 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2010 .......... 0 0 0 0 0 0 0 0 0 0 0 0
December 2011 .......... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
<F1> .................. 10.1 10.1 10.0 10.0 10.8 10.7 10.1 10.0 11.8 11.5 10.7 10.1
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS F CLASS G CLASS H
SCENARIO SCENARIO SCENARIO
------------------------------ ------------------------------ -----------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ------------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ......... 100 100 100 100 100 100 100 100 100 100 100 100
December 1997 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 1998 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 1999 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2000 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2001 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2002 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2003 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2004 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2005 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2006 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2007 ........... 100 100 100 30 100 100 100 100 100 100 100 100
December 2008 ........... 0 0 0 0 54 0 0 0 100 0 0 0
December 2009 ........... 0 0 0 0 0 0 0 0 0 0 0 0
December 2010 ........... 0 0 0 0 0 0 0 0 0 0 0 0
December 2011 ........... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
<F1> ................... 11.9 11.5 11.5 10.7 12.1 11.5 11.5 11.5 12.1 11.5 11.5 11.5
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
S-97
<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR
EACH DESIGNATED SCENARIO
<TABLE>
<CAPTION>
CLASS J CLASS K CLASS L-1
SCENARIO SCENARIO SCENARIO
------------------------------ ------------------------------ -----------------------------
DISTRIBUTION DATE 1 2 3 4 1 2 3 4 1 2 3 4
- ------------------------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance ......... 100 100 100 100 100 100 100 100 100 100 100 100
December 1997 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 1998 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 1999 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2000 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2001 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2002 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2003 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2004 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2005 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2006 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2007 ........... 100 100 100 100 100 100 100 100 100 100 100 100
December 2008 ........... 100 0 0 0 100 0 0 0 100 0 0 0
December 2009 ........... 42 0 0 0 100 0 0 0 100 0 0 0
December 2010 ........... 18 0 0 0 100 0 0 0 100 0 0 0
December 2011 ........... 0 0 0 0 0 0 0 0 26 0 0 0
December 2012 ........... 0 0 0 0 0 0 0 0 25 0 0 0
December 2013 ........... 0 0 0 0 0 0 0 0 23 0 0 0
December 2014 ........... 0 0 0 0 0 0 0 0 21 0 0 0
December 2015 ........... 0 0 0 0 0 0 0 0 19 0 0 0
December 2016 ........... 0 0 0 0 0 0 0 0 11 0 0 0
December 2017 ........... 0 0 0 0 0 0 0 0 9 0 0 0
December 2018 ........... 0 0 0 0 0 0 0 0 6 0 0 0
December 2019 ........... 0 0 0 0 0 0 0 0 4 0 0 0
December 2020 ........... 0 0 0 0 0 0 0 0 2 0 0 0
December 2021 ........... 0 0 0 0 0 0 0 0 0 0 0 0
Weighted Average Life
<F1> ................... 13.0 11.5 11.5 11.5 14.9 11.5 11.5 11.5 16.3 11.5 11.5 11.5
- ------------
<FN>
<F1> The weighted average life of each Class is determined by (i)
multiplying the amount of each distribution in reduction of the
Certificate Balance or Notional Balance of such Class by the number of
years from the date of purchase to the related Distribution Date, (ii)
adding the results and (iii) dividing the sum by the aggregate
distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (i).
</FN>
</TABLE>
S-98
<PAGE>
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of December 1, 1996 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer, the Special
Servicer, the Trustee and the Fiscal Agent.
The Depositor will provide to a prospective or actual holder of a
Certificate without charge, upon written request, a copy (without exhibits)
of the Pooling and Servicing Agreement. Requests should be addressed to
Midland Realty Acceptance Corp., 210 West 10th Street, 6th Floor, Kansas
City, Missouri 64105, attention: E. J. Burke at telephone number (816)
843-6272.
ASSIGNMENT OF THE MORTGAGE LOANS
On or before the Closing Date, the Depositor will assign or cause the
assignment of the Mortgage Loans without recourse, to the Trustee for the
benefit of the holders of Certificates. On or prior to the Closing Date, the
Depositor will deliver to the Trustee, with a copy to the Master Servicer,
with respect to each Mortgage Loan the following set of documents (the
"Trustee Mortgage File"):
(i) the original of the related Note, endorsed by the applicable Mortgage
Loan Seller in blank in the following form: "Pay to the order of ,
without recourse" which the Trustee or its designee is authorized to
complete and which Note and all endorsements thereof shall show a complete
chain of endorsement from the Originator to the applicable Mortgage Loan
Seller;
(ii) the related original recorded Mortgage or a copy thereof certified
by the related title insurance company, public recording office or closing
agent to be in the form in which executed or submitted for recording, the
related original recorded Assignment of Mortgage to the applicable
Mortgage Loan Seller or a copy thereof certified by the related title
insurance company, public recording office or closing agent to be in the
form in which executed or submitted for recording and the related original
Assignment of Mortgage executed by the applicable Mortgage Loan Seller in
blank which the Trustee or its designee is authorized to complete (and but
for the insertion of the name of the assignee and any related recording
information which is not yet available to the applicable Mortgage Loan
Seller, is in suitable form for recordation in the jurisdiction in which
the related Mortgaged Property is located);
(iii) if the related security agreement is separate from the Mortgage,
the original security agreement or a counterpart thereof, and if the
security agreement is not assigned under the Assignments of Mortgage
described in clause (ii) above, the related original assignment of such
security agreement to the applicable Mortgage Loan Seller or a counterpart
thereof and the related original assignment of such security agreement
executed by the applicable Mortgage Loan Seller in blank which the Trustee
or its designee is authorized to complete;
(iv) a copy of each Form UCC-1 financing statement, if any, filed with
respect to personal property constituting a part of the related Mortgaged
Property, together with a copy of each Form UCC-2 or UCC-3 assignment, if
any, of such financing statement to the applicable Mortgage Loan Seller
and a copy of each Form UCC-2 or UCC-3 assignment, if any, of such
financing statement executed by the applicable Mortgage Loan Seller in
blank which the Trustee or its designee is authorized to complete (and but
for the insertion of the name of the assignee and any related filing
information which is not yet available to the applicable Mortgage Loan
Seller, is in suitable form for filing in the filing office in which such
financing statement was filed);
(v) the related original of the Loan Agreement, if any, relating to such
Mortgage Loan or a counterpart thereof;
(vi) the related original lender's title insurance policy (or the
original pro forma title insurance policy), together with any endorsements
thereto;
(vii) if any related Assignment of Leases, Rents and Profits is separate
from the Mortgage, the original recorded Assignment of Leases, Rents and
Profits or a copy thereof certified by the related title insurance
company, public recording office, or closing agent to be in the form in
which executed or submitted for recording, the related original recorded
reassignment of such instrument, if any, to the applicable Mortgage Loan
Seller or a copy thereof certified by the related title insurance company
or closing agent to be in the form in which executed or submitted for
recording and the related original reassignment of such instrument, if
any, executed by the applicable Mortgage Loan Seller in blank
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<PAGE>
which the Trustee or its designee is authorized to complete (and but for
the insertion of the name of the assignee and any related recording
information which is not yet available to the applicable Mortgage Loan
Seller, is in suitable form for recordation in the jurisdiction in which
the related Mortgaged Property is located) (any of which reassignments,
however, may be included in a related Assignment of Mortgage and need not
be a separate instrument);
(viii) copies of the original Environmental Reports with respect to the
Mortgaged Property made in connection with the origination of such
Mortgage Loan;
(ix) if any related assignment of contracts is separate from the
Mortgage, the original assignment of contracts or a counterpart thereof,
and if the assignment of contracts is not assigned under the Assignments
of Mortgage described in clause (ii) above, the related original
reassignment of such instrument to the applicable Mortgage Loan Seller or
a counterpart thereof and the related original reassignment of such
instrument executed by the applicable Mortgage Loan Seller in blank which
the Trustee or its designee is authorized to complete;
(x) with respect to the related Reserve Accounts, if any, a copy of the
original of any separate agreement with respect thereto between the
related borrower and the Originator;
(xi) the original of any other written agreement, instrument or document
securing such Mortgage Loan, including, without limitation, originals of
any guaranties with respect to such Mortgage Loan or the original letter
of credit, if any, with respect thereto, together with any and all
amendments thereto, including, without limitation, any amendment which
entitles the Master Servicer to draw upon such letter of credit on behalf
of the Trustee for the benefit of the Certificateholders, and the original
of each instrument or other item of personal property given as security
for a Mortgage Loan possession of which by a secured party is necessary to
a secured party's valid, perfected, first priority security interest
therein, together with all assignments or endorsements thereof necessary
to entitle the Master Servicer to enforce a valid, perfected, first
priority security interest therein on behalf of the Trustee for the
benefit of the Certificateholders;
(xii) with respect to the related Reserve Accounts, if any, a copy of the
UCC-1 financing statements, if any, submitted for filing with respect to
the applicable Originator's security interest in such Reserve Accounts and
all funds contained therein, together with a copy of each Form UCC-2 or
UCC-3 assignment, if any, of such financing statement to the applicable
Mortgage Loan Seller and a copy of each Form UCC-2 or UCC-3 assignment, if
any, of such financing statement executed by the applicable Mortgage Loan
Seller in blank which the Trustee or its designee is authorized to
complete (and but for the insertion of the name of the assignee and any
related filing information which is not yet available to the applicable
Mortgage Loan Seller, is in suitable form for filing in the filing office
in which such financing statement was filed); and
(xiii) copies of any and all amendments, modifications and supplements
to, and waivers related to, any of the foregoing.
If the Depositor cannot deliver any original or certified recorded document
described above on the Closing Date, the Depositor will use its best efforts
to deliver (or cause to be delivered) such original or certified recorded
documents within 45 days from the Closing Date (subject to delays
attributable to the failure of the appropriate recording office to return
such documents, in which case the Depositor will deliver such documents
promptly upon receipt thereof). The Trustee is obligated to review the
Trustee Mortgage File for each Mortgage Loan within 45 days after the later
of delivery or the Closing Date and report any missing documents or certain
types of defects therein to the Depositor.
The Master Servicer will hold all remaining Mortgage Loan Documents and
all other documents related to each Mortgage Loan, including copies of any
management agreements, ground leases, appraisals, surveys, environmental
reports and similar documents and any other written agreements relating to
each Mortgage Loan (collectively, the "Master Servicer Mortgage File" and
together with the Trustee Mortgage File, the "Mortgage File") in trust for
the benefit of the Trustee on behalf of Certificateholders. The legal
ownership of all records and documents with respect to each Mortgage Loan
prepared by or that come into the possession of the Master Servicer will
immediately vest in the Trustee, in trust for the benefit of
Certificateholders.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the Master Servicer and the
Special Servicer to service and administer the Mortgage Loans (or in the case
of the Special Servicer, the Specially Serviced Mortgage Loans and REO
Mortgage Loans) on behalf of the Trust Fund solely in the best interests of
and for the benefit of all of the Certificateholders and the
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<PAGE>
Trustee in accordance with the terms of the Pooling and Servicing Agreement
and the Mortgage Loans. In furtherance of and to the extent consistent with
the foregoing, except to the extent that the Pooling and Servicing Agreement
provides for a contrary specific course of action, each of the Master
Servicer and the Special Servicer are required to service and administer the
Mortgage Loans (x) in the same manner in which, and with the same care,
skill, prudence and diligence with which it services and administers similar
mortgage loans for other third-party portfolios, giving due consideration to
customary and usual standards of practice of prudent institutional commercial
mortgage loan servicers used with respect to loans comparable to the Mortgage
Loans or (y) in the same manner in which, and with the same care, skill,
prudence and diligence with which, it services and administers similar
mortgage loans which it owns, whichever standard of care is higher, and
taking into account its other obligations under the Pooling and Servicing
Agreement, but without regard to (i) any other relationship that the Master
Servicer, the Special Servicer, any sub-servicer or any affiliate of the
Master Servicer, the Special Servicer or any sub-servicer may have with the
borrowers or any affiliate of such borrowers; (ii) the ownership of any
Certificate by the Master Servicer, the Special Servicer or any affiliate of
either; (iii) the Master Servicer's, the Trustee's or the Fiscal Agent's
obligations, as applicable, to make Advances or to incur servicing expenses
with respect to the Mortgage Loans; (iv) the Master Servicer's, the Special
Servicer's or any sub-servicer's right to receive compensation for its
services under the Pooling and Servicing Agreement or with respect to any
particular transaction; or (v) the ownership, servicing or management for
others, by the Master Servicer, the Special Servicer or any sub-servicer of
any other mortgage loans or property. Each of the Master Servicer and the
Special Servicer is permitted, at its own expense, to employ sub-servicers,
agents or attorneys in performing any of its obligations under the Pooling
and Servicing Agreement, but will not thereby be relieved of any such
obligation, and will be responsible for the acts and omissions of any such
sub-servicers, agents or attorneys. The Pooling and Servicing Agreement
provides, however, that neither the Master Servicer (or its general partner)
nor the Special Servicer (or its general partner), nor any of their
directors, officers, employees or agents, will have any liability to the
Trust Fund or the Certificateholders for taking any action or refraining from
taking an action in good faith or for errors in judgment. The foregoing
provision would not protect the Master Servicer, the Special Servicer or such
person for the breach of any of the Master Servicer's or Special Servicer's
respective representations or warranties in the Pooling and Servicing
Agreement, or against any specific liability imposed on the Master Servicer
or the Special Servicer for a breach of the servicing standards set forth in
the Pooling and Servicing Agreement, any liability by reason of willful
misfeasance, bad faith, fraud or negligence in the performance of its duties
or by reason of its reckless disregard of obligations or duties under the
Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires the Master Servicer and the
Special Servicer to make reasonable efforts to collect all payments called
for under the terms and provisions of the Mortgage Loans, and to follow
collection procedures as are consistent with the servicing standard under the
Pooling and Servicing Agreement. Consistent with the above, the Master
Servicer or the Special Servicer, as applicable, may, in its discretion,
waive any late payment charge or penalty fee in connection with any
delinquent Monthly Payment or Balloon Payment with respect to any Mortgage
Loan.
ADVANCES
Subject to the limitations described below, the Master Servicer will be
obligated to advance (each such amount, a "P&I Advance"), on the Business Day
preceding each Distribution Date (the "Remittance Date"), an amount equal to
the total or any portion of the Monthly Payment on a Mortgage Loan that was
delinquent as of the close of business on the Business Day preceding such
Remittance Date or, in the event of a default in the payment of a Balloon
Payment, the Assumed Scheduled Payment with respect to the related Balloon
Loan, unless the Master Servicer determines that any such advance would be a
nonrecoverable Advance and delivers to the Trustee an officer's certificate
and accompanying documentation related to a determination of
nonrecoverability as required by the Pooling and Servicing Agreement. In the
event any Mortgage Loan becomes a Seriously Delinquent Loan, the Special
Servicer will order an Updated Appraisal of the related Mortgaged Property
and upon receipt of such Updated Appraisal the Master Servicer will determine
the amount (the "Anticipated Loss") equal to the excess, if any, of (i) the
sum of (w) the Scheduled Principal Balance of such Mortgage Loan as of the
immediately preceding Determination Date, (x) to the extent not previously
advanced by the Master Servicer, the Trustee or the Fiscal Agent, all accrued
and unpaid interest on such Mortgage Loan at a per annum rate equal to the
related Mortgage Rate, (y) all unreimbursed Advances with respect to such
Mortgage Loan with interest thereon at the Advance Rate, and (z) to the
extent not previously advanced by the Master Servicer, the Trustee or the
Fiscal Agent, all currently due but unpaid real estate taxes and assessments,
insurance premiums, and, if applicable, ground rents and a good faith
estimate of any expenses relating to uncontested foreclosure, realization and
liquidation of such Mortgaged Property, over (ii) an amount equal to 90% of
the appraised value of the related Mortgaged Property as reflected in the
Updated Appraisal thereof; provided, however, that in the event the Updated
Appraisal has not been received within 60 days after the Special Servicer
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<PAGE>
has ordered such appraisal, the Anticipated Loss shall be equal to 40% of the
Scheduled Principal Balance of the Seriously Delinquent Loan; provided,
further that promptly upon its receipt of such appraisal, the Servicer shall
recalculate the Anticipated Loss. Upon determination of the Anticipated Loss
with respect to any Seriously Delinquent Loan, the amount of any P&I Advance
required to be made with respect to such Seriously Delinquent Loan on any
Distribution Date will be an amount equal to the product of (A) the amount of
the P&I Advance that would be required to be made in respect of such
Seriously Delinquent Loan without regard to the application of this sentence,
multiplied by (B) a fraction, the numerator of which is equal to the
Scheduled Principal Balance of such Mortgage Loan as of the immediately
preceding Determination Date less the Anticipated Loss and the denominator of
which is such Scheduled Principal Balance. A "Seriously Delinquent Loan" is
any Mortgage Loan as to which an Updated Appraisal has been ordered with
respect to the related Mortgaged Property. See "--Realization Upon Mortgage
Loans--Appraisals for Specially Serviced Mortgage Loans" herein. A Mortgage
Loan shall cease to be a Seriously Delinquent Loan in the event such Mortgage
Loan is no longer a Specially Serviced Mortgage Loan pursuant to the terms of
the Pooling and Servicing Agreement and as to which the related Mortgagor has
made 12 consecutive timely Monthly Payments by their respective Due Dates
since the date on which such Mortgage Loan became a Seriously Delinquent
Loan.
In addition to P&I Advances, the Master Servicer will also be obligated
(subject to the limitations described herein) to make cash advances
("Property Advances," and together with P&I Advances, "Advances") to pay (i)
certain costs and expenses incurred in connection with defaulted Mortgage
Loans, acquiring title to, or management of, REO Property or the sale of
defaulted Mortgage Loans or REO Properties, (ii) delinquent real estate
taxes, assessments and hazard insurance premiums and (iii) to cover other
similar costs and expenses necessary to protect and preserve the security of
the related Mortgage. The Master Servicer will not, however, be obligated to
advance from its own funds any amounts required to cure any failure of any
Mortgaged Property to comply with the Americans with Disabilities Act of
1990, and all rules and regulations promulgated pursuant thereto, or any
applicable environmental law or to contain, clean up or remedy any
environmental condition present at any Mortgaged Property.
If the Master Servicer fails to fulfill its obligation to make any
required Advance, the Trustee, acting in accordance with the servicing
standard, will be required to make the Advance subject to its determination
of recoverability. If the Trustee fails to make any such required Advance,
the Fiscal Agent will be required to make the Advance, subject to its
determination of recoverability. Both the Trustee and the Fiscal Agent will
be entitled to rely conclusively on any non-recoverability determination of
the Master Servicer. See "--The Trustee" and "--The Fiscal Agent" below.
The obligation of the Master Servicer, the Trustee or the Fiscal Agent, as
applicable, to make Advances with respect to any Mortgage Loan pursuant to
the Pooling and Servicing Agreement continues through the foreclosure of such
Mortgage Loan and until the liquidation of the Mortgage Loan or related
Mortgaged Properties. Advances are intended to provide a limited amount of
liquidity, not to guarantee or insure against losses. None of the Master
Servicer, the Trustee or the Fiscal Agent will be required to make any
Advance that it determines (based on, among other things, an Updated
Appraisal) in its good faith business judgment will not be recoverable by the
Master Servicer, the Trustee or the Fiscal Agent, as applicable, out of
related late payments, Insurance Proceeds, Liquidation Proceeds and certain
other collections with respect to the Mortgage Loan as to which such Advances
were made. To the extent that any borrower is not obligated under its
Mortgage Loan documents to pay or reimburse any portion of any Advances that
are outstanding with respect to the related Mortgage Loan as a result of a
modification of such Mortgage Loan by the Special Servicer that forgives loan
payments or other amounts that the Master Servicer, the Trustee or the Fiscal
Agent previously advanced, and the Master Servicer, the Trustee or the Fiscal
Agent determines that no other source of payment or reimbursement for such
Advances is available to it, such Advances will be deemed to be
nonrecoverable; provided, however, in connection with the foregoing, the
Master Servicer, the Trustee or the Fiscal Agent will provide an officer's
certificate as described below. In addition, if the Master Servicer, the
Trustee or the Fiscal Agent, as applicable, determines that any Advance
previously made will not be recoverable from the foregoing sources, then the
Master Servicer, the Trustee or the Fiscal Agent, as applicable, will be
entitled to reimburse itself for such Advance, plus interest thereon, out of
amounts on deposit in the Collection Account prior to distributions on the
Certificates. Any such judgment or determination must be evidenced by an
officer's certificate delivered to the Trustee (or, in the case of the
Trustee or the Fiscal Agent, the Depositor) setting forth such judgment or
determination of nonrecoverability and the procedure and considerations of
the Master Servicer, the Trustee or the Fiscal Agent, as applicable, forming
the basis of such determination, which will include a copy of the Updated
Appraisal and any other information or reports obtained by the Master
Servicer, the Trustee or the Fiscal Agent, such as property operating
statements, rent rolls, property inspection reports, engineering reports and
other documentation which may support such determinations.
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<PAGE>
The Master Servicer, the Trustee or the Fiscal Agent, as applicable, will
be entitled to reimbursement for any Advance equal to the amount of such
Advance from (i) any collections on or in respect of the particular Mortgage
Loan or REO Property with respect to which each such Advance was made or (ii)
upon determining that such Advance is not recoverable in the manner described
in the preceding paragraph, from any other amounts from time to time on
deposit in the Collection Account.
The Master Servicer, the Trustee or the Fiscal Agent, as applicable, will
be entitled to receive interest at a rate equal to the Prime Rate (as
published in The Wall Street Journal, or if The Wall Street Journal is no
longer published, The New York Times, from time to time), (the "Advance
Rate") on its outstanding Advances and will be authorized to pay itself such
interest from general collections with respect to all of the Mortgage Loans
prior to any payment to holders of Certificates. If the interest on such
Advance is not offset by Default Interest a shortfall will result which
generally will result in a Class Interest Shortfall for the most Subordinate
Class then outstanding.
ACCOUNTS
Collection Account. The Master Servicer will, pursuant to the Pooling and
Servicing Agreement, establish and maintain a segregated account or accounts
(the "Collection Account") into which it will be required to deposit, within
one Business Day of receipt the following payments and collections received
or made by it on or with respect to the Mortgage Loans: (i) all payments on
account of principal on the Mortgage Loans, including the principal component
of Unscheduled Payments on the Mortgage Loans; (ii) all payments on account
of interest and Default Interest on the Mortgage Loans and the interest
portion of all Unscheduled Payments and all Prepayment Premiums; (iii) any
amounts required to be deposited by the Master Servicer in connection with
losses realized on Permitted Investments with respect to funds held in the
Collection Account and in connection with Prepayment Interest Shortfalls;
(iv) (x) all Net REO Proceeds transferred from an REO Account and (y) all
Condemnation Proceeds, Insurance Proceeds and Net Liquidation Proceeds not
required to be applied to the restoration or repair of the related Mortgaged
Property; (v) any amounts received from borrowers that represent recoveries
of Property Advances; and (vi) any other amounts required by the provisions
of the Pooling and Servicing Agreement to be deposited into the Collection
Account by the Master Servicer or the Special Servicer, including, without
limitation, proceeds of any purchase or repurchase of a Mortgage Loan as
described under "DESCRIPTION OF THE MORTGAGE POOL--Representations and
Warranties; Repurchase," "THE POOLING AND SERVICING AGREEMENT--Realization
Upon Mortgage Loans" and "DESCRIPTION OF THE CERTIFICATES--Early Termination"
and "--Auction" herein.
The foregoing requirements for deposits in the Collection Account will be
exclusive, and any payments in the nature of late payment charges, late fees,
NSF check charges, assumption fees, loan modification fees, loan service
transaction fees, extension fees, demand fees, beneficiary statement charges
and similar fees need not be deposited in the Collection Account by the
Master Servicer and, to the extent permitted by applicable law, the Master
Servicer or the Special Servicer, as applicable, will be entitled to retain
any such charges and fees received with respect to the Mortgage Loans. In the
event that the Master Servicer deposits into the Collection Account any
amount not required to be deposited therein, the Master Servicer may at any
time withdraw such amount from the Collection Account.
Distribution Account. The Trustee will, pursuant to the Pooling and
Servicing Agreement, establish and maintain a segregated account or accounts
(the "Distribution Account") in the name of the Trustee for the benefit of
the holders of Certificates. With respect to each Distribution Date, the
Master Servicer will deposit in the Distribution Account, to the extent of
funds on deposit in the Collection Account, on or before the Remittance Date
an aggregate amount of immediately available funds equal to the Available
Funds plus (i) any Prepayment Premiums received by the Master Servicer during
the related Collection Period and (ii) Default Interest received with respect
to a Mortgage Loan that is in default with respect to its Balloon Payment. To
the extent not included in Available Funds, the Master Servicer will remit to
the Trustee all P&I Advances for deposit into the Distribution Account on the
related Remittance Date. See "DESCRIPTION OF THE CERTIFICATES--Distributions"
herein.
