Registration Statement No. 333-51817
Filed pursuant to Rule 424(b)(5)
Information contained herein is subject to completion or amendment. Offers to
buy these securities may not be accepted without the delivery of a final
prospectus supplement and prospectus. This prospectus supplement and the
prospectus to which it relates shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Information contained herein is subject to completion or amendment. Offers to
buy these securities may not be accepted without the delivery of a final
prospectus supplement and prospectus. This prospectus supplement and the
prospectus to which it relates shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
DATED JULY 8, 1998
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated May 13, 1998)
$1,061,090,000 (Approximate)
Commercial Mortgage Acceptance Corp.
as Depositor
Morgan Stanley Mortgage Capital Inc.
Midland Loan Services, Inc. and PNC Bank, N.A.
Residential Funding Corporation
as Mortgage Loan Sellers
and
Midland Loan Services, Inc.
as Master Sericer and Special Servicer
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-C1
-------------------------
The Commercial Mortgage Pass-Through Certificates, Series 1998-C1 (the
"Certificates") will consist of 19 Classes of Certificates, designated as (i)
the Class A-1 and Class A-2 Certificates (collectively, the "Class A
Certificates"), (ii) the Class X Certificates (the "Class X Certificates" or the
"Interest Only Certificates" and together with the Class A Certificates, the
"Senior Certificates"), (iii) the Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K, Class L, Class M and Class N Certificates
(collectively, the "Subordinate Certificates" and together with the Senior
Certificates, the "Regular Certificates", (iv) the Class R-I, Class R-II and
Class R-III Certificates (together, the "Residual Certificates"); and (v) the
Class V certificates (the "Class V Certificates," or the "Non-
Certificates"). Only the Senior Certificates and the Class B, Class C, Class D
and Class E Certificates (the "Offered Certificates") are offered hereby. It is
a condition to their issuance that the respective Classes of Offered
Certificates be assigned ratings by Moody's Investors Service, Inc. ("Moody's")
and by Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P" and, together with Moody's, the "Rating Agencies") as set
forth in the table below. Each Class of Offered Certificates will be issued with
the aggregate principal balance (the aggregate "Certificate Balance") or
aggregate notional amount (the aggregate "Notional Amount"), and will accrue
interest (initially, in the case of the Interest Only Certificates and the Class
E Certificates) at the per annum rate (the "Pass-Through Rate"), set forth in
the table below.
The Certificates will evidence the entire beneficial ownership interest in
a trust fund (the "Trust Fund") to be established by Commercial Mortgage
Acceptance Corp. (the "Depositor") pursuant to a Pooling and Servicing
Agreement, to be dated as of July 1, 1998 (the "Pooling and Servicing
Agreement"), among the Depositor, Midland Loan Services, Inc., as master
servicer (the "Master Servicer") and as special servicer (the "Special
Servicer"), LaSalle National Bank, as trustee (the "Trustee"), and ABN AMRO Bank
N.V., as fiscal agent (the "Fiscal Agent"). Distributions on the Certificates
will be payable solely from the assets transferred to the Trust Fund for the
benefit of the holders of the Certificates (the "Certificateholders"). The
Offered Certificates do not constitute obligations of the Depositor, the
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 any
governmental agency or instrumentality or by the Depositor, the Sellers, the
Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent, the
Underwriters or any of their respective affiliates or any other person.
(cover page continued on following pages)
-------------------------
See "Risk Factors" beginning on page S-19 in this Prospectus Supplement and page
6 of the Prospectus for a discussion of the material risks to be considered
before purchasing the Offered Certificates.
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.
-------------------------
<TABLE>
<CAPTION>
Initial
Initial Certificate Pass-Through Scheduled Final Ratings (4)
Class Balance (1) Rate (2) Distribution Date (3) S&P/Moody's
----- ---------- ------- --------------------- -----------
<S> <C> <C> <C> <C>
Class A-1............... $ 277,000,000 [6.19]% December 2007 AAA/Aaa
Class A-2............... $ 581,412,000 [6.40]% May 2008 AAA/Aaa
Class X................. $ 1,192,238,941 Variable March 2023 AAAr/Aaa
Class B................. $ 59,611,000 [6.53]% June 2008 AA/Aa2
Class C................. $ 59,612,000 [6.65]% June 2008 A/A2
Class D................. $ 62,593,000 WAPT-[0.50]% April 2010 BBB/Baa2
Class E................. $ 20,862,000 WAPT-[0.13]% May 2011 BBB-/Baa3
- -----------------------
(footnotes on next page)
</TABLE>
The Offered Certificates will be purchased by Morgan Stanley & Co.
Incorporated ("Morgan Stanley") and by Residential Funding Securities
Corporation ("RFSC" and together with Morgan Stanley, 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 $ , before deducting certain expenses
payable by the Depositor, plus accrued interest. For further information with
respect to the plan of distribution and any discounts and commissions, see "PLAN
OF DISTRIBUTION" herein. The Offered Certificates are offered by the
Underwriters, when, as and if issued by the Depositor, 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 facilities of The Depository Trust Company ("DTC")
in the United States and may be made in book-entry form through Cedel Bank, S.A.
("CEDEL") and the Euroclear System ("Euroclear"), as participants of DTC, in
Europe, on or about July , 1998 (the "Delivery Date"), against payment therefor
on or about July , 1998.
-------------------------
MORGAN STANLEY DEAN WITTER
RESIDENTIAL FUNDING SECURITIES CORPORATION
-------------------------
PNC CAPITAL MARKETS as Selling Agent
July , 1998
<PAGE>
[MAP OMITTED]
<PAGE>
The footnotes to the table on the cover page are as follows:
(1) The table sets forth: in the case of the Interest Only Certificates, the
initial aggregate Notional Amount thereof; and, in the case of each other
Class of Offered Certificates, the initial aggregate Certificate Balance
thereof. The Interest Only Certificates will not have Certificate Balances
and will not entitle the holders thereof to distributions of principal.
The initial aggregate Certificate Balance or Notional Amount of each Class
of Offered Certificates is subject to a permitted variance of plus or
minus 5%.
(2) The Pass-Through Rates for the Class A-1, Class A-2, Class B and Class C
Certificates for each Distribution Date are fixed at the respective per
annum rates set forth in the table; provided that in each case such
Pass-Through Rate will not exceed the Weighted Average Net Mortgage Rate
(as defined herein) for such Distribution Date. The Pass-Through Rates for
the Interest Only Certificates, Class D Certificates and the Class E
Certificates are variable and, subsequent to the initial Distribution Date
(as defined herein), will be determined as described under "DESCRIPTION OF
THE CERTIFICATES--Pass-Through Rates" herein. The Pass-Through Rates for
the Interest Only Certificates, the Class D and the Class E Certificates
as set forth in the table are the approximate initial Pass-Through Rates.
In addition to distributions of principal and interest, holders of certain
Classes of the Offered 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--Distributions
of Prepayment Premiums" herein.
(3) The "Scheduled Final Distribution Date" with respect to any Class of
Offered Certificates is the Distribution Date on which the final
distribution would occur for such Class based on the assumption that no
Mortgage Loan is prepaid in whole or in part and otherwise based on the
Maturity Assumptions (as described herein). The actual performance and
experiences of the Mortgage Loans will likely differ from such
assumptions. As described herein under "RATINGS", the Rated Final
Distribution Date for those Classes of Offered Certificates entitled to
distributions of principal will be the Distribution Date in .
(4) See "RATINGS" herein.
- ---------------------------
(continued from cover)
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 October , 1998, 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 to deliver a Prospectus Supplement and Prospectus when
acting as underwriters with respect to their unsold allotments or subscriptions.
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations 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 and the Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that the information herein or
therein 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.
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. The Offered Certificates will not be listed on
any securities exchange. See "RISK FACTORS--Limited Liquidity" herein.
S-iii
<PAGE>
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. See "ADDITIONAL INFORMATION" and
"REPORTS" in the Prospectus.
FORWARD-LOOKING STATEMENTS
If and when included in this Prospectus Supplement and the accompanying
Prospectus or in documents incorporated herein or therein by reference, the
words "expects," "intends," "anticipates," "estimates" and analogous expressions
are intended to identify forward-looking statements. Any such statements, which
may include statements contained in "RISK FACTORS" herein and in the Prospectus,
inherently are subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those projected. Such risks and
uncertainties include, among others, general economic and business conditions,
competition, changes in foreign, political, social and economic conditions,
regulatory initiatives and compliance with governmental regulations, customer
preferences and various other events, conditions and circumstances, many of
which are beyond the Depositor's control. These forward-looking statements speak
only as of the date of this Prospectus Supplement. The Depositor expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statement contained herein to reflect any
change in the Depositor's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail or otherwise make available monthly reports
concerning the Certificates to all Certificateholders of record.
S-iv
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION.....................S-iv
FORWARD-LOOKING STATEMENTS................S-iv
REPORTS TO CERTIFICATEHOLDERS.............S-iv
SUMMARY OF PROSPECTUS SUPPLEMENT...........S-1
RISK FACTORS..............................S-20
Investment in Commercial and Multifamily
Mortgage Loans.........................S-20
Repurchase of Mortgage Loans...........S-28
Prepayment and Yield Considerations....S-28
Effect of Prepayment Premiums..........S-29
Risks Associated with Balloon Loans....S-29
Pass-Through Rate Considerations.......S-29
Limited Liquidity......................S-29
Potential Conflict of Interest in
Connection with Specially Serviced
Mortgage Loans.........................S-29
DESCRIPTION OF THE MORTGAGE POOL..........S-30
General................................S-30
Security for the Mortgage Loans........S-31
Underwriting Standards.................S-32
Certain Terms and Conditions of the
Mortgage Loans.........................S-32
Certain Characteristics of the Mortgage
Pool...................................S-36
The Sellers............................S-40
Changes in Mortgage Pool
Characteristics........................S-40
Representations and Warranties;
Repurchase.............................S-41
MASTER SERVICER AND SPECIAL SERVICER......S-45
DESCRIPTION OF THE CERTIFICATES...........S-47
General................................S-47
Certificate Balances and Notional
Amounts................................S-48
Pass-Through Rates.....................S-48
Distributions..........................S-49
Appraisal Reductions...................S-53
Realized Losses and Allocations of
Certain Expenses.......................S-54
Prepayment Interest Shortfalls.........S-55
Scheduled Final Distribution Date......S-55
Subordination..........................S-55
Optional Termination...................S-56
Voting Rights..........................S-56
Delivery, Form and Denomination........S-56
Registration and Transfer..............S-61
YIELD AND MATURITY CONSIDERATIONS.........S-61
Yield Considerations...................S-61
Yield Sensitivity of the Interest Only
Certificates...........................S-64
Weighted Average Life..................S-64
THE POOLING AND SERVICING AGREEMENT.......S-70
General................................S-70
Assignment of the Mortgage Loans.......S-70
Servicing of the Mortgage Loans;
Collection of Payments.................S-72
Collection Activities..................S-73
Advances...............................S-73
Accounts...............................S-74
Withdrawals from the Collection
Account................................S-75
Enforcement of "Due-on-Sale" and "Due-
on-Encumbrance" Clauses................S-76
Inspections............................S-77
Realization Upon Mortgage Loans........S-77
Amendments, Modifications and Waivers..S-79
The Trustee............................S-79
Duties of the Trustee..................S-80
The Fiscal Agent.......................S-81
Servicing Compensation and Payment of
Expenses...............................S-81
Special Servicing......................S-81
The Operating Adviser..................S-83
Sub-Servicers..........................S-84
<PAGE>
Reports to Certificateholders; Available
Information............................S-84
MATERIAL FEDERAL INCOME TAX CONSEQUENCES..S-87
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
LOCATED IN CALIFORNIA.....................S-89
ERISA CONSIDERATIONS......................S-89
Plan Asset Regulation..................S-90
Individual Exemption...................S-90
Other Exemptions.......................S-91
Insurance Company Purchasers...........S-92
LEGAL INVESTMENT..........................S-93
PLAN OF DISTRIBUTION......................S-93
USE OF PROCEEDS...........................S-94
LEGAL MATTERS.............................S-94
RATINGS...................................S-94
INDEX OF DEFINITIONS......................S-96
APPENDIX I -- Mortgage Pool Information....I-1
S-v
<PAGE>
APPENDIX II -- Certain Characteristics
of the Mortgage Loans.....................II-1
APPENDIX III -- Significant Loan
Summaries................................III-1
TERM SHEET.................................T-1
S-vi
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
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 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. See "INDEX OF
DEFINITIONS" herein and in the Prospectus.
<TABLE>
<CAPTION>
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
Initial Description
Aggregate Rating by Weighted Principal of Pass-Through
Class Certificate S&P/Moody's Average Window<F2> Pass-Through Rate <F3>
Balance or Life <F2> Rate
Notional
Amount <F1>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Senior Certificates
- ------------------------------------------------------------------------------------------------
A-1 $ 277,000,000 AAA/Aaa 5.4 1-113 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
A-2 $ 581,412,000 AAA/Aaa 9.6 113-118 Fixed Rate [6.40]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
X <F4> $ 1,192,238,941 AAAr/Aaa N/A N/A Variable Variable
<F4> Rate I/O
- ------------------------------------------------------------------------------------------------
Subordinate Certificates
- ------------------------------------------------------------------------------------------------
B $ 59,611,000 AA/Aa2 9.8 118-119 Fixed Rate [6.53]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
C $ 59,612,000 A/A2 9.9 119 Fixed Rate [6.65]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
D $ 62,593,000 BBB/Baa2 10.5 119-141 Variable WAPT-[0.50]%
Rate
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
E $ 20,862,000 BBB-/Baa3 12.1 141-154 Variable WAPT-[0.13]%
Rate
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
F <F5> $ 53,650,000 BB+/NR 14.2 154-176 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
G <F5> $ 11,923,000 BB/NR 14.7 176-178 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
H <F5> $ 8,942,000 BB-/NR 15.1 178-186 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
J <F5> $ 14,905,000 B+/NR 16.5 186-210 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
K <F5> $ 8,939,000 B/NR 18.0 210-223 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
L <F5> $ 11,924,000 NR/B3 19.1 223-233 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
M<F5> $ 8,940,000 NR/Caa2 19.6 233-236 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
N<F5> $ 11,925,941 NR/NR 21.5 236-296 Fixed Rate [6.19]%
- ----------- ---------------- ------------ ------------- ------------- ------------ -------------
<FN>
<F1> In each case, subject to a variance of plus or minus 5%.
<F2> The weighted average life (expressed in years) and the period (expressed in
months following the Closing Date and commencing with the month of the
first Distribution Date) during which distributions of principal would be
received (the "Principal Window") set forth in the foregoing table are
based on the Maturity Assumptions and a pricing speed of 0% CPR (as defined
herein) applied to each Mortgage Loan during any period that it permits
voluntary prepayments of principal without imposing a Yield Maintenance
Premium (as defined herein) in connection therewith. See "YIELD AND
MATURITY CONSIDERATIONS" herein.
<F3> The Pass-Through Rates for the Class A-1, Class A-2, Class B, Class C,
Class F, Class G, Class H, Class J, Class K, Class L, Class M and Class N
Certificates for each Distribution Date will be equal to the fixed rates
per annum set forth in the table; provided that in each case such
Pass-Through Rate will not exceed the Weighted Average Net Mortgage Rate
for such Distribution Date. The initial Pass-Through Rates for the Interest
Only Certificates, the Class D Certificates and the Class E Certificates
set forth in the table are approximate. The Pass-Through Rates for the
Interest Only Certificates, the Class D Certificates and the
S-1
<PAGE>
Class E Certificates are variable and, subsequent to the initial
Distribution Date, will be determined as described under "DESCRIPTION OF
THE CERTIFICATES--Pass-Through Rates" herein. The Pass-Through Rates shown
above are for indicative purposes only and will be finalized at the time
of pricing.
<F4> Aggregate Notional Amount.
<F5> Not offered hereby.
- ---------------
</FN>
</TABLE>
The Residual Certificates and the Class V Certificates are not represented
in this table. The Residual Certificates and Class V Certificates do not have
Certificate Balances, Notional Amounts, Pass-Through Rates or any ratings
thereon.
S-2
<PAGE>
Title of
Certificates....... Commercial Mortgage Acceptance Corp.Commercial Mortgage
Pass-Through Certificates, Series 1998-C1 (the "Certifi-
cates").
The Certificates will be issued pursuant to a Pooling and
Servicing Agreement to be dated as of July 1, 1998 (the
"Pooling and Servicing Agreement") among the Depositor, the
Master Servicer, the Special Servicer, the Trustee and the
Fiscal Agent.
Only the Senior Certificates and the Class B, Class C, Class
D and Class E Certificates are offered hereby.
The Class F, Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class V, Class R-I, Class R-II and Class
R-III 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......... Commercial Mortgage Acceptance Corp. (the "Depositor"), a
wholly owned subsidiary of Midland Loan Services, Inc. (the
Master Servicer and the Special Servicer). See "THE
DEPOSITOR" in the Prospectus.
Sellers........... Morgan Stanley Mortgage Capital Inc. ("MSMC") as to 142
Mortgage Loans, representing 49.06% of the Initial Pool
Balance (as defined herein), Midland Loan Services, Inc.
("Midland") and PNC Bank, N.A. ("PNC") as to 109 Mortgage
Loans, representing 32.72% of the Initial Pool Balance; and
Residential Funding Corporation ("RFC" and, collectively
with MSMC, Midland and PNC, the "Sellers") as to 71 Mortgage
Loans, representing 18.22% of the Initial Pool Balance. Each
Seller will sell its Mortgage Loans to the Depositor on the
Closing Date pursuant to an agreement (each, a "Mortgage
Loan Purchase Agreement"), which will be assigned in
relevant part to the Trustee. See "DESCRIPTION OF THE
MORTGAGE POOL--The Sellers" herein.
Master Servicer... Midland Loan Services, Inc. (the "Master Servicer"), a
wholly owned subsidiary of PNC. See "MASTER SERVICER AND
SPECIAL SERVICER" herein. The Master Servicer will be
obligated to make Advances (as defined herein) with respect
to the Mortgage Loans as described herein. See "THE POOLING
AND SERVICING AGREEMENT--Advances" herein.
Special Servicer.. Midland Loan Services, Inc. (the "Special Servicer"), a
wholly owned subsidiary of PNC. The Special Servicer will be
responsible for performing certain servicing functions with
respect to Mortgage Loans that, in general, are in default
or as to which default is reasonably foreseeable, and for
the management of REO Properties. The Special Servicer will
be required to notify the Operating Adviser before taking
certain actions and to obtain the approval of the Operating
Adviser with respect to certain matters, and may be replaced
by the Operating Adviser without cause, as described herein.
See "MASTER SERVICER AND SPECIAL SERVICER" herein.
Trustee........... LaSalle National Bank, a national banking association (the
"Trustee"). See "THE POOLING AND SERVICING AGREEMENT-- The
Trustee" herein. The Trustee will be obligated to make
Advances with respect to the Mortgage Loans in certain
circumstances in which the Master Servicer was required but
S-3
<PAGE>
failed to do so, as described under "THE POOLING AND
SERVICING AGREEMENT--Advances" herein.
Fiscal Agent...... ABN AMRO Bank N.V., a Netherlands banking corporation, and
the indirect corporate parent of the Trustee (the "Fiscal
Agent"). See "THE POOLING AND SERVICING AGREEMENT--The
Fiscal Agent" herein. The Fiscal Agent will be obligated to
make Advances with respect to the Mortgage Loans in certain
circumstances in which the Master Servicer and the Trustee
were required but failed to do so, as described under "THE
POOLING AND SERVICING AGREEMENT--Advances" herein.
Operating Adviser.. The holders of Certificates representing more than 50% of
the aggregate Certificate Balance of the most subordinate
Class of Principal Balance Certificates outstanding at any
time of determination (or, if the then-aggregate Certificate
Balance of such Class of Certificates is less than 25% of
the initial aggregate Certificate Balance of such Class, the
next most subordinate Class of Principal Balance
Certificates) (in any event, the "Controlling Class"), may
appoint a representative (the "Operating Adviser") as
described herein. The Special Servicer will be required to
notify the Operating Adviser before taking certain actions
and to obtain the approval of the Operating Adviser with
respect to certain matters, and may be replaced by the
Operating Adviser without cause, as described herein. See
"THE POOLING AND SERVICING AGREEMENT--General" and "--The
Operating Adviser" herein.
Cut-off Date...... July 1, 1998.
Closing Date...... On or about July , 1998.
Distribution
Date.............. The 15th day of each month, or if such 15th day is not a
Business Day, the Business Day (as defined herein)
immediately following such day, commencing in August, 1998.
Scheduled Final
Distribution Date. Scheduled
Final
Class Designation Distribution Date
----------------- -----------------
Class A-1........................... December 2007
Class A-2........................... May 2008
Class X ........................... March 2023
Class B ........................... June 2008
Class C ........................... June 2008
Class D ........................... April 2010
Class E ........................... May 2011
Class F............................. March 2013
Class G ........................... May 2013
Class H ........................... January 2014
Class J ........................... January 2016
Class K............................. February 2017
Class L............................. December 2017
Class M............................. March 2018
Class N ........................... March 2023
The Scheduled Final Distribution Dates set forth above
have been determined on the basis of the assumptions
described in
S-4
<PAGE>
"DESCRIPTION OF THE CERTIFICATES--Scheduled Final
Distribution Date" herein.
Rated Final
Distribution
Date.............. As to each Class of Certificates.
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 August, 1998 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.............. With respect to each Distribution Date, the fifth Business
Day prior to such Distribution Date.
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 all
of the Mortgage Loans is the first day of the month (the
"Due Date").
Denominations..... The Class A Certificates will initially be issued in
book-entry form in denominations of $5,000 initial
Certificate Balance and in any whole dollar denomination in
excess thereof. The Class X, Class B, Class C, Class D and
Class E Certificates will initially be issued in book-entry
form in denominations of $50,000 initial Certificate Balance
or Notional Amount, as applicable, and in any whole dollar
denomination in excess thereof. Each Class of Offered
Certificates will be represented by one or more Certificates
registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"). No person acquiring an
interest in an Offered Certificate (any such person, a
"Certificate Owner") will be entitled to receive a fully
registered physical certificate (a "Definitive Certificate")
representing such interest, except under the limited
circumstances described herein and in the Prospectus. See
"DESCRIPTION OF THE CERTIFICATES--Delivery, Form and
Denomination" herein.
Clearance and
Settlement........ Certificateholders must elect to hold their Offered
Certificates in book-entry form, delivery of which will be
made through the facilities of DTC (in the United States)
and may be made through the facilities of Cedel Bank,
societe anonyme ("CEDEL"), or Euroclear System ("Euroclear")
(in Europe). Transfers within DTC, CEDEL or Euroclear, as
the case may be, will be in accordance with the usual rules
and operating procedures of the relevant system. Crossmarket
transfers between persons holding directly or indirectly
through DTC, on the one hand, and counterparties holding
directly or indirectly
S-5
<PAGE>
through CEDEL or Euroclear, on the other, will be effected
in DTC through Citibank, N.A. or The Chase Manhattan Bank,
the relevant depositaries of CEDEL and Euroclear,
respectively.
Distributions.... Distributions on the Certificates will be made on each
Distribution Date, commencing in August, 1998, to the
holders of record at the close of business on the related
Record Date.
The aggregate amount available for distribution with respect
to the Certificates on any Distribution Date, other than
distributions of Prepayment Premiums, is the Available
Funds. See "DESCRIPTION OF THE CERTIFICATES--
Distributions--Method, Timing and Amount" for a detailed
description of what constitutes Available Funds for any
Distribution Date.
On each Distribution Date, the Available Funds first will be
applied to make distributions to the holders of the Senior
Certificates as follows:
First, pro rata among the respective Classes of Senior
Certificates, in respect of interest accrued on such Classes
during the preceding month and any interest accrued on such
Classes in prior months but not previously paid, together
with interest on such past due amount at a rate equal to the
Pass-Through Rate applicable to such Class of Certificates
for such Distribution Date;
Second, to distributions of principal to the holders of the
Class A Certificates, in the following order: first, to the
holders of the Class A-1 Certificates and second, to the
holders of the Class A-2 Certificates, in each case up to an
amount equal to the lesser of (a) the then-outstanding
aggregate Certificate Balance of such Class of Certificates
and (b) the remaining portion of the Principal Distribution
Amount for such Distribution Date; and
Third, in reimbursement of any Realized Losses and Expense
Losses allocated to the Class A-1 and Class A-2 Certificates
on a prior Distribution Date, together with interest thereon
at the Pass-Through Rate for such Class, pro rata as among
such Classes in accordance with the respective amounts of
Realized Losses and Expense Losses.
On each Distribution Date, the Available Funds remaining
after distributions to the holders of the Senior
Certificates will be distributed to the holders of each
Class of Subordinate Certificates, in the order of their
alphabetic designation, as follows:
First, in respect of interest accrued on such Class during
the preceding month and any interest accrued on such Class
in prior months but not previously paid, together with
interest on such past due amount at a rate equal to the
Pass-Through Rate applicable to such Class of Certificates
for such Distribution Date;
Second, if the Certificate Balance of each Class with an
earlier alphabetic designation has been reduced to zero, to
distributions of principal, up to an amount equal to the
lesser of (x) the then-outstanding aggregate Certificate
Balance of such Class of Certificates and (y) the remaining
portion of the Principal Distribution Amount for such
Distribution Date; and
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<PAGE>
Third, in reimbursement of any Realized Losses and Expense
Losses allocated to such Class on a prior Distribution Date,
together with interest thereon at the Pass-Through Rate for
such Class;
provided that, on each Distribution Date after the aggregate
Certificate Balance of the Subordinate Certificates has been
reduced to zero, the payments of principal to be made as
contemplated by clause second above with respect to the
Class A Certificates will be made to the holders of the
respective Classes of such Certificates, up to an amount
equal to, and pro rata as among such Classes in accordance
with, the respective then-outstanding Certificate Balances
of such Classes of Certificates.
Any portion of the Available Funds for any Distribution Date
that is not otherwise payable to the holders of the Regular
Certificates as contemplated above, will be paid to the
holders of the Class R-I Certificates.
Reimbursement of previously allocated Realized Losses and
Expense Losses will not constitute distributions of
principal for any purpose and will not result in an
additional reduction in the Certificate Balances of the
Certificates in respect of which any such reimbursement is
made.
% and % of any Edgewater Final Contingent Interest will be
distributed to the holders of the Class A-1 and Class X
Certificates, respectively. Any remaining Contingent
Interest will be distributed to the holders of the Class V
Certificates.
See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein.
Distribution of
Prepayment
Premiums.........
Any Prepayment Premium actually collected with respect to a
Mortgage Loan during any particular Collection Period will
be distributed on the related Distribution Date to the
holders of the Offered Certificates as set forth in
"DESCRIPTION OF THE CERTIFICATES--Distributions--
Distributions of Prepayment Premiums" herein.
Appraisal
Reductions....... With respect to the first Distribution Date following the
earliest of (i) the third anniversary of the date on which
an extension of the maturity date of a Mortgage Loan becomes
effective as a result of a modification of such Mortgage
Loan by the Special Servicer, which extension does not
change the amount of Monthly Payments on the Mortgage Loan,
(ii) 90 days after an uncured delinquency occurs in respect
of a Mortgage Loan, (iii) 45 days after the date on which a
reduction in the amount of Monthly Payments on a Mortgage
Loan, or a change in any other material economic term of the
Mortgage Loan, becomes effective as a result of a
modification of such Mortgage Loan by the Special Servicer,
(iv) 30 days after a receiver has been appointed or after
the commencement of an involuntary bankruptcy proceeding,
(v) immediately after a borrower declares bankruptcy, and
(vi) immediately after a Mortgage Loan becomes an REO
Mortgage Loan (each, an "Appraisal Reduction Event" and the
affected Mortgage
S-7
<PAGE>
Loan, a "Required Appraisal Loan"), an Appraisal Reduction
will be calculated.
The "Appraisal Reduction" for any Distribution Date and for
any Mortgage Loan as to which any Appraisal Reduction Event
has occurred will be an amount equal to the excess of (a)
the outstanding Stated Principal Balance of such Mortgage
Loan as of the last day of the related Collection Period
over (b) the excess of (i) 90% of the sum of the appraised
values of the related Mortgaged Properties as determined by
independent MAI appraisals (the costs of which shall be paid
by the Master Servicer as an Advance) over (ii) the sum of
(A) to the extent not previously advanced by the Master
Servicer or the Trustee, all unpaid interest on such
Mortgage Loan at a per annum rate equal to the Mortgage
Rate, (B) all unreimbursed Advances and interest thereon at
the Advance Rate in respect of such Mortgage Loan and (C)
all currently due and unpaid real estate taxes and
assessments and insurance premiums and all other amounts,
including, if applicable, ground rents, due and unpaid under
the Mortgage Loan (which taxes, premiums and other amounts
have not been the subject of an Advance). If no independent
MAI appraisal has been obtained within twelve months prior
to the first Distribution Date on or after an Appraisal
Reduction Event has occurred, the Special Servicer will be
required to estimate the value of the related Mortgaged
Properties (the "Special Servicer's Appraisal Reduction
Estimate") and such estimate will be used for purposes of
determining the Appraisal Reduction. Within 60 days after
the Special Servicer receives notice or is otherwise aware
of an Appraisal Reduction Event, the Special Servicer will
be required to obtain an independent MAI appraisal, the cost
of which will be paid by the Master Servicer as a Servicing
Advance (an "Updated Appraisal"). On the first Distribution
Date occurring on or after the delivery of such Updated
Appraisal, the Special Servicer will be required to adjust
the Appraisal Reduction to take into account such appraisal
(regardless of whether the Updated Appraisal is higher or
lower than the Special Servicer's Appraisal Reduction
Estimate). Annual updates of such Updated Appraisal will be
obtained during the continuance of an Appraisal Reduction
Event and the Appraisal Reduction will be adjusted
accordingly.
Upon payment in full or liquidation of any Mortgage Loan for
which an Appraisal Reduction has been determined, such
Appraisal Reduction will be eliminated.
The existence of an Appraisal Reduction proportionately
reduces the Master Servicer's, the Trustee's or the Fiscal
Agent's, as the case may be, advancing obligation in respect
of delinquent principal and interest on the related Mortgage
Loan, which may result in a reduction in current
distributions in respect of one or more of the then-most
subordinate Classes of Principal Balance Certificates and
may under certain circumstances result in an Expense Loss
being allocated to the then-most subordinate Class of
Principal Balance Certificates. See "THE POOLING AND
SERVICING AGREEMENT--Advances" herein.
Administrative
Cost Rate........ Each of the Master Servicer and the Trustee will be entitled
to receive a monthly fee (a "Master Servicing Fee" and a
"Trustee Fee", respectively) in respect of each Mortgage
Loan (payable out of
S-8
<PAGE>
payments (or advances in lieu thereof) and other collections
of interest thereon) based upon the Stated Principal Balance
of such Mortgage Loan. The administrative costs on each
Mortgage Loan will equal the sum of the related Master
Servicing Fee and the Trustee Fee (collectively, expressed
as a per annum rate, the "Administrative Cost Rate"). With
respect to 150, 75 and 41 Mortgage Loans, representing
approximately 44.48%, 19.81% and 14.13%, respectively, of
the Initial Pool Balance, the Administrative Cost Rate for
each Mortgage Loan will equal 0.0824%, 0.0834% and 0.1250%,
respectively, per annum and, with respect to the remainder
of the Mortgage Loans, the Administrative Cost Rate for each
Mortgage Loan will range from 0.0484% to 0.6034% per annum,
as set forth in Appendix II hereto. As of the Cut-off Date,
the weighted average Administrative Cost Rate for the
Mortgage Loans was 0.0984% per annum. The Master Servicer
will be obligated to pay the fees of its subservicers out of
its Master Servicing Fees. For a discussion of additional
Master Servicer compensation, as well as Special Servicer
compensation, see "THE POOLING AND SERVICING
AGREEMENT--Servicing Compensation and Payment of Expenses"
herein.
Certain Yield
and Prepayment
Considerations... The yield on each Class of the Offered Certificates will
depend on, among other things, the Pass-Through Rate for
such Certificates.
The yield on any Principal Balance Certificate that is
purchased at a discount or premium will also be affected by
the rate and timing of distributions in respect of principal
on such Certificate, which in turn will be affected by (i)
the rate and timing of principal payments (including
principal prepayments) on the Mortgage Loans and (ii) the
extent to which such principal payments are applied on any
Distribution Date in reduction of the Certificate Balance of
such Certificate. An investor that purchases any Principal
Balance Certificate at a discount should consider the risk
that a slower than anticipated rate of principal payments on
such Certificate will result in an actual yield that is
lower than such investor's expected yield. An investor that
purchases any Principal Balance Certificate at a premium
should consider the risk that a faster than anticipated rate
of principal payments on such Certificate will result in an
actual yield that is lower than such investor's expected
yield. Insofar as an investor's initial investment in any
Principal Balance Certificate is returned in the form of
payments of principal thereon, there can be no assurance
that such amounts can be reinvested in a comparable
alternative investment with a comparable yield. The yield to
an Investor in the Certificates also will be affected by,
among other things, Pass-Through Rates in effect from time
to time, Appraisal Reductions, Realized Losses and Expense
Losses, which may adversely affect the amounts distributable
to one or more Classes of Regular Certificates. See
"DESCRIPTION OF THE CERTIFICATES--Distributions--Application
of Available Funds" and "--Distributions--Principal
Distribution Amount" herein.
The Class X Certificates are interest-only Certificates and
are not entitled to any distributions in respect of
principal. The yield to maturity of the Class X Certificates
will be especially sensitive to the prepayment, repurchase,
extension, default and recovery experience on the Mortgage
Loans, which prepayment, repurchase, default and recovery
experience may fluctuate significantly from time to time. A
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<PAGE>
rate of principal payments and liquidations on the Mortgage
Loans that is more rapid than expected by investors will
have a material negative effect on the yield to maturity of
the Class X Certificates. See "YIELD AND MATURITY
CONSIDERATIONS--Yield Sensitivity of the Interest Only
Certificates" herein.
The actual rate of prepayment of principal on the Mortgage
Loans cannot be predicted. The investment performance of the
Offered Certificates may vary materially and adversely from
the investment expectations of investors due to prepayments
on the Mortgage Loans being higher or lower than anticipated
by investors. The actual yield to the holder of an Offered
Certificate may not be equal to the yield anticipated at the
time of purchase of the Certificate or, notwithstanding that
the actual yield is equal to the yield anticipated at that
time, the total return on investment expected by the
investor or the expected weighted average life of the
Certificate may not be realized. For a discussion of certain
factors affecting prepayment of the Mortgage Loans,
including the effect of Prepayment Premiums, see "YIELD AND
MATURITY CONSIDERATIONS" herein. In deciding whether to
purchase any Offered Certificates, an investor should make
an independent decision as to the appropriate prepayment
assumptions to be used.
Advances........ As and to the extent described herein, the Master Servicer,
the Trustee and the Fiscal Agent will each be obligated to
make advances ("Advances") in respect of delinquent payments
of principal (other than the principal portion of Balloon
Payments) and/or interest on the Mortgage Loans (each, a
"P&I Advance") and the Master Servicer, the Trustee and the
Fiscal Agent will each be obligated to cover certain
servicing expenses (each, a "Servicing Advance") in
accordance with the provisions set forth in the Pooling and
Servicing Agreement. See "THE POOLING AND SERVICING
AGREEMENT--Advances" herein. If the Master Servicer fails to
make any Advance that it is obligated to make pursuant to
the Pooling and Servicing Agreement, the Trustee will be
required to make such Advance; if the Trustee fails to make
any Advance that it is obligated to make pursuant to the
Pooling and Servicing Agreement, the Fiscal Agent will be
required to make such Advance. No Advances will be required
in respect of payments of Contingent Interest.
Each of the Master Servicer, the Trustee and the Fiscal
Agent, as applicable, will be obligated to make Advances
only to the extent that it determines, in its reasonable
discretion, that such Advances are ultimately recoverable
from future payments and other collections on the related
Mortgage Loan or REO Property. Such determination will be
conclusive and binding on the Certificateholders.
The Master Servicer, the Trustee and the Fiscal Agent will
each be entitled, with respect to any Advance made thereby,
to receive interest accrued on the amount of such Advance
for so long as it is outstanding at a rate per annum (the
"Advance Rate") equal to the "prime rate" as published in
the "Money Rates" section of The Wall Street Journal, as
such "prime rate" may change from time to time; provided,
however, that neither the Master Servicer nor any other
party shall be entitled to interest accrued on the amount of
any P&I Advance with respect to the Mortgage Loans
identified as Loan ID numbers 136, 195, 208 and 240
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<PAGE>
on the Mortgage Loan Schedule, for the period commencing on
the date of such P&I Advance and ending on the day on which
the grace period applicable to the related borrower's
obligation to make the related Monthly Payment expires
pursuant to the related Mortgage Loan documents. Such
interest on any Advance will be payable to the Master
Servicer, the Trustee or the Fiscal Agent, as the case may
be, first out of default interest actually collected by the
Master Servicer or the Special Servicer (and not retainable
by any Sub-Servicer) in respect of the related Mortgage Loan
and, to the extent such amounts are insufficient, in
connection with or at any time following the reimbursement
of such Advance, out of any amounts then on deposit in the
Collection Account. To the extent not offset by default
interest actually collected in respect of any defaulted
Mortgage Loan, interest accrued on outstanding Advances made
in respect thereof will result in a reduction in amounts
payable on the Certificates. See "THE POOLING AND SERVICING
AGREEMENT-- Advances" herein.
Subordination;
Allocation of
Realized Losses
and Expense
Losses.......... The rights of the Class B, Class C, Class D, Class E, Class
F, Class G, Class H, Class J, Class K, Class L, Class M and
Class N Certificates (the "Subordinate Certificates") to
receive payments of principal and interest will be
subordinated to the rights of the Class A-1, Class A-2 and
Class X Certificates (the "Senior Certificates"), to the
extent described herein and, further, in the case of any
particular Class of Subordinate Certificates to the rights
of the holders of each other Class of Subordinate
Certificates, if any, with an earlier alphabetical Class
designation, as described herein. Such subordination will be
accomplished by (i) the application of Available Funds in
the order described above under "--Distributions" and (ii)
the allocation of Realized Losses incurred on the Mortgage
Loans and Expense Losses to the Regular Certificates (other
than the Class X Certificates, which may nonetheless incur
reductions of their Notional Amount) in reverse order of
their alphabetical Class designations; provided that
Realized Losses and Expense Losses are allocated pro rata to
the Class A-1 and Class A-2 Certificates in accordance with
their respective Certificate Balances. In addition, the
rights of the holders of the Residual Certificates to
receive distributions with respect to the Mortgage Loans
will be subordinated to the rights of the holders of the
Regular Certificates, to the extent described herein. No
other form of credit enhancement is offered for the benefit
of the holders of the Certificates.
Payment Interest
Shortfalls....... If a borrower prepays a Mortgage Loan, in whole or in part,
prior to the Determination Date in any calendar month, the
amount of interest at the related Mortgage Rate (as defined
herein) accrued on such prepayment, in general, from the
beginning of such calendar month to, but not including, the
date of prepayment (or any later date through which interest
accrues) will, to the extent actually collected, constitute
a "Prepayment Interest Excess". Conversely, if a borrower
prepays a Mortgage Loan, in whole or in part, after the
Determination Date in any calendar month and does not pay
interest on such prepayment through, in general, the end of
such calendar month, then the shortfall in a full month's
interest (net of related Master Servicing Fees and Trustee
Fees) on such prepayment will constitute a "Prepayment
Interest Shortfall".
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<PAGE>
Prepayment Interest Excesses collected on the Mortgage Loans
during any Collection Period will first be applied to offset
Prepayment Interest Shortfalls incurred in respect of the
Mortgage Loans during such Collection Period and, to the
extent not needed for such purposes, will be retained by the
Master Servicer as additional servicing compensation. The
Master Servicer will be obligated to cover, out of its own
funds, without right of reimbursement, to the extent of its
Master Servicing Fees for the related Collection Period (but
only up to 0.029% per annum per Mortgage Loan), any
Prepayment Interest Shortfalls in respect of the Mortgage
Loans that are not so offset by Prepayment Interest
Excesses. Any payment so made by the Master Servicer to
cover such shortfalls will constitute a "Compensating
Interest Payment". The aggregate of all Prepayment Interest
Shortfalls incurred in respect of the Mortgage Loans during
any Collection Period that are neither offset by Prepayment
Interest Excesses collected on the Mortgage Loans during
such Collection Period nor covered by a Compensating
Interest Payment made by the Master Servicer, shall
constitute the "Net Aggregate Prepayment Interest Shortfall"
for the related Distribution Date.
Any Net Aggregate Prepayment Interest Shortfall for a
Distribution Date will be allocated among the respective
Classes of Regular Certificates, on a pro rata basis, in the
ratio that the Accrued Certificate Interest with respect to
any such Class of Certificates for such Distribution Date,
bears to the total of the Accrued Certificate Interest with
respect to all Classes of Regular Certificates for such
Distribution Date. The Distributable Certificate Interest in
respect of any Class of Regular Certificates will be reduced
to the extent that any Net Aggregate Prepayment Interest
Shortfalls are allocated thereto. See "THE POOLING AND
SERVICING AGREEMENT--Servicing Compensation and Payment of
Expenses" herein.
Optional
Termination..... The Depositor, the Master Servicer, the Special Servicer,
the majority holders of the Controlling Class and any holder
of the Class R-I Certificates representing more than a 50%
Percentage Interest of the Class R-I Certificates 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 Certificate Balance of all Classes of
Principal Balance Certificates then outstanding is less than
or equal to 1% of the Initial Pool Balance. See "DESCRIPTION
OF THE CERTIFICATES--Optional Termination" herein.
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<PAGE>
Certain Federal
Income Tax
Consequences... Three separate "real estate mortgage investment conduit"
("REMIC") elections will be made with respect to the Trust
Fund for federal income tax purposes. The assets of "REMIC
I" will consist primarily of the Mortgage Loans and any
properties acquired on behalf of the Certificateholders (but
not including the Contingent Interest). The assets of "REMIC
II" will consist of the separate uncertificated REMIC I
regular interests, and the assets of "REMIC III" will
consist of the separate uncertificated REMIC II regular
interests. For federal income tax purposes, (i) the Regular
Certificates will be the "regular interests" in, and
generally will be treated as debt obligations of, REMIC III,
(ii) the Class R-I Certificates will be the sole class of
residual interests in REMIC I, (iii) the Class R-II
Certificates will be the sole class of residual interests in
REMIC II and (iv) the Class R-III Certificates will be the
sole class of residual interests in REMIC III.
Because they represent regular interests, the Offered
Certificates generally will be treated as newly originated
debt instruments for federal income tax purposes. 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 a
Certificateholder's usual method of accounting. The Class X
Certificates will be treated as having been issued with
original issue discount for federal income tax reporting
purposes. 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 not be voluntarily prepaid
prior to their respective maturity dates. No representation
is made as to whether the Mortgage Loans will prepay at that
rate or any other rate. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Federal Income Tax Consequences for REMIC
Certificates--Taxation of REMIC Regular Certificates--
Interest and Acquisition Discount" in the Prospectus.
The amount of income reported by a holder of a Subordinate
Certificate may exceed cash distributions as a result of the
preferential right of other Classes of Regular Certificates
to receive cash distributions in the event of losses or
delinquencies on the Mortgage Loans.
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--Federal Income Tax Consequences for REMIC
Certificates--Taxation of REMIC Regular Interests" in the
Prospectus.
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 Internal Revenue Code of 1986,
as amended (the "Code"), and interest (including original
issue discount) 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
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<PAGE>
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"
within the meaning of Section 7701(a)(19)(C)(xi) of the Code
only in the proportion that the underlying assets of the
REMIC are secured by residential property or otherwise are
assets described in Section 7701(a)(19)(C) of the Code and,
accordingly, an investment in the Certificates may not be
suitable for some thrift institutions. See "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES--Federal Income Tax Consequences for
REMIC Certificates--Taxation of the REMIC" in the
Prospectus.
In addition, the Class A-1 and Class X Certificates also
represent undivided beneficial interests in % and %,
respectively, of the Edgewater Final Contingent Interest,
which portions of the Trust Fund will be treated as a
grantor trust for federal income tax purposes. Furthermore
the Class V Certificates will represent the right to receive
any remaining Contingent Interest, which portion of the
Trust Fund will be treated as a grantor trust for federal
income tax purposes.
For further information regarding the federal income tax
consequences of investing in the Offered Certificates, see
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Federal Income
Tax Consequences for REMIC Certificates--Taxation of the
REMIC" in the Prospectus and "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" herein.
ERISA
Considerations.. A fiduciary of an employee benefit plan or other retirement
plan or arrangement subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") or Section
4975 of the Code, or an investor that is an insurance
company, should review carefully with its legal advisors
whether the purchase, holding or sale of the Offered
Certificates could constitute or result in a transaction
that is prohibited or is not otherwise permissible under
ERISA or Section 4975 of the Code and, if prohibited,
whether any statutory or administrative exemption is
applicable to any such purchase, holding or sale.
The United States Department of Labor has issued an
individual prohibited transaction exemption to each of
Morgan Stanley and RFSC that generally exempts from the
application of certain of the prohibited transaction
provisions of ERISA and the Code a transaction relating to
the purchase, holding and sale of certain pass-through
certificates, such as the Senior Certificates, underwritten
by an "underwriter," and the servicing and operation of
asset pools, such as the Mortgage Pool, provided that
certain conditions are satisfied. This exemption is not
applicable to the Subordinate Certificates; however, a class
prohibited transaction exemption granted with respect to
transactions involving insurance company general accounts
may be applicable to the purchase and holding by insurance
companies of such Classes, provided that the conditions of
such exemption are satisfied. See "ERISA CONSIDERATIONS"
herein.
Ratings......... It is a condition of the issuance of the Offered
Certificates that they receive the following ratings from
S&P and Moody's (the "Rating Agencies"):
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Class S&P Moody's
----- --- -------
A-1 AAA Aaa
A-2 AAA Aaa
X AAAr Aaa
B AA Aa2
C A A2
D BBB Baa2
E BBB- Baa3
A securities rating addresses the likelihood of the receipt
by Certificateholders of distributions due on their
Certificates. The rating takes into consideration the
characteristics of the Mortgage Loans and the structural and
legal aspects associated with the Certificates, including,
if applicable, distribution of all principal by the
Distribution Date in (the "Rated Final Distribution Date").
Each security rating assigned to the Certificates should be
evaluated independently of any other security rating.
The ratings on the Offered Certificates do not represent any
assessment of (i) the likelihood or frequency of principal
prepayments on the Mortgage Loans or the corresponding
effect on yield to investors, (ii) the degree to which such
prepayments might differ from those originally anticipated
or (iii) whether and to what extent Prepayment Premiums will
be received. A security rating does not represent any
assessment of the yield to maturity that investors may
experience or the possibility that the holders of Interest
Only Certificates might not fully recover their investment
in the event of rapid prepayments of the Mortgage Loans
(including both voluntary and involuntary prepayments). In
general, the ratings address credit risk and not prepayment
risk. As described herein, the amounts payable with respect
to the Interest Only Certificates consist only of interest
and a portion of Prepayment Premiums actually collected. The
aggregate Notional Amount upon which interest in respect of
the Interest Only Certificates is calculated may be reduced
by Realized Losses, Expense Losses, prepayments of
principal, whether voluntary or involuntary, and repurchases
of Mortgage Loans by the Sellers as a result of breaches of
representations and warranties. If all of the Mortgage Loans
were to prepay in the initial month, with the result that
the Interest Only Certificateholders receive only a single
month's interest and thus suffer a nearly complete loss of
their investment, all amounts "due" to such
Certificateholders would nevertheless have been paid, and
such results would be consistent with the "AAA/AAAr" rating
received on the Interest Only Certificates, because the
rating addresses only the obligation to pay interest timely
on the Notional Amount of such Certificates as so reduced
from time to time. Accordingly, the ratings of the Interest
Only Certificates should be evaluated independently from
similar ratings on other types of securities.
A credit rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at
any time by the assigning rating agency. See "RATINGS" and
"RISK FACTORS" herein.
Legal
Investment...... The Offered Certificates will not constitute "mortgage
related securities" within the meaning of the Secondary
Mortgage Market
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<PAGE>
Enhancement Act of 1984. The appropriate characterization of
the Offered Certificates under various legal investment
restrictions, and thus the ability of investors subject to
these restrictions to purchase the Offered Certificates, may
be subject to significant interpretative uncertainties.
Accordingly, investors whose investment authority is subject
to legal restrictions should consult their own legal
advisors to determine whether and to what extent the Offered
Certificates constitute legal investments for them. See
"LEGAL INVESTMENT" herein and in the Prospectus.
Collateral
Overview:
Loan Details.... The Certificates will represent beneficial ownership
interests in a trust fund (the "Trust Fund") to be created
by the Depositor. The Trust Fund will consist primarily of a
pool (the "Mortgage Pool") of 322 fixed-rate mortgage loans
(the "Mortgage Loans") with an aggregate Cut-off Date
Principal Balance of approximately $1,192,238,941, subject
to a variance of plus or minus 5%. Each Mortgage Loan is
secured by a first lien (other than the Crossroads Second
Loan) on fee simple or leasehold estates in commercial and
multifamily residential properties (each, a "Mortgaged
Property"). The Mortgage in the Crossroads Second Loan,
which represents approximately 0.27% of the Initial Pool
Balance, represents a second lien encumbering the related
borrower's: (i) fee interest in a portion of the related
Mortgaged Property and (ii) leasehold interest in the
remainder of the related Mortgaged Property. The first lien
encumbering such Mortgaged Property secures a Mortgage Loan
also included in the Mortgage Pool, and both such Mortgage
Loans are cross-collateralized and cross-defaulted with each
other. 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. For purposes
hereof, any Mortgage Loans secured by multiple Mortgaged
Properties are deemed secured by only one Mortgaged
Property.
None of the Mortgage Loans is insured or guaranteed by any
governmental entity, any private mortgage insurer or by any
other person or entity. Substantially all of the Mortgage
Loans are non-recourse loans, and prospective Investors
should consider all of the Mortgage Loans to be non-recourse
loans.
The number of the Mortgage Loans included within any
particular property type, and the approximate percentage of
the Initial Pool Balance for such property type, is set
forth below:
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% by Cut-off Number
Date Principal of
Property Types Balance Mortgage Loans
-------------- -------------- --------------
Retail 31.59% 94
Multifamily 29.14% 108
Office 12.12% 36
Hospitality 8.91% 26
Industrial 7.08% 25
Mixed Use 4.65% 2
Mobile Home Park 3.04% 15
Self Storage 2.03% 12
Garage 0.86% 2
Nursing Home/
Assisted Living 0.57% 2
The number of the Mortgage Loans secured by Mortgaged
Properties included within any specified geographic area,
and the approximate percentage of the Initial Pool Balance
for such geographic area, is set forth below:
Approximate
% by Cut-off Number
Date Principal of
Jurisdiction Balance Mortgage Loans
------------ -------------- --------------
Southern California 12.85% 30
Northern California 10.04% 20
Pennsylvania 7.42% 15
New Jersey 5.50% 13
Texas 5.08% 25
No other jurisdiction has Mortgage Loans aggregating more
than approximately 5% of the Initial Pool Balance. See
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics
of the Mortgage Pool--Geographic Concentration" herein, and
Appendix I and Appendix II hereto.
The Mortgage Pool includes 13 separate sets of
Cross-Collateralized Loans, none of which are
cross-collateralized or cross-defaulted with any mortgage
loan not included in the Mortgage Pool. No set of related
Cross-Collateralized Loans constitutes more than
approximately 2.59% of the Initial Pool Balance. See
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics
of the Mortgage Pool--Cross-Collateralized Loans" herein and
Appendix II hereto.
Thirty-nine borrowers (or groups of affiliated borrowers)
are a borrower under more than one Mortgage Loan in the
Mortgage Pool (totaling 117 of the Mortgage Loans
representing approximately 31.72% of the Initial Pool
Balance). However, no set of Mortgage Loans made to a single
borrower or to a single group of affiliated borrowers
constitutes more than approximately 2.59% of the Initial
Pool Balance. See "DESCRIPTION OF THE MORTGAGE POOL--
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Certain Characteristics of the Mortgage Pool--Concentration
of Mortgage Loans and Borrowers" herein and Appendix II
hereto.
Fifty-three of the Mortgage Loans, representing
approximately 16.02% of the Initial Pool Balance, are
secured by Mortgaged Properties wherein a Major Tenant
occupies approximately 50% or more of such Mortgaged
Property. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Characteristics of the Mortgage Pool--Tenant Matters" herein
and Appendix II hereto.
The Mortgage Loans generally permit the related borrower,
after the expiration of the applicable Lock-out Period, to
voluntarily prepay the Mortgage Loan provided that the
specified Prepayment Premium is paid in connection
therewith. The applicable Prepayment Premium is generally
calculated on the basis of a yield maintenance formula (or,
for some Mortgage Loans, a specified percentage of the
amount prepaid to the extent such percentage is greater than
the yield maintenance amount) or a specified percentage of
the amount prepaid, which percentage may either remain
constant or decline over time. The "Prepayment Restriction
Analysis" table included in Appendix I sets forth an
analysis of the percentage of the declining balance of the
Mortgage Pool that, for each of the time periods indicated,
will be within a Lock-out Period or in which Principal
Prepayments must be accompanied by the indicated Prepayment
Premium or Yield Maintenance Premium. See "DESCRIPTION OF
THE MORTGAGE POOL--Certain Terms and Conditions of the
Mortgage Loans--Prepayment Provisions" herein and Appendix I
and Appendix II hereto.
Thirteen of the Mortgage Loans permit the related Borrower
to defease its Mortgage Loan, subject to certain conditions.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Defeasance" herein and
Appendix II hereto.
Forty-one of the Mortgage Loans, representing approximately
11.34% of the Initial Pool Balance, have remaining
amortization terms that are the same as their respective
remaining terms to maturity. The Note evidencing one
Mortgage Loan, representing approximately 1.72% of the
Initial Pool Balance, is to fully amortize over its stated
term through stepped annual debt service payment as follows
(11/1/71 through 12/1/88 - $2,499,180; 1/1/89 through
10/1/2006 - $2,789,820; and 11/1/2006 through 10/1/2011 -
$2,128,140). See Appendix III--"The Eastridge Mall Loans"
hereto. The remainder of the Mortgage Loans (including 42
Hyper-Amortization Loans representing approximately 18.61%
of the Initial Pool Balance) are Balloon Loans providing 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 or Hyper-Amortization Dates. The
weighted average Balloon LTV applicable to the Mortgage Pool
is 52.2%. See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage Loans--Amortization of
Principal" herein and Appendix II hereto.
Three of the Mortgage Loans, representing approximately
3.36% of the Initial Pool Balance, provide for the related
borrower to pay contingent interest pursuant to the related
Mortgage Loan documents. See
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<PAGE>
"DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Contingent Interest Loans"
herein.
As of the Cut-off Date, the Mortgage Loans have the
following characteristics:
(a) Mortgage Rates ranging from 10.250% per annum to 6.640%
per annum, and a weighted average Mortgage Rate of 7.454%
per annum;
(b) remaining terms to stated maturity ranging from 31
months to 296 months, and a weighted average remaining term
to stated maturity of 132 months;
(c) Cut-off Date Principal Balances ranging from $537,699 to
$41,939,454, and an average Cut-off Date Principal Balance
of $3,702,605;
(d) a weighted average DSCR (calculated as described in
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics
of the Mortgage Pool--Other Information") of 1.42x; and
(e) a weighted average LTV (calculated as described in
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics
of the Mortgage Pool--Other Information") of 70.3%.
The characteristics of the Mortgage Loans are more
particularly described herein under "DESCRIPTION OF THE
MORTGAGE POOL" and in the tables in Appendix I, Appendix II
and Appendix III hereto.
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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
from many of the risks faced in connection with other types of lending such as
residential mortgage lending. Commercial and multifamily lending generally
involves larger loans, thereby providing lenders with less diversification of
risk. The ability of a borrower to repay a loan secured by an income-producing
property typically is dependent primarily upon the successful operation of such
property, rather than upon the existence of independent income or assets of the
borrower. If the net operating income of the property is reduced, borrower's
ability to repay its loan may be impaired. 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. Because the value of an income-producing property is directly
related to the net income derived from such property, if the borrower becomes
unable to meet its obligations under the related Mortgage Loan, the liquidation
value of any such Mortgaged Property may be substantially less, relative to the
amount outstanding on the related Mortgage Loan. 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.
Accordingly, commercial and multifamily property values and net operating income
are subject to volatility.
In addition, as described in more detail below with respect to the various
types of properties constituting the Mortgaged Properties, additional risk may
be presented by the type and use of a particular Mortgaged Property.
a. Property Location and Condition. In general, the location, 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 hospitality property, the amount that the customer
may be charged for the occupancy thereof. The characteristics of an area or
neighborhood in which a Mortgaged Property is located may change over time or in
relation to competing facilities. 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 will deteriorate over time if adequate maintenance is not
scheduled and performed in a timely manner.
b. Leases. In general, except in the case of any hospitality
property, borrowers rely upon periodic lease or rental payments from tenants to
pay for maintenance and other operating expenses of their related Mortgaged
Property, to fund capital improvements and to service the related Mortgage Loan
and any other outstanding debt or other obligations. There can be no guarantee
that tenants will renew leases upon expiration or, in the case of a commercial
tenant, that it will continue operations throughout the term of its lease.
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.
Accordingly, 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 release 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. In addition, upon the occurrence of an event of default by
a tenant, delays and costs in enforcing the lessor's rights could occur and a
recovery with respect thereto,
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<PAGE>
if any, may be significantly less than if no default had occurred. If a
significant portion of a Mortgaged Property is leased to a single tenant, the
consequences of the failure of the borrower to release 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.
In the case of retail, office and industrial properties, the performance
and liquidation value of such properties may be dependent upon the business
operated by tenants, the creditworthiness of such tenants and/or the number of
tenants. In some cases, a single tenant or a relatively small number of tenants
may account for all or a disproportionately large share of the rentable space or
rental income of such property. Accordingly, a decline in the financial
condition of a significant or the sole tenant, as the case may be, or other
adverse circumstances of such a tenant (such as a bankruptcy or insolvency), may
have a disproportionately greater effect on the net operating income derived
from such property than would be the case if rentable space or rental income
were more evenly distributed among a greater number of tenants at such property.
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 competing properties in the applicable market
have lower rents, lower operating costs, more favorable locations or better
facilities, the rental rates for a Mortgaged Property may be adversely affected.
In addition, if any oversupply of competing properties exists in a particular
market (either as a result of an increase in similar properties or a decrease in
the number of customers, tenants or other occupants due to a decline in economic
activity in the area), the rental rates for a Mortgaged Property may be
adversely affected. Increased competition could adversely affect income from and
the market value of the Mortgaged Properties.
d. Quality of Management. The successful operation of a Mortgaged
Property may also be dependent on the performance and viability of the
respective property managers of the Mortgaged Properties. 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. Management errors may
adversely affect the long-term viability of a Mortgaged Property. There can be
no assurance regarding the performance of any present or future property
manager, or that any such property manager will at all times be in a financial
condition to continue to fulfill its management responsibilities under the
related management agreement.
Risks Particular to Multifamily Properties. Multifamily projects are part
of a market that, in general, is characterized by low barriers to entry. Thus, a
particular apartment market with historically low vacancies could experience
substantial new construction, and a resultant oversupply of units, in a
relatively short period of time. Since multifamily apartment units are typically
leased on a short-term basis: (i) the tenants who reside in a particular project
within such a market may easily move to newer projects with better amenities;
and (ii) the timely receipt of rent payments and occupancy and rent levels may
be adversely affected more rapidly than other types of properties by unfavorable
economic conditions generally, local military base or factory closings and
national and local politics, including current or future rent stabilization and
rent control laws and agreements. Further, reduced mortgage interest rates may
encourage renters to purchase single-family housing.
Risks Particular to Office Properties. Office properties generally require
their owners to expend significant amounts for general capital improvements,
tenant improvements and costs of reletting space. In addition, office properties
that are not equipped to accommodate the needs of modern business may become
functionally obsolete and thus non-competitive. Office properties may also be
adversely affected if there is an economic decline in the businesses operated by
their tenants. The risk of such an adverse effect is increased if revenue is
dependent on a significant tenant or if there is a significant concentration of
tenants in a particular business or industry.
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Risks Particular to Retail Properties. In addition to risks generally
associated with real estate, retail properties can also be adversely affected by
other factors such as adverse changes in economic conditions generally, consumer
preferences, demographics or spending patterns and competition from alternative
forms of retailing (such as "off-price" or "factory outlet" retailing, direct
mail, video shopping networks, telephone shopping and electronic commerce) that
reduce the need for retail space. In addition, significant tenants at a retail
property play an important part in generating customer traffic and making a
retail property a desirable location for other tenants. Thus, a retail property
may be adversely affected if an anchor or other significant tenant ceases
operations (which may occur at the expiration of a lease term or the term of its
covenant to operate, the tenant's bankruptcy, its general cessation of business
activities or for other reasons). In addition, certain tenants at retail
properties may be entitled to terminate their leases if one or more anchor
tenants cease operations.
Risks Particular to Self Storage Facilities. Tenant privacy, anonymity and
unsupervised access may heighten environmental risks to a lender making a loan
secured by a self storage property. The environmental site assessments discussed
herein did not include an inspection of the contents of the self-storage units
included in the self storage properties and there is no assurance that all of
the units included in the self storage 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 self storage
leases, self storage 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
self storage facilities, it might be difficult or costly to convert such a
facility to an alternative use. Thus, the liquidation value of self storage
properties may be substantially less than would be the case if the same were
readily adaptable to other uses.
