_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest Event
Reported): August 22, 1997
CWABS, INC., (as depositor under the Pooling and
Servicing Agreement, to be dated as of August 22, 1997,
providing for the issuance of the CWABS, Inc.,
Countrywide Home Equity Loan Trust 1997-C Revolving Home
Equity Loan Asset Backed Certificates, Series 1997-C).
CWABS, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 333-11095 95-4596514
____________________________ ___________ __________________
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
4500 Park Granada
Calabasas, California 91302
_________________________ __________
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (818) 225-3240
_____ ________
_________________________________________________________________
Item 5. Other Events.
____ ____________
Filing of Certain Materials
___________________________
Pursuant to Rule 424(b)(5) under the Securities Act of 1933,
concurrently with, or subsequent to, the filing of this Current Report on
Form 8-K (the "Form 8-K"), CWABS, Inc. (the "Company") is filing a prospectus
and prospectus supplement with the Securities and Exchange Commission (the
"Commission") relating to its Revolving Home Equity Loan Asset Backed
Certificates, Series 1997-C.
The audited financial statements of Capital Markets Assurance
Corporation ("CapMac") that are included in this Form 8-K and the prospectus
supplement (the "Audited CapMac Financials") have been audited by KPMG Peat
Marwick LLP ("KPMG"). The consent of KPMG is attached hereto as Exhibit
23.1. The audited financial statements of CapMAC are attached hereto as
Exhibit 99.1. The unaudited financial statements of CapMAC for the period
ended June 30, 1997 (the "Unaudited CapMAC Financials") that are included in
this Form 8-K and the prospectus supplement are attached hereto as Exhibit
99.2.
In connection with the offering of the Revolving Home Equity
Loan Asset Backed Certificates, Series 1997-C, each of Lehman Brothers Inc.
("Lehman Brothers") and Countrywide Securities Corporation ("Countrywide
Securities" and together with Lehman Brothers, the "Underwriters"), as
underwriters of the Certificates, have prepared certain materials (the
"Computational Materials") for distribution to its potential investors.
Although the Company provided the Underwriters with certain information
regarding the characteristics of the Mortgage Loans in the related portfolio,
the Company did not participate in the preparation of the Computational
Materials.
For purposes of this Form 8-K, "Computational Materials" shall
mean computer generated tables and/or charts displaying, with respect to the
Certificates, any of the following: yield; average life; duration; expected
maturity; interest rate sensitivity; loss sensitivity; cash flow
characteristics; background information regarding the Mortgage Loans; the
proposes structure; decrement tables; or similar information (tabular or
otherwise) of a statistical, mathematical, tabular or computational nature.
The Computational Materials of the Underwriters are filed as Exhibit 99.3.
___________________
* Capitalized terms used and not otherwise defined herein shall
have the meanings assigned to them in the prospectus dated February 21, 1997
and the prospectus supplement dated August 21, 1997, of CWABS, Inc., relating
to its Revolving Home Equity Loan Asset Backed Certificates, Series 1997-C.
Item 7. Financial Statements, Pro Forma Financial
____ _________________________________________
Information and Exhibits.
________________________
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
23.1 Consent of KPMG Peat Marwick LLP
99.1 Audited CapMAC Financials.
99.2 Unaudited CapMAC Financials
99.3 Computational Materials.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CWMBS, INC.
By: /s/ David Walker
___________________________
David Walker
Vice President
Dated: August 22, 1997
Exhibit Index
_____________
Exhibit Page
_______ ____
23.1 Consent of KPMG Peat Marwick LLP
99.1 Audited CapMAC Financials.
99.2 Unaudited CapMAC Financials
99.3 Computational Materials
Exhibit 23.1
____________
Consent of Independent Certified Public Accountants
The Board of Directors
Capital Markets Assurance Corporation:
We consent to the use of our report included in the Form 8-K of CWABS, Inc.
and to the reference to our firm under the heading "Experts" in the
Prospectus Supplement for Countrywide Home Equity Loan Trust 1997-C,
Revolving Home Equity Loan Asset Backed Certificates, Series 1997-C.
New York, New York
August 22, 1997
/s/ KPMG Peat Marwick LLP
Exhibit 99.1
------------
(KPMG LOGO)
CAPITAL MARKETS ASSURANCE CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
(KPMG LETTERHEAD)
Independent Auditors' Report
The Board of Directors
Capital Markets Assurance Corporation:
We have audited the accompanying balance sheets of Capital Markets
Assurance Corporation as of December 31, 1996 and 1995 and the related
statements of income, stockholder's equity and cash flows for each of the
years in the three-year period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Capital Markets Assurance
Corporation as of December 31, 1996 and 1995 and the results of its operations
and its cash flows for each of the years in the three-year period ended
December 31, 1996 in conformity with generally accepted accounting principles.
(KPMG PEAT MARWICK LLP SIGNATURE)
New York, New York
January 29, 1997
CAPITAL MARKETS ASSURANCE CORPORATION
BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
------
December 31 December 31
1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS:
Bonds at fair value (amortized cost $294,861 at December 31,
1996 and $210,651 at December 31, 1995) $297,893 215,706
Short-term investments (at amortized cost which approximates
fair value) 16,810 68,646
- ---------------------------------------------------------------------------------------------
Total investments 314,703 284,352
- ---------------------------------------------------------------------------------------------
Cash 371 344
Accrued investment income 3,807 3,136
Deferred acquisition costs 45,380 35,162
Premiums receivable 5,141 3,540
Prepaid reinsurance 18,489 13,171
Other assets 6,424 3,428
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS $394,315 343,133
=============================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
LIABILITIES:
Unearned premiums $ 68,262 45,767
Reserve for losses and loss adjustment expenses 10,985 6,548
Ceded reinsurance 1,738 2,469
Accounts payable and other accrued expenses 8,019 10,844
Current income taxes 679 136
Deferred income taxes 15,139 11,303
- ---------------------------------------------------------------------------------------------
Total liabilities 104,822 77,067
- ---------------------------------------------------------------------------------------------
STOCKHOLDER'S EQUITY:
Common stock - $1.00 par value per share; 15,000,000 share
are authorized, issued and outstanding at December 31, 1996
and 1995 15,000 15,000
Additional paid-in capital 208,475 205,808
Unrealized appreciation on investments, net of tax 1,970 3,286
Retained earnings 64,048 41,972
- ---------------------------------------------------------------------------------------------
Total stockholder's equity 289,493 266,066
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $394,315 343,133
=============================================================================================
</TABLE>
See accompanying notes to financial statements.
CAPITAL MARKETS ASSURANCE CORPORATION
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31,1995 December 31, 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Direct premiums written $ 71,752 56,541 43,598
Assumed premiums written 1,086 935 1,064
Ceded premiums written (15,104) (15,992) (11,069)
- --------------------------------------------------------------------------------------------
Net premiums written 57,734 41,484 33,593
Increase in unearned premiums (17,177) (12,242) (10,490)
- --------------------------------------------------------------------------------------------
Net premiums earned 40,557 29,242 23,103
Net investment income 16,992 11,953 10,072
Net realized capital gains 236 1,301 92
Other income 146 2,273 120
- --------------------------------------------------------------------------------------------
Total revenues 57,931 44,769 33,387
- --------------------------------------------------------------------------------------------
EXPENSES:
Losses and loss adjustment expenses 4,815 3,141 1,429
Underwriting and operating expenses 14,613 13,808 11,833
Policy acquisition costs 7,824 7,203 4,529
- --------------------------------------------------------------------------------------------
Total expenses 27,252 24,152 17,791
- --------------------------------------------------------------------------------------------
Income before income taxes 30,679 20,617 15,596
- --------------------------------------------------------------------------------------------
INCOME TAXES:
Current income tax 5,235 2,113 865
Deferred income tax 3,368 3,102 2,843
- --------------------------------------------------------------------------------------------
Total income taxes 8,603 5,215 3,708
- --------------------------------------------------------------------------------------------
NET INCOME $ 22,076 15,402 11,888
============================================================================================
</TABLE>
See accompanying notes to financial statements.