The Collection Account and the Distribution Account will be held in the
name of the Trustee (or, in the case of the Collection Account, the Master
Servicer on behalf of the Trustee) on behalf of the holders of Certificates
and the Trustee (and, in the case of the Collection Account, the Master
Servicer) will be authorized to make withdrawals therefrom. Each of the
Collection Account and the Distribution Account will be either (i) a
segregated account or accounts maintained with either a federally or
state-chartered depository institution or trust company (a) the short term
unsecured debt obligations of which are rated at least "F1+" by Fitch or the
long term unsecured debt obligations of which (or of such institution's
parent holding company) are rated at least "AA" by Fitch and (b) the short
term unsecured debt obligations of which are rated at least "P1" by Moody's
and the long term unsecured debt obligations of which (or of such
institution's parent holding
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<PAGE>
company) are rated at least "A2" by Moody's or (ii) a segregated trust
account or accounts maintained with a federally or state chartered depository
institution or trust company acting in its fiduciary capacity, having, in
either case, a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal or state authority, or
otherwise confirmed in writing by each of the Rating Agencies that the
maintenance of such account and subject to regulations regarding fiduciary
funds on deposit substantially similar to 12 CFR 9.10(b), will not, in and of
itself, result in a downgrading, withdrawal or qualification of the rating
then assigned by such Rating Agency to any Class of Certificates (an
"Eligible Bank"). Amounts on deposit in such accounts may be invested in
certain United States government securities and other investments specified
in the Pooling and Servicing Agreement ("Permitted Investments"). See
"DESCRIPTION OF THE CERTIFICATES--Accounts" in the Prospectus for a listing
of Permitted Investments.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Master Servicer may make withdrawals from the Collection Account for
the following purposes: (i) to remit on or before each Remittance Date to the
Distribution Account an amount equal to Available Funds and any Prepayment
Premiums for such Distribution Date; (ii) to pay or reimburse the Master
Servicer, the Trustee or the Fiscal Agent, as applicable, for Advances made
by it and interest on Advances, the Master Servicer's right to reimburse
itself for items described in this clause (ii) being limited as described
herein under "--Advances"; (iii) to pay on or before each Remittance Date to
the Master Servicer and Special Servicer the fee portion of the servicing
compensation in respect of the related Distribution Date to be paid, in the
case of the Servicing Fee, from interest received on the related Mortgage
Loan, and to pay from time to time, to the Master Servicer, any interest or
investment income earned on funds deposited in the Collection Account, and
pay the Master Servicer as additional servicing compensation any Prepayment
Interest Surplus received in the preceding Collection Period and to pay the
Master Servicer or the Special Servicer, as applicable, any other amounts
constituting additional servicing compensation; (iv) to pay on or before each
Distribution Date to the Depositor, MCFC, GACC, BCMC or other purchaser with
respect to each Mortgage Loan or REO Property that has previously been
purchased or repurchased by it pursuant to the Pooling and Servicing
Agreement, all amounts received thereon during the related Collection Period
and subsequent to the date as of which the amount required to effect such
purchase or repurchase was determined; (v) to the extent not reimbursed or
paid pursuant to any of the above clauses, to reimburse or pay the Master
Servicer, the Special Servicer, the Trustee, the Depositor and/or the Fiscal
Agent, as applicable, for certain other unreimbursed expenses incurred by or
on behalf of such person pursuant to and to the extent reimbursable under the
Pooling and Servicing Agreement and to satisfy any indemnification
obligations of the Trust Fund under the Pooling and Servicing Agreement; (vi)
to pay to the Trustee amounts requested by it to pay taxes on certain net
income with respect to REO Properties; (vii) to withdraw any amount deposited
into the Collection Account that was not required to be deposited therein;
and (viii) to clear and terminate the Collection Account pursuant to a plan
for termination and liquidation of the Trust Fund.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Master Servicer or the Special Servicer, as applicable, will be
obligated to enforce the Trustee's rights under the "due-on-sale" clause in
the related Mortgage Loan documents to accelerate the maturity of the related
Mortgage Loan, unless such provision is not enforceable under applicable law
or such enforcement is reasonably likely to result in meritorious legal
action by the related borrower or to the extent the Master Servicer or the
Special Servicer, as applicable, acting in accordance with the servicing
standard described herein, determines that such enforcement is not in the
best interests of the Trust Fund. A "due-on-sale" or "due-on-encumbrance"
clause may, under certain circumstances, be unenforceable against a borrower
that is a debtor in a case under the Bankruptcy Code.
If applicable law prohibits the enforcement of a "due-on-sale" clause or
the Master Servicer or Special Servicer is (i) otherwise prohibited from
taking such action as described in the preceding paragraph or (ii) determines
that such enforcement is not in the best interests of the Trust Fund and, as
a consequence, a Mortgage Loan is assumed, (x) the original borrower may be
released from liability for the unpaid principal balance of the related
Mortgage Loan and interest thereon at the applicable Mortgage Rate during the
remaining term of such Mortgage Loan, (y) the Master Servicer may accept
payments in respect of the Mortgage Loan from the new owner of the Mortgaged
Property and (z) the Master Servicer or the Special Servicer, as applicable,
may enter into an assumption agreement with a new purchaser whereby the new
owner of the Mortgaged Property will be substituted as the borrower and the
original borrower released, so long as (to the extent permitted by law) the
new owner satisfies the underwriting requirements customarily imposed by the
Master Servicer or the Special Servicer, as applicable, as a condition to its
approval of a borrower on a new mortgage loan substantially similar to such
Mortgage Loan. In the event a Mortgage Loan is assumed as described in the
preceding sentences, the Trustee, the
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Master Servicer and the Special Servicer, will not permit any modification of
such Mortgage Loan other than as described below under "--Amendments,
Modifications and Waivers." The Master Servicer or Special Servicer, as
applicable, will be entitled to retain as additional servicing compensation
any assumption fees paid by the original borrower or the new owner in
connection with such assumption. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Enforceability of Certain Provisions--Due-on-Sale Provisions" in the
Prospectus. A new owner of the Mortgaged Property may be substituted or a
junior or senior lien allowed on the Mortgaged Property, without the consent
of the Master Servicer, the Special Servicer or the Trustee in a bankruptcy
proceeding involving the Mortgaged Property.
If any Mortgage Loan contains a provision in the nature of a
"due-on-encumbrance" clause, which by its terms (i) provides that such
Mortgage Loan will (or may at the related mortgagee's option) become due and
payable upon the creation of any lien or other encumbrance on such Mortgaged
Property or (ii) requires the consent of the related mortgagee to the
creation of any such lien or other encumbrance on such Mortgaged Property,
then, for so long as such Mortgage Loan is included in the Trust Fund, the
Master Servicer or the Special Servicer, as applicable, on behalf of the
Trust Fund, will enforce such provision and in connection therewith will (x)
accelerate the payments due on such Mortgage Loan or (y) withhold its consent
to the creation of any such lien or other encumbrance, as applicable, except,
in each case, to the extent that the Master Servicer or the Special Servicer,
as applicable, acting in accordance with the applicable servicing standard,
determines that such enforcement would not be in the best interests of the
Trust Fund. Notwithstanding the foregoing, the Master Servicer or the Special
Servicer, as applicable, may forbear from enforcing any "due-on-encumbrance"
provision in connection with any junior or senior lien on the Mortgaged
Property imposed in connection with any bankruptcy proceeding involving the
Mortgaged Property.
INSPECTIONS; APPRAISALS
The Master Servicer (or the Special Servicer with respect to Specially
Serviced Mortgage Loans or REO Property) is required (at its own expense) to
inspect each Mortgaged Property at such times and in such manner as are
consistent with the servicing standards described herein, but will in any
event (i) inspect each Mortgaged Property at least once every 12 months with
the first such inspection being completed on or prior to June, 1998, unless
each of the Rating Agencies has confirmed in writing that a longer period
between inspections (which may not exceed 24 months) will not result, in and
of itself, in a downgrading, withdrawal or qualification of the rating then
assigned by such Rating Agency to any Class of the Certificates, (ii) if the
Master Servicer or the Special Servicer, as applicable, retains any Financial
and Lease Reporting Fees pursuant to the related Mortgage Loan, inspect the
related Mortgaged Property as soon as practicable thereafter (except to the
extent such property has been inspected by the Master Servicer or the Special
Servicer within the preceding 120 days) and (iii) if any Monthly Payment
becomes more than 60 days delinquent (without giving effect to any grace
period permitted under the related Note or Mortgage) each related Mortgaged
Property shall be inspected by the Special Servicer (at its own expense) as
soon as practicable thereafter.
REALIZATION UPON MORTGAGE LOANS
Appraisals for Specially Serviced Mortgage Loans. Contemporaneously with
the earliest to occur of (i) the effective date of any modification of the
stated maturity, Mortgage Rate, principal balance or amortization terms of
any Specially Serviced Mortgage Loan or other "significant" modification (as
defined in Section 1001 of the Code) of any Mortgage Loan, as to which a
default has occurred or is reasonably foreseeable, (ii) the date 90 days
after the occurrence of any uncured payment delinquency, (iii) the
appointment of a receiver in respect of a Mortgaged Property or (iv) the date
a Mortgaged Property becomes an REO Property, the Special Servicer will
promptly order an Updated Appraisal of the Mortgaged Property or REO
Property, as the case may be, except to the extent such appraisal had been
previously obtained within the prior twelve months. In addition, the Special
Servicer will promptly order a new Updated Appraisal or an update from the
prior Updated Appraisal in the event any Mortgage Loan is a Seriously
Delinquent Loan and such prior Updated Appraisal is more than twelve months
old. An "Updated Appraisal" is an appraisal of the related Mortgaged Property
conducted in accordance with MAI standards from an independent appraiser who
is a member of the Appraisal Institute.
Following a default in the payment of a Balloon Payment, the Special
Servicer may grant any number of successive extensions; provided, however,
that the Special Servicer may not grant any extension that extends the
maturity date of any Mortgage Loan beyond the Rated Final Distribution Date.
Standards for Conduct Generally in Effecting Foreclosure or the Sale of
Defaulted Loans. In connection with any foreclosure or other acquisition, any
costs and expenses incurred in any such proceedings will be advanced by the
Master Servicer as a Property Advance, unless the Master Servicer determines
that such Advance would constitute a nonrecoverable Advance.
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If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state in which the Mortgaged Property is
located, the Special Servicer will not be required to pursue a deficiency
judgment against the related borrower, or any other liable party if the laws
of the state do not permit such a deficiency judgment after a non-judicial
foreclosure or if the Special Servicer determines, in its best judgment, that
the likely recovery if a deficiency judgment is obtained will not be
sufficient to warrant the cost, time, expense and/or exposure of pursuing the
deficiency judgment and such determination is evidenced by an officer's
certificate delivered to the Trustee.
Notwithstanding any provision to the contrary, the Special Servicer will
not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, and will not otherwise
acquire possession of, or take any other action with respect to, any
Mortgaged Property if, as a result of any such action, the Trustee, for the
Trust Fund or the holders of Certificates, would be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or "operator"
of, such Mortgaged Property within the meaning of CERCLA or any comparable
law, unless the Special Servicer has previously determined, based on an
updated environmental assessment report prepared by an independent person who
regularly conducts environmental audits, that: (i) such Mortgaged Property is
in compliance with applicable environmental laws or, if not, after
consultation with an environmental consultant, that it would be in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith and (ii) there are no
circumstances present at such 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 currently effective federal, state or local law or regulation, or
that, if any such hazardous materials are present for which such action could
be required, after consultation with an environmental consultant, it would be
in the best economic interest of the Trust Fund to take such actions with
respect to the affected Mortgaged Property.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed-in-lieu of foreclosure, the deed or certificate of
sale will be issued to the Trustee, or to its nominee (which shall not
include the Master Servicer or the Special Servicer) or a separate trustee or
co-trustee on behalf of the Trustee as the holder of the REMIC I Certificates
and the holders of Certificates. Notwithstanding any such acquisition of
title and cancellation of the related Mortgage Loan, such Mortgage Loan will
be considered to be a Mortgage Loan held in the Trust Fund until such time as
the related REO Property is sold by the Trust Fund and will be reduced by Net
REO Proceeds allocated to principal.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling
and Servicing Agreement provides that the Special Servicer must administer
such Mortgaged Property so that it qualifies at all times as "foreclosure
property" within the meaning of Code Section 860G(a)(8). The Pooling and
Servicing Agreement also requires that any such Mortgaged Property be managed
and operated by an "independent contractor," within the meaning of applicable
Treasury regulations, who furnishes or renders services to the tenants of
such Mortgaged Property, unless the Special Servicer provides the Trustee
with an opinion of counsel that the operation and management of the Mortgaged
Property other than through an independent contractor will not cause such
Mortgaged Property to fail to qualify as "foreclosure property" (which
opinion will be an expense of the Trust Fund). Generally, REMIC I will not be
taxable on income received with respect to the Mortgaged Property to the
extent that it constitutes "rents from real property," within the meaning of
Code Section 856(c)(3)(A) and Treasury regulations thereunder. "Rents from
real property" do not include the portion of any rental based on the net
income or gain of any tenant or sub-tenant. NO DETERMINATION HAS BEEN MADE
WHETHER RENT ON ANY OF THE MORTGAGED PROPERTIES MEETS THIS REQUIREMENT.
"Rents from real property" include charges for services customarily furnished
or rendered in connection with the rental of real property, whether the
charges are separately stated. Services furnished to the tenants of a
particular building will be considered as customary if, in the geographic
market in which the building is located, tenants in buildings that are of a
similar class are customarily provided with the service. NO DETERMINATION HAS
BEEN MADE WHETHER THE SERVICES FURNISHED TO THE TENANTS OF THE MORTGAGED
PROPERTIES ARE "CUSTOMARY" WITHIN THE MEANING OF APPLICABLE REGULATIONS. It
is therefore possible that a portion of the rental income with respect to a
Mortgaged Property owned by the Trust Fund, presumably allocated based on the
value of any non-qualifying services, would not constitute "rents from real
property." In addition to the foregoing, any net income from a trade or
business operated or managed by an independent contractor on a Mortgaged
Property owned by REMIC I, including but not limited to a skilled nursing
care business, will not constitute "rents from real property." Any of the
foregoing types of income may instead constitute "net income from foreclosure
property," which would be taxable to REMIC I at the highest marginal federal
corporate rate (currently 35%) and may also be subject to state or local
taxes. Any such taxes would be chargeable against the related income for
purposes of determining the Net REO Proceeds available for distribution to
holders of Certificates. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of the REMIC and its Holders," "--Taxation of Regular
Interests," "--Taxation of the REMIC" and "--Taxation of Holders of Residual
Certificates" in the Prospectus.
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The Special Servicer may offer to sell to any person any Specially
Serviced Mortgage Loan or any REO Property, if and when the Special Servicer
determines, consistent with the servicing standards set forth in the Pooling
and Servicing Agreement, that no satisfactory arrangements can be made for
collection of delinquent payments thereon and such a sale would be in the
best economic interests of the Trust Fund, but will, in any event, so offer
to sell any REO Property no later than the time determined by the Special
Servicer to be sufficient to result in the sale of such REO Property within
the period specified in the Pooling and Servicing Agreement, including
extensions thereof. The Special Servicer will give the Trustee not less than
10 Business Days' prior written notice of its intention to sell any Specially
Serviced Mortgage Loan or REO Property, in which case the Special Servicer
will accept any offer received from any person that is determined by the
Special Servicer to be a fair price for such Specially Serviced Mortgage Loan
or REO Property, if the highest offeror is an Interested Person, or is
determined to be such a price by the Trustee (which may be based upon updated
independent appraisals received by the Trustee or the Special Servicer, as
applicable), if the highest offeror is an Interested Person; provided,
however, that any offer by an Interested Person in the amount of the
Repurchase Price shall be deemed to be a fair price. "Interested Person"
means the Depositor, the Master Servicer, the Special Servicer, the Trustee,
any borrower or property manager of a Mortgaged Property, an independent
contractor engaged by the Special Servicer to manage or operate an REO
Property or any affiliate of any of the foregoing. Notwithstanding anything
to the contrary herein, neither the Trustee, in its individual capacity, nor
any of its affiliates may offer for or purchase any Specially Serviced
Mortgage Loan or any REO Property. In addition, the Special Servicer may
accept an offer that is not the highest offer if it determines, in accordance
with the servicing standard stated in the Pooling and Servicing Agreement,
that acceptance of such offer would be in the best interests of the holders
of Certificates (for example, if the prospective buyer making the lower offer
is more likely to perform its obligations, or the terms offered by the
prospective buyer making the lower offer are more favorable).
AMENDMENTS, MODIFICATIONS AND WAIVERS
Neither the Master Servicer nor the Special Servicer may modify, amend,
waive or otherwise consent to the change of the stated maturity date of any
Mortgage Loan, the payment of principal of, or interest or Default Interest
on, any Mortgage Loan, or any other term of a Mortgage Loan, unless (i) such
modification, amendment, waiver or consent is not a "significant
modification" under Section 1001 of the Code, (ii) to the extent such
modification, amendment, waiver or consent would constitute a "significant
modification" under Section 1001 of the Code, such Mortgage Loan is in
default or a default with respect thereto is reasonably foreseeable or (iii)
such modification, amendment, waiver or consent is permitted under
"--Realization Upon Mortgage Loans--Appraisals for Specially Serviced
Mortgage Loans" herein. Neither Master Servicer nor the Special Servicer may
agree to any retroactive modification, amendment, waiver or consent.
THE TRUSTEE
LaSalle National Bank, a nationally chartered bank with its principal
offices in Chicago, Illinois, will act as Trustee pursuant to the Pooling and
Servicing Agreement. The Trustee's corporate trust office is located at 135
South LaSalle Street, Suite 1740, Chicago, Illinois 60603.
The Trustee may resign at any time by giving written notice to the
Depositor, the Master Servicer, the Special Servicer and the Rating Agencies.
Upon such notice of the Trustee's resignation, the Fiscal Agent will also be
deemed removed and, accordingly, the Master Servicer will appoint a successor
trustee, which appointment of successor trustee will not result, in and of
itself, in a downgrading, withdrawal or qualification of the rating then
assigned by the Rating Agencies to any Class of the Certificates as confirmed
in writing by each of the Rating Agencies, and a successor fiscal agent,
which, if the successor trustee is not rated by each Rating Agency in one of
its two highest long-term debt rating categories, will be confirmed in
writing by each of the Rating Agencies that such appointment of such
successor fiscal agent will not result, in and of itself, in a downgrading,
withdrawal or qualification of the rating then assigned by such Rating Agency
to any Class of the Certificates. If no successor trustee and successor
fiscal agent is appointed within 30 days after the giving of such notice of
resignation, the resigning Trustee and departing Fiscal Agent may petition
any court of competent jurisdiction for appointment of a successor trustee
and successor fiscal agent.
The Depositor or the Master Servicer may remove the Trustee and the Fiscal
Agent if, among other things, the Trustee ceases to be eligible to continue
as such under the Pooling and Servicing Agreement or if at any time the
Trustee or the Fiscal Agent becomes incapable of acting, or is adjudged
bankrupt or insolvent, or a receiver of the Trustee or the Fiscal Agent or
its property is appointed or any public officer takes charge or control of
the Trustee or the Fiscal Agent or of its property. The holders of
Certificates evidencing a majority of the aggregate Voting Rights may remove
the Trustee and the Fiscal Agent upon written notice to the Master Servicer,
the Special Servicer, the Depositor, the Trustee and the Fiscal Agent. Any
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resignation or removal of the Trustee and the Fiscal Agent and appointment of
a successor trustee and, if such trustee is not rated by each Rating Agency
in one of its two highest long-term debt rating categories, fiscal agent will
not become effective until acceptance of the appointment by the successor
trustee and, if necessary, fiscal agent.
The "Voting Rights" assigned to each Class shall be (i) 0% in the case of
the Residual Certificates, (ii) in the case of any other Class of P&I
Certificates, a percentage equal to the product of (x) 96% so long as the
Class A-EC Notional Balance is greater than zero and 97% thereafter and (y) a
fraction, the numerator of which is equal to the aggregate outstanding
Certificate Balance of such Class and the denominator of which is equal to
the aggregate outstanding Certificate Balances of all such Classes of
Certificates; (iii) in the case of the Class A-EC Certificates, 1% so long as
the Class A-EC Notional Balance is greater than zero, and 0% thereafter; (iv)
0.1% in the Case of Class L-1 Certificates; and (v) 2.9% in the case of Class
L-2 Certificates. The Voting Rights of any Class of Certificates shall be
allocated among holders of Certificates of such Class in proportion to their
respective Percentage Interests; provided, however that, any Certificate held
or beneficially owned by the Depositor, the Master Servicer, the Special
Servicer, the Trustee, a property manager or a borrower or any affiliate
thereof will be deemed not to be outstanding and the Voting Rights to which
it is entitled shall not be taken into account in determining whether the
requisite percentage of Voting Rights necessary to effect any consent,
approval or waiver that specifically relates to any such person has been
obtained (unless such consent, approval or waiver is to an action that would
materially and adversely affect the interests of the holders of any Class of
Certificates while any such person is the holder of Certificates aggregating
not less than 66 2/3% of the Percentage Interest of any such Class).
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to receive a monthly fee from the Master Servicer.
The Trust Fund will indemnify the Trustee, the Fiscal Agent and their
respective directors, officers, employees, agents and affiliates against any
and all losses, liabilities, damages, claims or expenses (including
reasonable attorneys' fees) arising in respect of the Pooling and Servicing
Agreement or the Certificates (but only to the extent that they are expressly
reimbursable under the Pooling and Servicing Agreement or are unanticipated
expenses incurred by the REMIC) other than those resulting from the
negligence, fraud, bad faith or willful misconduct of the Trustee and those
for which such indemnified persons are indemnified pursuant to the last
sentence of this paragraph. The Trustee will not be required to expend or
risk its own funds or otherwise incur financial liability in the performance
of any of its duties under the Pooling and Servicing Agreement, or in the
exercise of any of its rights or powers, if in the Trustee's opinion the
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it. Each of the Master Servicer and the Special
Servicer will indemnify the Trustee, the Fiscal Agent and their respective
directors, officers, employees, agents and affiliates for similar losses
incurred related to the willful misconduct, fraud, bad faith and/or
negligence in the performance of the Master Servicer's or the Special
Servicer's respective duties under the Pooling and Servicing Agreement or by
reason of reckless disregard of the Master Servicer's or the Special
Servicer's respective obligations and duties under the Pooling and Servicing
Agreement.
DUTIES OF THE TRUSTEE
The Trustee, the Fiscal Agent, the Special Servicer and Master Servicer
will make no representation as to the validity or sufficiency of the Pooling
and Servicing Agreement, the Certificates, this Prospectus Supplement or the
validity, enforceability or sufficiency of the Mortgage Loans or related
documents. The Trustee and the Fiscal Agent will not be accountable for the
use or application by the Depositor of any Certificates or of the proceeds of
such Certificates, or for the use of or application of any funds paid to the
Depositor, the Master Servicer or the Special Servicer in respect of the
Mortgage Loans, or any funds deposited in or withdrawn from the Collection
Account or the Distribution Account by the Depositor, the Master Servicer or
the Special Servicer, other than with respect to any funds held by the
Trustee.
If no Event of Default has occurred of which the Trustee has actual
knowledge and after the curing of all Events of Default that may have
occurred, the Trustee is required to perform only those duties specifically
required under the Pooling and Servicing Agreement. 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 on their face to the requirements of the Pooling and
Servicing Agreement.
If the Master Servicer fails to make any required Advance, the Trustee, as
acting or successor Master Servicer, will be required to make such Advance to
the extent that such Advance is not deemed to be nonrecoverable. The Trustee
will be entitled to rely conclusively on any determination by the Master
Servicer that an Advance, if made, would be nonrecoverable. The Trustee will
be entitled to reimbursement for each Advance made by it in the same manner
and to the same extent as the Master Servicer. See "--Advances" herein.
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THE FISCAL AGENT
ABN AMRO Bank N.V., a Netherlands banking corporation and the corporate
parent of the Trustee, will act as Fiscal Agent for the Trustee and will be
obligated to make any Advance required to be made, and not made, by the
Trustee under the Pooling and Servicing Agreement, provided that the Fiscal
Agent will not be obligated to make any Advance that it deems to be
nonrecoverable. The Fiscal Agent will be entitled to rely conclusively on any
determination by the Master Servicer that an Advance, if made, would not be
recoverable. The Fiscal Agent will be entitled to reimbursement for each
Advance made by it in the same manner and to the same extent as the Trustee
and the Master Servicer. See "--Advances" herein.