Risks Particular to Hospitality Properties. Various factors, including
location, quality and franchise affiliation, if any, affect the economic
viability of a hospitality property. Additional factors affecting a hospitality
property's performance include a high level of continuing capital expenditures
to keep necessary furniture, fixtures and equipment updated, competition from
other hospitality properties, increases in operating costs, 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. Because hospitality property rooms generally are rented for short
periods of time, such properties tend to experience more volatility in response
to adverse economic conditions and competition than do other commercial
properties. Additionally, the revenues of certain hospitality properties,
particularly those located in regions whose economies depend upon tourism, may
be highly seasonal in nature. Furthermore, the financial strength and
capabilities of the owner and operator of a hospitality property may have an
impact on such property's quality of service and economic viability. Certain of
the Mortgaged Properties consisting of hospitality properties are franchisees of
national chains. The viability of any hospitality property affiliated with a
franchise depends in part on the continued existence and financial strength of
the franchiser, such property's adherence to the franchise operating standards,
the public perception of the franchise service mark and the duration of the
franchise licensing agreements. The loss of a franchise could have a material
adverse effect upon the operations or the underlying value of the related
Mortgaged Property because of the loss of associated name recognition, marketing
support and centralized reservation system. Additionally, in the event of a
foreclosure on a hospitality property (i) any related franchise agreement,
operating, liquor or other licenses may not be transferable; (ii) it may be
difficult to terminate an ineffective operator; and (iii) future occupancy rates
may be adversely affected by any negative perception created by the foreclosure.
Risks Particular to Parking Garage Facilities. The risks associated with
garage properties are generally the risks associated with the type of property
from which such garage property draws its customers. A garage property dependent
upon a retail facility for customers is subject to the risks affecting such
retail facility, while a garage property dependent upon an office facility for
customers is subject to the risks affecting such office facility. Due to the
short-term nature of parking leases, garage properties also may be subject to
more volatility than other types of properties.
Risks Particular to Mobile Home Parks. Mortgage lenders whose loans are
secured by mortgages encumbering mobile home parks 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.
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Risks Particular to Industrial Properties. Mortgage Loans secured by an
industrial property may be adversely affected by reduced demand for industrial
space occasioned by a decline in a particular industry segment. Furthermore, a
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 typically conducted upon
them, industrial properties may be subject to increased environmental risks. See
"--Environmental Risks" herein.
Mortgage Loans Not Insured. 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 applicable Seller, the Master
Servicer, the Special Servicer, the Trustee, the Fiscal Agent, the Underwriters,
any of their respective affiliates or any other person. However, as more fully
described under "DESCRIPTION OF THE MORTGAGE POOL--General" and
"--Representations and Warranties; Repurchase" herein, the applicable Seller
will be obligated to repurchase a Mortgage Loan if (i) there is a defect with
respect to certain of 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 the applicable Seller will be
in a financial position to effect such repurchase. See "DESCRIPTION OF THE
MORTGAGE POOL--The Sellers" herein.
Limited Recourse. Substantially all of the Mortgage Loans are non-recourse
loans as to which recourse, in the event of default, will be limited to the
related Mortgaged Property. With respect to Mortgage Loans where recourse is
permitted as to any person or entity, no current evaluation has been undertaken
of the financial condition of such person or entity. Consequently, prospective
Investors should consider each of the Mortgage Loans to be a non-recourse loan,
the payment of which 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 or the ability of the related borrower
to refinance such Mortgaged Property.
Concentration of Mortgage Loans and Borrowers. In general, a mortgage pool
with a smaller number of loans that have larger average balances 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. Additionally, a mortgage pool with a high concentration
of Mortgage Loans to the same borrower or affiliated 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 one or more of the Mortgaged
Properties. 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. See "DESCRIPTION OF THE MORTGAGE
POOL--Certain Characteristics of the Mortgage Pool--Concentration of Mortgage
Loans and Borrowers" herein.
No Reunderwriting of Mortgage Loans. The Depositor has not reunderwritten
the Mortgage Loans. Instead, the Depositor has relied on the representations and
warranties made by the applicable Seller, and the applicable Seller's obligation
to repurchase a Mortgage Loan in the event that a representation or warranty was
not true when made. These representations and warranties do not cover all of the
matters that the Depositor would review in underwriting a mortgage loan and
should not be viewed as a substitute for reunderwriting the Mortgage Loans. If
the Depositor had reunderwritten the Mortgage Loans, it is possible that the
reunderwriting process may have revealed problems with a Mortgage Loan not
covered by a representation or warranty. In addition, no assurance can be given
that the applicable Seller will be able to repurchase a Mortgage Loan if a
representation or warranty has been breached. See "DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties; Repurchase" herein.
Tax Considerations Related to Foreclosure. REMIC I might become subject to
federal (and possibly state or local) tax 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, including in some circumstances a 100% prohibited transaction tax,
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 sub-tenant or
allocable to a service that is customary in the
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area and for the type of property involved. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Federal Income Tax Consequences for REMIC Certificates--Taxation
of REMIC Regular Certificates," "--Federal Income Tax Consequences for REMIC
Certificates--Taxation of the REMIC" and "--Federal Income Tax Consequences for
REMIC Certificates--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 with respect to one or more of 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 of the Certificates is generally 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. In general, a mortgage pool with a significant
portion of its loans secured by properties located in a smaller number of states
or geographic regions may be subject to losses that are more severe than other
pools having a more diverse geographic distribution of its loans. See
"DESCRIPTION OF THE MORTGAGE POOL--Certain Characteristics of the Mortgage
Pool--Geographic Concentration" herein and Appendix I and Appendix II hereof for
a more detailed discussion of the location of the Mortgaged Properties on a
state-by-state basis. 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. 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, and "CERTAIN LEGAL ASPECTS OF CALIFORNIA MORTGAGE LOANS" 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 such Mortgaged Property or the inability
to foreclose against such Mortgaged Property; (ii) the potential that the
related borrower may default on the related Mortgage Loan due to such borrower's
inability to pay high remediation costs or difficulty in bringing its operations
into compliance with environmental laws; (iii) in certain circumstances as more
fully described below, liability for clean-up costs or other remedial actions,
which liability could exceed the value of such Mortgaged Property or the unpaid
balance of the related Mortgage Loan; or (iv) the inability to sell the related
Mortgage Loan in the secondary market or to lease such Mortgaged Property to
potential tenants. 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 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 found to be
an "owner" or "operator" of the related Mortgaged Property if it is determined
that the lender 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, or an agent of the
Trust Fund, actually takes possession of a Mortgaged Property or control of its
day-to-day operations. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
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LOANS--Environmental Risks" in the Prospectus, and "DESCRIPTION OF THE MORTGAGE
POOL--Certain Characteristics of the Mortgage Pool--Environmental Risks" herein.
The Pooling and Servicing Agreement will provide that the Special
Servicer, acting on behalf of the Trust Fund, may not acquire title to a
Mortgaged Property securing a Mortgage Loan or take over its operation unless
the Special Servicer has previously determined, based upon an environmental site
assessment prepared by a person who regularly conducts environmental audits,
that: (i) the Mortgaged Property is in compliance with applicable environmental
laws, and there are no circumstances present at the Mortgaged Property relating
to the use, management or disposal of any hazardous substances, hazardous
materials, wastes or petroleum based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
federal, state or local law or regulation; or (ii) if the Mortgaged Property is
not so in compliance or such circumstances are so present, then it would be in
the best economic interest of the Trust Fund to acquire title to the Mortgaged
Property and further to take such actions as would be necessary and appropriate
to effect such compliance and/or respond to such circumstances, which may
include obtaining an environmental insurance policy. 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 for any damages or for remediation costs under any
environmental law. However, there can be no assurance that the environmental
site assessment will accurately reveal the existence of conditions or
circumstances that would diminish the value of the related Mortgaged Property or
result in the Trust Fund becoming liable under any environmental law. 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.
Special Hazards Losses. The Master Servicer and/or Special Servicer will
generally be required to cause the borrower on each Mortgage Loan serviced by it
to maintain such insurance coverage in respect of the related Mortgaged Property
as is required under the related Mortgage, including hazard insurance; provided
that each of the Master Servicer and the Special Servicer may satisfy its
obligation to cause hazard insurance to be maintained with respect to any
Mortgaged Property through its acquisition of a blanket or master single
interest insurance policy. In general, the standard form of fire and extended
coverage policy covers physical damage to or destruction of the improvements on
the related Mortgaged Property by fire, lightning, explosion, smoke, windstorm
and hail, and riot, strike and civil commotion, subject to the conditions and
exclusions specified in each policy. Although the policies covering the
Mortgaged Properties are underwritten by different insurers under different
state laws in accordance with different applicable state forms, and therefore do
not contain identical terms and conditions, most such policies typically do not
cover any physical damage resulting from war, revolution, governmental actions,
floods and other water-related causes, earth movement (including earthquakes,
landslides and mud flows), wet or dry rot, vermin, domestic animals and other
kinds of risks not specified in the preceding sentence. Any losses incurred with
respect to Mortgage Loans due to uninsured risks or insufficient hazard
insurance proceeds could adversely affect distributions to the
Certificateholders.
Other Financing. In general, the borrowers: (i) are required to satisfy
all existing indebtedness encumbering the related Mortgaged Property as of the
closing of the related Mortgage Loan and (ii) are prohibited from encumbering
the related Mortgaged Property with additional secured debt without the lender's
prior approval. However, with respect to any such future subordinate debt, 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.
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Risks Related to the Borrower's Form of Entity. The borrowers may be
either individuals or legal entities. Mortgage loans made to legal entities may
entail risks of loss greater than those of mortgage loans made to individuals.
For example, a legal entity, as opposed to an individual, may be more inclined
to seek legal protection from its creditors under the bankruptcy laws. Unlike
individuals involved in bankruptcies, various types of entities generally do not
have personal assets and creditworthiness at stake. The bankruptcy of a
borrower, or a general partner or managing member of a borrower, may impair the
ability of the lender to enforce its rights and remedies under the related
mortgage. The borrowers are generally not bankruptcy-remote entities, and
therefore 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 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. 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 managing member of a
borrower will not initiate a bankruptcy or similar proceeding against such
borrower or corporate or individual general partner or managing 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 only the analysis and opinion of qualified experts and are not
guaranties of present or future value, and may determine a value of a property
that is significantly higher than the amount that can be 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. Any engineering
reports obtained in connection with this offering represent only the analysis of
the individual engineers or site inspectors preparing such reports, and may not
reveal 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., 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 Due-on-Sale Clauses and Assignments of
Leases and Rents. The Mortgages generally contain due-on-sale clauses, which
permit the acceleration of the maturity of the related Mortgage Loan if the
borrower sells, transfers or conveys the related Mortgaged Property or its
interest in the Mortgaged Property. There may be limitations on the
enforceability of such clauses. The Mortgages also generally include a
debt-acceleration clause, which permits the acceleration of the related Mortgage
Loan upon a monetary or non-monetary default by the borrower. The courts of all
states will generally enforce clauses providing for acceleration in the event of
a material payment default, but may refuse the foreclosure of a Mortgage when
acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render acceleration unconscionable. See "CERTAIN LEGAL
ASPECTS OF THE MORTGAGE LOANS--Enforceability of Certain Provisions" in the
Prospectus.
The Mortgage Loans may also be secured by an assignment of leases and
rents pursuant to which the borrower typically assigns its right, title and
interest as landlord under the leases on the related Mortgaged Property and the
income derived therefrom to the lender as further security for the related
Mortgage Loan, while retaining a
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license to collect rents for so long as there is no default. In the event the
borrower defaults, the license terminates and the lender is entitled to collect
the rents. Such assignments are typically not perfected as security interests
prior to the lender's taking possession of the related Mortgaged Property and/or
appointment of a receiver. Some state laws may require that the lender take
possession of the Mortgaged Property and obtain a judicial appointment of a
receiver before becoming entitled to collect the rents. In addition, if
bankruptcy or similar proceedings are commenced by or in respect of the
borrower, the lender's ability to collect the rents may be adversely affected.
See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Leases and Rents" in the
Prospectus.
Limitations on Enforceability of Cross-Collateralization. Certain of the
Mortgage Loans (the "Cross-Collateralized Loans") are cross-collateralized and
cross-defaulted with one or more related Cross-Collateralized Loans. Such
arrangements could be challenged as fraudulent conveyances by creditors of any
of the related borrowers or by the representative of the bankruptcy estate of
any related borrower 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, a lien granted by any such borrower could be avoided if a court were
to determine that (i) 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 (ii) 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 another 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--Cross-Collateralized Loans" and Appendix II 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 Appendix II herein.
Ground Leases. Mortgage Loans secured by a Mortgage encumbering a
leasehold interest are subject to certain risks not applicable to a Mortgage
encumbering 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. In general, the closer the expiration date of a ground lease is to the
maturity date of the related Mortgage Loan, the more adversely affected will be
the value of the related Mortgaged Property and the ability of the related
borrower to sell or refinance such Mortgaged Property. 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.
Purchase Options. Certain of the Mortgage Loans are secured, wholly or in
part, by first mortgage liens subject to an existing option to purchase all or
part of the related Mortgaged Property. Mortgage Loans secured, wholly or in
part, by a Mortgage which is subject to an existing option to purchase all or
part of the related Mortgaged Property may expose a lender to the risk that its
mortgage lien may be eliminated upon the effective exercise of such option. This
risk may be minimized if the agreement of the holder of the purchase option to
subordinate its option to the lien of the related Mortgage can be obtained, or
if the purchase price to be obtained by the borrower upon an exercise of such
option is appropriately assigned to the lender, is adequate to fully satisfy the
indebtedness remaining under the Mortgage Loan or is at least equivalent to the
fair market value of the Mortgaged Property. No assurance can be given that any
or all of the above described provisions will be obtained in connection with any
particular Mortgage Loan. See "DESCRIPTION OF THE MORTGAGE POOL--Security for
the Mortgage Loans--Purchase Options; Rights of First Refusal" herein.
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
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borrower's ability to meet its obligations under the related Mortgage Loan and,
thus, on the distributions to Certificateholders.
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 or
income generation from the affected Mortgaged Property. 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, the applicable Seller
will be obligated to substitute a Qualified Substitute Mortgage Loan or to
repurchase a Mortgage Loan if (i) there is a defect with respect to the
documents relating to such Mortgage Loan or (ii) one or more of its
representations or warranties concerning such Mortgage Loan in the related
Mortgage Loan Purchase Agreement 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 the applicable Seller will be in a financial position to effect
such substitution or repurchase. 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. In addition, since the Pooling and Servicing
Agreement requires the Master Servicer to enforce on behalf of the Trust the
Sellers' obligations to repurchase Mortgage Loans, Midland may experience a
conflict of interest to the extent that Midland is obligated to repurchase a
Mortgage Loan as a Seller.
Prepayment and Yield Considerations
The yield on any Offered Certificate will depend on (x) the price at which
such Certificate is purchased by an investor and (y) the rate, timing and amount
of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will, in turn, depend on, among other
things, (a) the Pass-Through Rate for such Certificate, (b) the rate and timing
of principal payments (including principal prepayments, liquidations and
repurchases) and other principal collections on or in respect of the Mortgage
Loans and the extent to which such amounts are to be applied or otherwise result
in a reduction of the Certificate Balance or Notional Amount of such
Certificate, (c) the rate, timing and severity of Realized Losses on or in
respect of the Mortgage Loans and of Expense Losses and the extent to which such
losses and expenses result in a reduction of the Certificate Balance or Notional
Amount of such Certificate, (d) the timing and severity of any Net Aggregate
Prepayment Interest Shortfalls and the extent to which such shortfalls are
allocated in reduction of the interest payable on such Certificate, (e) the
timing and severity of any Appraisal Reductions and the extent to which such
Appraisal Reductions result in a reduction or deferral of amounts otherwise
payable on such Certificate and (f) the extent to which Prepayment Premiums are
collected and, in turn, distributed on such Certificate. Except for the
Pass-Through Rates on the Principal Balance Certificates (which are, other than
the Class D and Class E Certificates, in each case, fixed), it is impossible to
predict with certainty any of the factors described in the preceding sentence.
Accordingly, investors may find it difficult to analyze the effect that such
factors might have on the yield to maturity of any Class of Offered
Certificates. The yield to maturity of the Interest Only Certificates will be
highly sensitive to the rate and timing of principal payments (including by
reason of prepayments, defaults, extensions, repurchases and liquidations) on or
in respect of the Mortgage Loans, and an investor in the Interest Only
Certificates should fully consider the associated risks, including the risk that
an extremely rapid rate of amortization and prepayment of the aggregate
Certificate Balance of the Principal Balance Certificates could result in the
failure of such investors to recoup their initial investments. See "DESCRIPTION
OF THE MORTGAGE POOL," "DESCRIPTION OF THE CERTIFICATES--Distributions" and
"--Subordination" herein and "RISK FACTORS--Effects of Prepayments on Average
Life of Certificates and Yields" in the Prospectus.
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Effect of Prepayment Premiums
The rate and timing of principal payments made on a Mortgage Loan will be
affected, in part, by restrictions on voluntary prepayments contained in the
related Note (e.g., Lock-out 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, potential purchasers of the Offered Certificates 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. In addition, pursuant to
the Pooling and Servicing Agreement, the Special Servicer will be able to waive
any Prepayment Premium with respect to Specially Serviced Mortgage Loans. See
"THE POOLING AND SERVICING AGREEMENT--Amendments, Modifications and Waivers."
Risks Associated with Balloon Loans
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.
Pass-Through Rate Considerations
The Pass-Through Rates of the Class X, Class D and Class E Certificates
are based on the Weighted Average Net Mortgage Rate of the Mortgage Loans.
Varying rates of principal payments (whether resulting from differences in
amortization terms or prepayments) on Mortgage Loans having mortgage interest
rates above the weighted average of such rates of the Mortgage Loans will have
the effect of reducing the Pass-Through Rates of such Certificates.
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.
Potential Conflict of Interest in Connection with Specially Serviced
Mortgage Loans
The Special Servicer is given considerable latitude in determining whether
and in what manner to liquidate or modify defaulted Mortgage Loans. As described
under "THE POOLING AND SERVICING AGREEMENT--The Operating Adviser" herein, the
Operating Adviser will be empowered to replace the Special Servicer. See "THE
POOLING AND SERVICING AGREEMENT--General" herein. At any given time, the
Operating Adviser will be controlled generally by the holders of the most
subordinated (or, under certain circumstances as described herein,
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the next most subordinated) Class of Certificates (that is, the Controlling
Class as described herein) outstanding from time to time, and such holders may
have interests in conflict with those of the holders of the Offered
Certificates. For instance, the holders of Certificates of the Controlling Class
might desire to mitigate the potential for loss to that Class from a troubled
Mortgage Loan by deferring enforcement in the hope of maximizing future
proceeds. However, the interests of the Trust Fund may be better served by
prompt action, since delay followed by a market downturn could result in less
proceeds to the Trust Fund than would have been realized if earlier action had
been taken. The Pooling and Servicing Agreement will provide that the Operating
Adviser and the Controlling Class may act in their own interest without
incurring any liability to the holders of any other Class of Certificates. It is
anticipated that an affiliate of the Special Servicer may acquire certain of the
most subordinated Regular Certificates (including those of the initial
Controlling Class). Under such circumstances, the Special Servicer may have
interests that conflict with the interests of the other holders of the
Certificates.
DESCRIPTION OF THE MORTGAGE POOL
General
The Mortgage Pool will consist of 322 multifamily and commercial "whole"
mortgage loans (the "Mortgage Loans"). The Mortgage Loans have an aggregate
Cut-off Date Principal Balance of approximately $1,192,238,941 (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. A brief summary of certain of the terms
of the Mortgage Loans, or groups of Cross-Collateralized Loans, with a Cut-off
Date Principal Balance greater than $20,000,000 is set forth on Appendix III
attached hereto.
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 (excepting the
Crossroads Second Loan described below which is secured by a second lien) on one
or more of a fee simple estate or a leasehold estate in one or more parcels of
real property (a "Mortgaged Property") improved for multifamily or commercial
use. The Mortgage securing one Mortgage Loan (the "Crossroads Second Loan"),
representing approximately 0.27% of the Initial Pool Balance, represents a
second lien encumbering the related Mortgaged Property. The first lien
encumbering such Mortgaged Property secures a Mortgage Loan also included in the
Mortgage Pool, and both such Mortgage Loans are cross-collateralized and
cross-defaulted with each other. See Appendix I hereto for information as to the
percentage of the Initial Pool Balance represented by each type of Mortgaged
Property. For those Mortgage Loans (excluding the Cross-Collateralized Loans),
wherein a single Note is secured by a lien encumbering more than one Mortgaged
Property, the presentation of numerical information herein, in Appendix I and in
Appendix II assumes that all such multiple Mortgaged Properties collectively
constitute one Mortgaged Property.
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, the Sellers, the Master Servicer, the Special
Servicer, the Trustee, the Fiscal Agent, the Underwriters, any of their
respective affiliates or any other person. Substantially all of the Mortgage
Loans are non-recourse loans, wherein recourse generally may be had only against
the related Mortgaged Property and such limited other assets as have been
pledged to secure such Mortgage Loan. In connection with those Mortgage Loans
wherein recourse to any person or entity is permitted by the loan documents, the
Depositor has not undertaken any evaluation of the financial condition of any
such person or entity (such entity may be a single asset entity having no assets
other than those pledged to secure the related Mortgage Loan). Accordingly,
prospective Investors should consider all of the Mortgage Loans to be
non-recourse loans.
The Depositor will purchase the Mortgage Loans on or before the Closing
Date from the Sellers, in each case pursuant to separate mortgage loan purchase
and sale agreements (each, a "Mortgage Loan Purchase
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Agreement") entered into between the Depositor and the particular Seller. As
described under "DESCRIPTION OF THE MORTGAGE POOL--Representations and
Warranties; Repurchase" herein, each Seller will be obligated under its
respective Mortgage Loan Purchase Agreement to repurchase a Mortgage Loan or
substitute a Qualified Substitute Mortgage Loan in the event of a breach of a
representation or warranty made by such Seller in the applicable Mortgage Loan
Purchase Agreement with respect to such Mortgage Loan, if such breach materially
and adversely affects the interests of the Certificateholders and is not cured.
There can be no assurance that any Seller has or will have sufficient assets
with which to fulfill any repurchase or substitution obligations that may arise.
The Depositor will not have any obligation to fulfill any repurchase obligation
upon the failure of a Seller to do so. The Depositor will assign the Mortgage
Loans in the Mortgage Pool, together with the Depositor's rights and remedies
against the Sellers 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
All of the Mortgage Loans are secured by a first lien (except the
Crossroads Second Loan which is secured by a second lien) encumbering one or
more of a fee simple estate or a leasehold estate in the related Mortgaged
Property, subject generally only to (a) liens for real estate and other taxes
and special assessments not yet delinquent or accruing interest or penalties,
(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. Substantially
all of the Mortgage Loans are also secured by an assignment of the related
borrower's interest in the leases, rents, issues and profits of the related
Mortgaged Property, and a security interest in all personal property material to
the use of the Mortgaged Property.
Ground Leases. Eight Mortgage Loans, representing approximately 6.76% of
the Initial Pool Balance, are each secured by a first lien encumbering only the
related borrower's leasehold interest in the related Mortgaged Property. With
respect to each such ground lease, the related ground lessors have agreed to
afford the mortgagee certain notices and rights, including without limitation,
cure rights with respect to breaches of the related ground lease by the related
borrower. The Mortgage in the Crossroads Second Loan, which represents
approximately 0.27% of the Initial Pool Balance, represents a second lien
encumbering the related borrower's: (i) fee interest in a portion of the related
Mortgaged Property and (ii) leasehold interest in the remainder of the related
Mortgaged Property. The first lien encumbering such Mortgaged Property secures a
Mortgage Loan also included in the Mortgage Pool, and both such Mortgage Loans
are cross-collateralized and cross-defaulted with each other. See "CERTAIN LEGAL
ASPECTS OF THE MORTGAGE LOANS--Foreclosure--Leasehold Risks" in the Prospectus.
Two Mortgage Loans, representing approximately 2.20% of the Initial Pool
Balance, are each secured by a first lien encumbering both the related
borrower's leasehold interest in the related Mortgaged Property and the fee
interest of the person/entity which owns the related Mortgaged Property. The
execution of such Mortgages by the fee owners may be subject to challenge as a
fraudulent conveyance. See "RISK FACTORS--Investment in Commercial and
Multifamily Mortgage Loans--Limitations on enforceability of
Cross-Collateralization" herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Foreclosure---Leasehold Risks" in the Prospectus.
Purchase Options; Rights of First Refusal. With respect to six Mortgage
Loans, representing approximately 2.07% of the Initial Pool Balance, a tenant of
all or a portion of the related Mortgaged Property (or in one case an agency of
the City of Boston) possesses a purchase option with respect to all or part of
the related Mortgaged Property. Each such purchase option has been subordinated
to the lien of the related Mortgage. With respect to one Mortgage Loan,
representing approximately 0.18% of the Initial Pool Balance, a tenant possesses
an option to purchase its demised premises which has not been subordinated to
the lien of the related Mortgage. However, the option price is to be equal to
the fair market value of such premises at the time of the exercise of such
option. With respect to seven Mortgage Loans, representing approximately 1.80%
of the Initial Pool Balance, a tenant of all or a portion of the related
Mortgaged Property (or in one case an agency of the City of Boston) possesses a
right of first refusal with respect to any future sale of either the Mortgaged
Property or its demised premises therein. 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.
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See "RISK FACTORS--Prepayment and Yield Considerations" and "YIELD AND MATURITY
CONSIDERATIONS" herein.
Underwriting Standards
Based upon information provided by the Sellers, which has not been
independently verified by any of the Depositor, the Master Servicer, the Special
Servicer, the Underwriters, the Trustee or the Fiscal Agent, the following is a
discussion of the customary underwriting policies and procedures utilized in
connection with the origination of the Mortgage Loans. Such policies and
procedures involved an evaluation of both the prospective borrower and the
proposed real estate collateral. Factors typically analyzed in connection with a
Mortgaged Property include its historical 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; leasing
commissions, tenant improvements and concessions; applicable market rentals for
similar properties; historical vacancy rate and credit loss rate; debt service
coverage ratio; and loan to value ratio. A site inspection of the related
Mortgaged Property was also typically performed, and third party appraisals,
engineering reports and Phase I environmental site assessments were obtained.
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.
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. Twenty-nine of the Mortgage
Loans, representing approximately 10.97% of the Initial Pool Balance, accrue
interest on the basis of an assumed 360-day year with twelve 30-day months,
while the remainder of the Mortgage Loans accrue interest on the basis of the
actual number of days elapsed each month in an assumed 360-day year. Except with
respect to the Hyper-Amortization Loans and the Contingent Interest Loans, 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 fixed interest.
Contingent Interest Loans. With respect to the Mortgage Loans described
below (the "Contingent Interest Loans"), the related borrower has agreed to pay
additional interest (the "Contingent Interest") contingent upon the occurrence
of certain conditions specified in the related loan documents. Under the terms
of the Eastridge Mall Loans (see Appendix III hereto), representing
approximately 2.59 % of the Initial Pool Balance, the related borrower is
required to pay Contingent Interest equal to 1.25% per annum on the outstanding
principal of one of the two separate Notes evidencing such Mortgage Loan (the
"Eastridge Contingent Interest"). The Eastridge Contingent Interest is payable
from a specified portion of the gross income from the related Mortgaged Property
and to the extent not paid, accrues and is payable in future periods. Under the
terms of the Edgewater Loan, which represents approximately 0.77% of the Initial
Pool Balance, the related borrower is required to pay Contingent Interest
annually equal to 35% of a portion of the net cash flow from the related
Mortgaged Property, subject to an annual interest (fixed and contingent) cap of
11% per annum (the "Edgewater Annual Contingent Interest"). Additionally, upon
any prepayment of the Edgewater Loan or at maturity thereof, the borrower is
required to pay additional Contingent Interest (the "Edgewater Final Contingent
Interest") equal to the greater of: (a) 25% of the greater of (i) the net
proceeds from any sale of the Mortgaged Property to a third party, (ii) the net
proceeds from any refinancing of the Mortgaged Property by a third party, and
(iii) the net appraised value of the Mortgaged Property; and (b) an amount
sufficient to provide the mortgagee an internal rate of return (taking into
account all prior fixed and Continent Interest paid) equal to 11% per annum;
provided that the Edgewater Final Contingent Interest cannot exceed an amount
sufficient to provide the mortgagee an internal rate of return (taking into
account all prior fixed and Contingent Interest paid) equal to 13% per annum.
The Contingent Interest was transferred to the Depositor by MSMC along
with the Contingent Interest Loans, and were transferred by the Depositor, along
with the Contingent Interest Loans, into the Trust Fund on the Closing Date.
Unlike the Mortgage Loans, however, the Contingent Interest is not included in
the Mortgage Pool
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and is an asset of the Trust Fund for which no REMIC election has been or will
be made; no "regular interest" in any of REMIC I, REMIC II or REMIC III will
correspond to any Contingent Interest.
Amortization of Principal. Two hundred eighty-one Mortgage Loans (the
"Balloon Loans"), which represent approximately 88.66% of the Initial Pool
Balance, provide for monthly payments of principal based on amortization
schedules longer than their remaining terms, thereby leaving potentially
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. Forty-one Mortgage Loans,
representing approximately 11.34% of the Initial Pool Balance, have remaining
amortization terms that are the same as their respective remaining terms to
maturity. Such Mortgage Loans include the Eastridge Mall Loan evidenced by the
Eastridge Mall Note 1, representing approximately 1.72% of the Initial Pool
Balance, which is scheduled to fully amortize over its stated term through
stepped annual debt service payment as follows (11/1/71 through 12/1/88 -
$2,499,180; 1/1/89 through 10/1/2006 - $2,789,820; and 11/1/2006 through
10/1/2011 - $2,128,140). See Appendix III-- "The Eastridge Mall Loans" hereto.
However, to the extent the Monthly Payment for a Mortgage Loan is calculated on
an assumed 30/360 basis but interest accrues on such Mortgage Loan on an
actual/360 basis, there may be a remaining balance upon maturity. The weighted
average Balloon LTV applicable to the Mortgage Pool is 52.2%. With respect to
four Mortgage Loans, representing approximately 0.80 % of the Initial Pool
Balance, the grace period for the payment of Monthly Payments expires on the
15th of each month.
Forty-two of the Balloon Loans (the "Hyper-Amortization Loans"),
representing approximately 18.61% of the Initial Pool Balance, have the
following characteristics: (i) each is to fully amortize by its related maturity
date; (ii) each bears interest until its Hyper-Amortization Date at its Initial
Interest Rate; (iii) each bears interest on and after its Hyper-Amortization
Date at its Revised Interest Rate, provided that payment of interest accrued at
the excess of the Revised Interest Rate over the Initial Interest Rate shall be
deferred until the related maturity date or such earlier date as principal is
paid in full and such deferred interest shall bear interest at the Revised
Interest Rate (such accrued and deferred interest, and interest thereon, the
"Deferred Interest"), and (iv) each requires that each scheduled monthly payment
due and payable thereunder from and after its Hyper-Amortization Date be in the
amount of the Revised Payment, which payments are to be applied in accordance
with the related loan documents, which typically require application first to
interest at the Initial Interest Rate, then to all principal amounts then
outstanding, and then to all outstanding Deferred Interest. For purposes hereof:
"Hyper-Amortization Date", means for any Hyper-Amortization Loan the date
specified therein on and after which the Revised Interest Rate and the Revised
Payment are to apply; "Revised Payment", means for any Hyper-Amortization Loan
the revised scheduled monthly payment required thereunder from and after its
Hyper-Amortization Date, which is to be equal to the greater of (a) the
scheduled monthly payment required in each month prior to its Hyper-Amortization
Date, or (b) all Excess Cash Flow from the operation of the related Mortgaged
Property; "Excess Cash Flow", means for any Hyper-Amortization Loan gross income
or revenues less debt service, any required reserve deposits and capital and
operating expenses approved by mortgagee; "Initial Interest Rate", means for any
Hyper-Amortization Loan the rate at which such Hyper-Amortization Loan accrues
interest from its origination until its Hyper-Amortization Date; and "Revised
Interest Rate", means for any Hyper-Amortization Loan the increased rate at
which such Hyper-Amortization Loan bears interest from and after its
Hyper-Amortization Date, which is equal to the greater of (a) its Initial
Interest Rate plus 2%, or (b) the yield rate on the U.S. Treasury obligation
that matures in the month in which the original maturity date of such
Hyper-Amortization Loan occurs plus 2%; provided that the Revised Interest Rate
may not exceed the Initial Interest Rate plus 5%.
Prepayment Provisions. All but five Mortgage Loans, representing
approximately 1.62% of the Initial Pool Balance, are subject to specified
periods following the origination of such Mortgage Loans wherein no voluntary
prepayments are allowed (any such period, a "Lock-out Period"). Substantially
all of the Mortgage Loans (other than the Defeasance Loans) permit each borrower
to voluntarily prepay the entire principal balance of its Mortgage Loan after
the applicable Lock-out Period provided that a specified premium or fee (a
"Prepayment Premium") is paid in connection therewith; provided, however, that
the applicable Prepayment Premium requirement expires prior to the maturity date
of all but twelve of the Mortgage Loans. Prepayments of less than the full
outstanding principal balance of a Mortgage Loan are generally prohibited;
provided that no Prepayment Premium is required in connection with partial
prepayments made with respect to (a) a sale of all or part of the related
Mortgaged Property in seven Mortgage Loans, representing approximately 2.26% of
the Initial Pool Balance; or (b) the application of a portion of the net cash
flow from the related Mortgaged Property to the outstanding principal of the
Edgewater
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Loan. No Prepayment Premium will be payable in connection with any principal
repayment of any Hyper-Amortization Loan from and after its Hyper-Amortization
Date.
The applicable Prepayment Premium is generally calculated (a) for a
certain period (any such period, a "Yield Maintenance Period") after the
origination of the related Mortgage Loan or the expiration of the applicable
Lock-out Period, if any, on the basis of a yield maintenance formula or, for
some Mortgage Loans, a specified percentage of the amount prepaid to the extent
such percentage is greater than the yield maintenance amount, and (b) after the
expiration of the applicable Yield Maintenance Period, a specified percentage of
the amount prepaid, which percentage may either remain constant or decline over
time. Appendix II hereto contains more specific information regarding the
Prepayment Premiums applicable to each of the Mortgage Loans.
With respect to the Eastridge Mall Loans (see Appendix III), representing
approximately 2.59% of the Initial Pool Balance, the applicable Prepayment
Premium is calculated as follows: (1) for Eastridge Mall Note 1, ten times the
average annual contingent interest paid during the three years preceding such
prepayment plus the applicable specified percentage prepayment (which percentage
declines over time); and (2) for Eastridge Mall Note 2, the applicable specified
percentage prepayment (which percentage declines over time).
The applicable Prepayment Premium for the Edgewater Loan, which represents
approximately 0.77% of the Initial Pool Balance, is the Edgewater Final
Contingent Interest. See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Contingent Interest Loans" herein.
The Mortgage Loans typically: (i) 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; (ii) 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; (iii) 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.
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 "Prepayment Restriction Analysis" table included in Appendix I hereto
sets forth an analysis of the percentage of the declining balance of the
Mortgage Pool that, for each of the time periods indicated, will be within a
Lock-out Period or in which Principal Prepayments must be accompanied by the
indicated Prepayment Premium or Yield Maintenance Premium.
Defeasance. For 13 of the Mortgage Loans (the "Defeasance Loans"),
representing approximately 7.78% of the Initial Pool Balance, even though a
voluntary prepayment may be generally prohibited, the borrower may after the
expiration of a specified period during which defeasance is prohibited, obtain a
release of the related Mortgaged Property by pledging certain substitute
collateral to the holder of the Mortgage Loan. This substitute collateral
consists of direct, non-callable United States Treasury obligations that provide
for payments prior, but as close as possible, to all successive dates on which a
Monthly Payment is due (including the scheduled maturity date), with each such
payment being equal to or greater than (with any excess to be returned to the
borrower) the Monthly Payment (including, in the case of the scheduled maturity
date, any Balloon Payment), due on such date. A borrower's ability to obtain
such a release is in each case subject to certain conditions specified in the
related loan documents, including a requirement that a written confirmation be
obtained from the applicable Rating Agency that the acceptance of the pledge of
the substitute collateral in lieu of a full prepayment will not result in a
qualification, downgrade or withdrawal of the rating then assigned by each
Rating Agency to any Class of Certificates.
"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
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Mortgaged Property with additional liens. See "--Certain Characteristics of the
Mortgage Pool --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 generally prohibit, without the mortgagee's prior consent,
the borrower from transferring any material interest in the Mortgaged Property
or allowing a material change in the ownership or control of the related
borrower; provided, however, that such a transfer or change may be permitted if
certain conditions specified in the related Mortgage Loan documents are
satisfied, which conditions may include one or more of the following, (i) no
event of default exists, (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) and an acceptable
assumption agreement is executed. The related Mortgages may also allow changes
in the ownership or control of the related borrower between partners, family
members, affiliated companies and certain specified individuals, or for estate
planning purposes. 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.
See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS--Enforceability of Certain
Provisions--Due-on-Sale Provisions" in the Prospectus.
With respect to the Eastridge Mall Loans (see Appendix III), representing
approximately 2.59% of the Initial Pool Balance, the related borrower is only
required to provide the lender notice of any conveyance, transfer or changes of
ownership.
Default Provisions. 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 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. 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.
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 (i) comprehensive public liability insurance,
typically with a minimum limit of $1,000,000 per occurrence, (ii) 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, (iii) if deemed advisable by the separate originators
of the Mortgage Loans (each, an "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, (iv) if deemed advisable by the related Originator, earthquake
insurance in the amount specified in the related loan documents, (v) 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 (vi) 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.
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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") or in the event of any taking or
exercise of the power of eminent domain with respect to the related Mortgaged
Property (a "Condemnation"), all applicable insurance proceeds or condemnation
awards will be paid to the mortgagee and then it is such mortgagee's option as
to whether to apply such proceeds or awards 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 specified conditions are satisfied, the mortgagee may be required to
disburse such proceeds or awards in connection with a restoration of the related
Mortgaged Property. 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 Casualty or Condemnation and the related Mortgage Loan
documents may permit the application of all applicable proceeds or awards 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. 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, and (b) current tenancy
information. However, in the case of owner-occupied properties, the borrower
typically provides financial information with respect to itself instead of the
Mortgaged Property.
Delinquencies. No Mortgage Loan was more than 30 days delinquent in
respect of any Monthly Payment as of the Cut-off Date, or during the twelve
months immediately preceding the Cut-off Date.
Borrower Escrows and Reserve Accounts. In many 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 those matters and in such amounts deemed necessary by
the related Originator, which matters may include one or more of the following,
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, or deferred maintenance and/or scheduled capital
improvements.
Certain Characteristics of the Mortgage Pool
Concentration of Mortgage Loans and Borrowers. The largest single Mortgage
Loan has a Cut-off Date Principal Balance that represents approximately 3.52% of
the Initial Pool Balance. The five largest individual Mortgage Loans (or sets of
Cross-Collateralized Loans) have Cut-off Date Principal Balances that represent
in the aggregate approximately 10.96% of the Initial Pool Balance. Thirty-nine
borrowers (or groups of affiliated borrowers) are the borrower under more than
one Mortgage Loan in the Mortgage Pool (totaling 117 of the Mortgage Loans
representing approximately 31.72% of the Initial Pool Balance). However, no set
of Mortgage Loans made to a single borrower or to a single group of affiliated
borrowers constitutes more than approximately 2.59% of the Initial Pool Balance.
See Appendix II hereto for further information regarding such Mortgage Loans.
Cross-Collateralized Loans. The Mortgage Pool includes 13 separate sets of
Mortgage Loans (the "Cross-Collateralized Loans") which are cross-collateralized
and cross-defaulted with one or more related Cross-Collateralized Loans.
However, none of the Mortgage Loans are cross-collateralized or cross-defaulted
with any mortgage loan not included in the Mortgage Pool, and no set of related
Cross-Collateralized Loans constitutes more than approximately 2.59% of the
Initial Pool Balance. See Appendix II hereto for further information regarding
the Cross-Collateralized Loans.
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 applicable Seller within 12 months of
the respective dates such Mortgage Loans were acquired by such Seller and (b)
all but five of the Mortgaged Properties have been subject to environmental site
assessments within 18 months preceding the Cut-off Date. With respect to 17
Mortgage Loans, representing 7.13% of the Initial Pool Balance, no environmental
indemnity was obtained from any person or entity.
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With respect to the remainder of the Mortgage Loans, no current evaluation has
been undertaken of the financial condition of any person or entity that
indemnified the lender from any losses related to the environmental condition of
the Mortgaged Property.
Other than as described below, the environmental site assessments did not
reveal the existence of conditions or circumstances respecting any Mortgaged
Property that would constitute or result in a material violation of applicable
environmental law, impose a material constraint on the operation of such
Mortgaged Property, 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 Property 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) for which (i) a hold-back or other escrow of funds has been created in
an amount estimated by the related Originator to be adequate to pay the cost of
completing such clean-up, remediation or compliance actions as specified in such
assessments, (ii) an environmental insurance policy in an amount satisfactory to
the related Originator has been obtained by the related borrower or an indemnity
for such costs has been obtained from a potentially culpable party, or (iii)
prior to the closing of such Mortgage Loan, such clean up, remediation or
compliance actions have been completed in compliance with applicable
environmental law, or commenced by a responsible party deemed solvent by the
related Originator in accordance with a remediation plan approved by applicable
regulatory agencies, all in compliance with applicable environmental law.
Certain of the Mortgaged Properties are in areas of known groundwater
contamination or in the vicinity of sites containing "leaking underground
storage tanks" ("LUSTs") or other potential sources of groundwater
contamination. The above referenced environmental site assessments generally do
not anticipate that the borrower will have to undertake remedial investigations
or actions at these sites. Further, the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 and certain state environmental
laws provide for a third-party defense that generally would preclude liability
for a party whose property is contaminated by off-site sources. In addition, in
its final "Policy Toward Owners of Property Containing Contaminated Aquifers,"
dated May 24, 1995, the United States Environmental Protection Agency (the
"EPA") stated its position that, with respect to federal enforcement actions and
subject to certain conditions specified therein, where hazardous substances have
come to be located on or in a property solely as a result of subsurface
migration in an aquifer from a source or sources outside the property, the EPA
will not take enforcement actions against the owner of such property to require
the performance of remediation actions or the payment of remediation costs.
However, even if the owners of such Mortgaged Properties and the Trust Fund are
not be liable for such contamination, enforcement of the related borrower's or
the Trust Fund's rights against third parties may result in additional
transaction costs and the presence of such contamination or potential
contamination may affect the related borrower's ability to refinance using such
Mortgaged Property as collateral or to sell such Mortgaged Property to a third
party.
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 Sellers, the borrowers, any environmental
consultants or any other person as to the absence or extent of the existence of
any environmental condition 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. There can be no assurance that any hold-back or other
escrow of funds to pay the cost of completing any clean-up, remediation or
compliance actions with respect to a Mortgaged Property will be sufficient to
complete such actions.
Geographic Concentration. Fifty Mortgage Loans, representing approximately
22.89% of the Initial Pool Balance, are secured by liens encumbering Mortgaged
Properties located in California. Thirty of such Mortgage Loans, representing
approximately 12.85% of the Initial Pool Balance, are located in Southern
California. The remaining 20, representing approximately 10.04% of the Initial
Pool Balance, are located in Northern California. The occurrence of adverse
economic conditions in California may affect repayments of such Mortgage Loans
or the value of the related Mortgaged Properties. Such Mortgaged Properties may
be more susceptible to special hazard losses (such as earthquakes) than
properties located in other areas of the country. The Mortgage Loans generally
do
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not require the related borrower to maintain earthquake insurance. No other
jurisdiction has Mortgage Loans representing more than approximately 7.5% of the
Initial Pool Balance. See "RISK FACTORS--Geographic Concentration" herein and
Appendix I hereto.
Other Financing. The related Mortgage Loan documents generally prohibit
subordinate financing without the mortgagee's prior consent. With respect to
eight Mortgage Loans, representing approximately 3.92% 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.
Tenant Matters. Certain additional information regarding the Major Tenants
is set forth in Appendix II hereto. Generally, Major Tenants do not have
investment-grade credit ratings. The Major Tenants generally occupy their
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. In 53 of the Mortgage Loans,
representing 16.02% of the Initial Pool Balance, the related Major Tenant
occupies approximately 50% or more of the related Mortgaged Property.
Other Information. Each of the tables set forth in Appendix I sets forth
certain characteristics of the Mortgage Pool presented, where applicable, as of
the Cut-Off Date. For a detailed presentation of certain of the characteristics
of the Mortgage Loans and the Mortgaged Properties, on an individual basis, see
Appendix II hereto, and for a brief summary of certain of the terms of the
Mortgage Loans, or groups of Cross-Collateralized Loans, with a Cut-off Date
Principal Balance greater than $20,000,000, see Appendix III hereto.
For purposes of the tables in Appendix I and for the information set forth
herein and in Appendix II and Appendix III:
(1) References to "DSCR" are references to "Debt Service Coverage Ratios".
In general, debt service coverage ratios are used by income property lenders to
measure the ratio of (a) cash currently generated by a property that is
available for debt service 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 does not possess a stable
operating expectancy (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
and/or that may be difficult to replace), 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. For purposes of this Prospectus Supplement,
including for the tables in Appendix I and the information set forth in Appendix
II and Appendix III, the "Debt Service Coverage Ratio" or "DSCR" for any
Mortgage Loan (or group of Cross-Collateralized Loans) is the ratio of
"Underwritable Cash Flow" estimated to be produced by the related Mortgaged
Property or Properties to the annualized amount of debt service payable under
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that Mortgage Loan (or that group of Cross-Collateralized Loans). "Underwritable
Cash Flow" in each case is an estimate of stabilized cash flow available for
debt service. In general, it is the estimated stabilized revenue derived from
the use and operation of a Mortgaged Property (consisting primarily of rental
income) less the sum of (a) estimated stabilized operating expenses (such as
utilities, administrative expenses, repairs and maintenance, management fees and
advertising), (b) fixed expenses (such as insurance, real estate taxes and, if
applicable, ground lease payments) and (c) recurring capital expenditures and
reserves for capital expenditures, including tenant improvement costs and
leasing commissions. Underwritable Cash Flow generally does not reflect interest
expenses and non-cash items such as depreciation and amortization. In
determining Underwritable Cash Flow for a Mortgaged Property, the applicable
Seller relied on rent rolls and other generally unaudited financial information
provided by the respective borrowers and calculated stabilized estimates of cash
flow that took into consideration historical financial statements, material
changes in the operating position of the Mortgaged Property of which the Seller
was aware (e.g., new signed leases or end of "free rent" periods and market
data), and estimated recurring capital expenditures and reserves for, leasing
commission and tenant improvements. The applicable Seller made certain changes
to operating statements and operating information obtained from the respective
borrowers, resulting in either an increase or decrease in the estimate of
Underwritable Cash Flow derived therefrom, based upon the Seller's evaluation of
such operating statements and operating information and the assumptions applied
by the respective borrowers in preparing such statements and information. In
certain cases, partial year operating income data was annualized, with certain
adjustments for items deemed not appropriate to be annualized, or borrower
supplied "trailing-12 months" income and/or expense information was utilized. In
certain instances, historical expenses were inflated. For purposes of
calculating Underwritable Cash Flow for Mortgage Loans where leases have been
executed by one or more affiliates of the borrower, the rents under some of such
leases have been adjusted to reflect market rents for similar properties.
Several Mortgage Loans are secured by Mortgaged Properties with newly
constructed improvements and, accordingly, there were no historical operating
results or financial statements available with respect to such Mortgaged
Properties. In such cases, items of revenue and expense used in calculating
Underwritable Cash Flow were generally derived from rent rolls, estimates set
forth in the related appraisal or from borrower-supplied information. No
assurance can be given with respect to the accuracy of the information provided
by any borrowers, or the adequacy of the procedures used by the applicable
Seller in determining the presented operating information.
The Debt Service Coverage Ratios are presented herein for illustrative
purposes only and, as discussed above, are limited in their usefulness in
assessing the current, or 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.
(2) References in the tables to "Cut-Off Date Loan-to-Value" or "Cut-Off
Date LTV" are references to the ratio, expressed as a percentage, of the Cut-Off
Date Balance of a Mortgage Loan (or the aggregate principal balance of a group
of Cross-Collateralized Loans) to the value of the related Mortgaged Property or
Properties as determined by the most recent appraisal or market valuation of
such Mortgaged Property, as described below. References to "Balloon LTV" or
"Balloon LTV Ratio" are references to the ratio, expressed as a percentage of
the principal balance of a Balloon Loan (or the aggregate principal balance of a
group of Cross-Collaterialized Loans) anticipated to be outstanding at the date
on which the related Balloon Payment(s) are scheduled to be due (calculated
based on the Maturity Assumptions and a 0% CPR) to the value of the related
Mortgaged Property or Properties as determined by the most recent appraisal or
market valuation of such Mortgaged Property or Properties available to the
Depositor. No representation is made that any such value would approximate
either the value that would be determined in a current appraisal of the related
Mortgaged Property or the amount that would be realized upon a sale.
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 Sellers, the Master Servicer, the Special Servicer,
the Underwriters, the Trustee or 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
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determined in a current appraisal of the related Mortgaged 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.
(3) References to "Years Built/renovated" are references to the later of
the year in which a Mortgaged Property was originally constructed or the most
recent year in which such Mortgaged Property was substantially renovated.
(4) References to "weighted averages" are references to averages weighted
on the basis of the Cut-Off Date Balances of the related Mortgage Loans.
The sum in any column of any of the tables in Appendix 1 may not add to
100% and may not equal the indicated total due to rounding.
The Sellers
Morgan Stanley Mortgage Capital Inc. MSMC is a subsidiary of Morgan
Stanley & Co. Incorporated and was formed as a New York corporation to originate
and acquire loans secured by mortgages on commercial and multifamily real
estate. Each of MSMC's Mortgage Loans was originated by one of the participants
in MSMC's commercial and multifamily mortgage loan conduit program, was
originated directly by MSMC or was purchased. All loans were underwritten by
MSMC underwriters. The principal offices of MSMC are located at 1585 Broadway,
New York, New York 10036. Its telephone number is (212) 761-4700.
Midland Loan Services, Inc and PNC Bank, N.A.. Midland Loan Services,
L.P., was organized under the laws of the State of Missouri in 1992 as a limited
partnership. On April 3, 1998, substantially all of the assets of Midland Loan
Services, L.P., were acquired by Midland Loan Services, Inc. ("Midland"), a
newly formed, wholly owned subsidiary of PNC Bank, National Association ("PNC").
Since 1994, Midland has been originating commercial and multifamily mortgage
loans for the purpose of securitization. Included in the Mortgage Loans are 41
Mortgage Loans with an aggregate original principal balance of approximately
$201,300,000 which were originated by PNC prior to its acquisition of Midland.
PNC will be the Seller with respect to these Mortgage Loans and will convey them
to the Depositor pursuant to a separate Mortgage Loan Purchase Agreement. In
addition, 63 of the Mortgage Loans, with an aggregate original principal balance
of approximately $183,125,300, were originated by Midland. Five Mortgage Loans,
with an aggregate original principal balance of approximately $7,395,000, were
purchased by Midland in the secondary market.
Residential Funding Corporation. RFC is a direct wholly owned subsidiary
of GMAC Mortgage Group, Inc. and was formed as a Delaware corporation. RFC
Commercial is a division of RFC which originates and acquires loans secured by
mortgages on commercial and multifamily real estate. Prior to origination or
acquisition, RFC Commercial's staff underwrites all the loans. RFC maintains its
principal office at 8400 Normandale Lake Boulevard, Suite 600, Minneapolis,
Minnesota 55437. Its telephone number is (612) 832-7000. RFC Commercial's
offices are located at 4800 Montgomery Lane, Suite 300, Bethesda, Maryland 20814
and its telephone number is (301) 215-6200. RFSC is an affiliate of RFC.
Although RFC is described as a Seller in this Prospectus Supplement, it
sold its respective Mortgage Loans to MSMC prior to the date hereof. MSMC
intends to sell the RFC Mortgage Loans and the MSMC Mortgage Loans to the
Depositor on the Closing Date. Nevertheless, RFC (and not MSMC) will be
responsible to the Trust Fund in respect of the representations and warranties
that relate to the RFC Loans to the same extent as the other Sellers are with
respect to their Mortgage Loans.
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
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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 Seller in its respective Mortgage Loan Purchase
Agreement. In each Mortgage Loan Purchase Agreement, the applicable Seller will
represent and warrant (with respect only to such Seller's Mortgage Loans and
subject to certain specified exceptions), in favor of the Depositor as of the
date of the Depositor's purchase of the related Mortgage Loan or such other date
specified in the related representation or warranty, among other things,
substantially as set forth below:
(1) The information set forth in the schedule of the Mortgage Loans attached to
the related Mortgage Loan Purchase Agreement (which contains certain of the
information set forth in Appendix II) is true and correct in all material
respects.
(2) Such Seller owns such Mortgage Loan free and clear of any and all pledges,
liens and/or other encumbrances.
(3) No scheduled payment of principal and interest under such Mortgage Loan was
30 days or more past due as of the Cut-off Date or during the 12-month period
immediately preceding the Cut-off Date.
(4) The related Mortgage, subject to certain creditors' rights exceptions and
general principles of equity, constitutes a valid and enforceable first priority
mortgage lien upon the related Mortgaged Property, subject to (a) the lien for
current real property taxes and assessments not yet delinquent or accruing
interest or penalties, (b) covenants, conditions and restrictions,
rights-of-way, easements and other matters of public record or referred to in
the related lender's title insurance policy, (c) exceptions and exclusions
specifically referred to in such lender's title insurance policy, (d) purchase
money security interests and (e) other matters to which like properties are
commonly subject.
(5) The assignment of the related Mortgage in favor of the Trustee constitutes a
legal, valid and binding assignment.
(6) The related assignment of leases, subject to certain creditors' rights
exceptions and general principles of equity, establishes and creates a valid and
enforceable first priority lien in the related borrower's interest in all leases
of the related Mortgaged Property.
(7) The related Mortgage has not been satisfied, cancelled, rescinded or
subordinated in whole or in material part, and the related Mortgaged Property
has not been released from the lien of such Mortgage in whole or in material
part, except for partial releases included in the related Mortgage File.
(8) Except as set forth in a structural engineering report prepared in
connection with the origination of such Mortgage Loan, the related Mortgaged
Property is, to the Seller's knowledge, free and clear of any damage (normal
wear and tear excepted) or defective condition that would materially and
adversely affect its value as security for such Mortgage Loan.
(9) To the Seller's knowledge, there is no proceeding pending for the
condemnation of all or any material portion of the related Mortgaged Property.
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(10) The related Mortgaged Property is or will be covered by an American Land
Title Association (or an equivalent form of) lender's title insurance policy
that insures that the related Mortgage is a valid, first priority lien on such
Mortgaged Property, subject only to the exceptions stated therein.
(11) The proceeds of such Mortgage Loan have been fully disbursed, and there is
no obligation for future advances with respect thereto.
(12) One or more environmental site assessments were performed with respect to
the Mortgaged Property in connection with the origination of such Mortgage Loan
and reviewed by the Seller, a report of each such assessment has been delivered
to the Depositor, and to the Seller's knowledge, there is no material and
adverse environmental condition or circumstance affecting such Mortgaged
Property except as disclosed in such report.
(13) Each Note, Mortgage and other agreement that evidences or secures such
Mortgage Loan is, subject to non-recourse provisions thereof, certain creditors'
rights exceptions and general principles of equity, the legal, valid and binding
obligation of the maker thereof, enforceable in accordance with its terms, and
subject to such matters, there is no valid defense, counterclaim, or right of
offset or rescission available to the related borrower with respect to such
Note, Mortgage or other agreement.
(14) The related Mortgaged Property is, and is required pursuant to the related
Mortgage to be, insured by casualty and liability insurance policies of a type
specified in the related Mortgage Loan Purchase Agreement.
(15) There are no delinquent taxes, assessments or other outstanding charges
affecting the related Mortgaged Property that are or may become a lien of
priority equal to or higher than the lien of the related Mortgage.
(16) The related borrower is not, to the Seller's knowledge, a debtor in any
state or federal bankruptcy or insolvency proceeding.
(17) The related Mortgaged Property consists of the related borrower's fee
simple estate in real estate; or, if the related Mortgage encumbers the interest
of a borrower as a lessee under a ground lease of the related Mortgaged Property
(but not the related fee interest), (a) such ground lease or a memorandum
thereof has been or will be duly recorded, and such ground lease or other
agreement permits the interest of the lessee thereunder to be encumbered by such
Mortgage; (b) the related borrower's interest in such ground lease is assignable
to the Depositor and its successors and assigns upon notice to, but without the
further consent of, the lessor thereunder; (c) such ground lease is in full
force and effect, and the Seller has received no notice that an event of default
has occurred thereunder; (d) such ground lease or other related agreement
requires the lessor thereunder to give notice of any default by the lessee to
the holder of such Mortgage (provided any required notice of such holder's
mortgage lien is given to such lessor), provides that no notice of termination
given under such ground lease is effective against such holder unless a copy has
been delivered to such holder and provides that no modification of such ground
lease will be effective without the prior written consent of such holder; (e)
the holder of such Mortgage is permitted a reasonable opportunity (including, if
necessary, sufficient time to gain possession of the interest of the lessee
under such ground lease) to cure any default under such ground lease, which is
curable after the receipt of notice of any such default, before the lessor
thereunder may terminate such ground lease; and (f) such ground lease has a
current term (excluding any extension options set forth therein which are not
binding on the lessor thereunder) which extends not less than ten years beyond
the scheduled maturity date of such Mortgage Loan.
(18) With respect to a related Mortgage that encumbers the interest of a
borrower as a lessee under a ground lease of the related Mortgaged Property and
also the related fee interest, (a) such Mortgage does not by its terms provide
that it will be subordinated to the lien of any other encumbrance upon such fee
interest, and (b) upon the occurrence of a default under such Mortgage by the
related borrower, any right of the lessor in such ground lease to receive notice
of, and cure, such default under any agreement binding upon the Seller would not
be considered commercially unreasonable in any material respect by prudent
commercial mortgage lenders.
(19) All escrow deposits and payments required under such Mortgage Loan
(inclusive of any applicable grace or cure period) have been so deposited or
paid by the related borrower and have been applied in accordance with their
intended purposes or are being transferred to the Depositor.
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(20) Either (a) such Mortgage Loan is secured by an interest in real property
having a fair market value at least equal to 80% of the adjusted issue price of
such Mortgage Loan or (b) substantially all the proceeds of such Mortgage Loan
were used to acquire, improve or protect the real property which served as the
only security for such Mortgage Loan (other than a recourse feature or other
third party credit enhancement). Any such Mortgage Loan that was "significantly
modified" so as to result in a taxable exchange under Section 1001 of the Code
either was modified as a result of the default or reasonably foreseeable default
of such Mortgage Loan or is covered under clause (a) of the immediately
preceding sentence.
(21) No holder of such Mortgage Loan has advanced funds or induced, solicited or
knowingly received any advance of funds from a party other than the borrower,
directly or indirectly, for the payment of any amount required by such Mortgage
Loan.
(22) Each Mortgaged Property is free and clear of any and all mechanic's and
materialmen's liens that are prior or equal to the lien of the related Mortgage,
except for liens insured against by the related title insurance policy.
(23) Such Mortgage Loan is not cross-collateralized or cross-defaulted with any
loan other than one or more other Mortgage Loans.
(24) No Mortgage requires the holder thereof to release all or any material
portion of the related Mortgaged Property from the lien thereof except upon
payment in full of such Mortgage Loan or, in connection with a partial release,
upon the satisfaction of certain legal and underwriting requirements and the
payment of a release price and prepayment consideration in connection herewith.
(25) No Mortgage Loan contains any equity participation by the lender or
provides for negative amortization or for any contingent or additional interest
in the form of participation in the cash flow of the related Mortgaged Property.
(26) To the Seller's knowledge, there exists no material default, breach,
violation or event of acceleration (and no event which, with the passage of time
or the giving of notice, or both, would constitute any of the foregoing) under
the related Note or Mortgage, in any such case to the extent the same materially
and adversely affects the value of such Mortgage Loan and the related Mortgaged
Property, provided that this representation does not cover any default, breach,
violation or event of acceleration that specifically pertains to any matter
otherwise covered by any representation under paragraph 3, 8, 9, 12, 14, 15 or
17 above.
(27) Based on due diligence, the improvements located on or forming a part of
each Mortgaged Property comply with applicable zoning laws and ordinances or
constitute a legal nonconforming use or structure, except such noncompliance as
does not materially and adversely affect the value of such Mortgaged Property,
and to the Seller's knowledge, the related borrower was, as of the date of
origination of such Mortgage Loan, in possession of all material licenses,
permits and franchises required by applicable law for the ownership and
operation of such Mortgaged Property.
(28) No Mortgage Loan permits the related Mortgaged Property to be encumbered by
any lien junior to or of equal priority with the lien of the related Mortgage
without the prior written consent of the holder thereof or the satisfaction of
debt service coverage or similar criteria specified therein.
Although RFC is described herein as a Seller, MSMC acquired the RFC
Mortgage Loans from RFC prior to the Closing Date pursuant to a mortgage loan
purchase agreement containing representations and warranties, rights and
remedies substantially similar to those contained in the Mortgage Loan Purchase
Agreements. In lieu of making the foregoing representations and warranties with
respect to such RFC Mortgage Loans, MSMC will assign to the Depositor all of
MSMC's rights related to its acquisition of the RFC Mortgage Loans. See
"DESCRIPTION OF THE MORTGAGE POOL--The Sellers--Residential Funding Corporation"
herein.