CAPITAL MARKETS ASSURANCE CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31,1996 December 31, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK:
Balance at beginning of year $ 15,000 15,000 15,000
- -----------------------------------------------------------------------------------------------------------
Balance at end of year 15,000 15,000 15,000
- -----------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year 205,808 146,808 146,808
Capital contribution 2,667 59,000 --
- -----------------------------------------------------------------------------------------------------------
Balance at end of year 208,475 205,808 146,808
- -----------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS, NET OF TAX:
Balance at beginning of year 3,286 (5,499) 3,600
Unrealized appreciation (depreciation)
on investments (1,316) 8,785 (9,099)
- -----------------------------------------------------------------------------------------------------------
Balance at end of year 1,970 3,286 (5,499)
- -----------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance at beginning of year 41,972 26,570 14,682
Net income 22,076 15,402 11,888
- -----------------------------------------------------------------------------------------------------------
Balance at end of year 64,048 41,972 26,570
- -----------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY $ 289,493 266,066 182,879
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
CAPITAL MARKETS ASSURANCE CORPORATION
STATEMENTS OF CASH FLOWS
(DOLLAR IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,076 15,402 11,888
- -----------------------------------------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Reserve for losses and loss adjustment
expenses 4,437 1,357 1,429
Unearned premiums, net 22,496 19,862 15,843
Deferred acquisition costs (10,218) (10,302) (9,611)
Premiums receivable (1,601) (161) (2,103)
Accrued investment income (671) (390) (848)
Income taxes payable 3,911 3,621 2,611
Net realized capital gains (236) (1,301) (92)
Accounts payable and other accrued
expenses 1,020 472 3,726
Prepaid reinsurance (5,318) (7,620) (5,352)
Other, net (3,396) 992 689
- -----------------------------------------------------------------------------------------------------------------
Total adjustments 10,424 6,530 6,292
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 32,500 21,932 18,180
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (199,989) (158,830) (77,980)
Proceeds from sales of investments 57,210 49,354 39,967
Proceeds from maturities of investments 110,306 28,803 19,665
- -----------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (32,473) (80,673) (18,348)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution - 59,000 -
- -----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 59,000 -
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 27 259 (168)
Cash balance at beginning of year 344 85 253
- -----------------------------------------------------------------------------------------------------------------
CASH BALANCE AT END OF YEAR $ 371 344 85
=================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid $ 4,525 1,450 1,063
=================================================================================================================
</TABLE>
See accompanying notes to financial statements.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1) BACKGROUND
Capital Markets Assurance Corporation ("CapMAC" or "the Company")
is a New York-domiciled monoline stock insurance company which
engages only in the business of financial guarantee and surety
insurance. CapMAC is a wholly owned subsidiary of CapMAC Holdings
Inc. ("Holdings"). CapMAC is licensed in all 50 states in addition
to the District of Columbia, the Commonwealth of Puerto Rico and the
territory of Guam. CapMAC insures structured asset-backed, corporate,
municipal and other financial obligations in the U.S. and international
capital markets. CapMAC also provides financial guarantee reinsurance
for structured asset-backed, corporate, municipal and other financial
obligations written by other major insurance companies.
CapMAC's claims-paying ability is rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's"), "AAA" by Standard & Poor's Ratings
Group ("S&P"), "AAA" by Duff & Phelps Credit Rating Co. ("Duff &
Phelps"), and "AAA" by Nippon Investors Service, Inc., a Japanese
rating agency. Such ratings reflect only the views of the respective
rating agencies, are not recommendations to buy, sell or hold
securities and are subject to revision or withdrawal at any time by
such rating agencies.
2) SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the
accompanying financial statements are as follows:
a) BASIS OF PRESENTATION
The accompanying financial statements are prepared on the
basis of generally accepted accounting principles ("GAAP").
Such accounting principles differ from statutory reporting
practices used by insurance companies in reporting to state
regulatory authorities.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Management believes the most
significant estimates relate to deferred acquisition costs,
reserve for losses and loss adjustment expenses and disclosures
of financial guarantees outstanding. Actual results could differ
from those estimates.
b) INVESTMENTS
As of December 31, 1996 and 1995, all of the Company's
securities have been classified as available-for-sale.
Available-for-sale securities are recorded at fair value.
Fair value is generally based upon quoted market prices.
Unrealized holding gains and losses, net of the related tax
effect, on available-for-sale securities are excluded from
earnings and are reported as a separate component of
stockholder's equity until realized. Transfers of securities
between categories are recorded at fair value at the date of
transfer. A decline in the fair value of any available-for-sale
security below cost that is deemed other than temporary is
charged to earnings resulting in the establishment of a new
cost basis for the security.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Short-term investments are those investments having a maturity
of less than one year at purchase date. Short-term investments
are carried at amortized cost which approximates fair value.
Premiums and discounts are amortized or accreted over the life
of the related security as an adjustment to yield using
the effective interest method. Dividend and interest income
are recognized when earned. Realized gains and losses are
included in earnings and are derived using the FIFO (first-in,
first-out) method for determining the cost of securities sold.
c) PREMIUM REVENUE RECOGNITION
Premiums which are payable monthly to CapMAC are reflected in
income when due, net of amounts payable to reinsurers.
Premiums which are payable quarterly, semi-annually or annually
are reflected in income, net of amounts payable to reinsurers,
on an equal monthly basis over the corresponding policy term.
Premiums that are collected as a single premium at the
inception of the policy and have a term longer than one year
are earned, net of amounts payable to reinsurers, by
allocating premium to each bond maturity based on the principal
amount and earning it straight-line over the term of each bond
maturity. For the years ended December 31, 1996 and 1995, 91%
of net premiums earned were attributable to premiums payable in
installments and 9% were attributable to premiums collected on
an up-front basis.
d) DEFERRED ACQUISITION COSTS
Certain costs incurred by CapMAC, which vary with and are
primarily related to the production of new business,
are deferred. These costs include direct and indirect
expenses related to underwriting, marketing and policy
issuance, rating agency fees and premium taxes, net of
reinsurance ceding commissions. The deferred acquisition
costs are amortized over the period in proportion to the
related premium earnings. The actual amount of premium
earnings may differ from projections due to various factors
such as renewal or early termination of insurance contracts
or different run-off patterns of exposure resulting in a
corresponding change in the amortization pattern of the
deferred acquisition costs.
e) RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The reserve for losses and loss adjustment expenses consists
of a supplemental loss reserve ("SLR") and a case basis loss
reserve. The SLR is established for expected levels of losses
resulting from credit failures on currently insured issues and
reflects the estimated portion of earned premiums required to
cover those losses.
A case basis loss reserve is established for insured obligations
when, in the judgment of management, a default in the timely
payment of debt service is imminent. For defaults considered
temporary, a case basis loss reserve is established in an
amount equal to the present value of the anticipated defaulted
debt service payments over the expected period of default.
If the default is judged not to be temporary, the present
value of all remaining defaulted debt service payments is
recorded as a case basis loss reserve. Anticipated salvage
recoveries are considered in establishing case basis loss
reserves when such amounts are reasonably estimable. Case
basis loss reserves may be allocated from any SLR outstanding
at the time the case basis reserves are established.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Management believes that the current level of reserves
is adequate to cover the ultimate net cost of claims and the
related expenses with respect to financial guarantees issued
by CapMAC. The establishment of the appropriate level of loss
reserves is an inherently uncertain process involving estimates
and subjective judgments by management, and therefore there can
be no assurance that ultimate losses in CapMAC's insured
portfolio will not exceed the current estimate of loss
reserves.
f) DEPRECIATION
Leasehold improvements, furniture, fixtures and electronic
data processing equipment are being amortized or depreciated
over the lease term or useful life, whichever is shorter,
using the straight-line method.
g) INCOME TAXES
Deferred income taxes are provided with respect to temporary
differences between the financial statement and tax basis
of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse.