In the event of the resignation or removal of the Trustee, the Fiscal
Agent shall be entitled to resign, it being understood that the initial
Fiscal Agent shall not be obligated to act in such capacity hereunder at any
time that LaSalle National Bank is not the Trustee. No resignation or removal
of the Fiscal Agent will become effective until a successor fiscal agent has
assumed the Fiscal Agent's obligations and duties under the Pooling and
Servicing Agreement and it is confirmed in writing by each of the Rating
Agencies that the appointment of such successor fiscal agent will not result,
in and of itself, in a downgrading, withdrawal or qualification of the rating
then assigned by such Rating Agency to any Class of the Certificates.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Pursuant to the Pooling and Servicing Agreement, the Master Servicer will
be entitled to receive a monthly servicing fee (the "Servicing Fee") for each
Mortgage Loan equal to the per annum rate set forth on Annex A plus, in the
case of each Mortgage Loan, .5 basis points per annum to cover Rating Agency
surveillance fees (the "Servicing Fee Rate") on the then outstanding
principal balance of such Mortgage Loan calculated on the basis of a 360-day
year consisting of twelve 30-day months. The Servicing Fee relating to each
Mortgage Loan will be retained by the Master Servicer from payments and
collections (including Insurance Proceeds and Liquidation Proceeds) in
respect of such Mortgage Loan. The Master Servicer will also be entitled to
retain as additional servicing compensation (i) all investment income earned
on amounts on deposit in the Reserve Accounts (to the extent consistent with
applicable law and the related Mortgage Loan documents), the Collection
Account and the Distribution Account, (ii) all amounts collected with respect
to the Mortgage Loans (that are not Specially Serviced Mortgage Loans) in the
nature of late payment charges, late fees, NSF check charges (including with
respect to Specially Serviced Mortgage Loans), loan service transaction fees,
extension fees, demand fees, modification fees, assumption fees, beneficiary
statement charges and similar fees and charges (but not including any
Prepayment Premiums so long as the A-EC Notional Balance is greater than zero
or Default Interest), (iii) Financial and Lease Reporting Fees (with respect
to any Mortgage Loan that is not a Specially Serviced Mortgage Loan and to
the extent permitted under the related Mortgage Loan) and (iv) any Prepayment
Interest Surplus (to the extent not offset against any Prepayment Interest
Shortfall in accordance with the provisions of the Pooling and Servicing
Agreement).
The Master Servicer will pay all expenses incurred in connection with its
responsibilities under the Pooling and Servicing Agreement (subject to
reimbursement as described herein), including all fees of any sub-servicers
retained by it, all fees payable to the Trustee and the various expenses of
the Master Servicer specifically described herein.
SPECIAL SERVICING
Midland Loan Services, L.P. will be the initial Special Servicer. The
Special Servicer may be removed without cause and a successor Special
Servicer appointed (i) first, by the holders of the majority of the aggregate
Voting Rights of the Class L-2, Class L-1, Class J and Class K Certificates
(but only with the written consent of the Special Servicer), but only until
such time as Realized Losses allocated to the Class L-1 Certificates equal or
exceed 75% of the initial Certificate Balance of such Class; (ii) second, but
only until such time as Realized Losses allocated to the Class J and the
Class K Certificates equal or exceed 50% of the aggregate initial Certificate
Balances of such Classes; (iii) third, by the holders of the majority of the
aggregate Voting Rights of the Class H Certificates, but only until such time
as Realized Losses allocated to the Class H Certificates equal or exceed 50%
of the initial Certificate Balance of such Class; and (iv) thereafter, by the
holders of the majority of the aggregate Voting Rights of the second most
subordinate Class of Certificates then outstanding, but only until such time
as Realized Losses allocated to the most subordinate Class equals or exceeds
50% of the initial Certificate Balance of such Class.
Notwithstanding the foregoing, the removal of the Special Servicer and the
appointment of a successor Special Servicer shall not be effective until (i)
the successor Special Servicer has assumed in writing all of the
responsibilities, duties and liabilities of the Special Servicer hereunder
pursuant to an agreement satisfactory to the Trustee, and (ii) each of the
Rating
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Agencies confirms to the Trustee in writing that such appointment and
assumption shall not result, in and of itself, in a downgrading, withdrawal
or qualification of the rating then assigned by such Rating Agency to any
Class of Certificates.
The duties of the Special Servicer relate primarily to Specially Serviced
Mortgage Loans and to any REO Property. The Pooling and Servicing Agreement
will define a "Specially Serviced Mortgage Loan" to include any Mortgage Loan
with respect to which: (i) the related borrower is 60 or more days delinquent
in the payment of principal and interest (regardless of whether in respect
thereof P&I Advances have been reimbursed); (ii) the borrower under which has
expressed to the Master Servicer an inability to pay or a hardship in paying
the Mortgage Loan in accordance with its terms; (iii) the Master Servicer has
received notice that the borrower has become the subject of any bankruptcy,
insolvency or similar proceeding, admitted in writing the inability to pay
its debts as they come due or made an assignment for the benefit of
creditors; (iv) the Master Servicer has received notice of a foreclosure or
threatened foreclosure of any lien on the Mortgaged Property securing the
Mortgage Loan; (v) a default of which the Master Servicer has notice (other
than a failure by the borrower to pay principal or interest) and which
materially and adversely affects the interests of the Certificateholders has
occurred and remained unremedied for the applicable grace period specified in
the Mortgage Loan (or, if no grace period is specified, 60 days); provided,
that a default requiring a Property Advance will be deemed to materially and
adversely affect the interests of Certificateholders; (vi) the borrower has
failed to make a Balloon Payment (except in the case where the Master
Servicer and the Special Servicer agree in writing that such Mortgage Loan is
likely to be paid in full within 30 days after such default); or (vii) the
Master Servicer proposes to commence foreclosure or other workout
arrangements; provided, however, that a Mortgage Loan will cease to be a
Specially Serviced Mortgage Loan (a) with respect to the circumstances
described in clauses (i) and (vi) above, when the borrower thereunder has
brought the Mortgage Loan current (with respect to the circumstances
described in clause (vi), pursuant to any workout recommended by the Special
Servicer) and thereafter made three consecutive full and timely Monthly
Payments, (b) with respect to the circumstances described in clauses (ii) and
(iv) above, when such circumstances cease to exist in the good faith judgment
of the Special Servicer and with respect to the circumstances described in
clauses (iii) and (vii), when such circumstances cease to exist or (c) with
respect to the circumstances described in clause (v) above, when such default
is cured; provided, in any such case, that at that time no circumstance
exists (as described above) that would cause the Mortgage Loan to continue to
be characterized as a Specially Serviced Mortgage Loan.
Pursuant to the Pooling and Servicing Agreement, the Special Servicer will
be entitled to certain fees, including a special servicing fee (the "Special
Servicing Fee") equal to 1/12th of 0.35% on a monthly basis of the Scheduled
Principal Balance of each related Specially Serviced Mortgage Loan. The
Special Servicer will also receive with respect to any Specially Serviced
Mortgage Loan or REO Property that is sold or transferred or otherwise
liquidated (except in connection with the repurchase of a Mortgage Loan as
described under "DESCRIPTION OF THE MORTGAGE POOL--Representations and
Warranties; Repurchase"), in addition to the Special Servicing Fee, a
disposition fee (the "Disposition Fee") equal to the product of (A) the
excess, if any, of (x) the proceeds of the sale or liquidation of any
Specially Serviced Mortgage Loan or REO Property over (y) any broker's
commission and related brokerage referral fees and (B) (x) 1.5%, if such sale
or liquidation occurs prior to 12 months following the date on which the
Mortgage Loan initially became a Specially Serviced Mortgage Loan or (y)
1.0%, if such sale or liquidation occurs upon or after the expiration of such
12-month period. Furthermore, the Special Servicer shall be entitled to
receive, as additional servicing compensation, a workout fee (the "Workout
Fee") equal to the product of 1.0% and the amount of Net Collections received
by the Master Servicer or the Special Servicer with respect to each Corrected
Mortgage Loan. If any Corrected Mortgage Loan again becomes a Specially
Serviced Mortgage Loan, any right to the Workout Fee with respect to such
Mortgage Loan earned in connection with the initial modification,
restructuring or workout thereof shall terminate, and the Special Servicer
shall be entitled to a new Workout Fee for such Mortgage Loan upon resolution
or workout of the subsequent event of default under such Mortgage Loan. If
the Special Servicer is terminated for any reason it will retain the right to
receive any Workout Fees payable in respect of any Mortgage Loans that become
Corrected Mortgage Loans during the period that it acted as Special Servicer
(and the successor Special Servicer will not be entitled to any portion of
such Workout Fees), in each case until the Workout Fees for any Mortgage Loan
cease to be payable in accordance with this paragraph. Each of the foregoing
fees, along with certain expenses related to special servicing of a Mortgage
Loan, will be payable out of funds otherwise available to pay principal and
interest on the Certificates. The Special Servicer will also be entitled to
retain as additional servicing compensation (i) all investment income earned
on amounts on deposit in any REO Account and (ii) to the extent permitted
under the related Mortgage Loan, all amounts collected with respect to the
Specially Serviced Mortgage Loans in the nature of late payment charges, late
fees, assumption fees, loan modification fees, extension fees, Financial and
Lease Reporting Fees (to the extent such fees are not required to be remitted
to the related borrower pursuant to the related Note), loan service
transaction fees, beneficiary
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statement charges or similar items (but not including any Default Interest or
Prepayment Premiums), in each case to the extent received with respect to any
Specially Serviced Mortgage Loan and not required to be deposited or retained
in the Collection Account pursuant to the Pooling and Servicing Agreement.
"Corrected Mortgage Loan" means any Mortgage Loan that is no longer a
Specially Serviced Mortgage Loan pursuant to the first proviso to the
definition of the term "Specially Serviced Mortgage Loan" as a result of the
curing of any event of default under such Specially Serviced Mortgage Loan
through a modification, restructuring or workout entered into by the Special
Servicer.
"Net Collections" means, with respect to any Corrected Mortgage Loan, an
amount equal to all payments on account of interest and principal on such
Mortgage Loan and all Prepayment Premiums.
The Special Servicer shall make its Servicing Officers available to
representatives of a Consulting Certificateholder during normal business
hours upon reasonable notice in order to discuss matters relating to any
Specially Serviced Mortgage Loan and REO Property, except to the extent doing
so is prohibited by applicable law or by any Mortgage Loan Documents. The
Special Servicer may, in its sole discretion, require that an agreement
governing the availability, use and disclosure of any information derived
pursuant to such discussions, and which may provide indemnification to the
Special Servicer for any liability or damage that may arise therefrom, be
executed by the Consulting Certificateholder.
The "Consulting Certificateholder" shall be any holder of Certificates of
the most subordinate Class or the next most subordinate Class then
outstanding, which Classes have an aggregate Certificate Balance of at least
$3,000,000.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Monthly Reports. On each Distribution Date, the Trustee will forward by
mail to each Certificateholder, with copies to the Depositor, the Paying
Agent, the Underwriter, the Master Servicer and each Rating Agency, a
statement as to such distribution setting forth for each class:
(i) the Pooled Principal Distribution Amount and the amount allocable to
principal, included in Available Funds;
(ii) The Class Interest Distribution Amount distributable to such Class
and the amount of Available Funds allocable thereto, together with any
Class Interest Shortfall allocable to such Class;
(iii) The amount of any P&I Advances by the Master Servicer, the Trustee
or the Fiscal Agent included in the amounts distributed to the
Certificateholders;
(iv) The Certificate Balance of each Class of Certificates after giving
effect to the distribution of amounts in respect of the Pooled Principal
Distribution Amount on such Distribution Date;
(v) Realized Losses and their allocation to the Certificate Balance of
any Class of Certificates;
(vi) The Scheduled Principal Balance of the Mortgage Loans as of the Due
Date preceding such Distribution Date;
(vii) The number and aggregate principal balance of Mortgage Loans (A)
delinquent one month, (B) delinquent two months, (C) delinquent three or
more months, (D) as to which foreclosure proceedings have been commenced
and (E) that otherwise constitute Specially Serviced Mortgage Loans, and,
with respect to each Specially Serviced Mortgage Loan, the amount of
Property Advances made during the related Collection Period, the amount of
the P&I Advances made on such Distribution Date, the aggregate amount of
Property Advances theretofore made that remain unreimbursed and the
aggregate amount of P&I Advances theretofore made that remain
unreimbursed;
(viii) With respect to any Mortgage Loan that became an REO Mortgage Loan
during the preceding calendar month, the principal balance of such
Mortgage Loan as of the date it became an REO Mortgage Loan;
(ix) As of the Due Date preceding such Distribution Date, as to any REO
Property sold during the related Collection Period, the date on which the
Special Servicer made a Final Recovery Determination and the amount of the
proceeds of such sale deposited into the Collection Account, and the
aggregate amount of REO Proceeds and Net REO Proceeds (in each case other
than Liquidation Proceeds) and other revenues collected by the Special
Servicer with respect to each REO Property during the related Collection
Period and credited to the Collection Account, in each case identifying
such REO Property by name;
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(x) The outstanding principal balance of each REO Mortgage Loan as of
the close of business on the immediately preceding Due Date and the
appraised value of the related REO Property per the most recent appraisal
obtained;
(xi) The amount of the servicing compensation paid to the Master Servicer
with respect to such Distribution Date, and the amount of the additional
servicing compensation that was paid to the Master Servicer with respect
to such Distribution Date;
(xii) The amount of any Special Servicing Fee, Disposition Fee or Workout
Fee paid to the Special Servicer with respect to such Distribution Date;
and
(xiii) (A) The amount of Prepayment Premiums, if any, received during the
related Collection Period, and (B) the amount of Default Interest received
during the related Collection Period.
In the case of information furnished pursuant to subclauses (i), (ii),
(iii) and (xiii)(A) above, the amounts will be expressed as a dollar amount
in the aggregate for all Certificates of each applicable Class and for each
Class of Certificates for a denomination of $1,000 initial Certificate
Balance or Notional Balance.
Within a reasonable period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during the calendar
year was a holder of a Certificate (except for a Residual Certificate) a
statement containing the information set forth in subclauses (i) and (ii)
above, aggregated for such calendar year or applicable portion thereof during
which such person was a Certificateholder. Such obligation of the Trustee
will be deemed to have been satisfied to the extent that it provided
substantially comparable information pursuant to any requirements of the Code
as from time to time in force.
On each Distribution Date, the Trustee will forward to each holder of a
Residual Certificate a copy of the reports forwarded to the other
Certificateholders on such Distribution Date and a statement setting forth
the amounts, if any, actually distributed with respect to the Residual
Certificates on such Distribution Date.
Within a reasonable period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during the calendar
year was a holder of a Residual Certificate a statement setting forth the
amounts actually distributed with respect to such Certificate aggregated for
such calendar year or applicable portion thereof during which such person was
a Certificateholder. Such obligation of the Trustee will be deemed to have
been satisfied to the extent that it provided substantially comparable
information pursuant to any requirements of the Code as from time to time in
force.
In addition, the Trustee will forward to each Certificateholder any
additional information, if any, regarding the Mortgage Loans that the Master
Servicer or the Special Servicer, in its sole discretion, delivers to the
Trustee for distribution to the Certificateholders.
Certain information made available in the Distribution Date statements
referred to above may be obtained by calling LaSalle National Bank's ASAP
System at (312) 904-2200 and requesting statement number 222 or such other
mechanism as the Trustee may have in place from time to time.
Loan Portfolio Analysis System. The Master Servicer will collect and
maintain information regarding the Mortgage Loans in a computerized database,
which the Master Servicer currently commonly refers to as the "Loan Portfolio
Analysis System" or "LPAS." The Master Servicer currently intends to provide
access to LPAS via on-line telephonic communication to Certificateholders,
persons identified by a Certificateholder as a prospective transferee and
such other persons deemed appropriate by the Master Servicer. Information
contained in LPAS regarding the composition of the Mortgage Pool and certain
other information about the Mortgage Pool deemed appropriate by the Master
Servicer will be updated periodically. Certificateholders should contact Brad
Hauger, at telephone number (816) 435-5175, for access to LPAS.
Other Available Information. The Master Servicer or the Special Servicer,
if applicable, will promptly give notice to the Trustee, who will provide a
copy to each Certificateholder, each Rating Agency, the Depositor, the
Underwriters, Midland and the Mortgage Loan Sellers of (a) any notice from a
borrower or insurance company regarding an upcoming voluntary or involuntary
prepayment (including that resulting from a Casualty or Condemnation) of all
or part of the related Mortgage Loan (provided that a request by a borrower
or other party for a quotation of the amount necessary to satisfy all
obligations with respect to a Mortgage Loan will not, in and of itself, be
deemed to be such notice); and (b) of any other occurrence known to it with
respect to a Mortgage Loan or REO Property that the Master Servicer or the
Special Servicer determines would have a material effect on such Mortgage
Loan or REO Property, which notice will include an explanation as to the
reason for such material effect (provided that any extension of the term of
any Mortgage Loan will be deemed to have a material effect).
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In addition to the other reports and information made available and
distributed to the Depositor, the Underwriters, the Trustee or the
Certificateholders pursuant to other provisions of the Pooling and Servicing
Agreement, the Master Servicer and the Special Servicer will, in accordance
with such reasonable rules and procedures as it may adopt (which may include
the requirement that an agreement governing the availability, use and
disclosure of such information, and which may provide indemnification to the
Master Servicer or the Special Servicer, as applicable, for any liability or
damage that may arise therefrom, be executed to the extent the Master
Servicer or the Special Servicer, as applicable, deems such action to be
necessary or appropriate), also make available any information relating to
the Mortgage Loans, the Mortgaged Properties or the borrower for review by
the Depositor, the Underwriters, the Trustee, the Certificateholders and any
other persons to whom the Master Servicer or the Special Servicer, as the
case may be, believes such disclosure is appropriate, in each case except to
the extent doing so is prohibited by applicable law or by any documents
related to a Mortgage Loan.
The Trustee will also make available during normal business hours, for
review by the Depositor, the Rating Agencies, any Certificateholder, the
Underwriters, any person identified to the Trustee by a Certificateholder as
a prospective transferee of a Certificate and any other persons to whom the
Trustee believes such disclosure is appropriate, the following items: (i) the
Pooling and Servicing Agreement, (ii) all monthly statements to
Certificateholders delivered since the closing date, (iii) all annual
statements as to compliance delivered to the Trustee and the Depositor and
(iv) all annual independent accountants' reports delivered to the Trustee and
the Depositor. The Master Servicer or the Special Servicer, as appropriate,
will make available at its offices during normal business hours, for review
by the Depositor, the Underwriters, the Trustee, the Rating Agencies, any
Certificateholder, any person identified to the Master Servicer or the
Special Servicer, as applicable, by a Certificateholder as a prospective
transferee of a Certificate any other persons to whom the Master Servicer or
the Special Servicer, as applicable, believes such disclosure is appropriate,
the following items: (i) the inspection reports prepared by or on behalf of
the Master Servicer or the Special Servicer, as applicable, in connection
with the property inspections conducted by the Master Servicer or the Special
Servicer, as applicable, (ii) any and all modifications, waivers and
amendments of the terms of a Mortgage Loan entered into by the Master
Servicer or the Special Servicer and (iii) any and all officer's certificates
and other evidence delivered to the Trustee and the Depositor to support the
Master Servicer's determination that any Advance was, or if made would be, a
Nonrecoverable Advance, in each case except to the extent doing so is
prohibited by applicable laws or by any documents related to a Mortgage Loan.
The Master Servicer, the Special Servicer and the Trustee will be permitted
to require payment (other than from any Rating Agency) of a sum sufficient to
cover the reasonable costs and expenses incurred by it in providing copies of
or access to any of the above information.
The Master Servicer will, on behalf of the Trust Fund, prepare, sign and
file with the Commission any and all reports, statements and information
respecting the Trust Fund that the Master Servicer or the Trustee determines
are required to be filed with the Commission pursuant to Sections 13(a) or
15(d) of the 1934 Act, each such report, statement and information to be
filed on or prior to the required filing date for such report, statement or
information. Notwithstanding the foregoing, the Depositor will file with the
Commission, within 15 days of the closing date, a Form 8-K together with the
Pooling and Servicing Agreement.
None of the Trustee, the Fiscal Agent, the Master Servicer and the Special
Servicer will be responsible for the accuracy or completeness of any
information supplied to it by a borrower or other third party for inclusion
in any notice or in any other report or information furnished or provided by
the Master Servicer, the Special Servicer or the Trustee hereunder, and the
Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent will
be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
any statement or omission or alleged statement or omission therein, including
any liability related to the inclusion of such information in any report
filed with the Commission.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, two separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to the
Trust Fund, creating two REMICs. Upon the issuance of the Offered
Certificates, Morrison & Hecker L.L.P. will deliver its opinion, generally to
the effect that, assuming compliance with all provisions of the Pooling and
Servicing Agreement, (i) each pool of assets with respect to which a REMIC
election is made will qualify as a REMIC under the Internal Revenue Code of
1986 (the "Code") and (ii) (a) the Class A-1, Class A-2, Class A-EC, Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class
L-1 and Class L-2 Certificates will be, or will represent ownership of, REMIC
"regular interests" and (b) each residual interest will be the sole "residual
interest" in the related REMIC. Holders of the Offered Certificates will be
required to include in income all interest on such Certificates in accordance
with the accrual method of accounting regardless of such Certificateholders'
usual methods of accounting.
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Because they represent regular interests, the Regular Certificates
generally will be treated as newly originated debt instruments for federal
income tax purposes. Holders of such Classes of Certificates will be required
to include in income all interest on such Certificates in accordance with the
accrual method of accounting, regardless of a Certificateholder's usual
method of accounting. Except as discussed with respect to the Class A-EC,
Class F, Class G, Class H, Class J, Class K, Class L-1 and Class L-2
Certificates, the Certificates are not expected to be treated for federal
income tax reporting purposes as having been issued with original issue
discount. The Class A-EC and Class L-2 Certificates constitute interest only
Classes and the Class L-1 Certificates constitute a principal only Class.
These Certificates, together with the Class F, Class G, Class H, Class J and
Class K Certificates, are expected to be deemed to have been issued with
original issue discount ("OID"). The Trustee intends to treat the Class A-EC
and Class L-2 Certificates as having no "qualified stated interest."
Accordingly, the Class A-EC and Class L-2 Certificates will be considered to
be issued with OID in an amount equal to the excess of all distributions of
interest expected to be received thereon over their respective issue prices
(including accrued interest, if any, unless the holder elects on its federal
income tax return to exclude such amount from the issue price and to recover
it on the first Distribution Date). In addition, the Class L-1 Certificates
will be issued with OID in an amount equal to the excess of the initial
principal balance thereof over their issue price. Any "negative" amounts of
OID on the Class A-EC or Class L-2 Certificates attributable to rapid
prepayments with respect to the Mortgage Loans will not be deductible
currently, but may be offset against future positive accruals of OID, if any.
However, the holder of a Class A-EC or Class L-2 Certificate may be entitled
to a loss deduction to the extent it becomes certain that such holder will
not recover a portion of its basis in such Certificate. No representation is
made as to the timing, amount or character of such loss, if any. See
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Taxation of Regular
Interests--Interest and Acquisition Discount." For the purposes of
determining the rate of accrual of market discount, original issue discount
and premium for federal income tax purposes, it has been assumed that the
Mortgage Loans will prepay at the rate of 0% CPR and that the Trust Fund will
be terminated on the Distribution Date occurring in June 2008 pursuant to the
auction termination procedure described herein. No representation is made as
to whether the Mortgage Loans will prepay at that rate or any other rate or
whether the Trust Fund will be terminated on such date. If it were ultimately
determined that market discount, original issue discount and premium should
be amortized over the longer term of the Mortgage Loans disregarding the
assumed termination of the Trust Fund in June 2008, the Class A-EC, Class F,
Class G, Class H, Class J, Class K, Class L-1 and Class L-2 Certificates
would recognize less original issue discount in the years prior to and
including June 2008 and the Class R-I and R-II Certificateholders would
realize greater excess inclusion income in such years. Although it is unclear
whether the Class A-EC Certificates will qualify as "variable rate
instruments" under the OID Regulations, it will be assumed for purposes of
determining the original issue discount thereon that such Certificates so
qualify. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Taxation of Regular
Interests--Interest and Acquisition Discount" in the Prospectus.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on such Certificateholder's purchase
price. Holders of such Classes of Certificates should consult their own tax
advisors regarding the possibility of making an election to amortize any such
premium. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Taxation of Regular
Interests" in the Prospectus.