The Pooling and Servicing Agreement will require that the custodian, the
Master Servicer, the Special Servicer or the Trustee notify the applicable
Seller upon its becoming aware (i) of any breach of certain representations or
warranties made by such Seller in its Mortgage Loan Purchase Agreement, or (ii)
that any document required to be included in the Mortgage File does not conform
to the requirements of the Pooling and
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Servicing Agreement, which in the case of any such breach or defect materially
and adversely affects the interests of the Trustee or the Certificateholders.
The applicable Mortgage Loan Purchase Agreement provides that, if such breach or
default is not cured within 90 days after discovery of such breach or defect by
the applicable Seller, the Depositor, the custodian, the Master Servicer, the
Special Servicer or the Trustee, the applicable Seller will either (1)
repurchase such Mortgage Loan at its outstanding principal balance, plus unpaid
accrued interest at the applicable rate (in absence of a default) to, but not
including, the date of repurchase, the amount of any unreimbursed Servicing
Advances relating to such Mortgage Loan, accrued interest on Advances (including
P&I Advances) at the Advance Rate, the amount of any unpaid servicing
compensation (other than Master Servicing Fees) and Trust Fund expenses
allocable to such Mortgage Loan and the amount of any expenses reasonably
incurred by the Master Servicer, the Special Servicer or the Trustee in respect
of such repurchase obligation, including any expenses arising out of the
enforcement of the repurchase obligation (such price, the "Repurchase Price") or
(2) substitute a Qualified Substitute Mortgage Loan for such Mortgage Loan and
pay the Trustee a shortfall amount equal to the difference between the
Repurchase Price of the deleted Mortgage Loan calculated as of the date of
substitution and the Stated Principal Balance of such Qualified Substitute
Mortgage Loan as of the date of substitution, provided, however, if such
Mortgage Loan continues to be a "qualified mortgage" within the meaning of the
REMIC provisions of the Code, such 90-day period shall not commence until the
Seller receives notice of or discovers that such Mortgage Loan is a defective
Mortgage Loan; provided, further, that if such breach or defect cannot be cured
within such 90-day period, so long as such Seller has commenced and is
diligently proceeding with the cure of such breach or defect, such 90-day period
will be extended for an additional 90 days; provided, further, that no such
extension will be applicable unless such Seller delivers to the Depositor (or
its successor in interest) an officer's certificate (i) describing the measures
being taken to cure such breach or defect, (ii) stating that such breach or
defect is susceptible to being cured within such 90 days, and (iii) stating that
such breach or defect does not cause such Mortgage Loan to fail to be a
"qualified mortgage" within the meaning of the REMIC provisions of the Code.
A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (i) have an outstanding principal balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of the Stated Principal
Balance of the deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs; (ii) have a mortgage rate not less than
the Mortgage Rate of the deleted Mortgage Loan; (iii) have the same Due Date as
the deleted Mortgage Loan; (iv) accrue interest on the same basis as the deleted
Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (v) have a remaining term to stated maturity not greater than,
and not more than two years less than, the remaining term to stated maturity of
the deleted Mortgage Loan; (vi) have an original loan to-value-ratio not higher
than that of the deleted Mortgage Loan and a current loan to-value-ratio not
higher than the then-current loan to-value-ratio of the deleted Mortgage Loan;
(vii) comply as of the date of substitution with all of the representations and
warranties set forth in the applicable Mortgage Loan Purchase Agreement; (viii)
have an environmental report with respect to the related Mortgaged Property
which will be delivered as a part of the related Mortgage File; (ix) at the
Trustee's request, be determined by Opinion of Counsel to be a "qualified
replacement mortgage" within the meaning of Section 860G(a)(4) of the Code; (x)
not have a maturity date after the date three years prior to the Rated Final
Distribution Date; (xi) not be substituted for a deleted Mortgage Loan unless
the Trustee has received prior confirmation in writing by each Rating Agency
that such substitution will not result in the withdrawal, downgrade, or
qualification of the rating assigned by the Rating Agency to any Class of
Certificates then rated by the Rating Agency; (xii) not be substituted for a
deleted Mortgage Loan if it would result in the termination of the REMIC status
of REMIC I, REMIC II or REMIC III or the imposition of tax on REMIC I, REMIC II
or REMIC III other than a tax on income expressly permitted or contemplated to
be received by the terms of the Pooling and Servicing Agreement; and (xiii) not
be substituted for a deleted Mortgage Loan unless the Operating Adviser shall
have approved of such substitution based upon an engineering report and the
environmental report obtained with respect to such Qualified Substitute Mortgage
Loan. In the event that one or more mortgage loans are substituted for one or
more deleted Mortgage Loans, then the amounts described in clause (i) shall be
determined on the basis of aggregate principal balances and the rates described
in clause (ii) above and the remaining term to stated maturity referred to in
clause (v) above shall be determined on a weighted average basis. When a
Qualified Substitute Mortgage Loan is substituted for a deleted Mortgage Loan,
the applicable Seller shall certify that such Mortgage Loan meets all of the
requirements of the above definition and shall send such certification to the
Trustee.
The obligations of the Sellers to substitute, repurchase or cure
constitute the sole remedies available to the Trustee for the benefit of the
holders of Certificates for a breach of a representation or warranty with regard
to a
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<PAGE>
Mortgage Loan by a Seller or missing or defective Mortgage Loan documentation.
Other than as specifically described in the preceding paragraph, neither the
Sellers, the Special Servicer (unless the Seller is the Special Servicer and is
otherwise obligated as described herein), the Master Servicer (unless the Seller
is the Master Servicer and is otherwise obligated as described herein) nor the
Depositor will be obligated to purchase a Mortgage Loan if any Seller defaults
on its respective obligation to substitute, repurchase or cure, and no assurance
can be given that any Seller will fulfill its obligations. If such obligations
are not met, as to a Mortgage Loan that is not a "qualified mortgage," REMIC I,
REMIC II and REMIC III may be disqualified.
MASTER SERVICER AND SPECIAL SERVICER
Midland Loan Services, L.P., was organized under the laws of the State of
Missouri in 1992 as a limited partnership. On April 3, 1998, substantially all
of the assets of Midland Loan Services, L.P., were acquired by Midland Loan
Services, Inc. ("Midland"), a newly formed, wholly owned subsidiary of PNC Bank,
National Association ("PNC"). 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 initial
Special Servicer for the Trust Fund under the Pooling and Servicing Agreement.
In addition, Midland (or its predecessor in interest, Midland Loan Services,
L.P.) and its affiliates are the Seller with respect to 109 of the Mortgage
Loans. See "DESCRIPTION OF THE MORTGAGE POOL--The Sellers" herein.
As of May 31, 1998, Midland was responsible for the servicing of
approximately 12,300 commercial and multifamily loans with an aggregate
principal balance of approximately $26.8 billion the collateral for which is
located in all 50 states, Puerto Rico and the District of Columbia. With respect
to such loans, approximately 10,400 loans with an aggregate principal balance of
approximately $18.8 billion pertain to commercial and multifamily
mortgage-backed securities. Property type concentrations within the portfolio
include multifamily, office, retail, hospitality and other types of income
producing properties. Midland also provides 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 provides asset management and disposition services for commercial
and multifamily mortgage-backed securities transactions and transactions for
private investors. As of May 31, 1998, Midland provided such services for 26
transactions with original aggregate asset balances in excess of $8 billion.
Midland and its affiliates have liquidated, disposed of or otherwise resolved
approximately 2,250 assets with net recoveries of more than $2.4 billion.
The following delinquency tables set forth information concerning the
delinquency experience on commercial and multifamily mortgage loans serviced by
the Master Servicer (including loans serviced by Midland Loan Services, L.P.
prior to April 3, 1998) for commercial mortgage-backed securities transactions
(the "CMBS Portfolio"). The CMBS Portfolio does not include mortgage loans
included in distressed RTC portfolios.
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<PAGE>
<TABLE>
<CAPTION>
As of December 31,
----------------------------------------------------------------
1995 1996 1997
------------------ ----------------- ------------------
By By Dollar By By Dollar By By Dollar
No. of Amount No. of Amount No. of Amount
Loans of Loans Loans of Loans Loans of Loans
------ --------- ------ --------- ------ ---------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio 651 $1,899,207 2,782 $6,557,024 4,290 $13,284,970
=== ========== ===== ========== ===== ===========
Period of delinquency<F1>
30-59 days 16 $ 80,888 198 $ 89,419 96 $ 140,191
60 to 89 days 3 1,372 17 10,479 27 13,381
90 days or more<F2> 6 49,607 18 33,898 78 155,223
--- ---------- ----- ---------- ----- -----------
Total delinquent loans 25 $ 131,866 233 $ 133,795 201 $ 308,795
=== ========== ==== ========== ===== ===========
Percent of portfolio 4% 7% 8% 2% 5% 2%
--- -- -- -- -- --
<FN>
<F1> The indicated periods of delinquency are based on the number of days past
due on a contractual basis, based on a 30-day month. No mortgage loan is
considered delinquent for these purposes until the monthly anniversary of its
contractual due date (e.g., a mortgage loan with a payment due on January 1
would first be considered delinquent on February 1), at which time such mortgage
loan is considered 30 days delinquent. The delinquencies reported above were
determined as of the dates indicated.
<F2> Includes pending foreclosures.
</FN>
</TABLE>
<TABLE>
<CAPTION>
As of March 31,
-----------------------------------------------------------
1997 1998
----------------------- -------------------------
By By Dollar By By Dollar
No. of Amount No. of Amount
Loans of Loans Loans Of Loans
------ -------- ------ ---------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
Total Portfolio........... 2,866 $7,160,214 5,022 $15,790,583
===== ========== ===== ===========
Period of delinquency<F1>
30-59 days.......... 318 $110,821 34 $ 25,170
60 to 89 days....... 31 20,859 19 34,218
90 days or more<F2> 24 35,560 122 106,688
----- ---------- ----- -----------
Total delinquent loans.... 373 $167,240 175 $ 166,076
===== ========== ===== ===========
Percent of portfolio...... 13% 2% 3% 1%
- ---------------
*Less than 1%.
<FN>
<F1> The indicated periods of delinquency are based on the number of days
past due on a contractual basis, based on a 30-day month. No mortgage
loan is considered delinquent for these purposes until the monthly
anniversary of its contractual due date (e.g., a mortgage loan with a
payment due on January 1 would first be considered delinquent on
February 1), at which time such mortgage loan is considered 30 days
delinquent. The delinquencies reported above were determined as of the
dates indicated.
<F2> Includes pending foreclosures.
</FN>
</TABLE>
Management of Midland believes that because the delinquency rate for the
CMBS Portfolio is relatively low, any changes in delinquency levels from period
to period are not due to any overall market trends, but rather are primarily due
to variations in the size of the CMBS Portfolio, as well as individual property
level economics and circumstances unique to individual borrowers.
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<PAGE>
The delinquency experience set forth above is historical and is based on
the servicing of mortgage loans that may not be representative of the Mortgage
Loans in the Mortgage Pool. Consequently, there can be no assurance that the
delinquency experience on the Mortgage Loans in the Mortgage Pool will be
consistent with the data set forth above. In addition, most of the mortgage
loans included in the CMBS Portfolio were originated by persons that are not
affiliated with the Master Servicer and were not reunderwritten by the Master
Servicer or its affiliates. These mortgage loans were originated by numerous
entities over a long period of time in accordance with a variety of underwriting
policies and standards that may be materially different from those used to
underwrite the Mortgage Loans included in the Mortgage Pool. Furthermore, some
of the mortgage loans included in the CMBS Portfolio and some of the Mortgage
Loans in the Mortgage Pool are being primary serviced or sub-serviced by third
parties.
The CMBS Portfolio includes many mortgage loans which have not been
outstanding long enough to have seasoned to a point where delinquencies would be
fully reflected. In the absence of substantial continuous additions of servicing
for recently originated mortgage loans to the CMBS Portfolio, it is possible
that the delinquency percentages experienced in the future could be
significantly higher than those indicated in the tables above.
It should be noted that if the commercial and/or multifamily real estate
market should experience an overall decline in property values, the actual rates
of delinquencies could be higher than those previously experienced by the Master
Servicer. In addition, adverse economic conditions may affect the timely payment
of scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the actual rates of delinquencies with respect to the Mortgage
Pool.
Midland has been approved as a master and special servicer for investment
grade commercial and multifamily mortgage-backed securities by Fitch IBCA, Inc.
("Fitch") and S&P. Midland is ranked "Strong" as a commercial loan servicer and
asset manager and "Above Average" as a master servicer by S&P, and "Acceptable"
as a master servicer and "Above Average" as a special servicer by Fitch. S&P
ranks commercial loan servicers, asset managers and master servicers in one of
five rating categories: Strong, Above Average, Average, Below Average and Weak.
Fitch ranks special servicers in one of five categories: Superior, Above
Average, Average, Below Average and Unacceptable. Fitch ranks master servicers
as Acceptable or Unacceptable.
The information concerning Midland set forth above has been provided by
Midland and none of the Trustee, the Fiscal Agent, the Sellers or the
Underwriters make any representation or warranty as to the accuracy thereof.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of 19 Classes to be designated as the Class A-1
Certificates, the Class A-2 Certificates, the Class X 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
Certificates, the Class M Certificates, the Class N Certificates, the Class R-I
Certificates, the Class R-II Certificates, the Class R-III and Class V
Certificates. Only the Class A-1, Class A-2, Class X, 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 more 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 and principal due after the Cut-off Date and all payments under and
proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of
Principal Prepayments received prior to the Cut-off Date and scheduled 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, deed-in-lieu
of foreclosure or otherwise (upon acquisition, an "REO Property"); (iii) such
funds or assets as from time to time are deposited in the
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<PAGE>
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 applicable Mortgage Loan Purchase
Agreement; and (vi) all of the mortgagee's right, title and interest in the
Reserve Accounts.
Certificate Balances and Notional Amounts
Upon initial issuance, the Class A-1, Class A-2, Class B, Class C, Class
D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M and
Class N Certificates (collectively, the "Principal Balance Certificates") will
have the following aggregate Certificate Balances (in each case, subject to a
variance of plus or minus 5%):
Approximate
Initial Percent of Approximate
Initial Aggregate Initial Percent of
Class Certificate Balance Pool Balance Credit Support
----- ------------------- ------------ --------------
Class A-1 $ 277,000,000 23.23% 28.00%
Class A-2 $ 581,412,000 48.77 28.00
Class B $ 59,611,000 5.00 23.00
Class C $ 59,612,000 5.00 18.00
Class D $ 62,593,000 5.25 12.75
Class E $ 20,862,000 1.75 11.00
Class F $ 53,650,000 4.50 6.50
Class G $ 11,923,000 1.00 5.50
Class H $ 8,942,000 0.75 4.75
Class J $ 14,905,000 1.25 3.5
Class K $ 8,939,000 0.75 2.75
Class L $ 11,924,000 1.00 1.75
Class M $ 8,940,000 0.75 1.00
Class N $ 11,925,941 1.00 0.00
The Certificate Balance of any Class of Principal Balance 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 Principal Balance Certificates
will in each case be reduced by amounts actually distributed on such Class that
are allocable to principal and by any Realized Losses and Expense Losses
allocated to such Class. The Class X Certificates are interest only
Certificates, have no Certificate Balances and are not entitled to distributions
in respect of principal. The aggregate Notional Amount of the Class X
Certificates as of any date is generally equal to the aggregate Certificate
Balance of the Principal Balance Certificates.
Pass-Through Rates
The rate per annum at which any Class of Certificates accrues interest
from time to time is herein referred to as its "Pass-Through Rate".
The Pass-Through Rates applicable to Class A-1, Class A-2, Class B, Class
C, Class F, Class G, Class H, Class J, Class K, Class L, Class M and Class N
Certificates will, at all times, be equal to [6.19]%, [6.40]%, [6.53]%, [6.65]%,
[6.19]%, [6.19]%, [6.19]%, [6.19]%, [6.19]%, [6.19]%, [6.19]% and [6.19]% per
annum, respectively; provided, however, that each such Pass-Through Rate will
not exceed the Weighted Average Net Mortgage Rate for such Distribution Date.
The Pass-Through Rate on the Class D and Class E Certificates for the
initial Interest Accrual Period will equal % and %, respectively. For each
subsequent Interest Accrual Period, the Pass-Through Rate on the Class D and
Class E Certificates will be a per annum rate equal to the Weighted Average Net
Mortgage Rate minus [0.50]% and [0.13]%, respectively.
The Pass-Through Rate on the Class X Certificates for the initial Interest
Accrual Period will equal %. For each subsequent Interest Accrual Period, the
Pass-Through Rate on the Class X Certificates will be a per annum
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<PAGE>
rate equal to the excess of the Weighted Average Net Mortgage Rate over the
Weighted Average Pass-Through Rate.
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 and without giving effect to any Revised Interest Rate) minus the
Administrative Cost Rate. However, for purposes of calculating Pass-Through
Rates, the Net Mortgage Rate for any Mortgage Loan will be determined without
regard to any post-Closing Date modification, waiver or amendment of the terms
of such Mortgage Loan. In addition, because the Certificates accrue interest on
the basis of a 360-day year consisting of twelve 30-day months, when calculating
the Pass-Through Rate for each Class of Certificates for each Distribution Date,
the Net Mortgage Rate of a Mortgage Loan that accrues interest other than on the
basis of a 360-day year consisting of twelve 30-day months (a "Non-30/360 Loan")
will be appropriately adjusted to reflect such difference. See "THE POOLING AND
SERVICING AGREEMENT--Servicing Compensation and Payment of Expenses" herein.
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 Principal Balance Certificates as of the first day of such Interest Accrual
Period.
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.
Distributions
Method, Timing and Amount. Distributions on the Regular Certificates will
be made on the 15th day of each month or, if such day is not a Business Day,
then on the next succeeding Business Day, commencing in August, 1998 (each, a
"Distribution Date"). All distributions (other than the final distribution on
any Certificate) will be made by the Trustee to the persons in whose names the
Certificates are registered at the close of business on the last Business Day of
the month preceding the month in which such Distribution Date occurs (the
"Record Date"). Such distributions will be made 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
provides the Trustee with wiring instructions no less than five Business Days
prior to the related Record Date or otherwise by check mailed to such
Certificateholder. The final distribution on any Certificate (determined without
regard to any possible future reimbursement of any Realized Losses or Expense
Losses previously allocated to such 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. Any
distribution that is to be made with respect to a Certificate in reimbursement
of a Realized Loss or Expense Loss previously allocated thereto, which
reimbursement is to occur after the date on which such Certificate is
surrendered as contemplated by the preceding sentence (the likelihood of any
such distribution being remote), will be made by check mailed to the
Certificateholder that surrendered such Certificate. All distributions made 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 X Certificates, the initial Notional Amount) of the related Class.
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, in general, equal (a) all amounts on deposit in the
Collection Account as of the close of business on the related Determination
Date, exclusive of any portion thereof that represents one or more of the
following:
(i) Monthly Payments collected but due on a Due Date subsequent to
the related Collection Period;
(ii) Prepayment Premiums (which are separately distributable
on the Certificates as hereinafter described);
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<PAGE>
(iii) amounts that are payable or reimbursable to any person other
than the Certificateholders (including amounts payable to the Master
Servicer, the Special Servicer or the Trustee as compensation or in
reimbursement of outstanding Advances and amounts payable in respect of
Additional Trust Fund Expenses); and
(iv) amounts representing Contingent Interest; and
(v) amounts deposited in the Collection Account in error;
plus (b) to the extent not already included in clause (a), any P&I
Advances and Compensating Interest Payments made with respect to such
Distribution Date.
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.
"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 compensate the lender for the
economic effect of an early payment of the principal on the Mortgage Loan.
"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 payment.
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 August, 1998 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, with respect to a Distribution Date, the fifth
Business Day immediately preceding such Distribution Date.
Application of Available Funds. On each Distribution Date, the Trustee
will apply the Available Funds for such date for the following purposes and in
order of priority:
(1) to pay interest to the holders of the respective Classes of
Senior Certificates, up to an amount equal to, and pro rata as among such
Classes in accordance with, the Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date;
(2) to pay principal from the Principal Distribution Amount for such
Distribution Date, first to the holders of the Class A-1 Certificates and
second to the holders of the Class A-2 Certificates, in each case, up to
an amount equal to the lesser of (a) the then-outstanding aggregate
Certificate Balance of such Class of Certificates and (b) the remaining
portion of such Principal Distribution Amount;
(3) to reimburse the holders of the respective Classes of Class A
Certificates, up to an amount equal to, and pro rata as among such Classes
in accordance with, (a) the respective amounts of Realized Losses and
Expense Losses, if any, previously allocated to such Classes of
Certificates and for which no reimbursement has previously been paid, plus
(b) all unpaid interest on such amounts (compounded monthly) at the
respective Pass-Through Rates of such Classes; and
(4) to make payments on the Subordinate Certificates and the Residual
Certificates as contemplated below;
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<PAGE>
provided that, on each Distribution Date after the aggregate Certificate Balance
of the Subordinate Certificates has been reduced to zero, and in any event on
the final Distribution Date in connection with a termination of the Trust Fund
(see "--Optional Termination" below), the payments of principal to be made as
contemplated by clause (2) above with respect to the Class A Certificates, will
be so made to the holders of the respective Classes of such Certificates, up to
an amount equal to, and pro rata as among such Classes in accordance with, the
respective then-outstanding aggregate Certificate Balances of such Classes of
Certificates.
On each Distribution Date, following the above-described distributions on
the Senior Certificates, the Trustee will apply the remaining portion, if any,
of the Available Funds for such date to make payments on the respective Classes
of Subordinate Certificates in alphabetical order of Class designation. On each
Distribution Date, the holders of each Class of Subordinate Certificates will be
entitled, to the extent of the Available Funds remaining after all required
distributions to be made therefrom (as described under this
"--Distributions--Application of the Available Funds" section) on the Senior
Certificates and each other Class of Subordinate Certificates, if any, with an
earlier alphabetical Class designation: first, to distributions of interest, up
to an amount equal to the Distributable Certificate Interest in respect of such
Class of Certificates for such Distribution Date; second, if the aggregate
Certificate Balance of the Class A Certificates and each other Class of
Subordinate Certificates, if any, with an earlier alphabetical Class designation
has been reduced to zero, to distributions of principal, up to an amount equal
to the lesser of (a) the then-outstanding aggregate Certificate Balance of such
Class of Certificates and (b) the aggregate of the remaining Principal
Distribution Amount for such Distribution Date (or, on the final Distribution
Date in connection with the termination of the Trust Fund, up to an amount equal
to the then-outstanding aggregate Certificate Balance of such Class of
Certificates); and, third, to distributions for purposes of reimbursement, up to
an amount equal to (a) all Realized Losses and Expense Losses, if any,
previously allocated to such Class of Certificates and for which no
reimbursement has previously been paid, plus (b) all unpaid interest on such
amounts (compounded monthly) at the respective Pass-Through Rate for such Class
of Certificates.
On each Distribution Date, following the above-described distributions on
the Regular Certificates, the Trustee will pay the remaining portion, if any, of
the Available Funds for such date to the holders of the Class R-I Certificates.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of Regular Certificates for each Distribution
Date will be equal to the Accrued Certificate Interest in respect of such Class
of Certificates for such Distribution Date, reduced (to not less than zero) by
such Class of Certificates' allocable share (calculated as described below) of
any Net Aggregate Prepayment Interest Shortfall for such Distribution Date, and
increased by any Class Interest Shortfall in respect of such Class of
Certificates for such Distribution Date. See "--Prepayment Interest Shortfalls"
below.
The "Accrued Certificate Interest" in respect of each Class of Regular
Certificates for each Distribution Date will equal the amount of interest for
the applicable Interest Accrual Period accrued at the applicable Pass-Through
Rate on the aggregate Certificate Balance or Notional Amount, as the case may
be, of such Class of Certificates as of the first day of the related Interest
Accrual Period. Accrued Certificate Interest will be calculated on the basis of
a 360-day year consisting of twelve 30-day months.
Class Interest Shortfall. The "Class Interest Shortfall" with respect to
any Class of Regular Certificates for any Distribution Date will equal: (a) in
the case of the initial Distribution Date, zero; and (b) in the case of any
subsequent Distribution Date, the sum of (i) the excess, if any, of (A) all
Distributable Certificate Interest in respect of such Class of Certificates on
the immediately preceding Distribution Date, over (B) all distributions of
interest made with respect to such Class of Certificates on the immediately
preceding Distribution Date, plus (ii) to the extent permitted by applicable
law, other than in the case of the Interest Only Certificates, one month's
interest on any such excess at the Pass-Through Rate applicable to such Class of
Certificates.
Principal Distribution Amount. The "Principal Distribution Amount" for any
Distribution Date will, in general, equal the aggregate of the following:
(a) the principal portions of all Monthly Payments (other than
Balloon Payments) and Assumed Monthly Payments due or deemed due, as the
case may be, in respect of the Mortgage Loans for their respective Due
Dates occurring during the related Collection Period; and
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<PAGE>
(b) all payments (including voluntary principal prepayments and
Balloon Payments) and other collections received on the Mortgage Loans
during the related Collection Period that were identified and applied by
the Master Servicer as recoveries of principal thereof, in each case net
of any portion of such amounts that represents a payment or other recovery
of the principal portion of any Monthly Payment (other than a Balloon
Payment) due, or the principal portion of any Assumed Monthly Payment
deemed due, in respect of the related Mortgage Loan on a Due Date during
or prior to the related Collection Period and not previously paid or
recovered.
If on any Distribution Date the aggregate amount of distributions of principal
made on the Principal Balance Certificates is less than such Principal
Distribution Amount, then the amount of such shortfall will be included in the
Principal Distribution Amount for the next succeeding Distribution Date. This
provision would generally result in a Class Interest Shortfall to the then-most
subordinate Class or Classes outstanding on such succeeding Distribution Date in
an amount equal to such carried forward amount.
The "Monthly Payment" for any Mortgage Loan will, in general, be the
scheduled payment of principal and/or interest due thereon from time to time
(taking into account any waiver, modification or amendment of the terms of such
Mortgage Loan, whether agreed to by the Master Servicer or Special Servicer or
in connection with a bankruptcy or similar proceeding involving the related
borrower).
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i)
any Balloon Loan that is delinquent in respect of its Balloon Payment beyond the
end of the Collection Period in which its stated maturity date occurs; or (ii)
an REO Mortgage Loan. The Assumed Monthly Payment for any such Balloon Loan
deemed due on its stated maturity date and on each successive Due Date that it
remains or is deemed to remain outstanding shall equal the Monthly Payment that
would have been due thereon on such date if the related Balloon Payment had not
come due, but rather such Mortgage Loan had continued to amortize in accordance
with such Mortgage Loan's amortization schedule, if any, in effect immediately
prior to maturity and had continued to accrue interest in accordance with its
terms in effect immediately prior to maturity. The Assumed Monthly Payment for
any REO Mortgage Loan, deemed due on each Due Date for so long as such REO
Property remains part of the Trust Fund, will equal the Monthly Payment (or, in
the case of a Balloon Loan described in the prior sentence, the Assumed Monthly
Payment) due on the last Due Date prior to the acquisition of such REO Property.
Distributions of Prepayment Premiums. Any Prepayment Premium collected
with respect to a Mortgage Loan during any particular Collection Period will be
distributed on the following Distribution Date as follows: The holders of the
respective Classes of Principal Balance Certificates (other than the Privately
Offered Certificates) then entitled to distributions of principal from the
Principal Distribution Amount for such Distribution Date, will be entitled to an
aggregate amount (allocable among such Classes, if more than one, as described
below) equal to the lesser of (a) such Prepayment Premium and (b) such
Prepayment Premium multiplied by a fraction, the numerator of which is equal to
the excess, if any, of the Pass-Through Rate applicable to the most senior of
such Classes of Certificates then outstanding (or, in the case of two Classes of
Class A Certificates, the one with the earlier payment priority), over the
relevant Discount Rate (as defined herein), and the denominator of which is
equal to the excess, if any, of the Mortgage Rate for the prepaid Mortgage Loan,
over the relevant Discount Rate. If there is more than one Class of Principal
Balance Certificates entitled to distributions of principal from the Principal
Distribution Amount for such Distribution Date, the aggregate amount described
in the preceding sentence shall be allocated among such Classes on a pro rata
basis in accordance with the relative amounts of such distributions of
principal. Any portion of such Prepayment Premium that is not so distributed to
the holders of such Principal Balance Certificates will be distributed to the
holders of the Interest Only Certificates.
For purposes of the foregoing, the "Discount Rate" is the rate which, when
compounded monthly, is equivalent to the Treasury Rate when compounded
semi-annually. The "Treasury Rate" is the yield calculated by the linear
interpolation of the yields, as reported in Federal Reserve Statistical Release
H.15--Selected Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the week ending prior to the date
of the relevant principal prepayment, of U.S. Treasury constant maturities with
a maturity date (one longer and one shorter) most nearly approximating the
maturity date (or Hyper-Amortization Date, if applicable) of the Mortgage Loan
prepaid. If Release H.15 is no longer published, the Trustee will select a
comparable publication to determine the Treasury Rate.
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Any Prepayment Premiums distributed to the holders of a Class of
Certificates may not be sufficient to fully compensate such Certificateholders
for any loss in yield attributable to the related Principal Prepayments.
Distributions of Contingent Interest. % and % of any Edgewater Final
Contingent Interest will be distributed to the holders of the Class A-1 and
Class X Certificates, respectively. Any remaining Contingent Interest will be
distributed to the holders of the Class V Certificates.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan (an "REO Mortgage Loan")
will be treated, for purposes of, among other things, determining distributions
on the Certificates, allocations of Realized Losses and Expense Losses to the
Certificates, and the amount of Master Servicing Fees, Special Servicing Fees
and Trustee Fees payable under the Pooling and Servicing Agreement, as having
remained outstanding until such REO Property is liquidated. Among other things,
such REO Mortgage Loan will be taken into account when determining Pass-Through
Rates and the Principal Distribution Amount. In connection therewith, operating
revenues and other proceeds derived from such REO Property (after application
thereof to pay certain costs and taxes, including certain reimbursements payable
to the Master Servicer, the Special Servicer and/or the Trustee, incurred in
connection with the operation and disposition of such REO Property) will be
"applied" by the Master Servicer as principal, interest and other amounts "due"
on such Mortgage Loan, and subject to the applicable limitations described under
"THE POOLING AND SERVICING AGREEMENT--Advances" herein, the Master Servicer, the
Trustee and the Fiscal Agent will each be required, to the extent such proceeds
are less than the monthly payments due under such REO Mortgage Loan, to make P&I
Advances in respect of such REO Mortgage Loan, in all cases as if such REO
Mortgage Loan had remained outstanding.
Appraisal Reductions
With respect to the first Distribution Date following the earliest of (i)
the third anniversary of the date on which an extension of the maturity date of
a Mortgage Loan becomes effective as a result of a modification of such Mortgage
Loan by the Special Servicer, which extension does not change the amount of
Monthly Payments on the Mortgage Loan, (ii) 90 days after an uncured delinquency
occurs in respect of a Mortgage Loan, (iii) 45 days after the date on which a
reduction in the amount of Monthly Payments on a Mortgage Loan, or a change in
any other material economic term of the Mortgage Loan, becomes effective as a
result of a modification of such Mortgage Loan by the Special Servicer, (iv) 30
days after a receiver has been appointed or after the commencement of an
involuntary bankruptcy proceeding, (v) immediately after a borrower declares
bankruptcy, and (vi) immediately after a Mortgage Loan becomes an REO Mortgage
Loan (each, an "Appraisal Reduction Event" and the affected Mortgage Loan, a
"Required Appraisal Loan"), an Appraisal Reduction will be calculated.
The "Appraisal Reduction" for any Distribution Date and for any Mortgage
Loan as to which any Appraisal Reduction Event has occurred will be an amount
equal to the excess of (a) the outstanding Stated Principal Balance of such
Mortgage Loan as of the last day of the related Collection Period over (b) the
excess of (i) 90% of the sum of the appraised values of the related Mortgaged
Properties as determined by independent MAI appraisals (the costs of which shall
be paid by the Master Servicer as an Advance) over (ii) the sum of (A) to the
extent not previously advanced by the Master Servicer or the Trustee, all unpaid
interest on such Mortgage Loan at a per annum rate equal to the Mortgage Rate,
(B) all unreimbursed Advances and interest thereon at the Advance Rate in
respect of such Mortgage Loan and (C) all currently due and unpaid real estate
taxes and assessments and insurance premiums and all other amounts, including,
if applicable, ground rents, due and unpaid under the Mortgage Loan (which
taxes, premiums and other amounts have not been the subject of an Advance). If
no independent MAI appraisal has been obtained within twelve months prior to the
first Distribution Date on or after an Appraisal Reduction Event has occurred,
the Special Servicer will be required to estimate the value of the related
Mortgaged Properties (the "Special Servicer's Appraisal Reduction Estimate") and
such estimate will be used for purposes of determining the Appraisal Reduction.
Within 60 days after the Special Servicer receives notice or is otherwise aware
of an Appraisal Reduction Event, the special Servicer will be required to obtain
an independent MAI appraisal, the cost of which will be paid by the Master
Servicer as a Servicing Advance (an "Updated Appraisal"). On the first
Distribution Date occurring on or after the delivery of such Updated Appraisal,
the Special Servicer will be required to adjust the Appraisal Reduction to take
into account such appraisal (regardless of whether the Updated Appraisal is
higher or lower than the Special Servicer's Appraisal Reduction Estimate).
Annual updates of such Updated
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Appraisal will be obtained during the continuance of an Appraisal Reduction
Event and the Appraisal Reduction will be adjusted accordingly.
Upon payment in full or liquidation of any Mortgage Loan for which an
Appraisal Reduction has been determined, such Appraisal Reduction will be
eliminated.
The existence of an Appraisal Reduction proportionately reduces the Master
Servicer's, the Trustee's or the Fiscal Agent's, as the case may be, advancing
obligation in respect of delinquent principal and interest on the related
Mortgage Loan, which may result in a reduction in current distributions in
respect of one or more of the then-most subordinate Classes of Principal Balance
Certificates and may under certain circumstances result in an Expense Loss being
allocated to the then-most subordinate Class of Principal Balance Certificates.
See "THE POOLING AND SERVICING AGREEMENT--Advances" herein.
The "Stated Principal Balance" of each Mortgage Loan will generally equal
the unpaid principal balance thereof as of the Cut-off Date (or, in the case of
a Qualified Substitute Mortgage Loan (as defined herein), as of the date of
substitution), after application of all payments due on or before such date
(whether or not received), reduced (to not less than zero) on each subsequent
Distribution Date by (i) any payments or other collections (or advances in lieu
thereof) of principal of such Mortgage Loan that have been or, if they had not
been applied to cover Additional Trust Fund Expenses, would have been
distributed on the Certificates on such date, and (ii) the principal portion of
any Realized Loss incurred in respect of or allocable to such Mortgage Loan
during the related Collection Period. Notwithstanding the foregoing, but subject
to the discussion under "--Distributions--Treatment of REO Properties" herein,
if any Mortgage Loan is paid in full, liquidated or otherwise removed from the
Trust Fund, then, commencing as of the first Distribution Date following the
Collection Period during which such event occurred, the Stated Principal Balance
of such Mortgage Loan will be zero.
Realized Losses and Allocations of Certain Expenses
If, following the distributions to be made in respect of the Certificates
on any Distribution Date, the aggregate Stated Principal Balance of the Mortgage
Pool that will be outstanding immediately following such Distribution Date is
less than the aggregate Certificate Balance of the Principal Balance
Certificates, the respective aggregate Certificate Balances of the Class N,
Class M, Class L, Class K, Class J, Class H, Class G, Class F, Class E, Class D,
Class C and Class B Certificates will be reduced, sequentially in that order, in
the case of each such Class until such deficit (or the related aggregate
Certificate Balance) is reduced to zero (whichever occurs first). If any portion
of such deficit remains at such time as the aggregate Certificate Balance of all
such Classes of Certificates is reduced to zero, then the respective aggregate
Certificate Balances of the Class A-1 and Class A-2 Certificates will be
reduced, pro rata in accordance with the relative sizes of the remaining
aggregate Certificate Balances of such Classes of Certificates, until such
deficit (or the aggregate Certificate Balance of each such Class of
Certificates) is reduced to zero.
In general, any such deficit will be the result of Realized Losses
incurred in respect of the Mortgage Loans and/or Expense Losses. Accordingly,
the foregoing reductions in the aggregate Certificate Balances of the respective
Classes of Principal Balance Certificates will constitute an allocation of any
such Realized Losses and Expense Losses. Any such allocation of Realized Losses
and/or Expense Losses to a particular Class of Principal Balance Certificates
will be allocated among the Certificates of such Class in proportion to their
respective Percentage Interests in such Class.
"Realized Losses" are losses on or in respect of the Mortgage Loans
arising from the inability of the Master Servicer to collect all amounts due and
owing under any such Mortgage Loan, including by reason of the fraud or
bankruptcy of a borrower or a casualty of any nature at a Mortgaged Property, to
the extent not covered by insurance. The Realized Loss in respect of a
liquidated Mortgage Loan (or related REO Property) is an amount generally equal
to the excess, if any, of (a) the outstanding principal balance of such Mortgage
Loan as of the date of liquidation, together with (i) all accrued and unpaid
interest thereon at the related Mortgage Rate to but not including the Due Date
in the Collection Period in which the liquidation occurred and (ii) all related
unreimbursed Servicing Advances (including interest on any outstanding Advances
at the Advance Rate) and outstanding liquidation expenses, over (b) the
aggregate amount of liquidation proceeds, if any, recovered in connection with
such liquidation. If any portion of the debt due under a Mortgage Loan is
forgiven, whether in connection with a
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modification, waiver or amendment granted or agreed to by the Special Servicer
or in connection with the bankruptcy or similar proceeding involving the related
borrower, the amount so forgiven also will be treated as a Realized Loss.
"Expense Losses" are losses incurred by the Trust Fund by reason of
Additional Trust Fund Expenses being paid out of the Trust Fund that were not of
the type typically subject to a Servicing Advance or were of such type but were
the subject of a determination that such Servicing Advance, if made, would be
nonrecoverable. Generally, Additional Trust Fund Expenses will result in an
Expense Loss only if such expenses cause the amount of principal distributions
on the Principal Balance Certificates to be less than the Principal Distribution
Amount for such Distribution Date. In other cases, Additional Trust Fund
Expenses will result in a Class Interest Shortfall for the then-most subordinate
Classes of Certificates then outstanding. "Additional Trust Fund Expenses"
include, among other things, (i) Special Servicing Fees, Workout Fees and
Disposition Fees, (ii) interest in respect of Advances not paid out of default
interest, (iii) the cost of various opinions of counsel required or permitted to
be obtained in connection with the servicing of the Mortgage Loans and the
administration of the Trust Fund, (iv) certain unanticipated, non-Mortgage Loan
specific expenses of the Trust Fund, including certain indemnities and
reimbursements to the Trustee (and certain indemnities and reimbursements to the
Fiscal Agent comparable to those for the Trustee) as described under "THE
POOLING AND SERVICING AGREEMENT--The Trustee" herein, certain indemnities and
reimbursements to the Master Servicer, the Special Servicer and the Depositor as
described under "SERVICING OF THE MORTGAGE LOANS--Certain Matters With Respect
to the Master Servicer, the Special Servicer, the Trustee and the Depositor" in
the Prospectus and certain federal, state and local taxes, and certain
tax-related expenses, payable out of the Trust Fund as described under "THE
POOLING AND SERVICING AGREEMENT--Withdrawals from the Collection Account" and
"--Realization Upon Mortgage Loans--Standards for Conduct Generally in Effecting
Foreclosure or the Sale of Defaulted Loans" herein and "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES--Federal Income Tax Consequences for REMIC
Certificates--Taxation of REMIC Regular Certificates", "--Federal Income Tax
Consequences for REMIC Certificates--Taxation of the REMIC" and "--Federal
Income Tax Consequences for REMIC Certificates--Taxation of Holders of Residual
Certificates" in the Prospectus, (v) any amounts expended on behalf of the Trust
Fund to remediate an adverse environmental condition at any Mortgaged Property
securing a defaulted Mortgage Loan (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 (vi) any
other expense of the Trust Fund not specifically included in the calculation of
Realized Loss for which there is no corresponding collection from a borrower.
Prepayment Interest Shortfalls
If a borrower prepays a Mortgage Loan, in whole or in part, prior to the
Determination Date in any calendar month, the amount of interest accrued on such
prepayment, in general, from the related Due Date occurring in such calendar
month to, but not including, the date of prepayment (or any later date through
which interest accrues) will, to the extent actually collected, constitute a
"Prepayment Interest Excess." Conversely, if a borrower prepays a Mortgage Loan,
in whole or in part, after the Determination Date in any calendar month and does
not pay interest on such prepayment through, in general, the end of such
calendar month, then the shortfall in a full month's interest (net of related
Master Servicing Fees and Trustee Fees) on such prepayment will constitute a
"Prepayment Interest Shortfall." Prepayment Interest Excesses collected on the
Mortgage Loans during any Collection Period will first be applied to offset
Prepayment Interest Shortfalls incurred in respect of the Mortgage Loans during
such Collection Period and, to the extent not needed for such purposes, will be
retained by the Master Servicer as additional servicing compensation. The Master
Servicer will be obligated to cover, out of its own funds, without right of
reimbursement, to the extent of that portion of its Master Servicing Fees for
the related Collection Period (but only up to 0.029% per annum per Mortgage
Loan), any Prepayment Interest Shortfalls in respect of the Mortgage Loans that
are not so offset by Prepayment Interest Excesses. Any payment so made by the
Master Servicer to cover such shortfalls will constitute a "Compensating
Interest Payment." The aggregate of all Prepayment Interest Shortfalls incurred
in respect of the Mortgage Loans during any Collection Period that are neither
offset by Prepayment Interest Excesses collected on the Mortgage Loans during
such Collection Period nor covered by a Compensating Interest Payment made by
the Master Servicer, shall constitute the "Net Aggregate Prepayment Interest
Shortfall" for the related Distribution Date.
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Any Net Aggregate Prepayment Interest Shortfall for a Distribution Date
will be allocated among the respective Classes of Regular Certificates, on a pro
rata basis, in the ratio that the Accrued Certificate Interest with respect to
any such Class of Certificates for such Distribution Date, bears to the total of
the Accrued Certificate Interest with respect to all Classes of Regular
Certificates for such Distribution Date. The Distributable Certificate Interest
in respect of any Class of Regular Certificates will be reduced to the extent
any Net Aggregate Prepayment Interest Shortfalls are allocated to such Class of
Certificates. See "THE POOLING AND SERVICING AGREEMENT--Servicing Compensation
and Payment of Expenses" herein.
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 Amount, 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:
Class Designation Scheduled Final Distribution Date
Class A-1 December 2007
Class A-2 May 2008
Class X March 2023
Class B June 2008
Class C June 2008
Class D April 2010
Class E May 2011
Class F March 2013
Class G May 2013
Class H January 2014
Class J January 2016
Class K February 2017
Class L December 2017
Class M March 2018
Class N March 2023
The Scheduled Final Distribution Dates set forth above 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 repurchases,
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 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 to the
extent described herein, and, further, in the case of any particular Class of
Subordinate Certificate to the rights of holders of each other Class of
Subordinate Certificates, if any, with an earlier alphabetical class
designation, as described herein. This subordination is intended to enhance the
likelihood of
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timely receipt by holders of the respective Classes of Senior Certificates of
the full amount of Distributable Certificate Interest payable in respect of
their Certificates on each Distribution Date, and the ultimate receipt by
holders of the respective Classes of Class A Certificates of principal equal to,
in each such case, the entire aggregate Certificate Balance of such Class of
Certificates. Similarly, but to decreasing degrees, this subordination is also
intended to enhance the likelihood of timely receipt by holders of the other
Classes of Offered Certificates of the full amount of Distributable Certificate
Interest payable in respect of their Certificates on each Distribution Date, and
the ultimate receipt by holders of such other Classes of Offered Certificates of
principal equal to, in each such case, the entire aggregate Certificate Balance
of such Class of Certificates. Such subordination will be accomplished by (i)
the application of Available Funds in the order described above under
"--Distributions" herein and (ii) the allocation of Realized Losses and Expenses
Losses to the Regular Certificates (other than the Class X Certificates, which
may nonetheless incur reductions of their Notional Amount) in reverse order of
their alphabetical Class designations; provided that Realized Losses and Expense
Losses are allocated pro rata to the Class A-1 and Class A-2 Certificates in
accordance with their respective Certificate Balances. No other form of credit
enhancement will be available for the benefit of the holders of the
Certificates.
Optional Termination
The Depositor, the Master Servicer, the Special Servicer, the majority
holders of the Controlling Class and the holder of the Class R-I Certificates
representing greater than a 50% Percentage Interest of the Class R-I
Certificates will each 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 Certificate Balance of all Classes of Principal Balance Certificates
then outstanding is less than 1% of the aggregate principal balance of the
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
100% of the aggregate unpaid principal balance of the Mortgage Loans (other than
any Mortgage Loans as to which the Special Servicer has determined that all
payments or recoveries with respect thereto have been made and other than any
Mortgage Loans as to which the related Mortgaged Property has become an REO
Property), plus accrued and unpaid interest on each such Mortgage Loan at the
related Mortgage Rate to the Due Date for such Mortgage Loan in the Collection
Period with respect to which such purchase occurs, plus related unreimbursed
Servicing Advances, plus interest on any related Advances at the Advance Rate,
plus the fair market value of any other property (including REO Property)
remaining in the Trust Fund. The purchase price, net of any portion thereof
payable to persons other than the Certificateholders, will constitute part of
the Available Funds for the final Distribution Date.
Voting Rights
At all times during the term of the Pooling and Servicing Agreement, 97%
of the voting rights for the Certificates (the "Voting Rights") are to be
allocated among the holders of the respective Classes of Principal Balance
Certificates in proportion to the aggregate Certificate Balances of such
Classes, 2% of the Voting Rights are to be allocated among the holders of the
Class of Interest Only Certificates, and the remaining Voting Rights are to be
allocated equally among the holders of the respective Classes of Residual
Certificates. Voting Rights allocated to a Class of Certificateholders will be
allocated among such Certificateholders in proportion to the Percentage
Interests in such Class evidenced by their respective Certificates.
Delivery, Form and Denomination
Book-Entry Certificates. No Person acquiring an Offered Certificate will
be entitled to receive a physical certificate representing such Certificate,
except under the limited circumstances described below. Absent such
circumstances, the Offered 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. The Class A Certificates will initially be issued in denominations of
$5,000 initial Certificate Balance and integral multiples of $1 in excess
thereof and the remaining Classes of Offered Certificates will be issued in
denominations of $50,000 initial Certificate Balance or Notional Amount and
integral multiples of $1 in excess thereof, except in each case one certificate
of each such Class may be issued that represents a different initial Certificate
Balance or Notional Amount to accommodate the remainder of the initial
Certificate Balance or Notional Amount of such Class. The Depositor has been
informed by DTC that its nominee will be Cede & Co. Accordingly,
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Cede & Co. is expected to be the holder of record of the Offered Certificates.
Certificateholders may also hold Certificates through CEDEL or Euroclear (in
Europe), if they are participants in such systems or indirectly through
organizations that are participants in such systems. CEDEL and Euroclear will
hold omnibus positions on behalf of their participants through customers'
certificates accounts in CEDEL's and Euroclear's names on the books of their
respective Depositaries which in turn will hold such positions in customers'
certificates accounts in the Depositaries' names on the books of DTC. Citibank,
N.A. ("Citibank") will act as depositary for CEDEL and The Chase Manhattan Bank
("Chase") will act as depositary for Euroclear (in such capacities, the
"Depositaries").
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules. Transfers between CEDEL Participants and Euroclear
Participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL or
Euroclear Participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterpart in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving certificates through
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of certificates received in
CEDEL or Euroclear as a result of a transaction with a DTC Participant will be
made during subsequent certificates settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
certificates settled during such processing will be reported to the relevant
Euroclear or CEDEL Participant on such business day. Cash received in CEDEL or
Euroclear as a result of sales of certificates by or through a CEDEL Participant
or a Euroclear Participant to a DTC Participant will be received with value on
the DTC settlement date but will be available in the relevant CEDEL or Euroclear
cash account only as of the business day following settlement in DTC.
No Beneficial Owner of an Offered Certificate will be entitled to receive
a definitive Certificate (a "Definitive Certificate") representing such person's
interest in the Offered Certificates, except as set forth below. Unless and
until Definitive Certificates are issued to Beneficial Owners in respect of the
Offered Certificates under the limited circumstances described herein, all
references to actions taken by Certificateholders or holders will, in the case
of the Offered 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
Offered 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 Offered Certificates at any time by
giving reasonable notice to the Trustee. Under such circumstances, in the event
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 Offered 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.
Offered 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 Offered
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 Offered 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
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Certificates. Upon surrender by DTC of the physical certificates representing
the affected Offered Certificates and receipt from DTC of instructions for
re-registration, the Certificate Registrar will reissue the Offered 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 X, 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.
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 changes 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 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 Offered Certificates under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Offered
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
Offered 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 Offered
Certificates is discontinued. Neither the Certificate Registrar nor the Trustee
will have any responsibility to monitor or restrict the transfer of ownership
interests in Offered Certificates through the book-entry facilities of DTC.
To facilitate subsequent transfers, all Offered Certificates deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Offered 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 Offered Certificates; DTC's records reflect
only the identity of the Direct Participants to whose accounts such Offered
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 Offered Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such Offered
Certificates, may be limited due to lack of a definitive Certificate for such
Offered Certificates. In addition, under a book-entry format, Beneficial
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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
Offered 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 Offered Certificates evidence such Percentage Interests or
Voting Rights authorize divergent action.
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 Offered 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 Offered Certificates are registered, the ability of the Beneficial
Owners of such Offered 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 Offered Certificates may be impaired.
CEDEL. Cedel Bank, societe anonyme ("CEDEL") is incorporated under the
laws of Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of securities. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets in
several countries. As a professional depository, CEDEL is subject to regulation
by the Luxembourg Monetary Institute. CEDEL Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to CEDEL is also available to others, such
as banks, brokers, dealers, and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear. The Euroclear System ("Euroclear") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 27 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator"), under contract with Euroclear
Clearance System S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers. Indirect access
to Euroclear is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation that is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Certificates clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of Euroclear and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect
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to securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution to specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants, and has no record of or relationship
with persons holding through Euroclear Participants.
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 Amount, 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 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 Offered Certificate will depend on: (i) the
Pass-Through Rate in effect from time to time for such Certificate; (ii) the
price paid for such Certificate and, if the price was other than par, the rate
and timing of payments of principal on such Certificate; and (iii) the aggregate
amount of distributions on such Certificate.
Rate and Timing of Principal Payments. The yield to holders of the Class X
Certificates and any other Offered 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 or Notional Amount of such Certificates. As
described herein, the 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 Principal
Balance 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 Offered 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
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this purpose, collections made in connection with liquidations of Mortgage Loans
due to defaults, Casualties or Condemnations affecting the Mortgaged Properties
or repurchases 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--Optional Termination" herein).
Prepayments and, assuming the respective stated maturity dates therefor have not
occurred, liquidations and repurchases of the Mortgage Loans will result in
distributions on the Principal Balance Certificates of amounts that would
otherwise have been distributed over the remaining terms of the Mortgage Loans.
Conversely, 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 Principal Balance 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 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 Mortgage 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
Mortgaged Property. See "RISK FACTORS--Prepayment and Yield Considerations"
herein and "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Enforceability of
Certain Provisions" in the Prospectus.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of the
principal balance of the Offered Certificates entitled to distributions of
principal may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest amounts distributed in reduction of the principal balance
of such investor's Offered Certificate may be lower than the Pass-Through Rate
applicable thereto. Conversely, slower rates of prepayments on the Mortgage
Loans, and therefor of amounts distributable in reduction of principal balance
of the Offered Certificates entitled to distributions of principal, may coincide
with periods of high prevailing interest rates. During such periods, the amount
of principal distributions resulting from prepayments available to an investor
in such Certificates for reinvestment at such high prevailing interest rates may
be relatively small. 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. Some borrowers may also be motivated by federal and state tax
laws (which are subject to change) to sell Mortgaged Properties prior to the
exhaustion of tax depreciation benefits.
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.
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Neither the Depositor nor the Sellers make 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 Offered
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 on or
otherwise result in the reduction of the Certificate Balance or Notional Amount
of such Certificates. An investor should consider, in the case of any Principal
Balance Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of any Principal Balance Certificate purchased at a premium (or the
Interest Only 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 Principal Balance Certificate purchased at a
discount or premium (or, in the case of the Interest Only Certificates, applied
in reduction of the Notional Amount), 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. The yield to maturity of the Interest Only Certificates will
be highly sensitive to the rate and timing of principal payments (including by
reason of prepayments, repurchases, extensions, defaults and liquidations) on or
in respect of the Mortgage Loans. Investors in the Interest Only Certificates
should fully consider the associated risks, including the risk that an extremely
rapid rate of amortization and prepayment of the Principal Balance Certificates
could result in the failure of such investors to recoup their initial
investments. 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.
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 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 Remaining Terms to Stated
Maturity Table in Appendix I for additional information regarding maturity dates
of the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. 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, Additional Trust Fund
Expenses or other similar items (other than Net Aggregate Prepayment Interest
Shortfalls) will generally be borne by holders of each Class of Principal
Balance Certificates in reverse alphabetical order of class designation to the
extent of amounts otherwise distributable to such holder; provided that any such
shortfalls will be allocated to the holders of the Class A-1 and Class A-2
Certificates on a pro rata basis.
Realized Losses and Expense 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'
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 and Expense Losses prior
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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 and Expense Losses to the Principal Balance
Certificates will reduce the Notional Amount of the Interest Only Certificates.
Pass-Through Rate. Because (i) the Pass-Through Rate for the Class X
Certificates is equal to the excess, if any of the Weighted Average Net Mortgage
Rate over the Weighted Average Pass-Through Rate; (ii) the Pass-Through Rate for
the Class D Certificates is equal to the Weighted Average Net Mortgage Rate less
[0.50]%; and (iii) the Pass-Through Rate for the Class E Certificates is equal
to the Weighted Average Net Mortgage Rate less [0.13]%, the Pass-Through Rate
for the Class X Certificates will be sensitive to changes in both the Weighted
Average Net Mortgage Rate and the Weighted Average Pass-Through Rate and the
Pass-Through Rate for the Class D and Class E Certificates will be sensitive to
changes in the Weighted Average Net Mortgage Rate.
The Weighted Average Pass-Through Rate will fluctuate based on the
relative sizes of the Certificate Balances of the Principal Balance
Certificates. The Weighted Average Net Mortgage Rate will fluctuate over the
life of the Class X, Class D and Class E Certificates as a result of scheduled
amortization, voluntary prepayments and liquidations and repurchases 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 Rates applicable to the Class X, Class D and Class
E 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, repurchases and liquidations of Mortgage Loans.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until, at the earliest, the 15th day of the month
following the month in which interest accrued on the Certificates, the effective
yield to the holders of the Offered 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).
Yield Sensitivity of the Interest Only Certificates
The yield to maturity of the Interest Only Certificates will be especially
sensitive to the prepayment, repurchase and default experience on the Mortgage
Loans, which prepayment, repurchase and default experience may fluctuate
significantly from time to time. A rapid rate of principal payments (including
prepayments as a result of liquidations and repurchases) will have a material
negative effect on the yield to maturity of the Interest Only Certificates.
There can be no assurance that the Mortgage Loans will prepay at any particular
rate. Prospective investors in the Interest Only Certificates should fully
consider the associated risks, including the risk that such investors may not
fully recover their initial investment.
The following table indicates the sensitivity of the pre-tax yield to
maturity on the Interest Only Certificates to various constant rates of
prepayment on the Mortgage Loans by projecting the monthly aggregate payments of
interest on the Interest Only Certificates and computing the corresponding
pre-tax yields to maturity on a corporate bond equivalent basis, based on the
Maturity Assumptions. It was further assumed that the respective aggregate
purchase prices of the Interest Only Certificates are as specified below and the
initial Pass-Through Rate (expressed as a percentage of the initial Notional
Amount) and the initial Notional Amount are as set forth herein. Any differences
between such assumptions and the actual characteristics and performance of the
Mortgage Loans and the Interest Only Certificates will likely result in yields
being different from those shown in such table. Discrepancies between assumed
and actual characteristics and performance underscore the hypothetical nature of
the table, which is provided only to give a general sense of the sensitivity of
yields in varying prepayment scenarios. For purposes of calculating and
allocating Prepayment Premiums, the yields for U.S. Treasury Securities having a
maturity of up to one year, two years, three years, five years, ten years and
thirty years are approximately %, %, %, %, % and %.
The pre-tax yields set forth in the following table were calculated by
determining the monthly discount rates that, when applied to the assumed stream
of cash flows to be paid on the Interest Only Certificates, would cause the
discounted present value of such assumed stream of cash flows to equal the
assumed aggregate purchase
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price thereof, which includes accrued interest, and by converting such monthly
rates to semi-annual corporate bond equivalent rates. Such calculation does not
take into account shortfalls in collection of interest due to prepayments (or
other liquidations or repurchases) of the Mortgage Loans or the interest rates
at which investors may be able to reinvest funds received by them as
distributions on the Interest Only Certificates (and accordingly does not
purport to reflect the return on any investment in the Interest Only
Certificates when such reinvestment rates are considered).
Notwithstanding the assumed prepayment rates reflected in the following
table, it is highly unlikely that the Mortgage Loans will be prepaid according
to one particular pattern. For this reason, and because the timing of cash flows
is critical to determining yields, the pre-tax yield to maturity on the Interest
Only Certificates is likely to differ from those shown in the table, even if all
of the Mortgage Loans prepay at the indicated CPRs over any given time period or
over the entire life of the Certificates.
There can be no assurance that the Mortgage Loans will prepay at any
particular rate or that the yield on Interest Only Certificates will conform to
the yields described herein. Investors are urged to make their investment
decisions based on the determinations as to anticipated rates of prepayment
under a variety of scenarios. Investors in the Interest Only Certificates should
fully consider the risk that a rapid rate of prepayments on the Mortgage Loans
could result in the failure of such investors to fully recover their
investments.
Pre-Tax Yield to Maturity (CBE)
of the Class X Certificates
Assumed Aggregate
Purchase Price Prepayment Assumption (CPR)
(including -------------------------------------------------
accrued interest) 0% 3% 5% 7% 10% 15%
- ----------------- -- -- -- -- --- ---
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 of such
security. The weighted average life of each Class of Principal Balance
Certificates is determined by (i) multiplying the amount of each distribution in
reduction of the Certificate 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 referred to in clause (i). Accordingly, the weighted average
life of any such Certificate will be influenced by, among other things, the rate
at which principal of the Mortgage Loans is paid or otherwise collected or
advanced and the extent to which such payments, collections and/or advances of
principal are in turn applied in reduction of the Certificate Balance of such
Certificate.
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. As used in each of the following tables, the column headed "0%"
assumes that none of the Mortgage Loans is prepaid before maturity. The columns
headed "3%", "5%", "7%", "10%" and "15%" assume that no prepayments are made on
any Mortgage Loan during such Mortgage Loan's Lock-out Period, if any, or during
such Mortgage Loan's Yield Maintenance Period, if any, and are otherwise made on
each of the Mortgage Loans at the indicated CPRs. Such tables and assumptions
are intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and are not intended to predict or to
provide information that will enable investors to predict the actual weighted
average life of the Certificates. Consequently no assurance can be given and no
representation is made that (i) prepayments of the Mortgage Loans (whether or
not in a Lock-out Period or a Yield Maintenance Period) will conform to any
particular CPR, (ii) all the Mortgage Loans will prepay in accordance with the
assumptions at the same rate, or (iii)
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Mortgage Loans that are in a Lock-out Period or Yield Maintenance Period will
not prepay as a result of involuntary liquidations upon default, repurchases or
otherwise.
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 have been prepared on the basis of the following assumptions
(collectively, the "Maturity Assumptions"): (i) the Initial Pool Balance is
approximately $1,192,238,941, (ii) the initial aggregate Certificate Balance or
Notional Amount, as the case may be, for each Class of Offered Certificates is
as set forth on the cover page hereof, and the Pass-Through Rate for each Class
of Offered Certificates is as set forth or otherwise described herein, (iii) the
scheduled Monthly Payments for each Mortgage Loan are as set forth in Appendix
II, (iv) all Monthly Payments are due and timely received on the first day of
each month, (v) there are no delinquencies or losses in respect of the Mortgage
Loans, there are no extensions of maturity in respect of the Mortgage Loans,
there are no Appraisal Reductions with respect to the Mortgage Loans and there
are no Casualties or Condemnations affecting the Mortgaged Properties, (vi) (A)
prepayments are made on each of the Mortgage Loans at the indicated CPRs (except
that prepayments are assumed not to be received as to any Mortgage Loan during
such Mortgage Loan's Lock-out Period, if any, or Yield Maintenance Period, if
any, unless the prepayment penalty for such Mortgage Loan is calculated as the
lesser of yield maintenance or a fixed percentage) and (B) Mortgage Loans that
provide for an increase in the respective Mortgage Rate and/or principal
amortization on a specified date prior to stated maturity are prepaid in full on
their respective Hyper-Amortization Dates, (vii) no party entitled thereto
exercises its right of optional termination described herein under "DESCRIPTION
OF THE CERTIFICATES--Optional Termination", (viii) no Mortgage Loan is required
to be repurchased or replaced by a Seller or other party, (ix) no Prepayment
Interest Shortfalls are incurred, (x) there are no Additional Trust Fund
Expenses, (xi) distributions on the Certificates are made on the 15th day of
each month, commencing in August, 1998, (xii) the Certificates are issued on the
Closing Date, (xiii) the prepayment provisions for each Mortgage Loan are
assumed to begin on the first payment date of such Mortgage Loan and any
resulting Prepayment Premiums are allocated as described under "DESCRIPTION OF
THE CERTIFICATES--Distributions--Distributions of Prepayment Premiums" and (xiv)
the open prepayment period, if any, is assumed to begin on the first day of the
respective month prior to the maturity date. To the extent that the Mortgage
Loans have characteristics that differ from those assumed in preparing the
tables set froth below, the Offered Certificates (other than the Interest Only
Certificates) may mature earlier or later than indicated by the tables. It is
highly unlikely that the Mortgage Loans will prepay in accordance with the
Maturity Assumptions at any constant rate until maturity or that all the
Mortgage Loans will prepay in accordance with the Maturity Assumptions at the
same rate. In addition, variations in the actual prepayment experience and the
balance of the Mortgage Loans that prepay may increase or decrease the
percentages of initial aggregate Certificate Balances (and weighted average
lives) shown in the following tables. Such variations may occur even if the
average prepayment experience of the Mortgage Loans were to reflect the Maturity
Assumptions and any of the specified CPR percentages.