The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in the period that includes the
enactment date.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
3) INSURED PORTFOLIO
At December 31, 1996 and 1995, the principal amount of financial
obligations insured by CapMAC was $24.5 billion and $16.9 billion,
respectively, and net of reinsurance (net principal outstanding),
was $19.7 billion and $12.6 billion, respectively, with a weighted
average life of 6.4 years and 6.0 years, respectively. CapMAC's
insured portfolio was broadly diversified by geographic distribution
and type of insured obligations, with no single insured obligation
in excess of statutory single risk limits, after giving effect to any
reinsurance and collateral, which are a function of CapMAC's statutory
qualified capital (the sum of statutory capital and surplus and
mandatory contingency reserve). At December 31, 1996 and 1995, the
statutory qualified capital was approximately $260 million and $240
million, respectively.
<TABLE>
<CAPTION>
Net Principal Outstanding
December 31, 1996 December 31, 1995
------------------------- -----------------------
Type of Obligations Insured ($ in millions) Amount % Amount %
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer receivables $ 10,362 52.8 $ 6,959 55.1
Trade and other corporate
obligations 8,479 43.1 4,912 38.9
Municipal/government obligations 814 4.1 757 6.0
- ----------------------------------------------------------------------------------------------
TOTAL $ 19,655 100.0 $12,628 100.0
==============================================================================================
</TABLE>
At December 31, 1996 and 1995, the principal and interest amount
of financial obligations insured by CapMAC was $29.8 billion and
$20.3 billion, respectively, and net of reinsurance (net principal
and interest outstanding) was $23.3 billion and $15.1 billion,
respectively. At December 31, 1996, approximately 93% of CapMAC's
insured portfolio was comprised of structured asset-backed
transactions. Under these structures, a pool of assets covering
at least 100% of the principal amount guaranteed under its insurance
contract is sold or pledged to a special purpose bankruptcy remote
entity. CapMAC's primary risk from such insurance contracts is the
impairment of cash flows due to delinquency or loss on the underlying
assets. CapMAC, therefore, evaluates all the factors affecting past
and future asset performance by studying historical data on losses,
delinquencies and recoveries of the underlying assets. Each
transaction is reviewed to ensure that an appropriate legal structure
is used to protect against the bankruptcy risk of the originator of
the assets. Along with the legal structure, an additional level of
first loss protection is also created to protect against losses due
to credit or dilution. This first level of loss protection is
usually available from reserve funds, excess cash flows,
overcollateralization, or recourse to a third party. The level of
first loss protection depends upon the historical losses and dilution
of the underlying assets, but is typically several times the normal
historical loss experience for the underlying type of assets.
During 1995, the Company sold without recourse its interest in
potential cash flows from transactions included in its insured
portfolio and recognized $2,200,000 of income which has been
included in other income in the accompanying financial statements.
The following entities each accounted for, through referrals and
otherwise, 10% or more of total revenues for each of the
periods presented:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
---------------------- ----------------------- -----------------------
% of % of % of
Revenues Revenues Revenues
---------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Citicorp 14.5 15.2 16.3
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
4) INVESTMENTS
The amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair value for available-for-sale securities by major
security type at December 31, 1996 and 1995 were as follows ($ in
thousands):
<TABLE>
<CAPTION>
December 31, 1996
- -----------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Securities Available-for-sale Cost Gains Losses Value
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury obligations $ 4,059 10 - 4,069
Mortgage-backed securities of
U.S. government instrumentalities
and agencies 109,436 265 1,160 108,541
Obligations of states, municipalities
and political subdivisions 177,811 4,602 555 181,858
Corporate and asset-backed
securities 20,365 23 153 20,235
- -----------------------------------------------------------------------------------
TOTAL $ 311,671 4,900 1,868 314,703
===================================================================================
December 31, 1995
- -----------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Securities Available-for-sale Cost Gains Losses Value
- -----------------------------------------------------------------------------------
U.S. Treasury obligations $ 4,153 55 - 4,208
Mortgage-backed securities of
U.S. government instrumentalities
and agencies 100,628 313 79 100,862
Obligations of states, municipalities
and political subdivisions 166,010 4,809 82 170,737
Corporate and asset-backed
securities 8,506 45 6 8,545
- -----------------------------------------------------------------------------------
TOTAL $ 279,297 5,222 167 284,352
===================================================================================
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The amortized cost and estimated fair value of investments in debt
securities at December 31, 1996 by contractual maturity are shown
below ($ in thousands):
<TABLE>
<CAPTION>
December 31, 1996
- ------------------------------------------------------------------------------------
Amortized Estimated
Securities Available-for-sale Cost Fair Value
- ------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 11,627 11,644
Due after one year through five years 31,821 32,815
Due after five years through ten years 76,450 78,200
Due after ten years 82,337 83,503
- ------------------------------------------------------------------------------------
Sub-total 202,235 206,162
Mortgage-backed securities 109,436 108,541
- ------------------------------------------------------------------------------------
TOTAL $ 311,671 314,703
====================================================================================
</TABLE>
Actual maturities may differ from contractual maturities because
borrowers may call or prepay obligations with or without call
or prepayment penalties.
Proceeds from sales of investment securities were approximately
$57.2 million, $49.3 million and $39.9 million in 1996, 1995 and
1994, respectively. Gross realized capital gains of $772,000,
$1,320,000 and $714,000, and gross realized capital losses of
$536,000, $19,000 and $622,000 were realized on those sales for
the years ended December 31, 1996, 1995 and 1994, respectively.
Investments include bonds having a fair value of approximately
$3,884,000 and $3,985,000 which are on deposit at December 31,
1996 and 1995, respectively, with state regulators as required
by law.
Investment income is comprised of interest and dividends, net of
related expenses, and is applicable to the following sources:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
$ in thousands December 31, 1996 December 31, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds $ 15,726 11,105 9,193
Short-term investments 1,534 1,245 484
Mutual funds - (162) 579
Investment expenses (268) (235) (184)
- -----------------------------------------------------------------------------------------
TOTAL $ 16,992 11,953 10,072
=========================================================================================
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The change in unrealized appreciation (depreciation) on
available-for-sale securities is included as a separate
component of stockholder's equity as shown below:
<TABLE>
<CAPTION>
Year Ended Year Ended
$ in thousands December 31, 1996 December 31, 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $ 3,286 (5,499)
Change in unrealized (depreciation) appreciation (2,024) 13,386
Income tax effect 708 (4,601)
- -------------------------------------------------------------------------------------
Net change (1,316) 8,785
- -------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 1,970 3,286
=====================================================================================
No single issuer, except for investments in U.S. Treasury and U.S.
government agency securities, exceeds 2% of stockholder's equity as
of December 31, 1996 and 1995, respectively.
5) DEFERRED ACQUISITION COSTS
The following table reflects acquisition costs deferred by CapMAC
and amortized in proportion to the related premium earnings:
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
$ in thousands December 31, 1996 December 31, 1995 December 31, 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 35,162 24,860 15,249
Additions 18,042 17,505 14,140
Amortization (policy
acquisition costs) (7,824) (7,203) (4,529)
- ---------------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 45,380 35,162 24,860
=======================================================================================
</TABLE>
6) EMPLOYEE BENEFITS
CapMAC has a service agreement with CapMAC Financial Services,
Inc. ("CFS"). Under the service agreement, CFS has agreed to
provide various services, including underwriting, reinsurance,
marketing, data processing and other services to CapMAC in
connection with the operation of CapMAC's insurance business.
CapMAC pays CFS a fee for providing such services, but not in
excess of CFS's cost for such services. CFS incurred, on behalf
of CapMAC, total compensation expenses, excluding bonuses, of
$13,374,000, $13,484,000 and $11,081,000 in 1996, 1995 and
1994, respectively.
The Company, through CFS, maintains an incentive compensation plan
for its employees. The plan is an annual discretionary bonus award.