Offered Certificates held by a mutual savings bank or domestic building
and loan association will represent interests in "qualifying real property
loans" within the meaning of Section 593(d) of the Code. Offered Certificates
held by a real estate investment trust will constitute "real estate assets"
within the meaning of Section 856(c)(6)(B) of the Code, and income with
respect to Offered Certificates will be considered "interest on obligations
secured by mortgages on real property or on interests in property" within the
meaning of Section 856(c)(3)(B) of the Code. Offered Certificates held by a
domestic building and loan association will generally constitute "a regular
or a residual interest in a REMIC" with the meaning of Section
7701(a)(19)(C)(xi) of the Code only in the proportion that the Mortgage Loans
are secured by multifamily apartment buildings. See "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES--Taxation of the REMIC and its Holders" in the Prospectus.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of the REMIC" in the Prospectus.
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO THE
MANNER OF THEIR APPLICATION TO THE TRUST FUND AND CERTIFICATEHOLDERS, IT IS
PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE CERTIFICATES.
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ERISA CONSIDERATIONS
GENERAL
The Subordinate Certificates and the Class A-EC Certificates may not be
purchased by or transferred to (A) an employee benefit plan or other
retirement arrangement, including an individual retirement account or a Keogh
plan, which is subject to the fiduciary responsibility provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Section 4975 of the Code, or a governmental plan subject to any federal,
state or local law ("Similar Law") that is, to a material extent, similar to
the foregoing provisions of ERISA or the Code ("Plans"), (B) a collective
investment fund in which such Plans are invested, (C) other persons acting on
behalf of any such Plan or using the assets of any such Plan or any entity
whose underlying assets include plan assets by reason of a Plan's investment
in the entity (within the meaning of Department of Labor Regulations Section
2510.3-101) or (D) an insurance company that is using assets of any insurance
company separate account or general account in which the assets of such Plans
are invested (or which are deemed pursuant to ERISA or any Similar Law to
include assets of such Plans) other than an insurance company using the
assets of its general account under circumstances whereby such purchase and
the subsequent holding of such Certificates would not constitute or result in
a prohibited transaction within the meaning of Section 406 or 407 of ERISA,
Section 4975 of the Code or a materially similar characterization under any
Similar Law. Each prospective transferee of a Certificate will be required to
deliver to the Depositor, the Certificate Registrar and the Trustee, (i) a
transferee representation letter, substantially in the form of Exhibit D-2 to
the Pooling and Servicing Agreement, stating that such prospective transferee
is not a person referred to in clause (A), (B), (C) or (D) above, or (ii) an
opinion of counsel which establishes to the satisfaction of the Depositor,
the Trustee and the Certificate Registrar that the purchase or holding of
such Certificate will not result in the assets of the Trust Fund being deemed
to be "plan assets" and subject to the fiduciary responsibility or prohibited
transaction provision of ERISA, the Code or any Similar Law, and will not
constitute or result in a prohibited transaction within the meaning of
Section 406 or 407 of ERISA, Section 4975 of the Code or any Similar Law, and
will not subject the Master Servicer, the Special Servicer, the Depositor,
the Trustee or the Certificate Registrar to any obligation of liability
(including obligations or liabilities under ERISA or Section 4975 of the
Code), which opinion of counsel will not be an expense of the Trustee, the
Trust Fund, the Master Servicer, the Special Servicer, the Certificate
Registrar or the Depositor.
TO THE EXTENT ANY OFFERED CERTIFICATE IS IN BOOK-ENTRY FORM, THE HOLDER OF
THE BENEFICIAL INTEREST IN SUCH CERTIFICATE AND ANY TRANSFEREE THEREOF SHALL
BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT A PERSON REFERRED TO IN CLAUSES
(A), (B), (C) OR (D) ABOVE.
None of the Residual Certificates may be purchased by or transferred to a
Plan. Accordingly, the following discussion does not purport to discuss the
considerations under ERISA or Code Section 4975 with respect to the purchase,
holding or disposition of the Subordinate Certificates, the Class A-EC
Certificates and the Residual Certificates.
ERISA and the Code impose certain duties and restrictions on Plans and
certain persons who perform services for Plans. For example, unless exempted,
investment by a Plan in the Certificates may constitute or give rise to a
prohibited transaction under ERISA or the Code. There are certain exemptions
issued by the United States Department of Labor (the "Department") that may
be applicable to an investment by a Plan in the Offered Certificates,
including the individual administrative exemption described below.
Before purchasing any Offered Certificates, a Plan fiduciary should
consult with its counsel and determine whether there exists any prohibition
to such purchase under the requirements of ERISA, whether the individual
administrative exemption (as described below) applies, including whether the
appropriate conditions set forth therein would be met, or whether any
statutory prohibited transaction exemption is applicable.
CERTAIN REQUIREMENTS UNDER ERISA
General. In accordance with ERISA's general fiduciary standards, before
investing in a Certificate a Plan fiduciary should determine whether to do so
is permitted under the governing Plan instruments and is appropriate for the
Plan in view of its overall investment policy and the composition and
diversification of its portfolio. A Plan fiduciary should especially consider
the ERISA requirement of investment prudence and the sensitivity of the
return on the Certificates to the rate of principal repayments (including
voluntary prepayments by the borrowers and involuntary liquidations) on the
Mortgage Loans, as discussed in "YIELD AND MATURITY CONSIDERATIONS" herein.
Parties in Interest/Disqualified Persons. Other provisions of ERISA (and
corresponding provisions of the Code) prohibit certain transactions involving
the assets of a Plan and persons who have certain specified relationships to
the Plan
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(so-called "parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code). The Depositor, the Underwriters,
the Master Servicer, the Special Servicer or the Trustee or certain
affiliates thereof might be considered or might become "parties in interest"
or "disqualified persons" with respect to a Plan. If so, the acquisition or
holding of Certificates by or on behalf of such Plan could be considered to
give rise to a "prohibited transaction" within the meaning of ERISA and the
Code unless an administrative exemption described below or some other
exemption is available. Special caution should be exercised before the assets
of a Plan are used to purchase a Certificate if, with respect to such assets,
the Depositor, the Underwriters, the Master Servicer, the Special Servicer or
the Trustee or an affiliate thereof either: (i) has discretionary authority
or control with respect to the investment or management of such assets of
such Plan, or (ii) has authority or responsibility to give, or regularly
gives, investment advice with respect to such assets pursuant to an agreement
or understanding that such advice will serve as a primary basis for
investment decisions with respect to such assets and that such advice will be
based on the particular needs of the Plan.
Delegation of Fiduciary Duty. Further, if the assets included in the Trust
Fund were deemed to constitute Plan assets, it is possible that a Plan's
investment in the Certificates might be deemed to constitute a delegation
under ERISA of the duty to manage Plan assets by the fiduciary deciding to
invest in the Certificates, and certain transactions involved in the
operation of the Trust Fund might be deemed to constitute prohibited
transactions under ERISA and the Code. Neither ERISA nor the Code define the
term "plan assets."
The Department has published final regulations (the "Regulations")
concerning whether a Plan's assets would be deemed to include an interest in
the underlying assets of an entity (such as the Trust Fund) for purposes of
the reporting and disclosure and general fiduciary responsibility provisions
of ERISA, as well as for the prohibited transaction provisions of ERISA and
the Code, if the Plan acquires an "equity interest" (such as a Certificate)
in such an entity.
Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be considered merely to include its interest in the
Certificates instead of being deemed to include an interest in the underlying
assets of a Trust Fund. However, the Depositor cannot predict in advance, nor
can there be any continuing assurance whether such exceptions may be met,
because of the factual nature of certain of the rules set forth in the
Regulations. For example, one of the exceptions in the Regulations states
that the underlying assets of an entity will not be considered "plan assets"
if less than 25% of the value of any class of equity interests is held by
"benefit plan investors," which are defined as Plans, individual retirement
accounts and employee benefit plans not subject to ERISA (for example,
governmental plans), but this exception is tested immediately after each
acquisition of an equity interest in the entity whether upon initial issuance
or in the secondary market.
ADMINISTRATIVE EXEMPTIONS
Individual Administrative Exemptions. The Department has granted to
Prudential Securities Incorporated an individual administrative exemption
(Prohibited Transaction Exemption 90-32, 55 Fed. Reg. 23147 (June 6, 1990))
referred to herein as the "Exemption," for certain mortgage-backed and asset
backed certificates underwritten in whole or in part by Prudential Securities
Incorporated. The Exemption might be applicable to the initial purchase, the
holding and the subsequent resale by a Plan of certain certificates, such as
the Class A-1 and Class A-2 Certificates underwritten by the Underwriters,
representing interests in pass-through trusts that consist of certain
receivables, loans and other obligations, provided that the conditions and
requirements of the Exemption are satisfied. The loans described in the
Exemption include mortgage loans such as the Mortgage Loans.
Among the conditions that must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of certificates by a Plan is on terms (including the
price for the certificates) that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by 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 one of the three highest generic rating
categories from any of the following: S&P, Moody's, Duff & Phelps or
Fitch;
(4) The trustee must not be an affiliate of any of the following: the
Depositor, the Underwriters, the Master Servicer, the Special Servicer (if
any), any obligor with respect to the Mortgage Loans included in the Trust
Fund constituting more than 5% of the aggregate unamortized balance of the
assets in the Trust Fund, or any affiliate of such parties (the
"Restricted Group");
S-116
<PAGE>
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of certificates represents not more than
reasonable compensation for underwriting the 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 represents not more than the fair
market value of such mortgage loans. The sum of all payments made to and
retained by the master servicer and any other servicer represents 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; and
(6) The Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Commission under the 1933
Act.
The trust fund must also meet the following requirements:
(a) the corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
(b) certificates in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, Fitch or Duff
& Phelps for at least one year prior to the Plan's acquisition of the
certificates pursuant to the Exemption; and
(c) 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 pursuant to the
Exemption.
If the conditions of the Exemption are met, the acquisition, holding and
resale of the Class A-1 and Class A-2 Certificates by Plans would be exempt
from the prohibited transaction provisions of ERISA and the Code (regardless
of whether a Plan's assets would be considered to include an ownership
interest in the Mortgage Loans in the Mortgage Pool).
Moreover, the Exemption can provide relief from certain
self-dealing/conflict-of-interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust provided that, among other requirements, (i) in
the case of an acquisition in connection with the initial issuance of
certificates, at least 50% of each class of certificates in which Plans have
invested is acquired by persons independent of the Restricted Group and at
least 50% of the aggregate interest in the trust is acquired by persons
independent of the Restricted Group; (ii) such fiduciary (or its affiliate)
is an obligor with respect to 5% or less of the fair market value of the
obligations contained in the trust; (iii) the Plan's investment in
certificates of any class does not exceed 25% of all of the certificates of
that class outstanding at the time of the acquisitions; and (iv) immediately
after the acquisition no more than 25% of the assets of the Plan with respect
to which such person is a fiduciary are invested in certificates representing
an interest in one or more trusts containing assets sold or served by the
same entity.
The Exemption does not apply to the purchasing or holding of the Class A-1
and Class A-2 Certificates by Plans sponsored by the Depositor, the
Underwriters, the Trustee, the Master Servicer, the Special Servicer, any
obligor with respect to Mortgage Loans included in the Trust Fund
constituting more than 5% of the aggregate unamortized principal balance of
the assets in the Trust Fund or any affiliate of such parties (the
"Restricted Group").
THE CHARACTERISTICS OF THE SUBORDINATE CERTIFICATES AND THE RESIDUAL
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION. ACCORDINGLY, THE
SUBORDINATE CERTIFICATES MAY NOT BE PURCHASED BY OR TRANSFERRED TO, AND
ADDITIONALLY THE CLASS A-EC CERTIFICATES ARE NOT BEING OFFERED TO, A PLAN OR
PERSON ACTING ON BEHALF OF ANY PLAN OR USING THE ASSETS OF ANY SUCH PLAN,
OTHER THAN AN INSURANCE COMPANY USING ASSETS OF ITS GENERAL ACCOUNT UNDER
CIRCUMSTANCES IN WHICH SUCH PURCHASE OR TRANSFER WOULD NOT CONSTITUTE OR
RESULT IN A PROHIBITED TRANSACTION. THE RESIDUAL CERTIFICATES MAY NOT BE
PURCHASED BY OR TRANSFERRED TO A PLAN.
Before purchasing a Class A-1 or Class A-2 Certificate, a fiduciary of a
Plan should make its own determination as to the availability of the
exemptive relief provided by the Exemption or the availability of any other
prohibited transaction exemptions, and whether the conditions of any such
exemption will be applicable to the Class A-1 and Class A-2 Certificates.
Any fiduciary of a Plan (including an entity that is deemed to hold Plan
assets for purposes of ERISA and the Code) considering whether to purchase a
Class A-1 or Class A-2 Certificate should also carefully review with its own
legal advisors the applicability of the fiduciary duty and prohibited
transaction provisions of ERISA and the Code to such investment.
S-117
<PAGE>
EXEMPT PLAN
A governmental plan as defined in Section 3(32) of ERISA is not subject to
ERISA or Code Section 4975. However, such a governmental plan may be subject
to a Similar Law. A fiduciary of a governmental plan should make its own
determination as to the need for and the availability of any exemptive relief
under any Similar Law.
THE SALE OF THE CLASS A-1 AND CLASS A-2 CERTIFICATES TO A PLAN IS IN NO
RESPECT A REPRESENTATION BY THE DEPOSITOR, THE UNDERWRITERS OR ANY OTHER
MEMBER OF THE RESTRICTED GROUP THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS GENERALLY OR ANY PARTICULAR
PLAN OR THAT THIS INVESTMENT IS APPROPRIATE FOR PLANS GENERALLY OR ANY
PARTICULAR PLAN.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code
Section 501(a), including most varieties of ERISA Plans, may give rise to
"unrelated business taxable income" as described in Code Sections 511-515 and
860E. Further, prior to the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a
"Disqualified Organization," which term as defined above includes certain
tax-exempt entities not subject to Code Section 511 including certain
governmental plans, as discussed above under the caption "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES" in the Prospectus.
LEGAL INVESTMENT
The Certificates will not constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA").
The appropriate characterization of the Certificates under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase the Certificates, may be subject to significant
interpretive uncertainties.
The Depositor makes no representations as to the proper characterization
of the Certificates for legal investment purposes, financial institution
regulatory purposes or other purposes or as to the ability of particular
investors to purchase the Certificates under applicable legal investment
restrictions. These uncertainties may adversely affect the liquidity of the
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 Certificates
constitute a legal investment or are subject to investment, capital or other
restrictions.
PLAN OF DISTRIBUTION
Prudential Securities Incorporated, Deutsche Morgan Grenfell Inc. and
Llama Company (the "Underwriters") have agreed, severally and not jointly,
pursuant to an Underwriting Agreement dated as of December 18, 1996 (the
"Underwriting Agreement") to purchase from the Depositor the respective
principal or notional amounts of Offered Certificates set forth opposite
their names below.
<TABLE>
<CAPTION>
PRINCIPAL OR NOTIONAL
UNDERWRITER AMOUNT
- ----------------------------------- ---------------------
<S> <C>
Prudential Securities Incorporated $267,576,000
Deutsche Morgan Grenfell Inc. ..... $130,699,000
Llama Company ...................... $ 47,256,000
---------------------
Total ............................ $445,531,000
=====================
</TABLE>
The Offered Certificates will be offered by the Underwriters in negotiated
transactions or otherwise, on varying terms (which may include the sale of
separate financial instruments by the Underwriters or an affiliate) and at
varying prices, in each case to be determined at the time of sale. The
Underwriters may effect such transactions by selling such Offered
Certificates to or through dealers, and such dealers may receive compensation
in the form of underwriting discounts, concessions or commissions from the
Underwriters or purchasers of the Offered Certificates for whom they may act
as agent. Any dealers that participate with the Underwriters in the
distribution of the Offered Certificates purchased by the Underwriters may be
S-118
<PAGE>
deemed to be underwriters, and any discounts or commissions received by them
or the Underwriters and any profit on the resale of Offered Certificates by
them or the Underwriters may be deemed to be underwriting discounts or
commissions under the 1933 Act.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and the Underwriters
generally will be obligated to purchase all of the Offered Certificates if
any are purchased. The Depositor has agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the 1933 Act, or
contribute to payments that the Underwriters may be required to make in
respect thereof.
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. For further information regarding any
offer or sale of the Offered Certificates pursuant to this Prospectus
Supplement and the Prospectus, see "PLAN OF DISTRIBUTION" in the Prospectus.
PSCC, an affiliate of PSI, has provided a warehouse line of credit (most
of which is non-recourse) to MCFC for the purpose of financing the Mortgage
Loans originated by Midland prior to their sale to the Depositor. In exchange
for providing the warehouse line of credit and agreeing to be responsible for
a portion of any losses realized by MCFC in connection with the sale of such
Mortgage Loans to the Depositor, PSCC receives interest on amounts borrowed
under the warehouse line of credit and will share in any profits realized by
MCFC in connection with the sale of such Mortgage Loans to the Depositor. PSI
provides advice to Midland Loan Services, L.P. in connection with the
disposition of mortgage loans. PSI has acted as financial advisor to the
Depositor in connection with the structuring of the Certificates for which it
will be paid a fee of $100,000. PSI has agreed to indemnify the Depositor
against certain liabilities, including liabilities under the Securities Act,
related to the structuring of the Certificates or to contribute to payments
that the Depositor may be required to make in respect thereof.
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay the purchase price of the Mortgage Loans, to repay
indebtedness that has been incurred to obtain funds to acquire the Mortgage
Loans and to pay costs of structuring, issuing and underwriting the Offered
Certificates.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Morrison &
Hecker L.L.P. and for the Underwriters by O'Melveny & Myers LLP.
S-119
<PAGE>
RATINGS
It is a condition to the initial issuance of the Certificates that the
Certificates have the following ratings:
<TABLE>
<CAPTION>
CLASS FITCH MOODY'S
- --------- ----------- -----------
<S> <C> <C>
A-1 AAA Aaa
A-2 AAA Aaa
A-EC AAA Aaa
B AA Aa2
C A A2
D BBB Baa2
E BBB- unrated
F BB+ unrated
G BB unrated
H BB- unrated
J B unrated
K B- unrated
L-1 unrated unrated
L-2 unrated unrated
R-I unrated unrated
R-II unrated unrated
</TABLE>
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely receipt by holders thereof of all payments of
interest to which they are entitled and ultimate receipt of all payments of
principal by the Rated Final Distribution Date. The Rating Agencies' ratings
take into consideration the credit quality of the mortgage pool, structural
and legal aspects associated with the Certificates, and the extent to which
the payment stream in the mortgage pool is adequate to make payments required
under the Certificates. Ratings on mortgage pass-through certificates do not,
however, represent an assessment of the likelihood, timing or frequency of
principal prepayments by borrowers or the degree to which such prepayments
(both voluntary and involuntary) might differ from those originally
anticipated. The security ratings do not address the possibility that
Certificateholders might suffer a lower than anticipated yield. In addition,
ratings on mortgage pass-through certificates do not address the likelihood
of receipt of Prepayment Premiums or the timing of the receipt thereof or the
likelihood of collection by the Master Servicer of Default Interest. In
general, the ratings thus address credit risk and not prepayment risk. As
described herein, the amounts payable with respect to the Class A-EC
Certificates consist only of interest. If the entire pool of Mortgage Loans
were to prepay in the initial month, with the result that the Class A-EC
Certificateholders receive only a single month's interest and thus suffer a
nearly complete loss of their investment, all amounts "due" to such holders
will nevertheless have been paid, and such result is consistent with the
"AAA" and "Aaa" ratings received on the Class A-EC Certificates. Class A-EC
Subordinated Advance Amounts, if any, will be subordinated to the Subordinate
Certificates and it is highly unlikely that any such amounts will actually be
received by the holders of the Class A-EC Certificates. THE RATINGS FOR THE
CLASS A-EC CERTIFICATES DO NOT ADDRESS THE LIKELIHOOD OF THE TIMING OR
RECEIPT OF ANY CLASS A-EC SUBORDINATED ADVANCE AMOUNTS. The Class A-EC
Notional Balance upon which interest is calculated is reduced by the
allocation of Realized Losses, scheduled payments on the Mortgage Loans and
prepayments, whether voluntary or involuntary. The rating does not address
the timing or magnitude of reductions of Class A-EC Notional Balance, but
only the obligation to pay interest timely on the Class A-EC Notional Balance
as so reduced from time to time. Accordingly, the ratings of the Class A-EC
Certificates should be evaluated independently from similar ratings on other
types of securities.
There can be no assurance as to whether any rating agency not requested to
rate the Certificates will nonetheless issue a rating and, if so, what such
rating would be. A rating assigned to the Certificates by a rating agency
that has not been requested by the Depositor to do so may be lower than the
rating assigned by the Rating Agencies pursuant to the Depositor's request.
The rating of the Certificates should be evaluated independently from
similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision
or withdrawal at any time by the assigning rating agency.