Investors are urged to conduct their own analyses of the rates at which
the Mortgage Loans may be expected to prepay.
Subject to the foregoing discussion and assumptions, the following tables
indicate the weighted average life of each Class of the Offered Certificates
(other than the Class X Certificates), and set forth the percentages of the
initial Certificate Balance of each such Class of Offered Certificates that
would be outstanding after each of the Distribution Dates shown at various CPRs.
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<PAGE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Balance
of the Class A-1 Certificates
at the Specified CPRs
Prepayment Assumption (CPR)
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
July 1999 94 94 94 93 93 92
July 2000 88 87 87 86 86 85
July 2001 80 79 79 78 77 76
July 2002 64 63 62 62 61 59
July 2003 55 54 53 52 51 49
July 2004 47 45 44 43 41 39
July 2005 32 30 29 28 27 25
July 2006 21 19 18 16 15 13
July 2007 8 6 5 3 2 0
July 2008 0 0 0 0 0 0
Weighted Average 5.43 5.31 5.24 5.17 5.08 4.96
Life (Years)
</TABLE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Balance
of the Class A-2 Certificates
at the Specified CPRs
Prepayment Assumption (CPR)
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
July 1999 100 100 100 100 100 100
July 2000 100 100 100 100 100 100
July 2001 100 100 100 100 100 100
July 2002 100 100 100 100 100 100
July 2003 100 100 100 100 100 100
July 2004 100 100 100 100 100 100
July 2005 100 100 100 100 100 100
July 2006 100 100 100 100 100 100
July 2007 100 100 100 100 100 100
July 2008 0 0 0 0 0 0
Weighted Average 9.64 9.63 9.63 9.62 9.61 9.60
Life (Years)
</TABLE>
S-67
<PAGE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Balance
of the Class B Certificates
at the Specified CPRs
Prepayment Assumption (CPR)
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
July 1999 100 100 100 100 100 100
July 2000 100 100 100 100 100 100
July 2001 100 100 100 100 100 100
July 2002 100 100 100 100 100 100
July 2003 100 100 100 100 100 100
July 2004 100 100 100 100 100 100
July 2005 100 100 100 100 100 100
July 2006 100 100 100 100 100 100
July 2007 100 100 100 100 100 100
July 2008 0 0 0 0 0 0
Weighted Average 9.82 9.81 9.81 9.81 9.81 9.81
Life (Years)
</TABLE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Balance
of the Class C Certificates
at the Specified CPRs
Prepayment Assumption (CPR)
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
July 1999 100 100 100 100 100 100
July 2000 100 100 100 100 100 100
July 2001 100 100 100 100 100 100
July 2002 100 100 100 100 100 100
July 2003 100 100 100 100 100 100
July 2004 100 100 100 100 100 100
July 2005 100 100 100 100 100 100
July 2006 100 100 100 100 100 100
July 2007 100 100 100 100 100 100
July 2008 0 0 0 0 0 0
Weighted Average 9.90 9.90 9.89 9.89 9.89 9.88
Life (Years)
</TABLE>
S-68
<PAGE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Balance
of the Class D Certificates
at the Specified CPRs
Prepayment Assumption (CPR)
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
July 1999 100 100 100 100 100 100
July 2000 100 100 100 100 100 100
July 2001 100 100 100 100 100 100
July 2002 100 100 100 100 100 100
July 2003 100 100 100 100 100 100
July 2004 100 100 100 100 100 100
July 2005 100 100 100 100 100 100
July 2006 100 100 100 100 100 100
July 2007 100 100 100 100 100 100
July 2008 45 40 38 36 33 31
July 2009 28 24 22 20 18 16
July 2010 0 0 0 0 0 0
Weighted Average
Life (Years) 10.51 10.43 10.39 10.36 10.32 10.28
</TABLE>
<TABLE>
<CAPTION>
Percentage of Initial Certificate Balance
of the Class E Certificates
at the Specified CPRs
Prepayment Assumption (CPR)
Distribution Date 0% 3% 5% 7% 10% 15%
- ----------------- -- -- -- -- --- ---
<S> <C> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100 100
July 1999 100 100 100 100 100 100
July 2000 100 100 100 100 100 100
July 2001 100 100 100 100 100 100
July 2002 100 100 100 100 100 100
July 2003 100 100 100 100 100 100
July 2004 100 100 100 100 100 100
July 2005 100 100 100 100 100 100
July 2006 100 100 100 100 100 100
July 2007 100 100 100 100 100 100
July 2008 100 100 100 100 100 100
July 2009 100 100 100 100 100 100
July 2010 42 33 28 25 21 16
July 2011 0 0 0 0 0 0
Weighted Average
Life (Years) 12.08 11.99 11.95 11.92 11.88 11.84
</TABLE>
S-69
<PAGE>
THE POOLING AND SERVICING AGREEMENT
General
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of July 1, 1998 (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 Commercial
Mortgage Acceptance Corp., 210 West 10th Street, 6th Floor, Kansas City,
Missouri 64105, attention: Clarence Krantz at telephone number (816) 435-5000.
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 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 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, each related
original recorded Assignment of Mortgage which, together with other such
Assignments of Mortgage, shows a complete chain of assignment of the related
Mortgage from the applicable Originator to the applicable 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 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 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 Seller or a counterpart thereof and the related original assignment
of such security agreement executed by the applicable Seller in blank which the
Trustee or its designee is authorized to complete;
(iv) the acknowledgment copy of each Form UCC-1 financing statement (file
stamped to show the filing or recording thereof in the applicable public filing
or recording office), if any, filed or recorded with respect to personal
property or fixtures constituting a part of the related Mortgaged Property, or a
copy thereof in the form submitted for filing or recording, together with a copy
of each Form UCC-2 or UCC-3 assignment (file stamped to show the filing or
recording thereof in the applicable public filing or recording office), if any,
of such financing statement which, together with other such assignments, shows a
complete chain of assignment of such financing statement from the applicable
Originator to the applicable Seller, or a copy thereof in the form submitted for
filing or recording, and a copy of each Form UCC-2 or UCC-3 assignment, if any,
of such financing statement executed by the applicable 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 or recording information which
is not yet available to the applicable Seller, is in suitable form for filing or
recording in the filing or recording office in which such financing statement
was filed);
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<PAGE>
(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 or specimen title insurance policy or a marked, redated and
recertified commitment for lender's 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, each related original recorded reassignment of such
instrument, if any, which, together with other such reassignments, shows a
complete chain of assignment of such instrument from the applicable Originator
to the applicable 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 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 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) the original or a counterpart of each environmental warranty or
indemnity agreement, if any, with respect to 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 Seller or a counterpart thereof and the related
original reassignment of such instrument executed by the applicable 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, the
acknowledgment copy of each UCC-1 financing statement (file stamped to show the
filing thereof in the applicable public filing office), if any, filed with
respect to the applicable Originator's security interest in such Reserve
Accounts and all funds contained therein, or a copy thereof in the form
submitted for filing, together with a copy of each Form UCC-2 or UCC-3
assignment (file stamped to show the filing thereof in the applicable public
filing office), if any, of such financing statement which assignment, together
will all other such assignments, shows a complete chain of assignment of such
financing statement from the applicable Originator to the applicable Seller, or
a copy thereof in the form submitted for filing, and a copy of each Form UCC-2
or UCC-3 assignment, if any (file stamped to show the filing thereof in the
applicable public filing office) of such financing statement executed by the
applicable 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 Seller, is in
suitable form for filing in the filing office in which such financing statement
was filed);
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<PAGE>
(xiii) the original of each assumption, consolidation or substitution
agreement, if any, with evidence of recording thereon, where appropriate (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);
(xiv) if any document or instrument described above is signed by an
attorney in fact or similar agent on behalf of the related borrower or another
party, the original of the applicable power of attorney or a counterpart
thereof; and
(xv) originals or 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 will require 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 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 will be
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; (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 or (vi) any obligation of the Master Servicer, the
Special Servicer, any Sub-Servicer or any affiliate of the Master Servicer, the
Special Servicer or any Sub-Servicer to repurchase, as a Seller, any Mortgage
Loan if (a) there is a defect with respect to certain of the documents relating
to such Mortgage Loan or (b) certain of its 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 breach or
defect is not cured as required. The Pooling and Servicing Agreement will
provide, however, that neither the Master Servicer nor the Special Servicer, nor
any of their directors, officers, employees or agents, will have any liability
to
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<PAGE>
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,
misrepresentation, bad faith, fraud or negligence in the performance of its
duties or by reason of its negligent disregard of obligations or duties under
the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement will require 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.
Collection Activities
The Master Servicer monitors the performance of all loans, including
tracking of the status of outstanding payments due, grace periods and due dates,
and the calculation and assessment of late fees. The Master Servicer has created
a customized collection system that downloads all current loan information from
the servicing system on a daily basis. A variety of delinquency reports are
regularly prepared, and a series of delinquency notice letters is
system-generated and mailed. Payment reminder letters are automatically
generated and mailed to borrowers at 10 days past due; more strongly worded
collection letters are sent at 30 and 60 days past due. Higher-risk mortgage
loans, such as those with a large principal balance or chronic delinquency are
flagged on the system and the borrower receives a telephone call rather than a
letter. A delinquent Mortgage Loan will be transferred to the Special Servicer
upon such Mortgage Loan becoming a Specially Serviced Mortgage Loan.
See "--Special Servicing" herein.
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 Monthly 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. Upon determination of the
Appraisal Reduction with respect to any Required Appraisal Loan, the amount of
any P&I Advance required to be made with respect to such Required Appraisal 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
Required Appraisal Loan without regard to the application of this sentence,
multiplied by (B) a fraction, the numerator of which is equal to the Stated
Principal Balance of such Mortgage Loan as of the immediately preceding
Determination Date less the Appraisal Reduction and the denominator of which is
such Stated Principal Balance. No P&I Advances will be required in respect of
payments of Contingent Interest.
In addition to P&I Advances, the Master Servicer will also be obligated
(subject to the limitations described herein) to make cash advances ("Servicing
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) other similar costs and expenses necessary to
protect and preserve the security of the related Mortgage.
If the Master Servicer fails to fulfill its obligation to make any
required Advance, the Trustee will be required to make the Advance subject to
its good faith 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 good faith
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<PAGE>
determination of recoverability. Any such Advance made by the Fiscal Agent will
cure the Trustee's failure to make such Advance. Both the Trustee and the Fiscal
Agent will be entitled to rely conclusively on any non-recoverability
determination of the Master Servicer. See "--Duties of 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 will continue 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.
The Master Servicer, the Trustee or the Fiscal Agent, as applicable, will
be entitled to receive interest at a rate (the "Advance Rate") equal to the
Prime Rate (as published in The Wall Street Journal, or if The Wall Street
Journal is no longer published, such other publication determined by the Trustee
(with the concurrence of the Master Servicer) in its reasonable discretion, from
time to time) on its outstanding Advances and will be authorized to pay itself
such interest first out of default interest actually collected by the Master
Servicer in respect of the related Mortgage Loan and, to the extent such amounts
are insufficient, from general collections with respect to all of the Mortgage
Loans at such time as it is reimbursed for an unreimbursed Advance, prior to any
payment to holders of Certificates; provided, however, that neither the Master
Servicer nor any other party shall be entitled to interest accrued on the amount
of any P&I Advance with respect to (i) the Mortgage Loans identified as Loan ID
numbers 136, 195, 208 and 240 on the Mortgage Loan Schedule, for the period
commencing on the date of such P&I Advance and ending on the day on which the
grace period applicable to the related borrower's obligation to make the related
Monthly Payment expires pursuant to the related Mortgage Loan documents. If the
interest on such Advance is not offset by default interest, a shortfall will
result which generally will result in a reduction in amounts payable on the
Certificates.
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; (ii) all payments on account of interest and
default interest on the Mortgage Loans 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
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<PAGE>
amounts received from borrowers that represent recoveries of Servicing 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--Optional Termination" herein.
"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.
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 any
Prepayment Premiums received by the Master Servicer during the related
Collection Period. 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 "P1" by Moody's and the long term unsecured debt obligations of which
(or of such institution's parent holding company) are rated at least "A2" by
Moody's and (b) the short term unsecured debt obligations of which are rated at
least "A-1+" by S&P and the long term unsecured debt obligations of which (or of
such institution's parent holding company) are rated at least "AA" by S&P 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 and subject to regulations regarding fiduciary funds or deposits
substantially similar to 12 CFR 9.10(b), or otherwise confirmed in writing by
each of the Rating Agencies that the maintenance of such account 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; provided, however, that the Master Servicer's right
to reimburse itself for items described in this clause (ii) is limited as
described herein under "--
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Advances"; (iii) to pay (a) on or before each Remittance Date, to the Master
Servicer and Special Servicer the unpaid fee portion of the servicing
compensation to be paid, in the case of the Master Servicing Fee, from interest
received on the related Mortgage Loan and to pay to the Trustee the Trustee Fee,
(b) from time to time, to the Master Servicer any interest or investment income
earned on funds deposited in the Collection Account, (c) to the Master Servicer
as additional servicing compensation any Prepayment Interest Excess received in
the preceding Collection Period and (d) to 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,
the applicable Seller 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; provided, that
if the then-outstanding principal balance of the subject Mortgage Loan is more
than 5% of the then-outstanding aggregate principal balance of all Mortgage
Loans in the Trust Fund, the Master Servicer or Special Servicer, as applicable,
shall have first obtained written confirmation from S&P that such action shall
not result in a qualification, downgrade or withdrawal of the rating then
assigned by such Rating Agency to any Class of Certificates. In the event a
Mortgage Loan is assumed as described in the preceding sentences, the Trustee,
the 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.
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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; provided, that if the
then-outstanding principal balance of the subject Mortgage Loan is greater than
$2.5 million, the Master Servicer or Special Servicer, as applicable, will not
consent to the creation of any such lien or encumbrance unless it shall have
first obtained written confirmation from S&P that such consent shall not result
in a qualification, downgrade or withdrawal of the rating than assigned by such
Rating Agency to any Class of Certificates. 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
The Master Servicer (or the Special Servicer with respect to Specially
Serviced Mortgage Loans or REO Property) will be required (at its own expense)
to inspect each Mortgaged Property at least once every two years (or, if the
related Mortgage Loan has a then current principal balance greater than
$2,000,000, then at least once every year). The Master Servicer and the Special
Servicer will each prepare or cause to be prepared as soon as reasonably
possible a written report of each such inspection and will deliver a copy of
such report to the Trustee within 10 days after the preparation thereof.
Realization Upon Mortgage Loans
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 Servicing Advance, unless the Master Servicer determines
that such Advance would constitute a nonrecoverable Advance.
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.
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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 as Trustee
for 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 the principal balance thereof
will be reduced by Net REO Proceeds allocated thereto.
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 will provide 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 will also require 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 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%; however, phase out rates
of 39% for taxable income between $100,000 and $335,000 and 38% for taxable
income between $15,000,000 and $18,333,333 apply) 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. The Pooling and Servicing Agreement
provides that the Special Servicer will be permitted to cause the Trust Fund to
earn "net income from foreclosure property" that is subject to tax if it
determines that the net after-tax benefit to Certificateholders is greater than
what would be realized under another method of operating or net leasing the
mortgaged property. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Federal
Income Tax Consequences for REMIC Certificates--Taxation of the REMIC,"
"--Federal Income Tax Consequences for REMIC Certificates--Taxation of REMIC
Regular Certificates" and "--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Holders of Residual Certificates" in the Prospectus.
Sale of Specially Serviced Mortgage Loans and REO Properties. 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 not 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
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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
Subject to any restrictions applicable to REMICs, and to certain
limitations imposed by the Pooling and Servicing Agreement, the Master Servicer
may amend any term of a Mortgage Loan that is not a Specially Serviced Mortgage
Loan that does not relate to the maturity date, Mortgage Rate, principal
balance, amortization term or payment frequency (each, a "Money Term"). Subject
to any restrictions applicable to REMICs and to certain limitations imposed by
the Pooling and Servicing Agreement, the Special Servicer will be permitted to
enter into a modification, waiver or amendment of the terms of any Specially
Serviced Mortgage Loan, including any modification, waiver or amendment to (i)
reduce the amounts owing under any Specially Serviced Mortgage Loan by forgiving
principal, accrued interest and/or any Prepayment Premium, (ii) reduce the
amount of the Monthly Payment on any Specially Serviced Mortgage Loan, including
by way of a reduction in the related Mortgage Rate, (iii) forebear in the
enforcement of any right granted under any Note or Mortgage relating to a
Specially Serviced Mortgage Loan, (iv) extend the maturity date of any Specially
Serviced Mortgage Loan, and/or (v) accept a Principal Prepayment during any
Lock-Out Period; provided in each case that (x) the related borrower is in
default with respect to the Specially Serviced Mortgage Loan or, in the
reasonable judgment of the Special Servicer, such default is reasonably
foreseeable and (y) in the reasonable judgment of the Special Servicer, such
modification, waiver or amendment would increase the recovery to
Certificateholders on a net present value basis. See "--The Operating Adviser."
In no event, however, will the Special Servicer be permitted to (i) extend
the maturity date of a Specially Serviced Mortgage Loan beyond the date that is
two years prior to the Rated Final Distribution Date or (ii) if the Specially
Serviced Mortgage Loan is secured by a ground lease, extend the maturity date of
such Specially Serviced Mortgage Loan beyond a date that is 10 years prior to
the expiration of the term of such ground lease.
Modifications of a Mortgage Loan that forgive principal or interest will
result in Realized Losses on such Mortgage Loan and such Realized Losses will be
allocated among the various Classes of Certificates in the manner described
under "DESCRIPTION OF THE CERTIFICATES--Realized Losses and Allocations of
Certain Expenses" herein.
The Trustee
LaSalle National Bank, a national banking association, 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 1625, Chicago, Illinois 60674-4107, Attention:
Asset-Backed Securities Trust Services Group - Commercial Mortgage Acceptance
Corp. Commercial Mortgage Pass-Through Certificates, Series 1998-C1.
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
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, if required, a successor fiscal agent, which, if
the successor trustee is not rated by each Rating Agency in one of its two
highest long-term unsecured 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
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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 resignation or removal of the
Trustee and the Fiscal Agent and appointment of a successor trustee and, if such
successor trustee is not rated by each Rating Agency in one of its two highest
long-term unsecured debt rating categories, fiscal agent will not become
effective until acceptance of the appointment by the successor trustee and, if
necessary, fiscal agent.
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to receive a monthly fee (the "Trustee Fee") for each Mortgage Loan
from amounts on deposit in the Collection Account equal to .0034% of 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 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, misrepresentation,
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, misrepresentation, 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 negligent 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 will be 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 will be 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
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
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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.
The Fiscal Agent
ABN AMRO Bank N.V., a Netherlands banking corporation and the indirect
parent corporation 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 will be entitled to resign or will be removed, as the case may be. The
initial Fiscal Agent is not obligated to act in such capacity 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 "Master Servicing Fee") for
each Mortgage Loan equal to the per annum rate set forth on Appendix II (the
"Master 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 Master 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 or default interest), and
(iii) any Prepayment Interest Excess (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, and the various expenses of the Master Servicer specifically
described herein.
Special Servicing
Midland will be the Special Servicer. The Special Servicer may be removed
without cause and a successor Special Servicer appointed by the Operating
Adviser.
Notwithstanding the foregoing, the removal of the Special Servicer and the
appointment of a successor Special Servicer will not be effective until (i) the
successor Special Servicer has assumed in writing all of the responsibilities,
duties and liabilities of the Special Servicer under the Pooling and Servicing
Agreement pursuant to an agreement satisfactory to the Trustee, and (ii) each of
the Rating Agencies confirms to the Trustee in writing that such appointment and
assumption 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
Certificates. The removed Special Servicer shall be
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entitled to receive all amounts accrued and owing to it under the Pooling and
Servicing Agreement on or prior to the effective date of such removal.
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 Servicing 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 Stated
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) 1.0%.
Furthermore, the Special Servicer will 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 will 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, loan service
transaction fees, beneficiary 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
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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 Operating Adviser
Selection. The Pooling and Servicing Agreement will permit the holder (or
holders) of Certificates representing more than 50% of the aggregate Certificate
Balance of the most subordinate Class of Principal Balance Certificates at any
time of determination (or, if the aggregate Certificate Balance of such Class of
Certificates is less than 25% of the original aggregate Certificate Balance
thereof, of the next most subordinate Class of Principal Balance Certificates)
(in any event, the "Controlling Class") to appoint any person or entity to act
as the representative of the Controlling Class to the extent described below
(such person or entity, in such capacity, the "Operating Adviser").
Certain Rights and Powers. The Operating Adviser will be entitled to
advise the Special Servicer with respect to the following actions of the Special
Servicer, and subject to the discussion in the second following paragraph, the
Special Servicer will not be permitted to take any of the following actions as
to which the Operating Adviser has objected in writing within 10 business days
of having been notified thereof and having been provided with all reasonably
requested information with respect thereto (provided that if such written
objection has not been received by the Special Servicer within such 10 business
day period, then the Operating Adviser's approval will be deemed to have been
given):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue in
default;
(ii) any amendment, waiver or modification of a monetary term
(including the timing of payments) or any other term of a Mortgage Loan;
(iii)any proposed sale of a defaulted Mortgage Loan or REO Property
(other than in connection with the termination of the Trust Fund as
described under "Description of the Certificates--Optional Termination"
herein);
(iv) any acceptance of a discounted payoff;
(v) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous materials
located at an REO Property;
(vi) any release of collateral (other than in accordance with the
terms of, or upon satisfaction of, a Mortgage Loan);
(vii) any acceptance of substitute or additional collateral for a
Mortgage Loan;
(viii) any waiver of a "due-on-sale" or "due-on-encumbrance" clause;
and
(ix) any acceptance of an assumption agreement releasing a borrower
from liability under a Mortgage Loan.
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In addition, subject to the discussion in the following paragraph, the
Operating Adviser may direct the Special Servicer to take, or to refrain from
taking, such other actions as Operating Adviser may deem advisable or as to
which provision is otherwise made in the Pooling and Servicing Agreement.
The foregoing notwithstanding, no such advice, direction or objection
contemplated by either of the two preceding paragraphs may require or cause the
Special Servicer to violate any provision of the Pooling and Servicing
Agreement; including the Special Servicer's obligation to act in accordance with
the Servicing Standard.
Limitation on Liability of Operating Adviser. The Operating Adviser will
have no liability to the Certificateholders for any action taken, or for
refraining from the taking of any action, in good faith pursuant to the Pooling
and Servicing Agreement, or for errors in judgment. Each Certificateholder
acknowledges and agrees, by its acceptance of its Certificates, that, the
Operating Adviser may have special relationships and interests that conflict
with those of holders of one or more Classes of Certificates, that the Operating
Adviser may act solely in the interests of the holders of the Controlling Class,
that the Operating Adviser does not have any duties to the holders of any Class
of Certificates other than the Controlling Class, that the Operating Adviser may
take actions that favor the interests of the holders of the Controlling Class
over the interests of the holders of one or more other Classes, that the
Operating Adviser will not be deemed to have been negligent or reckless, or to
have acted in bad faith or engaged in willfull misconduct by reason of its
having acted solely in the interests of the Controlling Class, and that the
Operating Adviser will have no liability whatsoever for having so acted, and no
Certificateholder may take any action whatsoever against the Operating Adviser
for having so acted. With limited exception, Special Servicer will be required
by the Pooling and Servicing Agreement to keep confidential all advice,
directions, recommendations and/or objections received from the Operating
Adviser.
Sub-Servicers
The Master Servicer and Special Servicer may each delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that the Master
Servicer or Special Servicer, as the case may be, will remain obligated under
the Pooling and Servicing Agreement for such delegated duties, and will be
responsible for the acts and omissions of any such Sub-Servicer.
Mortgage Loans, representing % of the Initial Pool Balance, are currently
directly serviced by third-party servicers that are entitled to and will become
Sub-Servicers of such loans on behalf of the Master Servicer. Each sub-servicing
agreement between the Master Servicer or Special Servicer, as the case may be,
and a Sub-Servicer (each, a "Sub-Servicing Agreement") must provide that, if for
any reason the Master Servicer or Special Servicer, as the case may be, is no
longer acting in such capacity, the Trustee or any successor to such Master
Servicer or Special Servicer may assume such party's rights and obligations
under such Sub-Servicing Agreement or, in some circumstances, may terminate such
Sub-Servicer. The Master Servicer and Special Servicer will each be required to
monitor the performance of Sub-Servicers retained by it.
The Master Servicer and Special Servicer will each be solely liable for
all fees owed by it to any Sub-Servicer retained thereby, irrespective of
whether its compensation pursuant to the Pooling and Servicing Agreement is
sufficient to pay such fees. Each Sub-Servicer retained thereby will be
reimbursed by the Master Servicer or Special Servicer, as the case may be, for
certain expenditures which it makes, generally to the same extent the Master
Servicer or Special Servicer would be reimbursed under the Pooling and Servicing
Agreement. See "--Servicing Compensation and Payment of Expenses" herein.
Reports to Certificateholders; Available Information
Monthly Reports. On each Distribution Date, based upon, and to the extent
of information provided to it by the Master Servicer, upon which information it
may conclusively rely, the Trustee will forward by mail to each
Certificateholder, with copies to the Depositor, the Paying Agent, the
Underwriters, the Master Servicer and each Rating Agency, a statement as to such
distribution setting forth for each Class:
(i) The Principal Distribution Amount and the amount allocable to
principal for such Class, included in Available Funds;
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(ii) Distributable Certificate Interest for 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 Principal Distribution
Amount on such Distribution Date;
(v) Realized Losses and Expense Losses and their allocation to the
Certificate Balance of any Class of Certificates;
(vi) The Stated 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 Servicing Advances made
during the related Collection Period, the amount of the P&I Advances made on
such Distribution Date, the aggregate amount of Servicing 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;
(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;
(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;
(xiv) The Pass-Through Rate applicable to the Interest Only
Certificates and the Class E Certificates for such Distribution
Date;
(xv) The amount of any Appraisal Reductions effected during the related
Collection Period on a loan-by-loan basis and the total Appraisal Reductions as
of such Distribution Date; and
(xvi) Such other information and in such form as shall be specified in the
Pooling and Servicing Agreement.
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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 Amount.
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 an Offered 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.
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 via facsimile through LaSalle National Bank's
ASAP System by calling (312) 904-2200 and requesting statement number 338.
Additionally, certain information regarding the Mortgage Loans will be made
accessible at the website maintained by LaSalle National Bank at www.lnbabs.com
or their electronic bulletin board service at (714) 282-3990 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
and the applicable Seller 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)
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).
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 they 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
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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 and 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 Depositor 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 or 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, three separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to the Trust
Fund, creating three REMICs (the "Trust 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 Code and (ii) (a) the
Class A-1, Class A-2, Class X, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K, Class L, Class M and Class N Certificates
will be, or will represent ownership of, REMIC "regular interests" (the "Regular
Certificates") and (b) the Class R-I, Class R-II and Class R-III Certificates,
respectively, will be the sole "residual interest" in the related REMIC. In
addition, the Class A-1 and Class X Certificates will represent undivided
beneficial interests in % and %, respectively, of the Edgewater Final Contingent
Interest, which portion of the Trust Fund will be treated as a grantor trust for
federal income tax purposes. The holders of these two classes of Certificates
will be required to allocate their purchase price between their interests in the
regular interests in REMIC III and their beneficial interests in a portion of
the Edgewater Final Contingent Interest held by the grantor trust based on the
relative fair market values of each, it is anticipated that the rights to a
portion of the Edgewater Final Contingent Interest will have a value of $ as of
the Closing Date. The Class V Certificates will represent pro rata undivided
beneficial interests in the portion of the Trust Fund consisting of the
remaining Contingent Interest, and such portion will be treated as a grantor
trust for federal income tax purposes.
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
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of a Certificateholder's usual method of accounting. Except as discussed below
with respect to the Class X, Class F, Class G, Class H, Class J, Class K , Class
L, Class M and Class N Certificates, the Certificates are not expected to be
treated for federal income tax reporting purposes as having been issued with
original issue discount ("OID"). The Class X Certificates constitute interest
only Classes. These Certificates, together with the Class F, Class G, Class H,
Class J, Class K, Class L, Class M and Class N Certificates, are expected to be
deemed to have been issued with OID. The Trustee intends to treat the Class X
Certificates as having no "qualified stated interest." Accordingly, the Class X
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). Any "negative"
amounts of OID on the Class X Certificates attributable to rapid prepayments
with respect to the Mortgage Loans will not be deductible currently, but may be
offset against future positive accruals of OID, if any. However, certain holders
of a Class X Certificate may be entitled to a loss deduction to the extent it
becomes certain that such holder will not recover a portion of its basis in such
Certificate. No representation is made as to the timing, amount or character of
such loss, if any. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Federal Income
Tax Consequences for REMIC Certificates--Taxation of REMIC Regular
Certificates--Interest and Acquisition Discount" and "--Federal Income Tax
Consequences for REMIC Certificates --Taxation of REMIC Regular
Certificates--Subordinate Certificates--Effects of Defaults, Delinquencies and
Losses" in the Prospectus.
For the purposes of determining the rate of accrual of market discount,
OID and premium for federal income tax purposes, it has been assumed that the
Mortgage Loans will prepay at the rate of 0% CPR. No representation is made as
to whether the Mortgage Loans will prepay at that rate or any other rate.
Although it is unclear whether the Class X, Class D and Class E Certificates
will qualify as "variable rate instruments" under the OID Regulations, it will
be assumed for purposes of determining the OID thereon that such Certificates so
qualify. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Federal Income Tax
Consequences for REMIC Certificates --Taxation of REMIC Regular
Certificates--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--Federal Income Tax Consequences
for REMIC Certificates --Taxation of REMIC Regular Certificates" in the
Prospectus.
Offered Certificates held by a real estate investment trust will
constitute "real estate assets" within the meaning of Section 856(c)(5)(B) of
the Code, and interest (including OID, if any) on the 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
to the extent that the respective portions of the assets and income of the REMIC
are so treated. Offered Certificates held by a domestic building and loan
association will generally constitute "loans . . . secured by an interest in
real property. . . which is residential real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code only to the extent of the 29% of the
underlying assets of the REMIC which are mortgages secured by residential
property or otherwise are described in Section 7701(a)(19)(c) of the Code. A
Mortgage Loan that has been defeased with U.S. Treasury securities will not
qualify for any of the characterizations set forth in this paragraph. See
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Federal Income Tax Consequences for
REMIC Certificates--Taxation of the REMIC " in the Prospectus.
In addition, the Class A-1 and Class X Certificates also represent
undivided beneficial interests in %, and %, respectively, of the Edgewater Final
Contingent Interest, which portions of the Trust Fund will be treated as part of
a grantor trust for federal income tax purposes. Furthermore, the Class V
Certificates will represent the right to receive any remaining Contingent
Interest, which portion of the Trust Fund will be treated as a grantor trust for
federal income tax purposes.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Federal Income Tax Consequences for REMIC Certificates --Taxation
of the REMIC" in the Prospectus.
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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.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS LOCATED IN CALIFORNIA
The following discussion summarizes certain legal aspects of mortgage
loans secured by real property in California (approximately 22.89% of the
Initial Pool Balance) which is general in nature. This summary does not purport
to be complete and is qualified in its entirety by reference to the applicable
federal and state laws governing the Mortgage Loans.
Mortgage Loans in California generally are secured by deeds of trust on
the related real estate. Foreclosure of a deed of trust in California may be
accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust of by judicial foreclosure. Public notice of either the trustee's
sale or the judgment of foreclosure is pursuant to the trustee's power of sale,
or by court appointed sheriff under a judicial foreclosure. Following a judicial
foreclosure sale, the borrower or its successor in interest may, for a period of
up to one year, redeem the property. California's "one action rule" requires the
lender to exhaust the security afforded under the deed of trust by foreclosure
in an attempt to satisfy the full debt before bringing a personal action (if
otherwise permitted) against the borrower for recovery of the debt (excepting,
however, certain cases involving environmentally impaired real property).
California case law has held that acts such as an offset of an unpledged account
or the application of rents from secured property prior to foreclosure, under
some circumstances, constitute violations of such one action rule. A violation
of such one action rule may result in the loss of some or all of the security
under the loan. Other statutory provisions in California limit any deficiency
judgment (if otherwise permitted) against the borrower following a judicial sale
to the excess of the outstanding debt over the greater of (i) the fair market
value of the property at the time of the public sale, or (ii) the amount of the
wining bid in the foreclosure. Further, under California law, once a property
has been sold pursuant to a power-of-sale clause contained in a deed of trust,
the lender is precluded from seeking a deficiency judgment from the borrower or,
under certain circumstances, guarantors. In certain circumstances, the lender
may have a receiver appointed.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts, annuities, Keogh plans,
and collective investment funds, separate accounts and general accounts in which
such plans, accounts or arrangements are invested, that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (each a "Plan") and any entity whose assets include
assets of such a Plan should carefully review with its legal advisers whether
the purchase or holding of Offered Certificates could give rise to a transaction
that is prohibited or is not otherwise permitted either under ERISA or Section
4975 of the Code or whether there exists any statutory or administrative
exemption applicable thereto.
Certain employee benefit plans, such as governmental plans and church
plans (if no election has been made under section 410(d) of the Code), are not
subject to the restrictions of ERISA, and assets of such plans may be invested
in the Offered Certificates without regard to the ERISA considerations described
below, subject to other applicable federal and state law. However, any such
governmental or church plan which is qualified under section 401(a) of the Code
and exempt from taxation under section 501(a) of the Code is subject to the
prohibited transaction rules set forth in Section 503 of the Code.
In accordance with ERISA's general fiduciary standards, before investing
in an Offered 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.
S-89
<PAGE>
Plan Asset Regulation
The United States Department of Labor (the "DOL") has issued a final
regulation (the "Final Regulation") determining when assets of an entity in
which a Plan makes an equity investment will be treated as assets of the
investing Plan. If the Certificates are treated as debt with no substantial
equity features under applicable local law, the assets of the Trust Fund would
not be treated as assets of the Plans that become Certificateholders. In the
absence of treatment of the Certificates as debt, and unless the Final
Regulation provides an exemption from this "plan asset" treatment, an undivided
portion of the assets of the Trust Fund will be treated, for purposes of
applying the fiduciary standards and prohibited transactions rules of ERISA and
Section 4975 of the Code, as an asset of each Plan that acquires and holds the
Offered Certificates.
The Final Regulation provides an exemption from "plan asset" treatment for
securities issued by an entity if, immediately after the most recent acquisition
of any equity interest in the entity, less than 25% of the value of each Class
of equity interests in the entity, excluding interests held by any person who
has discretionary authority or control with respect to the assets of the entity
(or any affiliate of such a person), are held by "benefit plan investors" (e.g.,
Plans, governmental, foreign and other plans not subject to ERISA and entities
holding assets deemed to be "plan assets"). Because the availability of this
exemption to the Trust Fund depends upon the identity of the holders of the
Offered Certificates at any time, there can be no assurance that any Class of
the Offered Certificates will qualify for this exemption.
Individual Exemption
The DOL has issued to each of Morgan Stanley and RFSC an individual
prohibited transaction exemption, Prohibited Transaction Exemption Nos. 90-24
and 94-29 (as amended by Prohibited Transaction Exemption No. 97-34),
respectively (each, an "Exemption"), which generally exempt from the application
of the prohibited transaction provisions of Section 406 of ERISA, and the excise
taxes imposed on such prohibited transactions pursuant to Section 4975(a) and
(b) of the Code and Section 502(i) of ERISA, certain transactions, among others,
relating to the servicing and operation of mortgage loans, such as the Mortgage
Loans, and the purchase, sale and holding of mortgage pass-through certificates,
such as the Senior Certificates, underwritten by an "underwriter," provided that
certain conditions set forth in the Exemption are satisfied. For purposes of
this discussion, the term "underwriter" shall include (a) Morgan Stanley & Co.
Incorporated, (b) any person directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with Morgan
Stanley & Co. Incorporated, and (c) any member of the underwriting syndicate or
selling group of which a person described in (a) or (b) is a manager or
co-manager with respect to the Senior Certificates, including Residential
Funding Securities Corporation.
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the purchase, sale and holding of Senior Certificates to
be eligible for exemptive relief thereunder. First, the acquisition of such
Certificates by a Plan must be on terms that are at least as favorable to the
Plan as they would be in an arm's-length transaction with an unrelated party.
Second, the rights and interests evidenced by the Senior Certificates must not
be subordinated to the rights and interests evidenced by the other certificates
of the same trust. Third, the Senior Certificates at the time of acquisition by
the Plan must be rated in one of the three highest generic rating categories by
S&P, Duff & Phelps Credit Rating Co. ("DCR"), Moody's or Fitch. Fourth, the
Trustee cannot be an affiliate of any other member of the "Restricted Group,"
which consists of either Underwriters, the Depositor, the Master Servicer, the
Special Servicer, the Trustee, any Sub-Servicer, and any mortgagor with respect
to a Mortgage Loan constituting more than 5% of the aggregate unamortized
principal balance of the Mortgage Loans as of the date of initial issuance of
the Senior Certificates. Fifth, the sum of all payments made to and retained by
the Underwriters must represent not more than reasonable compensation for
underwriting the Senior Certificates; the sum of all payments made to and
retained by the Depositor pursuant to the assignment of the Mortgage Loans to
the Trust Fund must represent not more than the fair market value of such
obligations; and the sum of all payments made to and retained by the Master
Servicer, the Special Servicer or any Sub-Servicer must represent not more than
reasonable compensation for such person's services under the Pooling and
Servicing Agreement and reimbursement of such person's reasonable expenses in
connection therewith. Sixth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D under the Securities Act.
S-90
<PAGE>
Because the Senior Certificates are not subordinate to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of the issuance of the Senior
Certificates that they be rated not lower than "Aaa" and "AAA" (or, in the case
of the Interest Only Certificates, "Aaa" and "AAAr") by each of Moody's and S&P;
thus, the third general condition set forth above is satisfied with respect to
the Senior Certificates as of the Closing Date. In addition, the fourth general
condition set forth above is also satisfied as of the Closing Date. A fiduciary
of a Plan contemplating purchasing a Senior Certificate in the secondary market
also must make its own determination that, at the time of such purchase, the
Senior Certificates continue to satisfy the third and fourth general conditions
set forth above. A fiduciary of a Plan contemplating the purchase of a Senior
Certificate also must make its own determination that the first, fifth and sixth
general conditions set forth above will be satisfied with respect to such Senior
Certificate as of the date of such purchase.
The Exemption also requires that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates in such other
investment pools must have been rated in one of the three highest categories of
S&P, DCR, Moody's or Fitch for at least one year prior to the Plan's acquisition
of Senior Certificates; and (iii) certificates 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 Senior Certificates.
Moreover, the Exemption provides relief from certain self-dealing/conflict
of interest prohibited transactions that may occur when any person who has
discretionary authority or renders investment advice with respect to the
investment of plan assets causes a Plan to acquire Senior Certificates, provided
that, among other requirements: (i) such person (or its affiliate) is an obligor
with respect to 5% or less of the fair market value of the obligations or
receivables contained in the trust; (ii) the Plan is not a plan with respect to
which any member of the Restricted Group is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA); (iii) in the case of an acquisition in connection
with the initial issuance of Senior Certificates, at least 50% of such class is
acquired by persons independent of the Restricted Group and at least 50% of the
aggregate interest in the trust fund is acquired by persons independent of the
Restricted Group; (iv) the Plan's investment in Senior Certificates does not
exceed 25% of all of the Certificates of that Class outstanding at the time of
the acquisition; and (v) immediately after the acquisition, no more than 25% of
the assets of the Plan with respect to which such person has discretionary
authority or renders investment advice are invested in certificates representing
an interest in one or more trusts containing assets sold or serviced by the same
entity.
Finally, if certain specific conditions of the Exemption are satisfied,
the Exemption may provide an exemption from the restrictions imposed by Sections
406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Section 4975(c) of the Code for transactions in
connection with the servicing, management and operation of the Mortgage Loan.
The Depositor expects that the specific conditions of the Exemption required for
this purpose will be satisfied with respect to the Senior Certificates.
A purchaser of a Senior Certificate should be aware, however, that even if
the conditions specified in one or more parts of the Exemption is satisfied, the
scope of relief provided by the Exemption may not cover all acts that may be
considered prohibited transactions.
Before purchasing a Senior Certificate, a fiduciary of a Plan should
itself confirm that the specific and general conditions of the Exemption and the
other requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions.
Other Exemptions
The characteristics of each Class of the Subordinate Certificates do not
meet the requirements of the Exemption. Accordingly, Certificates of those
Classes may not be acquired by, on behalf of or with assets of (A) a Plan, (B) a
governmental plan subject to any federal, state or local law ("Similar Law")
that is, to a material extent, similar to the provisions of ERISA or the Code
("Other Plans"), (C) a collective investment fund in which Plans or Other Plans
are invested, or (D) other persons acting on behalf of any Plan or Other Plans
or using the assets of any Plan or Other Plans or any entity whose underlying
assets include plan assets by reason of a Plan's or Other Plan's investment in
the entity (within the meaning of DOL Regulations Section 2510.3-101), unless
such transaction is
S-91
<PAGE>
covered by a Prohibited Transaction Class Exemption ("PTCE") issued by the DOL,
such as: PTCE 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 91-38, regarding investments by bank collective investment funds;
PTCE 84-14, regarding transactions effected by "qualified professional asset
managers"; and PTCE 96-23, regarding transactions effected by "in-house asset
managers". There can be no assurance that any of these exemptions will apply
with respect to any particular Plan's investment in Offered Certificates or,
even if an exemption were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment.
Before purchasing Subordinate Certificates based on the availability of any such
exemption, a Plan fiduciary should itself confirm that all applicable conditions
and other requirements set forth in such exemption have been satisfied. Any such
Plan or person to whom a transfer of any such Certificate or interest therein is
made shall be deemed to have represented to the Depositor, the Master Servicer,
the Special Servicer, the Trustee and any Sub-Servicer that the purchase and
holding of such Certificate is so exempt on the basis of the availability of a
PTCE.
Each prospective transferee of a Subordinate Certificate will be required
to deliver to the Depositor, the Certificate Registrar and the Trustee, (i) a
transferee representation letter, substantially in the form attached as an
Exhibit 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 provisions 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 or 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.
Insurance Company Purchasers
Purchasers that are insurance companies should consult their legal
advisors with respect to the applicability of PTCE 95-60, regarding transactions
by insurance company general accounts. In addition to any exemption that may be
available under PTCE 95-60 for the purchase and holding of Certificates by an
insurance company general account, the Small Business Job Protection Act of 1996
added a new Section 401(c) to ERISA, which provides certain exemptive relief
from the provisions of Part 4 of Title I of ERISA and Section 4975 of the Code,
including the prohibited transaction restrictions imposed by ERISA and the
related excise taxes imposed by the Code, for transactions involving an
insurance company general account. The DOL issued proposed regulations under
Section 401(c) on December 22, 1997, but the required final regulations have not
been issued as of the date hereof. Section 401(c) of ERISA required the DOL to
issue final regulations ("401(c) Regulations") no later than December 31, 1997,
to provide guidance for the purpose of determining, in cases where insurance
policies or annuity contracts supported by an insurer's general account are
issued to or for the benefit of a Plan on or before December 31, 1998, which
general account assets constitute plan assets. Section 401(c) of ERISA generally
provides that, until the date that is 18 months after the 401(c) Regulations
become final, no person shall be subject to liability under Part 4 of Title I of
ERISA and Section 4975 of the Code on the basis of a claim that the assets of an
insurance company general account constitute plan assets of any plan, unless (i)
as otherwise provided by the Secretary of Labor in the 401(c) Regulations to
prevent avoidance of the regulations or (ii) an action is brought by the
Secretary of Labor for certain breaches of fiduciary duty which would also
constitute a violation of federal or state criminal law. Any assets of an
insurance company general account that support insurance policies or annuity
contracts issued to a Plan after December 31, 1998, or issued to Plans on or
before December 31, 1998, for which the insurance company does not comply with
the 401(c) Regulations may be treated as plan assets. In addition, because
Section 401(c) does not relate to insurance company separate accounts, separate
account assets are still treated as plan assets of any Plan invested in such
separate account. Insurance companies contemplating the investment of general
account assets in the Certificates should consult their legal counsel with
respect to the applicability of Section 401(c) of ERISA, including the general
account's ability to continue to hold the Certificates after the date which is
18 months after the date the 401(c) Regulations become final.
S-92
<PAGE>
LEGAL INVESTMENT
The Offered 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 Offered Certificates for legal investment purposes, financial institution
regulatory purposes or other purposes or as to the ability of particular
investors to purchase the Offered Certificates under applicable legal investment
restrictions. These uncertainties (and any unfavorable future determinations
concerning legal investment or financial institution regulatory characteristics
of the Offered Certificates) 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 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
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement"), the Underwriters have severally agreed
to purchase the respective aggregate principal or notional amount of each Class
of the Offered Certificates, in each case as set forth opposite its name below:
<TABLE>
<CAPTION>
Underwriter Class A-1 Class A-2 Class X Class B
<S> <C> <C> <C> <C>
Morgan Stanley & Co. Incorporated $ $ $ $
Residential Funding Securities
Corporation ____________ ____________ ______________ ___________
Total $277,000,000 $581,412,000 $1,192,238,941 $59,611,000
=========== =========== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
Underwriter Class C Class D Class E
<S> <C> <C> <C>
Morgan Stanley & Co. Incorporated $ $ $
Residential Funding Securities
Corporation ____________ ____________ ______________
Total $ 59,612,000 $ 62,593,000 $ 20,862,000
=========== =========== =============
</TABLE>
PNC Capital Markets, Inc., an affiliate of PNC and Midland, also is acting
as selling agent for the Certificates.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Offered Certificates if
any are purchased.
The Underwriters have advised the Depositor that they propose to offer the
Offered Certificates from time to time for sale in one or more negotiated
transactions or otherwise at prices to be determined at the time of sale. The
Underwriters may effect such transactions by selling such Classes of Offered
Certificates to or through dealers and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Underwriters and any purchasers of such Classes of Offered Certificates for whom
they may act as agent.
The Offered Certificates are offered by the Underwriters when, as and if
issued by the Depositor, 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
facilities of DTC against payment therefor on or about ,
1998, which is the business day following the date of
pricing of the Certificates. Under Rule 15c6-1 adopted by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
trades in the secondary market generally are required to settle in three
business days, unless the parties to any trade expressly agree otherwise.
Accordingly, purchasers who wish to trade Offered Certificates in the secondary
market prior to such delivery should specify a longer settlement cycle, or
should refrain from specifying a shorter settlement cycle, to the extent that
failing to do so would result in a settlement date that is earlier than the date
of delivery of such Offered Certificates.
S-93
<PAGE>
The Underwriters and any dealers that participate with the Underwriters in
the distribution of the Offered Certificates may be deemed to be underwriters,
and any discounts or commissions received by them and any profit on the resale
of such Classes of Offered Certificates by them may be deemed to be underwriting
discounts or commissions, under the Securities Act of 1933, as amended.
The Depositor has agreed to indemnify the Underwriters against civil
liabilities, including liabilities under the Securities Act of 1933, as amended
or contribute to payments the Underwriters may be required to make in respect
thereof.
The Underwriters intend to make a secondary market in the Offered
Certificates, but they are not obligated to do so.
USE OF PROCEEDS
The Depositor will use net proceeds from the sale of the Offered
Certificates to pay part of the purchase price for the Mortgage Loans and to pay
the costs of structuring, issuing and underwriting the Offered Certificates.
LEGAL MATTERS
The legality of the Offered Certificates and the material federal income
tax consequences of investing in the Offered Certificates will be passed upon
for the Depositor by Morrison & Hecker, L.L.P., Kansas City, Missouri. Certain
legal matters with respect to the Offered Certificates will be passed upon for
the Underwriters by Latham & Watkins, New York, New York.
RATINGS
It is a condition of the issuance of the Offered Certificates that they
receive the following credit ratings from S&P and Moody's:
Class S&P Moody's
- ----- --- -------
Class A-1........................... AAA Aaa
Class A-2........................... AAA Aaa
Class X............................. AAAr Aaa
Class B............................. AA Aa2
Class C............................. A A2
Class D............................. BBB Baa2
Class E............................. BBB- Baa3
S&P assigns the additional symbol of "r" to highlight classes of
securities that S&P believes may experience high volatility or high variability
in expected returns due to non-credit risks; however, the absence of an "r"
symbol should not be taken as an indicated that a class will exhibit no
volatility or variability in total return.
The ratings of the Offered Certificates address the likelihood of the timely
receipt by holders thereof of all payments of interest to which they are
entitled and the ultimate receipt by holders thereof of all payments of
principal to which they are entitled, if any, by the Distribution Date in (the
"Rated Final Distribution Date"). The ratings on the Offered Certificates should
be evaluated independently from similar ratings on other types of securities. A
security rating is not a recommendation to buy, sell or hold securities and may
be subject to revision or withdrawal at any time by the assigning rating agency.
The ratings of the Certificates do not represent any assessment of (i) the
likelihood or frequency of principal prepayments on the Mortgage Loans, (ii) the
degree to which such prepayments might differ from those originally anticipated
or (iii) whether and to what extent Prepayment Premiums will be received. A
security rating does not represent any assessment of the yield to maturity that
investors may experience or the possibility that the holders of the Interest
Only Certificates might not fully recover their investment in the event of rapid
prepayments of the Mortgage Loans (including both voluntary and involuntary
prepayments). In general, the ratings thus address credit risk and not
prepayment risk. As described herein, the amounts payable with respect to the
Interest Only
S-94
<PAGE>
Certificates consist only of interest. If all of the Mortgage Loans were to
prepay in the initial month, with the result that the Certificateholders receive
only a single month's interest and thus suffer a nearly complete loss of their
investment, all amounts "due" to such Certificateholders would nevertheless have
been paid, and such result will be consistent with the "Aaa/AAAr" ratings
received on the Interest Only Certificates. The respective aggregate Notional
Amounts upon which interest in respect of the Interest Only Certificates are
calculated is reduced by the allocation of Realized Losses, Expense Losses and
prepayments of principal, whether voluntary or involuntary. The ratings do not
address the timing or magnitude or reductions of such aggregate Notional
Amounts, but only the obligation to pay interest timely on such aggregate
Notional Amounts as so reduced from time to time. Accordingly, the rating of the
Interest Only 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 Offered Certificates will nonetheless issue a rating to any Class
thereof and, if so, what such rating would be. A rating assigned to any Class of
Offered Certificates by a rating agency that has not been requested by the
Depositor to do so may be lower than the ratings assigned thereto at the request
of the Depositor.
S-95
<PAGE>
INDEX OF DEFINITIONS
1933 Act................................S-iv
401(c) Regulations......................S-92
Accrued Certificate Interest............S-51
Additional Trust Fund Expenses..........S-55
Administrative Cost Rate.................S-9
Advance Rate......................S-10, S-74
Advances..........................S-10, S-73
Appraisal Reduction................S-8, S-53
Appraisal Reduction Event..........S-7, S-53
Assumed Monthly Payment.................S-52
Available Funds.........................S-49
Balloon Loans...........................S-33
Balloon Payment.........................S-33
Beneficial Owners.......................S-57
Business Day............................S-50
Casualty................................S-36
CEDEL........................S-iv, S-5, S-60
CEDEL Participants......................S-60
Certificate Balance....................S-iii
Certificate Owner........................S-5
Certificate Registrar...................S-61
Certificateholders.....................S-iii
Certificates...........................S-iii
Chase...................................S-58
Citibank................................S-58
Class A Certificates...................S-iii
Class Interest Shortfall................S-51
Class V Certificates...................S-iii
Class X Certificates...................S-iii
CMBS Portfolio..........................S-45
Code....................................S-13
Collection Account......................S-74
Collection Period.......................S-50
Commission..............................S-iv
Compensating Interest Payment.....S-12, S-55
Condemnation............................S-36
Constant Prepayment Rate................S-65
Contingent Interest.....................S-32
Contingent Interest Loans...............S-32
Controlling Class..................S-4, S-83
Cooperative.............................S-60
Corrected Mortgage Loan.................S-83
CPR.....................................S-65
Cross-Collateralized Loans........S-27, S-36
Crossroads Second Loan..................S-30
Cut-Off Date Loan-to-Value..............S-39
Cut-Off Date LTV........................S-39
Cut-off Date Principal Balance....S-16, S-30
DCR.....................................S-90
Defeasance Loans........................S-34
Deferred Interest.......................S-33
Definitive Certificate.............S-5, S-58
Delivery Date...........................S-iv
Depositaries............................S-58
Depositor..............................S-iii
Determination Date......................S-50
Discount Rate...........................S-52
Disposition Fee.........................S-82
Distributable Certificate Interest......S-51
Distribution Account....................S-75
Distribution Date.......................S-49
DOL.....................................S-90
DTC................................S-iv, S-5
Due Date.................................S-5
Eastridge Contingent Interest...........S-32
Edgewater Annual Contingent Interest....S-32
Edgewater Final Contingent Interest.....S-32
Edgewater Loan..........................S-32
Eligible Bank...........................S-75
EPA.....................................S-37
ERISA.............................S-14, S-89
Euroclear....................S-iv, S-5, S-60
Euroclear Operator......................S-60
Euroclear Participants..................S-60
Excess Cash Flow........................S-33
Exemption...............................S-90
Expense Losses..........................S-55
Final Regulation........................S-90
Fiscal Agent......................S-iii, S-4
Fitch...................................S-47
Form 8-K................................S-41
Hyper-Amortization Date.................S-33
Hyper-Amortization Loans................S-33
Indirect Participants...................S-59
Initial Interest Rate...................S-33
Initial Pool Balance....................S-30
Interest Accrual Period.................S-49
Interest Only Certificates.............S-iii
Interested Person.......................S-79
Loan Portfolio Analysis System..........S-86
Lock-out Period.........................S-33
LOP.....................................S-66
LPAS....................................S-86
LUSTs...................................S-37
Major Tenant............................S-27
Master Servicer........................S-iii
Master Servicer Mortgage File...........S-72
Master Servicing Fee...............S-8, S-81
Master Servicing Fee Rate...............S-81
Maturity Assumptions....................S-66
Midland......................S-3, S-40, S-45
Money Term..............................S-79
Monthly Payment.........................S-52
Moody's................................S-iii
Morgan Stanley..........................S-iv
Mortgage................................S-30
Mortgage File...........................S-72
Mortgage Loan Purchase Agreement...S-3, S-31
S-96
<PAGE>
Mortgage Loans....................S-16, S-30
Mortgage Pool...........................S-16
Mortgage Rate...........................S-32
Mortgaged Property................S-16, S-30
Mortgages...............................S-30
MSMC.....................................S-3
Net Aggregate Prepayment Interest
Shortfall........................S-12, S-55
Net Collections.........................S-83
Net Mortgage Rate.......................S-49
Net REO Proceeds........................S-75
Non-30/360 Loan.........................S-49
Non-REMIC Certificates.................S-iii
Note....................................S-30
Notes...................................S-30
Notional Amount........................S-iii
Offered Certificates...................S-iii
OID.....................................S-88
Operating Adviser..................S-4, S-83
Originator..............................S-35
Other Plans.............................S-91
P&I Advance.......................S-10, S-73
Participants............................S-59
Pass-Through Rate................S-iii, S-48
Paying Agent............................S-59
Percentage Interest.....................S-49
Permitted Investments...................S-75
Plan....................................S-89
PNC..........................S-3, S-40, S-45
Pooling and Servicing Agreement..S-iii, S-70
Prepayment Interest Excess........S-11, S-55
Prepayment Interest Shortfall.....S-11, S-55
Prepayment Premium......................S-33
Prepayment Premiums.....................S-50
Principal Balance Certificates..........S-48
Principal Distribution Amount...........S-51
Principal Prepayments...................S-50
Principal Window.........................S-1
Private Certificates.....................S-3
PTCE....................................S-92
Qualified Substitute Mortgage Loan......S-44
Rated Final Distribution Date.....S-15, S-94
Rating Agencies..................S-iii, S-14
Realized Losses.........................S-54
Record Date.............................S-49
Regular Certificates.............S-iii, S-87
REMIC.............................S-13, S-87
Remittance Date.........................S-73
REO Account.............................S-48
REO Mortgage Loan.......................S-53
REO Property............................S-47
Repurchase Price........................S-44
Required Appraisal Loan............S-8, S-53
Reserve Accounts........................S-36
Residual Certificates..................S-iii
Revised Interest Rate...................S-33
Revised Payment.........................S-33
RFC......................................S-3
RFSC....................................S-iv
S&P....................................S-iii
Scheduled Final Distribution DateS-iii, S-56
Sellers..................................S-3
Senior Certificates..............S-iii, S-11
Servicing Advance.......................S-10
Servicing Advances......................S-73
Similar Law.............................S-91
SMMEA...................................S-93
Special Servicer.......................S-iii
Special Servicer's Appraisal Reduction
Estimate..........................S-8, S-53
Special Servicing Fee...................S-82
Specially Serviced Mortgage Loan........S-82
Stated Principal Balance................S-54
Subordinate Certificates.........S-iii, S-11
Sub-Servicer............................S-84
Sub-Servicing Agreement.................S-84
Terms and Conditions....................S-60
Treasury Rate...........................S-52
Trust Fund.......................S-iii, S-16
Trust REMICs............................S-87
Trustee................................S-iii
Trustee Fee........................S-8, S-80
Trustee Mortgage File...................S-70
Underwriters............................S-iv
Underwriting Agreement..................S-93
Updated Appraisal..................S-8, S-53
Voting Rights...........................S-57
Weighted Average Net Mortgage Rate......S-49
Weighted Average Pass-Through Rate......S-49
Workout Fee.............................S-82
Yield Maintenance Period................S-34
Zoning Laws.............................S-26
S-97
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Cut-Off Date Balance ($) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 to 1,000,000 20 16,867,153 1.41 7.423 123 1.52 66.7 49.9
1,000,001 to 2,000,000 95 139,716,746 11.72 7.376 140 1.45 69.6 47.5
2,000,001 to 3,000,000 75 184,322,072 15.46 7.588 129 1.43 68.9 48.8
3,000,001 to 4,000,000 37 127,789,674 10.72 7.497 129 1.42 71.5 52.7
4,000,001 to 5,000,000 31 140,465,303 11.78 7.412 139 1.46 70.9 53.3
5,000,001 to 6,000,000 15 82,256,055 6.90 7.296 140 1.52 68.4 48.8
6,000,001 to 7,000,000 12 78,806,570 6.61 7.353 116 1.42 72.4 62.2
7,000,001 to 8,000,000 9 68,357,355 5.73 7.321 131 1.45 71.1 53.7
8,000,001 to 9,000,000 5 42,121,593 3.53 7.449 133 1.31 75.2 62.8
9,000,001 to 10,000,000 3 28,919,733 2.43 8.081 93 1.42 75.4 64.7
10,000,001 to 11,000,000 5 51,981,687 4.36 7.702 137 1.38 66.5 47.9
11,000,001 to 12,000,000 6 67,262,776 5.64 7.459 121 1.39 67.9 57.8
12,000,001 to 13,000,000 1 12,739,172 1.07 6.820 119 1.54 74.9 65.1
13,000,001 to 14,000,000 3 40,193,636 3.37 7.067 113 1.41 71.6 58.7
14,000,001 to 15,000,000 1 14,945,268 1.25 7.250 117 1.45 70.2 61.7
15,000,001 to 20,000,000 2 33,059,679 2.77 7.591 199 1.26 74.7 35.1
20,000,001 to 25,000,000 1 20,495,015 1.72 8.750 159 1.38 51.5 0.0
Greater than 25,000,000 1 41,939,454 3.52 7.020 118 1.31 74.9 65.5
============================ ========== =============== ============= =========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============= =========== =============== ========== =========== ==========
</TABLE>
Minimum: $537,699
Maximum: $41,939,454
Average: $3,702,605
I-1
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
State Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California 50 272,864,163 22.89 7.534 130 1.44 68.2 51.4
Southern(1) 30 153,221,635 12.85 7.442 128 1.46 70.8 58.6
Northern(1) 20 119,642,528 10.04 7.652 133 1.41 64.8 42.1
Pennsylvania 15 88,430,396 7.42 7.147 117 1.34 76.1 65.4
New Jersey 13 65,571,863 5.50 7.432 150 1.49 71.0 45.5
Texas 25 60,576,734 5.08 7.415 135 1.41 70.5 48.9
North Carolina 12 57,305,654 4.81 7.135 129 1.39 70.1 51.2
Florida 15 51,068,025 4.28 7.591 145 1.41 71.8 57.7
Illinois 12 50,233,105 4.21 7.462 115 1.36 71.3 59.4
Ohio 20 44,851,062 3.76 7.322 136 1.50 69.8 54.0
Massachusetts 9 42,518,384 3.57 7.382 130 1.38 70.7 59.4
Georgia 13 40,254,985 3.38 7.234 117 1.41 72.8 63.2
Arizona 12 34,698,006 2.91 7.502 104 1.41 71.3 62.1
Washington 7 32,503,482 2.73 7.570 139 1.39 69.2 48.5
Kentucky 7 27,977,908 2.35 7.479 128 1.31 73.9 54.6
Colorado 10 26,885,558 2.26 7.525 116 1.73 61.1 49.2
Oregon 10 26,078,685 2.19 7.784 134 1.40 68.7 38.0
New York 6 25,052,628 2.10 8.611 129 1.38 71.1 36.2
West Virginia 5 23,828,162 2.00 7.219 119 1.51 67.3 59.1
Louisiana 10 22,365,506 1.88 7.238 208 1.36 72.6 1.5
Missouri 11 22,012,051 1.85 7.601 140 1.51 66.5 46.2
Indiana 3 21,453,338 1.80 7.693 114 1.38 67.1 55.1
Oklahoma 6 20,479,306 1.72 7.104 134 1.51 74.0 55.2
Nevada 4 17,696,177 1.48 7.854 117 1.70 61.1 50.3
</TABLE>
I-2
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
(continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
State Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maryland 7 16,464,972 1.38 7.456 135 1.46 71.5 53.1
Michigan 7 15,677,391 1.31 7.239 154 1.30 74.2 57.1
New Hampshire 3 13,097,923 1.10 7.099 134 1.34 77.8 58.0
Mississippi 3 10,747,250 0.90 7.248 120 1.43 60.4 53.1
Tennessee 2 9,288,155 0.78 8.213 236 1.31 74.7 28.9
Virginia 3 6,905,036 0.58 7.283 116 1.39 72.2 61.9
Iowa 3 6,263,189 0.53 7.425 185 1.37 64.6 24.9
Nebraska 1 5,167,192 0.43 6.940 115 1.38 79.5 63.8
Connecticut 2 5,006,105 0.42 7.394 116 1.36 74.0 62.2
South Carolina 3 5,005,536 0.42 7.446 117 1.37 76.5 62.3
Kansas 2 4,839,404 0.41 7.565 116 1.46 69.8 53.1
New Mexico 2 4,080,451 0.34 7.745 156 1.56 70.0 49.9
Utah 2 4,005,729 0.34 7.260 159 1.36 71.5 41.2
Maine 2 3,328,894 0.28 7.870 173 1.20 74.0 30.7
Minnesota 2 3,182,750 0.27 7.335 151 1.55 62.2 44.6
Idaho 1 1,789,317 0.15 7.330 115 1.37 71.0 57.7
Rhode Island 1 1,491,483 0.13 7.610 295 1.22 76.5 5.5
Vermont 1 1,192,986 0.10 7.420 115 1.77 74.1 59.3
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
(1)Loans to Borrowers with properties in California have a Cut-off Date Principal Balance that represents approximately
22.89% of the Initial Pool Balance. Southern California consists of loans in California zip codes less than or equal to 93600.