For the years ended December 31, 1996, 1995 and 1994, the Company had
provided approximately $8,810,000, $7,804,000 and $5,253,000,
respectively, for the plan. CFS also provides health and welfare
benefits to substantially all of its employees. The Company incurred
$551,943, $598,530, and $562,508 of expense for the years ended
December 31, 1996, 1995 and 1994, respectively, for such plan. The
Company also has a defined contribution retirement plan which allows
participants to make voluntary contributions by salary reduction
pursuant to section 401 (k) of the Internal Revenue Code. The Company
provides for the administrative cost for the 401 (k) plan.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
On June 25, 1992, certain officers of CapMAC were granted 182,633
restricted stock units ("RSU") at $13.33 a share in respect of
certain deferred compensation. On December 7, 1995, the RSU's were
converted to cash in the amount of approximately $3.7 million, and
such officers agreed to defer receipt of such cash amount in exchange
for receiving the same number of new shares of restricted stock of
Holdings as the number of RSU's such officers previously held. During
1995 and 1994, the expense was $1.3 million and $0.1 million,
respectively. During 1996, Holdings assumed the liability of $3.7
million less the related deferred tax asset of $1.1 million as
capital contribution. The cash amount is held by Holdings and
invested in accordance with certain guidelines. Such amount,
including the investment earnings thereon, will be paid to each
officer upon the occurrence of certain events but no later than
December 2000.
7) EMPLOYEE STOCK OWNERSHIP PLAN
Holdings maintains an Employee Stock Ownership Plan ("ESOP") to
provide its employees the opportunity to obtain beneficial interests
in the stock of Holdings through a trust (the "ESOP Trust").
Compensation expense related to the ESOP and allocated to CapMAC was
approximately $2,764,000, $2,087,000 and $2,086,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
8) RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The reserve for losses and loss adjustment expenses consists of a
case basis loss reserve and the SLR.
In 1995, CapMAC incurred its first claim on a financial guarantee
policy. Based on its current estimate, the Company expects the
aggregate amount of claims and related expenses not to exceed $2.7
million, although no assurance can be given that such claims and
related expenses will not exceed that amount. Such loss amount was
covered through a recovery under a quota share reinsurance agreement
of $0.2 million and a reduction in the SLR of $2.5 million. The
portion of such claims and expenses not covered under the quota share
agreement is being funded through payments to CapMAC from the Lureco
Trust Account (see note 12).
The following is a summary of the activity in the case basis loss
reserve account and the components of the reserve for losses and
loss adjustment expenses ($ in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASE BASIS LOSS RESERVE:
Net balance at January 1 $ 620 - -
- ---------------------------------------------------------------------------------------
INCURRED RELATED TO:
Current year - 2,473 -
Prior years - - -
- ---------------------------------------------------------------------------------------
Total incurred - 2,473 -
PAID RELATED TO:
Current year - 1,853 -
Prior years 309 - -
- ---------------------------------------------------------------------------------------
Total paid 309 1,853 -
- ---------------------------------------------------------------------------------------
Net balance at December 31 311 620 -
Reinsurance recoverable - 69 -
- ---------------------------------------------------------------------------------------
GROSS BALANCE AT DECEMBER 31 311 689 -
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL LOSS RESERVE
Balance at January 1 5,859 5,191 3,762
- ---------------------------------------------------------------------------------------
Additions to supplemental loss reserve 4,815 3,141 1,429
Allocated to case basis reserve - (2,473) -
- ---------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31 10,674 5,859 5,191
- ---------------------------------------------------------------------------------------
TOTAL RESERVE FOR LOSSES AND LOSS ADJUSTMENT
EXPENSES $ 10,985 6,548 5,191
=======================================================================================
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
9) INCOME TAXES
Pursuant to a tax sharing agreement with Holdings, the Company is
included in Holdings' consolidated U.S. Federal income tax return.
The Company's annual Federal income tax liability is determined by
computing its pro rata share of the consolidated group Federal income
tax liability.
Total income tax expense differed from the amount computed by applying
the U.S. Federal income tax rate of 35% in 1996 and 1995 and 34%
in 1994:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
$ in thousands Amount % Amount % Amount %
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Expected tax expense computed
at the statutory rate $10,738 35.0 $7,216 35.0 $5,303 34.0
Increase (decrease) in tax
resulting from:
Tax-exempt interest (2,916) (9.5) (2,335) (11.3) (1,646) (10.6)
Other, net 781 2.5 334 1.6 51 0.4
- -----------------------------------------------------------------------------------------
TOTAL INCOME TAX EXPENSE $ 8,603 28.0 $5,215 25.3 $3,708 23.8
=========================================================================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred Federal income tax liability are as follows:
<TABLE>
<CAPTION>
$ in thousands December 31, 1996 December 31, 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Deferred compensation $ 200 1,901
Losses and loss adjustment expenses 1,527 1,002
Unearned premiums 866 852
Other, net 96 98
- -----------------------------------------------------------------------------------
Total gross deferred tax assets 2,689 3,853
- -----------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Deferred acquisition costs 15,883 12,307
Unrealized capital gains on investments 1,061 1,769
Other, net 884 1,080
- -----------------------------------------------------------------------------------
Total gross deferred tax liabilities 17,828 15,156
- -----------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITY $ 15,139 11,303
===================================================================================
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized.
Management believes that the deferred tax assets will be fully realized
in the future.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
10) INSURANCE REGULATORY RESTRICTIONS
CapMAC is subject to insurance regulatory requirements of the State
of New York and other states in which it is licensed to conduct
business. Generally, New York insurance laws require that dividends
be paid from earned surplus and restrict the amount of dividends in
any year that may be paid without obtaining approval for such
dividends from the Superintendent of Insurance to the lower of (i) net
investment income as defined or (ii) 10% of statutory surplus as of
December 31 of the preceding year. No dividends were paid by CapMAC
to Holdings during the years ended December 31, 1996, 1995 and 1994.
No dividends could be paid during these periods because CapMAC had
negative earned surplus. Statutory surplus at December 31, 1996 and
1995 was approximately $193,726,000 and $195,018,000, respectively.
Statutory surplus differs from stockholder's equity determined under
GAAP principally due to the mandatory contingency reserve required for
statutory accounting purposes and differences in accounting for
investments, deferred acquisition costs, SLR and deferred taxes
provided under GAAP. Statutory net income was $18,737,000, $9,000,000
and $4,543,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. Statutory net income differs from net income determined
under GAAP principally due to deferred acquisition costs, SLR and
deferred income taxes.
11) COMMITMENTS AND CONTINGENCIES
The Company's lease agreement for the space occupied in New York
expires on November 20, 2008. CapMAC has a lease agreement for its
London office, which expires on October 1, 2002. As of December
31, 1996, future minimum payments under the lease agreements are as
follows:
$ in thousands Payment
- ---------------------------------------------------------------
1997 $ 2,647
1998 2,715
1999 3,077
2000 3,152
2001 and thereafter 28,660
- ---------------------------------------------------------------
TOTAL $ 40,251
===============================================================
Rent expense, commercial rent taxes and electricity for the years
ended December 31, 1996, 1995 and 1994 amounted to $1,618,000,
$1,939,000 and $2,243,000, respectively.
CapMAC has available a $150,000,000 standby corporate liquidity
facility (the "Liquidity Facility") scheduled to terminate in
September 1999. The Liquidity Facility is provided by a consortium
of banks, headed by Bank of Montreal, as agent, which is rated "A-1+"
and "P-1" by S&P and Moody's, respectively. Under the Liquidity
Facility, CapMAC will be able, subject to satisfying certain
conditions, to borrow funds from time to time in order to enable
it to fund any claim payments or payments made in settlement or
mitigation of claim payments under its insurance contracts.
There have been no draws under the Liquidity Facility.
CapMAC has agreed to make an investment of 50 million French Francs
(approximately $10 million U.S. dollars) in CapMAC Assurance, S.A.,
an insurance subsidiary to be established in Paris, France. This
investment is anticipated to be made in 1997.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
12) REINSURANCE
In the ordinary course of business, CapMAC cedes exposure under
various treaty and facultative reinsurance contracts, both on a
pro rata and excess of loss basis, primarily designed to
minimize losses from large risks and protect the capital and
surplus of CapMAC.