S-120
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
DEFINITIONS PAGE
<TABLE>
<CAPTION>
<S> <C>
1933 Act .............................................................. S-4
Advance Rate .......................................................... S-103
Advances .............................................................. S-102
Annual Debt Service ................................................... S-57
Anticipated Loss ...................................................... S-101
Anticipated Loss Subordination Amount ................................. S-78
Appraised LTV ......................................................... S-57
Appraised Value ....................................................... S-57
Assumed Maturity Date ................................................. S-1
Assumed Scheduled Payment ............................................. S-80
Auction Closing Date .................................................. S-88
Auction Fees .......................................................... S-88
Auction Valuation Date ................................................ S-18, S-87
Available Funds ....................................................... S-77
Available Funds Allocation ............................................ S-80
Balloon Amount ........................................................ S-57
Balloon Balance ....................................................... S-57
Balloon Loans ......................................................... S-40
Balloon LTV ........................................................... S-57
Balloon Payment ....................................................... S-40
Base Interest Fraction ................................................ S-85
BCMC .................................................................. S-2, S-75
BCMC Mortgage Loan Purchase Agreement ................................. S-33
BCMC Mortgage Loans ................................................... S-32
Beneficial Owners ..................................................... S-88
Book-Entry Certificate ................................................ S-88
Business Day .......................................................... S-15
Cash Flow ............................................................. S-55, S-56, S-57
Casualty .............................................................. S-44
Certificate Balance ................................................... S-14
Certificate Registrar ................................................. S-90
Certificates .......................................................... S-1, S-14
Class A-EC Notional Balance ........................................... S-76, S-78
Class A-EC Pass-Through Rate .......................................... S-78
Class A-EC Subordinated Advance Amount ................................ S-78
Class Interest Distribution Amount .................................... S-16, S-78
Class Interest Shortfall .............................................. S-80
Class L-2 Notional Balance ............................................ S-76
Closing Date .......................................................... S-8, S-15
Code .................................................................. S-28, S-113
Collection Account .................................................... S-103
Collection Period ..................................................... S-78
Commission ............................................................ S-4
Condemnation .......................................................... S-44
Condemnation Proceeds ................................................. S-77
Congregate Care Loan .................................................. S-31
Congregate Care Property .............................................. S-31
Constant Prepayment Rate .............................................. S-94
Consulting Certificateholder .......................................... S-111
Corrected Mortgage Loan ............................................... S-111
CPR ................................................................... S-94
Cross-Collateralized Loans ............................................ S-28, S-55
S-122
<PAGE>
Cut-off Date Principal Balance ........................................ S-9, S-31
Debt Service Coverage Ratio ........................................... S-57
Default Interest ...................................................... S-44, S-78
Default Rate .......................................................... S-78
Definitive Certificate ................................................ S-88
Delivery Date ......................................................... S-1
Department ............................................................ S-115
Depositor ............................................................. S-2
Depository ............................................................ S-15
Determination Date .................................................... S-78
Disposition Fee ....................................................... S-110
Disqualified Organization ............................................. S-118
Distribution Account .................................................. S-103
Distribution Date ..................................................... S-2, S-76
DMG ................................................................... S-2
DSCR .................................................................. S-10, S-57
DTC ................................................................... S-1, S-8, S-15
Due Date .............................................................. S-15
Effective Age ......................................................... S-57
Eligible Bank ......................................................... S-104
Environmental Consultant .............................................. S-37
ERISA ................................................................. S-20, S-115
Exemption ............................................................. S-116
Factory Outlet Loan ................................................... S-31
Factory Outlet Property ............................................... S-31
Final Recovery Determination .......................................... S-86
Fiscal Agent .......................................................... S-3
Fitch ................................................................. S-3
Form 8-K .............................................................. S-69
GACC .................................................................. S-2, S-75
GACC Mortgage Loan Purchase Agreement ................................. S-33
GACC Mortgage Loans ................................................... S-33
Hotel Loan ............................................................ S-31
Hotel Property ........................................................ S-31
Indirect Participants ................................................. S-89
Industrial Loan ....................................................... S-31
Industrial Property ................................................... S-31
Industrial/Warehouse Loan ............................................. S-31
Industrial/Warehouse Property ......................................... S-31
Initial Pool Balance .................................................. S-31
Insurance Proceeds .................................................... S-77
Interest Accrual Period ............................................... S-79
Interested Person ..................................................... S-107
IRS ................................................................... S-50
Liquidation Proceeds .................................................. S-77
Llama Company ......................................................... S-2
Loan Portfolio Analysis System ........................................ S-112
Loan Purchase Closing Date ............................................ S-33
Loan-to-Value Ratio ................................................... S-57
Lockout Period ........................................................ S-41
LPAS .................................................................. S-112
LTV ................................................................... S-57
Major Tenant .......................................................... S-28
Master Servicer ....................................................... S-3
Master Servicer Mortgage File ......................................... S-100
S-123
<PAGE>
MCFC .................................................................. S-2, S-74
MCFC Mortgage Loan Purchase Agreement ................................. S-33
MCFC/BCMC Mortgage Loan Purchase Agreement ............................ S-33
Midland ............................................................... S-2, S-32, S-74
Midland Mortgage Loans ................................................ S-32
Mini Warehouse Loan ................................................... S-31
Mini Warehouse Property ............................................... S-31
Minimum Auction Price ................................................. S-88
Mixed Use Loan ........................................................ S-31
Mixed Use Property .................................................... S-31
Mobile Home Park Loan ................................................. S-31
Mobile Home Park Property ............................................. S-31
Monthly Payment ....................................................... S-77
Monthly Payments ...................................................... S-45
Moody's ............................................................... S-3
Mortgage .............................................................. S-31
Mortgage File ......................................................... S-100
Mortgage Loan Sellers ................................................. S-2
Mortgage Loans ........................................................ S-2, S-31
Mortgage Pool ......................................................... S-2
Mortgage Rate ......................................................... S-40
Mortgaged Property .................................................... S-2, S-31
Mortgages ............................................................. S-31
Multifamily Loan ...................................................... S-31
Multifamily Property .................................................. S-31
Net Collections ....................................................... S-111
Net Mortgage Rate ..................................................... S-79
Net Operating Income .................................................. S-55, S-56
Net REO Proceeds ...................................................... S-78
Newly Originated Loans ................................................ S-40
NOI ................................................................... S-56
Note .................................................................. S-31
Notional Balances ..................................................... S-76
Occupancy Date ........................................................ S-58
Occupancy Percentage .................................................. S-58
Occupancy Rate ........................................................ S-57
Offered Certificates .................................................. S-2
Office Loan ........................................................... S-31
Office Property ....................................................... S-31
Office/R&D Loan ....................................................... S-31
Office/R&D Property ................................................... S-31
Office/Retail Loan .................................................... S-31
Office/Retail Property ................................................ S-31
Office/Warehouse Loan ................................................. S-31
Office/Warehouse Property ............................................. S-31
OID ................................................................... S-114
Originator ............................................................ S-32
Originators ........................................................... S-32
Participants .......................................................... S-89
Pass-Through Rate ..................................................... S-79
Paying Agent .......................................................... S-89
Percentage Interest ................................................... S-76
Permitted Encumbrances ................................................ S-70
Permitted Investments ................................................. S-104
P&I Advance ........................................................... S-9, S-17, S-101
S-124
<PAGE>
P&I Certificates ...................................................... S-2
Plans ................................................................. S-20, S-115
Pooled Principal Distribution Amount .................................. S-16, S-80
Pooling and Servicing Agreement ....................................... S-3, S-14, S-99
Prepayment Interest Shortfall ......................................... S-79
Prepayment Interest Surplus ........................................... S-79
Prepayment Premium .................................................... S-41
Prepayment Premiums ................................................... S-77
Principal Prepayments ................................................. S-78
Private Certificates .................................................. S-14
Property Advances ..................................................... S-102
Property Age .......................................................... S-57
PSCC .................................................................. S-35
PSI ................................................................... S-35
Rated Final Distribution Date ......................................... S-1
Rating Agencies ....................................................... S-3
Realized Loss ......................................................... S-85
Record Date ........................................................... S-76
Regular Certificates .................................................. S-2, S-19
Regulations ........................................................... S-116
Remaining Amortization Term ........................................... S-58
Remaining Term to Maturity ............................................ S-57
REMIC ................................................................. S-4, S-8, S-113
REMIC I ............................................................... S-4, S-19
REMIC II .............................................................. S-4, S-19
Remittance Date ....................................................... S-101
REO Account ........................................................... S-76
REO Mortgage Loan ..................................................... S-80
REO Property .......................................................... S-76
Repurchase Price ...................................................... S-73
Reserve Accounts ...................................................... S-45
Residual Certificates ................................................. S-2
Restricted Group ...................................................... S-116, S-117
Retail, Anchored Loan ................................................. S-31
Retail, Anchored Property ............................................. S-31
Retail, Factory Outlet Loan ........................................... S-31
Retail, Factory Outlet Property ....................................... S-31
Retail, Single Tenant Loan ............................................ S-31
Retail, Single Tenant Property ........................................ S-31
Retail, Unanchored Loan ............................................... S-31
Retail, Unanchored Property ........................................... S-31
Scenarios ............................................................. S-94
Scheduled Final Distribution Date ..................................... S-1, S-86
Scheduled Principal Balance ........................................... S-85
Section 42 Mortgage Loans ............................................. S-50
Senior Certificates ................................................... S-2
Senior Principal Distribution Cross-Over Date ......................... S-84
Seriously Delinquent Loan ............................................. S-102
Servicing Fee ......................................................... S-109
Servicing Fee Rate .................................................... S-109
Similar Law ........................................................... S-115
SMMEA ................................................................. S-118
S&P ................................................................... S-74
Special Servicer ...................................................... S-3
Special Servicing Fee ................................................. S-110
S-125
<PAGE>
Specially Serviced Mortgage Loan ...................................... S-110, S-111
Tax Credit Period ..................................................... S-28, S-51
Tax Credit Project .................................................... S-28, S-50
Tax Credits ........................................................... S-28
Title Policy .......................................................... S-70
Trust Fund ............................................................ S-2
Trust REMICs .......................................................... S-4
Trustee ............................................................... S-3
Trustee Mortgage File ................................................. S-99
Underwriters .......................................................... S-1, S-118
Underwriting Agreement ................................................ S-118
Underwritten Cash Flow ................................................ S-56, S-57
Underwritten DSCR ..................................................... S-57
Underwritten NOI ...................................................... S-56, S-57
Unscheduled Payments .................................................. S-77
Updated Appraisal ..................................................... S-105
Voting Rights ......................................................... S-108
Weighted Average Maturity ............................................. S-58
Weighted Average Net Mortgage Rate .................................... S-79
Weighted Average Pass-Through Rate .................................... S-79
Workout Fee ........................................................... S-110
Year Renovated ........................................................ S-58
Yield Maintenance Charges ............................................. S-84
Yield Maintenance Period .............................................. S-41
Zoning Laws ........................................................... S-27
</TABLE>
S-126
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE DEPOSITOR SINCE SUCH DATE.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information ................................... S-4
Executive Summary ....................................... S-5
Summary of Terms ........................................ S-14
Risk Factors ............................................ S-23
Description of the Mortgage Pool ........................ S-31
Midland Loan Services, L.P. ............................. S-74
Mortgage Loan Sellers ................................... S-74
Boston Capital Mortgage Company, Limited Partnership ... S-75
Description of the Certificates ......................... S-76
Yield and Maturity Considerations ....................... S-91
The Pooling and Servicing Agreement ..................... S-99
Material Federal Income Tax Consequences ................ S-113
ERISA Considerations .................................... S-115
Legal Investment ........................................ S-118
Plan of Distribution .................................... S-118
Use of Proceeds ......................................... S-119
Legal Matters ........................................... S-119
Ratings ................................................. S-120
Index of Significant Definitions ........................ S-121
Annex A ................................................. A-1
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
<S> <C>
Prospectus Supplement ................................. 2
Additional Information ............................... 2
Incorporation of Certain Information by Reference ... 2
Reports .............................................. 3
Summary of Prospectus ................................ 4
Risk Factors ......................................... 9
The Depositor ........................................ 16
Use of Proceeds ...................................... 16
Description of the Certificates ...................... 16
The Mortgage Pools ................................... 22
Servicing of the Mortgage Loans ...................... 26
Credit Enhancement ................................... 33
Certain Legal Aspects of the Mortgage Loans ......... 36
Material Federal Income Tax Consequences ............. 52
State Tax Considerations ............................. 70
ERISA Considerations ................................. 70
Legal Investment ..................................... 72
Plan of Distribution ................................. 72
Legal Matters ........................................ 73
Financial Information ................................ 73
Rating ............................................... 73
Index of Significant Definitions ..................... 74
</TABLE>
$445,531,000 (APPROXIMATE)
MIDLAND REALTY ACCEPTANCE CORP.
DEPOSITOR
MIDLAND LOAN SERVICES, L.P.
MASTER SERVICER AND SPECIAL SERVICER
CLASS A-1, CLASS A-2,
CLASS B, CLASS C, CLASS D
AND CLASS E CERTIFICATES
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 1996-C2
#############################################################################
GRAPHIC OMITTED
#############################################################################
PROSPECTUS SUPPLEMENT
PRUDENTIAL SECURITIES INCORPORATED
DEUTSCHE MORGAN GRENFELL INC.
LLAMA COMPANY, L.P.
DECEMBER 18, 1996
<PAGE>
<TABLE>
<CAPTION>
LOAN TERMS
CUT-OFF SERVICING ORIGINAL FIRST
LOAN ORIGINAL DATE INTEREST FEE ORIGINAL TERM TO ORIGINAL PYMT MAT.
NO. PROPERTY NAME BALANCE BALANCE RATE (BPS)<F1> AMORT. MATURITY NOTE DATE DATE DATE
- ---- --------------------- ---------- ----------- -------- --------- -------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Kennedy Ridge 27,497,600 27,292,186 7.61% 5.75 360 120 1/4/96 3/1/96 2/1/06
2 Gateway Shopping 18,000,000 17,686,288 8.59% 5.75 187 84 3/13/96<F3> 5/1/96 4/1/03
Center
3 Gentry's Landing<F2> 16,890,000 16,890,000 8.47% 9.75 360 120 11/12/96 1/1/97 12/1/06
4 Kendall I Place 12,450,000 12,339,021 8.54% 5.75 300 84 2/29/96 4/1/96 3/1/03
5 LAM Research 11,700,000 11,700,000 8.44% 16.53 300 120 11/22/96 1/1/97 12/1/06
6 Bay Plaza K Mart 10,700,000 10,700,000 8.89% 5.75 276 120 11/22/96 1/1/97 11/30/06
7 Preferred Freezer 10,500,000 10,299,239 8.83% 5.75 240 83 11/8/95 1/1/96 11/8/02
8 Rio Norte Shopping 10,200,000 10,200,000 8.43% 16.53 300 120 12/5/96 2/1/97 1/1/07
Center
9 Val Mesa Medical 10,046,000 10,035,390 9.18% 16.53 360 120 9/27/96 11/1/96 10/1/06
Building
10 Lakewood Cove 9,800,000 9,800,000 8.09% 16.53 360 120 11/22/96 1/1/97 12/1/06
Apartments
11 Longhorn Pavillion 9,010,000 9,004,859 8.79% 8.50 360 180 10/11/96 12/1/96 11/1/11
Apartments
12 Cape Cod Factory 8,916,000 8,916,000 8.65% 16.53 300 144 12/9/96 2/1/97 1/1/09
Outlet Mall
13 Super K Mart #7634 8,700,000 8,656,251 9.49% 9.75 300 120 5/22/96 7/1/96 6/1/06
14 Garden Grove Plaza 8,500,000 8,500,000 8.45% 16.53 300 144 11/27/96 2/1/97 1/1/09
15 North Creek Apartments 8,395,000 8,395,000 7.79% 16.53 360 60 11/25/96 1/1/97 12/1/01
16 Holiday Inn Maingate 8,000,000 7,850,184 9.00% 16.53 240 120 11/2/95 1/1/96 12/1/05
17 Hunter Park Office 7,850,000 7,850,000 8.91% 16.53 300 120 11/13/96 1/1/97 12/1/06
Plaza
18 Westgate Apartments 7,725,000 7,708,582 9.19% 16.53 360 120 7/31/96 9/1/96 8/1/06
19 Malone Plaza 7,700,000 7,700,000 8.83% 16.53 300 120 11/21/96 1/1/97 12/1/06
20 Builder's Square II 7,500,000 7,500,000 8.88% 16.53 240 144 12/5/96 2/1/97 1/1/09
21 Hunter's Ridge 7,473,000 7,468,832 8.90% 16.53 360 180 10/31/96 12/1/96 11/1/11
Apartments
22 Blaustein Building 7,125,000 7,114,237 8.93% 16.53 240 144 10/11/96 12/1/96 11/1/08
23 B J's Warehouse Club 7,000,000 6,980,718 8.87% 8.50 300 120 8/23/96 10/1/96 9/1/06
24 Woodhollow Apartments 6,300,000 6,300,000 8.15% 16.53 360 84 12/4/96 2/1/97 1/1/04
25 Big Curve Shopping 6,072,000 6,061,466 9.19% 5.75 300 120 9/20/96 11/1/96 10/1/06
Center
26 Windmill Terrace 5,650,000 5,650,000 8.08% 16.53 360 120 11/23/96 1/1/97 12/1/06
Apartments
27 Armand Place 5,625,000 5,625,000 8.49% 16.53 360 120 12/3/96 2/1/97 1/1/07
Apartments
28 Oakland Valley 5,550,000 5,525,851 9.24% 8.50 300 120 6/14/96 8/1/96 7/1/06
Apartments
29 1610 W Bernardo Drive 5,200,000 5,186,928 9.42% 16.53 300 144 9/19/96 10/1/96 9/1/08
30 Cobblestone Village 5,100,000 5,097,084 8.78% 10.25 360 120 10/24/96 12/1/96 11/1/06
Apartments
31 Name'Office Building 5,050,000 5,045,636 9.19% 16.53 300 144 10/3/96 12/1/96 11/1/08
32 Goodwin Gardens 5,000,000 5,000,000 8.20% 16.53 300 120 11/26/96 1/1/97 12/1/06
Apartments
33 Lake George Plaza 5,000,000 5,000,000 8.80% 16.53 300 120 11/22/96 1/1/97 12/1/06
Outlet Center
34 North Pointe Office 4,850,000 4,850,000 8.50% 16.53 300 84 12/5/96 2/1/97 1/1/04
Plaza
35 The Shoppes at 4,875,000 4,808,738 9.23% 5.75 300 119 8/10/95 10/1/95 8/14/05
Bellgrade
36 Cypress Station 4,650,000 4,638,014 9.27% 16.53 300 120 8/16/96 10/1/96 9/1/06
Shopping Center
37 Sundance Apartments 4,645,000 4,636,807 8.68% 16.53 360 120 8/9/96 10/1/96 9/1/06
38 Riggs Plaza 4,630,000 4,617,925 9.20% 16.53 300 120 8/19/96 10/1/96 9/1/06
39 Emmett Street & 4,560,000 4,547,929 9.11% 16.53 300 120 8/30/96 10/1/96 9/1/06
Redstone Hill Road
40 Shadow Valley 4,552,000 4,544,199 8.82% 16.53 360 120 8/23/96 10/1/96 9/1/06
Apartments
<PAGE>
LOAN TERMS
CUT-OFF SERVICING ORIGINAL FIRST
LOAN ORIGINAL DATE INTEREST FEE ORIGINAL TERM TO ORIGINAL PYMT MAT.
NO. PROPERTY NAME BALANCE BALANCE RATE (BPS)<F1> AMORT. MATURITY NOTE DATE DATE DATE
- ---- --------------------- ---------- ----------- -------- --------- -------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
41 Casa Devon Apartments 4,525,000 4,512,124 8.97% 16.53 173 173 10/3/96 12/1/96 4/1/11
42 Silvergate Fallbrook 4,475,000 4,475,000 8.48% 16.53 300 60 11/6/96 1/1/97 12/1/01
Retirement Residence
43 Inter American 4,400,000 4,396,286 9.33% 5.75 300 84 10/8/96 12/1/96 11/1/03
Transport Equipment
Co.
44 Midway Mills Shopping 4,200,000 4,154,647 8.64% 5.75 300 120 12/26/95 2/1/96 12/31/05
Center
45 Desert Shadows 4,100,000 4,097,465 8.40% 10.25 360 120 10/31/96 12/1/96 11/1/06
Apartments
46 Cabana Club Apartments 3,700,000 3,681,789 8.49% 8.50 300 300 6/3/96 8/1/96 7/1/21
47 Whispering Hills 3,440,000 3,437,950 8.58% 10.25 360 120 10/24/96 12/1/96 11/1/06
Apartments
48 Denver Sports 3,416,000 3,416,000 8.99% 16.53 300 144 11/22/96 1/1/97 12/1/08
49 Promenade Shopping 3,400,000 3,397,082 9.23% 5.75 300 120 10/24/96 12/1/96 11/1/06
Center
50 Dulles Square Shopping 3,250,000 3,250,000 8.67% 16.53 300 120 12/4/96 2/1/97 1/1/07
Center
51 Somerset Place 3,240,000 3,240,000 8.30% 16.53 300 120 11/25/96 1/1/97 12/1/06
Apartments
52 95 Office Park 3,200,000 3,200,000 9.16% 16.53 300 132 11/1/96 1/1/97 12/1/07
53 Frankford Center 3,200,000 3,200,000 8.78% 16.53 300 120 11/22/96 1/1/97 12/1/06
54 ICN Pharmaceuticals 3,200,000 3,200,000 8.90% 5.75 300 84 12/13/96 2/1/97 1/1/04
55 Lindell Court 3,175,000 3,172,106 8.87% 16.53 300 120 10/24/96 12/1/96 11/1/06
Apartments
56 The Delphax Building 3,150,000 3,139,628 9.55% 8.50 300 115 7/26/96 9/1/96 3/1/06
57 The Phoenix Sports 3,100,000 3,100,000 8.99% 16.53 300 144 11/22/96 1/1/97 12/1/08
Building
58 New Grand Hotel 2,888,000 2,884,950 9.18% 8.50 360 144 9/27/96 11/1/96 10/1/08
59 East Hills Village 2,875,000 2,875,000 8.76% 8.50 300 120 11/26/96 1/1/97 12/1/06
Shopping Center
60 Rosedale Towers Office 2,800,000 2,792,514 9.05% 16.53 300 120 8/16/96 10/1/96 9/1/06
Building
61 Western Hills 2,734,000 2,726,905 9.23% 8.50 300 120 8/7/96 10/1/96 9/1/06
Apartments
62 Dillon Factory Stores 2,700,000 2,697,612 9.05% 8.50 300 120 10/21/96 12/1/96 11/1/06
63 Lafayette Business 2,625,000 2,625,000 8.76% 16.53 300 120 12/4/96 2/1/97 1/1/07
Center
64 Wyngate Medical Park 2,525,000 2,525,000 8.51% 16.53 300 120 12/4/96 2/1/97 1/1/07
65 University Business 2,525,000 2,509,778 9.44% 16.53 204 120 8/26/96 10/1/96 9/1/06
Center
66 Lucas Creek Apartments 2,500,000 2,500,000 8.56% 16.53 300 120 11/14/96 1/1/97 12/1/06
67 Fox Creek Apartments 2,437,500 2,430,685 8.78% 16.53 300 120 8/16/96 10/1/96 9/1/06
68 Spring Hill Apartments 2,400,000 2,400,000 8.48% 16.53 240 144 11/15/96 1/1/97 12/1/08
I & II
68 East Ridge Village N/A N/A N/A N/A N/A N/A N/A N/A N/A
Apartments I & II
69 Forest Place 2,360,000 2,351,762 9.20% 8.50 300 120 7/12/96 9/1/96 8/1/06
Apartments
70 Mulberry Row 2,325,000 2,312,133 8.91% 8.50 300 120 5/3/96 7/1/96 6/1/06
Apartments
71 Brentwood Terrace 2,250,000 2,250,000 8.48% 16.53 300 120 11/14/96 1/1/97 12/1/06
Apartments
72 580 Cottage Grove Road 2,245,000 2,241,407 9.67% 16.53 300 120 9/13/96 11/1/96 10/1/06
73 Sedgefield Apartments 2,190,000 2,187,930 8.65% 16.53 300 180 10/31/96 12/1/96 11/1/11
74 Bullock Habersham 2,125,000 2,111,251 8.92% 8.50 300 120 4/17/96 6/1/96 5/1/06
Apartments
75 North Gaithersburg 2,100,000 2,100,000 8.96% 16.53 300 120 11/6/96 1/1/97 12/1/06
Shopping Center
76 OSO Grande Mobile Home 2,000,000 1,989,559 8.82% 16.53 120 120 10/25/96 12/1/96 11/1/06
Village
77 Flamingo Pecos Plaza 1,950,000 1,950,000 9.01% 16.53 300 120 11/25/96 1/1/97 12/1/06
<PAGE>
LOAN TERMS
CUT-OFF SERVICING ORIGINAL FIRST
LOAN ORIGINAL DATE INTEREST FEE ORIGINAL TERM TO ORIGINAL PYMT MAT.