Northern California consists of loans in California zip codes greater than 93600.
</TABLE>
I-3
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Property Type Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail 94 376,669,668 31.59 7.652 142 1.41 69.6 47.2
Multifamily 108 347,435,764 29.14 7.144 127 1.44 72.9 57.7
Office 36 144,524,262 12.12 7.579 117 1.35 68.7 54.8
Hospitality 26 106,277,181 8.91 7.805 125 1.51 65.5 46.4
Industrial 25 84,397,329 7.08 7.541 140 1.38 70.7 48.9
Mixed Use 2 55,404,718 4.65 7.110 132 1.31 75.9 64.6
Mobile Home Park 15 36,283,197 3.04 7.190 116 1.39 69.7 58.4
Self Storage 12 24,188,932 2.03 7.375 148 1.59 64.4 42.1
Garage 2 10,310,409 0.86 7.214 117 1.50 74.9 61.8
Nursing Home/Assisted 2 6,747,481 0.57 7.966 214 2.37 45.0 10.1
Living
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
</TABLE>
I-4
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Mortgage Rate (%) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.501 to 6.750 2 7,094,907 0.60 6.664 161 2.45 54.6 43.7
6.751 to 7.000 42 170,670,111 14.32 6.911 118 1.49 71.7 58.6
7.001 to 7.250 79 316,633,424 26.56 7.134 126 1.40 71.4 56.6
7.251 to 7.500 76 275,364,867 23.10 7.377 125 1.39 72.0 58.8
7.501 to 7.750 45 146,588,500 12.30 7.582 143 1.38 72.0 51.7
7.751 to 8.000 49 167,210,154 14.02 7.860 147 1.49 67.0 42.5
8.001 to 8.250 9 18,917,669 1.59 8.113 141 1.35 72.6 47.2
8.251 to 8.500 11 31,848,091 2.67 8.340 158 1.40 69.0 39.4
8.501 to 8.750 5 33,489,264 2.81 8.712 182 1.36 57.4 4.7
8.751 to 9.000 2 13,093,421 1.10 8.955 149 1.36 55.8 15.8
10.001 to 10.250(1) 2 11,328,532 0.95 10.250 42 1.44 64.9 52.8
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Minimum: 6.640%
Maximum: 10.250%
Weighted Average: 7.454%
(1)The Edgewater Development loan has the following stepped fixed interest schedule: February 1, 1992 to and including
January 1, 1993 (12 months)- 2.50%; February 1, 1993 to and including January 1, 1994 (12 months) - 4.00%; February 1, 1994 to
and including January 1, 1995 (12 months) - 7.75%; February 1, 1995 to and including January 1, 1996 (12 months) -
9.00%; February 1, 1996 to and including January 1, 2000 (48 months) - 10.25%; February 1, 2000 to and including January
1, 2002 (24 months) - 10.50%. Amortization equals the sum of (i) 100% of the amount by which income attributable to
the Metropolitan Life lease exceeds the sum of (x) miscellaneous expenses and (y) fixed interest; (ii) 25% of the
amount by which net cash flow exceeds the sum of (x) fixed interest and (y) the sum due under (i) above; and (iii) an amount
equal to the amount by which contingent interest exceeds 11%. Contingent interest is calculated as 35% of the amount by which
net cash flow exceeds the sum of fixed interest and amortization.
</TABLE>
I-5
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Original Term to Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Stated Maturity (mos) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 and below 2 16,449,860 1.38 7.016 49 1.57 75.1 72.1
61 to 84 7 18,617,831 1.56 7.544 73 1.32 72.9 66.2
85 to 120 246 900,000,989 75.49 7.378 115 1.43 70.5 59.2
121 to 144 7 31,134,429 2.61 7.451 138 1.33 72.4 51.3
145 to 180 18 74,001,174 6.21 7.450 174 1.49 71.4 48.8
181 to 240 35 96,893,748 8.13 7.669 232 1.42 70.4 12.4
241 to 300 5 24,221,263 2.03 7.898 289 1.27 73.2 0.6
Greater than 300 2 30,919,647 2.59 8.834 159 1.38 51.5 1.4
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
</TABLE>
Minimum: 48 months
Maximum: 480 months
Weighted Average: 145 months
I-6
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Remaining Term to Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Stated Maturity (mos) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 and below 6 30,184,955 2.53 8.298 45 1.55 69.0 62.5
61 to 84 5 16,211,269 1.36 7.495 79 1.23 76.9 69.8
85 to 120 246 891,504,782 74.78 7.343 116 1.43 70.6 59.3
121 to 144 6 30,735,171 2.58 7.508 139 1.31 70.6 46.2
145 to 180 19 102,487,754 8.60 7.843 171 1.46 65.9 35.7
181 to 240 37 99,534,673 8.35 7.664 232 1.42 70.0 12.2
241 to 300 3 21,580,338 1.81 7.950 295 1.27 75.4 0.4
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
</TABLE>
Minimum: 31 months
Maximum: 296 months
Weighted Average: 132 months
I-7
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Percent by Weighted Weighted
Number Aggregate Weighted Average Average Weighted
of Aggregate Cut-Off Date Average Remaining Weighted Cut-Off Average
Original Amortization Mortgage Cut-Off Date Balance Mortgage Term to Average Date Balloon
Term (mos) Loans Balance ($) (%) Rate (%) Maturity DSCR (x) LTV (%) LTV (%)
(mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balloon Loan
120(1) 1 9,173,024 0.77 10.250 42 1.41 70.6 57.0
192 1 2,578,785 0.22 7.870 114 1.43 69.7 48.2
240 23 74,066,608 6.21 7.791 112 1.46 65.0 44.9
252 1 1,130,246 0.09 7.280 115 1.32 70.6 51.1
264 1 1,734,441 0.15 7.510 114 1.20 78.8 59.8
300 121 325,221,205 27.28 7.486 120 1.46 69.1 55.4
316 1 4,080,169 0.34 7.860 114 1.27 78.5 66.6
360 131 628,659,545 52.73 7.245 123 1.41 72.8 63.0
420 1 10,424,632 0.87 9.000 159 1.38 51.5 4.3
Subtotal: 281 1,057,068,655 88.66 7.405 121 1.43 70.9 58.7
Fully-Amortizing Loan
120 4 7,698,801 0.65 7.109 114 1.50 48.5 0.4
144 1 4,284,995 0.36 7.430 138 1.12 65.5 0.9
180 3 6,259,626 0.53 7.868 156 1.22 58.2 1.1
236 1 2,287,050 0.19 8.290 216 1.05 76.5 0.0
240 28 72,564,461 6.09 7.624 232 1.44 68.5 1.8
300 3 21,580,338 1.81 7.950 295 1.27 75.4 0.4
480(2) 1 20,495,015 1.72 8.750 159 1.38 51.5 0.0
Subtotal: 41 135,170,286 11.34 7.834 217 1.38 65.5 1.1
============================ ========== =============== ============== =========== ============== ========== =========== ==========
Total: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== =========== ============== ========== =========== ==========
Minimum: 120 months
Maximum: 480 months
Weighted Average: 324 months
(1)The Edgewater Development loan amortization equals the sum of (i) 100% of the amount by which income attributable to the
Metropolitan Life lease exceeds the sum of (x) miscellaneous expenses and (y) fixed interest; (ii) 25% of the amount by
which net cash flow exceeds the sum of (x) fixed interest and (y) the sum due under (i) above; and (iii) an amount equal
to the amount by which contingent interest exceeds 11%. Contingent interest is calculated as 35% of the amount by which net
cash flow exceeds the sum of fixed interest and amortization.
(2)Note 1 of the Eastridge Mall loan has an amortization term of 480 months which is based on the following irregular
schedule of principal and fixed interest payments: November 1, 1971 to and including December 1, 1988 (206 months) -
$208,265.00; January 1, 1989 to and including October 1, 2006 (214 months) - $232,485.00; November 1, 2006 to and including
October 1, 2011 (60 months)- $177,345.00.
</TABLE>
I-8
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Debt Service Coverage Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Ratios (x) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.15 and below 13 38,504,796 3.23 7.785 152 1.11 71.8 29.0
1.16 to 1.25 21 59,803,769 5.02 7.547 183 1.22 75.2 36.6
1.26 to 1.35 96 430,646,602 36.12 7.334 128 1.31 73.2 58.2
1.36 to 1.50 111 418,627,431 35.11 7.587 132 1.42 70.7 51.9
1.51 to 1.75 59 180,374,603 15.13 7.363 122 1.60 67.2 53.4
1.76 to 2.00 12 36,541,190 3.06 7.339 120 1.88 56.3 46.5
Greater than 2.00 10 27,740,550 2.33 7.394 148 2.45 43.5 27.3
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
</TABLE>
Minimum: 1.05x
Maximum: 2.83x
Weighted Average: 1.42x
I-9
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Cut-Off Date Loan-to- Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Value Ratio (%) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.1 to 30.0 1 2,555,203 0.21 7.010 117 2.19 28.1 0.6
30.1 to 40.0 4 8,641,152 0.72 7.847 183 2.42 38.0 11.6
40.1 to 50.0 10 22,441,500 1.88 7.618 130 2.04 45.5 32.1
50.1 to 60.0 32 143,357,394 12.02 7.735 134 1.51 55.1 31.7
60.1 to 70.0 80 250,341,548 21.00 7.481 125 1.47 66.3 49.6
70.1 to 80.0 190 746,059,931 62.58 7.388 134 1.36 75.5 57.7
80.1 to 90.0 5 18,842,214 1.58 7.254 124 1.37 83.1 70.5
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
</TABLE>
Minimum: 28.1%
Maximum: 88.2%
Weighted Average: 70.3%
I-10
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted
Number Percent by Weighted Average Average Weighted
of Aggregate Aggregate Average Remaining Weighted Cut-Off Average
Balloon Loan-to- Mortgage Cut-Off Date Cut-Off Date Mortgage Term to Average Date Balloon
Value Ratio (%) Loans Balance ($) Balance (%) Rate (%) Maturity (mos) DSCR (x) LTV (%) LTV (%)
- ---------------------------- ---------- -------------- ------------- ----------- --------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.0 12 65,819,303 5.52 8.127 222 1.30 66.0 0.0
0.1 to 10.0 30 79,775,615 6.69 7.744 206 1.45 63.2 2.5
20.1 to 30.0 2 1,888,604 0.16 7.781 126 1.95 32.0 25.5
30.1 to 40.0 15 52,252,502 4.38 7.328 146 1.69 56.1 36.4
40.1 to 50.0 46 151,332,354 12.69 7.640 127 1.57 61.7 47.2
50.1 to 60.0 75 231,101,219 19.38 7.504 119 1.45 68.5 56.1
60.1 to 70.0 129 541,497,631 45.42 7.306 120 1.37 75.2 64.6
70.1 to 80.0 13 68,571,713 5.75 7.145 97 1.36 80.2 72.0
============================ ========== =============== ============== ========== =============== ========== =========== ==========
Total or Weighted Average: 322 $1,192,238,941 100.00% 7.454% 132 1.42x 70.3% 52.2%
============================ ========== =============== ============== ========== =============== ========== =========== ==========
</TABLE>
Minimum: 0.0%
Maximum: 75.3%
Weighted Average: 52.2%
I-11
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PREPAYMENT RESTRICTION ANALYSIS
Percentage of Mortgage Pool by Prepayment Restriction
Assuming No Prepaymetns
<TABLE>
<CAPTION>
- --------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prepayment July-1998 July-1999 July-2000 July-2001 July-2002 July-2003 July-2004 July-2005 July-2006 July-2007 July-2008
Restriction
Locked Out/Defeased 94.59% 94.27% 92.83% 85.94% 56.00% 18.09% 16.51% 14.35% 13.25% 12.34% 1.01%
Yield Maintenance(1) 2.04% 2.44% 3.96% 10.54% 40.42% 77.05% 78.52% 81.46% 82.73% 71.41% 92.25%
Edgewater Add'l 0.77% 0.78% 0.79% 0.81% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Interest(2)
Penalty Points
5.00% and greater (3) 1.72% 1.65% 1.58% 1.50% 2.16% 3.47% 1.21% 1.09% 0.93% 0.79% 3.67%
4.00% to 4.99% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.14% 0.00% 0.00% 0.00% 0.00%
3.00% to 3.99% 0.87% 0.00% 0.00% 0.17% 0.20% 0.00% 0.00% 2.18% 0.00% 0.00% 0.00%
2.00% to 2.99% 0.00% 0.86% 0.84% 0.00% 0.18% 0.20% 0.00% 0.00% 2.20% 0.00% 0.00%
1.00% to 1.99% 0.00% 0.00% 0.00% 1.04% 1.04% 1.19% 1.36% 0.73% 0.70% 2.88% 2.98%
Open 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.26% 0.19% 0.19% 12.58% 0.08%
- ---------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------- --------- --------
TOTALS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Mortgage Pool Balance
Outstanding (in 1,192.24 1,175.84 1,158.36 1,137.13 1,092.88 1,068.07 1,044.73 1,004.77 973.27 938.59 180.24
millions)
% of Initial Pool 100.00% 98.62% 97.16% 95.38% 91.67% 89.58% 87.63% 84.28% 81.63% 78.72% 15.12%
Balance
Notes: (1) Except for 2 of the loans, yield maintenance for each loan is calculated by using a discount rate equal to the yield of
a specified point on the treasury curve (the "Treasury Yield"). Yield maintenance for Broadway Plaza East, which has a
current balance of 3,000,855, is calculated by adding a spread of 0.65% to the Treasury Yield. Yield maintenance
for Wenatchee - The Fair Market, which has a current balance of $3,274,847, is calculated by adding a spread of 0.75%
to the Treasury Yield.
(2) See Appendix II - Footnote 14.
(3) Includes Eastridge Mall Note 1 Prepayment Premium (see Appendix II - Footnote 12).
</TABLE>
I-12
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 MID Two Chatham Center $41,939,454 $146.70
2 MS Eastridge Mall (2) (11) 3 $20,495,015 $32.20
3 MS Eastridge Mall (2) (11) 2 $10,424,632 $32.20
4 MS Phoenix Inn - Beaverton (2A) (15) 5, 6, 7, 8, 9, 10 $4,750,536 $44,546.33
5 MS Phoenix Inn - Vancouver (2A) (15) 4, 6, 7, 8, 9, 10 $4,404,143 $44,546.33
6 MS Phoenix Inn - Salem (2A) (15) 4, 5, 7, 8, 9, 10 $4,057,750 $44,546.33
7 MS Phoenix Inn - Lake Oswego (2A) (15) 4, 5, 6, 8, 9, 10 $3,265,994 $44,546.33
8 MS Phoenix Inn - Tigard (2A) (15) 4, 5, 6, 7, 9, 10 $2,894,858 $44,546.33
9 MS Phoenix Inn - Eugene (2A) (15) 4, 5, 6, 7, 8, 10 $2,578,785 $44,546.33
10 MS Phoenix Inn - Wilsonville (2A) (15) 4, 5, 6, 7, 8, 9 $2,771,146 $44,546.33
11 MS Piazza Carmel Shopping Center $17,926,684 $130.36
12 MID Shrewsbury Plaza 48 $15,132,994 $67.27
13 MS La Mirada $14,945,268 $135.49
14 MS Crossroads Shopping Center (2B) 15 $11,099,732 $31.31
15 MS Crossroads Shopping Center (2B) 14 $3,250,268 $31.31
16 MID Residence Inn (2C) 17, 18, 19, 20 $3,727,027 $51,764.26
17 MID Fairfield Inn (2C) 16, 18, 19, 20 $3,370,184 $39,649.22
18 MID Fairfield Inn (2C) 16, 17, 19, 20 $2,527,638 $29,736.92
19 MID Fairfield Inn (2C) 16, 17, 18, 20 $2,503,505 $29,453.00
20 MID Residence Inn (2C) 16, 17, 18, 19 $2,081,584 $24,489.22
21 MS University Village $13,465,264 $133.12
22 MS Coffey Creek Apartments $13,399,525 $31,903.63
23 RFC East Gate Square Phase IV $13,328,848 $149.07
24 MS Treybrooke Apartments $12,739,172 $35,386.59
25 MID Embassy Suites Hotel $11,924,542 $53,957.20
26 RFC Oxnard Redhill Partners $11,085,436 $105.49
27 MS 1155 Market Street 122 $11,080,194 $84.17
28 RFC Bluffs III $11,070,688 $125.49
29 MID Riverfront Technical Park $11,002,184 $63.77
30 MS Hampton Inn/Midway Airport 84 $10,837,711 $64,896.47
31 MS Commerce Place $10,471,993 $60.92
32 MS JP Center $10,174,266 $148.84
33 MID Vineyard Terrace Apartments $10,073,085 $26,719.06
34 RFC Perimeter Place Office Building $9,991,963 $119.58
35 MID Bourse Garage (2D) 36 $7,514,120 $174.67
36 MID Kevon Office Center (2D) 35 $2,451,557 $23.45
37 RFC Sherman Plaza Retail Center $9,754,746 $129.30
38 MS The Villas of Bon Vista Apartments (2E) 39, 40 $4,948,549 $34,591.83
39 MS Bon Vista (2E) 38, 40 $2,822,407 $34,591.83
40 MS Barrington North Apartments (2E) 38, 39 $1,707,206 $34,591.83
41 MS Edgewater Development (13) $9,173,024 $45.50
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 MID Two Chatham Center 7.020% 4/9/98 5/1/08 120 118 360
2 MS Eastridge Mall (2) (11) 8.750% 9/28/71 10/1/11 480 159 480
3 MS Eastridge Mall (2) (11) 9.000% 12/15/78 10/1/11 393 159 420
4 MS Phoenix Inn - Beaverton (2A) (15) 7.870% 12/29/97 1/1/08 120 114 240
5 MS Phoenix Inn - Vancouver (2A) (15) 7.870% 12/29/97 1/1/08 120 114 240
6 MS Phoenix Inn - Salem (2A) (15) 7.870% 12/29/97 1/1/08 120 114 240
7 MS Phoenix Inn - Lake Oswego (2A) (15) 7.870% 12/29/97 1/1/08 120 114 240
8 MS Phoenix Inn - Tigard (2A) (15) 7.870% 12/29/97 1/1/08 120 114 240
9 MS Phoenix Inn - Eugene (2A) (15) 7.870% 12/29/97 1/1/08 120 114 192
10 MS Phoenix Inn - Wilsonville (2A) (15) 7.870% 12/29/97 1/1/08 120 114 240
11 MS Piazza Carmel Shopping Center 7.440% 4/10/98 5/1/08 120 118 360
12 MID Shrewsbury Plaza 7.770% 2/17/98 3/1/23 300 296 300
13 MS La Mirada 7.250% 4/1/98 4/1/08 120 117 360
14 MS Crossroads Shopping Center (2B) 7.390% 6/15/98 7/1/08 120 120 360
15 MS Crossroads Shopping Center (2B) 7.390% 6/15/98 7/1/08 120 120 360
16 MID Residence Inn (2C) 7.850% 1/23/98 2/1/08 120 115 240
17 MID Fairfield Inn (2C) 7.850% 1/23/98 2/1/08 120 115 240
18 MID Fairfield Inn (2C) 7.850% 1/22/98 2/1/08 120 115 240
19 MID Fairfield Inn (2C) 7.850% 2/12/98 3/1/08 120 116 240
20 MID Residence Inn (2C) 7.850% 1/23/98 2/1/08 120 115 240
21 MS University Village 7.390% 12/22/97 1/2/13 180 174 360
22 MS Coffey Creek Apartments 6.910% 2/27/98 3/1/08 120 116 240
23 RFC East Gate Square Phase IV 6.900% 5/13/98 6/1/02 48 47 360
24 MS Treybrooke Apartments 6.820% 5/15/98 6/1/08 120 119 360
25 MID Embassy Suites Hotel 7.910% 12/30/97 1/1/08 120 114 300
26 RFC Oxnard Redhill Partners 7.400% 4/23/98 5/1/08 120 118 360
27 MS 1155 Market Street 7.100% 4/7/98 5/1/08 120 118 360
28 RFC Bluffs III 7.400% 2/4/98 3/1/08 120 116 360
29 MID Riverfront Technical Park 7.520% 4/9/98 5/1/10 144 142 300
30 MS Hampton Inn/Midway Airport 7.540% 5/26/98 6/1/08 120 119 300
31 MS Commerce Place 7.360% 2/25/98 3/1/08 120 116 360
32 MS JP Center 7.580% 2/20/98 3/1/13 180 176 360
33 MID Vineyard Terrace Apartments 7.010% 1/14/98 2/1/08 120 115 360
34 RFC Perimeter Place Office Building 6.970% 5/26/98 6/1/08 120 119 360
35 MID Bourse Garage (2D) 7.160% 3/5/98 4/1/08 120 117 300
36 MID Kevon Office Center (2D) 7.160% 3/5/98 4/1/08 120 117 300
37 RFC Sherman Plaza Retail Center 7.180% 12/16/97 1/1/08 120 114 360
38 MS The Villas of Bon Vista Apartments (2E) 6.960% 3/2/98 4/1/08 120 117 360
39 MS Bon Vista (2E) 6.960% 3/2/98 4/1/08 120 117 360
40 MS Barrington North Apartments (2E) 6.960% 3/2/98 4/1/08 120 117 360
41 MS Edgewater Development (13) 10.250% 1/1/92 1/1/02 120 42 120
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 MID Two Chatham Center $36,660,803.56 65.5% Leasehold