The effect of reinsurance on premiums written and earned was as
follows:
<TABLE>
<CAPTION>
Years Ended December 31
1996 1995 1994
-------------------- ------------------ -------------------
$ in thousands Written Earned Written Earned Written Earned
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Direct $ 71,752 48,835 56,541 36,853 43,598 28,561
Assumed 1,086 1,508 935 761 1,064 258
Ceded (15,104) (9,786) (15,992) (8,372) (11,069) (5,716)
- -----------------------------------------------------------------------------------
NET PREMIUMS $ 57,734 40,557 41,484 29,242 33,593 23,103
===================================================================================
</TABLE>
The reinsurance of risk does not relieve the ceding insurer of
its original liability to its policyholders. A contingent liability
exists with respect to the aforementioned reinsurance arrangements,
which may become a liability of CapMAC in the event the reinsurers
are unable to meet obligations assumed by them under the reinsurance
contracts. At December 31, 1996 and 1995, CapMAC had ceded loss
reserves of $0 and $69,000, respectively, and had ceded unearned
premiums of $18,489,000 and $13,171,000, respectively.
In 1994, CapMAC entered into a reinsurance agreement (the "Lureco
Treaty") with Luxembourg European Reinsurance LURECO S.A. ("Lureco"),
a European-based reinsurer. The agreement is renewable annually at
the Company's option, subject to satisfying certain conditions.
The agreement reinsured and indemnified the Company for any loss
incurred by CapMAC during the agreement period up to the limits of
the agreement. The Lureco Treaty provides that the annual
reinsurance premium payable by CapMAC to Lureco, after deduction of
the reinsurer's fee payable to Lureco, be deposited in a trust
account (the "Lureco Trust Account") to be applied by CapMAC, at its
option, to offset losses and loss expenses incurred by CapMAC in
connection with incurred claims. Amounts on deposit in the Lureco
Trust Account which have not been applied against claims are
contractually due to CapMAC at the termination of the treaty.
The premium deposit amounts in the Lureco Trust Account have been
reflected as assets by CapMAC during the term of the agreement.
Premiums in excess of the deposit amounts have been recorded as ceded
premiums in the statements of income. For the 1996 policy year, the
agreement provides $7 million of loss coverage in excess of the
premium deposit amount of $5 million retained in the Lureco Trust
Account. Additional coverage is provided for losses incurred in
excess of 200% of the net premiums earned up to $4 million for any
one agreement year. In September 1995, a claim of approximately
$2.5 million on an insurance policy was applied against the Lureco
Trust Account.
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
In addition to its capital (including statutory contingency reserves),
CapMAC has other reinsurance available to pay claims under its
insurance contracts. Effective November 30, 1995, CapMAC entered into
a Stop-loss Reinsurance Agreement with Mitsui Marine and Fire
Insurance Co. (the "Mitsui Stop-loss Agreement"). Under the Mitsui
Stop-loss Agreement, Mitsui Marine and Fire Insurance Co. ("Mitsui")
will be required to pay any losses in excess of $100 million in the
aggregate incurred by CapMAC during the term of the Mitsui Stop-loss
Agreement on the insurance policies in effect on December 1, 1995 and
written during the one-year period thereafter, up to an aggregate
limit payable under the Mitsui Stop-loss Agreement of $50 million.
The Mitsui Stop-loss Agreement has a term of seven years and is
subject to early termination by CapMAC in certain circumstances.
Effective January 1, 1997 the stop-loss reinsurance coverage increased
to $75 million in excess of incurred losses of $150 million increasing
annually based on increases in CapMAC's statutory qualified capital.
The new stop-loss reinsurance is provided by Mitsui, AXA Re Finance
S.A. ("AXA Re") and Munchener Ruckversicherungs-Gesellschaft
("Munich Re"). On November 30, 1995, CapMAC canceled the quota share
reinsurance agreement with Winterthur Swiss Insurance Company
("Winterthur") pursuant to which Winterthur had the right to reinsure
on a quota share basis 10% of each policy written by CapMAC. As
a result, CapMAC reassumed approximately $1.4 billion of principal
insured by Winterthur on January 1, 1996. In connection with the
commutation, Winterthur returned $2.0 million of unearned premiums,
net of ceding commission and Federal excise tax.
13) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments at December 31, 1996 and
1995. The fair value amounts were determined by the Company using
independent market information when available, and appropriate
valuation methodologies when market information was not available.
Such valuation methodologies require significant judgment and are not
necessarily indicative of the amount the Company could recognize in a
current market exchange.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Estimated Carrying Estimated
$ in thousands Amount Fair Value Amount Fair Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Available-for-sale securities $314,703 314,703 284,352 284,352
- ------------------------------------------------------------------------------------------------------
OFF-BALANCE-SHEET INSTRUMENTS:
Financial guarantees outstanding $ - 219,989 - 147,840
Less: ceding commission - 65,997 - 44,352
- ------------------------------------------------------------------------------------------------------
Net financial guarantees outstanding $ - 153,992 103,488
======================================================================================================
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments summarized above:
AVAILABLE-FOR-SALE SECURITIES
The fair values of fixed maturities are based upon quoted market
prices. The fair value of short-term investments approximates
amortized cost.
FINANCIAL GUARANTEES OUTSTANDING
The fair value of financial guarantees outstanding consists of (1)
the current unearned premium reserve, net of prepaid reinsurance and
(2) the fair value of installment revenue which is derived by
calculating the present value of the estimated future cash inflow to
CapMAC of policies in force having installment premiums, net of
amounts payable to reinsurers, at a discount rate of 7% at December
31, 1996 and 1995. The amount calculated is assumed to be equivalent
to the consideration that would be paid by CapMAC under market
conditions prevailing at the reporting dates to transfer CapMAC's
financial guarantee business to a third party under reinsurance and
other agreements. Ceding commission represents the expected amount
that would be paid to CapMAC to compensate CapMAC for originating
and servicing the insurance contracts. In constructing estimated
future cash inflows, management makes assumptions regarding
prepayments for amortizing asset-backed securities which are
consistent with relevant historical experience. For revolving
programs, assumptions are made regarding program utilization based on
discussions with program users. The amount of future installment
revenue actually realized by the Company could be reduced in the
future due to factors such as early termination of insurance
contracts, accelerated prepayments of underlying obligations or
lower than anticipated utilization of insured structured programs,
such as commercial paper conduits. Although increases in future
installment revenue earnings due to renewals of existing insurance
contracts historically have been greater than reductions in future
installment revenue due to factors such as those described above,
there can be no assurance that future circumstances might not cause a
material net reduction in the future installment revenue.
14) CAPITALIZATION
In 1995, $59.0 million of the proceeds received by Holdings from
the sale of shares in connection with an initial public offering and
private placements were contributed to CapMAC.