NO. PROPERTY NAME BALANCE BALANCE RATE (BPS)<F1> AMORT. MATURITY NOTE DATE DATE DATE
- ---- --------------------- ---------- ----------- -------- --------- -------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
78 San Pedro Place 1,950,000 1,946,617 9.19% 16.53 300 144 9/27/96 11/1/96 10/1/08
Shopping Center
79 South Post Oak Service 1,925,000 1,925,000 8.73% 16.53 300 96 11/26/96 2/1/97 1/1/05
Center
80 Central Avenue 1,900,000 1,900,000 8.87% 16.53 300 120 11/19/96 1/1/97 12/1/06
Industrial Park
81 Hammond Street 1,850,000 1,850,000 8.66% 16.53 240 144 11/11/96 1/1/97 12/1/08
Apartments
82 Rosenberg Building 1,839,000 1,837,045 9.15% 8.50 360 168 9/27/96 11/1/96 10/1/10
Apartments
83 Wicklow Apartments 1,800,000 1,800,000 8.39% 16.53 240 144 11/25/96 1/1/97 12/1/08
84 5300 Harbor Street 1,775,000 1,770,466 9.33% 16.53 300 144 8/5/96 10/1/96 9/1/08
85 Cedar Square Shopping 1,760,000 1,760,000 8.63% 8.50 300 120 12/4/96 2/1/97 1/1/07
Center
86 Ames Department Store 1,760,000 1,745,248 9.70% 5.75 240 84 5/31/96 7/1/96 6/1/03
87 Water's Edge 1,729,605 1,729,605 8.44% 16.53 300 120 11/27/96 1/1/97 12/1/06
Apartments
88 The Townhouse 1,725,000 1,719,809 8.99% 16.53 240 120 9/27/96 11/1/96 10/1/06
Apartments
89 Champlain Apartments 1,706,250 1,698,450 8.98% 15.25 300 120 7/1/96 8/1/96 7/1/06
90 2603 Oaklawn Office 1,650,000 1,647,301 9.54% 16.53 300 144 9/25/96 11/1/96 10/1/08
91 Carriage Green 1,650,000 1,642,844 9.26% 8.50 300 120 6/7/96 8/1/96 7/1/06
Apartments
92 Stafford Station 1,600,000 1,600,000 9.21% 16.53 300 120 11/14/96 1/1/97 12/1/06
93 Shoppes at Gloucester 1,550,000 1,540,053 8.97% 5.75 300 121 4/4/96 6/1/96 6/1/06
94 Crosby Green 1,511,000 1,511,000 8.37% 8.50 300 120 12/6/96 2/1/97 1/1/07
Apartments
95 Wavertree Apartments 1,500,000 1,500,000 8.63% 16.53 180 180 11/22/96 1/1/97 12/1/11
96 Riverview Apartments 1,435,000 1,429,949 9.15% 16.53 300 120 7/11/96 9/1/96 8/1/06
96 Riverview Professional N/A N/A N/A N/A N/A N/A N/A N/A N/A
Building
97 Plainfield Realty 1,400,000 1,396,337 9.06% 16.53 180 180 10/30/96 12/1/96 11/1/11
98 Lincoln Plaza Medical 1,390,000 1,386,369 9.19% 16.53 300 144 8/14/96 10/1/96 9/1/08
Center
99 Office Depot Plaza 1,400,000 1,381,801 9.06% 5.75 300 84 9/18/95 11/1/95 9/18/02
100 Callahan Plaza 1,350,000 1,348,816 9.10% 5.75 300 120 10/31/96 12/1/96 11/1/06
101 Precision Metal 1,350,000 1,343,160 9.51% 16.53 180 144 9/3/96 11/1/96 10/1/08
Products
102 Frank's Nursery & 1,330,423 1,309,044 8.70% 16.53 240 120 1/26/96 3/1/96 2/1/06
Craft Store #277
103 228 River Street 1,300,000 1,300,000 8.66% 16.53 300 120 12/6/96 2/1/97 1/1/07
104 Frank's Nursery & 1,316,019 1,294,871 8.70% 16.53 240 120 1/26/96 3/1/96 2/1/06
Craft Store #626
105 Franklin School 1,275,000 1,273,665 9.22% 8.50 360 240 9/27/96 11/1/96 10/1/16
Apartments
106 North Georgia Business 1,250,000 1,250,000 9.18% 16.53 240 144 11/15/96 1/1/97 12/1/08
Center
106 Direct Connection N/A N/A N/A N/A N/A N/A N/A N/A N/A
Drive Business Center
107 Westridge Apartments 1,250,000 1,250,000 8.48% 16.53 300 120 11/21/96 1/1/97 12/1/06
108 12222 Moorpark 1,250,000 1,248,638 9.03% 16.53 360 120 9/12/96 11/1/96 10/1/06
109 Somerset Apartments 1,250,000 1,245,452 8.95% 16.53 300 120 7/11/96 9/1/96 8/1/06
110 Town Center Plaza 1,211,000 1,208,889 9.16% 16.53 300 120 9/30/96 11/1/96 10/1/06
111 Deer Creek Apartments 1,160,000 1,159,334 8.76% 16.53 360 144 10/28/96 12/1/96 11/1/08
112 Mt. Airy Manor 1,100,000 1,100,000 8.92% 16.53 264 180 11/6/96 1/1/97 12/1/11
Apartments
113 Applegate Trail 1,100,000 1,099,380 8.85% 16.53 360 180 10/21/96 12/1/96 11/1/11
Apartments
114 Plaza Farms Apartments 1,060,000 1,057,272 9.28% 16.53 300 180 8/29/96 10/1/96 9/1/11
114 Zito Apartments N/A N/A N/A N/A N/A N/A N/A N/A N/A
114 Washington Street N/A N/A N/A N/A N/A N/A N/A N/A N/A
Development
115 Williams Group Office 1,050,000 1,048,226 9.35% 16.53 300 144 9/26/96 11/1/96 10/1/08
/ Warehouse
116 Buckingham Apartments 1,050,000 1,046,180 8.95% 16.53 300 120 7/11/96 9/1/96 8/1/06
117 Raleigh Square 1,030,000 1,028,159 9.01% 16.53 300 180 9/27/96 11/1/96 10/1/11
Apartments
118 Mountain Shadow 1,000,000 1,000,000 8.64% 16.53 360 180 11/13/96 1/1/97 12/1/11
Apartments
119 Colonial Apartments 1,000,000 997,322 9.04% 16.53 300 120 8/20/96 10/1/96 9/1/06
120 Village Marketplace of 1,000,000 995,758 9.51% 16.53 240 144 8/27/96 10/1/96 9/1/08
Union Park
<PAGE>
LOAN TERMS
CUT-OFF SERVICING ORIGINAL FIRST
LOAN ORIGINAL DATE INTEREST FEE ORIGINAL TERM TO ORIGINAL PYMT MAT.
NO. PROPERTY NAME BALANCE BALANCE RATE (BPS)<F1> AMORT. MATURITY NOTE DATE DATE DATE
- ---- --------------------- ---------- ----------- -------- --------- -------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
121 Kendall Plaza Shopping 980,000 978,437 9.69% 16.53 300 120 9/10/96 11/1/96 10/1/06
Center
122 Century Mobile Home 950,000 950,000 8.92% 16.53 240 120 11/20/96 1/1/97 12/1/06
Park
123 Hy-Vee Shopping Center 944,000 942,435 9.46% 16.53 300 120 9/26/96 11/1/96 10/1/06
124 Frank's Nursery & 956,708 941,334 8.70% 16.53 240 120 1/26/96 3/1/96 2/1/06
Craft Store #65
125 ETI Center 935,000 935,000 8.68% 16.53 240 84 12/4/96 2/1/97 1/1/04
126 8801-8811 Castner 930,000 930,000 8.89% 16.53 300 120 12/3/96 2/1/97 1/1/07
Drive
127 Garden Gate Apartments 900,000 897,545 8.93% 16.53 300 120 8/22/96 10/1/96 9/1/06
128 Frank's Nursery & 909,974 895,351 8.70% 16.53 240 120 1/26/96 3/1/96 2/1/06
Craft Store #244
129 Westview Gardens 850,000 847,547 9.32% 16.53 240 120 9/5/96 11/1/96 10/1/06
Apartments
130 Frank's Nursery & 849,344 835,695 8.70% 16.53 240 120 1/26/96 3/1/96 2/1/06
Craft Store #245
131 Southern Hills 815,625 812,787 9.22% 16.53 300 120 7/29/96 9/1/96 8/1/06
Apartments
131 Wood Haven Apartments N/A N/A N/A N/A N/A N/A N/A N/A N/A
132 Berneta Bivins Office 800,000 800,000 9.20% 16.53 300 120 11/15/96 1/1/97 12/1/06
Building
133 2125 West Spur -- HWY 750,000 750,000 9.03% 16.53 300 120 11/13/96 1/1/97 12/1/06
303
134 Frank's Nursery & 726,793 715,114 8.70% 16.53 240 120 1/26/96 3/1/96 2/1/06
Crafts Store #168
135 Frank's Nursery & 682,878 674,768 9.28% 16.53 240 120 3/14/96 5/1/96 4/1/06
Crafts Store #25
136 43rd Place Industrial 620,000 620,000 8.79% 16.53 300 120 12/9/96 2/1/97 1/1/07
512,101,998 8.74% 303 123
- ------------------
<FN>
<F1> Excludes .5 basis points that will be paid to the Master Servicer as
a reimbursement for Rating Agency surveillance fees.
<F2> Property consists of 54,420 of commercial square feet and 411
multifamily units. As of the occupancy date, 63.3% of the commercial
space was occupied and 99.3% of the multifamily was occupied.
<F3> Modification date is 11/15/96. The first payment under the
modification will be on 1/1/97. Debt service is calculated based upon
the modified payment.
</FN>
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
COLLATERAL DESCRIPTION
REMAIN. REMAIN. MORTGAGE
LOAN AMORT. TERM TO BALLOON LOAN YEAR
NO. TERM MATURITY BALANCE SELLER PROPERTY TYPE PROPERTY CITY STATE ZIP UNITS/SF BUILT
- ---- ------- -------- ---------- -------- ----------------------- ----------------- ----- ----- --------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 350 110 23,924,020 GACC Multifamily Denver CO 80014 958 Unit 1974
2 179 76 12,771,650 GACC Retail-Anchored Wayne PA 19087 222,145 SF 1967
3 360 120 14,956,317 GACC Mixed Use St. Louis MO 63102 54,420 SF 1965
4 291 75 11,078,813 GACC Office/Retail Kendall FL 33143 119,179 SF 1972
5 300 120 9,553,254 MCF Office/R & D Fremont CA 94538 152,928 SF 1987
6 276 120 8,414,036 GACC Retail-Single Tenant Bronx NY 10476 134,032 SF 1994
7 228 71 8,671,275 GACC Industrial/Warehouse Perth Amboy NJ 08861 232,250 SF 1945
8 300 120 8,326,451 MCF Retail-Anchored Laredo TX 78041 206,524 SF 1992
9 358 118 9,012,810 MCF Office Fullerton CA 92635 69,699 SF 1992
10 360 120 8,612,881 MCF Multifamily Henderson NV 89015 260 Unit 1985
11 359 179 7,101,056 BCMC Multifamily Palmdale CA 93550 304 Unit 1993
12 300 144 6,796,143 MCF Retail-Factory Outlet Bourne MA 02561 96,049 SF 1972
13 294 114 7,277,652 GACC Retail-Single Tenant Port Huron MI 48060 193,950 SF 1993
14 300 144 6,440,035 MCF Retail-Anchored Garden Grove CA 92843 131,323 SF 1985
15 360 60 7,965,497 MCF Multifamily Everett WA 98208 264 Unit 1986
16 228 108 5,682,086 MCF Hotel Anaheim CA 92802 313 Unit 1968
17 300 120 6,481,566 MCF Office Riverside CA 92507 110,209 SF 1988
18 356 116 6,931,425 MCF Multifamily Laurel MD 20707 218 Unit 1969
19 300 120 6,345,894 MCF Retail-Anchored Malone NY 14226 179,247 SF 1991
20 240 144 4,586,071 MCF Retail-Single Tenant Livonia MI 48152 109,800 SF 1995
21 359 179 5,910,042 MCF Multifamily Winter Park FL 32792 238 Unit 1986
22 239 143 4,364,683 MCF Office Baltimore MD 21201 290,176 SF 1963
23 297 117 5,774,376 BCMC Retail-Single Tenant Stoneham MA 02180 119,780 SF 1995
24 360 84 5,837,721 MCF Multifamily Orlando FL 32809 318 Unit 1973
25 298 118 5,045,664 GACC Retail-Unanchored Yuma AZ 85364 126,402 SF 1970
26 360 120 4,964,578 MCF Multifamily Bedford TX 76021 284 Unit 1984
27 360 120 4,982,935 MCF Multifamily Houston TX 77058 244 Unit 1979
28 295 115 4,617,074 BCMC Multifamily Auburn Hills MI 48326 280 Unit 1971
29 297 141 4,052,649 MCF Office Rancho Bernardo CA 92127 65,755 SF 1988
30 359 119 4,542,667 GACC Multifamily Grapevine TX 76051 200 Unit 1983
31 299 143 3,910,400 MCF Office San Antonio TX 78216 158,315 SF 1981
32 300 120 4,058,542 MCF Multifamily Wethersfield CT 06109 163 Unit 1963
33 300 120 4,117,820 MCF Retail-Factory Outlet Queensbury NY 12846 52,230 SF 1987
34 300 84 4,313,126 MCF Office Albuquerque NM 87109 77,488 SF 1983
35 285 104 4,065,043 GACC Retail-Unanchored Midlothian VA 23113 65,429 SF 1991
36 297 117 3,870,952 MCF Retail-Unanchored Houston TX 77090 126,429 SF 1981
37 357 117 4,129,689 MCF Multifamily Tulsa OK 74105 232 Unit 1977
38 297 117 3,848,268 MCF Retail-Unanchored Langley Park MD 20783 76,475 SF 1950
39 297 117 3,782,390 MCF Multifamily Bristol CT 06010 250 Unit 1970
40 357 117 4,057,548 MCF Multifamily Leon Valley TX 78238 250 Unit 1983
41 172 172 0 MCF Multifamily Miami FL 33157 210 Unit 1981
42 300 60 4,151,324 MCF Congregate Care Fallbrook CA 92028 75 Unit 1990
43 299 83 3,962,137 GACC Industrial/Warehouse Hialeah FL 33142 237,796 SF 1959
44 289 109 3,445,919 GACC Retail-Unanchored Carrollton TX 75006 71,990 SF 1986
45 359 119 3,625,675 GACC Multifamily San Antonio TX 78232 204 Unit 1984
46 295 295 0 BCMC Multifamily Miami FL 33151 334 Unit 1970
47 359 119 3,052,596 GACC Multifamily San Antonio TX 78233 164 Unit 1982
48 300 144 2,630,005 MCF Retail-Single Tenant Westminster CO 80030 61,488 SF 1994
49 299 119 2,827,845 GACC Retail-Unanchored Corpus Christie TX 78412 51,120 SF 1986
50 300 120 2,668,388 MCF Retail-Unanchored Sterling VA 20166 71,704 SF 1989
51 300 120 2,636,463 MCF Multifamily Texas City TX 77590 200 Unit 1984
52 300 132 2,570,678 MCF Office Landover MD 20785 58,245 SF 1988
53 300 120 2,634,169 MCF Retail-Unanchored Dallas TX 75287 53,551 SF 1986
54 300 84 2,863,390 GACC Industrial Orangeburg NY 10962 102,560 SF 1961
55 299 119 2,619,092 MCF Multifamily Spokane WA 99204 102 Unit 1995
<PAGE>
LOAN YEAR OWNERSHIP
NO. RENOVATED INTEREST
- ---- --------- ---------
1 1996 Fee
2 1990 Fee
3 1994 Leasehold
4 1990 Fee
5 Fee
6 Fee
7 1989 Fee
8 Fee
9 Fee
10 Fee
11 Fee
12 1985 Fee
13 Fee
14 Fee
15 Fee
16 1989 Fee
17 Fee
18 1988 Fee
19 Fee
20 Fee
21 Fee
22 Fee
23 Fee
24 1995 Fee
25 1983 Fee
26 Fee
27 Fee
28 Fee
29 1996 Fee
30 Fee
31 Fee
32 Fee
33 Fee
34 Fee
35 Fee
36 Fee
37 Fee
38 1992 Fee
39 Fee
40 Fee
41 1993 Fee
42 Fee
43 Fee
44 Fee
45 Fee
46 Fee
47 Fee
48 Fee
49 Fee
50 Fee
51 Fee
52 Fee
53 Fee
54 1990 Fee
55 Fee
<PAGE>
COLLATERAL DESCRIPTION
REMAIN. REMAIN. MORTGAGE
LOAN AMORT. TERM TO BALLOON LOAN YEAR
NO. TERM MATURITY BALANCE SELLER PROPERTY TYPE PROPERTY CITY STATE ZIP UNITS/SF BUILT
- ---- ------- -------- ---------- -------- ----------------------- ----------------- ----- ----- --------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 296 111 2,670,842 BCMC Office/R & D Canton MA 02021 54,540 SF 1991
57 300 144 2,386,715 MCF Retail-Single Tenant Glendale AZ 85308 61,648 SF 1994
58 358 142 2,491,512 BCMC Multifamily Salt Lake City UT 84111 89 Unit 1910
59 300 120 2,365,523 BCMC Retail-Anchored Bakersfield CA 93306 39,460 SF 1984
60 297 117 2,319,352 MCF Office Roseville MN 55113 83,364 SF 1974
61 297 117 2,273,919 BCMC Multifamily Westland MI 48185 144 Unit 1974
62 299 119 2,236,517 BCMC Retail-Factory Outlet Dillon CO 80435 24,029 SF 1982
63 300 120 2,159,826 MCF Office/Warehouse West St. Paul MN 55077 64,417 SF 1988
64 300 120 2,065,206 MCF Office Bethesda MD 20814 23,599 SF 1982
65 201 117 1,526,211 MCF Office Davis CA 95616 57,538 SF 1986
66 300 120 2,047,221 MCF Multifamily Newport News VA 23608 140 Unit 1970
67 297 117 2,006,497 MCF Multifamily Carrollton TX 75006 172 Unit 1969
68 240 144 1,446,087 MCF Multifamily Ringgold GA 30736 69 Unit 1990
68 N/A N/A N/A N/A Multifamily East Ridge TN 37412 60 Unit 1989
69 296 116 1,961,535 BCMC Multifamily Orlando FL 32810 176 Unit 1975
70 294 114 1,919,700 BCMC Multifamily Ann Arbor MI 48104 120 Unit 1972
71 300 120 1,838,949 MCF Multifamily Euless TX 76040 192 Unit 1968
72 298 118 1,885,282 MCF Office Bloomfield CT 06002 43,049 SF 1989
73 299 179 1,430,924 MCF Multifamily Winter Park FL 32792 111 Unit 1973
74 293 113 1,754,971 BCMC Multifamily East Point GA 30344 128 Unit 1969
75 300 120 1,735,928 MCF Retail-Unanchored Gaithersburg MD 20879 16,400 SF 1991
76 119 119 0 MCF Mobile Home Park Glenn Heights TX 75115 379 Unit 1982
77 300 120 1,613,786 MCF Office Las Vegas NV 89121 35,178 SF 1983
78 298 142 1,509,958 MCF Retail-Unanchored San Antonio TX 78216 29,609 SF 1975
79 300 96 1,676,815 MCF Office/Retail Houston TX 77035 142,370 SF 1982
80 300 120 1,567,331 MCF Industrial/Warehouse Irwindale CA 91010 69,304 SF 1978
81 240 144 1,122,157 MCF Multifamily Tempe AZ 85252 82 Unit 1980
82 358 166 1,509,235 BCMC Multifamily Santa Rosa CA 95403 77 Unit 1922
83 240 144 1,080,918 MCF Multifamily Stillwater OK 74074 125 Unit 1972
84 297 141 1,379,693 MCF Industrial/Warehouse Commerce CA 90040 108,080 SF 1953
85 300 120 1,443,661 BCMC Retail-Anchored Duncanville TX 75137 61,019 SF 1979
86 234 78 1,471,908 GACC Retail-Single Tenant Washington T'shp. PA 16412 56,850 SF 1988
87 300 120 1,412,253 MCF Multifamily Land O' Lakes FL 34639 120 Unit 1988
88 238 118 1,224,844 MCF Multifamily Colorado Springs CO 80910 54 Unit 1965
89 295 115 1,410,971 GACC Multifamily Kansas City MO 64131 166 Unit 1967
90 298 142 1,290,204 MCF Office Dallas TX 75219 34,725 SF 1986
91 295 115 1,373,257 BCMC Multifamily Kalamazoo MI 49007 132 Unit 1966
92 300 120 1,330,154 MCF Office/Retail Worcester MA 01603 40,913 SF 1988
93 293 114 1,278,179 GACC Retail-Unanchored Gloucester VA 23061 24,075 SF 1994
94 300 120 1,231,653 BCMC Multifamily Baytown TX 77520 138 Unit 1972
95 180 180 0 MCF Multifamily Flagstaff AZ 86001 104 Unit 1994
96 296 116 1,191,370 MCF Multifamily Harlingen TX 78550 72 Unit 1973
96 N/A N/A N/A N/A Office Harlingen TX 78550 15,890 SF 1973
97 179 179 0 MCF Multifamily Plainfield NJ 07601 84 Unit 1929
98 297 141 1,076,328 MCF Office Scottsdale AZ 85253 25,444 SF 1976
99 286 70 1,255,637 GACC Retail-Anchored Lake Worth FL 33463 57,254 SF 1973
100 299 119 1,119,533 GACC Retail-Anchored Callahan FL 32011 91,685 SF 1972
101 178 142 440,269 MCF Industrial/Warehouse El Cajon CA 92020 91,534 SF 1961
102 230 110 936,740 MCF Retail-Single Tenant Bloomfield MI 48302 23,111 SF 1992
103 300 120 1,067,102 MCF Multifamily Hackensack NJ 07601 28 Unit 1993
104 230 110 926,599 MCF Retail-Single Tenant Bricktown NJ 08723 20,877 SF 1985
105 358 238 818,135 BCMC Multifamily Great Falls MT 59404 40 Unit 1916
106 240 144 772,644 MCF Mini-Warehouse Ringgold GA 30736 138 Unit 1992
106 N/A N/A N/A N/A Mini-Warehouse Rossville GA 30756 36 Unit 1991
107 300 120 1,021,637 MCF Multifamily Tempe AZ 85281 55 Unit 1981
<PAGE>
LOAN YEAR OWNERSHIP
NO. RENOVATED INTEREST
- ------ --------- ---------
56 Fee
57 Fee
58 1989 Fee
59 Fee
60 Fee
61 1995 Fee
62 1994 Fee
63 Fee
64 Fee
65 Fee
66 Fee
67 1995 Fee
68 Fee
68 Fee
69 Fee
70 Fee
71 1993 Fee
72 Fee
73 Fee
74 1995 Fee
75 Fee
76 Fee
77 Fee
78 1994 Fee
79 Fee
80 Fee
81 Fee
82 1992 Fee
83 1988 Fee
84 Fee
85 1989 Fee
86 Fee
87 Fee
88 Fee
89 1994 Fee
90 1993 Fee
91 1995 Fee
92 Fee
93 Fee
94 1996 Fee
95 Fee
96 Fee
96 Fee
97 1993 Fee
98 1992 Fee
99 Fee
100 Fee
101 Fee
102 Fee
103 Fee
104 Fee
105 1991 Fee
106 Fee
106 Fee
107 Fee
<PAGE>
COLLATERAL DESCRIPTION
REMAIN. REMAIN. MORTGAGE
LOAN AMORT. TERM TO BALLOON LOAN YEAR
NO. TERM MATURITY BALANCE SELLER PROPERTY TYPE PROPERTY CITY STATE ZIP UNITS/SF BUILT
- ---- ------- -------- ---------- -------- ----------------------- ----------------- ----- ----- --------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
108 358 118 1,118,472 MCF Multifamily Studio City CA 91604 16 Unit 1995
109 296 116 1,033,051 MCF Multifamily Harlingen TX 78550 104 Unit 1973
110 298 118 1,005,627 MCF Office Boca Raton FL 33486 24,519 SF 1985
111 359 143 991,200 MCF Multifamily Dallas TX 75228 104 Unit 1983
112 264 180 593,506 MCF Multifamily Philadelphia PA 19119 66 Unit 1961
113 359 179 868,579 MCF Multifamily Klamath Falls OR 97603 49 Unit 1995
114 297 177 709,819 MCF Multifamily Wheatfield NY 14301 24 Unit 1993
114 N/A N/A N/A N/A Multifamily Niagara Falls NY 14304 12 Unit 1992
114 N/A N/A N/A N/A Multifamily Lewiston NY 14092 16 Unit 1992
115 298 142 816,728 MCF Office/Warehouse Albuquerque NM 87106 29,972 SF 1990
116 296 116 867,763 MCF Multifamily Harlingen TX 78552 69 Unit 1978
117 298 178 682,614 MCF Multifamily Oklahoma City OK 73135 104 Unit 1984
118 360 180 784,378 MCF Multifamily Helena MT 59601 36 Unit 1995
119 297 117 828,151 MCF Multifamily Houston TX 77007 156 Unit 1961
120 237 141 625,354 MCF Retail-Unanchored Orlando FL 32807 37,200 SF 1980
121 298 118 823,325 MCF Retail-Unanchored Miami FL 33183 17,123 SF 1982
122 240 120 673,191 MCF Mobile Home Park Alamosa CO 81101 185 Unit 1973
123 298 118 789,151 MCF Retail-Anchored New Ulm MN 56073 51,297 SF 1977
124 230 110 673,611 MCF Retail-Single Tenant Roseville MN 55113 18,491 SF 1981
125 240 84 767,316 MCF Industrial/Warehouse West St. Paul MN 55118 75,802 SF 1960
126 300 120 767,524 MCF Industrial/Warehouse El Paso TX 79907 41,496 SF 1988
127 297 117 743,454 MCF Multifamily Irving TX 75061 55 Unit 1974
128 230 110 640,706 MCF Retail-Single Tenant Eden Prairie MN 55344 18,569 SF 1990
129 238 118 609,238 MCF Multifamily Houston TX 77055 138 Unit 1969
130 230 110 598,016 MCF Retail-Single Tenant Eagan MN 55123 18,558 SF 1990
131 296 116 678,218 MCF Multifamily Sapulpa OK 74066 56 Unit 1975
131 N/A N/A N/A N/A Multifamily Sapulpa OK 74066 40 Unit 1971
132 300 120 664,928 MCF Office Amarillo TX 79101 21,758 SF 1980
133 300 120 620,970 MCF Office/Warehouse Grand Prairie TX 75053 55,700 SF 1981
134 230 110 511,729 MCF Retail-Single Tenant Battle Creek MI 49815 18,100 SF 1986
135 232 112 488,902 MCF Retail-Single Tenant<F4> Grand Rapids MI 49505 30,060 SF 1969
136 300 120 510,490 MCF Industrial/Warehouse Tucson AZ 85717 39,263 SF 1985
300 120
<PAGE>
LOAN YEAR OWNERSHIP
NO. RENOVATED INTEREST
- ----- --------- ---------
108 Fee
109 Fee
110 1996 Fee
111 Fee
112 Fee
113 Fee
114 Fee
114 Fee
114 Fee
115 Fee
116 Fee
117 Fee
118 Fee
119 1995 Fee
120 Fee
121 1992 Fee
122 1994 Fee
123 1990 Fee
124 Fee
125 1981 Fee
126 Fee
127 Fee
128 Fee
129 1995 Fee
130 Fee
131 Fee
131 Fee
132 Fee
133 Fee
134 Fee
135 Fee
136 Fee
- -------------------
<FN>
<F1> Excludes .5 basis points that will be paid to the Master Servicer as
a reimbursement for Rating Agency surveillance fees.