2 MS Eastridge Mall (2) (11) $0.00 0.0% Fee
3 MS Eastridge Mall (2) (11) $2,589,296.14 4.3% Fee
4 MS Phoenix Inn - Beaverton (2A) (15) $3,368,354.73 48.2% Fee
5 MS Phoenix Inn - Vancouver (2A) (15) $3,122,745.36 48.2% Fee
6 MS Phoenix Inn - Salem (2A) (15) $2,877,135.96 48.2% Fee
7 MS Phoenix Inn - Lake Oswego (2A) (15) $2,315,743.95 48.2% Fee
8 MS Phoenix Inn - Tigard (2A) (15) $2,052,590.95 48.2% Fee
9 MS Phoenix Inn - Eugene (2A) (15) $1,412,550.74 48.2% Leasehold
10 MS Phoenix Inn - Wilsonville (2A) (15) $1,964,873.63 48.2% Fee
11 MS Piazza Carmel Shopping Center $15,839,831.93 64.7% Fee
12 MID Shrewsbury Plaza $0.00 0.0% Fee / Leasehold
13 MS La Mirada $13,150,941.00 61.7% Fee
14 MS Crossroads Shopping Center (2B) $9,782,099.11 55.0% Fee / Leasehold
15 MS Crossroads Shopping Center (2B) $2,864,434.40 55.0% Fee / Leasehold
16 MID Residence Inn (2C) $2,636,005.56 46.2% Fee
17 MID Fairfield Inn (2C) $2,383,622.05 47.7% Fee
18 MID Fairfield Inn (2C) $1,787,716.54 46.4% Fee
19 MID Fairfield Inn (2C) $1,769,085.38 45.6% Fee
20 MID Residence Inn (2C) $1,472,237.15 35.1% Fee
21 MS University Village $10,525,479.87 61.9% Fee
22 MS Coffey Creek Apartments $9,163,153.40 39.1% Fee
23 RFC East Gate Square Phase IV $12,798,179.00 75.3% Fee
24 MS Treybrooke Apartments $11,068,156.02 65.1% Fee
25 MID Embassy Suites Hotel $9,861,330.84 49.3% Fee
26 RFC Oxnard Redhill Partners $9,801,555.00 66.2% Fee
27 MS 1155 Market Street $9,705,819.58 54.5% Fee
28 RFC Bluffs III $9,803,867.00 65.8% Fee
29 MID Riverfront Technical Park $8,327,272.33 56.6% Leasehold
30 MS Hampton Inn/Midway Airport $8,825,440.21 56.9% Fee
31 MS Commerce Place $9,247,055.75 49.2% Fee
32 MS JP Center $8,013,664.61 60.3% Fee
33 MID Vineyard Terrace Apartments $8,819,788.32 69.7% Fee
34 RFC Perimeter Place Office Building $8,759,590.00 64.9% Fee
35 MID Bourse Garage (2D) $6,062,913.99 64.3% Fee
36 MID Kevon Office Center (2D) $1,978,086.11 39.6% Fee
37 RFC Sherman Plaza Retail Center $8,597,718.00 71.6% Fee
38 MS The Villas of Bon Vista Apartments (2E) $4,292,472.53 65.2% Fee
39 MS Bon Vista (2E) $2,507,079.67 65.2% Fee
40 MS Barrington North Apartments (2E) $1,478,605.80 65.2% Fee
41 MS Edgewater Development (13) $7,413,024.00 57.0% Fee
</TABLE>
II-1
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
42 RFC 4th Street Portfolio 283 $8,773,459 $91.76
43 MID Tamarack Trace Apartments $8,560,538 $32,426.28
44 RFC Ridgeway Industrial I (2F) 45 $5,770,000 $15.09
45 RFC Ridgeway Industrial II (2F) 44 $2,780,000 $15.09
46 MS Indian Creek Apartments $8,366,985 $32,940.89
47 RFC Riverbend Distribution Center $8,227,046 $18.35
48 MID Baker Waterfront Plaza 12 $8,193,565 $88.32
49 MID The Blue Harbor Club Apartments 73, 215, 256 $7,975,461 $20,038.85
50 MS Berkeley Business Center $7,973,021 $31.54
51 MS Colonial Self Storage - Arlington (2G) 52, 53, 54 $1,829,080 $3,613.14
52 MS Colonial Self Storage - Andrews (2G) 51, 53, 54 $2,147,181 $3,613.14
53 MS Colonial Self Storage - Coppell (2G) 51, 52, 54 $2,385,756 $3,613.14
54 MS Colonial Self Storage - Loop (2G) 51, 52, 53 $1,590,504 $3,613.14
55 MID Mid - Rise Office Building $7,729,892 $98.47
56 MID Barrington Place Development $7,665,884 $77.22
57 MS Partridge Pointe Apartments $7,632,415 $31,801.73
58 MS 345 Underhill Boulevard $7,372,261 $28.26
59 MS Lakeshore Apartments $7,315,539 $65,317.31
60 MS Wilson Woods Apartments $7,178,761 $19,092.45
61 MS Mill Street Plaza Building $6,980,380 $245.36
62 MID Fallwood Apartments 88, 131, 191 $6,955,835 $28,982.65
63 MID Pinebrooke Center $6,884,946 $70.44
64 RFC Woodside Apartments $6,794,404 $64,098.15
65 MS Poway Plaza $6,736,259 $66.71
66 MS Holbrook - Spyglass (2H) 67, 68 $2,360,754 $17,428.04
67 MS Holbrook - Heritage Park (2H) 66, 68 $2,330,129 $17,428.04
68 MS Holbrook - Burl Park (2H) 66, 67 $1,966,629 $17,428.04
69 MID University Townhouse Apartments 103, 104 $6,632,173 $22,405.99
70 MS Shadow Lake Mobile Home Community $6,486,172 $25,336.61
71 MS Regency Towers $6,424,897 $36,094.93
72 MS Polo Plaza $6,387,630 $122.50
73 MID South Cove Apartments 49, 215, 256 $6,231,106 $20,429.85
74 RFC Jefferson Townhome Apartments 307, 308, 320 $6,158,915 $20,259.59
75 MS Holiday Inn - Livermore $6,133,853 $49,070.83
76 MID Riverbend Apartments 120, 87 $5,981,915 $21,063.08
77 MID Beach Mobile Home Park 141, 246, 266 $5,776,661 $27,772.41
78 MID Kentucky Home Life Building $5,665,200 $32.56
79 MS Ramada Resort and Conference Center $5,583,101 $21,894.52
80 MS Country Hills Health Center $5,551,130 $18,200.43
81 MS Porters Neck Shopping Center $5,510,383 $75.22
82 MS Kern Valley Plaza $5,459,274 $42.57
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
42 RFC 4th Street Portfolio 8.300% 9/18/97 10/1/17 240 231 360
43 MID Tamarack Trace Apartments 7.210% 12/8/97 1/1/08 120 114 360
44 RFC Ridgeway Industrial I (2F) 7.160% 6/2/98 7/1/08 120 120 360
45 RFC Ridgeway Industrial II (2F) 7.160% 6/2/98 7/1/08 120 120 360
46 MS Indian Creek Apartments 7.280% 1/22/98 2/1/05 84 79 360
47 RFC Riverbend Distribution Center 7.190% 2/23/98 3/1/08 120 116 360
48 MID Baker Waterfront Plaza 7.220% 5/22/98 6/1/08 120 119 360
49 MID The Blue Harbor Club Apartments 7.790% 3/17/98 4/1/08 120 117 300
50 MS Berkeley Business Center 7.260% 3/4/98 4/1/08 120 117 300
51 MS Colonial Self Storage - Arlington (2G) 7.330% 1/20/98 2/1/08 120 115 300
52 MS Colonial Self Storage - Andrews (2G) 7.330% 1/20/98 2/1/08 120 115 300
53 MS Colonial Self Storage - Coppell (2G) 7.330% 1/20/98 2/1/08 120 115 300
54 MS Colonial Self Storage - Loop (2G) 7.330% 1/20/98 2/1/08 120 115 300
55 MID Mid - Rise Office Building 7.470% 2/25/98 3/1/10 144 140 360
56 MID Barrington Place Development 7.190% 2/11/98 3/1/08 120 116 300
57 MS Partridge Pointe Apartments 6.960% 3/16/98 4/1/08 120 117 360
58 MS 345 Underhill Boulevard 7.900% 8/14/97 9/1/17 240 230 240
59 MS Lakeshore Apartments 7.180% 2/24/98 3/1/08 120 116 360
60 MS Wilson Woods Apartments 6.950% 4/24/98 3/1/08 120 116 360
61 MS Mill Street Plaza Building 7.160% 2/6/98 3/1/08 120 116 360
62 MID Fallwood Apartments 6.940% 1/27/98 2/1/08 120 115 300
63 MID Pinebrooke Center 7.190% 3/18/98 4/1/08 120 117 360
64 RFC Woodside Apartments 6.990% 5/27/98 6/1/08 120 119 360
65 MS Poway Plaza 7.490% 3/2/98 4/1/08 120 117 360
66 MS Holbrook - Spyglass (2H) 7.200% 5/20/98 6/1/08 120 119 360
67 MS Holbrook - Heritage Park (2H) 7.200% 5/20/98 6/1/08 120 119 360
68 MS Holbrook - Burl Park (2H) 7.200% 5/20/98 6/1/08 120 119 360
69 MID University Townhouse Apartments 7.340% 2/24/98 3/1/08 120 116 360
70 MS Shadow Lake Mobile Home Community 7.300% 3/2/98 4/1/08 120 117 360
71 MS Regency Towers 7.330% 1/5/98 2/1/08 120 115 360
72 MS Polo Plaza 7.710% 3/20/98 4/1/08 120 117 360
73 MID South Cove Apartments 7.870% 3/24/98 4/1/08 120 117 300
74 RFC Jefferson Townhome Apartments 7.600% 12/18/97 1/1/08 120 114 300
75 MS Holiday Inn - Livermore 7.420% 2/3/98 3/1/08 120 116 300
76 MID Riverbend Apartments 6.860% 2/4/98 3/1/08 120 116 360
77 MID Beach Mobile Home Park 7.160% 1/2/98 2/1/08 120 115 360
78 MID Kentucky Home Life Building 7.150% 1/20/98 2/1/08 120 115 300
79 MS Ramada Resort and Conference Center 7.880% 3/7/98 4/1/08 120 117 300
80 MS Country Hills Health Center 7.890% 1/30/98 2/1/18 240 235 240
81 MS Porters Neck Shopping Center 7.220% 2/17/98 3/1/18 240 236 240
82 MS Kern Valley Plaza 7.060% 2/26/98 3/1/08 120 116 360
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
42 RFC 4th Street Portfolio $5,447,940.00 45.4% Fee
43 MID Tamarack Trace Apartments $7,539,177.82 70.1% Fee
44 RFC Ridgeway Industrial I (2F) $5,063,741.00 49.0% Fee
45 RFC Ridgeway Industrial II (2F) $2,439,723.00 49.0% Fee
46 MS Indian Creek Apartments $7,766,311.26 74.0% Fee
47 RFC Riverbend Distribution Center $7,247,671.00 63.9% Fee
48 MID Baker Waterfront Plaza $7,072,606.64 61.5% Fee
49 MID The Blue Harbor Club Apartments $6,555,868.02 41.4% Fee
50 MS Berkeley Business Center $6,452,587.48 53.8% Fee
51 MS Colonial Self Storage - Arlington (2G) $1,486,058.00 53.2% Fee
52 MS Colonial Self Storage - Andrews (2G) $1,744,503.00 53.2% Fee
53 MS Colonial Self Storage - Coppell (2G) $1,938,337.00 53.2% Fee
54 MS Colonial Self Storage - Loop (2G) $1,292,225.00 53.2% Fee
55 MID Mid - Rise Office Building $6,564,897.09 67.5% Leasehold
56 MID Barrington Place Development $6,198,370.48 56.7% Fee
57 MS Partridge Pointe Apartments $6,666,096.96 60.4% Fee
58 MS 345 Underhill Boulevard $312,196.08 83.0% Fee
59 MS Lakeshore Apartments $6,430,620.48 70.1% Fee
60 MS Wilson Woods Apartments $6,273,184.19 66.0% Fee
61 MS Mill Street Plaza Building $6,132,883.66 46.8% Fee
62 MID Fallwood Apartments $5,586,152.85 63.5% Fee
63 MID Pinebrooke Center $6,049,097.56 68.3% Fee
64 RFC Woodside Apartments $5,939,428.00 65.3% Fee
65 MS Poway Plaza $5,963,249.88 65.5% Fee
66 MS Holbrook - Spyglass (2H) $2,071,634.40 60.7% Fee
67 MS Holbrook - Heritage Park (2H) $2,045,109.50 60.7% Fee
68 MS Holbrook - Burl Park (2H) $1,725,713.00 60.7% Fee
69 MID University Townhouse Apartments $5,853,467.16 65.9% Fee
70 MS Shadow Lake Mobile Home Community $5,714,667.41 64.7% Fee
71 MS Regency Towers $5,670,923.42 70.0% Fee
72 MS Polo Plaza $5,685,134.50 60.9% Fee
73 MID South Cove Apartments $5,133,769.26 58.3% Fee
74 RFC Jefferson Townhome Apartments $5,062,078.00 60.3% Fee
75 MS Holiday Inn - Livermore $4,993,636.88 56.7% Fee
76 MID Riverbend Apartments $5,215,033.15 63.2% Fee
77 MID Beach Mobile Home Park $5,077,196.38 68.6% Fee
78 MID Kentucky Home Life Building $4,578,377.81 58.0% Fee
79 MS Ramada Resort and Conference Center $4,601,198.25 43.8% Leasehold
80 MS Country Hills Health Center $227,458.68 81.6% Fee
81 MS Porters Neck Shopping Center $196,917.63 32.6% Fee
82 MS Kern Valley Plaza $4,784,199.24 65.5% Fee
</TABLE>
II-2
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
83 MS Comfort Inn Airport West $5,411,666 $54,116.66
84 MS Sleep Inn/Midway Airport 30 $5,393,884 $44,949.03
85 RFC Woods Apartments $5,392,303 $32,097.04
86 MS Foothill Park Plaza $5,358,045 $123.09
87 MID Yacht Club Apartments 76, 120 $5,199,281 $13,539.79
88 MID Westbrook Manor 62, 131, 191 $5,167,192 $34,913.46
89 MS Kelsey Business Center $5,036,021 $30.60
90 RFC Dorchester Manor $5,000,000 $25,000.00
91 RFC Financial Plaza $4,995,861 $142.81
92 MS Casa View Shopping Center $4,971,203 $25.19
93 MID Shurgard of Factoria North $4,964,874 $4,332.35
94 RFC Space Park East $4,955,860 $11.13
95 MID Best Buy Store $4,864,474 $106.86
96 RFC Chouteau Trace Apartments $4,809,675 $37,575.59
97 RFC Pinewood Apartments $4,792,996 $19,483.72
98 MID 70 Grand Avenue $4,680,409 $66.86
99 MS Wyntrace Apartments 178 $4,627,821 $25,710.12
100 MS Newton Towers Apartments $4,626,944 $32,815.21
101 MS Four Points Hotel by ITT Sheraton $4,590,335 $24,416.68
102 MS Mountvue Place $4,578,579 $77.61
103 MID Rivermill Apartments (2I) 69, 104 $2,694,082 $19,809.43
104 MID Village Square Apartments (2I) 69, 103 $1,796,055 $19,522.33
105 MS Sandy Ridge Square Shopping Center $4,478,142 $78.64
106 MS Americana Northridge Apartments $4,390,022 $38,508.96
107 MS Waterdam Centre Shopping Plaza $4,385,214 $97.88
108 MID Thorn Run Crossing Shopping Center $4,383,177 $92.54
109 MS LabCorp $4,376,841 $60.54
110 MS Kings Crossing Apartments 153, 155 $4,332,295 $30,085.38
111 MID American Transtech, Inc. Communication Building $4,284,995 $63.19
112 MID Cedar Point Plaza $4,280,727 $54.34
113 MS Westbrooke Village Apartments $4,223,725 $13,537.58
114 MID Briggs Chaney Center $4,189,619 $95.59
115 MID Parkside at Westminster $4,188,170 $65,440.15
116 RFC Copley Place Apartments $4,174,032 $26,417.92
117 MS Best Buy Yorba Linda $4,080,169 $87.84
118 MS Kingsbrook Estates Mobile Home Park 212, 213 $4,078,166 $17,502.86
119 RFC Pineloch Estates 267, 284, 317 $3,994,163 $76,810.83
120 MID Monaco Park Apartments 76, 87 $3,987,943 $22,155.24
121 MS Walden Point 158, 165, 176, 198,
225, 278, 282, 292 $3,977,957 $17,370.99
122 MS 950 Franklin 27 $3,931,241 $68,969.15
123 MID Huntley Square $3,824,099 $46.58
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
83 MS Comfort Inn Airport West 7.550% 3/2/98 3/1/18 240 236 240
84 MS Sleep Inn/Midway Airport 7.540% 5/26/98 6/1/08 120 119 300
85 RFC Woods Apartments 7.070% 4/28/98 5/1/08 120 118 360
86 MS Foothill Park Plaza 7.910% 7/31/97 8/1/07 120 109 360
87 MID Yacht Club Apartments 6.860% 2/4/98 3/1/08 120 116 360
88 MID Westbrook Manor 6.940% 1/27/98 2/1/08 120 115 300
89 MS Kelsey Business Center 7.190% 5/28/98 6/1/08 120 119 360
90 RFC Dorchester Manor 6.640% 6/15/98 7/1/13 180 180 360
91 RFC Financial Plaza 6.950% 5/21/98 6/1/08 120 119 360
92 MS Casa View Shopping Center 7.520% 1/27/98 2/1/08 120 115 300
93 MID Shurgard of Factoria North 7.250% 12/29/97 1/1/13 180 174 300
94 RFC Space Park East 8.600% 9/9/97 10/1/22 300 291 300
95 MID Best Buy Store 7.510% 2/9/98 3/1/18 240 236 360
96 RFC Chouteau Trace Apartments 7.270% 3/12/98 4/1/08 120 117 360
97 RFC Pinewood Apartments 6.970% 4/20/98 5/1/13 180 178 360
98 MID 70 Grand Avenue 7.660% 12/10/97 1/1/08 120 114 360
99 MS Wyntrace Apartments 7.590% 11/10/97 12/1/07 120 113 360
100 MS Newton Towers Apartments 6.840% 2/3/98 3/1/08 120 116 360
101 MS Four Points Hotel by ITT Sheraton 7.440% 4/3/98 5/1/08 120 118 300
102 MS Mountvue Place 7.140% 12/18/97 1/1/08 120 114 360
103 MID Rivermill Apartments (2I) 7.170% 3/24/98 4/1/08 120 117 360
104 MID Village Square Apartments (2I) 7.170% 3/24/98 4/1/08 120 117 360
105 MS Sandy Ridge Square Shopping Center 7.510% 11/25/97 12/1/12 180 173 360
106 MS Americana Northridge Apartments 7.020% 3/12/98 4/1/10 144 141 360
107 MS Waterdam Centre Shopping Plaza 7.280% 3/18/98 4/1/08 120 117 300
108 MID Thorn Run Crossing Shopping Center 7.420% 1/7/98 2/1/08 120 115 360
109 MS LabCorp 7.470% 3/17/98 4/1/13 180 177 240
110 MS Kings Crossing Apartments 7.770% 12/30/97 1/1/13 180 174 360
111 MID American Transtech, Inc.
Communication Building 7.430% 12/30/97 1/1/10 144 138 144
112 MID Cedar Point Plaza 7.860% 11/17/97 12/1/07 120 113 360
113 MS Westbrooke Village Apartments 7.070% 1/12/98 2/1/08 120 115 300
114 MID Briggs Chaney Center 7.660% 2/19/98 3/1/08 120 116 360
115 MID Parkside at Westminster 7.140% 2/4/98 3/1/08 120 116 360
116 RFC Copley Place Apartments 7.430% 2/17/98 3/1/08 120 116 360
117 MS Best Buy Yorba Linda 7.860% 1/23/98 1/1/08 119 114 316
118 MS Kingsbrook Estates Mobile Home Park 7.030% 2/12/98 3/1/08 120 116 360
119 RFC Pineloch Estates 6.970% 4/20/98 5/1/08 120 118 360
120 MID Monaco Park Apartments 6.860% 2/4/98 3/1/08 120 116 360
121 MS Walden Point 7.120% 3/13/98 4/1/18 240 237 240
122 MS 950 Franklin 6.960% 4/7/98 5/1/08 120 118 360
123 MID Huntley Square 7.510% 12/30/97 1/1/08 120 114 300
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
83 MS Comfort Inn Airport West $0.00 0.0% Fee
84 MS Sleep Inn/Midway Airport $4,392,384.94 46.2% Fee
85 RFC Woods Apartments $4,726,488.00 66.6% Fee
86 MS Foothill Park Plaza $4,728,305.77 67.5% Fee
87 MID Yacht Club Apartments $4,532,732.99 66.9% Fee
88 MID Westbrook Manor $4,149,713.55 63.8% Fee
89 MS Kelsey Business Center $4,418,337.78 70.1% Leasehold
90 RFC Dorchester Manor $3,775,083.84 34.8% Fee
91 RFC Financial Plaza $4,362,628.00 59.9% Fee
92 MS Casa View Shopping Center $4,061,296.09 58.9% Fee
93 MID Shurgard of Factoria North $3,202,694.03 37.0% Fee
94 RFC Space Park East $0.00 0.0% Fee
95 MID Best Buy Store $3,101,375.81 50.4% Fee
96 RFC Chouteau Trace Apartments $4,240,769.00 69.5% Fee
97 RFC Pinewood Apartments $3,679,749.00 56.6% Fee
98 MID 70 Grand Avenue $4,167,307.99 69.5% Fee
99 MS Wyntrace Apartments $4,116,549.65 64.8% Fee
100 MS Newton Towers Apartments $4,031,649.58 52.9% Fee
101 MS Four Points Hotel by ITT Sheraton $3,731,132.07 49.1% Fee
102 MS Mountvue Place $4,025,267.06 57.9% Fee
103 MID Rivermill Apartments (2I) $2,365,805.17 64.8% Fee
104 MID Village Square Apartments (2I) $1,577,203.48 57.4% Fee
105 MS Sandy Ridge Square Shopping Center $3,521,737.95 62.9% Fee
106 MS Americana Northridge Apartments $3,671,742.77 56.5% Fee
107 MS Waterdam Centre Shopping Plaza $3,551,093.60 64.6% Fee
108 MID Thorn Run Crossing Shopping Center $3,877,373.31 66.3% Fee
109 MS LabCorp $1,875,264.17 34.1% Leasehold
110 MS Kings Crossing Apartments $3,441,645.64 62.0% Fee
111 MID American Transtech, Inc.
Communication Building $58,182.50 0.9% Fee
112 MID Cedar Point Plaza $3,831,980.90 54.7% Fee
113 MS Westbrooke Village Apartments $3,405,306.79 50.1% Fee
114 MID Briggs Chaney Center $3,726,897.52 66.6% Fee
115 MID Parkside at Westminster $3,677,804.51 69.4% Fee
116 RFC Copley Place Apartments $3,699,121.00 69.8% Fee
117 MS Best Buy Yorba Linda $3,462,590.79 66.6% Fee
118 MS Kingsbrook Estates Mobile Home Park $3,571,113.69 65.4% Fee
119 RFC Pineloch Estates $3,493,108.00 69.9% Fee
120 MID Monaco Park Apartments $3,476,688.78 66.9% Fee
121 MS Walden Point $135,861.62 22.7% Fee
122 MS 950 Franklin $3,431,031.53 56.9% Fee
123 MID Huntley Square $3,126,873.72 56.9% Fee
</TABLE>
II-3
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
124 MS Enclave at Renaissance Apartments $3,814,533 $68,116.67
125 MS Suburban Lodge Jeffersontown $3,777,728 $26,234.22
126 MID Wacker Plaza $3,634,957 $53.99
127 MS Kona Kai Apartments $3,629,082 $37,031.45
128 MS Oleander Business Center $3,595,120 $57.55
129 MID Seymour Franks Woodworking, LLC. $3,589,235 $22.40
130 MID Highlandtown Village $3,575,537 $63.72
131 MID Sunrise at Atascocita 62, 88, 191 $3,575,208 $25,356.09
132 MID 2-8 East Dennison Parkway, 21-23 East First Street $3,563,343 $84.47
133 MID Hickory Ridge Shopping Center $3,512,254 $27.36
134 RFC Grant-Academy Shopping Center $3,484,541 $48.83
135 MID Edgetowne Square $3,477,727 $64.99
136 MS Walgreen - Kentucky $3,443,026 $247.61
137 MS Georgetown Square II $3,297,511 $46.40
138 MS The Farm Office and Shopping Center $3,292,908 $35.01
139 MID 17171 Gale Avenue $3,289,297 $66.75
140 MS Wenatchee-The Fair Market $3,274,847 $53.02
141 MID Mel Kay/Burt Estates Mobile Home Park 77, 246, 266 $3,264,790 $13,490.87
142 MS Northridge Apartments $3,243,070 $50,672.97
143 MID The Vida Apartments $3,219,010 $55,500.17
144 RFC Lucky Center $3,200,000 $48.95
145 MS Dicks Sporting Goods $3,190,431 $41.91
146 MS Plaza del Sol $3,174,351 $63.55
147 RFC Gateway Park Shopping Center $3,121,012 $38.29
148 MS Tower Associates of Wayne, Inc. $3,093,719 $92.48
149 MID Riverdale Towne Apartments $3,089,471 $21,756.84
150 MID Calusa Shops $3,037,232 $127.27
151 MS Broadway Plaza East $3,000,855 $21.97
152 MS Hunter Plaza $2,993,273 $229.72
153 MS Silver Maple Apartments 110, 155 $2,992,793 $23,381.20
154 MS Flint Village Plaza $2,989,793 $66.44
155 MS Fox Chase Apartments 110, 153 $2,957,912 $25,499.24
156 MS Fredericksburg Square Shopping Center (2J) 157 $1,495,067 $48.20
157 MS North Point Shopping Center (2J) 156 $1,436,437 $48.20
158 MS Pine Highland Apartments 121, 165, 176, 198,
225, 278, 282, 292 $2,911,945 $11,741.72
159 MID Huntington Commons Apartment Complex 254 $2,890,391 $27,527.54
160 RFC Avis Rent-A-Car Garage $2,796,289 $59.87
161 MS Cimarron Place Apartments $2,794,057 $14,255.39
162 MS Best Western Desert Aire $2,788,751 $27,887.51
163 MS Maple Canyon $2,782,689 $20,766.34
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
124 MS Enclave at Renaissance Apartments 7.050% 4/29/98 5/1/08 120 118 360
125 MS Suburban Lodge Jeffersontown 8.320% 12/31/97 1/1/08 120 114 300
126 MID Wacker Plaza 7.530% 2/12/98 3/1/18 240 236 240
127 MS Kona Kai Apartments 6.930% 3/2/98 4/1/08 120 117 360
128 MS Oleander Business Center 7.270% 4/2/98 5/1/08 120 118 360
129 MID Seymour Franks Woodworking, LLC. 7.930% 3/26/98 4/1/08 120 117 300
130 MID Highlandtown Village 7.450% 12/19/97 1/1/08 120 114 300
131 MID Sunrise at Atascocita 7.370% 12/29/97 1/1/18 240 234 300
132 MID 2-8 East Dennison Parkway, 21-23 East
First Street 7.450% 3/30/98 4/1/08 120 117 300
133 MID Hickory Ridge Shopping Center 7.760% 11/7/97 12/1/07 120 113 360
134 RFC Grant-Academy Shopping Center 7.390% 12/30/97 1/1/08 120 114 360
135 MID Edgetowne Square 8.050% 12/24/97 1/1/08 120 114 300
136 MS Walgreen - Kentucky 8.150% 10/31/96 11/1/16 240 220 240
137 MS Georgetown Square II 7.420% 5/6/98 6/1/08 120 119 360
138 MS The Farm Office and Shopping Center 7.320% 4/8/98 5/1/08 120 118 300
139 MID 17171 Gale Avenue 7.480% 3/23/98 4/1/08 120 117 300
140 MS Wenatchee-The Fair Market 8.625% 11/15/93 12/1/13 240 185 240
141 MID Mel Kay/Burt Estates Mobile Home Park 7.160% 12/19/97 1/1/08 120 114 360
142 MS Northridge Apartments 7.290% 3/5/98 4/1/08 120 117 360
143 MID The Vida Apartments 6.770% 1/14/98 2/1/08 120 115 300
144 RFC Lucky Center 6.980% 6/2/98 7/1/08 120 120 360
145 MS Dicks Sporting Goods 7.930% 3/4/98 4/1/08 120 117 300
146 MS Plaza del Sol 8.100% 10/9/97 11/1/07 120 112 300
147 RFC Gateway Park Shopping Center 7.510% 4/27/98 5/1/03 60 58 360
148 MS Tower Associates of Wayne, Inc. 7.510% 3/2/98 4/1/08 120 117 360
149 MID Riverdale Towne Apartments 7.220% 3/20/98 4/1/08 120 117 300
150 MID Calusa Shops 7.640% 12/23/97 1/1/08 120 114 360
151 MS Broadway Plaza East 7.750% 3/29/96 4/1/06 120 93 300
152 MS Hunter Plaza 7.070% 3/2/98 4/1/08 120 117 360
153 MS Silver Maple Apartments 7.770% 2/11/98 3/1/13 180 176 360
154 MS Flint Village Plaza 7.210% 3/27/98 4/1/08 120 117 300
155 MS Fox Chase Apartments 7.770% 12/30/97 1/1/13 180 174 360
156 MS Fredericksburg Square Shopping Center (2J) 7.420% 2/11/98 3/1/08 120 116 300
157 MS North Point Shopping Center (2J) 7.420% 2/11/98 3/1/08 120 116 300
158 MS Pine Highland Apartments 6.920% 1/30/98 2/1/08 120 115 120
159 MID Huntington Commons Apartment Complex 7.360% 3/4/98 4/1/08 120 117 300
160 RFC Avis Rent-A-Car Garage 7.360% 4/1/98 5/1/08 120 118 360
161 MS Cimarron Place Apartments 7.310% 2/27/98 4/1/08 120 117 360
162 MS Best Western Desert Aire 7.710% 2/6/98 3/1/13 180 176 300
163 MS Maple Canyon 7.070% 1/29/98 2/1/08 120 115 300
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
124 MS Enclave at Renaissance Apartments $3,337,037.82 63.0% Fee
125 MS Suburban Lodge Jeffersontown $3,159,393.22 56.4% Fee
126 MID Wacker Plaza $142,417.01 12.3% Fee
127 MS Kona Kai Apartments $3,167,125.19 65.1% Fee
128 MS Oleander Business Center $3,162,989.83 63.6% Fee
129 MID Seymour Franks Woodworking, LLC. $2,962,216.05 61.7% Fee
130 MID Highlandtown Village $2,918,584.20 60.8% Fee
131 MID Sunrise at Atascocita $1,461,811.87 31.4% Fee
132 MID 2-8 East Dennison Parkway, 21-23 East
First Street $2,900,183.33 60.8% Fee
133 MID Hickory Ridge Shopping Center $3,081,159.86 61.6% Fee
134 RFC Grant-Academy Shopping Center $3,087,007.00 60.5% Fee
135 MID Edgetowne Square $2,830,301.90 56.6% Fee
136 MS Walgreen - Kentucky $0.00 0.0% Fee
137 MS Georgetown Square II $2,910,112.77 64.0% Fee
138 MS The Farm Office and Shopping Center $2,666,954.20 57.9% Fee
139 MID 17171 Gale Avenue $2,679,510.89 57.6% Fee
140 MS Wenatchee-The Fair Market $100,464.60 2.0% Fee
141 MID Mel Kay/Burt Estates Mobile Home Park $2,871,684.14 70.0% Fee
142 MS Northridge Apartments $2,856,598.34 70.1% Fee
143 MID The Vida Apartments $2,571,818.31 70.5% Fee
144 RFC Lucky Center $2,749,954.00 45.1% Fee
145 MS Dicks Sporting Goods $2,633,080.97 61.2% Fee
146 MS Plaza del Sol $2,644,209.66 48.3% Fee
147 RFC Gateway Park Shopping Center $2,980,711.00 58.4% Fee
148 MS Tower Associates of Wayne, Inc. $2,740,057.69 65.2% Fee
149 MID Riverdale Towne Apartments $2,497,315.17 61.7% Fee
150 MID Calusa Shops $2,702,983.27 71.1% Fee
151 MS Broadway Plaza East $2,523,040.72 60.8% Fee
152 MS Hunter Plaza $2,621,789.69 35.9% Fee
153 MS Silver Maple Apartments $2,376,513.30 66.9% Fee
154 MS Flint Village Plaza $2,416,014.72 60.4% Fee
155 MS Fox Chase Apartments $2,349,813.22 62.7% Fee
156 MS Fredericksburg Square Shopping Center (2J) $1,215,982.90 58.2% Fee
157 MS North Point Shopping Center (2J) $1,170,586.28 58.2% Fee
158 MS Pine Highland Apartments $0.03 0.0% Fee
159 MID Huntington Commons Apartment Complex $2,346,200.70 61.7% Fee
160 RFC Avis Rent-A-Car Garage $2,469,965.00 54.9% Fee
161 MS Cimarron Place Apartments $2,462,335.91 68.4% Fee
162 MS Best Western Desert Aire $1,839,883.78 46.0% Fee
163 MS Maple Canyon $2,243,496.17 49.9% Fee
</TABLE>
II-4
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
164 MID Fairfield Inn $2,678,796 $40,587.82
165 MS Park Villa Apartments 121, 158, 176, 198,
225, 278, 282, 292 $2,674,464 $20,732.28
166 RFC Cornell North Industrial $2,668,789 $17.87
167 MS Village Square Shopping Center $2,644,362 $40.40
168 MS Town Corral Shopping Center $2,621,336 $32.31
169 MS King Plaza Retail Center $2,586,863 $157.32
170 MS Crooked Creek Shopping Center $2,572,961 $50.42
171 MS Lowe's Food Store, Grandfather Center $2,570,275 $64.72
172 MS Taylors Landing $2,569,535 $56.10
173 RFC Tahitian Terrace Mobile Home Park $2,555,203 $16,172.17
174 MID Springdale Promenade $2,545,988 $108.10
175 MID West Wind Apartments: Phase I & II $2,543,283 $51,903.74
176 MS Tanglewood Terrace Apartments 121, 158, 165, 198,
225, 278, 282, 292 $2,535,788 $16,682.82
177 MID Southside Plaza $2,517,560 $42.21
178 MS Wynridge Apartments 99 $2,512,956 $24,163.04
179 MS Valley West Shopping Center $2,509,729 $25.36
180 MS Market Square Shopping Center $2,496,922 $52.08
181 MID Meridian Mansions, Corporate Suites Apartments $2,485,418 $21,801.91
182 MS Uptown Shopping Center $2,433,067 $19.47
183 MS Woodside Glen Apartments $2,430,029 $33,750.41
184 MS Super 8 Motels 197 $2,429,692 $22,921.63
185 RFC Fallbrook Towne Centre $2,394,582 $79.13
186 MS Stow-A-Way Self Storage $2,393,039 $4,062.88
187 RFC 555 Passaic Avenue (Regency Plaza) $2,345,239 $107.92
188 MS Midtown Plaza Shopping Center $2,344,596 $50.09
189 MID The Fountain Head Manufactured Housing Park $2,339,588 $14,622.43
190 RFC Iron Place Warehouse $2,335,965 $33.05
191 MID Greenbrier Apartments/Townhouses 62, 88, 131 $2,335,898 $29,198.73
192 MS Village of Melrose Park $2,313,922 $26.60
193 RFC Duxbury Marketplace 210, 217 $2,295,103 $62.87
194 RFC Glen Iris Lofts $2,293,183 $65,519.51
195 MS Walgreen - Oklahoma $2,287,050 $164.48
196 MID Royalgate & Timberwood Apartments $2,286,068 $18,738.26
197 MS Days Inn - Central 184 $2,267,749 $15,970.07
198 MS Hermitage Apartments 121, 158, 165, 176,
225, 278, 282, 292 $2,266,572 $19,046.82
199 RFC Augusta Commons $2,237,103 $96.11
200 MID Lock-N-Key Mini Storage $2,234,659 $3,469.97
201 MS Morgantown Plaza Shopping Center $2,197,250 $23.73
202 MS Woodland Park Shopping Center $2,190,581 $28.97
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
164 MID Fairfield Inn 8.450% 2/17/98 3/1/05 84 80 240
165 MS Park Villa Apartments 7.220% 1/30/98 2/1/18 240 235 240
166 RFC Cornell North Industrial 8.780% 6/25/97 7/1/07 120 108 300
167 MS Village Square Shopping Center 7.300% 3/19/98 4/1/08 120 117 360
168 MS Town Corral Shopping Center 8.375% 1/23/97 2/1/07 120 103 240
169 MS King Plaza Retail Center 7.990% 10/17/97 11/1/07 120 112 360
170 MS Crooked Creek Shopping Center 8.720% 6/4/97 7/1/07 120 108 300
171 MS Lowe's Food Store, Grandfather Center 7.370% 5/15/98 6/1/08 120 119 240
172 MS Taylors Landing 7.310% 3/30/98 4/1/08 120 117 360
173 RFC Tahitian Terrace Mobile Home Park 7.010% 3/20/98 4/1/08 120 117 120
174 MID Springdale Promenade 7.840% 1/16/98 2/1/08 120 115 300
175 MID West Wind Apartments: Phase I & II 7.410% 2/25/98 3/1/08 120 116 360
176 MS Tanglewood Terrace Apartments 7.220% 1/30/98 2/1/18 240 235 240
177 MID Southside Plaza 7.590% 3/17/98 4/1/13 180 177 180
178 MS Wynridge Apartments 7.590% 11/3/97 12/1/07 120 113 360
179 MS Valley West Shopping Center 7.210% 1/30/98 2/1/08 120 115 300
180 MS Market Square Shopping Center 7.650% 4/17/98 5/1/08 120 118 360
181 MID Meridian Mansions, Corporate Suites Apartments 7.440% 1/6/98 2/1/13 180 175 300
182 MS Uptown Shopping Center 8.500% 10/26/93 11/1/08 180 124 180
183 MS Woodside Glen Apartments 6.790% 2/9/98 3/1/08 120 116 360
184 MS Super 8 Motels 8.310% 1/5/98 2/1/08 120 115 240
185 RFC Fallbrook Towne Centre 7.040% 3/23/98 4/1/08 120 117 360
186 MS Stow-A-Way Self Storage 7.020% 2/5/98 3/1/08 120 116 360
187 RFC 555 Passaic Avenue (Regency Plaza) 7.510% 3/4/98 4/1/08 120 117 360
188 MS Midtown Plaza Shopping Center 7.870% 2/12/98 3/1/08 120 116 240
189 MID The Fountain Head Manufactured Housing Park 7.190% 2/20/98 3/1/08 120 116 300
190 RFC Iron Place Warehouse 7.290% 1/28/98 2/1/08 120 115 300
191 MID Greenbrier Apartments/Townhouses 7.260% 1/27/98 2/1/08 120 115 300
192 MS Village of Melrose Park 8.000% 11/22/95 12/1/05 120 89 300
193 RFC Duxbury Marketplace 7.370% 4/8/98 5/1/08 120 118 300
194 RFC Glen Iris Lofts 6.930% 2/25/98 3/1/08 120 116 360
195 MS Walgreen - Oklahoma 8.290% 10/31/96 7/1/16 236 216 236
196 MID Royalgate & Timberwood Apartments 7.200% 1/6/98 2/1/05 84 79 300
197 MS Days Inn - Central 7.960% 1/5/98 2/1/08 120 115 300
198 MS Hermitage Apartments 6.900% 3/13/98 5/1/18 240 238 240
199 RFC Augusta Commons 7.550% 1/29/98 2/1/08 120 115 300
200 MID Lock-N-Key Mini Storage 7.430% 12/2/97 1/1/08 120 114 300
201 MS Morgantown Plaza Shopping Center 7.590% 4/17/98 5/1/08 120 118 360
202 MS Woodland Park Shopping Center 8.730% 8/1/97 8/1/17 240 229 240
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
164 MID Fairfield Inn $2,231,949.13 61.1% Fee
165 MS Park Villa Apartments $0.00 0.0% Fee
166 RFC Cornell North Industrial $2,228,527.00 60.6% Fee
167 MS Village Square Shopping Center $2,329,825.99 68.5% Fee
168 MS Town Corral Shopping Center $1,882,777.15 33.6% Fee
169 MS King Plaza Retail Center $2,323,917.82 65.5% Fee
170 MS Crooked Creek Shopping Center $2,187,028.30 58.9% Fee
171 MS Lowe's Food Store, Grandfather Center $1,776,730.33 54.7% Fee
172 MS Taylors Landing $2,264,469.74 62.9% Fee
173 RFC Tahitian Terrace Mobile Home Park $54,221.00 0.6% Fee
174 MID Springdale Promenade $2,099,042.23 65.6% Fee
175 MID West Wind Apartments: Phase I & II $2,248,582.86 60.8% Fee
176 MS Tanglewood Terrace Apartments $0.47 0.0% Fee
177 MID Southside Plaza $54,869.70 1.5% Fee
178 MS Wynridge Apartments $2,235,330.62 67.7% Fee
179 MS Valley West Shopping Center $2,031,869.24 48.0% Fee
180 MS Market Square Shopping Center $2,217,766.31 69.7% Fee
181 MID Meridian Mansions, Corporate Suites Apartments $1,616,676.52 42.4% Fee
182 MS Uptown Shopping Center $34,868.94 40.7% Fee
183 MS Woodside Glen Apartments $2,114,594.52 65.1% Fee
184 MS Super 8 Motels $1,744,884.85 49.9% Fee
185 RFC Fallbrook Towne Centre $2,099,078.00 65.6% Fee
186 MS Stow-A-Way Self Storage $2,094,963.27 59.5% Fee
187 RFC 555 Passaic Avenue (Regency Plaza) $2,080,136.00 66.0% Fee
188 MS Midtown Plaza Shopping Center $1,657,920.71 52.6% Fee
189 MID The Fountain Head Manufactured Housing Park $1,891,709.88 48.5% Leasehold
190 RFC Iron Place Warehouse $1,900,771.00 60.3% Fee
191 MID Greenbrier Apartments/Townhouses $1,893,930.19 61.1% Fee
192 MS Village of Melrose Park $1,965,676.37 60.6% Fee
193 RFC Duxbury Marketplace $1,866,952.00 60.2% Fee
194 RFC Glen Iris Lofts $2,006,852.00 69.8% Fee
195 MS Walgreen - Oklahoma $0.00 0.0% Fee
196 MID Royalgate & Timberwood Apartments $2,021,117.34 67.8% Fee
197 MS Days Inn - Central $1,875,657.08 53.6% Fee
198 MS Hermitage Apartments $73,034.13 32.4% Fee
199 RFC Augusta Commons $1,833,992.00 61.1% Fee
200 MID Lock-N-Key Mini Storage $1,823,020.14 56.1% Fee
201 MS Morgantown Plaza Shopping Center $1,948,719.75 69.1% Fee
202 MS Woodland Park Shopping Center $0.00 0.0% Fee
</TABLE>
II-5
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
203 MID Walgreens 237 $2,168,113 $136.10
204 MS 190-210 Sylvan Avenue $2,155,509 $39.18
205 RFC Park Apartments $2,153,946 $21,117.11
206 MID Wendy's, Friendly's, & Citizens Bank $2,130,446 $194.77
207 MS Milford Post Plaza $2,115,714 $25.44
208 MS Rite Aid - Ohio $2,114,967 $128.18
209 MS Gull Cove Apartments $2,094,907 $20,143.34
210 RFC Dodge Crossing 193, 217 $2,091,515 $64.27
211 MS Sutter Pointe Plaza Shopping Center $2,081,877 $49.69
212 MS Crystal Downs Mobile Village (2K) 118, 213 $1,351,972 $11,474.26
213 MS Twin Pines Mobile Home Park (2K) 118, 212 $678,973 $11,474.26
214 MS Mountain View Estates $2,024,760 $29,344.34
215 MID The Sunflower Apartments 49, 73, 256 $2,018,989 $15,651.08
216 MS White Lane Plaza Shopping Center $2,002,886 $49.23
217 RFC Ledgemere Plaza 193, 210 $1,997,672 $58.72
218 MID Econo Lodge Motel $1,993,461 $33,787.48
219 MID 38500-58680 Michigan Ave. & 3736-69 Commerce Ct. $1,993,373 $33.67
220 MS Biocell Laboratories $1,992,057 $54.54
221 RFC The Crossings Apartments 248, 287, 288, 303, 321 $1,925,000 $13,368.06
222 MS Tanglewood West $1,924,709 $35.54
223 RFC Park Trails Apartments $1,891,090 $15,759.08
224 MS GSK Office Building $1,872,079 $59.37
225 MS Glenwood Trace Apartments 121, 158, 165, 176,
198, 278, 282, 292 $1,861,126 $15,509.39
226 RFC The Marina Dune Apartments $1,844,770 $39,250.42
227 RFC La Miradora Apartments $1,843,635 $33,520.63
228 RFC 1106 Smith Road $1,837,510 $34.86
229 MS Los Robles Medical Center $1,827,202 $91.54
230 MS Chatham Mall Shopping Center $1,825,469 $46.72
231 MID Lamp Lighter Mobile Home Park-Canon City (2L) 232 $1,245,784 $8,962.48
232 MID Alpine Village Mobile Home Park-Florence (2L) 231 $548,145 $8,305.23
233 MID Maple Hill Mobile Home Park $1,793,724 $10,020.80
234 MID Ashment Shopping Center $1,789,317 $102.62
235 RFC Nicholson Corner 312 $1,743,993 $76.07
236 MID Equestrian Centre $1,742,586 $63.46
237 MID Walgreen's Drug 203 $1,734,904 $124.77
238 RFC Staples $1,734,441 $72.27
239 MS Winmont Apartments $1,692,524 $20,640.53
240 MS Rite Aid - Lincoln $1,665,946 $149.01
241 MID Masonic Building $1,662,948 $39.73
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
203 MID Walgreens 7.240% 3/5/98 4/1/18 240 237 360
204 MS 190-210 Sylvan Avenue 10.250% 1/16/92 2/1/02 120 43 240
205 RFC Park Apartments 7.160% 2/27/98 3/1/08 120 116 360
206 MID Wendy's, Friendly's, & Citizens Bank 7.550% 1/15/98 2/1/18 240 235 240
207 MS Milford Post Plaza 7.440% 12/26/97 1/1/08 120 114 360
208 MS Rite Aid - Ohio 8.290% 2/27/97 3/1/17 240 224 240
209 MS Gull Cove Apartments 6.720% 3/4/98 4/1/08 120 117 360
210 RFC Dodge Crossing 7.680% 2/19/98 3/1/08 120 116 300
211 MS Sutter Pointe Plaza Shopping Center 8.250% 9/8/97 10/1/07 120 111 300
212 MS Crystal Downs Mobile Village (2K) 7.180% 2/12/98 3/1/08 120 116 300
213 MS Twin Pines Mobile Home Park (2K) 7.180% 2/12/98 3/1/08 120 116 300
214 MS Mountain View Estates 7.490% 2/18/98 3/1/08 120 116 360
215 MID The Sunflower Apartments 7.970% 3/24/98 4/1/08 120 117 300
216 MS White Lane Plaza Shopping Center 8.350% 9/16/97 10/1/07 120 111 300
217 RFC Ledgemere Plaza 7.370% 5/28/98 6/1/08 120 119 300
218 MID Econo Lodge Motel 7.810% 4/20/98 5/1/18 240 238 240
219 MID 38500-58680 Michigan Ave. & 3736-69
Commerce Ct. 7.360% 3/12/98 4/1/08 120 117 300
220 MS Biocell Laboratories 7.770% 2/6/98 3/1/13 180 176 300
221 RFC The Crossings Apartments 6.810% 6/12/98 7/1/08 120 120 300
222 MS Tanglewood West 7.250% 2/13/98 3/1/08 120 116 360
223 RFC Park Trails Apartments 6.880% 2/12/98 3/1/13 180 176 300
224 MS GSK Office Building 7.610% 12/19/97 1/1/08 120 114 360
225 MS Glenwood Trace Apartments 6.950% 3/12/98 4/1/18 239 237 240
226 RFC The Marina Dune Apartments 7.125% 2/6/98 3/1/08 120 116 360
227 RFC La Miradora Apartments 7.280% 12/31/97 1/1/05 84 78 360
228 RFC 1106 Smith Road 7.680% 12/22/97 1/1/08 120 114 300
229 MS Los Robles Medical Center 8.080% 11/7/97 12/1/07 120 113 300
230 MS Chatham Mall Shopping Center 7.570% 3/25/98 4/1/18 240 237 240
231 MID Lamp Lighter Mobile Home Park-Canon City (2L) 7.260% 3/31/98 4/1/08 120 117 300
232 MID Alpine Village Mobile Home Park-Florence (2L) 7.260% 3/31/98 4/1/08 120 117 300
233 MID Maple Hill Mobile Home Park 7.070% 3/11/98 4/1/08 120 117 300
234 MID Ashment Shopping Center 7.330% 1/28/98 2/1/08 120 115 300
235 RFC Nicholson Corner 7.460% 4/20/98 6/1/18 241 239 240
236 MID Equestrian Centre 7.430% 2/11/98 3/1/08 120 116 300
237 MID Walgreen's Drug 6.980% 2/18/98 3/1/18 240 236 360
238 RFC Staples 7.510% 12/22/97 1/1/08 120 114 264
239 MS Winmont Apartments 7.230% 2/24/98 3/1/08 120 116 300
240 MS Rite Aid - Lincoln 7.850% 10/1/97 10/1/17 240 231 240
241 MID Masonic Building 7.890% 11/25/97 1/1/08 121 114 300
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
203 MID Walgreens $1,354,626.55 39.3% Fee
204 MS 190-210 Sylvan Avenue $1,853,108.77 35.1% Fee
205 RFC Park Apartments $1,896,100.00 70.2% Fee
206 MID Wendy's, Friendly's, & Citizens Bank $79,150.18 82.6% Fee
207 MS Milford Post Plaza $1,873,850.40 63.0% Fee
208 MS Rite Aid - Ohio $0.57 0.0% Fee
209 MS Gull Cove Apartments $1,818,087.98 64.9% Fee
210 RFC Dodge Crossing $1,720,802.00 61.5% Fee
211 MS Sutter Pointe Plaza Shopping Center $1,743,052.62 62.3% Fee
212 MS Crystal Downs Mobile Village (2K) $1,092,830.22 59.1% Fee
213 MS Twin Pines Mobile Home Park (2K) $548,829.39 59.1% Fee
214 MS Mountain View Estates $1,793,684.31 61.0% Fee
215 MID The Sunflower Apartments $1,668,178.58 55.6% Fee
216 MS White Lane Plaza Shopping Center $1,681,368.69 65.7% Fee
217 RFC Ledgemere Plaza $1,622,814.00 52.3% Fee
218 MID Econo Lodge Motel $84,222.42 23.1% Fee
219 MID 38500-58680 Michigan Ave. & 3736-69
Commerce Ct. $1,618,069.92 50.6% Fee
220 MS Biocell Laboratories $1,318,294.75 47.1% Fee
221 RFC The Crossings Apartments $1,535,848.00 49.5% Fee
222 MS Tanglewood West $1,694,888.84 54.7% Fee
223 RFC Park Trails Apartments $1,201,629.00 35.3% Fee
224 MS GSK Office Building $1,664,865.48 65.3% Fee
225 MS Glenwood Trace Apartments $74,887.82 23.2% Fee
226 RFC The Marina Dune Apartments $1,622,500.00 63.6% Fee
227 RFC La Miradora Apartments $1,714,405.00 73.6% Fee
228 RFC 1106 Smith Road $1,486,198.00 58.3% Fee
229 MS Los Robles Medical Center $1,519,808.81 61.3% Fee
230 MS Chatham Mall Shopping Center $71,265.48 82.9% Fee
231 MID Lamp Lighter Mobile Home Park-Canon City (2L) $1,008,216.84 47.0% Fee
232 MID Alpine Village Mobile Home Park-Florence (2L) $443,615.40 48.0% Fee
233 MID Maple Hill Mobile Home Park $1,443,354.78 48.9% Fee
234 MID Ashment Shopping Center $1,453,752.88 57.7% Fee
235 RFC Nicholson Corner $66,513.39 91.7% Fee
236 MID Equestrian Centre $1,419,075.85 54.6% Fee
237 MID Walgreen's Drug $1,065,489.20 38.1% Fee
238 RFC Staples $1,315,095.00 59.8% Fee
239 MS Winmont Apartments $1,370,156.03 63.7% Fee
240 MS Rite Aid - Lincoln $0.21 0.0% Fee
241 MID Masonic Building $1,372,515.50 61.4% Fee
</TABLE>
II-6
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
242 RFC Washington Square Shopping Center $1,637,269 $25.84
243 MID Springfield Secure Storage Facility 244, 304 $1,634,957 $3,911.38
244 MID Riverside Mini Storage 243, 304 $1,605,159 $2,296.36
245 RFC Cherokee Hills Shopping Center $1,594,614 $66.07
246 MID Country Acre Estates Mobile Home Park 77, 141, 266 $1,592,580 $12,843.39
247 MID Overlea Shopping Center $1,574,857 $42.46
248 RFC Crystal Shores Apartments 221, 287, 288, 303, 321 $1,550,000 $15,196.08
249 RFC Lakeshore Place Apartments 302 $1,545,272 $27,110.03
250 MS Super 8 Motel Kissimmee $1,532,759 $25,545.98
251 MID US Forest Service Office Building $1,500,236 $98.57
252 MID Office Building/Day Care 296 $1,497,985 $79.34
253 MID Lakeview Meadow Estates Townhomes $1,496,654 $53,451.93
254 MID Whispering Pines Apartments 159 $1,494,733 $16,608.15
255 RFC United States Post Office $1,491,483 $141.15
256 MID Studio Plaza Apartments 49, 73, 215 $1,470,622 $19,608.29
257 MS Keoway Village Apartments $1,469,875 $18,373.44
258 RFC Belleview Estates Apartments $1,448,054 $34,477.48
259 MS Towne Plaza $1,439,933 $51.43
260 MID State Office Building $1,436,194 $72.51
261 MID Fort Mott Village Apartments $1,435,732 $19,940.72
262 MID Brigham Road Apartments $1,429,649 $13,746.63
263 MID 87 Northpointe Drive 272 $1,415,005 $49.42
264 MID Clough Shops $1,396,994 $60.32
265 MID Crain Professional Center $1,394,562 $51.71
266 MID Maple Crest Manor Mobile Home Park 77, 141, 246 $1,353,693 $12,534.20
267 RFC Bayberry Apartments 119, 284, 317 $1,348,030 $38,515.15
268 RFC Landmark II $1,346,994 $45.51
269 MS Magnolia Hall Apartments $1,310,368 $27,299.33
270 MID Multi-Tenant Industrial Project $1,308,999 $29.52
271 MS Converse Corners Shopping Center $1,298,558 $62.18
272 MID 162 Northpointe Drive 263 $1,295,427 $46.79
273 RFC West Oaks Center $1,294,236 $134.82
274 MID Zia Self Stor-All $1,291,700 $2,387.61
275 MID Lappin Lighting/ Boarman & Assoc. Building $1,291,660 $53.15
276 MS Darby House Apartments $1,276,412 $35,455.90
277 MID Sony Centre $1,276,256 $64.37
278 MS Misty Hollow Apartments 121, 158, 165, 176,
198, 225, 282, 292 $1,268,020 $15,850.24
279 RFC Bay State Building $1,248,562 $16.57
280 MID Vienna Square Apartments 297 $1,248,318 $15,603.98
281 RFC Seven Palms Apartments $1,247,201 $31,180.03
282 MS Parkchester Apartments 121, 158, 165, 176,
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
242 RFC Washington Square Shopping Center 7.830% 11/12/97 12/1/07 120 113 300
243 MID Springfield Secure Storage Facility 7.530% 1/9/98 2/1/18 240 235 240
244 MID Riverside Mini Storage 7.490% 1/9/98 2/1/18 240 235 240
245 RFC Cherokee Hills Shopping Center 7.270% 3/24/98 4/1/08 120 117 300
246 MID Country Acre Estates Mobile Home Park 7.160% 12/19/97 1/1/08 120 114 360
247 MID Overlea Shopping Center 7.460% 3/30/98 4/1/08 120 117 300
248 RFC Crystal Shores Apartments 6.810% 6/12/98 7/1/08 120 120 300
249 RFC Lakeshore Place Apartments 6.810% 2/9/98 3/1/08 120 116 360
250 MS Super 8 Motel Kissimmee 8.310% 3/6/98 4/1/08 120 117 240
251 MID US Forest Service Office Building 7.210% 2/26/98 3/1/08 120 116 120
252 MID Office Building/Day Care 7.280% 1/21/98 2/1/08 120 115 300
253 MID Lakeview Meadow Estates Townhomes 7.120% 4/9/98 5/1/08 120 118 300
254 MID Whispering Pines Apartments 7.030% 3/3/98 4/1/08 120 117 300
255 RFC United States Post Office 7.610% 1/12/98 2/1/23 300 295 300
256 MID Studio Plaza Apartments 7.970% 3/24/98 4/1/08 120 117 300
257 MS Keoway Village Apartments 7.090% 3/2/98 4/1/08 120 117 300
258 RFC Belleview Estates Apartments 7.310% 4/30/98 5/1/08 120 118 360
259 MS Towne Plaza 8.090% 11/17/97 12/1/07 120 113 300
260 MID State Office Building 7.170% 1/20/98 2/1/18 240 235 240
261 MID Fort Mott Village Apartments 6.930% 2/6/98 3/1/08 120 116 360
262 MID Brigham Road Apartments 7.200% 2/26/98 3/1/08 120 116 300
263 MID 87 Northpointe Drive 7.020% 3/26/98 4/1/08 120 117 300
264 MID Clough Shops 7.260% 3/12/98 4/1/08 120 117 360
265 MID Crain Professional Center 7.340% 1/12/98 2/1/08 120 115 360
266 MID Maple Crest Manor Mobile Home Park 7.160% 12/18/97 1/1/08 120 114 360
267 RFC Bayberry Apartments 6.970% 4/20/98 5/1/08 120 118 360
268 RFC Landmark II 7.130% 4/20/98 5/1/08 120 118 300
269 MS Magnolia Hall Apartments 7.020% 12/31/97 1/1/08 120 114 300
270 MID Multi-Tenant Industrial Project 7.230% 2/26/98 3/1/13 180 176 180
271 MS Converse Corners Shopping Center 7.670% 5/15/98 6/1/08 120 119 300
272 MID 162 Northpointe Drive 7.020% 3/26/98 4/1/08 120 117 300
273 RFC West Oaks Center 7.600% 12/3/97 1/1/08 120 114 360
274 MID Zia Self Stor-All 7.820% 12/9/97 1/1/08 120 114 300
275 MID Lappin Lighting/ Boarman & Assoc. Building 8.000% 12/24/97 1/1/08 120 114 300
276 MS Darby House Apartments 7.160% 2/2/98 3/1/08 120 116 360
277 MID Sony Centre 8.050% 3/5/98 4/1/08 120 117 300
278 MS Misty Hollow Apartments 7.170% 3/13/98 4/1/18 240 237 240
279 RFC Bay State Building 7.910% 4/29/98 5/1/08 120 118 360
280 MID Vienna Square Apartments 7.300% 4/14/98 5/1/18 240 238 360
281 RFC Seven Palms Apartments 7.100% 4/15/98 5/1/08 120 118 300
282 MS Parkchester Apartments 7.100% 3/25/98 4/1/18 240 237 240
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
242 RFC Washington Square Shopping Center $1,330,666.00 35.7% Fee
243 MID Springfield Secure Storage Facility $60,390.98 2.5% Fee
244 MID Riverside Mini Storage $58,602.55 2.4% Fee
245 RFC Cherokee Hills Shopping Center $1,294,395.00 60.2% Fee
246 MID Country Acre Estates Mobile Home Park $1,400,821.53 70.0% Fee
247 MID Overlea Shopping Center $1,282,145.53 60.8% Fee
248 RFC Crystal Shores Apartments $1,236,657.00 47.6% Fee
249 RFC Lakeshore Place Apartments $1,348,115.00 69.1% Fee
250 MS Super 8 Motel Kissimmee $1,098,107.23 49.9% Fee
251 MID US Forest Service Office Building $15,378.85 50.7% Fee
252 MID Office Building/Day Care $1,215,271.49 59.8% Fee
253 MID Lakeview Meadow Estates Townhomes $1,204,825.53 63.4% Fee
254 MID Whispering Pines Apartments $1,201,300.57 57.2% Fee
255 RFC United States Post Office $106,490.00 5.5% Fee
256 MID Studio Plaza Apartments $1,215,093.04 57.9% Fee
257 MS Keoway Village Apartments $1,183,483.27 62.3% Fee
258 RFC Belleview Estates Apartments $1,277,465.00 67.2% Fee
259 MS Towne Plaza $1,198,017.67 66.9% Fee
260 MID State Office Building $47,709.29 2.4% Fee
261 MID Fort Mott Village Apartments $1,253,965.61 73.8% Fee
262 MID Brigham Road Apartments $1,156,312.45 57.8% Fee
263 MID 87 Northpointe Drive $1,136,876.48 59.8% Fee
264 MID Clough Shops $1,229,582.82 64.7% Fee
265 MID Crain Professional Center $1,231,211.47 61.6% Fee
266 MID Maple Crest Manor Mobile Home Park $1,190,698.30 70.0% Fee
267 RFC Bayberry Apartments $1,178,924.00 65.5% Fee
268 RFC Landmark II $1,087,507.00 47.8% Fee
269 MS Magnolia Hall Apartments $1,056,194.51 60.4% Fee
270 MID Multi-Tenant Industrial Project $26,536.15 1.1% Fee
271 MS Converse Corners Shopping Center $1,061,524.99 64.3% Fee
272 MID 162 Northpointe Drive $1,040,802.40 59.5% Fee
273 RFC West Oaks Center $1,132,811.00 64.7% Fee
274 MID Zia Self Stor-All $1,065,524.79 58.2% Fee
275 MID Lappin Lighting/ Boarman & Assoc. Building $1,049,923.14 58.3% Fee
276 MS Darby House Apartments $1,121,441.56 70.1% Fee
277 MID Sony Centre $1,056,888.82 66.1% Fee
278 MS Misty Hollow Apartments $43,964.15 2.7% Fee
279 RFC Bay State Building $1,117,694.00 48.6% Fee
280 MID Vienna Square Apartments $783,054.06 48.2% Fee
281 RFC Seven Palms Apartments $1,006,360.00 55.1% Fee
282 MS Parkchester Apartments $42,200.76 2.6% Fee
</TABLE>
II-7
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
283 RFC Cascades at Lake St. George 42 $1,220,164 $88.05
284 RFC Brodhead North Condominiums 119, 267, 317 $1,208,234 $38,975.30
285 MS Greensboro-Wendover Phase-I 286 $1,205,144 $17.74
286 MS Greensboro- Wendover Phase-2 285 $1,201,418 $14.94
287 RFC The Sandpiper Cove Apartments 221, 248, 288, 303, 321 $1,200,000 $12,500.00
288 RFC The Southwyck Manor Apartments 221, 248, 287, 303, 321 $1,200,000 $13,333.33
289 MS Home Depot Center $1,197,376 $159.54
290 MS Forest Hills Rest Home $1,196,351 $25,454.27
291 MID Lakeside Village Apartments $1,194,664 $15,719.26
292 MS Southern Oaks Apartments 121, 158, 165, 176,
198, 225, 278, 282 $1,193,473 $10,849.75
293 MID Mobile Acres $1,192,986 $12,426.94
294 RFC 520 Courtney Way $1,169,378 $69.77
295 MID Pine Point Apartment Complex $1,132,266 $20,219.04
296 MID 1693 NE 54th Avenue 252 $1,130,246 $27.17
297 MID French Riviera Apartments 280 $1,098,520 $19,616.43
298 MID Lone Star Self Storage $1,092,760 $3,480.13
299 MID Appaloosa Road Office Building $1,088,329 $71.25
300 RFC Longwood Trade Center $1,048,848 $26.35
301 RFC Fifth Avenue Court Apartments $1,035,785 $33,412.43
302 RFC Patterson House Apartments 249 $1,025,563 $15,306.90
303 RFC The Bluffs Apartments 221, 248, 287, 288, 321 $1,025,000 $14,236.11
304 MID Albany Secure Storage 243, 244 $1,019,264 $2,777.29
305 MID Westover Plaza $996,791 $43.72
306 RFC Panola Mercado $995,537 $56.80
307 RFC Oxford Building 74, 308, 320 $993,593 $23.05
308 RFC Villa St. Cyr Apartments 74, 307, 320 $993,148 $16,552.46
309 MID Olive Tree Plaza $977,133 $61.07
310 MID Hyde Park Apartments $932,075 $25,191.21
311 MID Bel Aire Apartments $915,802 $10,063.76
312 RFC Davis Memorial Goodwill Industries 235 $896,932 $86.95
313 RFC Centre Pointe Apartments 314 $896,166 $16,595.66
314 RFC The Knight Apartments 313 $896,166 $16,595.66
315 MID Continental Car Office Building $895,011 $39.67
316 MID Twin Tower Apartments $894,392 $27,949.76
317 RFC Westwind Apartments 119, 267, 284 $878,716 $24,408.78
318 RFC Shadow Center/Baytown Village Center $765,504 $91.48
319 MS Industrial Park Addison $731,417 $16.25
320 RFC Orchard Park Apartments 74, 307, 308 $728,954 $16,567.15
321 RFC Meadowbrook Apartments 221, 248, 288, 287, 303 $715,000 $13,240.74
322 MID Keys West Apartments $537,699 $13,442.48
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
283 RFC Cascades at Lake St. George 8.180% 12/15/97 1/1/18 240 234 360
284 RFC Brodhead North Condominiums 6.970% 4/20/98 5/1/08 120 118 360
285 MS Greensboro-Wendover Phase-I 8.000% 1/13/94 2/1/01 84 31 240
286 MS Greensboro- Wendover Phase-2 7.750% 1/13/94 2/1/01 84 31 240
287 RFC The Sandpiper Cove Apartments 6.810% 6/12/98 7/1/08 120 120 300
288 RFC The Southwyck Manor Apartments 6.810% 6/12/98 7/1/08 120 120 300
289 MS Home Depot Center 7.180% 3/12/98 4/1/08 120 117 360
290 MS Forest Hills Rest Home 8.320% 4/28/98 5/1/08 120 118 240
291 MID Lakeside Village Apartments 7.170% 2/3/98 3/1/08 120 116 300
292 MS Southern Oaks Apartments 7.220% 3/13/98 4/1/18 240 237 240
293 MID Mobile Acres 7.420% 1/16/98 2/1/08 120 115 300
294 RFC 520 Courtney Way 7.510% 5/5/98 7/1/08 121 120 360
295 MID Pine Point Apartment Complex 7.650% 12/19/97 1/1/08 120 114 300
296 MID 1693 NE 54th Avenue 7.280% 1/21/98 2/1/08 120 115 252
297 MID French Riviera Apartments 7.300% 4/14/98 5/1/18 240 238 360
298 MID Lone Star Self Storage 7.640% 12/23/97 1/1/08 120 114 300
299 MID Appaloosa Road Office Building 7.640% 12/29/97 1/1/18 240 234 240
300 RFC Longwood Trade Center 7.740% 5/5/98 6/1/13 180 179 300
301 RFC Fifth Avenue Court Apartments 7.790% 12/8/97 1/1/05 84 78 360
302 RFC Patterson House Apartments 6.810% 1/27/98 2/1/08 120 115 360
303 RFC The Bluffs Apartments 6.810% 6/12/98 7/1/08 120 120 300
304 MID Albany Secure Storage 7.780% 12/29/97 1/1/18 240 234 240
305 MID Westover Plaza 7.540% 3/17/98 4/1/08 120 117 300
306 RFC Panola Mercado 7.150% 2/19/98 3/1/08 120 116 300
307 RFC Oxford Building 7.800% 12/23/97 1/1/08 120 114 300
308 RFC Villa St. Cyr Apartments 7.400% 12/23/97 1/1/08 120 114 300
309 MID Olive Tree Plaza 8.050% 3/5/98 4/1/08 120 117 300
310 MID Hyde Park Apartments 7.490% 1/29/98 2/1/08 120 115 300
311 MID Bel Aire Apartments 7.030% 2/25/98 3/1/08 120 116 300
312 RFC Davis Memorial Goodwill Industries 7.510% 4/20/98 6/1/18 241 239 240
313 RFC Centre Pointe Apartments 7.400% 2/19/98 3/1/08 120 116 300
314 RFC The Knight Apartments 7.400% 2/25/98 3/1/08 120 116 300
315 MID Continental Car Office Building 7.760% 1/16/98 2/1/10 144 139 300
316 MID Twin Tower Apartments 7.020% 1/30/98 1/1/08 119 114 300
317 RFC Westwind Apartments 6.970% 4/20/98 5/1/08 120 118 360
318 RFC Shadow Center/Baytown Village Center 7.600% 12/22/97 1/1/08 120 114 360
319 MS Industrial Park Addison 8.000% 4/24/96 5/1/06 120 94 120
320 RFC Orchard Park Apartments 7.500% 12/23/97 1/1/08 120 114 300
321 RFC Meadowbrook Apartments 6.810% 6/12/98 7/1/08 120 120 300
322 MID Keys West Apartments 7.400% 2/27/98 3/1/08 120 116 300
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
283 RFC Cascades at Lake St. George $751,708.00 45.6% Fee
284 RFC Brodhead North Condominiums $1,056,665.00 66.0% Fee
285 MS Greensboro-Wendover Phase-I $1,093,376.04 48.6% Fee
286 MS Greensboro- Wendover Phase-2 $1,092,099.61 35.9% Fee
287 RFC The Sandpiper Cove Apartments $957,412.00 41.6% Fee
288 RFC The Southwyck Manor Apartments $957,412.00 47.9% Fee
289 MS Home Depot Center $1,051,743.09 56.9% Fee
290 MS Forest Hills Rest Home $856,156.74 49.8% Fee
291 MID Lakeside Village Apartments $965,384.34 58.5% Fee
292 MS Southern Oaks Apartments $42,004.76 2.6% Fee
293 MID Mobile Acres $954,560.21 59.3% Fee
294 RFC 520 Courtney Way $1,034,252.13 65.0% Fee
295 MID Pine Point Apartment Complex $912,402.51 64.0% Fee
296 MID 1693 NE 54th Avenue $816,802.95 51.1% Fee
297 MID French Riviera Apartments $689,087.57 50.1% Fee
298 MID Lone Star Self Storage $896,848.81 52.8% Fee
299 MID Appaloosa Road Office Building $42,188.99 2.9% Fee
300 RFC Longwood Trade Center $693,940.00 46.3% Fee
301 RFC Fifth Avenue Court Apartments $970,527.00 55.5% Fee
302 RFC Patterson House Apartments $894,811.00 42.6% Fee
303 RFC The Bluffs Apartments $817,789.45 51.1% Fee
304 MID Albany Secure Storage $41,140.34 2.3% Fee
305 MID Westover Plaza $813,435.57 59.6% Fee
306 RFC Panola Mercado $806,509.00 59.7% Fee
307 RFC Oxford Building $821,226.00 26.1% Fee
308 RFC Villa St. Cyr Apartments $811,653.00 54.1% Fee
309 MID Olive Tree Plaza $809,180.50 66.1% Fee
310 MID Hyde Park Apartments $760,812.07 60.9% Fee
311 MID Bel Aire Apartments $736,920.36 61.4% Fee
312 RFC Davis Memorial Goodwill Industries $34,716.00 3.0% Fee
313 RFC Centre Pointe Apartments $731,381.00 60.9% Fee
314 RFC The Knight Apartments $731,381.00 56.9% Fee
315 MID Continental Car Office Building $685,160.35 24.9% Fee
316 MID Twin Tower Apartments $722,016.94 58.7% Fee
317 RFC Westwind Apartments $768,484.00 64.0% Fee
318 RFC Shadow Center/Baytown Village Center $681,578.00 64.9% Fee
319 MS Industrial Park Addison $6,205.92 0.4% Fee
320 RFC Orchard Park Apartments $597,442.00 55.6% Fee
321 RFC Meadowbrook Apartments $570,458.01 51.9% Fee
322 MID Keys West Apartments $437,488.87 60.8% Fee
</TABLE>
II-8
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
LOAN INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Related Borrower Aggregate Cut-Off
Loan Loan Groups Cut-Off Date Bal./
No. Seller(1) Property Name (by Loan No.) Date Balance Unit or SF(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total/Weighted Average: 1,192,238,941
<CAPTION>
(table continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Term to Rem. Term
Maturity Maturity to Maturity Amort.
Loan Mortgage Note Date or ARD or ARD Term(5)
No. Seller(1) Property Name Rate Date or ARD(4) (mos) (mos) (mos)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total/Weighted Average: 7.454% 145 132 324
<CAPTION>
(table continued)
- ---------------------------------------------------------------------------------------------------------------
Scheduled
Loan Balloon Balloon Security
No. Seller(1) Property Name Balance LTV(3) Type
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total/Weighted Average: 52.2%
</TABLE>
II-9
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State Zipcode
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Two Chatham Center Fifth Avenue and Washington Place Pittsburgh PA 15219
2 Eastridge Mall 1 Eastridge Mall San Jose CA 95122
3 Eastridge Mall 1 Eastridge Mall San Jose CA 95122
4 Phoenix Inn - Beaverton 15402 NW Cornell Road Beaverton OR 97006
5 Phoenix Inn - Vancouver 12712 SE Second Circle Vancouver WA 98684
6 Phoenix Inn - Salem 4370 Commercial Street SE Salem OR 97302
7 Phoenix Inn - Lake Oswego 14905 SW Bangy Road Lake Oswego OR 97035
8 Phoenix Inn - Tigard 9575 SW Locust Street Tigard OR 97223
9 Phoenix Inn - Eugene 850 Franklin Boulevard Eugene OR 97403
10 Phoenix Inn - Wilsonville 29769 SW Boones Ferry Road Wilsonville OR 97070
11 Piazza Carmel Shopping Center 3804-3890 Valley Center Drive San Diego CA 92130
12 Shrewsbury Plaza Route 35 & Shrewsbury Avenue Shrewsbury NJ 07701
13 La Mirada 8900 East Pinnacle Peak Road Scottsdale AZ 85255
14 Crossroads Shopping Center SWC of U.S. 21 and U.S. 19 Beckley WV 25880
15 Crossroads Shopping Center SWC of U.S. 21 and U.S. 19 Beckley WV 25880
16 Residence Inn 2765 Geyser Drive Colorado Springs CO 80906
17 Fairfield Inn 2725 Geyser Drive Colorado Springs CO 80906
18 Fairfield Inn 11700 Northwest Plaza Circle Kansas City MO 64153
19 Fairfield Inn 12245 South Strang Line Road Olathe KS 66062
20 Residence Inn 280 Wildwood Drive South Branson MO 65616
21 University Village 1201 East University Avenue Riverside CA 92507
22 Coffey Creek Apartments 2208 Yager Creek Drive Charlotte NC 28273
23 East Gate Square Phase IV Nixon Drive & Mall Link Road Mount Laurel NJ 08057
24 Treybrooke Apartments 701 Treybrooke Circle Greenville NC 27834
25 Embassy Suites Hotel 3912 Vincennes Road Indianapolis IN 42268
26 Oxnard Redhill Partners 1700 - 1742 Ventura Boulevard Oxnard CA 93030
27 1155 Market Street 1155 Market Street San Francisco CA 94103
28 Bluffs III 6303 & 6307 Carpinteria Avenue Carpinteria CA 93013
29 Riverfront Technical Park 2811 South 102nd Street Tukwila WA 98168
30 Hampton Inn/Midway Airport 6540 South Cicero Avenue Bedford Park IL 60638
31 Commerce Place 350 Main Street Malden MA 02148
32 JP Center 299 - 301 Centre Street Jamaica Plain MA 02130
33 Vineyard Terrace Apartments 90 South Main Street Concord NH 03303
34 Perimeter Place Office Building 800 Mt. Vernon Highway Atlanta GA 30328
35 Bourse Garage 400 Ranstead Street Philadelphia PA 19106
36 Kevon Office Center 2500 McClellan Boulevard Pennsauken NJ 08109
37 Sherman Plaza Retail Center 1160-1170 Broadway Saugus MA 01906
38 The Villas of Bon Vista Apartments 1335 Stewartstown Road Morgantown WV 26505
39 Bon Vista 1325 Stewartstown Road Morgantown WV 26505
40 Barrington North Apartments 108 Number One Wedgewood Drive Morgantown WV 26505
41 Edgewater Development 505 Boices Lane Kingston NY 12401
42 4th Street Portfolio 14 Properties With Various Addresses Saint Petersburg,
Largo, Tampa,
Bradenton FL Various
43 Tamarack Trace Apartments 1000 Tamarack Circle Florence KY 41042
44 Ridgeway Industrial I 10700, 10795, 10800 Ridgeway Industrial Park Olive Branch MS 38654
45 Ridgeway Industrial II 10665A&B, 10705 Ridgeway Industrial Road Olive Branch MS 38654
46 Indian Creek Apartments 1930 College Avenue San Bernardino CA 92407
47 Riverbend Distribution Center 7301 - 7400 Trinity Boulevard Fort Worth TX 76118
<CAPTION>
(table continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. Property Name Type Sub-Type Units/NSF Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Two Chatham Center Mixed Use Mixed Use 285,887 1989
2 Eastridge Mall Retail Anchored Retail 960,222 1994
3 Eastridge Mall Retail Anchored Retail 960,222 1994
4 Phoenix Inn - Beaverton Hospitality Limited Service 98 1997
5 Phoenix Inn - Vancouver Hospitality Limited Service 98 1996
6 Phoenix Inn - Salem Hospitality Limited Service 88 1990
7 Phoenix Inn - Lake Oswego Hospitality Limited Service 62 1993
8 Phoenix Inn - Tigard Hospitality Motel 56 1995
9 Phoenix Inn - Eugene Hospitality Motel 97 1994
10 Phoenix Inn - Wilsonville Hospitality Motel 56 1997
11 Piazza Carmel Shopping Center Retail Anchored Retail 137,522 1990
12 Shrewsbury Plaza Retail Anchored Retail 224,963 1998
13 La Mirada Retail Mixed Use 110,302 1997
14 Crossroads Shopping Center Retail Anchored Retail 458,247 1982
15 Crossroads Shopping Center Retail Anchored Retail 458,247 1982
16 Residence Inn Hospitality Extended Stay 72 1996
17 Fairfield Inn Hospitality Limited Service 85 1996
18 Fairfield Inn Hospitality Limited Service 85 1995
19 Fairfield Inn Hospitality Limited Service 85 1995
20 Residence Inn Hospitality Extended Stay 85 1994
21 University Village Mixed Use Mixed Use 101,148 1997
22 Coffey Creek Apartments Multifamily Garden Apartments 420 1995
23 East Gate Square Phase IV Retail Other Anchored Retail 89,411 1997
24 Treybrooke Apartments Multifamily Garden Apartments 360 1997
25 Embassy Suites Hotel Hospitality Full Service Hotel 221 1985
26 Oxnard Redhill Partners Retail Shadow Retail 105,083 1988-1992
27 1155 Market Street Office Mixed Use 131,637 1997
28 Bluffs III Industrial High Finish Industrial 88,223 1989-1996
29 Riverfront Technical Park Office Single Tenant 172,516 1987
30 Hampton Inn/Midway Airport Hospitality Limited Service 167 1990
31 Commerce Place Office Suburban Office 171,898 1988
32 JP Center Retail Mixed Use 68,358 1996
33 Vineyard Terrace Apartments Multifamily Multifamily 377 1986
34 Perimeter Place Office Building Office Suburban Garden Office 83,558 1996
35 Bourse Garage Garage Garage 43,019 1989
36 Kevon Office Center Office Suburban Office 104,562 1990
37 Sherman Plaza Retail Center Retail Other Anchored Retail 75,441 1994
38 The Villas of Bon Vista Apartments Multifamily Garden Apartments 120 1991
39 Bon Vista Multifamily Garden Apartments 95 1976
40 Barrington North Apartments Multifamily Garden Apartments 59 1985
41 Edgewater Development Office Suburban Office 201,612 1981
42 4th Street Portfolio Retail Unanchored Retail 95,612 1991
43 Tamarack Trace Apartments Multifamily Multifamily 264 1990
44 Ridgeway Industrial I Industrial Low Finish Industrial 372,875 1992-1996
45 Ridgeway Industrial II Industrial Low Finish Industrial 193,800 1995-1997
46 Indian Creek Apartments Multifamily Garden Apartments 254 1987
47 Riverbend Distribution Center Industrial Low Finish Industrial 448,461 1997
</TABLE>
II-10
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State Zipcode
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
48 Baker Waterfront Plaza 2 Hudson Place Hoboken NJ 07030
49 The Blue Harbor Club Apartments 3380 S. Swenson Street Las Vegas NV 89109
50 Berkeley Business Center 2942 San Pablo Avenue Berkeley CA 94710
51 Colonial Self Storage - Arlington 1712-1720 W Randol Mill Road Arlington TX 76012
52 Colonial Self Storage - Andrews 5005 Andrews Highway Midland TX 79703
53 Colonial Self Storage - Coppell 810 Denton Tap Road Coppell TX 75019
54 Colonial Self Storage - Loop 1904 West Loop 250 Midland TX 79705
55 Mid - Rise Office Building 1620 Fifth Avenue San Diego CA 92101
56 Barrington Place Development 18 E Dundee Road Barrington IL 60010
57 Partridge Pointe Apartments 4001 South Watt Avenue Sacramento CA 95826
58 345 Underhill Boulevard 345 Underhill Boulevard Syosset NY 11791
59 Lakeshore Apartments 1175 Lakeshore Boulevard Davis CA 95616
60 Wilson Woods Apartments 1706-4 Vineyard Drive Wilson NC 27893
61 Mill Street Plaza Building 205 South Mill Street Aspen CO 81611
62 Fallwood Apartments 5200 Fall Creek Parkway, North Drive Indianapolis IN 46201
63 Pinebrooke Center SE/q Falkenburg and Windhorst Roads Tampa FL 33619
64 Woodside Apartments 2557 Alvin Avenue San Jose CA 95121
65 Poway Plaza 13301 - 13407 Poway Road Poway CA 92064
66 Holbrook - Spyglass 1600 Thompson Heights Avenue Cincinnati OH 45223
67 Holbrook - Heritage Park 4011 Bramblewood Drive Erlanger KY 41018
68 Holbrook - Burl Park 5972 Carlton Drive Burlington KY 41005
69 University Townhouse Apartments 4102 Quixote Boulevard Tampa FL 33613
70 Shadow Lake Mobile Home Community 5100 N. State Hwy 99 Stockton CA 95212
71 Regency Towers 1130 3rd Avenue Oakland CA 94606
72 Polo Plaza 3702 & 3790 Via de la Valle Rancho Santa Fe CA 92111
73 South Cove Apartments 1501 East Fremont Street Las Vegas NV 89101
74 Jefferson Townhome Apartments 333 Tuckahoe Drive Saint Louis MO 63125
75 Holiday Inn - Livermore 720 Las Flores Road Livermore CA 94550
76 Riverbend Apartments 2121 East 83rd Street Tulsa OK 74137
77 Beach Mobile Home Park 38703 N. Sheridan Road Beach Park IL 60099
78 Kentucky Home Life Building 237-39 South Fifth Street Louisville KY 40202
79 Ramada Resort and Conference
Center 1800 E. Palm Canyon Drive Palm Springs CA 92264
80 Country Hills Health Center 1580 Broadway El Cajon CA 92021
81 Porters Neck Shopping Center 8207 & 8211 Market Street Wilmington NC 28405
82 Kern Valley Plaza 5500/6300 Lake Isabellla Boulevard Lake Isabella CA 93240
83 Comfort Inn Airport West 1390 El Camino Real Millbrae CA 94030
84 Sleep Inn/Midway Airport 6650 South Cicero Avenue Bedford Park IL 60638
85 Woods Apartments 852 Garden Walk Boulevard College Park GA 30349
86 Foothill Park Plaza 121-141 Myrtle Avenue Monrovia CA 91016
87 Yacht Club Apartments 5087 South Toledo Avenue Tulsa OK 74135
88 Westbrook Manor 14735 "W" Plaza Omaha NE 68137
89 Kelsey Business Center 3125-3149 John Curci Dr. & 2500 S. Park Road Pembroke Park FL 33331
90 Dorchester Manor 195 Dilworth Road New Milford NJ 07646
91 Financial Plaza 3902-3910 State Street Santa Barbara CA 93105
92 Casa View Shopping Center 2205-2267 & 2275-2461 Gus Thomasson Road Dallas TX 75228
93 Shurgard of Factoria North 13120 SE 30th Street Bellevue WA 98005
94 Space Park East 3201 - 3538 Ambrose Avenue Nashville TN 37207
<CAPTION>
(table continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. Property Name Type Sub-Type Units/NSF Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
48 Baker Waterfront Plaza Office Suburban Office 92,771 1987
49 The Blue Harbor Club Apartments Multifamily Multifamily 398 1985
50 Berkeley Business Center Retail Mixed Use 252,766 1986
51 Colonial Self Storage - Arlington Self Storage Self Storage 424 1994
52 Colonial Self Storage - Andrews Self Storage Self Storage 626 1984
53 Colonial Self Storage - Coppell Self Storage Self Storage 770 1996
54 Colonial Self Storage - Loop Self Storage Self Storage 381 1996
55 Mid - Rise Office Building Office Suburban Office 78,502 1985
56 Barrington Place Development Office Suburban Office 99,267 1988
57 Partridge Pointe Apartments Multifamily Garden Apartments 240 1988
58 345 Underhill Boulevard Industrial Warehouse 260,870 1997
59 Lakeshore Apartments Multifamily Garden Apartments 112 1991
60 Wilson Woods Apartments Multifamily Garden Apartments 376 1996
61 Mill Street Plaza Building Retail Mixed Use 28,450 1995
62 Fallwood Apartments Multifamily Multifamily 240 1972
63 Pinebrooke Center Industrial Flex/R&D 97,740 1996
64 Woodside Apartments Multifamily Garden Multifamily 106 1981
65 Poway Plaza Retail Anchored Retail 100,972 1986
66 Holbrook - Spyglass Multifamily Low-Rise 100 1989
67 Holbrook - Heritage Park Multifamily Garden Apartments 153 1996
68 Holbrook - Burl Park Multifamily Garden Apartments 129 1996
69 University Townhouse Apartments Multifamily Multifamily 296 1981
70 Shadow Lake Mobile Home Community Mobile Home Park Mobile Home Park 256 1972
71 Regency Towers Multifamily HighRise 178 1976
72 Polo Plaza Retail Flex 52,146 1987
73 South Cove Apartments Multifamily Multifamily 305 1979
74 Jefferson Townhome Apartments Multifamily Garden Multifamily 304 1966
75 Holiday Inn - Livermore Hospitality Full Service 125 1997
76 Riverbend Apartments Multifamily Multifamily 284 1973
77 Beach Mobile Home Park Mobile Home Park Mobile Home Park 208 1987
78 Kentucky Home Life Building Office Downtown Office 173,999 1911
79 Ramada Resort and Conference
Center Hospitality Full Service 255 1995
80 Country Hills Health Center Nursing Home/Assisted Living Nursing Home 305 1986
81 Porters Neck Shopping Center Retail Anchored Retail 73,260 1997
82 Kern Valley Plaza Retail Anchored Retail 128,245 1986
83 Comfort Inn Airport West Hospitality Limited Service 100 1986
84 Sleep Inn/Midway Airport Hospitality Limited Service 120 1995
85 Woods Apartments Multifamily Garden Multifamily 168 1987
86 Foothill Park Plaza Retail Shadow Retail 43,530 1985
87 Yacht Club Apartments Multifamily Multifamily 384 1971
88 Westbrook Manor Multifamily Multifamily 148 1973
89 Kelsey Business Center Industrial Warehouse 164,565 1988
90 Dorchester Manor Multifamily Garden Multifamily 200 1997
91 Financial Plaza Office Suburban Garden Office 34,983 1997
92 Casa View Shopping Center Retail Unanchored Retail 197,365 1997
93 Shurgard of Factoria North Self Storage Self Storage 1146 1988
94 Space Park East Industrial Low Finish Industrial 445,250 1993
</TABLE>
II-11
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State Zipcode
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
95 Best Buy Store 32320 John R. Road Madison Heights MI 48071
96 Chouteau Trace Apartments 64 Abel Court Pontoon Beach IL 62040
97 Pinewood Apartments 1410-1474 South Carpenter Road Brunswick OH 44212
98 70 Grand Avenue 70 Grand Avenue River Edge NJ 07661
99 Wyntrace Apartments 2283 Plaster Road Atlanta GA 30324
100 Newton Towers Apartments 3112-3142 Newton Street Torrance CA 90505
101 Four Points Hotel by ITT
Sheraton 7800 N IH-35 Austin TX 78753
102 Mountvue Place 14504-14510 NE 20th Street Bellevue WA 98007
103 Rivermill Apartments 12315 Little Road Hudson FL 34667
104 Village Square Apartments 7110 Tudor Lane Port Richey FL 34668
105 Sandy Ridge Square Shopping
Center 1405-23 29th Avenue, NE Hickory NC 28601
106 Americana Northridge Apartments 9740 Zelzah Avenue & 17816 Kinzie Street Northridge CA 91325
107 Waterdam Centre Shopping Plaza 4150 Washington Road McMurray PA 15317
108 Thorn Run Crossing Shopping Center Thorn Run Road @ Beaver Grade Road Moon PA 15108
109 LabCorp 7207 North Gessner Road Houston TX 77040
110 Kings Crossing Apartments 1710 E. Northfield Boulevard Murfreesboro TN 37130
111 American Transtech, Inc.
Communication Building 3701 West Loop 289 Lubbock TX 79407
112 Cedar Point Plaza 2761 E. Ocean Boulevard Stuart FL 34996
113 Westbrooke Village Apartments 5530 Autumn Hills Drive Trotwood OH 45426
114 Briggs Chaney Center 13816 & 13820 Old Columbia Pike Silver Spring MD 55555
115 Parkside at Westminster 3929 West 38th Street Erie PA 16506
116 Copley Place Apartments 7400 Haverford Avenue Philadelphia PA 19151
117 Best Buy Yorba Linda 23000 Savi Ranch Parkway Yorba Linda CA 92885
118 Kingsbrook Estates Mobile
Home Park 4600 North Van Dyke Road Almont MI 48003
119 Pineloch Estates Darlington & St. Martinique Drive Beaver Falls PA 15010
120 Monaco Park Apartments 5031 South 72nd East Avenue Tulsa OK 74145
121 Walden Point 476 Twin Bridges Road Alexandria LA 71303
122 950 Franklin 950 Franklin Street San Francisco CA 94109
123 Huntley Square 211 W. Main Street Carpentersville IL 60110
124 Enclave at Renaissance Apartments 200 Renaissance Parkway Atlanta GA 30308
125 Suburban Lodge Jeffersontown 8800 Salsman Drive Jeffersontown KY 40220
126 Wacker Plaza 806 Wacker Drive Dubuque IA 52002
127 Kona Kai Apartments 622-663 South Pasadena Avenue Glendora CA 91740
128 Oleander Business Center 5702 - 5710 Oleander Drive Wilmington NC 28403
129 Seymour Franks Woodworking, LLC. 135 E. Essex Avenue Avenel NJ 07601
130 Highlandtown Village 3800-3876 East Lombard Street Baltimore MD 21224
131 Sunrise at Atascocita 7850 FM 1960 East Humble TX 77346
132 2-8 East Dennison Parkway,
21-23 East First Street 8 East Denison Parkway Corning NY 14830
133 Hickory Ridge Shopping Center 1055-1085 Pearl Road Brunswick OH 44212
134 Grant-Academy Shopping Center 3330-3362 Grant Avenue Philadelphia PA 19114
135 Edgetowne Square 1005 Beaver Grade Road Moon PA 15108
136 Walgreen - Kentucky 4520 Shelbyville Road Louisville KY 40207
137 Georgetown Square II 4330-4390 Georgetown Square Atlanta GA 30338
138 The Farm Office and Shopping
Center 12125 Blue Ridge Boulevard Grandview MO 64030
139 17171 Gale Avenue 17171 Gale Avenue Industry CA 91744
140 Wenatchee-The Fair Market SR 2 and 97 and Easy Street Wenatchee WA 98801
141 Mel Kay/Burt Estates Mobile
Home Park 300 N. Daley Street Diamond IL 61360
<CAPTION>
(table continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. Property Name Type Sub-Type Units/NSF Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