Exhibit 99.2
------------
CAPITAL MARKETS ASSURANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
CAPITAL MARKETS ASSURANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
------
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
(Unaudited)
<S> <C> <C>
INVESTMENTS:
Bonds at fair value (amortized cost $307,166 at June 30, 1997 and $294,861 at $ 307,821 297,893
December 31, 1996)
Short-term investments (at amortized cost which approximates fair value) 17,053 16,810
- ----------------------------------------------------------------------------------------------------------------------------
Total investments 324,874 314,703
- ----------------------------------------------------------------------------------------------------------------------------
Cash 4,506 371
Accrued investment income 3,835 3,807
Deferred acquisition costs 50,327 45,380
Premiums receivable 5,826 5,141
Prepaid reinsurance 20,787 18,489
Other assets 10,464 6,424
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 420,619 394,315
============================================================================================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Unearned premiums $ 71,800 68,262
Reserve for losses and loss adjustment expenses 13,861 10,985
Ceded reinsurance 2,766 1,738
Accounts payable and other accrued expenses 14,433 8,019
Current income taxes 203 679
Deferred income taxes 15,700 15,139
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 118,763 104,822
============================================================================================================================
STOCKHOLDER'S EQUITY:
Common stock - $1.00 par value per share; 15,000,000 shares are authorized, 15,000 15,000
issued and outstanding at June 30, 1997 and December 31, 1996
Additional paid-in capital 208,475 208,475
Unrealized appreciation on investments, net of tax 425 1,970
Retained earnings 77,956 64,048
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholder's equity 301,856 289,493
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 420,619 394,315
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
CAPITAL MARKETS ASSURANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Direct premiums written $ 18,726 18,622 35,180 32,777
Assumed premiums written 655 150 916 1,024
Ceded premiums written (6,272 ) (5,103) (10,621 ) (7,013)
- ----------------------------------------------------------------------------------------------------------------------------
Net premiums written 13,109 13,669 25,475 26,788
Increase in unearned premiums (877) (3,681) (1,240 ) (7,972)
- ----------------------------------------------------------------------------------------------------------------------------
Net premiums earned 12,232 9,988 24,235 18,816
Net investment income 4,684 4,112 9,386 7,989
Net realized capital gains 506 19 2,549 168
Other income 45 25 88 79
- ----------------------------------------------------------------------------------------------------------------------------
Total revenues 17,467 14,144 36,258 27,052
- ----------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Losses and loss adjustment expenses 1,333 1,109 2,876 2,184
Underwriting and operating expenses 4,208 3,385 8,879 7,362
Policy acquisition costs 2,472 2,059 5,053 4,123
- ----------------------------------------------------------------------------------------------------------------------------
Total expenses 8,013 6,553 16,808 13,669
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 9,454 7,591 19,450 13,383
- ----------------------------------------------------------------------------------------------------------------------------
INCOME TAXES:
Current income tax 2,277 1,316 4,150 1,981
Deferred income tax 473 1,148 1,392 1,971
- ----------------------------------------------------------------------------------------------------------------------------
Total income taxes 2,750 2,464 5,542 3,952
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 6,704 5,127 13,908 9,431
================================================================================================================================
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997
<S> <C>
COMMON STOCK:
Balance at beginning of period $ 15,000
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of period 15,000
- -----------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period 208,475
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of period 208,475
- -----------------------------------------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION)
ON INVESTMENTS, NET OF TAX:
Balance at beginning of period 1,970
Unrealized depreciation on investments (1,545)
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of period 425
- -----------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS:
Balance at beginning of period 64,048
Net income 13,908
- -----------------------------------------------------------------------------------------------------------------------
Balance at end of period 77,956
- -----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY $ 301,856
=======================================================================================================================
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,908 9,431
- -------------------------------------------------------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES:
Reserve for losses and loss adjustment expenses 2,876 1,821
Unearned premiums, net 3,538 10,977
Deferred acquisition costs (4,947) (4,742)
Premiums receivable (685) 308
Accrued investment income (28) (579)
Income taxes payable 916 2,113
Net realized capital gains (2,549) (168)
Accounts payable and other accrued expenses 6,414 2,581
Prepaid reinsurance (2,298) (3,004)
Other, net (2,765) (183)
- -------------------------------------------------------------------------------------------------------------------------------
Total adjustments 472 9,124
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,380 18,555
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (112,743) (121,115)
Proceeds from sales of investments 74,768 19,875
Proceeds from maturities of investments 27,730 82,800
- -------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (10,245) (18,440)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase in cash 4,135 115
Cash balance at beginning of period 371 344
- -------------------------------------------------------------------------------------------------------------------------------
CASH BALANCE AT END OF PERIOD $ 4,506 459
===============================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Income taxes paid $ 4,550 1,725
Tax and loss bonds purchased $ 76 112
===============================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
CAPITAL MARKETS ASSURANCE CORPORATION AND SUBSIDIARY
NOTES TO UNAUDITED COLSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. BACKGROUND
Capital Markets Assurance Corporation ("CapMAC") is a New York-
domiciled monoline stock insurance company which engages only in the
business of financial guaranty and surety insurance. CapMAC is a
wholly owned subsidiary of CapMAC Holdings Inc. ("Holdings"). In
early 1997, CapMAC made an investment of 50 million French francs
(approximately 10 million U.S. dollars) in CapMAC Assurance, S.A.,
an insurance subsidiary to be established in Paris, France. CapMAC
Assurance, S.A., is licensed to write financial guarantee
insurance in the European Union member states.
CapMAC is licensed in all 50 states in addition to the District of
Columbia, the Commonwealth of Puerto Rico and the territory of
Guam. CapMAC insures structured asset-backed, corporate, municipal
and other financial obligations in the U.S. and international
capital markets. CapMAC also provides financial guaranty reinsurance
for structured asset-backed, corporate, municipal and other
financial obligations written by other major insurance companies.
CapMAC's claims-paying ability is rated triple-A by Moody's
Investors Service, Inc., Standard & Poor's Ratings Services, Duff &
Phelps Credit Rating Co., and Nippon Investors Service, Inc., a
Japanese rating agency. Such ratings reflect only the views of the
respective rating agencies, are not recommendations to buy, sell or
hold securities and are subject to revision or withdrawal at any
time by such rating agencies.
2. BASIS OF PRESENTATION
CapMAC's consolidated unaudited interim financial statements have
been prepared on the basis of generally accepted accounting
principles and, in the opinion of management, reflect all
adjustments necessary for a fair presentation of the CapMAC's
financial condition, results of operations and cash flows for the
periods presented. The results of operations for the six months
ended June 30, 1997 may not be indicative of the results that may be
expected for the full year ending December 31, 1997. These
consolidated financial statements and notes should be read in
conjunction with the financial statements and notes included in the
audited financial statements of CapMAC as of December 31, 1996 and
1995, and for each of the years in the three-year period ended
December 31, 1996.
3. RECLASSIFICATIONS
Certain prior period balances have been reclassified to conform
to the current period presentation.
Exhibit 99.3
____________
[Lehman Brothers Inc. Legend]
[This information does not constitute either an offer to sell or
a solicitation of an offer to buy any of the securities referred
to herein. Offers to sell and solicitations of offers to buy the
securities are made only by, and this information must be read in
conjunction with, the final Prospectus Supplement and the related
Prospectus or, if not registered under the securities laws, the
final Offering Memorandum (the "Offering Document"). Information
contained herein does not purport to complete and is subject to
the same qualifications and assumptions, and should be considered
by investors only in the light of the same warnings, lack of
assurances and representations and other precautionary matters,
as disclosed in the Offering Document. Information regarding the
underlying assets has been provided by the issuer of the
securities or an affiliate thereof and has not been independently
verified by Lehman Brothers Inc. or any affiliate. The analyses
contained herein have been prepared on the basis of certain
assumptions (including, in certain cases, assumptions specified
by the recipient hereof) regarding payments,interest rates,
losses and other matters, including, but not limited to, the
assumptions described in the Offering Document. Lehman Brothers
Inc., and any of its affiliates, make no representation or
warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities.
This information supersedes any prior versions hereof and will be
deemed to be superseded by any subsequent versions (including,
with respect to any description of the securities or underlying
assets, the information contained in the Offering Document).]
[Countrywide Securities Corporation Legend]
[This information has been prepared in connection with the
issuance of securities representing interest in the above trust,
and is based in part on information provided by Countrywide Home
Loans, Inc. with respect to the expected characteristics of the
pool of home equity loans in which these securities will
represent undivided beneficial interests. The actual
characteristics and performance of the home equity loans will
differ form the assumptions used in preparing these materials,
which are hypothetical in nature. Changes in the assumptions may
have a material impact on the information set forth in these
materials. No representation is made that any performance or
return indicated herein will be achieved. For example, it is
very unlikely that loans will prepay at a constant rate or follow
a predictable pattern. This information may not be used or
otherwise disseminated in connection with the offer or sale of
these or any other securities, except in connection with the
initial offer or sale of these securities to you to the extent
set forth below. NO REPRESENTATION IS MADE AS TO THE
APPROPRIATENESS, USEFULNESS, ACCURACY OR COMPLETENESS OF THESE
MATERIALS OR THE ASSUMPTIONS ON WHICH THEY ARE BASED. Additional
information is available upon request. These materials do not
constitute an offer to buy or sell or a solicitation of an offer
to buy or sell any security or instrument or to participate in
any particular trading strategy. ANY SUCH OFFER TO BUY OR SELL
ANY SECURITY WOULD BE MADE PURSUANT TO A DEFINITIVE PROSPECTUS
AND PROSPECTUS SUPPLEMENT PREPARED BY THE ISSUER WHICH WOULD
CONTAIN MATERIAL INFORMATION NOT CONTAINED IN THESE MATERIALS.
SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT WILL CONTAIN ALL
MATERIAL INFORMATION IN RESPECT OF ANY SUCH SECURITY OFFERED
THEREBY AND ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE
MADE SOLELY IN RELIANCE UPON SUCH PROSPECTUS AND PROSPECTUS
SUPPLEMENT. ANY CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN
ARE TO BE READ IN CONJUNCTION WITH SUCH PROSPECTUS AND PROSPECTUS
SUPPLEMENT. In the event of any such offering these materials,
including any description of the home equity loans contained
herein, shall be deemed superseded, amended and supplemented in
their entirety by such Prospectus and Prospectus Supplement.
COUNTRYWIDE SECURITIES CORPORATION IS ACTING AS AN UNDERWRITER OF
SUCH SECURITIES. COUNTRYWIDE SECURITIES CORPORATIONS IS AN
AFFILIATE OF CWABS, INC., AND COUNTRYWIDE HOME LOANS, INC.]
DERIVED INFORMATION
___________________
Preliminary - Superseded
________________________
$176,400,000 Certificates (Approximate)
COUNTRYWIDE HOME EQUITY LOAN TRUST 1997-C
Revolving Home Equity Loan Asset-Backed Certificates
CWABS, Inc. (Depositor)
Countrywide Home Loans, Inc. (Seller & Master Servicer)
SECURITIES OFFERED(1)
<TABLE>
<CAPTION>
ESTIMATED EST. EXPECTED STATED EXPECTED
EXPECTED WAL/MDUR PRINCIPAL FINAL FINAL RATINGS
SECURITIES SIZE BENCHMARK (YRS) PMT. WINDOW MATURITY MATURITY (MOODY'S/S&P)
(MOS)
<S> <C> <C> <C> <C> <C> <C> <C>
To 10% Call $176,400,000 1 Mo LIBOR 4.12 / 3.43 90 months 3/15/2005 9/15/2022 Aaa/AAA
To Maturity $176,400,000 1 Mo. LIBOR 4.16 / 3.45 100 months 1/15/2006 9/15/2022 Aaa/AAA
</TABLE>
(1) The base case pricing assumptions used are 32% CPR and 20% CDR.
SENSITIVITY ANALYSIS
WEIGHTED AVERAGE LIFE (1) AND PRINCIPAL PAYMENT WINDOW (2)
SENSITIVITY OF THE CERTIFICATES TO PAYMENTS AND DRAWS
(ASSUMES 10% CLEAN UP CALL)
CONDITIONAL PREPAYMENT RATE (% CPR)
<TABLE>
<CAPTION>
10% 20% 25% 32% 35% 40% 50%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Constant Draw Window Window Window Window Window Window Window
Rate (% CDR) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months)WAL(yrs)(months)WAL(yrs)(months)
0% 8.64 264 4.13 125 3.23 98 2.43 73 2.19 66 1.86 56 1.39 41
10% 9.81 104 5.29 118 4.14 102 3.04 83 2.69 75 2.22 65 1.57 46
16% 8.83 83 6.39 114 4.98 102 3.63 88 3.20 82 2.61 72 1.78 52
20% 8.83 83 7.33 50 5.70 101 4.12 90 3.62 85 2.92 76 1.95 57
24% 8.83 83 6.87 40 6.58 100 4.72 91 4.13 87 3.31 79 2.18 63
30% 8.83 83 6.87 40 6.48 32 5.90 90 5.11 87 4.06 82 2.60 69
</TABLE>
(ASSUMES NO CLEAN UP CALL)
CONDITIONAL PREPAYMENT RATE (% CPR)
<TABLE>
<CAPTION>
10% 20% 25% 32% 35% 40% 50%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Constant Draw Window Window Window Window Window Window Window
Rate (% CDR) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months)WAL(yrs)(months)WAL(yrs)(months)
0% 8.77 281 4.55 281 3.56 281 2.68 281 2.41 281 2.05 281 1.53 281
10% 9.86 115 5.36 135 4.22 123 3.13 110 2.79 104 2.32 95 1.66 77
16% 8.86 91 6.42 121 5.02 113 3.69 103 3.26 100 2.68 93 1.87 80
20% 8.86 91 7.35 55 5.72 108 4.16 100 3.66 97 2.98 92 2.04 81
24% 8.86 91 6.88 43 6.60 104 4.74 97 4.15 94 3.35 90 2.25 82
30% 8.86 91 6.88 43 6.48 34 5.91 93 5.13 91 4.08 88 2.64 82
</TABLE>
(1) The weighted average life of each of the Certificates is determined by
(i) multiplying the amount of each principal payment by the number of
years from the date of issuance to the related Distribution Date,
(ii) adding the results, and (iii) dividing the sum by the Original
Certificate Principal Balance.
(2) The window of the Certificates is number of months during which principal
is repaid.
COLLATERAL SUMMARY
<TABLE>
<CAPTION>
<S> <C>
TOTAL NUMBER OF LOANS 6,663
AGGREGATE LOAN PRINCIPAL BALANCE $149,678,057.53
AVERAGE LOAN PRINCIPAL BALANCE $22,464.06
AVERAGE CREDIT LIMIT $34,115.24
AVERAGE CREDIT UTILIZATION RATE 67.71%
WEIGHTED AVERAGE COUPON (1) 6.22%
WEIGHTED AVERAGE MARGIN 2.23%
WEIGHTED AVERAGE REMAINING TERM (MOS) 281
WEIGHTED AVERAGE SEASONING (MOS) 1
WEIGHTED AVERAGE LIFE CAP 17.81%
WEIGHTED AVERAGE CLTV 81.76%
WEIGHTED AVERAGE SECOND MTG. RATIO 23.59%
(FOR LOANS IN SECOND LIEN POSITION ONLY)
LIEN POSITION (FIRST/SECOND) 4.50% / 95.50%
PROPERTY TYPE
SINGLE FAMILY 88.24%
TWO TO FOUR FAMILY 0.43%
CONDO 2.36%
PUD 8.97%
OCCUPANCY STATUS
OWNER OCCUPIED 97.78%
SECOND HOME 0.52%
INVESTMENT 1.71%
GEOGRAPHIC DISTRIBUTION: California - South: 20.12%
OTHER STATE ACCOUNT INDIVIDUALLY FOR LESS California - North: 10.15%
THAN 4% OF THE INITIAL POOL BALANCE Washington: 6.12%
Michigan: 4.95%
Colorado: 4.57%
Florida: 4.45%
Days Delinquent (as of 7/31/97) Current: 99.91%
30+ days: 0.09%
</TABLE>
(1) As of the Statistic Calculation Date, 93.95% of the loans were subject to
an introductory rate of 5.99%.
[Lehman Brothers Inc. Legend]
[This information does not constitute either an offer to sell or
a solicitation of an offer to buy any of the securities referred
to herein. Offers to sell and solicitations of offers to buy the
securities are made only by, and this information must be read in
conjunction with, the final Prospectus Supplement and the related
Prospectus or, if not registered under the securities laws, the
final Offering Memorandum (the "Offering Document"). Information
contained herein does not purport to complete and is subject to
the same qualifications and assumptions, and should be considered
by investors only in the light of the same warnings, lack of
assurances and representations and other precautionary matters,
as disclosed in the Offering Document. Information regarding the
underlying assets has been provided by the issuer of the
securities or an affiliate thereof and has not been independently
verified by Lehman Brothers Inc. or any affiliate. The analyses
contained herein have been prepared on the basis of certain
assumptions (including, in certain cases, assumptions specified
by the recipient hereof) regarding payments,interest rates,
losses and other matters, including, but not limited to, the
assumptions described in the Offering Document. Lehman Brothers
Inc., and any of its affiliates, make no representation or
warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities.
This information supersedes any prior versions hereof and will be
deemed to be superseded by any subsequent versions (including,
with respect to any description of the securities or underlying
assets, the information contained in the Offering Document).]