<F2> Property consists of 54,420 of commercial square feet and 411
multifamily units. As of the occupancy date, 63.3% of the commercial
space was occupied and 99.3% of the multifamily was occupied.
<F3> Modification date is 11/15/96. The first payment under the
modification will be on 1/1/97. Debt service is calculated based upon
the modified payment.
<F4> E&B Marine is leasing 10,150 sf from Frank's.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TENANT DATA COLLATERAL VALUE
LOAN PCT. OF LEASE EXP. APPRAISED APPRAIS. APPRAIS. BALLOON
NO. LARGEST TENANT SF PROPERTY DATE VALUE DATE LTV LTV
- ---- ----------------------------------- ------- -------- ---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 N/A N/A N/A N/A 35,000,000 12/12/95 78.0% 68.4%
2 Circuit City 30,686 13.8% 6/01/08 32,000,000 10/25/96 55.3% 39.9%
3 Miller Marketing 10,333 19.0% 8/31/97 22,300,000 7/30/96 75.7% 67.1%
4 Bed, Bath & Beyond 36,694 30.8% 4/24/00 17,100,000 12/6/95 72.2% 64.8%
5 LAM Research 152,928 100.0% 12/31/14 18,060,000 10/11/96 64.8% 52.9%
6 K Mart 134,032 100.0% 11/30/19 15,000,000 10/1/96 71.3% 56.1%
7 Preferred Freezer 232,250 100.0% 11/30/15 17,100,000 9/1/95 60.2% 50.7%
8 Toys R Us 45,000 21.8% 1/31/18 14,100,000 10/25/96 72.3% 59.1%
9 St. Jude Cancer Center 29,048 41.7% 4/14/06 13,400,000 8/21/96 74.9% 67.3%
10 N/A N/A N/A N/A 12,300,000 11/1/96 79.7% 70.0%
11 N/A N/A N/A N/A 10,600,000 8/31/96 85.0% 67.0%
12 Bed N Bath 11,036 11.5% 4/30/04 15,200,000 10/17/96 58.7% 44.7%
13 K Mart 193,950 100.0% 11/30/18 12,200,000 2/26/96 71.0% 59.7%
14 Service Merchandise 31,684 24.1% 2/28/01 12,000,000 9/27/96 70.8% 53.7%
15 N/A N/A N/A N/A 11,225,000 11/14/96 74.8% 71.0%
16 N/A N/A N/A N/A 19,200,000 7/26/95 40.9% 29.6%
17 County of Riverside 66,440 60.3% 1/17/04 10,500,000 8/19/96 74.8% 61.7%
18 N/A N/A N/A N/A 9,850,000 6/27/96 78.3% 70.4%
19 K-Mart 86,749 48.4% 1/31/17 10,580,000 10/3/96 72.8% 60.0%
20 Builder's Square II 109,800 100.0% 10/14/20 12,000,000 11/01/96 62.5% 38.2%
21 N/A N/A N/A N/A 9,500,000 10/7/96 78.6% 62.2%
22 Crown Central Petroleum 67,521 23.3% 12/31/03 10,500,000 9/23/96 67.8% 41.6%
23 B J's Warehouse Club 119,600 99.8% 7/15/15 10,600,000 4/8/96 65.9% 54.5%
24 N/A N/A N/A N/A 7,900,000 11/5/96 79.7% 73.9%
25 Walgreen's 28,000 22.2% 2/28/99 8,300,000 4/15/96 73.0% 60.8%
26 N/A N/A N/A N/A 7,600,000 11/13/96 74.3% 65.3%
27 N/A N/A N/A N/A 8,300,000 10/12/96 67.8% 60.0%
28 N/A N/A N/A N/A 7,550,000 11/30/95 73.2% 61.2%
29 Cymer Laser Technologies 65,755 100.0% 1/01/10 7,650,000 7/15/96 67.8% 53.0%
30 N/A N/A N/A N/A 6,480,000 8/1/96 78.7% 70.1%
31 Prudential Insurance, Inc. 57,807 36.5% 7/31/02 14,700,000 7/20/96 34.3% 26.6%
32 N/A N/A N/A N/A 6,400,000 10/16/96 78.1% 63.4%
33 Polo-Ralph Lauren 7,500 14.4% 6/30/99 7,000,000 10/11/96 71.4% 58.8%
34 The Insurance Center 12,720 16.4% 12/31/01 7,400,000 11/6/96 65.5% 58.3%
35 Ruth Chris' Steak 9,205 14.1% 11/30/06 7,500,000 7/24/96 64.1% 54.2%
36 Louis Shanks Furniture 40,698 32.2% 12/31/04 6,100,000 7/26/96 76.0% 63.5%
37 N/A N/A N/A N/A 5,850,000 7/16/96 79.3% 70.6%
38 Fairlanes Bowling 39,200 51.3% 6/30/04 6,900,000 7/25/96 66.9% 55.8%
39 N/A N/A N/A N/A 5,775,000 7/10/96 78.8% 65.5%
40 N/A N/A N/A N/A 6,200,000 7/9/96 73.3% 65.4%
41 N/A N/A N/A N/A 6,500,000 11/26/95 69.4% 0.0%
42 N/A N/A N/A N/A 6,175,000 7/16/96 72.5% 67.2%
43 Inter American Transport Equipment 237,796 100.0% 10/07/21 6,600,000 2/15/96 66.6% 60.0%
44 The Gym 11,936 16.6% 8/01/01 6,200,000 9/14/95 67.0% 55.6%
45 N/A N/A N/A N/A 5,560,000 7/30/96 73.7% 65.2%
46 N/A N/A N/A N/A 6,780,000 4/4/96 54.3% 0.0%
47 N/A N/A N/A N/A 4,900,000 7/30/96 70.2% 62.3%
48 Sports & Recreation 61,488 100.0% N/A 6,100,000 10/15/96 56.0% 43.1%
49 Millers Outpost 20,000 39.1% 1/31/02 4,700,000 9/5/96 72.3% 60.2%
50 Belfort Furniture 34,235 47.7% 2/1/18 6,100,000 11/10/96 53.3% 43.7%
51 N/A N/A N/A N/A 4,700,000 9/5/96 68.9% 56.1%
52 The Developmental School 20,931 35.9% 8/31/97 4,600,000 10/10/96 69.6% 55.9%
53 Allens Hardware 10,326 19.3% 10/31/98 4,350,000 10/31/96 73.6% 60.6%
54 ICN Pharmaceuticals 102,560 100.0% 12/20/21 4,750,000 9/23/96 67.4% 60.3%
55 N/A N/A N/A N/A 4,370,000 8/19/96 72.6% 59.9%
56 Delphax Company 54,540 100.0% 3/01/06 4,580,000 3/29/96 68.6% 58.3%
57 Sports & Recreation 61,648 100.0% 10/31/21 4,810,000 10/19/96 64.4% 49.6%
58 N/A N/A N/A N/A 3,410,000 9/10/96 84.6% 73.1%
59 Union Bank 4,380 11.1% 11/01/06 3,900,000 9/9/96 73.7% 60.7%
60 Gausman & Moore 11,143 13.4% 3/31/03 5,000,000 7/31/96 55.9% 46.4%
61 N/A N/A N/A N/A 3,550,000 11/29/95 76.8% 64.1%
62 Timberland 5,118 21.3% 6/30/01 4,000,000 9/1/96 67.4% 55.9%
63 Andal Corporation 24,202 37.6% 11/30/04 3,550,000 10/24/96 73.9% 60.8%
64 Drs. Goldstein, Blundon 2,525 10.7% 10/31/99 4,000,000 11/1/96 63.1% 51.6%
65 Soil Conservation 26,450 46.0% 10/03/98 4,470,000 5/24/96 56.1% 34.1%
66 N/A N/A N/A N/A 3,400,000 10/4/96 73.5% 60.2%
67 N/A N/A N/A N/A 3,400,000 7/25/96 71.5% 59.0%
68 N/A N/A N/A N/A 1,700,000 9/26/96 75.0% 45.2%
68 N/A N/A N/A N/A 1,500,000 9/26/96 N/A N/A
69 N/A N/A N/A N/A 3,650,000 4/15/96 64.4% 53.7%
70 N/A N/A N/A N/A 3,250,000 12/28/95 71.1% 59.1%
71 N/A N/A N/A N/A 3,080,000 10/30/96 73.1% 59.7%
72 Lindberg & Ripple 7,335 17.0% 12/31/99 3,000,000 7/25/96 74.7% 62.8%
73 N/A N/A N/A N/A 3,000,000 10/2/96 72.9% 47.7%
74 N/A N/A N/A N/A 3,750,000 12/19/95 56.3% 46.8%
75 Reliable La-Z-Boy 8,000 48.8% 10/13/98 3,000,000 10/16/96 70.0% 57.9%
76 N/A N/A N/A N/A 4,480,000 9/30/96 44.4% 0.0%
77 Webster University 4,091 11.6% 4/30/00 3,000,000 10/20/96 65.0% 53.8%
78 Shepherd's Shoppe 16,579 56.0% 9/30/02 2,740,000 7/17/96 71.0% 55.1%
79 Houston Shutter 17,740 12.5% 12/31/99 2,840,000 10/18/96 67.8% 59.0%
80 A & C Plastics, Inc. 8,816 12.7% 3/11/99 2,600,000 7/26/96 73.1% 60.3%
<PAGE>
TENANT DATA COLLATERAL VALUE
LOAN PCT. OF LEASE EXP. APPRAISED APPRAIS. APPRAIS. BALLOON
NO. LARGEST TENANT SF PROPERTY DATE VALUE DATE LTV LTV
- ---- ----------------------------------- ------- -------- ---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
81 N/A N/A N/A N/A 2,475,000 8/22/96 74.7% 45.3%
82 N/A N/A N/A N/A 2,390,000 9/5/96 76.9% 63.1%
83 N/A N/A N/A N/A 2,700,000 10/25/96 66.7% 40.0%
84 Master Warehousing Services 55,780 51.6% 8/31/98 2,700,000 7/3/96 65.6% 51.1%
85 Beall's 21,015 34.4% 1/31/05 2,600,000 10/22/96 67.7% 55.5%
86 Ames Department Store 56,850 100.0% 1/30/09 2,350,000 2/27/96 74.3% 62.6%
87 N/A N/A N/A N/A 2,500,000 10/21/96 69.2% 56.5%
88 N/A N/A N/A N/A 2,450,000 9/9/96 70.2% 50.0%
89 N/A N/A N/A N/A 2,400,000 5/3/96 70.8% 58.8%
90 Ferrer, Montes & Polrot, P.C. 34,724 100.0% 8/31/08 2,900,000 8/21/96 56.8% 44.5%
91 N/A N/A N/A N/A 2,600,000 11/28/95 63.2% 52.8%
92 Children's Playland 9,928 24.3% 12/31/04 2,550,000 9/03/96 62.7% 52.2%
93 Fashion Bug 9,350 38.8% 10/31/99 2,260,000 11/1/95 68.1% 56.6%
94 N/A N/A N/A N/A 2,200,000 9/16/96 68.7% 56.0%
95 N/A N/A N/A N/A 2,520,000 10/23/96 59.5% 0.0%
96 WK Associates N/A N/A N/A 1,961,000 6/10/96 72.9% 60.8%
96 WK Associates 2,050 12.9% 4/15/97 N/A N/A N/A N/A
97 N/A N/A N/A N/A 2,200,000 8/5/96 63.5% 0.0%
98 Drs. Chiappetti & Huntington 3,349 13.2% 1/31/01 2,050,000 4/2/96 67.6% 52.5%
99 Office Depot 23,168 40.5% 4/1/01 2,050,000 5/15/95 67.4% 61.3%
100 Winn Dixie 39,211 42.8% 5/20/07 2,250,000 8/12/96 59.9% 49.8%
101 Precision Metal Products, Inc. 87,000 95.0% 6/30/06 2,370,000 7/1/96 56.7% 18.6%
102 Frank's Nursery & Crafts Store #277 23,111 100.0% N/A 2,200,000 8/21/95 59.5% 42.6%
103 N/A N/A N/A N/A 1,680,000 10/29/96 77.4% 63.5%
104 Frank's Nursery & Crafts Store #626 20,877 100.0% N/A 2,250,000 8/21/95 57.5% 41.2%
105 N/A N/A N/A N/A 1,500,000 9/5/96 84.9% 54.5%
106 N/A N/A N/A N/A 1,234,000 9/26/96 66.9% 41.3%
106 N/A N/A N/A N/A 635,000 9/26/96 N/A N/A
107 N/A N/A N/A N/A 1,700,000 10/4/96 73.5% 60.1%
108 N/A N/A N/A N/A 1,800,000 7/3/96 69.4% 62.1%
109 N/A N/A N/A N/A 1,948,000 6/6/96 63.9% 53.0%
110 Parren Corporation 14,025 57.2% 8/31/98 1,950,000 6/11/96 62.0% 51.6%
111 N/A N/A N/A N/A 1,800,000 5/14/96 64.4% 55.1%
112 N/A N/A N/A N/A 1,470,000 9/25/96 74.8% 40.4%
113 N/A N/A N/A N/A 2,110,000 8/19/96 52.1% 41.2%
114 N/A N/A N/A N/A 790,000 6/11/96 66.5% 44.6%
114 N/A N/A N/A N/A 300,000 6/11/96 N/A N/A
114 N/A N/A N/A N/A 500,000 6/11/96 N/A N/A
115 Williams Glass Company, Inc. 11,532 38.5% 12/31/07 1,550,000 4/19/96 67.6% 52.7%
116 N/A N/A N/A N/A 1,662,000 6/4/96 62.9% 52.2%
117 N/A N/A N/A N/A 1,520,000 8/23/96 67.6% 44.9%
118 N/A N/A N/A N/A 2,593,500 9/5/96 38.6% 30.2%
119 N/A N/A N/A N/A 2,500,000 7/3/96 39.9% 33.1%
120 Big Lots (Malone & Hyde) 25,200 67.7% 5/31/05 1,700,000 7/1/96 58.6% 36.8%
121 Miami Banquet Hall 3,669 21.4% 11/30/98 1,350,000 6/28/96 72.5% 61.0%
122 N/A N/A N/A N/A 1,400,000 9/5/96 67.9% 48.1%
123 K-Mart/(Hy-Vee Sublessee) 39,797 77.6% 7/31/03 1,275,000 8/28/96 73.9% 61.9%
124 Frank's Nursery & Crafts Store #65 18,491 100.0% N/A 1,610,000 8/21/95 58.5% 41.8%
125 Eclipse Concert Systems 5,907 7.8% 3/31/97 2,300,000 11/1/96 40.7% 33.4%
126 Robles Intl. 25 25,277 60.9% 1/1/98 1,250,000 10/24/96 74.4% 61.4%
127 N/A N/A N/A N/A 1,200,000 10/10/96 74.8% 62.0%
128 Frank's Nursery & Crafts Store #244 18,569 100.0% N/A 1,500,000 8/22/95 59.7% 42.7%
129 N/A N/A N/A N/A 1,900,000 6/20/96 44.6% 32.1%
130 Frank's Nursery & Crafts Store #245 18,558 100.0% N/A 1,510,000 8/22/95 55.3% 39.6%
131 N/A N/A N/A N/A 570,000 5/17/96 71.9% 60.0%
131 N/A N/A N/A N/A 560,000 5/17/96 N/A N/A
132 Coldwater Cattle 21,758 100.0% 10/24/21 1,200,000 10/7/96 66.7% 55.4%
133 Winner's Circle 5,000 9.0% 2/28/98 1,125,000 9/18/96 66.7% 55.2%
134 Frank's Nursery & Crafts Store #168 18,100 100.0% N/A 1,275,000 8/22/95 56.1% 40.1%
135 Frank's Nursery & Crafts Store #25 19,910 66.2% N/A 2,100,000 8/25/95 32.1% 23.3%
136 Hiline Design 16,195 41.2% 9/30/99 1,100,000 9/23/96 56.4% 46.4%
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
</TABLE>
<TABLE>
<CAPTION>
COLLATERAL OPERATING PERFORMANCE
UNDER- UNDER- ANNUAL UNDER-
LOAN CURRENT OCC. AS WRITTEN WRITTEN CASH DEBT WRITTEN 1994 CASH 1995 CASH
NO. OCCUPANCY OF NOI FLOW SERVICE DSCR 1994 NOI FLOW 1995 NOI FLOW
- ---- --------- -------- --------- ------------ --------- ------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 91.54% 12/29/95 3,180,449 3,180,449 2,332,112 1.36 3,055,476 3,055,476 3,151,253<F5> 2,959,653<F5>
2 92.25% 11/6/96 3,040,987 2,951,631 2,105,916 1.40 2,851,547 2,851,547 2,713,770 2,713,770
3 87.00% 10/24/96 2,062,078 2,007,658 1,554,127 1.29 1,273,843 1,273,843 1,913,575 1,913,575
4 99.43% 7/3/96 1,580,424 1,520,424 1,207,039 1.26 1,570,639 1,570,639 1,553,293 1,553,293
5 100.00% 10/1/96 1,560,110 1,521,239 1,124,868 1.35 1,706,676 1,706,676 1,696,800 1,696,800
6 100.00% 10/10/96 1,437,493 1,430,791 1,093,868 1.31 N/A N/A 1,487,416 1,487,416
7 100.00% 11/11/96 1,530,136 1,530,136 1,119,915 1.37 951,277 951,277 1,230,953 1,230,953
8 94.55% 11/11/96 1,334,520 1,285,510 979,831 1.31 1,262,551 1,262,551 1,790,203 1,790,203
9 99.73% 10/8/96 1,291,112 1,232,100 985,642 1.25 913,816 883,254 994,114 947,238
10 95.77% 10/28/96 1,164,681 1,164,681 870,297 1.34 1,030,361 947,530 988,947 939,977
11 89.80% 7/31/96 1,032,910 1,032,910 853,671 1.21 845,754 845,754 902,552 881,941
12 100.00% 6/1/96 1,276,476 1,199,531 872,370 1.38 1,178,559 1,178,559 1,438,355 1,438,355
13 100.00% 1/1/96 1,207,844 1,207,844 911,414 1.33 1,227,239 1,227,239 1,227,239 1,227,239
14 100.00% 8/25/96 1,234,189 1,158,379 817,898 1.42 1,232,046 1,181,474 1,294,648 1,192,491
15 93.56% 10/19/96 952,597 952,597 724,500 1.31 1,012,367 941,663 1,081,431 968,391
16 73.16% 4/1/96 2,121,500 2,121,500 863,736 2.46 2,246,172 2,246,172 2,568,611 2,568,611
17 83.94% 10/23/96 1,103,289 1,058,861 784,725 1.35 818,185 813,386 988,959 925,394
18 93.58% 11/4/96 986,404 986,404 758,425 1.30 973,116 973,116 982,699 982,699
19 97.75% 8/28/96 1,145,898 1,118,808 764,689 1.46 1,320,850 1,319,807 1,185,393 1,185,393
20 100.00% 10/15/95 1,103,688 1,076,954 802,821 1.34 N/A N/A N/A N/A
21 97.06% 9/27/96 858,204 858,204 715,110 1.20 848,510 760,518 804,063 704,581
22 82.08% 10/1/96 1,364,141 1,001,640 765,421 1.31 1,388,579 1,378,034 1,701,814 1,695,590
23 99.85% 11/1/96 966,216 966,216 697,462 1.39 N/A N/A N/A N/A
24 91.51% 10/21/96 770,049 770,049 562,652 1.37 427,914 (307,086) 526,185 (208,815)
25 100.00% 7/31/96 861,841 801,841 620,980 1.29 948,589 948,589 952,979 952,979
26 98.59% 11/1/96 677,654 677,654 501,279 1.35 717,927 717,927 739,781<F5> 739,781<F5>
27 93.03% 10/1/96 758,522 758,522 518,538 1.46 860,865 802,999 827,613 767,783
28 93.21% 9/30/96 716,162 716,162 569,891 1.26 652,394 652,394 757,070 757,070
29 100.00% 8/12/96 772,215 688,162 541,721 1.27 508,085 508,085 696,513 696,513
30 94.00% 8/28/96 607,983 607,983 482,773 1.26 546,624 504,624 571,718 531,718
31 97.47% 4/28/96 908,722 673,045 516,461 1.30 1,091,810 942,528 804,893 804,893
32 98.77% 10/8/96 636,226 636,226 471,067 1.35 650,204 633,027 660,351 613,038
33 100.00% 8/9/96 723,273 675,175 495,326 1.36 794,128 794,128 783,588 783,588
34 99.95% 10/24/96 680,093 592,843 468,642 1.27 524,254 490,071 658,804 658,804
35 100.00% 6/30/95 671,236 652,780 500,176 1.31 565,165 549,523 N/A N/A
36 85.97% 5/1/96 725,326 658,982 478,631 1.38 570,716 536,109 704,162 674,974
37 93.97% 8/1/96 537,275 537,275 435,723 1.23 596,616 596,616 547,813 547,813
38 100.00% 6/1/96 675,263 640,100 473,890 1.35 606,691 588,941 735,821 615,299
39 86.40% 8/19/96 610,155 610,155 463,337 1.32 525,831 525,831 808,421 808,421
40 96.40% 8/1/96 618,395 618,395 432,461 1.43 567,751 202,387 689,604 632,170
41 99.52% 10/15/96 677,617 677,617 560,409 1.21 678,300 607,328 768,798 687,396
42 97.33% 10/10/96 613,385 613,385 431,683 1.42 553,671 553,671 623,120 623,120
43 100.00% 8/8/96 603,694 579,693 455,088 1.27 N/A N/A N/A N/A
44 100.00% 10/20/95 617,199 593,199 410,600 1.44 535,634 535,634 629,284 625,067
45 92.65% 8/16/96 501,557 501,557 374,824 1.34 534,148 499,148 557,774 522,774
46 92.81% 8/10/96 585,659 585,659 357,222 1.64 N/A N/A N/A N/A
47 95.12% 8/16/96 411,016 411,016 319,751 1.29 493,131 463,131 461,434 431,434
48 100.00% 11/1/96 520,812 511,233 343,723 1.49 N/A N/A N/A N/A
49 95.21% 9/1/96 492,972 460,256 348,841 1.32 503,580 503,580 508,871 508,871
50 100.00% 9/1/96 557,179 508,143 318,519 1.60 434,157 (30,108) 636,463 449,050
51 87.00% 11/14/96 407,553 407,553 307,850 1.32 499,211 440,297 466,405 402,173
52 98.02% 10/1/96 504,888 448,220 326,469 1.37 N/A N/A 490,920 429,477
53 95.51% 10/31/96 466,339 432,959 316,486 1.37 313,459 313,459 332,258 332,258
54 100.00% 11/25/96 451,892 419,482 319,626 1.31 N/A N/A N/A N/A
55 95.10% 8/1/96 405,036 405,036 316,349 1.28 N/A N/A N/A N/A
<PAGE>
COLLATERAL OPERATING PERFORMANCE
UNDER- UNDER- ANNUAL UNDER-
LOAN CURRENT OCC. AS WRITTEN WRITTEN CASH DEBT WRITTEN 1994 CASH 1995 CASH
NO. OCCUPANCY OF NOI FLOW SERVICE DSCR 1994 NOI FLOW 1995 NOI FLOW
- ---- --------- -------- --------- ------------ --------- ------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
56 100.00% 11/1/96 460,725 460,725 331,572 1.39 455,033 455,033 456,369 456,369
57 100.00% 11/1/96 476,171 467,164 311,926 1.50 N/A N/A N/A N/A
58 91.01% 8/20/96 335,570 327,425 283,350 1.16 270,841 270,841 349,704 349,704
59 88.43% 11/1/96 405,825 380,728 283,874 1.34 47,754 47,754 268,032 268,032
60 96.39% 10/20/96 478,567 382,153 283,121 1.35 555,763 543,003 433,653 420,906
61 93.06% 9/30/96 350,623 350,623 280,509 1.25 371,962 371,962 390,805 232,193
62 87.60% 9/1/96 386,942 370,552 273,010 1.36 148,173 148,173 276,522 276,522
63 88.20% 9/5/96 377,713 331,042 259,189 1.28 294,513 252,916 348,497 334,529
64 100.00% 10/31/96 387,824 351,587 244,188 1.44 391,282 391,282 416,208 416,208
65 100.00% 10/22/96 443,767 394,566 298,770 1.32 379,166 333,529 517,584 512,253
66 96.43% 7/1/96 332,332 332,332 242,782 1.37 274,306 244,394<F6> 336,098 288,622
67 94.77% 6/1/96 331,578 331,578 241,073 1.38 250,928 (413,195) 421,716 314,448
68 91.30% 10/08/96 194,078 194,078 249,569 1.35 95,395 95,395 210,334 210,334
68 98.33% 10/08/96 143,252 143,252 N/A N/A 172,767 172,767 155,464 155,464
69 90.91% 9/1/96 334,765 334,765 241,551 1.39 383,319 383,319 277,670 277,670
70 81.67% 9/30/96 290,986 290,986 232,419 1.25 248,450 248,450 313,421 221,572
71 89.58% 10/8/96 304,739 304,739 217,047 1.40 187,786 136,256 294,086 294,086
72 87.80% 9/5/96 361,442 303,516 238,565 1.27 N/A N/A 283,015 167,633
73 98.20% 9/27/96 285,012 285,012 214,277 1.33 278,584 167,776 283,594 247,220
74 94.53% 9/30/96 348,098 348,098 212,600 1.64 242,040 242,040 428,429 428,429