95 Best Buy Store Retail Single Tenant 45,520 1996
96 Chouteau Trace Apartments Multifamily Garden Multifamily 128 1990-1995
97 Pinewood Apartments Multifamily Garden Multifamily 246 1973
98 70 Grand Avenue Office Suburban Office 70,000 1987
99 Wyntrace Apartments Multifamily Townhouse 180 1971
100 Newton Towers Apartments Multifamily Garden Apartments 141 1963
101 Four Points Hotel by ITT
Sheraton Hospitality Full Service 188 1992
102 Mountvue Place Retail Mixed Use 58,996 1977
103 Rivermill Apartments Multifamily Multifamily 136 1985
104 Village Square Apartments Multifamily Multifamily 92 1985
105 Sandy Ridge Square Shopping
Center Retail Anchored Retail 56,943 1995
106 Americana Northridge Apartments Multifamily Garden Apartments 114 1994
107 Waterdam Centre Shopping Plaza Retail Anchored Retail 44,800 1997
108 Thorn Run Crossing Shopping Center Retail Unanchored Retail 47,363 1996
109 LabCorp Industrial Flex 72,296 1997
110 Kings Crossing Apartments Multifamily Garden Apartments 144 1997
111 American Transtech, Inc.
Communication Building Office Single Tenant 67,808 1997
112 Cedar Point Plaza Retail Unanchored Retail 78,782 1975
113 Westbrooke Village Apartments Multifamily Garden Apartments 312 1974
114 Briggs Chaney Center Retail Unanchored Retail 43,828 1987
115 Parkside at Westminster Multifamily Multifamily 64 1991
116 Copley Place Apartments Multifamily Garden Multifamily 158 1995-1997
117 Best Buy Yorba Linda Retail Single Tenant 46,449 1997
118 Kingsbrook Estates Mobile
Home Park Mobile Home Park Mobile Home Park 233 1988
119 Pineloch Estates Multifamily Other 52 1992-1994
120 Monaco Park Apartments Multifamily Multifamily 180 1990
121 Walden Point Multifamily Garden Apartments 229 1997
122 950 Franklin Multifamily Multi Tenant 57 1995
123 Huntley Square Retail Unanchored Retail 82,103 1988
124 Enclave at Renaissance Apartments Multifamily Garden Apartments 56 1996
125 Suburban Lodge Jeffersontown Hospitality Hotel 144 1997
126 Wacker Plaza Retail Unanchored Retail 67,326 1990
127 Kona Kai Apartments Multifamily Garden Apartments 98 1997
128 Oleander Business Center Office Suburban Office 62,474 1998
129 Seymour Franks Woodworking, LLC. Industrial Light Industrial 160,254 1970
130 Highlandtown Village Retail Unanchored Retail 56,109 1987
131 Sunrise at Atascocita Multifamily Multifamily 141 1984
132 2-8 East Dennison Parkway,
21-23 East First Street Office Suburban Office 42,187 1989
133 Hickory Ridge Shopping Center Retail Unanchored Retail 128,369 1994
134 Grant-Academy Shopping Center Retail Grocery Anchored Retail 71,358 1994
135 Edgetowne Square Office Suburban Office 53,510 1978
136 Walgreen - Kentucky Retail Box Retail 13,905 1996
137 Georgetown Square II Office Suburban Office 71,063 1995
138 The Farm Office and Shopping
Center Retail Mixed Use 94,047 1987
139 17171 Gale Avenue Office Suburban Office 49,280 1986
140 Wenatchee-The Fair Market Retail Single Tenant 61,761 1993
141 Mel Kay/Burt Estates Mobile
Home Park Mobile Home Park Mobile Home Park 242 1981
</TABLE>
II-12
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State Zipcode
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
142 Northridge Apartments 15416 - 40th Avenue West Lynnwood WA 98036
143 The Vida Apartments 235 South 15th Street Philadelphia PA 19107
144 Lucky Center Hwy 29 & Lincoln Center Napa CA 94558
145 Dicks Sporting Goods 234 N. Springboro Pike Miamisburg OH 45342
146 Plaza del Sol 4688-90 Convoy Street San Diego CA 92111
147 Gateway Park Shopping Center 665-687 S Lake Powell Boulevard Page AZ 86040
148 Tower Associates of Wayne, Inc 1501 Hamburg Turnpike Wayne NJ 07470
149 Riverdale Towne Apartments 6822 Riverdale Road Lanham MD 20737
150 Calusa Shops Kendall Drive and SW 127th Avenue Kendall FL 33186
151 Broadway Plaza East 3707, 3717, & 3757 East Broadway Road Phoenix AZ 85040
152 Hunter Plaza 600-602 East Cooper Avenue Aspen CO 81611
153 Silver Maple Apartments 134 Fox Run Drive Delaware OH 43015
154 Flint Village Plaza 933 Pleasant Street Fall River MA 02723
155 Fox Chase Apartments 364-394 Jamesway Drive Marion OH 43302
156 Fredericksburg Square
Shopping Center 3903-3955 Fredericksburg Road San Antonio TX 78201
157 North Point Shopping Center 4535 Fredericksburg Road San Antonio TX 78201
158 Pine Highland Apartments 141 Sunburst Lane Pineville LA 71360
159 Huntington Commons Apartment
Complex 122 Sycamore Manchester CT 06040
160 Avis Rent-A-Car Garage 675 Post Street San Francisco CA 94109
161 Cimarron Place Apartments 4136 East 52nd Street Odessa TX 78762
162 Best Western Desert Aire 1021 S. White Sands Boulevard Alamogordo NM 88310
163 Maple Canyon 2093 Hampstead Drive Columbus OH 43229
164 Fairfield Inn 7425 West Chandler Boulevard Chandler AZ 85226
165 Park Villa Apartments 4220 Reily Lane Shreveport LA 71105
166 Cornell North Industrial 1945-1965 N. Cornell Avenue & 3415 W. North Avenue Melrose Park IL 60160
167 Village Square Shopping Center 11105-11151 Patrick Henry Highway Amelia VA 23002
168 Town Corral Shopping Center 1012 N. Bermuda Avenue Kissimmee FL 34741
169 King Plaza Retail Center 2507-2527 S. King Road San Jose CA 95122
170 Crooked Creek Shopping Center 7818-7880 N. Michigan Road Indianapolis IN 46240
171 Lowe's Food Store, Grandfather
Center 4000 NC Hwy 105 at Hwy 184 Linville NC 28604
172 Taylors Landing 2490 West 4700 South Taylorsville City UT 84118
173 Tahitian Terrace Mobile Home Park NEC of Pacific Coast Hwy & Temescal Canyon Road Pacific Palisades CA 90272
174 Springdale Promenade 11332 Princeton Pike Springdale OH 45246
175 West Wind Apartments:
Phase I & II 5200 Block Old Zuck Road Millcreek PA 16506
176 Tanglewood Terrace Apartments 2114 Shreveport Highway Pineville LA 71360
177 Southside Plaza 718 - 740 Foote Avenue Jamestown NY 14701
178 Wynridge Apartments 425 Lake Drive Marietta GA 30354
179 Valley West Shopping Center 5000 Valley West Boulevard Arcata CA 95521
180 Market Square Shopping Center 1700 South Cannon Boulevard Kannapolis NC 28083
181 Meridian Mansions, Corporate
Suites Apartments 1309 North Merdian Avenue Oklahoma City OK 73107
182 Uptown Shopping Center 4800 Line Avenue Shreveport LA 71106
183 Woodside Glen Apartments 311 North College Street Woodland CA 95695
184 Super 8 Motels 5888 North Broadway Denver CO 80216
185 Fallbrook Towne Centre 1081-1099, 1103-1129, 1135 S. Mission Boulevard Fallbrook CA 92028
186 Stow-A-Way Self Storage 1519 West Lugonia Avenue Redlands CA 92374
187 555 Passaic Avenue (Regency Plaza) 555 Passaic Avenue West Caldwell NJ 07006
188 Midtown Plaza Shopping Center 3201-3285 East Shields Avenue Fresno CA 93726
<CAPTION>
(table continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. Property Name Type Sub-Type Units/NSF Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
142 Northridge Apartments Multifamily Garden Apartments 64 1996
143 The Vida Apartments Multifamily Multifamily 58 1936
144 Lucky Center Retail Grocery Anchored Retail 65,379 1998
145 Dicks Sporting Goods Retail Box Retail 76,128 1987
146 Plaza del Sol Retail Unanchored Retail 49,953 1974
147 Gateway Park Shopping Center Retail Grocery Anchored Retail 81,519 1991
148 Tower Associates of Wayne, Inc Office Suburban Office 33,453 1986
149 Riverdale Towne Apartments Multifamily Multifamily 142 1965
150 Calusa Shops Retail Unanchored Retail 23,864 1985
151 Broadway Plaza East Industrial Warehouse 136,572 1981
152 Hunter Plaza Retail Mixed Use 13,030 1987
153 Silver Maple Apartments Multifamily Townhouse 128 1993
154 Flint Village Plaza Retail Unanchored Retail 45,000 1987
155 Fox Chase Apartments Multifamily Garden Apartments 116 1992
156 Fredericksburg Square
Shopping Center Retail Unanchored Retail 31,488 1978
157 North Point Shopping Center Retail Unanchored Retail 29,328 1978
158 Pine Highland Apartments Multifamily Garden Apartments 248 1979
159 Huntington Commons Apartment
Complex Multifamily Multifamily 105 1967
160 Avis Rent-A-Car Garage Garage Garage 46,707 1983
161 Cimarron Place Apartments Multifamily Garden Apartments 196 1997
162 Best Western Desert Aire Hospitality Limited Service 100 1996
163 Maple Canyon Multifamily Townhouse 134 1995
164 Fairfield Inn Hospitality Limited Service 66 1995
165 Park Villa Apartments Multifamily Garden Apartments 129 1990
166 Cornell North Industrial Industrial Low Finish Industrial 149,348 1992
167 Village Square Shopping Center Retail Anchored Retail 65,450 1996
168 Town Corral Shopping Center Retail Anchored Retail 81,120 1994
169 King Plaza Retail Center Retail Unanchored Retail 16,443 1988
170 Crooked Creek Shopping Center Retail Unanchored Retail 51,028 1988
171 Lowe's Food Store, Grandfather
Center Retail Anchored Retail 39,714 1996
172 Taylors Landing Office Mixed Use 45,803 1984
173 Tahitian Terrace Mobile Home Park Mobile Home Park Other 158 1962
174 Springdale Promenade Retail Unanchored Retail 23,552 1990
175 West Wind Apartments:
Phase I & II Multifamily Multifamily 49 1995
176 Tanglewood Terrace Apartments Multifamily Garden Apartments 152 1995
177 Southside Plaza Retail Anchored Retail 59,640 1956
178 Wynridge Apartments Multifamily Garden Apartments 104 1992
179 Valley West Shopping Center Retail Anchored Retail 98,975 1979
180 Market Square Shopping Center Retail Anchored Retail 47,940 1989
181 Meridian Mansions, Corporate
Suites Apartments Multifamily Multifamily 114 1997
182 Uptown Shopping Center Retail Anchored Retail 124,957 1964
183 Woodside Glen Apartments Multifamily Garden Apartments 72 1986
184 Super 8 Motels Hospitality Motel 106 1993
185 Fallbrook Towne Centre Retail Shadow Retail 30,263 1985
186 Stow-A-Way Self Storage Self Storage Self Storage 589 1979
187 555 Passaic Avenue (Regency Plaza) Retail Unanchored Retail 21,732 1988
188 Midtown Plaza Shopping Center Retail Unanchored Retail 46,807 1978
</TABLE>
II-13
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State Zipcode
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
189 The Fountain Head Manufactured
Housing Park 1 Rose Drive Jackson NJ 08527
190 Iron Place Warehouse 6621 Iron Place Springfield VA 22151
191 Greenbrier Apartments/Townhouses 8500 to 8650 West 85th Street Overland Park KS 66212
192 Village of Melrose Park 8315 West North Avenue Melrose Park IL 60160
193 Duxbury Marketplace 15-45 Depot Street Duxbury MA 02331
194 Glen Iris Lofts 650 Glen Iris Drive Atlanta GA 30308
195 Walgreen - Oklahoma 7111 South Lewis Avenue Tulsa OK 74136
196 Royalgate & Timberwood Apartments 1711 & 1702 Gessner Road Houston TX 77080
197 Days Inn - Central 620 Federal Boulevard Denver CO 80204
198 Hermitage Apartments 5702 Jackson Street Extension Alexandria LA 71303
199 Augusta Commons 2222 Augusta Road Greenville SC 29605
200 Lock-N-Key Mini Storage 5215 Dixie Highway Louisville KY 40216
201 Morgantown Plaza Shopping Center 435 U.S. Hwy. 61 North Natchez MS 39120
202 Woodland Park Shopping Center 11398 Westheimer Road Houston TX 77077
203 Walgreens SWC US 92/Combee Road Lakeland FL 33813
204 190-210 Sylvan Avenue 190-210 Sylvan Avenue Englewood Cliffs NJ 07632
205 Park Apartments 3807 Half Turn Drive Colorado Springs CO 80917
206 Wendy's, Friendly's, & Citizens
Bank 125, 141, and 149 Daniel Webster Highway Nashua NH 03060
207 Milford Post Plaza 321 Post Road and 326/344 West Main Street Milford CT 06460
208 Rite Aid - Ohio 600 N. Main Street Akron OH 44310
209 Gull Cove Apartments 606 Park Avenue Orange Park FL 32073
210 Dodge Crossing 2-6 Enon Street (aka. Route 1A) Beverly MA 01915
211 Sutter Pointe Plaza Shopping
Center 27737 Bouquet Canyon Road Santa Clarita CA 91380
212 Crystal Downs Mobile Village 2701 Crystal Lake Road Whitehall Township MI 49461
213 Twin Pines Mobile Home Park 2701 Calhoun Road Sheridan Township MI 49224
214 Mountain View Estates 1320 San Bernadino Road Upland CA 91786
215 The Sunflower Apartments 1500 E Fremont Street Las Vegas NV 89101
216 White Lane Plaza Shopping Center 1400-1550 White Lane Bakersfield CA 93307
217 Ledgemere Plaza 300 Eliot Street Ashland MA 01721
218 Econo Lodge Motel 11300 NW Praire View Road Kansas City MO 64153
219 38500-58680 Michigan Ave. &
3736-69 Commerce Ct. 38500 Michigan Avenue Wayne MI 48184
220 Biocell Laboratories 2015 East University Drive Rancho Dominguez CA 90220
221 The Crossings Apartments 101 - 148 Park Meadow Drive Elyria OH 44035
222 Tanglewood West 3959 Electric Road SW Roanoke VA 24018
223 Park Trails Apartments 4511-4545 West 36 1/2 Street Saint Louis Park MN 55419
224 GSK Office Building 9414 N. 25th Street Phoenix AZ 85021
225 Glenwood Trace Apartments 1001 Glenwood Drive West Monroe LA 71291
226 The Marina Dune Apartments 3104, 3106 & 3108 Lake Drive Marina CA 93933
227 La Miradora Apartments 17609 North 19th Avenue Phoenix AZ 85023
228 1106 Smith Road 1106 Smith Road Austin TX 78721
229 Los Robles Medical Center 15215 National Avenue Los Gatos CA 95032
230 Chatham Mall Shopping Center 650 Shunpike Road Chatham Township NJ 07928
231 Lamp Lighter Mobile Home
Park-Canon City 722 East Third Street Canon City CO 80018
232 Alpine Village Mobile Home Park-Floren722 East Third Street Florence CO 80018
233 Maple Hill Mobile Home Park 315 Parkview Road Bowling Green OH 43402
234 Ashment Shopping Center 2385 East 17th Street Idaho Falls ID 83404
235 Nicholson Corner 5542-5550 Nicholson Lane Rockville MD 20852
<CAPTION>
(table continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. Property Name Type Sub-Type Units/NSF Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
189 The Fountain Head Manufactured
Housing Park Mobile Home Park Mobile Home Park 160 1978
190 Iron Place Warehouse Industrial Low Finish Industrial 70,670 1997
191 Greenbrier Apartments/Townhouses Multifamily Multifamily 80 1967
192 Village of Melrose Park Retail Single Tenant 87,000 1990
193 Duxbury Marketplace Retail Unanchored Retail 36,504 1974-1984
194 Glen Iris Lofts Multifamily High Rise Multifamily 35 1997
195 Walgreen - Oklahoma Retail Box Retail 13,905 1996
196 Royalgate & Timberwood Apartments Multifamily Multifamily 122 1962
197 Days Inn - Central Hospitality Motel 142 1995
198 Hermitage Apartments Multifamily Garden Apartments 119 1995
199 Augusta Commons Retail Unanchored Retail 23,276 1988
200 Lock-N-Key Mini Storage Self Storage Self Storage 644 1986
201 Morgantown Plaza Shopping Center Retail Anchored Retail 92,580 1982
202 Woodland Park Shopping Center Retail Unanchored Retail 75,620 1984
203 Walgreens Retail Single Tenant 15,930 1997
204 190-210 Sylvan Avenue Office Suburban Office 55,013 1998
205 Park Apartments Multifamily Garden Multifamily 102 1988
206 Wendy's, Friendly's, & Citizens
Bank Retail Unanchored Retail 10,938 1986
207 Milford Post Plaza Office Mixed Use 83,161 1988
208 Rite Aid - Ohio Retail Anchored Retail 16,500 1996
209 Gull Cove Apartments Multifamily Garden Apartments 104 1994
210 Dodge Crossing Retail Unanchored Retail 32,543 1989
211 Sutter Pointe Plaza Shopping
Center Retail Unanchored Retail 41,896 1989
212 Crystal Downs Mobile Village Mobile Home Park Mobile Home Park 104 1972
213 Twin Pines Mobile Home Park Mobile Home Park Mobile Home Park 73 1972
214 Mountain View Estates Mobile Home Park Mobile Home Park 69 1980
215 The Sunflower Apartments Multifamily Multifamily 129 1980
216 White Lane Plaza Shopping Center Retail Shadow Retail 40,687 1985
217 Ledgemere Plaza Retail Unanchored Retail 34,021 1997
218 Econo Lodge Motel Hospitality Limited Service 59 1986
219 38500-58680 Michigan Ave. &
3736-69 Commerce Ct. Industrial Industrial 59,200 1990
220 Biocell Laboratories Industrial Light Industrial 36,526 1986
221 The Crossings Apartments Multifamily Garden Multifamily 144 1978
222 Tanglewood West Office Suburban Office 54,151 1996
223 Park Trails Apartments Multifamily Garden Multifamily 120 1994
224 GSK Office Building Office Suburban Office 31,530 1985
225 Glenwood Trace Apartments Multifamily Garden Apartments 120 1991
226 The Marina Dune Apartments Multifamily Garden Multifamily 47 1979
227 La Miradora Apartments Multifamily Garden Multifamily 55 1984
228 1106 Smith Road Industrial High Finish Industrial 52,707 1996
229 Los Robles Medical Center Office Medical Office 19,961 1976
230 Chatham Mall Shopping Center Retail Anchored Retail 39,070 1997
231 Lamp Lighter Mobile Home
Park-Canon City Mobile Home Park Mobile Home Park 139 1974
232 Alpine Village Mobile Home Park-Floren Mobile Home Park Mobile Home Park 66 1971
233 Maple Hill Mobile Home Park Mobile Home Park Mobile Home Park 179 1989
234 Ashment Shopping Center Retail Single Tenant 17,436 1995
235 Nicholson Corner Retail Unanchored Retail 22,926 1998
</TABLE>
II-14
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State Zipcode
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
236 Equestrian Centre 12020 South Warner-Elliot Loop Phoenix AZ 85044
237 Walgreen's Drug 2200 East Pioneer Parkway Arlington TX 76010
238 Staples 3230 Clarendon Boulevard New Bern NC 28562
239 Winmont Apartments 2100 Tremont Street Philadelphia PA 19115
240 Rite Aid - Lincoln Main and High Streets Lincoln ME 04457
241 Masonic Building 415 Congress Street Portland ME 04101
242 Washington Square Shopping
Center Washington Street at West By-pass Gainesville GA 30501
243 Springfield Secure Storage
Facility 2750 Pheasant Boulevard Springfield OR 97477
244 Riverside Mini Storage 410 Earhart Street Medford OR 97501
245 Cherokee Hills Shopping Center 1241 Indian Trail-Lilburn Road Lilburn GA 30087
246 Country Acre Estates Mobile Home Park 2464 E. 29th Road Brookfield IL 61360
247 Overlea Shopping Center 6635-6665 Belair Road Baltimore MD 21206
248 Crystal Shores Apartments 340 - 450 Salem Drive & 450 - 455 Nantucket Drive Vermillion OH 44089
249 Lakeshore Place Apartments 144 Bellaire Avenue Dayton OH 45420
250 Super 8 Motel Kissimmee 5875 W. Irlo Bronson Highway Kissimmee FL 34746
251 US Forest Service Office Building 595 Industrial Way Estacada OR 97023
252 Office Building/Day Care 2951 86th Street Urbandale IA 50322
253 Lakeview Meadow Estates Townhomes 6200-6336; 6700-6706 Alissa Drive Rowlett TX 75088
254 Whispering Pines Apartments 145 Klondike Avenue Fitchburg MA 01420
255 United States Post Office 7 Commerical Way Middletown RI 02842
256 Studio Plaza Apartments 915 South Casino Center Boulevard Las Vegas NV 89101
257 Keoway Village Apartments 50 Keoway Drive Seneca SC 29678
258 Belleview Estates Apartments 4540 East Belleview Phoenix AZ 85008
259 Towne Plaza 150 Towne Lake Parkway Woodstock GA 30188
260 State Office Building 1050 South 500 West Brigham City UT 84302
261 Fort Mott Village Apartments 20 Fort Sumpter Road Pennsville NJ 08070
262 Brigham Road Apartments 100 Brigham Road Fredonia NY 14063
263 87 Northpointe Drive 87 Northpointe Drive Orion Township MI 48360
264 Clough Shops 545 Clough Pike Union Township OH 45245
265 Crain Professional Center 1406 - B Crain Highway Glen Burnie MD 21060
266 Maple Crest Manor Mobile Home Park 550 Birch Street Manteno IL 61360
267 Bayberry Apartments Beaver Street @ Fourth Street Beaver PA 15059
268 Landmark II 5820 Veterans Parkway Columbus GA 31904
269 Magnolia Hall Apartments 756 Mimosa Boulevard Roswell GA 30075
270 Multi-Tenant Industrial Project 18411 & 18421 Gothard Huntington Beach CA 92648
271 Converse Corners Shopping Center 551 East Main Street Spartanburg SC 29302
272 162 Northpointe Drive 162 Northpointe Drive Orion Township MI 48360
273 West Oaks Center 2808 Highway 6 South Houston TX 77082
274 Zia Self Stor-All 4012 and 4128 N Grimes Hobbs NM 88240
275 Lappin Lighting/ Boarman & Assoc.
Building 100-127 North 3rd Avenue Minneapolis MN 55401
276 Darby House Apartments 18407 Dearborn Street Northridge CA 91325
277 Sony Centre 2240 North Scottsdale Road Tempe AZ 85281
278 Misty Hollow Apartments 2747 LA Hwy 28 East Pineville LA 71360
279 Bay State Building 11 Lawrence Street Lawrence MA 01840
280 Vienna Square Apartments 302 NE 64th Street Gladstone MO 64118
281 Seven Palms Apartments 8800 W. Sample Road Coral Springs FL 33065
282 Parkchester Apartments 200 Cleco Drive Pineville LA 71360
<CAPTION>
(table continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. Property Name Type Sub-Type Units/NSF Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
236 Equestrian Centre Retail Unanchored Retail 27,459 1987
237 Walgreen's Drug Retail Single Tenant 13,905 1996
238 Staples Retail Other Anchored Retail 24,000 1996
239 Winmont Apartments Multifamily Garden Apartments 82 1960
240 Rite Aid - Lincoln Retail Box Retail 11,180 1997
241 Masonic Building Office Downtown Office 41,860 1912
242 Washington Square Shopping
Center Retail Unanchored Retail 63,361 1997
243 Springfield Secure Storage
Facility Self Storage Self Storage 418 1994
244 Riverside Mini Storage Self Storage Self Storage 699 1980
245 Cherokee Hills Shopping Center Retail Unanchored Retail 24,135 1986
246 Country Acre Estates Mobile Home Park Manufactured Housing Mobile Home Park 124 1974
247 Overlea Shopping Center Retail Anchored Retail 37,090 1950
248 Crystal Shores Apartments Multifamily Garden Multifamily 102 1972-1973
249 Lakeshore Place Apartments Multifamily Garden Multifamily 57 1976
250 Super 8 Motel Kissimmee Hospitality Motel 60 1984
251 US Forest Service Office Building Office Single Tenant 15,220 1997
252 Office Building/Day Care Office Suburban Office 18,881 1995
253 Lakeview Meadow Estates Townhomes Multifamily Multifamily 28 1984
254 Whispering Pines Apartments Multifamily Multifamily 90 1967
255 United States Post Office Retail Other 10,567 1996
256 Studio Plaza Apartments Multifamily Multifamily 75 1978
257 Keoway Village Apartments Multifamily Garden Apartments 80 1970
258 Belleview Estates Apartments Multifamily Garden Multifamily 42 1981
259 Towne Plaza Retail Unanchored Retail 28,000 1989
260 State Office Building Office Single Tenant 19,807 1996
261 Fort Mott Village Apartments Multifamily Multifamily 72 1996
262 Brigham Road Apartments Multifamily Multifamily 104 1972
263 87 Northpointe Drive Industrial Light Industrial 28,635 1997
264 Clough Shops Retail Unanchored Retail 23,158 1989
265 Crain Professional Center Office Suburban Office 26,970 1991
266 Maple Crest Manor Mobile Home Park Mobile Home Park Mobile Home Park 108 1966
267 Bayberry Apartments Multifamily Garden Multifamily 35 1990-1997
268 Landmark II Office Suburban Garden Office 29,596 1988
269 Magnolia Hall Apartments Multifamily Garden Apartments 48 1964
270 Multi-Tenant Industrial Project Industrial Industrial 44,350 1985
271 Converse Corners Shopping Center Retail Unanchored Retail 20,884 1995
272 162 Northpointe Drive Industrial Light Industrial 27,685 1997
273 West Oaks Center Retail Shadow Retail 9,600 1997
274 Zia Self Stor-All Self Storage Self Storage 541 1982
275 Lappin Lighting/ Boarman & Assoc.
Building Office Suburban Office 24,300 1988
276 Darby House Apartments Multifamily Garden Apartments 36 1993
277 Sony Centre Retail Unanchored Retail 19,827 1980
278 Misty Hollow Apartments Multifamily Garden Apartments 80 1996
279 Bay State Building Office CBD Office 75,363 1974
280 Vienna Square Apartments Multifamily Multifamily 80 1965
281 Seven Palms Apartments Multifamily Garden Multifamily 40 1974
282 Parkchester Apartments Multifamily Garden Apartments 80 1979
</TABLE>
II-15
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan
No. Property Name Address City State Zipcode
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
283 Cascades at Lake St. George 3398 Tampa Road (S.R. 584) Palm Harbor FL 34684
284 Brodhead North Condominiums Brodhead Road @ Charity Avenue Center Township PA 15001
285 Greensboro-Wendover Phase-I 3408 - 3410 W. Wendover Road Greensboro NC 27047
286 Greensboro- Wendover Phase-2 3400-02, -04 W. Wendover Avenue Greensboro NC 27047
287 The Sandpiper Cove Apartments 537-551 Cleveland Road West Huron OH 44839
288 The Southwyck Manor Apartments 1442-1454 West River Road Elyria OH 44035
289 Home Depot Center 24338 El Toro Road Laguna Hills CA 92653
290 Forest Hills Rest Home 4234 Camden Road Fayetteville NC 28306
291 Lakeside Village Apartments 301 W. Kirby Street Wylie TX 75098
292 Southern Oaks Apartments 1111 W. 70th Street Shreveport LA 71106
293 Mobile Acres Route 12 A Braintree VT 05060
294 520 Courtney Way 520 Courtney Way Lafayette CO 80026
295 Pine Point Apartment Complex #1 Pine Point Drive Bastrop TX 78602
296 1693 NE 54th Avenue 1693 N E 54th Avenue Des Moines IA 50313
297 French Riviera Apartments 12 NW 72nd Street Gladstone MO 64118
298 Lone Star Self Storage 3500 Melcer Rowlett TX 75088
299 Appaloosa Road Office Building 9740 Appaloosa Road San Diego CA 92131
300 Longwood Trade Center 400 Savage Court Longwood FL 32750
301 Fifth Avenue Court Apartments 2132 5th Avenue Seattle WA 98121
302 Patterson House Apartments 817-B Patterson Road Dayton OH 45419
303 The Bluffs Apartments 11-21 Sycamore Drive Norwalk OH 44857
304 Albany Secure Storage 3605 S. W. Pacific Boulevard Albany OR 97321
305 Westover Plaza 621-625 Main Street Union NY 13760
306 Panola Mercado 6125 Covington Highway Decatur GA 30035
307 Oxford Building 141 & 147 N. Meramec Avenue Clayton MO 63105
308 Villa St. Cyr Apartments 1059 St. Cyr Road Bellefontaine
Neighbors MO 63137
309 Olive Tree Plaza 535 East Southern Avenue Mesa AZ 85203
310 Hyde Park Apartments 1410 Hyde Park Boulevard Houston TX 77006
311 Bel Aire Apartments 800, 808, & 818 Tharp Street Arlington TX 76010
312 Davis Memorial Goodwill Industries 6700 Laurel-Bowie Road Bowie MD 20715
313 Centre Pointe Apartments 724 East Devonshire Phoenix AZ 85014
314 The Knight Apartments 2242 East Pinchot Avenue Phoenix AZ 85014
315 Continental Car Office Building 5585 & 5615 Pershing Avenue Saint Louis MO 63112
316 Twin Tower Apartments 471 Silver Street Manchester NH 03103
317 Westwind Apartments 112-114 West Prospect Avenue Ingram PA 15205
318 Shadow Center/Baytown Village
Center 4601 Garth Road Baytown TX 77521
319 Industrial Park Addison 31 Industrial Drive Addison IL 60101
320 Orchard Park Apartments 10852 Verhaven Lane Saint Louis MO 63114
321 Meadowbrook Apartments 1155-1175 North Elm Street &
930 Hostetler Road Orrville OH 44667
322 Keys West Apartments 510 South University Boulevard Norman OK 73069
<CAPTION>
(table continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Property Property Year Built/
No. Property Name Type Sub-Type Units/NSF Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
283 Cascades at Lake St. George Retail Unanchored Retail 13,858 1987
284 Brodhead North Condominiums Multifamily Garden Multifamily 31 1996
285 Greensboro-Wendover Phase-I Industrial Flex 67,950 1993
286 Greensboro- Wendover Phase-2 Industrial Flex 80,410 1982
287 The Sandpiper Cove Apartments Multifamily Garden Multifamily 96 1971-1974
288 The Southwyck Manor Apartments Multifamily Garden Multifamily 90 1972-1975
289 Home Depot Center Retail Shadow Retail 7,505 1997
290 Forest Hills Rest Home Nursing Home/Assisted Living Assisted Living 47 1995
291 Lakeside Village Apartments Multifamily Multifamily 76 1984
292 Southern Oaks Apartments Multifamily Garden Apartments 110 1970
293 Mobile Acres Mobile Home Park Mobile Home Park 96 1969
294 520 Courtney Way Industrial High Finish Industrial 16,760 1997
295 Pine Point Apartment Complex Multifamily Multifamily 56 1986
296 1693 NE 54th Avenue Industrial Industrial 41,600 1994
297 French Riviera Apartments Multifamily Multifamily 56 1965
298 Lone Star Self Storage Self Storage Self Storage 314 1995
299 Appaloosa Road Office Building Office Single Tenant 15,275 1980
300 Longwood Trade Center Industrial Low Finish Industrial 39,800 1981-1983
301 Fifth Avenue Court Apartments Multifamily Garden Multifamily 31 1990
302 Patterson House Apartments Multifamily Garden Multifamily 67 1966
303 The Bluffs Apartments Multifamily Garden Multifamily 72 1972-1979
304 Albany Secure Storage Self Storage Self Storage 367 1990
305 Westover Plaza Retail Unanchored Retail 22,799 1993
306 Panola Mercado Retail Unanchored Retail 17,527 1982-1987
307 Oxford Building Office Medical Office 43,107 1990
308 Villa St. Cyr Apartments
Multifamily Garden Multifamily 60 1966
309 Olive Tree Plaza Retail Unanchored Retail 16,000 1981
310 Hyde Park Apartments Multifamily Multifamily 37 1962
311 Bel Aire Apartments Multifamily Multifamily 91 1985
312 Davis Memorial Goodwill Industries Retail Unanchored Retail 10,315 1997
313 Centre Pointe Apartments Multifamily Garden Multifamily 54 1984
314 The Knight Apartments Multifamily Garden Multifamily 54 1945 -1967
315 Continental Car Office Building Office Suburban Office 22,564 1984
316 Twin Tower Apartments Multifamily Multifamily 32 1986
317 Westwind Apartments Multifamily Garden Multifamily 36 1991-1997
318 Shadow Center/Baytown Village
Center Retail Shadow Retail 8,368 1997
319 Industrial Park Addison Industrial Light Industrial 45,000 1978
320 Orchard Park Apartments Multifamily Garden Multifamily 44 1966
321 Meadowbrook Apartments
Multifamily Garden Multifamily 54 1972
322 Keys West Apartments Multifamily Multifamily 40 1974
</TABLE>
II-16
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Two Chatham Center $4,409,050 $279,991 1.31 $56,000,000 3/10/98 74.9% 99.3% 2/16/98
2 Eastridge Mall $5,562,617 $232,485 1.38 $60,000,000 4/15/98 51.5% 57.8% 3/31/98
3 Eastridge Mall $5,562,617 $104,294 1.38 $60,000,000 4/15/98 51.5% 57.8% 3/31/98
4 Phoenix Inn - Beaverton $735,459 $39,762 1.43 $6,800,000 10/6/97 69.7% 91.5% 2/28/98
5 Phoenix Inn - Vancouver $722,440 $36,862 1.43 $6,300,000 10/8/97 69.7% 78.3% 2/28/98
6 Phoenix Inn - Salem $557,047 $33,963 1.43 $5,700,000 9/30/97 69.7% 72.7% 3/1/98
7 Phoenix Inn - Lake Oswego $458,818 $27,336 1.43 $4,400,000 10/2/97 69.7% 85.8% 3/31/98
8 Phoenix Inn - Tigard $411,095 $24,230 1.43 $3,900,000 10/6/97 69.7% 87.3% 4/6/98
9 Phoenix Inn - Eugene $444,178 $24,034 1.43 $4,600,000 9/30/97 69.7% 90.2% 4/6/98
10 Phoenix Inn - Wilsonville $253,738 $23,194 1.43 $3,775,000 10/2/97 69.7% 66.9% 2/28/98
11 Piazza Carmel Shopping
Center $1,885,876 $124,772 1.26 $24,500,000 2/18/98 73.2% 95.1% 1/19/98
12 Shrewsbury Plaza $1,731,747 $115,010 1.25 $19,800,000 12/23/97 76.4% 98.4% 2/13/98
13 La Mirada $1,780,493 $102,173 1.45 $21,300,000 10/8/97 70.2% 97.0% 4/20/98
14 Crossroads Shopping Center $1,874,772 $76,777 1.57 $23,000,000 4/14/98 62.4% 92.8% 1/1/98
15 Crossroads Shopping Center $1,874,772 $22,482 1.57 $23,000,000 4/14/98 62.4% 92.8% 1/1/98
16 Residence Inn $596,084 $31,100 1.60 $5,700,000 12/24/97 65.4% 88.9% 10/31/97
17 Fairfield Inn $539,306 $28,122 1.60 $5,000,000 12/24/97 67.4% 90.6% 10/31/97
18 Fairfield Inn $357,205 $21,092 1.41 $3,850,000 12/24/97 65.7% 81.2% 8/1/97
19 Fairfield Inn $396,416 $20,844 1.58 $3,880,000 12/24/97 64.5% 85.9% 8/1/97
20 Residence Inn $332,409 $17,370 1.59 $4,200,000 12/17/97 49.6% 61.2% 8/1/97
21 University Village $1,492,922 $93,552 1.33 $17,000,000 8/18/97 79.2% 100.0% 12/12/97
22 Coffey Creek Apartments $1,654,837 $103,937 1.33 $23,435,000 2/4/98 57.2% 93.1% 2/28/98
23 East Gate Square Phase IV $1,662,114 $87,857 1.58 $17,000,000 2/6/98 78.4% 100.0% 1/1/98
24 Treybrooke Apartments $1,541,599 $83,290 1.54 $17,000,000 4/7/98 74.9% 96.7% 3/29/98
25 Embassy Suites Hotel $1,551,338 $91,904 1.41 $20,000,000 9/30/97 59.6% 77.8% 8/26/96
26 Oxnard Redhill Partners $1,248,742 $76,854 1.35 $14,800,000 1/9/98 74.9% 97.1% 4/28/98
27 1155 Market Street $1,152,844 $74,568 1.29 $17,800,000 12/26/97 62.2% 99.8% 1/31/98
28 Bluffs III $1,303,429 $76,854 1.41 $14,900,000 10/13/97 74.3% 100.0% 2/1/98
29 Riverfront Technical Park $1,280,759 $81,617 1.31 $14,700,000 10/1/97 74.8% 100.0% 9/1/97
30 Hampton Inn/Midway Airport $1,449,818 $80,463 1.50 $15,500,000 2/26/98 69.9% 90.1% 1/28/98
31 Commerce Place $1,104,611 $72,414 1.27 $18,800,000 12/2/97 55.7% 95.8% 4/1/98
32 JP Center $1,247,505 $71,879 1.45 $13,300,000 11/1/97 76.5% 100.0% 1/10/98
33 Vineyard Terrace Apartments $1,062,987 $67,363 1.31 $12,645,000 11/4/97 79.7% 97.4% 12/23/97
34 Perimeter Place Office
Building $1,129,727 $66,329 1.42 $13,500,000 4/6/98 74.0% 95.3% 3/15/98
35 Bourse Garage $896,998 $54,063 1.38 $9,425,000 10/22/97 79.7% 95.0% 2/3/98
36 Kevon Office Center $239,643 $17,639 1.13 $5,000,000 10/16/97 49.0% 99.6% 2/3/98
37 Sherman Plaza Retail Center $1,128,800 $66,389 1.42 $12,000,000 1/1/98 81.3% 100.0% 3/1/98
38 The Villas of Bon Vista
Apartments $575,873 $33,042 1.41 $6,666,230 1/9/98 74.6% 95.8% 2/24/98
39 Bon Vista $295,450 $18,494 1.41 $3,731,260 1/9/98 74.6% 93.7% 2/23/98
40 Barrington North Apartments $195,277 $11,413 1.41 $2,302,510 1/9/98 74.6% 100.0% 2/23/98
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Two Chatham Center Travelers 21.7%
2 Eastridge Mall J. C. Penney 25.7%
3 Eastridge Mall J. C. Penney 25.7%
4 Phoenix Inn - Beaverton
5 Phoenix Inn - Vancouver
6 Phoenix Inn - Salem
7 Phoenix Inn - Lake Oswego
8 Phoenix Inn - Tigard
9 Phoenix Inn - Eugene
10 Phoenix Inn - Wilsonville
11 Piazza Carmel Shopping
Center Vons 35.9%
12 Shrewsbury Plaza Marshall's 16.6%
13 La Mirada Walgreens 14.4%
14 Crossroads Shopping Center J. C. Penney 19.6%
15 Crossroads Shopping Center J. C. Penney 19.6%
16 Residence Inn
17 Fairfield Inn
18 Fairfield Inn
19 Fairfield Inn
20 Residence Inn
21 University Village CinemaStar Theaters 41.4%
22 Coffey Creek Apartments
23 East Gate Square Phase IV Barnes & Noble 33.6%
24 Treybrooke Apartments
25 Embassy Suites Hotel
26 Oxnard Redhill Partners Wickes Furniture 47.6%
27 1155 Market Street CCSF-PUC 28.7%
28 Bluffs III Digital Sound Pulse 60.2%
29 Riverfront Technical Park The Boeing Company 71.5%
30 Hampton Inn/Midway Airport
31 Commerce Place Department of Education 50.9%
32 JP Center Stop & Shop 62.9%
33 Vineyard Terrace Apartments
34 Perimeter Place Office
Building R.J. Griffin 16.6%
35 Bourse Garage Ritz Theatre 46.5%
36 Kevon Office Center Curtis Circulation 46.0%
37 Sherman Plaza Retail Center Michael's Crafts 37.0%
38 The Villas of Bon Vista
Apartments
39 Bon Vista
40 Barrington North Apartments
</TABLE>
II-17
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
41 Edgewater Development $1,329,601 $78,353 1.41 $13,000,000 4/17/98 70.6% 82.6% 12/31/97
42 4th Street Portfolio $1,094,546 $66,610 1.37 $12,010,000 7/15/97 73.1% 95.0% 1/1/98
43 Tamarack Trace Apartments $924,918 $58,434 1.32 $10,750,000 5/23/97 79.6% 100.0% 9/30/97
44 Ridgeway Industrial I $683,121 $39,010 1.45 $10,025,000 4/9/98 55.9% 100.0% 5/1/98
45 Ridgeway Industrial II $323,536 $18,795 1.45 $5,275,000 4/9/98 55.9% 100.0% 5/1/98
46 Indian Creek Apartments $786,443 $57,474 1.14 $10,500,000 10/16/97 79.7% 89.8% 3/25/98
47 Riverbend Distribution
Center $968,424 $55,944 1.44 $11,350,000 11/10/97 72.5% 100.0% 2/19/98
48 Baker Waterfront Plaza $872,768 $55,772 1.30 $11,500,000 3/31/98 71.2% 100.0% 5/1/98
49 The Blue Harbor Club
Apartments $1,342,384 $60,637 1.84 $15,830,000 12/8/98 50.4% 94.0% 10/31/97
50 Berkeley Business Center $1,090,035 $57,876 1.57 $12,000,000 10/28/97 66.4% 100.0% 11/1/97
51 Colonial Self Storage
- Arlington $233,643 $13,395 1.63 $2,539,500 11/20/97 65.5% 86.6% 12/8/97
52 Colonial Self Storage
- Andrews $290,360 $15,724 1.63 $3,100,000 11/23/97 65.5% 80.0% 12/9/97
53 Colonial Self Storage
- Coppell $327,013 $17,471 1.63 $4,400,000 11/21/97 65.5% 71.4% 10/28/97
54 Colonial Self Storage
- Loop $290,360 $11,648 1.63 $2,100,000 11/23/97 65.5% 95.3% 10/28/97
55 Mid - Rise Office Building $898,162 $54,030 1.39 $9,725,000 11/26/97 79.5% 89.4% 11/17/97
56 Barrington Place Development $842,095 $55,359 1.27 $10,930,000 1/1/98 70.1% 94.7% 1/16/98
57 Partridge Pointe Apartments $881,068 $50,690 1.45 $11,040,000 12/2/97 69.1% 95.0% 12/31/97
58 345 Underhill Boulevard $1,047,948 $62,267 1.40 $10,400,000 8/1/97 70.9% 100.0% 8/15/97
59 Lakeshore Apartments $802,980 $49,697 1.35 $9,170,000 11/14/97 79.8% 100.0% 11/30/97
60 Wilson Woods Apartments $773,978 $47,660 1.35 $9,500,000 11/12/97 75.6% 84.6% 2/19/98
61 Mill Street Plaza Building $1,111,905 $47,326 1.96 $13,100,000 12/9/97 53.3% 100.0% 1/1/98
62 Fallwood Apartments $795,105 $49,207 1.35 $8,800,000 12/4/97 79.0% 86.7% 11/30/97
63 Pinebrooke Center $729,968 $46,790 1.30 $8,855,000 11/27/97 77.8% 100.0% 3/1/98
64 Woodside Apartments $729,578 $45,195 1.35 $9,100,000 2/9/98 74.7% 98.1% 3/13/98
65 Poway Plaza $844,164 $47,151 1.49 $9,100,000 1/5/98 74.0% 93.9% 3/31/98
66 Holbrook - Spyglass $269,027 $16,036 1.33 $3,150,000 12/15/97 69.2% 85.6% 1/30/98
67 Holbrook - Heritage Park $257,316 $15,831 1.33 $3,600,000 12/17/97 69.2% 79.9% 1/30/98
68 Holbrook - Burl Park $193,813 $13,359 1.33 $2,875,000 12/17/97 69.2% 79.9% 10/2/97
69 University Townhouse
Apartments $733,778 $45,771 1.34 $8,880,000 12/22/97 74.7% 87.8% 1/16/98
70 Shadow Lake Mobile Home
Community $702,078 $44,562 1.31 $8,830,000 11/21/97 73.5% 93.8% 12/31/97
71 Regency Towers $768,457 $44,351 1.44 $8,100,000 10/1/97 79.3% 99.4% 1/10/98
72 Polo Plaza $689,848 $45,674 1.26 $9,330,000 12/2/97 68.5% 98.0% 12/2/97
73 South Cove Apartments $886,962 $47,702 1.55 $8,810,000 12/5/97 70.7% 92.5% 11/1/97
74 Jefferson Townhome Apartments $737,169 $46,222 1.33 $8,400,000 10/15/97 73.3% 95.1% 4/28/98
75 Holiday Inn - Livermore $722,792 $45,202 1.33 $8,800,000 11/21/97 69.7% 69.6% 12/31/97
76 Riverbend Apartments $732,515 $39,356 1.55 $8,250,000 11/4/97 72.5% 89.8% 10/31/97
77 Beach Mobile Home Park $602,229 $39,213 1.28 $7,400,000 9/28/97 78.1% 98.1% 9/30/97
78 Kentucky Home Life Building $642,678 $40,833 1.31 $7,900,000 10/23/97 71.7% 92.1% 1/12/98
79 Ramada Resort and Conference
Center $1,092,074 $42,777 2.13 $10,500,000 1/28/98 53.2% 58.6% 11/30/97
80 Country Hills Health Center $1,454,444 $46,458 2.61 $14,000,000 10/20/97 39.7% 94.1% 10/20/97
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
41 Edgewater Development Metropolitan Life 73.9%
42 4th Street Portfolio Proline Golf 8.4%
43 Tamarack Trace Apartments
44 Ridgeway Industrial I ICI Acrylics 75.6%
45 Ridgeway Industrial II Priority Transportation, Inc. 85.1%
46 Indian Creek Apartments
47 Riverbend Distribution
Center MBM/Proficient Food Co. 52.7%
48 Baker Waterfront Plaza United States Postal Service 24.9%
49 The Blue Harbor Club
Apartments
50 Berkeley Business Center Orchard Supply Hardware 19.4%
51 Colonial Self Storage
- Arlington
52 Colonial Self Storage
- Andrews
53 Colonial Self Storage
- Coppell
54 Colonial Self Storage
- Loop
55 Mid - Rise Office Building Robert F. Driver Co. 52.3%
56 Barrington Place Development IUS 19.9%
57 Partridge Pointe Apartments
58 345 Underhill Boulevard GWD Holdings, Inc. 100.0%
59 Lakeshore Apartments
60 Wilson Woods Apartments
61 Mill Street Plaza Building Eddie Bauer 21.7%
62 Fallwood Apartments
63 Pinebrooke Center CCN 61.8%
64 Woodside Apartments
65 Poway Plaza VAT / Dixie Line 39.6%
66 Holbrook - Spyglass
67 Holbrook - Heritage Park
68 Holbrook - Burl Park
69 University Townhouse
Apartments
70 Shadow Lake Mobile Home
Community
71 Regency Towers
72 Polo Plaza Scalini Restaurant 13.4%
73 South Cove Apartments
74 Jefferson Townhome Apartments
75 Holiday Inn - Livermore
76 Riverbend Apartments
77 Beach Mobile Home Park
78 Kentucky Home Life Building Creative Alliance 13.4%
79 Ramada Resort and Conference
Center
80 Country Hills Health Center
</TABLE>
II-18
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
81 Porters Neck Shopping Center $677,195 $43,765 1.29 $7,515,000 11/17/97 73.3% 93.3% 1/1/98
82 Kern Valley Plaza $635,121 $36,646 1.44 $7,300,000 12/5/97 74.8% 95.6% 1/7/98
83 Comfort Inn Airport West $722,629 $44,072 1.37 $8,400,000 5/15/97 64.4% 88.0% 12/31/97
84 Sleep Inn/Midway Airport $742,962 $40,046 1.55 $9,500,000 2/26/98 56.8% 91.5% 3/5/98
85 Woods Apartments $607,559 $36,181 1.40 $7,100,000 3/25/98 75.9% 94.6% 4/7/98
86 Foothill Park Plaza $601,631 $39,285 1.28 $7,000,000 7/1/97 76.5% 79.7% 4/1/98
87 Yacht Club Apartments $596,125 $34,207 1.45 $6,775,000 11/4/97 76.7% 96.1% 10/31/97
88 Westbrook Manor $606,068 $36,554 1.38 $6,500,000 12/1/97 79.5% 95.9% 11/30/97
89 Kelsey Business Center $525,374 $34,177 1.28 $6,300,000 1/14/98 79.9% 100.0% 4/1/98
90 Dorchester Manor $1,088,156 $32,065 2.83 $10,850,000 3/4/98 46.1% 99.5% 1/31/98
91 Financial Plaza $533,207 $33,097 1.34 $7,280,000 11/12/97 68.6% 100.0% 4/21/98
92 Casa View Shopping Center $578,234 $37,015 1.30 $6,900,000 12/1/97 72.0% 92.0% 12/12/97
93 Shurgard of Factoria North $753,806 $36,140 1.74 $8,650,000 11/28/97 57.4% 86.5% 10/7/97
94 Space Park East $653,478 $40,599 1.34 $6,900,000 6/12/97 71.8% 100.0% 4/20/98
95 Best Buy Store $510,253 $34,134 1.25 $6,150,000 1/14/98 79.1% 100.0% 2/9/98
96 Chouteau Trace Apartments $514,659 $32,946 1.30 $6,100,000 1/23/98 78.8% 96.1% 1/30/98
97 Pinewood Apartments $598,612 $31,838 1.57 $6,500,000 2/12/98 73.7% 88.6% 3/23/98
98 70 Grand Avenue $596,861 $33,380 1.49 $6,000,000 11/7/97 78.0% 97.2% 11/1/97
99 Wyntrace Apartments $459,574 $32,801 1.17 $6,350,000 9/22/97 72.9% 97.2% 3/31/98
100 Newton Towers Apartments $668,878 $30,380 1.83 $7,620,000 11/17/97 60.7% 95.0% 12/31/97
101 Four Points Hotel by ITT
Sheraton $666,930 $33,814 1.64 $7,600,000 1/29/98 60.4% 82.4% 12/31/97
102 Mountvue Place $561,872 $31,038 1.51 $6,950,000 10/20/97 65.9% 90.1% 3/31/98
103 Rivermill Apartments $321,832 $18,272 1.47 $3,650,000 1/7/98 73.8% 90.4% 2/28/98
104 Village Square Apartments $205,354 $12,182 1.40 $2,750,000 1/7/98 65.3% 90.2% 3/9/98
105 Sandy Ridge Square Shopping
Center $481,359 $31,495 1.27 $5,600,000 10/21/97 80.0% 100.0% 3/31/98
106 Americana Northridge Apartments $500,685 $29,332 1.42 $6,500,000 10/26/97 67.5% 98.2% 2/3/98
107 Waterdam Centre Shopping Plaza $516,998 $31,889 1.35 $5,500,000 2/21/98 79.7% 100.0% 1/5/98
108 Thorn Run Crossing Shopping
Center $512,405 $30,525 1.40 $5,850,000 10/3/97 74.9% 93.0% 12/3/97
109 LabCorp $492,126 $35,365 1.16 $5,500,000 12/15/97 79.6% 100.0% 1/1/98
110 Kings Crossing Apartments $479,009 $31,224 1.28 $5,550,000 12/16/97 78.1% 97.9% 3/31/98
111 American Transtech, Inc.
Communication Building $623,971 $46,264 1.12 $6,540,000 12/17/97 65.5% 100.0% 1/21/96