[Countrywide Securities Corporation Legend]
[This information has been prepared in connection with the
issuance of securities representing interest in the above trust,
and is based in part on information provided by Countrywide Home
Loans, Inc. with respect to the expected characteristics of the
pool of home equity loans in which these securities will
represent undivided beneficial interests. The actual
characteristics and performance of the home equity loans will
differ form the assumptions used in preparing these materials,
which are hypothetical in nature. Changes in the assumptions may
have a material impact on the information set forth in these
materials. No representation is made that any performance or
return indicated herein will be achieved. For example, it is
very unlikely that loans will prepay at a constant rate or follow
a predictable pattern. This information may not be used or
otherwise disseminated in connection with the offer or sale of
these or any other securities, except in connection with the
initial offer or sale of these securities to you to the extent
set forth below. NO REPRESENTATION IS MADE AS TO THE
APPROPRIATENESS, USEFULNESS, ACCURACY OR COMPLETENESS OF THESE
MATERIALS OR THE ASSUMPTIONS ON WHICH THEY ARE BASED. Additional
information is available upon request. These materials do not
constitute an offer to buy or sell or a solicitation of an offer
to buy or sell any security or instrument or to participate in
any particular trading strategy. ANY SUCH OFFER TO BUY OR SELL
ANY SECURITY WOULD BE MADE PURSUANT TO A DEFINITIVE PROSPECTUS
AND PROSPECTUS SUPPLEMENT PREPARED BY THE ISSUER WHICH WOULD
CONTAIN MATERIAL INFORMATION NOT CONTAINED IN THESE MATERIALS.
SUCH PROSPECTUS AND PROSPECTUS SUPPLEMENT WILL CONTAIN ALL
MATERIAL INFORMATION IN RESPECT OF ANY SUCH SECURITY OFFERED
THEREBY AND ANY DECISION TO INVEST IN SUCH SECURITIES SHOULD BE
MADE SOLELY IN RELIANCE UPON SUCH PROSPECTUS AND PROSPECTUS
SUPPLEMENT. ANY CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN
ARE TO BE READ IN CONJUNCTION WITH SUCH PROSPECTUS AND PROSPECTUS
SUPPLEMENT. In the event of any such offering these materials,
including any description of the home equity loans contained
herein, shall be deemed superseded, amended and supplemented in
their entirety by such Prospectus and Prospectus Supplement.
COUNTRYWIDE SECURITIES CORPORATION IS ACTING AS AN UNDERWRITER OF
SUCH SECURITIES. COUNTRYWIDE SECURITIES CORPORATIONS IS AN
AFFILIATE OF CWABS, INC., AND COUNTRYWIDE HOME LOANS, INC.]
DERIVED INFORMATION
___________________
Final Version
___________________
$176,400,000 Certificates (Approximate)
COUNTRYWIDE HOME EQUITY LOAN TRUST 1997-C
Revolving Home Equity Loan Asset-Backed Certificates
CWABS, Inc. (Depositor)
Countrywide Home Loans, Inc. (Seller & Master Servicer)
SECURITIES OFFERED(1)
<TABLE>
<CAPTION> ESTIMATED EST. EXPECTED STATED EXPECTED
EXPECTED WAL/MDUR PRINCIPAL FINAL FINAL RATINGS
SECURITIES SIZE BENCHMARK (YRS) PMT. WINDOW MATURITY MATURITY (MOODY'S/S&P)
(MOS)
<C> <C> <C> <C> <C> <C> <C> <C>
To 10% Call $176,400,000 1 Mo LIBOR 4.12/3.43 90 months 3/15/2005 9/15/2022 Aaa/AAA
To Maturity $176,400,000 1 Mo. LIBOR 4.16/3.45 100 months 1/15/2006 9/15/2022 Aaa/AAA
(1) The base case pricing assumptions used are 32% CPR and 20% CDR.
</TABLE>
SENSITIVITY ANALYSIS**
WEIGHTED AVERAGE LIFE (1) AND PRINCIPAL PAYMENT WINDOW (2)
SENSITIVITY OF THE CERTIFICATES TO PAYMENTS AND DRAWS
(ASSUMES 10% CLEAN UP CALL)**
CONDITIONAL PREPAYMENT RATE (% CPR)
<TABLE>
<CAPTION>
10% 20% 25% 32% 35% 40% 50%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Constant Draw Window Window Window Window Window Window Window
Rate (% CDR) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months)WAL(yrs)(months)WAL(yrs)(months)
0% 8.64 264 4.13 125 3.23 98 2.43 73 2.19 66 1.86 56 1.39 41
10% 9.81 104 5.29 118 4.14 102 3.04 83 2.69 75 2.22 65 1.57 46
16% 8.25 70 6.39 114 4.98 102 3.63 88 3.20 82 2.61 72 1.78 52
20% 8.20 69 7.33 50 5.70 101 4.12 90 3.62 85 2.92 76 1.95 57
24% 8.20 69 6.75 37 6.58 100 4.72 91 4.13 87 3.31 79 2.18 63
30% 8.20 69 6.57 34 6.29 27 5.90 90 5.11 87 4.06 82 2.60 69
</TABLE>
(ASSUMES NO CLEAN UP CALL)**
CONDITIONAL PREPAYMENT RATE (% CPR)
<TABLE>
<CAPTION>
10% 20% 25% 32% 35% 40% 50%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Constant Draw Window Window Window Window Window Window Window
Rate (% CDR) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months) WAL(yrs)(months)WAL(yrs)(months)WAL(yrs)(months)
0% 8.77 281 4.55 281 3.56 281 2.68 281 2.41 281 2.05 281 1.53 281
10% 9.86 115 5.36 135 4.22 123 3.13 110 2.79 104 2.32 95 1.66 77
16% 8.27 76 6.42 121 5.02 113 3.69 103 3.26 100 2.68 93 1.87 80
20% 8.23 76 7.35 55 5.72 108 4.16 100 3.66 97 2.98 92 2.04 81
24% 8.23 76 6.76 39 6.60 104 4.74 97 4.15 94 3.35 90 2.25 82
30% 8.23 76 6.58 36 6.29 29 5.91 93 5.13 91 4.08 88 2.64 82
</TABLE>
(1) The weighted average life of each of the Certificates is determined by
(i) multiplying the amount of each principal payment by the number of
years from the date of issuance to the related Distribution Date, (ii)
adding the results, and (iii) dividing the sum by the Original
Certificate Principal Balance.
(2) The window of the Certificates is number of months during which principal
is repaid.
COLLATERAL SUMMARY
<TABLE>
<CAPTION>
<S> <C>
TOTAL NUMBER OF LOANS 6,663
AGGREGATE LOAN PRINCIPAL BALANCE $149,678,057.53
AVERAGE LOAN PRINCIPAL BALANCE $22,464.06
AVERAGE CREDIT LIMIT $34,115.24
AVERAGE CREDIT UTILIZATION RATE 67.71%
WEIGHTED AVERAGE COUPON (1) 6.22%
WEIGHTED AVERAGE MARGIN 2.23%
WEIGHTED AVERAGE REMAINING TERM (MOS) 281
WEIGHTED AVERAGE SEASONING (MOS) 1
WEIGHTED AVERAGE LIFE CAP 17.81%
WEIGHTED AVERAGE CLTV 81.76%
WEIGHTED AVERAGE SECOND MTG. RATIO 23.59%
(FOR LOANS IN SECOND LIEN POSITION ONLY)
LIEN POSITION (FIRST/SECOND) 4.50% / 95.50%
PROPERTY TYPE
SINGLE FAMILY 88.24%
TWO TO FOUR FAMILY 0.43%
CONDO 2.36%
PUD 8.97%
OCCUPANCY STATUS
OWNER OCCUPIED 97.78%
SECOND HOME 0.52%
INVESTMENT 1.71%
GEOGRAPHIC DISTRIBUTION: California - South: 20.12%
OTHER STATE ACCOUNT INDIVIDUALLY FOR LESS California - North: 10.15%
THAN 4% OF THE INITIAL POOL BALANCE Washington: 6.12%
Michigan: 4.95%
Colorado: 4.57%
Florida: 4.45%
Days Delinquent (as of 7/31/97) Current: 99.91%
30+ days: 0.09%
</TABLE>
(1) As of the Statistic Calculation Date, 93.95% of the loans were subject to
an introductory rate of 5.99%. This represents 92.27% of the loans by
Statistical Calculation Date Principal Balance.