75 99.39% 10/31/96 301,588 286,099 210,788 1.36 317,645 317,645 327,147 327,147
76 84.17% 9/30/96 462,684 462,684 301,689 1.53 486,430 486,430 522,919 522,919
77 93.59% 11/1/96 304,594 271,249 196,532 1.38 233,815 216,800 352,405 345,340
78 100.00% 8/3/96 327,005 302,643 199,425 1.52 292,373 283,073 273,349 273,349
79 94.03% 10/9/96 281,747 253,987 189,601 1.34 314,876 310,270 341,058 341,058
80 91.98% 10/16/96 274,038 258,494 189,311 1.37 267,424 265,774 273,495 273,495
81 96.34% 9/30/96 247,204 247,204 194,911 1.27 N/A N/A 178,106 178,106
82 100.00% 9/1/96 206,697 206,697 179,951 1.15 178,990 178,990 234,274 234,274
83 98.40% 10/15/96 254,130 254,130 185,949 1.37 317,210 267,833 328,434 260,614
84 100.00% 7/26/96 276,085 249,631 183,513 1.36 328,010 328,010 303,526 303,526
85 91.48% 9/13/96 242,314 219,857 171,918 1.28 170,668 170,668 238,399 238,399
86 100.00% 4/25/96 247,915 247,915 199,633 1.24 260,345 260,345 262,157 262,157
87 95.83% 10/10/96 242,264 242,264 166,289 1.46 352,117 320,977 322,110 277,873
88 94.44% 9/30/96 250,984 250,984 186,110 1.35 239,570 29,570 281,152 269,152
89 89.76% 6/1/96 209,078 209,078 171,545 1.22 228,153 228,153 289,041 289,041
90 100.00% 9/13/96 255,894 232,618 173,543 1.34 199,508 141,455 346,737 340,737
91 95.45% 8/31/96 213,748 213,748 169,700 1.26 266,210 266,210 268,260 268,260
92 100.00% 5/1/96 280,537 245,896 163,896 1.50 283,752 283,752 281,836 281,836
93 100.00% 9/29/96 225,580 212,280 155,709 1.36 N/A N/A 248,074 248,074
94 92.03% 10/31/96 183,752 183,752 144,419 1.27 N/A N/A N/A N/A
95 98.08% 9/30/96 233,384 233,384 178,627 1.31 33,044 33,044 190,529 190,529
96 88.89% 9/20/96 152,247 152,247 146,283 1.20 246,812 222,936 215,926 184,287
96 61.65% 9/20/96 33,952 22,854 N/A N/A N/A N/A N/A N/A
97 95.24% 10/10/96 244,870 244,870 170,997 1.43 N/A N/A N/A N/A
98 98.99% 10/28/96 209,956 177,997 142,155 1.25 164,345 134,132 201,820 154,311
99 77.09% 9/28/96 206,358 197,770 141,618 1.40 N/A N/A N/A N/A
100 90.41% 8/1/96 189,728 177,328 137,061 1.29 196,586 196,586 230,937 230,937
101 95.05% 7/25/96 265,977 237,605 169,262 1.40 N/A N/A N/A N/A
102 100.00% 11/21/96 223,321 220,423 140,576 1.57 N/A N/A N/A N/A
103 82.14% 10/28/96 169,083 169,083 127,302 1.33 152,950 152,950 183,240 183,240
104 100.00% 11/21/96 220,903 218,047 139,054 1.57 N/A N/A N/A N/A
105 100.00% 8/29/96 163,071 163,071 125,537 1.30 168,367 168,367 191,878 191,878
106 81.88% 10/8/96 151,347 151,347 136,700 1.44 127,839 127,839 141,610 141,610
106 66.67% 10/8/96 45,901 45,901 N/A N/A 69,659 69,659 49,188 49,188
107 92.73% 10/1/96 163,447 163,447 120,582 1.36 167,546 162,141 174,703 163,713
<PAGE>
COLLATERAL OPERATING PERFORMANCE
UNDER- UNDER- ANNUAL UNDER-
LOAN CURRENT OCC. AS WRITTEN WRITTEN CASH DEBT WRITTEN 1994 CASH 1995 CASH
NO. OCCUPANCY OF NOI FLOW SERVICE DSCR 1994 NOI FLOW 1995 NOI FLOW
- ---- --------- -------- --------- ------------ --------- ------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
108 100.00% 8/15/96 145,468 145,468 121,017 1.20 N/A N/A N/A N/A
109 80.77% 9/20/96 179,276 179,276 125,366 1.43 222,045 185,562 189,994 118,525
110 100.00% 9/24/96 184,785 154,458 123,548 1.25 178,744 178,744 192,260 150,285
111 93.27% 9/30/96 179,923 179,923 109,608 1.64 229,019 229,019 187,981 180,727
112 93.94% 5/29/96 146,736 146,736 114,298 1.28 164,963 164,963 171,115 171,115
113 100.00% 9/20/96 140,129 140,129 104,789 1.34 N/A N/A N/A N/A
114 87.50% 8/9/96 60,973 60,973 109,195 1.25 57,660 57,660 79,162 78,362
114 75.00% 8/9/96 24,364 24,364 N/A N/A 27,627 27,627 34,541 34,041
114 93.75% 8/9/96 50,888 50,888 N/A N/A 57,719 57,719 59,399 58,399
115 100.00% 8/26/96 156,491 143,192 108,775 1.32 134,222 128,402 138,524 132,461
116 97.10% 9/18/96 144,083 144,083 105,308 1.37 196,950 164,403 178,227 147,105
117 94.23% 8/1/96 138,506 138,506 103,809 1.33 178,729 155,646 192,471 192,471
118 94.44% 8/28/96 124,611 124,611 93,463 1.33 N/A N/A N/A N/A
119 90.38% 7/22/96 148,594 148,594 101,032 1.47 136,543 17,229 185,259 130,971
120 100.00% 8/1/96 150,350 140,815 111,934 1.26 152,189 142,489 164,504 164,504
121 100.00% 7/31/96 152,047 138,566 104,304 1.33 146,714 146,714 155,507 155,507
122 99.46% 9/30/96 138,461 138,461 101,983 1.36 111,200 111,200 147,384 147,384
123 100.00% 9/13/96 139,809 125,058 98,658 1.27 136,722 130,247 132,960 128,790
124 100.00% 11/21/96 160,590 158,482 101,088 1.57 N/A N/A N/A N/A
125 78.14% 10/1/96 188,387 155,561 98,652 1.58 N/A N/A N/A N/A
126 97.54% 11/8/96 136,440 124,631 92,815 1.34 72,421 72,421 158,842 158,842
127 96.36% 6/30/96 116,802 116,802 90,116 1.30 125,821 99,845 128,632 118,085
128 100.00% 11/21/96 152,746 150,735 96,150 1.57 N/A N/A N/A N/A
129 86.96% 7/31/96 140,213 140,213 93,882 1.49 4,974 (149,002) 180,608 156,160
130 100.00% 11/21/96 142,568 140,664 89,744 1.57 N/A N/A N/A N/A
131 91.07% 6/30/96 58,315 58,315 83,616 1.38 64,660 64,660 87,876 50,639
131 95.00% 6/30/96 56,669 56,669 N/A N/A 90,363 90,363 91,647 91,647
132 100.00% 10/22/96 124,392 108,550 81,882 1.33 N/A N/A (58,949) (58,949)
133 100.00% 6/1/96 124,500 99,884 75,713 1.32 112,615 91,849 147,773 135,510
134 100.00% 11/21/96 121,997 120,336 76,795 1.57 N/A N/A N/A N/A
135 100.00% 11/21/96 208,512 204,857 75,210 2.72 N/A N/A N/A N/A
136 96.26% 9/1/96 93,531 82,462 61,370 1.34 74,776 74,776 94,978 94,978
<PAGE>
YTD
YTD CASH YTD AS PERIOD
YTD NOI FLOW OF (MONTHS)
--------- --------- -------- ------
<C> <C> <C> <C>
2,893,898 2,716,283 9/30/96 9
1,172,763 1,172,763 6/30/96 6
2,389,262 2,389,262 9/30/96 9
761,559 761,559 6/30/96 6
1,292,958 1,292,958 9/30/96 9
1,449,580 1,449,580 7/31/96 12
1,684,104 1,684,104 10/31/96 12
1,484,472 1,484,472 10/31/96 12
1,001,938 566,966 6/30/96 12
1,193,607 1,098,236 11/30/96 12
601,515 601,515 7/31/96 7
1,171,622 1,171,622 9/30/96 9
1,022,699 1,022,699 10/31/96 10
1,274,901 1,246,655 8/31/96 12
1,155,732 1,083,575 10/31/96 12
895,198 895,198 4/30/96 4
742,669 738,225 7/31/96 7
994,295 902,495 9/30/96 12
629,362 629,362 6/30/96 6
878,655 878,655 9/30/96 9
439,155 439,155 6/30/96 6
1,689,955 1,679,836 7/31/96 12
N/A N/A N/A N/A
441,261 341,188 8/31/96 8
727,865 727,865 9/30/96 9
551,955 326,115 9/30/96 9
620,158 579,306 8/31/96 8
532,135 532,156 9/30/96 9
N/A N/A N/A N/A
361,849 361,849 7/31/96 7
735,590 458,021 9/30/96 9
379,420 363,633 7/31/96 7
418,103 418,103 6/30/96 6
649,662 649,662 9/30/96 9
565,591 488,295 10/31/96 10
168,592 167,745 3/31/96 3
239,284 218,075 5/31/96 5
N/A N/A N/A N/A
N/A N/A N/A N/A
696,864 673,718 4/30/96 12
772,901 709,516 9/30/96 12
434,213 426,652 9/30/96 9
N/A N/A N/A N/A
304,289 301,199 6/20/96 6
266,009 266,009 6/30/96 6
21,311 21,311 9/30/96 6
217,472 217,472 6/30/96 6
N/A N/A N/A N/A
194,198 194,198 5/31/96 5
349,149 349,149 8/31/96 6
460,028 381,349 9/30/96 12
348,203 286,760 8/31/96 8
380,555 380,555 9/30/96 12
N/A N/A N/A N/A
N/A N/A N/A N/A
<PAGE>
YTD
YTD CASH YTD AS PERIOD
YTD NOI FLOW OF (MONTHS)
--------- --------- -------- ------
<C> <C> <C> <C>
N/A N/A N/A N/A
N/A N/A N/A N/A
155,771 155,771 6/30/96 6
193,373 193,373 7/31/96 7
N/A N/A N/A N/A
258,963 258,963 9/30/96 9
174,263 174,263 6/30/96 6
269,907 256,401 9/30/96 9
237,746 213,404 8/31/96 8
345,528 345,528 9/30/96 9
414,223 378,240 6/30/96 12
338,014 338,014 8/31/96 8
N/A N/A N/A N/A
N/A N/A N/A N/A
206,869 206,869 7/31/96 7
200,533 200,533 9/30/96 9
244,571 244,571 8/31/96 8
249,474 217,097 9/30/96 9
156,645 156,645 6/30/96 6
309,521 309,521 9/30/96 9
182,879 182,879 7/31/96 7
340,593 340,593 10/31/96 10
277,378 277,378 10/31/96 10
308,316 194,699 9/30/96 9
218,961 214,895 8/31/96 8
280,855 280,855 4/30/96 12
241,451 202,482 5/31/96 12
149,054 149,054 7/31/96 7
212,806 176,546 9/30/96 9
N/A N/A N/A N/A
143,346 131,977 8/25/96 8
148,501 148,501 6/30/96 6
179,878 27,590 9/30/96 6
124,730 118,730 5/31/96 5
99,223 99,223 5/25/96 5
N/A N/A N/A N/A
212,407 212,407 9/30/96 9
N/A N/A N/A N/A
123,685 123,685 6/30/96 6
145,536 145,536 9/30/96 9
328,921 328,921 8/31/96 12
163,135 126,394 9/30/96 9
N/A N/A N/A N/A
200,573 189,573 4/30/96 9
161,369 125,928 9/30/96 9
209,680 207,223 10/31/96 10
117,691 117,691 7/31/96 7
N/A N/A N/A 12
N/A N/A N/A 12
144,561 144,561 9/30/96 9
N/A N/A N/A N/A
90,686 90,686 6/30/96 6
N/A N/A N/A N/A
N/A N/A N/A N/A
177,176 168,051 5/31/96 12
<PAGE>
YTD
YTD CASH YTD AS PERIOD
YTD NOI FLOW OF (MONTHS)
--------- --------- -------- ------
<C> <C> <C> <C>
45,549 43,254 4/30/96 4
178,932 154,599 9/30/96 9
103,236 103,236 6/30/96 6
115,701 61,501 6/30/96 6
70,037 70,037 5/31/96 5
46,835 32,253 7/31/96 7
N/A N/A N/A N/A
N/A N/A N/A N/A
N/A N/A N/A N/A
140,766 124,871 4/30/96 11
166,259 145,174 9/30/96 9
53,019 53,019 5/31/96 5
6,272 (6,672) 7/31/96 7
119,467 76,246 10/31/96 10
N/A N/A N/A N/A
N/A N/A N/A N/A
123,828 123,828 9/30/96 9
N/A N/A N/A N/A
N/A N/A N/A N/A
110,217 110,217 9/1/96 6
101,438 101,438 8/31/96 8
N/A N/A N/A N/A
N/A N/A N/A N/A
139,808 114,138 9/30/96 9
N/A N/A N/A 6
178,173 159,646 9/30/96 9
N/A N/A N/A N/A
72,162 72,162 5/31/96 5
N/A N/A N/A N/A
N/A N/A N/A 12
N/A N/A N/A 12
94,978 94,978 3/31/96 12
- -----------------
<FN>
<F5> Annualized NOI and Cash Flow.
<F6> The 1994 NOI covers the period from 1/1/94 to 11/30/94.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT
PREPAY- PREPAYMENT PREMIUM PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
MENT YIELD (GREATER THAN ----------------------------------------------
LOCKOUT MAINTENANCE OF THE FIRST PREPAYMENT SECOND PREPAYMENT THIRD PREPAYMENT
PERIOD PERIOD FOLLOWING RATE PERIOD PREMIUM PERIOD PREMIUM PERIOD PREMIUM
(MONTHS) (MONTHS) OR TYM) (MONTHS) RATE (MONTHS) RATE (MONTHS) RATE
- ------- ----------- -------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 114 1% 3 1% 0 0% 0 0%
0 40 1% 12 3% 12 2% 6 1%
60 54 1% 0 0% 0 0% 0 0%
0 78 1% 0 0% 0 0% 0 0%
0 108 2% 0 0% 0 0% 0 0%
60 60 1% 0 0% 0 0% 0 0%
0 48 1% 12 3% 12 2% 6 1%
0 96 5% 12<F7> 5%<F7> 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 2% 12 2% 0 0% 0 0%
120 54 0% 0 0% 0 0% 0 0%
0 132 0% 0 0% 0 0% 0 0%
60 54 1% 0 0% 0 0% 0 0%
0 120 3% 12 3% 0 0% 0 0%
0 57 1% 0 0% 0 0% 0 0%
60 60 2% 0 0% 0 0% 0 0%
0 96 3% 12 2% 0 0% 0 0%
48 66 1% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 132 5% 0 0% 0 0% 0 0%
0 108 5% 12 5% 12 4% 0 0%
0 108 5% 12 5% 12 4% 0 0%
60 54 0% 0 0% 0 0% 0 0%
0 60 3% 12 3% 6 1% 0 0%
36 78 1% 0 0% 0 0% 0 0%
0 96 1% 12 3% 0 0% 0 0%
72 0 0% 12 2% 12 1% 0 0%
60 54 0% 0 0% 0 0% 0 0%
0 0 0% 132 2% 0 0% 0 0%
48 66 1% 0 0% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 72 1% 0 0% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 3% 12 3% 0 0% 0 0%
0 60 5% 12 4% 12 3% 12 2%
0 108 1% 0 0% 0 0% 0 0%
0 173 5% 0 0% 0 0% 0 0%
0 54 5% 0 0% 0 0% 0 0%
0 48 1% 12 3% 12 2% 6 1%
0 84 1% 12 3% 12 2% 6 1%
60 54 1% 0 0% 0 0% 0 0%
0 294 0% 0 0% 0 0% 0 0%
48 66 1% 0 0% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
60 24 1% 12 3% 12 2% 6 1%
0 96 5% 12 5% 0 0% 0 0%
24 84 1%<F8> 0 0% 0 0% 0 0%
0 96 3% 12 3% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
48 33 1% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
60 49 1% 0 0% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
60 78 0% 0 0% 0 0% 0 0%
60 54 0% 0 0% 0 0% 0 0%
24 84 1%<F8> 0 0% 0 0% 0 0%
60 54 0% 0 0% 0 0% 0 0%
60 54 1% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 1% 12 1% 0 0% 0 0%
0 96 3% 12 1% 0 0% 0 0%
0 72 3% 12 3% 12 2% 12 1%
0 120 5% 12 5% 0 0% 0 0%
N/A N/A N/A N/A N/A N/A N/A N/A N/A
60 54 0% 0 0% 0 0% 0 0%
60 54 0% 0 0% 0 0% 0 0%
0 84 3% 12 3% 0 0% 0 0%
0 60 5% 12 5% 24 2% 12 1%
0 108 5% 12 5% 12 4% 12 3%
60 54 0% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
0 60 5% 12 4% 18 3% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
<PAGE>
PREPAYMENT PREPAYMENT PREMIUM SCHEDULE AFTER PREPAYMENT LOCKOUT
PREPAY- PREPAYMENT PREMIUM PERIOD AND PREPAYMENT YIELD MAINTENANCE PERIOD
MENT YIELD (GREATER THAN ----------------------------------------------
LOCKOUT MAINTENANCE OF THE FIRST PREPAYMENT SECOND PREPAYMENT THIRD PREPAYMENT
PERIOD PERIOD FOLLOWING RATE PERIOD PREMIUM PERIOD PREMIUM PERIOD PREMIUM
(MONTHS) (MONTHS) OR TYM) (MONTHS) RATE (MONTHS) RATE (MONTHS) RATE
- ------- ----------- -------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
120 42 0% 0 0% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
60 54 0% 0 0% 0 0% 0 0%
0 48 1% 12 3% 12 2% 6 1%
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
60 54 1% 0 0% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
60 54 0% 0 0% 0 0% 0 0%
0 108 5% 0 0% 0 0% 0 0%
0 84 1% 12 3% 12 2% 6 1%
60 54 0% 0 0% 0 0% 0 0%
0 108 5% 12 5% 12 4% 12 3%
0 114 2% 0 0% 0 0% 0 0%
N/A N/A N/A N/A N/A N/A N/A N/A N/A
0 96 5% 12 5% 0 0% 0 0
0 120 5% 12 5% 0 0% 0 0%
0 48 1% 12 3% 12 2% 6 1%
0 84 1% 12 3% 12 2% 6 1%
0 120 5% 12 5% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
0 96 0%<F9> 0 0% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
120 114 0% 0 0% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
N/A N/A N/A N/A N/A N/A N/A N/A N/A
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 114 2% 0 0% 0 0% 0 0%
24 84 1%<F8> 0 0% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 108 5% 12 5% 12 4% 12 3%
0 108 5% 12 5% 12 4% 12 3%
N/A N/A N/A N/A N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A N/A N/A N/A N/A
0 120 5% 12 5% 0 0% 0 0%
0 114 2% 0 0% 0 0% 0 0%
0 96 5% 12 5% 12 4% 12 3%
0 108 5% 12 5% 12 4% 12 3%
0 96 5% 12 5% 0 0% 0 0%
0 120 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 60 5% 12 3% 12 2% 12 1%
0 96 5% 12 5% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
0 60 5% 12 5% 6 1% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 1% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
N/A N/A N/A N/A N/A N/A N/A N/A N/A
0 96 5% 12 5% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
0 114 1% 0 0% 0 0% 0 0%
0 96 5% 12 5% 0 0% 0 0%
- --------------
<FN>
<F7> The lesser of Yield Maintenance or 5%.
<F8> Year 3 greater of YM or 3%; year 4 greater of YM or 2%; years 5-9 greater
of YM or 1%.
<F9> Years 1 & 2 lesser of YM or 8.5%; years 3-8 YM.
</FN>
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TOTAL
FOURTH PREPAYMENT FIFTH PREPAYMENT PENALTY
PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) RATE (MONTHS) RATE (MONTHS)
------ ---------- ------ ---------- ------
<C> <C> <C> <C> <C>
0 0% 0 0% 117
0 0% 0 0% 70
0 0% 0 0% 114
0 0% 0 0% 78
0 0% 0 0% 108
0 0% 0 0% 120
0 0% 0 0% 78
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 174
0 0% 0 0% 132
0 0% 0 0% 114
0 0% 0 0% 132
0 0% 0 0% 57
0 0% 0 0% 120
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 132
0 0% 0 0% 132
0 0% 0 0% 132
0 0% 0 0% 114
0 0% 0 0% 78
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 96
0 0% 0 0% 114
0 0% 0 0% 132
0 0% 0 0% 114
0 0% 0 0% 132
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 72
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
12 1% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 173
0 0% 0 0% 54
0 0% 0 0% 78
0 0% 0 0% 114
0 0% 0 0% 114
0 0% 0 0% 294
0 0% 0 0% 114
0 0% 0 0% 132
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 81
0 0% 0 0% 108
<PAGE>
TOTAL
FOURTH PREPAYMENT FIFTH PREPAYMENT PENALTY
PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) RATE (MONTHS) RATE (MONTHS)
------ ---------- ------ ---------- ------
<C> <C> <C> <C> <C>
0 0% 0 0% 109
0 0% 0 0% 132
0 0% 0 0% 138
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 132
N/A N/A N/A N/A N/A
0 0% 0 0% 114
0 0% 0 0% 114
0 0% 0 0% 96
0 0% 0 0% 108
12 2% 12 1% 168
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 132
0 0% 0 0% 90
0 0% 0 0% 108
0 0% 0 0% 132
0 0% 0 0% 162
0 0% 0 0% 132
0 0% 0 0% 132
0 0% 0 0% 114
0 0% 0 0% 78
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 132
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 114
12 2% 12 1% 168
0 0% 0 0% 114
N/A N/A N/A N/A N/A
0 0% 0 0% 108
0 0% 0 0% 132
0 0% 0 0% 78
0 0% 0 0% 114
0 0% 0 0% 132
0 0% 0 0% 114
0 0% 0 0% 96
0 0% 0 0% 114
0 0% 0 0% 234
0 0% 0 0% 132
N/A N/A N/A N/A N/A
0 0% 0 0% 108
<PAGE>
TOTAL
FOURTH PREPAYMENT FIFTH PREPAYMENT PENALTY
PERIOD PREMIUM PERIOD PREMIUM PERIOD
(MONTHS) RATE (MONTHS) RATE (MONTHS)
------ ---------- ------ ---------- ------
<C> <C> <C> <C> <C>
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 132
0 0% 0 0% 108
12 2% 12 1% 168
12 2% 12 1% 168
N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A
0 0% 0 0% 132
0 0% 0 0% 114
12 2% 12 1% 156
12 2% 12 1% 168
0 0% 0 0% 108
0 0% 0 0% 132
0 0% 0 0% 108
0 0% 0 0% 96
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 78
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 108
N/A N/A N/A N/A N/A
0 0% 0 0% 108
0 0% 0 0% 108
0 0% 0 0% 114
0 0% 0 0% 114
0 0% 0 0% 108
</TABLE>