112 Cedar Point Plaza $516,245 $31,133 1.38 $7,000,000 9/1/97 61.2% 97.4% 10/21/97
113 Westbrooke Village Apartments $614,067 $30,228 1.69 $6,800,000 12/6/97 62.1% 97.1% 12/30/97
114 Briggs Chaney Center $602,385 $29,829 1.68 $5,600,000 8/28/97 74.8% 100.0% 7/2/97
115 Parkside at Westminster $437,513 $28,339 1.29 $5,300,000 12/17/97 79.0% 100.0% 12/31/97
116 Copley Place Apartments $482,432 $29,062 1.38 $5,300,000 11/12/97 78.8% 94.3% 4/15/98
117 Best Buy Yorba Linda $468,247 $30,764 1.27 $5,200,000 11/19/97 78.5% 100.0% 3/31/98
118 Kingsbrook Estates Mobile
Home Park $423,339 $27,293 1.29 $5,460,000 12/31/97 74.7% 100.0% 12/23/97
119 Pineloch Estates $438,385 $26,532 1.38 $5,000,000 12/12/97 79.9% 98.1% 11/30/97
120 Monaco Park Apartments $480,094 $26,237 1.52 $5,200,000 11/4/97 76.7% 96.1% 10/31/97
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
81 Porters Neck Shopping Center Food Lion 45.0%
82 Kern Valley Plaza Vons Market 24.4%
83 Comfort Inn Airport West
84 Sleep Inn/Midway Airport
85 Woods Apartments
86 Foothill Park Plaza Home Savings of America 12.7%
87 Yacht Club Apartments
88 Westbrook Manor
89 Kelsey Business Center Olinger Distributing Co. 11.8%
90 Dorchester Manor
91 Financial Plaza Santa Barbara Flex (Gold's) 42.7%
92 Casa View Shopping Center Hancock Fabric 8.7%
93 Shurgard of Factoria North
94 Space Park East Southeastern Metals 11.8%
95 Best Buy Store Best Buy 100.0%
96 Chouteau Trace Apartments
97 Pinewood Apartments
98 70 Grand Avenue Peckar & Abramson 31.4%
99 Wyntrace Apartments
100 Newton Towers Apartments
101 Four Points Hotel by ITT
Sheraton
102 Mountvue Place Goodwill Industries 33.0%
103 Rivermill Apartments
104 Village Square Apartments
105 Sandy Ridge Square Shopping
Center Lowe's Food Stores, Inc. 80.0%
106 Americana Northridge Apartments
107 Waterdam Centre Shopping Plaza Eckerd Drug 26.8%
108 Thorn Run Crossing Shopping
Center Main Medical 9.7%
109 LabCorp LabCorp 100.0%
110 Kings Crossing Apartments
111 American Transtech, Inc.
Communication Building American Transtech 100.0%
112 Cedar Point Plaza Anthony's 9.7%
113 Westbrooke Village Apartments
114 Briggs Chaney Center Small Wonders Child Care 12.4%
115 Parkside at Westminster
116 Copley Place Apartments
117 Best Buy Yorba Linda Best Buy Co., Inc. 100.0%
118 Kingsbrook Estates Mobile
Home Park
119 Pineloch Estates
120 Monaco Park Apartments
</TABLE>
II-19
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
121 Walden Point $498,757 $31,301 1.33 $5,000,000 12/4/97 79.6% 84.3% 2/28/98
122 950 Franklin $435,326 $26,087 1.39 $6,030,000 12/17/97 65.2% 96.5% 2/24/98
123 Huntley Square $444,600 $28,476 1.30 $5,500,000 11/11/97 69.5% 94.7% 11/21/97
124 Enclave at Renaissance
Apartments $430,220 $25,543 1.40 $5,300,000 2/16/98 72.0% 92.9% 4/25/98
125 Suburban Lodge Jeffersontown $535,977 $30,139 1.48 $5,600,000 10/8/97 67.5% 83.0% 3/31/98
126 Wacker Plaza $500,849 $29,552 1.41 $6,175,000 1/9/98 58.9% 100.0% 12/1/97
127 Kona Kai Apartments $492,473 $24,030 1.71 $4,860,000 12/23/97 74.7% 98.0% 2/20/98
128 Oleander Business Center $425,726 $24,607 1.44 $4,970,000 1/7/98 72.3% 100.0% 4/1/98
129 Seymour Franks Woodworking,
LLC. $472,714 $27,619 1.43 $4,800,000 12/5/97 74.8% 100.0% 10/1/97
130 Highlandtown Village $466,086 $26,487 1.47 $4,800,000 7/25/97 74.5% 100.0% 7/7/97
131 Sunrise at Atascocita $439,375 $26,300 1.39 $4,650,000 11/20/97 76.9% 97.2% 9/30/97
132 2-8 East Dennison Parkway,
21-23 East First Street $418,113 $26,303 1.32 $4,770,000 11/13/97 74.7% 100.0% 1/12/98
133 Hickory Ridge Shopping Center $406,722 $25,314 1.34 $5,000,000 7/2/97 70.2% 90.5% 6/23/97
134 Grant-Academy Shopping Center $410,001 $24,209 1.41 $5,100,000 9/18/97 68.3% 97.1% 4/17/98
135 Edgetowne Square $452,039 $27,130 1.39 $5,000,000 6/11/97 69.6% 100.0% 6/6/97
136 Walgreen - Kentucky $380,514 $30,195 1.05 $4,340,000 12/7/97 79.3% 100.0% 12/20/97
137 Georgetown Square II $359,276 $22,894 1.31 $4,550,000 4/2/98 72.5% 100.0% 4/17/98
138 The Farm Office and Shopping
Center $421,261 $24,002 1.46 $4,600,000 2/5/98 71.6% 88.4% 3/31/98
139 17171 Gale Avenue $420,180 $24,344 1.44 $4,650,000 10/29/97 70.7% 97.2% 1/26/98
140 Wenatchee-The Fair Market $422,356 $32,052 1.10 $5,000,000 10/22/93 65.5% 100.0% 4/21/98
141 Mel Kay/Burt Estates Mobile
Home Park $355,413 $22,176 1.34 $4,100,000 10/13/97 79.6% 100.0% 12/5/97
142 Northridge Apartments $330,632 $22,259 1.24 $4,075,000 12/3/97 79.6% 98.4% 1/1/98
143 The Vida Apartments $371,591 $22,426 1.38 $3,650,000 10/21/97 88.2% 100.0% 11/18/97
144 Lucky Center $476,027 $21,247 1.87 $6,100,000 1/23/98 52.5% 100.0% NAP
145 Dicks Sporting Goods $387,546 $24,550 1.32 $4,300,000 10/10/97 74.2% 100.0% 12/1/97
146 Plaza del Sol $501,966 $24,910 1.68 $5,480,000 8/29/97 57.9% 79.3% 9/25/97
147 Gateway Park Shopping Center $398,509 $21,872 1.52 $5,100,000 3/16/98 61.2% 76.7% 2/1/98
148 Tower Associates of Wayne, Inc $344,056 $21,697 1.32 $4,200,000 11/25/97 73.7% 100.0% 4/1/98
149 Riverdale Towne Apartments $358,734 $22,347 1.34 $4,050,000 2/6/98 76.3% 93.7% 1/2/98
150 Calusa Shops $350,566 $21,619 1.35 $3,800,000 10/1/97 79.9% 100.0% 6/18/97
151 Broadway Plaza East $415,929 $23,416 1.48 $4,150,000 6/25/96 72.3% 89.9% 4/1/98
152 Hunter Plaza $586,692 $20,100 2.43 $7,300,000 1/27/98 41.0% 100.0% 4/1/98
153 Silver Maple Apartments $297,054 $21,534 1.15 $3,550,000 12/9/97 84.3% 91.4% 12/31/97
154 Flint Village Plaza $363,772 $21,607 1.40 $4,000,000 1/7/98 74.7% 100.0% 3/1/98
155 Fox Chase Apartments $290,949 $21,319 1.14 $3,750,000 12/9/97 78.9% 92.2% 11/30/97
156 Fredericksburg Square Shopping
Center $207,137 $11,007 1.36 $2,000,000 1/19/98 71.5% 94.1% 3/31/98
157 North Point Shopping Center $145,125 $10,596 1.36 $2,100,000 1/19/98 71.5% 71.3% 3/31/98
158 Pine Highland Apartments $515,488 $34,709 1.24 $5,100,000 11/17/97 57.1% 92.2% 3/31/98
159 Huntington Commons Apartment
Complex $330,968 $21,167 1.30 $3,800,000 2/20/98 76.1% 90.5% 2/17/98
160 Avis Rent-A-Car Garage $420,248 $19,310 1.81 $4,500,000 1/23/98 62.1% 100.0% 2/1/98
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
121 Walden Point
122 950 Franklin
123 Huntley Square Crafter's Showcase 12.3%
124 Enclave at Renaissance
Apartments
125 Suburban Lodge Jeffersontown
126 Wacker Plaza Western Auto 22.8%
127 Kona Kai Apartments
128 Oleander Business Center Law Engineering 12.8%
129 Seymour Franks Woodworking,
LLC. Seymour Franks Woodworking 100.0%
130 Highlandtown Village Santoni's 45.4%
131 Sunrise at Atascocita
132 2-8 East Dennison Parkway,
21-23 East First Street Corning- ASAHI 44.1%
133 Hickory Ridge Shopping Center Country Counter 22.7%
134 Grant-Academy Shopping Center Aldi Inc. 23.8%
135 Edgetowne Square Smith Steelite/Centria 68.9%
136 Walgreen - Kentucky Walgreens 100.0%
137 Georgetown Square II New Life Institute 7.6%
138 The Farm Office and Shopping
Center North American Savings 8.5%
139 17171 Gale Avenue County of Los Angeles 72.0%
140 Wenatchee-The Fair Market Associated Grocers, Inc. 100.0%
141 Mel Kay/Burt Estates Mobile
Home Park
142 Northridge Apartments
143 The Vida Apartments
144 Lucky Center Lucky/Savon 100.0%
145 Dicks Sporting Goods Dicks Clothing & Sporting
Goods 100.0%
146 Plaza del Sol General Bank 7.6%
147 Gateway Park Shopping Center Bashas 57.2%
148 Tower Associates of Wayne, Inc Arthur J. Gallagher & Co. 43.4%
149 Riverdale Towne Apartments
150 Calusa Shops Kenny Rodgers 21.0%
151 Broadway Plaza East Hughes Weston 20.0%
152 Hunter Plaza Mezzaluna 31.0%
153 Silver Maple Apartments
154 Flint Village Plaza Maxi Drugs (Brooks) 28.4%
155 Fox Chase Apartments
156 Fredericksburg Square Shopping
Center Western Shamrock Corporation 17.7%
157 North Point Shopping Center Sizes Unlimited 18.0%
158 Pine Highland Apartments
159 Huntington Commons Apartment
Complex
160 Avis Rent-A-Car Garage AVIS 100.0%
</TABLE>
II-20
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
161 Cimarron Place Apartments $291,384 $19,215 1.26 $3,600,000 1/10/98 77.6% 94.4% 3/25/98
162 Best Western Desert Aire $389,027 $21,076 1.54 $4,000,000 11/24/97 69.7% 71.0% 8/1/97
163 Maple Canyon $392,449 $19,915 1.64 $4,500,000 1/2/98 61.8% 98.5% 1/9/98
164 Fairfield Inn $390,109 $23,303 1.40 $3,650,000 1/8/98 73.4% 68.2% 1/2/98
165 Park Villa Apartments $322,453 $21,291 1.26 $3,400,000 11/17/97 78.7% 90.0% 3/31/98
166 Cornell North Industrial $345,946 $22,253 1.30 $3,675,000 4/16/97 72.6% 87.6% 4/14/98
167 Village Square Shopping Center $302,846 $18,168 1.39 $3,400,000 11/19/97 77.8% 100.0% 3/19/98
168 Town Corral Shopping Center $554,385 $23,218 1.99 $5,600,000 10/9/96 46.8% 91.8% 4/1/98
169 King Plaza Retail Center $302,582 $19,060 1.32 $3,550,000 8/19/97 72.9% 100.0% 4/1/98
170 Crooked Creek Shopping Center $339,786 $21,323 1.33 $3,710,000 4/15/97 69.4% 92.2% 12/31/97
171 Lowe's Food Store, Grandfather
Center $296,296 $20,540 1.20 $3,250,000 4/7/98 79.1% 100.0% 5/31/98
172 Taylors Landing $295,693 $17,671 1.39 $3,600,000 11/4/97 71.4% 100.0% 2/28/98
173 Tahitian Terrace Mobile
Home Park $793,465 $30,202 2.19 $9,100,000 12/19/97 28.1% 100.0% 3/28/98
174 Springdale Promenade $296,418 $19,488 1.27 $3,200,000 10/6/97 79.6% 89.7% 12/22/97
175 West Wind Apartments:
Phase I & II $281,392 $17,673 1.33 $3,700,000 10/20/97 68.7% 100.0% 1/29/98
176 Tanglewood Terrace Apartments $345,642 $20,187 1.43 $3,200,000 11/17/97 79.2% 95.4% 3/31/98
177 Southside Plaza $365,118 $23,676 1.29 $3,740,000 8/4/97 67.3% 100.0% 2/17/98
178 Wynridge Apartments $264,989 $17,811 1.24 $3,300,000 9/22/97 76.2% 97.1% 12/31/97
179 Valley West Shopping Center $318,978 $18,186 1.46 $4,230,000 11/10/97 59.3% 98.1% 5/1/98
180 Market Square Shopping Center $289,453 $17,738 1.36 $3,180,000 3/10/98 78.5% 100.0% 4/3/98
181 Meridian Mansions, Corporate
Suites Apartments $431,754 $18,377 1.96 $3,810,000 11/12/97 65.2% 86.0% 11/5/97
182 Uptown Shopping Center $406,109 $29,542 1.15 $4,700,000 6/30/93 51.8% 89.9% 4/24/98
183 Woodside Glen Apartments $277,645 $15,874 1.46 $3,250,000 12/23/97 74.8% 98.6% 12/1/97
184 Super 8 Motels $402,573 $20,968 1.60 $3,500,000 10/31/97 69.4% 65.2% 11/30/97
185 Fallbrook Towne Centre $279,668 $16,032 1.45 $3,200,000 12/2/97 74.8% 93.1% 11/19/97
186 Stow-A-Way Self Storage $328,889 $16,000 1.71 $3,520,000 12/17/97 68.0% 96.6% 3/31/98
187 555 Passaic Avenue
(Regency Plaza) $251,178 $16,448 1.27 $3,150,000 12/4/97 74.5% 100.0% 2/1/98
188 Midtown Plaza Shopping Center $326,624 $19,549 1.39 $3,150,000 10/21/97 74.4% 95.0% 11/10/97
189 The Fountain Head Manufactured
Housing Park $272,918 $16,895 1.35 $3,900,000 9/3/97 60.0% 95.6% 1/29/98
190 Iron Place Warehouse $275,587 $17,047 1.35 $3,150,000 12/13/97 74.2% 100.0% 2/1/98
191 Greenbrier Apartments/
Townhouses $274,105 $17,001 1.34 $3,100,000 12/1/97 75.4% 93.8% 11/30/97
192 Village of Melrose Park $272,544 $18,524 1.23 $3,245,000 9/29/95 71.3% 100.0% 12/1/97
193 Duxbury Marketplace $270,798 $16,803 1.34 $3,100,000 2/6/98 74.0% 95.6% 4/20/98
194 Glen Iris Lofts $260,964 $15,194 1.43 $2,875,000 11/26/97 79.8% 97.1% 1/31/98
195 Walgreen - Oklahoma $257,243 $20,414 1.05 $2,990,000 12/7/97 76.5% 100.0% 12/20/97
196 Royalgate & Timberwood
Apartments $256,324 $16,551 1.29 $2,980,000 11/3/97 76.7% 94.3% 9/15/97
197 Days Inn - Central $323,722 $17,539 1.54 $3,500,000 11/13/97 64.8% 65.2% 12/2/97
198 Hermitage Apartments $333,014 $17,502 1.59 $3,000,000 12/4/97 75.6% 99.2% 3/31/98
199 Augusta Commons $269,552 $16,701 1.35 $3,000,000 11/21/97 74.6% 100.0% 1/1/98
200 Lock-N-Key Mini Storage $276,569 $16,525 1.39 $3,250,000 9/18/97 68.8% 86.3% 9/6/97
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
161 Cimarron Place Apartments
162 Best Western Desert Aire
163 Maple Canyon
164 Fairfield Inn
165 Park Villa Apartments
166 Cornell North Industrial Rock-Tenn 42.7%
167 Village Square Shopping Center Food Lion 51.6%
168 Town Corral Shopping Center Old America Stores 16.0%
169 King Plaza Retail Center King Launderland 16.4%
170 Crooked Creek Shopping Center Allemenos Hardware, Inc. 31.8%
171 Lowe's Food Store, Grandfather
Center Lowe's Food Stores, Inc. 100.0%
172 Taylors Landing Taylorsville City 16.5%
173 Tahitian Terrace Mobile
Home Park
174 Springdale Promenade Mitchell's Salon & Day
Spa, Inc. 32.5%
175 West Wind Apartments:
Phase I & II
176 Tanglewood Terrace Apartments
177 Southside Plaza Quality Markets 79.5%
178 Wynridge Apartments
179 Valley West Shopping Center Ray's Sentry Market 23.4%
180 Market Square Shopping Center Food Lion 52.1%
181 Meridian Mansions, Corporate
Suites Apartments
182 Uptown Shopping Center Brookshires 28.0%
183 Woodside Glen Apartments
184 Super 8 Motels
185 Fallbrook Towne Centre Chief Auto Parts 20.9%
186 Stow-A-Way Self Storage
187 555 Passaic Avenue
(Regency Plaza) Marado Blu 19.3%
188 Midtown Plaza Shopping Center MK Medical 57.1%
189 The Fountain Head Manufactured
Housing Park
190 Iron Place Warehouse Capital Office 25.8%
191 Greenbrier Apartments/
Townhouses
192 Village of Melrose Park OMNI 100.0%
193 Duxbury Marketplace SPORTWORKS 11.1%
194 Glen Iris Lofts
195 Walgreen - Oklahoma Walgreens 100.0%
196 Royalgate & Timberwood
Apartments
197 Days Inn - Central
198 Hermitage Apartments
199 Augusta Commons Talbots 19.3%
200 Lock-N-Key Mini Storage
</TABLE>
II-21
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
201 Morgantown Plaza Shopping
Center $246,901 $15,519 1.33 $2,820,000 11/26/97 77.9% 100.0% 1/31/98
202 Woodland Park Shopping Center $383,612 $19,678 1.62 $4,100,000 3/31/97 53.4% 85.1% 2/28/98
203 Walgreens $269,107 $14,808 1.51 $3,450,000 2/12/98 62.8% 100.0% 1/1/98
204 190-210 Sylvan Avenue $459,910 $24,541 1.56 $5,275,000 1/3/92 40.9% 98.2% 4/3/98
205 Park Apartments $234,662 $14,603 1.34 $2,700,000 1/28/98 79.8% 90.2% 2/5/98
206 Wendy's, Friendly's, &
Citizens Bank $280,332 $17,386 1.34 $3,000,000 12/1/97 71.0% 100.0% 8/1/97
207 Milford Post Plaza $257,498 $14,771 1.45 $2,975,000 10/21/97 71.1% 74.0% 10/31/97
208 Rite Aid - Ohio $241,008 $18,587 1.08 $2,710,000 12/7/97 78.0% 100.0% 12/7/97
209 Gull Cove Apartments $251,299 $13,579 1.54 $2,800,000 1/15/98 74.8% 95.2% 12/31/97
210 Dodge Crossing $243,775 $15,766 1.29 $2,800,000 12/12/97 74.7% 91.2% 2/1/98
211 Sutter Pointe Plaza Shopping
Center $265,697 $16,557 1.34 $2,800,000 7/15/97 74.4% 80.0% 4/1/98
212 Crystal Downs Mobile Village $155,301 $9,755 1.23 $1,780,000 12/29/97 73.1% 98.1% 12/23/97
213 Twin Pines Mobile Home Park $61,775 $4,899 1.23 $1,000,000 12/29/97 73.1% 97.3% 12/23/97
214 Mountain View Estates $227,852 $14,180 1.34 $2,940,000 1/12/98 68.9% 100.0% 2/1/98
215 The Sunflower Apartments $292,606 $15,589 1.56 $3,000,000 12/5/97 67.3% 87.6% 10/31/97
216 White Lane Plaza Shopping
Center $262,156 $16,062 1.36 $2,560,000 8/4/97 78.2% 73.7% 4/1/98
217 Ledgemere Plaza $246,478 $14,611 1.41 $3,100,000 3/11/98 64.4% 93.6% 2/1/98
218 Econo Lodge Motel $338,491 $16,493 1.71 $2,700,000 2/3/98 73.8% 82.0% 8/30/97
219 38500-58680 Michigan Ave. &
3736-69 Commerce Ct. $238,239 $14,598 1.36 $3,200,000 1/28/98 62.3% 100.0% 1/21/98
220 Biocell Laboratories $260,670 $15,133 1.44 $2,800,000 9/10/97 71.1% 100.0% 1/1/98
221 The Crossings Apartments $279,894 $13,373 1.74 $3,100,000 11/4/97 62.1% 94.4% 2/9/98
222 Tanglewood West $228,614 $13,166 1.45 $3,100,000 10/30/97 62.1% 100.0% 2/2/98
223 Park Trails Apartments $261,907 $13,284 1.64 $3,400,000 12/30/97 55.6% 100.0% 1/2/98
224 GSK Office Building $193,709 $13,287 1.21 $2,550,000 11/10/97 73.4% 83.6% 1/1/98
225 Glenwood Trace Apartments $253,792 $14,427 1.47 $2,335,000 11/17/97 79.7% 82.9% 3/31/98
226 The Marina Dune Apartments $200,621 $12,464 1.34 $2,550,000 11/3/97 72.3% 97.9% 3/31/98
227 La Miradora Apartments $188,111 $12,672 1.24 $2,330,000 10/30/97 79.1% 96.4% 12/11/97
228 1106 Smith Road $230,479 $13,889 1.38 $2,550,000 9/18/97 72.1% 90.4% 3/31/98
229 Los Robles Medical Center $224,703 $14,299 1.31 $2,480,000 8/13/97 73.7% 90.7% 10/13/97
230 Chatham Mall Shopping Center $222,329 $14,861 1.25 $2,450,000 12/22/97 74.5% 100.0% 2/27/98
231 Lamp Lighter Mobile Home
Park-Canon City $141,358 $9,043 1.30 $2,145,000 3/15/98 58.1% 97.1% 1/1/98
232 Alpine Village Mobile Home
Park-Florence $81,439 $3,979 1.71 $924,000 3/15/98 59.3% 100.0% 1/1/98
233 Maple Hill Mobile Home Park $197,647 $12,803 1.29 $2,950,000 12/10/97 60.8% 79.3% 12/7/97
234 Ashment Shopping Center $215,990 $13,103 1.37 $2,520,000 12/2/97 71.0% 100.0% 8/6/97
235 Nicholson Corner $221,509 $14,055 1.31 $3,900,000 3/3/98 44.7% 87.8% 5/11/98
236 Equestrian Centre $203,845 $12,853 1.32 $2,600,000 12/17/97 67.0% 100.0% 10/1/97
237 Walgreen's Drug $234,547 $11,553 1.69 $2,800,000 1/6/98 62.0% 100.0% 12/23/97
238 Staples $194,890 $13,565 1.20 $2,200,000 11/12/97 78.8% 100.0% 12/22/97
239 Winmont Apartments $178,028 $12,266 1.21 $2,150,000 1/16/98 78.7% 94.0% 2/13/98
240 Rite Aid - Lincoln $176,532 $14,003 1.05 $2,260,000 2/13/97 73.7% 100.0% 2/25/97
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
201 Morgantown Plaza Shopping
Center Helig Meyers 28.4%
202 Woodland Park Shopping Center NOEL Furniture, Inc. 41.1%
203 Walgreens Walgreens 100.0%
204 190-210 Sylvan Avenue Don Smith/TMI 18.2%
205 Park Apartments
206 Wendy's, Friendly's, &
Citizens Bank Citizen's Bank 39.4%
207 Milford Post Plaza Third Atrium 6.3%
208 Rite Aid - Ohio Rite Aid 100.0%
209 Gull Cove Apartments
210 Dodge Crossing Photographics 25.9%
211 Sutter Pointe Plaza Shopping
Center Joy Christian Fellowship 18.6%
212 Crystal Downs Mobile Village
213 Twin Pines Mobile Home Park
214 Mountain View Estates
215 The Sunflower Apartments
216 White Lane Plaza Shopping
Center KFC 12.3%
217 Ledgemere Plaza Just A Wee 15.3%
218 Econo Lodge Motel
219 38500-58680 Michigan Ave. &
3736-69 Commerce Ct. Mels Auto 13.5%
220 Biocell Laboratories Biocell Laboratories, Inc. 100.0%
221 The Crossings Apartments
222 Tanglewood West Executive Suites 11.1%
223 Park Trails Apartments
224 GSK Office Building Amdahl Corp. 37.5%
225 Glenwood Trace Apartments
226 The Marina Dune Apartments
227 La Miradora Apartments
228 1106 Smith Road Crouch Industries 47.0%
229 Los Robles Medical Center Loro Enterprises 30.7%
230 Chatham Mall Shopping Center A&P Tea Co., Inc. 51.6%
231 Lamp Lighter Mobile Home
Park-Canon City
232 Alpine Village Mobile Home
Park-Florence
233 Maple Hill Mobile Home Park
234 Ashment Shopping Center Barnes & Noble 100.0%
235 Nicholson Corner American Reprographic 24.7%
236 Equestrian Centre Cyndi Pan's Dance Studio 13.5%
237 Walgreen's Drug Walgreens 100.0%
238 Staples Staples 100.0%
239 Winmont Apartments
240 Rite Aid - Lincoln Rite-Aid, Inc. 100.0%
</TABLE>
II-22
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
241 Masonic Building $208,276 $12,806 1.36 $2,235,000 9/23/97 74.4% 97.2% 11/20/97
242 Washington Square Shopping
Center $347,689 $12,550 2.31 $3,725,000 6/24/97 44.0% 93.9% 2/20/98
243 Springfield Secure Storage
Facility $221,314 $13,323 1.38 $2,460,000 12/3/97 66.5% 91.9% 9/30/97
244 Riverside Mini Storage $217,580 $13,041 1.39 $2,417,000 10/25/97 66.4% 91.1% 10/31/97
245 Cherokee Hills Shopping Center $197,859 $11,586 1.42 $2,150,000 2/3/98 74.2% 89.2% 4/8/98
246 Country Acre Estates Mobile
Home Park $178,456 $10,817 1.37 $2,000,000 10/13/97 79.6% 99.2% 12/5/97
247 Overlea Shopping Center $193,631 $11,635 1.39 $2,110,000 2/12/98 74.6% 100.0% 2/16/98
248 Crystal Shores Apartments $244,270 $10,768 1.89 $2,600,000 11/4/97 59.6% 97.1% 2/19/98
249 Lakeshore Place Apartments $199,731 $10,115 1.65 $1,950,000 12/2/97 79.2% 93.0% 3/25/98
250 Super 8 Motel Kissimmee $259,966 $13,180 1.64 $2,200,000 1/1/98 69.7% 82.2% 12/1/97
251 US Forest Service Office
Building $226,698 $17,989 1.05 $2,200,000 2/10/98 68.2% 98.6% 1/1/98
252 Office Building/Day Care $172,933 $10,922 1.32 $2,032,000 12/15/97 73.7% 100.0% 12/8/97
253 Lakeview Meadow Estates
Townhomes $170,611 $10,717 1.33 $1,900,000 2/6/98 78.8% 96.4% 1/30/98
254 Whispering Pines Apartments $163,243 $10,630 1.28 $2,100,000 12/18/97 71.2% 92.2% 2/19/98
255 United States Post Office $163,429 $11,192 1.22 $1,950,000 10/14/97 76.5% 100.0% 1/12/98
256 Studio Plaza Apartments $233,168 $11,355 1.71 $2,100,000 11/25/97 70.0% 93.3% 10/31/97
257 Keoway Village Apartments $174,875 $10,510 1.39 $1,900,000 1/7/98 77.4% 96.3% 5/1/98
258 Belleview Estates Apartments $159,176 $9,951 1.33 $1,900,000 3/16/98 76.2% 97.6% 4/18/98
259 Towne Plaza $175,563 $11,278 1.30 $1,790,000 8/25/97 80.4% 100.0% 12/31/97
260 State Office Building $179,451 $11,390 1.31 $2,000,000 11/25/97 71.8% 98.7% 12/5/97
261 Fort Mott Village Apartments $176,611 $9,513 1.55 $1,700,000 12/1/97 84.5% 88.9% 1/30/98
262 Brigham Road Apartments $167,303 $10,333 1.35 $2,000,000 12/4/97 71.5% 97.1% 12/1/97
263 87 Northpointe Drive $171,977 $10,054 1.43 $1,900,000 11/26/97 74.5% 100.0% 3/3/98
264 Clough Shops $155,502 $9,560 1.36 $1,900,000 12/2/97 73.5% 100.0% 3/5/98
265 Crain Professional Center $162,457 $9,636 1.40 $2,000,000 11/21/97 69.7% 97.7% 10/17/97
266 Maple Crest Manor Mobile
Home Park $139,123 $9,195 1.26 $1,700,000 10/13/97 79.6% 97.2% 9/15/97
267 Bayberry Apartments $151,974 $8,954 1.41 $1,800,000 12/12/97 74.9% 94.3% 11/30/97
268 Landmark II $165,766 $9,654 1.43 $2,275,000 2/19/98 59.2% 91.2% 2/24/98
269 Magnolia Hall Apartments $182,746 $9,346 1.63 $1,750,000 10/29/97 74.9% 95.8% 12/31/97
270 Multi-Tenant Industrial Project $174,051 $12,081 1.20 $2,500,000 1/5/98 52.4% 99.9% 2/26/98
271 Converse Corners Shopping
Center $162,034 $9,751 1.38 $1,650,000 12/10/97 78.7% 99.4% 3/31/98
272 162 Northpointe Drive $156,392 $9,205 1.42 $1,750,000 11/26/97 74.0% 100.0% 3/3/98
273 West Oaks Center $156,297 $9,179 1.42 $1,750,000 10/17/97 74.0% 100.0% 3/20/98
274 Zia Self Stor-All $191,339 $9,879 1.61 $1,830,000 9/24/97 70.6% 86.0% 9/15/97
275 Lappin Lighting/ Boarman &
Assoc. Building $169,729 $10,034 1.41 $1,800,000 11/1/97 71.8% 99.3% 12/21/97
276 Darby House Apartments $122,800 $8,654 1.18 $1,600,000 12/10/97 79.8% 91.7% 12/31/97
277 Sony Centre $156,515 $9,922 1.31 $1,600,000 1/15/98 79.8% 100.0% 1/1/98
278 Misty Hollow Apartments $169,562 $10,016 1.41 $1,625,000 12/4/97 78.0% 97.5% 3/31/98
279 Bay State Building $165,399 $9,094 1.52 $2,300,000 12/15/97 54.3% 87.6% 3/1/98
280 Vienna Square Apartments $152,460 $8,570 1.48 $1,625,000 2/23/98 76.8% 95.0% 12/31/97
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
241 Masonic Building Norman Hanson and Detroy 44.6%
242 Washington Square Shopping
Center Old America Stores 49.8%
243 Springfield Secure Storage
Facility
244 Riverside Mini Storage
245 Cherokee Hills Shopping Center Derby VIII, Inc. 19.1%
246 Country Acre Estates Mobile
Home Park
247 Overlea Shopping Center CVS Pharmacy 38.0%
248 Crystal Shores Apartments
249 Lakeshore Place Apartments
250 Super 8 Motel Kissimmee
251 US Forest Service Office
Building U.S Forest Service 98.6%
252 Office Building/Day Care Koalaty Time Inc. 75.0%
253 Lakeview Meadow Estates
Townhomes
254 Whispering Pines Apartments
255 United States Post Office U. S. Postal Service 100.0%
256 Studio Plaza Apartments
257 Keoway Village Apartments
258 Belleview Estates Apartments
259 Towne Plaza Woodstock School of Ballet 14.3%
260 State Office Building Human Services 98.7%
261 Fort Mott Village Apartments
262 Brigham Road Apartments
263 87 Northpointe Drive Lawrence Plastics, Inc. 100.0%
264 Clough Shops Walgreens 51.8%
265 Crain Professional Center Independent Dialysis 14.5%
266 Maple Crest Manor Mobile
Home Park
267 Bayberry Apartments
268 Landmark II Mortgage America 11.8%
269 Magnolia Hall Apartments
270 Multi-Tenant Industrial Project Hyper Therm 12.6%
271 Converse Corners Shopping
Center Smith Barney 34.4%
272 162 Northpointe Drive Mint Tool Corp. 100.0%
273 West Oaks Center Fort Bend Hospital 37.5%
274 Zia Self Stor-All
275 Lappin Lighting/ Boarman &
Assoc. Building
276 Darby House Apartments
277 Sony Centre Sony Corp. 45.9%
278 Misty Hollow Apartments
279 Bay State Building Dept. of Training &
Development 26.0%
280 Vienna Square Apartments
</TABLE>
II-23
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
281 Seven Palms Apartments $142,843 $8,915 1.34 $1,825,000 12/31/97 68.3% 100.0% 3/20/98
282 Parkchester Apartments $182,275 $9,766 1.56 $1,610,000 12/4/97 77.2% 98.8% 3/31/98
283 Cascades at Lake St. George $159,193 $9,143 1.45 $1,650,000 10/17/97 73.9% 100.0% 1/1/98
284 Brodhead North Condominiums $135,797 $8,026 1.41 $1,600,000 12/12/97 75.5% 96.8% 1/31/98
285 Greensboro-Wendover Phase-I $206,249 $11,292 1.52 $2,250,000 7/12/93 53.6% 85.9% 4/1/98
286 Greensboro- Wendover Phase-2 $308,550 $11,083 2.32 $3,040,000 11/29/93 39.5% 96.8% 4/30/98
287 The Sandpiper Cove Apartments $239,866 $8,336 2.40 $2,300,000 11/4/97 52.2% 96.9% 2/9/98
288 The Southwyck Manor Apartments $177,129 $8,336 1.77 $2,000,000 11/4/97 60.0% 97.8% 2/9/98
289 Home Depot Center $182,954 $8,129 1.88 $1,850,000 4/11/97 64.7% 100.0% 9/10/97
290 Forest Hills Rest Home $154,117 $10,278 1.25 $1,720,000 2/6/98 69.6% 97.9% 3/12/98
291 Lakeside Village Apartments $138,029 $8,612 1.34 $1,650,000 12/11/97 72.4% 98.7% 2/2/98
292 Southern Oaks Apartments $148,236 $9,463 1.31 $1,600,000 12/23/97 74.6% 92.7% 3/31/98
293 Mobile Acres $186,530 $8,806 1.77 $1,610,000 9/9/97 74.1% 97.9% 12/1/97
294 520 Courtney Way $125,365 $8,189 1.28 $1,590,000 4/30/98 73.5% 100.0% 3/31/98
295 Pine Point Apartment Complex $141,102 $8,536 1.38 $1,425,000 10/16/97 79.5% 89.3% 3/24/98
296 1693 NE 54th Avenue $139,830 $8,842 1.32 $1,600,000 11/25/97 70.6% 100.0% 12/8/97
297 French Riviera Apartments $125,467 $7,541 1.39 $1,375,000 2/23/98 79.9% 98.2% 12/31/97
298 Lone Star Self Storage $150,229 $8,229 1.52 $1,700,000 12/8/97 64.3% 92.4% 12/2/97
299 Appaloosa Road Office Building $142,731 $8,956 1.33 $1,450,000 11/24/97 75.1% 100.0% 1/1/98
300 Longwood Trade Center $127,034 $7,924 1.34 $1,500,000 3/18/98 69.9% 100.0% 4/1/98
301 Fifth Avenue Court Apartments $116,630 $7,479 1.30 $1,750,000 10/2/97 59.2% 100.0% 3/25/98
302 Patterson House Apartments $215,430 $6,722 2.67 $2,100,000 12/2/97 48.8% 98.5% 3/31/98
303 The Bluffs Apartments $135,827 $7,121 1.59 $1,600,000 11/5/97 64.1% 88.9% 2/9/98
304 Albany Secure Storage $139,125 $8,475 1.37 $1,800,000 12/12/97 56.6% 80.7% 12/1/97
305 Westover Plaza $121,822 $7,416 1.37 $1,365,000 12/1/97 73.0% 100.0% 10/8/97
306 Panola Mercado $138,256 $7,164 1.61 $1,350,000 2/2/98 73.7% 100.0% 1/15/98
307 Oxford Building $211,788 $7,586 2.33 $3,150,000 10/16/97 31.5% 96.2% 4/28/98
308 Villa St. Cyr Apartments $150,783 $7,325 1.72 $1,500,000 10/30/97 66.2% 96.7% 4/28/98
309 Olive Tree Plaza $111,341 $7,596 1.22 $1,225,000 1/16/98 79.8% 95.6% 1/16/98
310 Hyde Park Apartments $134,603 $6,922 1.62 $1,250,000 12/20/97 74.6% 97.3% 12/18/97
311 Bel Aire Apartments $111,194 $6,520 1.42 $1,200,000 11/17/97 76.3% 94.5% 10/8/97
312 Davis Memorial Goodwill
Industries $114,781 $7,256 1.32 $1,165,000 3/5/98 77.0% 100.0% 1/1/98
313 Centre Pointe Apartments $115,146 $6,592 1.46 $1,200,000 12/5/97 74.7% 92.6% 5/7/98
314 The Knight Apartments $107,239 $6,592 1.36 $1,285,000 12/18/97 69.7% 100.0% 4/1/98
315 Continental Car Office Building $124,035 $6,804 1.52 $2,750,000 6/16/97 32.5% 100.0% 9/30/97
316 Twin Tower Apartments $132,724 $6,373 1.74 $1,230,000 11/25/97 72.7% 96.9% 12/31/97
317 Westwind Apartments $97,097 $5,837 1.39 $1,200,000 12/12/97 73.2% 83.3% 3/20/98
318 Shadow Center/Baytown Village
Center $88,649 $5,428 1.36 $1,050,000 12/4/97 72.9% 100.0% 4/8/98
319 Industrial Park Addison $137,095 $10,495 1.09 $1,620,000 2/8/96 45.1% 100.0% 12/31/97
320 Orchard Park Apartments $99,943 $5,423 1.54 $1,075,000 10/30/97 67.8% 100.0% 4/28/98
<CAPTION>
(table contined)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
281 Seven Palms Apartments
282 Parkchester Apartments
283 Cascades at Lake St. George Southland (7 and 11) 18.7%
284 Brodhead North Condominiums 0.0%
285 Greensboro-Wendover Phase-I GTE/Cellular One 20.5%
286 Greensboro- Wendover Phase-2 Dillard Express 9.2%
287 The Sandpiper Cove Apartments 0.0%
288 The Southwyck Manor Apartments 0.0%
289 Home Depot Center Starbucks Coffee 20.7%
290 Forest Hills Rest Home
291 Lakeside Village Apartments
292 Southern Oaks Apartments
293 Mobile Acres
294 520 Courtney Way Exide Electronics Corp. 75.9%
295 Pine Point Apartment Complex
296 1693 NE 54th Avenue Lanter Courier Corp. 61.5%
297 French Riviera Apartments
298 Lone Star Self Storage
299 Appaloosa Road Office Building Cigna Health Care of
California 100.0%
300 Longwood Trade Center Grizzly Bar 10.1%
301 Fifth Avenue Court Apartments
302 Patterson House Apartments
303 The Bluffs Apartments
304 Albany Secure Storage
305 Westover Plaza Binghamton Limb & Brace 46.0%
306 Panola Mercado Chou Lee's Restaurant 18.0%
307 Oxford Building Personal Touch 8.3%
308 Villa St. Cyr Apartments
309 Olive Tree Plaza Academy with Community
Partners, Inc. 31.3%
310 Hyde Park Apartments
311 Bel Aire Apartments
312 Davis Memorial Goodwill
Industries Davis Memorial Goodwill 100.0%
313 Centre Pointe Apartments
314 The Knight Apartments
315 Continental Car Office Building American Red Cross 27.8%
316 Twin Tower Apartments
317 Westwind Apartments
318 Shadow Center/Baytown Village
Center Emerald Cleaners 29.9%
319 Industrial Park Addison Alcon Aluminum
Components, Inc. 100.0%
320 Orchard Park Apartments
</TABLE>
II-24
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PROPERTY OPERATING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Loan Underwritable Monthly Property Valuation Percent Leased(6)
No. Property Name Cash Flow Payment DSCR(3) Value Date LTV(3) Leased Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
321 Meadowbrook Apartments $111,052 $4,967 1.86 $1,100,000 11/17/97 65.0% 96.3% 2/9/98
322 Keys West Apartments $64,501 $3,955 1.36 $720,000 11/19/97 74.7% 97.5% 12/10/97
Total/Weighted Average: 1.42 70.3%
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------
Loan Tenant Information(7)
No. Property Name Largest Tenant % NSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
321 Meadowbrook Apartments
322 Keys West Apartments
Total/Weighted Average:
</TABLE>
II-25
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Two Chatham Center Actual/360 2 26 90
2 Eastridge Mall (12) 30/360 321 180
3 Eastridge Mall (12) 30/360 234 180 12 12
4 Phoenix Inn - Beaverton Actual/360 6 60 57
5 Phoenix Inn - Vancouver Actual/360 6 60 57
6 Phoenix Inn - Salem Actual/360 6 60 57
7 Phoenix Inn - Lake Oswego Actual/360 6 60 57
8 Phoenix Inn - Tigard Actual/360 6 60 57
9 Phoenix Inn - Eugene Actual/360 6 60 57
10 Phoenix Inn - Wilsonville Actual/360 6 60 57
11 Piazza Carmel Shopping Center Actual/360 2 60 57
12 Shrewsbury Plaza 30/360 4 84 180
13 La Mirada Actual/360 3 60 57
14 Crossroads Shopping Center Actual/360 0 24 96
15 Crossroads Shopping Center Actual/360 0 24 96
16 Residence Inn Actual/360 5 60 0 54
17 Fairfield Inn Actual/360 5 60 0 54
18 Fairfield Inn Actual/360 5 60 0 54
19 Fairfield Inn Actual/360 4 60 0 54
20 Residence Inn Actual/360 5 60 0 54
21 University Village Actual/360 6 48 129
22 Coffey Creek Apartments Actual/360 4 60 57
23 East Gate Square Phase IV Actual/360 1 36 6
24 Treybrooke Apartments Actual/360 1 60 57
25 Embassy Suites Hotel Actual/360 6 48 66
26 Oxnard Redhill Partners Actual/360 2 48 69
27 1155 Market Street Actual/360 2 24 93
28 Bluffs III Actual/360 4 48 69
29 Riverfront Technical Park Actual/360 2 24 108
30 Hampton Inn/Midway Airport Actual/360 1 60 12
31 Commerce Place Actual/360 4 60 57
32 JP Center Actual/360 4 89 88
33 Vineyard Terrace Apartments Actual/360 5 48 66
34 Perimeter Place Office Building Actual/360 1 48 66
35 Bourse Garage Actual/360 3 48 66
36 Kevon Office Center Actual/360 3 12 102
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Two Chatham Center 4 6.84
2 Eastridge Mall (12) 12 12 12 12 252 8.24
3 Eastridge Mall (12) 12 12 12 12 12 12 117 8.24
4 Phoenix Inn - Beaverton 3 12.50
5 Phoenix Inn - Vancouver 3 12.50
6 Phoenix Inn - Salem 3 12.50
7 Phoenix Inn - Lake Oswego 3 12.50
8 Phoenix Inn - Tigard 3 12.50
9 Phoenix Inn - Eugene 3 12.50
10 Phoenix Inn - Wilsonville 3 12.50
11 Piazza Carmel Shopping Center 3 12.24
12 Shrewsbury Plaza 36 4.84
13 La Mirada 3 12.50
14 Crossroads Shopping Center 8.24
15 Crossroads Shopping Center 8.24
16 Residence Inn 6 8.34
17 Fairfield Inn 6 8.34
18 Fairfield Inn 6 8.34
19 Fairfield Inn 6 8.34
20 Residence Inn 6 8.34
21 University Village 3 8.24
22 Coffey Creek Apartments 3 8.24
23 East Gate Square Phase IV 6 8.24
24 Treybrooke Apartments 3 8.24
25 Embassy Suites Hotel 6 8.34
26 Oxnard Redhill Partners 3 8.24
27 1155 Market Street 3 10.24
28 Bluffs III 3 8.24
29 Riverfront Technical Park 12 8.34
30 Hampton Inn/Midway Airport 12 12 12 9 3 11.24
31 Commerce Place 3 12.50
32 JP Center 3 8.24
33 Vineyard Terrace Apartments 6 8.34
34 Perimeter Place Office Building 6 8.24
35 Bourse Garage 6 8.34
36 Kevon Office Center 6 8.34
</TABLE>
II-26
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
37 Sherman Plaza Retail Center Actual/360 6 36 81
38 The Villas of Bon Vista Apartments Actual/360 3 60 57
39 Bon Vista Actual/360 3 60 57
40 Barrington North Apartments Actual/360 3 60 57
41 Edgewater Development (14) 30/360 78
42 4th Street Portfolio 30/360 9 36 201
43 Tamarack Trace Apartments Actual/360 6 48 66
44 Ridgeway Industrial I Actual/360 0 48 69
45 Ridgeway Industrial II Actual/360 0 48 69
46 Indian Creek Apartments Actual/360 5 42 39
47 Riverbend Distribution Center Actual/360 4 48 12 12
48 Baker Waterfront Plaza 30/360 1 48 66
49 The Blue Harbor Club Apartments Actual/360 3 48 60
50 Berkeley Business Center Actual/360 3 60 57
51 Colonial Self Storage - Arlington Actual/360 5 24 93
52 Colonial Self Storage - Andrews Actual/360 5 24 93
53 Colonial Self Storage - Coppell Actual/360 5 24 93
54 Colonial Self Storage - Loop Actual/360 5 24 93
55 Mid - Rise Office Building Actual/360 4 72 66
56 Barrington Place Development Actual/360 4 60 54
57 Partridge Pointe Apartments Actual/360 3 48 69
58 345 Underhill Boulevard Actual/360 10 60 177
59 Lakeshore Apartments Actual/360 4 60 57
60 Wilson Woods Apartments Actual/360 4 60 57
61 Mill Street Plaza Building Actual/360 4 60 57
62 Fallwood Apartments Actual/360 5 60 48
63 Pinebrooke Center Actual/360 3 48 66
64 Woodside Apartments Actual/360 1 48 69
65 Poway Plaza Actual/360 3 60 57
66 Holbrook - Spyglass Actual/360 1 24 93
67 Holbrook - Heritage Park Actual/360 1 24 93
68 Holbrook - Burl Park Actual/360 1 24 93
69 University Townhouse Apartments Actual/360 4 48 66
70 Shadow Lake Mobile Home Community Actual/360 3 60 57
71 Regency Towers Actual/360 5 60 54
72 Polo Plaza Actual/360 3 60 57
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
37 Sherman Plaza Retail Center 3 8.24
38 The Villas of Bon Vista Apartments 3 12.50
39 Bon Vista 3 12.50
40 Barrington North Apartments 3 12.50
41 Edgewater Development (14) 8.24
42 4th Street Portfolio 3 8.24
43 Tamarack Trace Apartments 6 8.34
44 Ridgeway Industrial I 3 8.24
45 Ridgeway Industrial II 3 8.24
46 Indian Creek Apartments 3 8.24
47 Riverbend Distribution Center 12 12 12 9 3 8.24
48 Baker Waterfront Plaza 6 8.34
49 The Blue Harbor Club Apartments 12 8.34
50 Berkeley Business Center 3 12.50
51 Colonial Self Storage - Arlington 3 8.24
52 Colonial Self Storage - Andrews 3 8.24
53 Colonial Self Storage - Coppell 3 8.24
54 Colonial Self Storage - Loop 3 8.24
55 Mid - Rise Office Building 6 13.34
56 Barrington Place Development 6 8.34
57 Partridge Pointe Apartments 3 8.24
58 345 Underhill Boulevard 3 12.50
59 Lakeshore Apartments 3 8.24
60 Wilson Woods Apartments 3 8.24
61 Mill Street Plaza Building 3 8.24
62 Fallwood Apartments 12 18.34
63 Pinebrooke Center 6 8.34
64 Woodside Apartments 3 8.24
65 Poway Plaza 3 12.50
66 Holbrook - Spyglass 3 8.24
67 Holbrook - Heritage Park 3 8.24
68 Holbrook - Burl Park 3 8.24
69 University Townhouse Apartments 6 16.34
70 Shadow Lake Mobile Home Community 3 8.24
71 Regency Towers 6 12.24
72 Polo Plaza 3 12.50
</TABLE>
II-27
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
73 South Cove Apartments Actual/360 3 48 60
74 Jefferson Townhome Apartments Actual/360 6 48 66
75 Holiday Inn - Livermore Actual/360 4 60 57
76 Riverbend Apartments Actual/360 4 48 66
77 Beach Mobile Home Park Actual/360 5 48 66
78 Kentucky Home Life Building Actual/360 5 48 66
79 Ramada Resort and Conference Center Actual/360 3 36 81
80 Country Hills Health Center Actual/360 5 60 177
81 Porters Neck Shopping Center Actual/360 4 120 117
82 Kern Valley Plaza Actual/360 4 60 57
83 Comfort Inn Airport West 30/360 4 60 180
84 Sleep Inn/Midway Airport Actual/360 1 60 12
85 Woods Apartments Actual/360 2 48 66
86 Foothill Park Plaza 30/360 11 60 54
87 Yacht Club Apartments Actual/360 4 48 66
88 Westbrook Manor Actual/360 5 60 48
89 Kelsey Business Center Actual/360 1 60 57
90 Dorchester Manor Actual/360 0 48 129
91 Financial Plaza Actual/360 1 48 69
92 Casa View Shopping Center Actual/360 5 60 57
93 Shurgard of Factoria North Actual/360 6 84 90
94 Space Park East 30/360 9 36 261
95 Best Buy Store Actual/360 4 120 114
96 Chouteau Trace Apartments Actual/360 3 48 69
97 Pinewood Apartments Actual/360 2 120 57
98 70 Grand Avenue Actual/360 6 48 66
99 Wyntrace Apartments Actual/360 7 114
100 Newton Towers Apartments Actual/360 4 48 69
101 Four Points Hotel by ITT Sheraton Actual/360 2 60 57
102 Mountvue Place Actual/360 6 60 57
103 Rivermill Apartments Actual/360 3 48 66
104 Village Square Apartments Actual/360 3 48 66
105 Sandy Ridge Square Shopping Center Actual/360 7 84 72
106 Americana Northridge Apartments Actual/360 3 60 84
107 Waterdam Centre Shopping Plaza Actual/360 3 48 69
108 Thorn Run Crossing Shopping Center Actual/360 5 48 66
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
73 South Cove Apartments 12 8.34
74 Jefferson Townhome Apartments 6 8.24
75 Holiday Inn - Livermore 3 8.24
76 Riverbend Apartments 6 13.34
77 Beach Mobile Home Park 6 8.34
78 Kentucky Home Life Building 6 8.34
79 Ramada Resort and Conference Center 3 8.24
80 Country Hills Health Center 3 8.24
81 Porters Neck Shopping Center 3 8.24
82 Kern Valley Plaza 3 10.24
83 Comfort Inn Airport West 11.24
84 Sleep Inn/Midway Airport 12 12 12 9 3 11.24
85 Woods Apartments 6 8.24
86 Foothill Park Plaza 6 8.24
87 Yacht Club Apartments 6 13.34
88 Westbrook Manor 12 18.34
89 Kelsey Business Center 3 12.50
90 Dorchester Manor 3 8.24
91 Financial Plaza 3 8.24
92 Casa View Shopping Center 3 8.24
93 Shurgard of Factoria North 6 13.34
94 Space Park East 3 8.24
95 Best Buy Store 6 8.34
96 Chouteau Trace Apartments 3 8.24
97 Pinewood Apartments 3 8.24
98 70 Grand Avenue 6 8.34
99 Wyntrace Apartments 6 12.50
100 Newton Towers Apartments 3 8.24
101 Four Points Hotel by ITT Sheraton 3 11.24
102 Mountvue Place 3 12.50
103 Rivermill Apartments 6 18.34
104 Village Square Apartments 6 18.34
105 Sandy Ridge Square Shopping Center 24 12.50
106 Americana Northridge Apartments 11.24
107 Waterdam Centre Shopping Plaza 3 12.50
108 Thorn Run Crossing Shopping Center 6 8.34
</TABLE>
II-28
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
109 LabCorp Actual/360 3 60 117
110 Kings Crossing Apartments Actual/360 6 60 117
111 American Transtech, Inc.
Communication Building Actual/360 6 36 96
112 Cedar Point Plaza Actual/360 7 48 66
113 Westbrooke Village Apartments Actual/360 5 60 57
114 Briggs Chaney Center Actual/360 4 48 66
115 Parkside at Westminster Actual/360 4 48 66
116 Copley Place Apartments Actual/360 4 36 78
117 Best Buy Yorba Linda Actual/360 5 48 68
118 Kingsbrook Estates Mobile Home Park Actual/360 4 60 57
119 Pineloch Estates Actual/360 2 48 69
120 Monaco Park Apartments Actual/360 4 48 66
121 Walden Point Actual/360 3 60 177
122 950 Franklin Actual/360 2 24 93
123 Huntley Square Actual/360 6 48 66
124 Enclave at Renaissance Apartments Actual/360 2 60 57
125 Suburban Lodge Jeffersontown Actual/360 6 36 81
126 Wacker Plaza Actual/360 4 120 114
127 Kona Kai Apartments Actual/360 3 48 69
128 Oleander Business Center Actual/360 2 60 57
129 Seymour Franks Woodworking, LLC. Actual/360 3 48 66
130 Highlandtown Village Actual/360 6 48 66
131 Sunrise at Atascocita Actual/360 6 120 108
132 2-8 East Dennison Parkway, 21-23
East First Street Actual/360 3 60 54
133 Hickory Ridge Shopping Center 30/360 7 48 66
134 Grant-Academy Shopping Center Actual/360 6 36 78
135 Edgetowne Square 30/360 6 48 66
136 Walgreen - Kentucky 30/360 20 120 120
137 Georgetown Square II Actual/360 1 60 57
138 The Farm Office and Shopping Center Actual/360 2 60 57
139 17171 Gale Avenue Actual/360 3 60 54
140 Wenatchee-The Fair Market Actual/360 55 24 213
141 Mel Kay/Burt Estates Mobile Home Park Actual/360 6 48 66
142 Northridge Apartments Actual/360 3 60 54
143 The Vida Apartments Actual/360 5 48 66
144 Lucky Center Actual/360 0 48 66
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
109 LabCorp 3 12.50
110 Kings Crossing Apartments 3 12.50
111 American Transtech, Inc.
Communication Building 12 8.34
112 Cedar Point Plaza 6 18.34
113 Westbrooke Village Apartments 3 12.50
114 Briggs Chaney Center 6 8.34
115 Parkside at Westminster 6 8.34
116 Copley Place Apartments 6 8.24
117 Best Buy Yorba Linda 3 11.24
118 Kingsbrook Estates Mobile Home Park 3 8.24
119 Pineloch Estates 3 8.24
120 Monaco Park Apartments 6 13.34
121 Walden Point 3 11.24
122 950 Franklin 3 10.24
123 Huntley Square 6 8.34
124 Enclave at Renaissance Apartments 3 8.24
125 Suburban Lodge Jeffersontown 3 12.50
126 Wacker Plaza 6 18.34
127 Kona Kai Apartments 3 8.24
128 Oleander Business Center 3 8.24
129 Seymour Franks Woodworking, LLC. 6 8.34
130 Highlandtown Village 6 8.34
131 Sunrise at Atascocita 12 8.34
132 2-8 East Dennison Parkway, 21-23
East First Street 6 18.34
133 Hickory Ridge Shopping Center 6 8.34
134 Grant-Academy Shopping Center 6 8.24
135 Edgetowne Square 6 8.34
136 Walgreen - Kentucky 8.24
137 Georgetown Square II 3 8.24
138 The Farm Office and Shopping Center 3 12.50
139 17171 Gale Avenue 6 18.34
140 Wenatchee-The Fair Market 3 8.24
141 Mel Kay/Burt Estates Mobile Home Park 6 8.34
142 Northridge Apartments 6 12.50
143 The Vida Apartments 6 8.34
144 Lucky Center 6 8.24
</TABLE>
II-29
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
145 Dicks Sporting Goods Actual/360 3 60 57
146 Plaza del Sol Actual/360 8 60 57
147 Gateway Park Shopping Center actual/360 2 24 30
148 Tower Associates of Wayne, Inc. Actual/360 3 60 57
149 Riverdale Towne Apartments Actual/360 3 60 54
150 Calusa Shops Actual/360 6 48 66
151 Broadway Plaza East Actual/360 27 24 93
152 Hunter Plaza Actual/360 3 60 57
153 Silver Maple Apartments Actual/360 4 60 117
154 Flint Village Plaza Actual/360 3 60 57
155 Fox Chase Apartments Actual/360 6 60 117
156 Fredericksburg Square Shopping Center Actual/360 4 60 57
157 North Point Shopping Center Actual/360 4 60 57
158 Pine Highland Apartments 30/360 5 60 57
159 Huntington Commons Apartment Complex Actual/360 3 48 66
160 Avis Rent-A-Car Garage Actual/360 2 48 69
161 Cimarron Place Apartments Actual/360 3 60 57
162 Best Western Desert Aire Actual/360 4 102 72
163 Maple Canyon Actual/360 5 60 57
164 Fairfield Inn Actual/360 4 36
165 Park Villa Apartments 30/360 5 60 177
166 Cornell North Industrial 30/360 12 36 78
167 Village Square Shopping Center Actual/360 3 60 57
168 Town Corral Shopping Center 30/360 17 24 94
169 King Plaza Retail Center Actual/360 8 60 54
170 Crooked Creek Shopping Center Actual/360 12 60 57
171 Lowe's Food Store, Grandfather Center Actual/360 1 60 57
172 Taylors Landing Actual/360 3 60 57
173 Tahitian Terrace Mobile Home Park Actual/360 3 36 78
174 Springdale Promenade Actual/360 5 48 66
175 West Wind Apartments: Phase I & II Actual/360 4 48 66
176 Tanglewood Terrace Apartments 30/360 5 60 177
177 Southside Plaza Actual/360 3 84 90
178 Wynridge Apartments Actual/360 7 0 114
179 Valley West Shopping Center Actual/360 5 60 57
180 Market Square Shopping Center Actual/360 2 60 57
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
145 Dicks Sporting Goods 3 12.50
146 Plaza del Sol 3 8.24
147 Gateway Park Shopping Center 6 8.24
148 Tower Associates of Wayne, Inc. 3 12.50
149 Riverdale Towne Apartments 6 18.34
150 Calusa Shops 6 8.34
151 Broadway Plaza East 3 8.24
152 Hunter Plaza 3 8.24
153 Silver Maple Apartments 3 12.50
154 Flint Village Plaza 3 12.50
155 Fox Chase Apartments 3 12.50
156 Fredericksburg Square Shopping Center 3 8.24
157 North Point Shopping Center 3 8.24
158 Pine Highland Apartments 3 11.24
159 Huntington Commons Apartment Complex 6 8.34
160 Avis Rent-A-Car Garage 3 8.24
161 Cimarron Place Apartments 3 8.24
162 Best Western Desert Aire 6 8.24
163 Maple Canyon 3 12.50
164 Fairfield Inn 42 6 60.34
165 Park Villa Apartments 3 11.24
166 Cornell North Industrial 6 8.24
167 Village Square Shopping Center 3 8.24
168 Town Corral Shopping Center 2 8.24
169 King Plaza Retail Center 6 8.24
170 Crooked Creek Shopping Center 3 12.50
171 Lowe's Food Store, Grandfather Center 3 8.24
172 Taylors Landing 3 8.24
173 Tahitian Terrace Mobile Home Park 6 8.24
174 Springdale Promenade 6 8.34
175 West Wind Apartments: Phase I & II 6 8.34
176 Tanglewood Terrace Apartments 3 11.24
177 Southside Plaza 6 18.34
178 Wynridge Apartments 6 12.50
179 Valley West Shopping Center 3 8.24
180 Market Square Shopping Center 3 8.24
</TABLE>
II-30
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
181 Meridian Mansions, Corporate Suites
Apartments Actual/360 5 108 66
182 Uptown Shopping Center Actual/360 56 24 152
183 Woodside Glen Apartments Actual/360 4 48 69
184 Super 8 Motels Actual/360 5 60 57
185 Fallbrook Towne Centre Actual/360 3 48 69
186 Stow-A-Way Self Storage Actual/360 4 60 57
187 555 Passaic Avenue (Regency Plaza) Actual/360 3 48 66
188 Midtown Plaza Shopping Center Actual/360 4 60 57
189 The Fountain Head Manufactured
Housing Park Actual/360 4 48 66
190 Iron Place Warehouse Actual/360 5 36 81
191 Greenbrier Apartments/Townhouses Actual/360 5 60 48
192 Village of Melrose Park Actual/360 31 24 93
193 Duxbury Marketplace Actual/360 2 48 66
194 Glen Iris Lofts Actual/360 4 48 69
195 Walgreen - Oklahoma 30/360 20 120 116
196 Royalgate & Timberwood Apartments Actual/360 5 42
197 Days Inn - Central Actual/360 5 60 57
198 Hermitage Apartments Actual/360 2 60 177
199 Augusta Commons Actual/360 5 36 81
200 Lock-N-Key Mini Storage Actual/360 6 48 66
201 Morgantown Plaza Shopping Center Actual/360 2 60 54
202 Woodland Park Shopping Center 30/360 11 120 117
203 Walgreens Actual/360 3 120 114
204 190-210 Sylvan Avenue Actual/360 77 116
205 Park Apartments Actual/360 4 48 69
206 Wendy's, Friendly's, & Citizens Bank Actual/360 5 48 186
207 Milford Post Plaza Actual/360 6 60 57
208 Rite Aid - Ohio 30/360 16 120 120
209 Gull Cove Apartments Actual/360 3 60 57
210 Dodge Crossing Actual/360 4 36 78
211 Sutter Pointe Plaza Shopping Center Actual/360 9 60 54
212 Crystal Downs Mobile Village Actual/360 4 60 57
213 Twin Pines Mobile Home Park Actual/360 4 60 57
214 Mountain View Estates Actual/360 4 36
215 The Sunflower Apartments Actual/360 3 48 60
216 White Lane Plaza Shopping Center Actual/360 9 60 54
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
181 Meridian Mansions, Corporate Suites
Apartments 6 18.34
182 Uptown Shopping Center 4 8.24
183 Woodside Glen Apartments 3 8.24
184 Super 8 Motels 3 8.24
185 Fallbrook Towne Centre 3 8.24
186 Stow-A-Way Self Storage 3 8.24
187 555 Passaic Avenue (Regency Plaza) 6 8.24
188 Midtown Plaza Shopping Center 3 8.24
189 The Fountain Head Manufactured
Housing Park 6 8.34
190 Iron Place Warehouse 3 8.24
191 Greenbrier Apartments/Townhouses 12 18.34
192 Village of Melrose Park 3 8.24
193 Duxbury Marketplace 6 8.24
194 Glen Iris Lofts 3 8.24
195 Walgreen - Oklahoma 8.24
196 Royalgate & Timberwood Apartments 12 12 12 6 35.34
197 Days Inn - Central 3 8.24
198 Hermitage Apartments 3 11.24
199 Augusta Commons 3 8.24
200 Lock-N-Key Mini Storage 6 8.34
201 Morgantown Plaza Shopping Center 6 12.50
202 Woodland Park Shopping Center 3 12.50
203 Walgreens 6 8.34
204 190-210 Sylvan Avenue 4 8.24
205 Park Apartments 3 8.24
206 Wendy's, Friendly's, & Citizens Bank 6 8.34
207 Milford Post Plaza 3 12.50
208 Rite Aid - Ohio 8.24
209 Gull Cove Apartments 3 8.24
210 Dodge Crossing 6 8.24
211 Sutter Pointe Plaza Shopping Center 6 8.24
212 Crystal Downs Mobile Village 3 8.24
213 Twin Pines Mobile Home Park 3 8.24
214 Mountain View Estates 12 12 24 36 8.24
215 The Sunflower Apartments 12 8.34
216 White Lane Plaza Shopping Center 6 8.24
</TABLE>
II-31
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
217 Ledgemere Plaza Actual/360 1 48 66
218 Econo Lodge Motel Actual/360 2 120 114
219 38500-58680 Michigan Ave. &
3736-69 Commerce Ct. Actual/360 3 66 48
220 Biocell Laboratories Actual/360 4 90 87
221 The Crossings Apartments Actual/360 0 72 42
222 Tanglewood West Actual/360 4 60 57
223 Park Trails Apartments Actual/360 4 60 84
224 GSK Office Building Actual/360 6 60 60
225 Glenwood Trace Apartments Actual/360 2 60 176
226 The Marina Dune Apartments Actual/360 4 48 66
227 La Miradora Apartments Actual/360 6 36 42
228 1106 Smith Road 30/360 6 36 78
229 Los Robles Medical Center Actual/360 7 60 54
230 Chatham Mall Shopping Center Actual/360 3 60 177
231 Lamp Lighter Mobile Home
Park-Canon City Actual/360 3 60 54
232 Alpine Village Mobile Home
Park-Florence Actual/360 3 60 54
233 Maple Hill Mobile Home Park Actual/360 3 48 66
234 Ashment Shopping Center Actual/360 5 60 54
235 Nicholson Corner Actual/360 2 132 106
236 Equestrian Centre Actual/360 4 60 54
237 Walgreen's Drug Actual/360 4 120 114
238 Staples Actual/360 6 36 78
239 Winmont Apartments Actual/360 4 60 57
240 Rite Aid - Lincoln 30/360 9 120 120
241 Masonic Building Actual/360 7 48 66
242 Washington Square Shopping Center 30/360 7 24 90
243 Springfield Secure Storage Facility Actual/360 5 120 114
244 Riverside Mini Storage Actual/360 5 120 114
245 Cherokee Hills Shopping Center Actual/360 3 48 66
246 Country Acre Estates Mobile Home Park Actual/360 6 48 66
247 Overlea Shopping Center Actual/360 3 60 54
248 Crystal Shores Apartments Actual/360 0 72 42
249 Lakeshore Place Apartments Actual/360 4 36 81
250 Super 8 Motel Kissimmee Actual/360 3 60 57
251 US Forest Service Office Building Actual/360 4 60 54
252 Office Building/Day Care Actual/360 5 60 54
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
217 Ledgemere Plaza 6 8.24
218 Econo Lodge Motel 6 8.34
219 38500-58680 Michigan Ave. &
3736-69 Commerce Ct. 6 18.34
220 Biocell Laboratories 3 12.24
221 The Crossings Apartments 6 8.24
222 Tanglewood West 3 8.24
223 Park Trails Apartments 12 12 9 3 8.24
224 GSK Office Building 11.24
225 Glenwood Trace Apartments 3 11.24
226 The Marina Dune Apartments 6 8.24
227 La Miradora Apartments 6 8.24
228 1106 Smith Road 6 8.24
229 Los Robles Medical Center 6 8.24
230 Chatham Mall Shopping Center 3 12.50
231 Lamp Lighter Mobile Home
Park-Canon City 6 8.34
232 Alpine Village Mobile Home
Park-Florence 6 7.34
233 Maple Hill Mobile Home Park 6 8.34
234 Ashment Shopping Center 6 8.34
235 Nicholson Corner 3 8.24
236 Equestrian Centre 6 8.34
237 Walgreen's Drug 6 8.34
238 Staples 6 8.24
239 Winmont Apartments 3 8.24
240 Rite Aid - Lincoln 8.24
241 Masonic Building 7 8.34
242 Washington Square Shopping Center 6 8.24
243 Springfield Secure Storage Facility 6 18.34
244 Riverside Mini Storage 6 18.34
245 Cherokee Hills Shopping Center 6 8.24
246 Country Acre Estates Mobile Home Park 6 8.34
247 Overlea Shopping Center 6 8.34
248 Crystal Shores Apartments 6 8.24
249 Lakeshore Place Apartments 3 8.24
250 Super 8 Motel Kissimmee 3 8.24
251 US Forest Service Office Building 6 18.34
252 Office Building/Day Care 6 18.34
</TABLE>
II-32
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
253 Lakeview Meadow Estates Townhomes Actual/360 2 60 54
254 Whispering Pines Apartments Actual/360 3 48 66
255 United States Post Office Actual/360 5 36 258
256 Studio Plaza Apartments Actual/360 3 48 60
257 Keoway Village Apartments Actual/360 3 60 57
258 Belleview Estates Apartments Actual/360 2 48 69
259 Towne Plaza Actual/360 7 60 57
260 State Office Building Actual/360 5 84 150
261 Fort Mott Village Apartments Actual/360 4 48 66
262 Brigham Road Apartments Actual/360 4 48 66
263 87 Northpointe Drive Actual/360 3 60 54
264 Clough Shops Actual/360 3 48 66
265 Crain Professional Center Actual/360 5 48 66
266 Maple Crest Manor Mobile Home Park Actual/360 6 48 66
267 Bayberry Apartments Actual/360 2 48 69
268 Landmark II Actual/360 2 48 66
269 Magnolia Hall Apartments Actual/360 6 60 57
270 Multi-Tenant Industrial Project Actual/360 4 96 78
271 Converse Corners Shopping Center Actual/360 1 60 57
272 162 Northpointe Drive Actual/360 3 60 54
273 West Oaks Center 30/360 6 36 78
274 Zia Self Stor-All Actual/360 6 48 66
275 Lappin Lighting/ Boarman & Assoc.
Building 30/360 6 48 66
276 Darby House Apartments Actual/360 4 48 69
277 Sony Centre Actual/360 3 60 54
278 Misty Hollow Apartments Actual/360 3 60 177
279 Bay State Building Actual/360 2 48 69
280 Vienna Square Apartments Actual/360 2 120 114
281 Seven Palms Apartments Actual/360 2 48 69
282 Parkchester Apartments Actual/360 3 60 177
283 Cascades at Lake St. George 30/360 6 36 201
284 Brodhead North Condominiums Actual/360 2 48 69
285 Greensboro-Wendover Phase-I 30/360 53 24 57
286 Greensboro- Wendover Phase-2 Actual/360 53 24 57
287 The Sandpiper Cove Apartments Actual 360 0 72 42
288 The Southwyck Manor Apartments Actual/360 0 72 42
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
253 Lakeview Meadow Estates Townhomes 6 8.34
254 Whispering Pines Apartments 6 8.34
255 United States Post Office 6 8.24
256 Studio Plaza Apartments 12 8.34
257 Keoway Village Apartments 3 8.24
258 Belleview Estates Apartments 3 8.24
259 Towne Plaza 3 12.50
260 State Office Building 6 8.34
261 Fort Mott Village Apartments 6 8.34
262 Brigham Road Apartments 6 8.34
263 87 Northpointe Drive 6 18.34
264 Clough Shops 6 8.34
265 Crain Professional Center 6 8.34
266 Maple Crest Manor Mobile Home Park 6 8.34
267 Bayberry Apartments 3 8.24
268 Landmark II 6 8.24
269 Magnolia Hall Apartments 3 8.24
270 Multi-Tenant Industrial Project 6 8.34
271 Converse Corners Shopping Center 3 8.24
272 162 Northpointe Drive 6 18.34
273 West Oaks Center 6 8.24
274 Zia Self Stor-All 6 18.34
275 Lappin Lighting/ Boarman & Assoc.
Building 6 8.34
276 Darby House Apartments 3 8.24
277 Sony Centre 6 8.34
278 Misty Hollow Apartments 3 11.24
279 Bay State Building 3 8.24
280 Vienna Square Apartments 6 8.34
281 Seven Palms Apartments 3 8.24
282 Parkchester Apartments 3 11.24
283 Cascades at Lake St. George 3 8.24
284 Brodhead North Condominiums 3 8.24
285 Greensboro-Wendover Phase-I 3 8.24
286 Greensboro- Wendover Phase-2 3 8.24
287 The Sandpiper Cove Apartments 6 8.24
288 The Southwyck Manor Apartments 6 8.24
</TABLE>
II-33
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
PREPAYMENT AND SERVICING INFORMATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Prepayment Code(8)
Loan Accrual Lock-out
No. Property Name Method Seasoning(9) Period DEF YM5 YM3 YM1 YM 6.0% 5.0% 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
289 Home Depot Center Actual/360 3 60 57
290 Forest Hills Rest Home Actual/360 2 60 57
291 Lakeside Village Apartments Actual/360 4 48 66
292 Southern Oaks Apartments Actual/360 3 60 177
293 Mobile Acres 30/360 5 48 66
294 520 Courtney Way Actual/360 1 48 70
295 Pine Point Apartment Complex 30/360 6 48 66
296 1693 NE 54th Avenue Actual/360 5 60 54
297 French Riviera Apartments Actual/360 2 120 114
298 Lone Star Self Storage Actual/360 6 60 54
299 Appaloosa Road Office Building Actual/360 6 120 114
300 Longwood Trade Center Actual/360 1 72 105
301 Fifth Avenue Court Apartments Actual/360 6 36 42
302 Patterson House Apartments Actual/360 5 36 81
303 The Bluffs Apartments Actual/360 0 72 42
304 Albany Secure Storage Actual/360 6 120 114
305 Westover Plaza Actual/360 3 48 66
306 Panola Mercado Actual/360 4 48 69
307 Oxford Building Actual/360 6 48 66
308 Villa St. Cyr Apartments Actual/360 6 48 66
309 Olive Tree Plaza Actual/360 3 60 54
310 Hyde Park Apartments Actual/360 5 60 54
311 Bel Aire Apartments Actual/360 4 60 54
312 Davis Memorial Goodwill Industries Actual/360 2 132 103
313 Centre Pointe Apartments Actual/360 4 48 69
314 The Knight Apartments Actual/360 4 48 69
315 Continental Car Office Building Actual/360 5 120 12
316 Twin Tower Apartments Actual/360 5 48 64
317 Westwind Apartments Actual/360 2 48 69
318 Shadow Center/Baytown Village Center Actual/360 6 36 78
319 Industrial Park Addison Actual/360 26 24 94
320 Orchard Park Apartments Actual/360 6 48 66
321 Meadowbrook Apartments Actual/360 0 72 42
322 Keys West Apartments Actual/360 4 60 42
<CAPTION>
(table continued)
- --------------------------------------------------------------------------------------------------------------------------------
Prepayment Code(8)
Loan Cost
No. Property Name 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Open Rate (bps) (10)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
289 Home Depot Center 3 12.50
290 Forest Hills Rest Home 3 8.24
291 Lakeside Village Apartments 6 8.34
292 Southern Oaks Apartments 3 11.24
293 Mobile Acres 6 8.34
294 520 Courtney Way 3 8.24
295 Pine Point Apartment Complex 6 8.34
296 1693 NE 54th Avenue 6 18.34
297 French Riviera Apartments 6 8.34
298 Lone Star Self Storage 6 8.34
299 Appaloosa Road Office Building 6 8.34
300 Longwood Trade Center 3 8.24
301 Fifth Avenue Court Apartments 6 8.24
302 Patterson House Apartments 3 8.24
303 The Bluffs Apartments 6 8.24
304 Albany Secure Storage 6 18.34
305 Westover Plaza 6 8.34
306 Panola Mercado 3 8.24
307 Oxford Building 6 8.24
308 Villa St. Cyr Apartments 6 8.24
309 Olive Tree Plaza 6 8.34
310 Hyde Park Apartments 6 8.34
311 Bel Aire Apartments 6 8.34
312 Davis Memorial Goodwill Industries 6 8.24
313 Centre Pointe Apartments 3 8.24
314 The Knight Apartments 3 8.24
315 Continental Car Office Building 12 8.34
316 Twin Tower Apartments 7 8.34
317 Westwind Apartments 3 8.24
318 Shadow Center/Baytown Village Center 6 8.24
319 Industrial Park Addison 2 8.24
320 Orchard Park Apartments 6 8.24
321 Meadowbrook Apartments 6 8.24
322 Keys West Apartments 18 7.34
</TABLE>
II-34
<PAGE>
Footnotes to Appendix II
1 "MS", "MID" and "RFC" denote Morgan Stanley Mortgage Capital Inc., Midland
Loan Services, Inc., and Residential Funding Corporation respectively, as
Sellers.
2 Sets of Mortgage Loans that have identical alphabetical coding designate
multiple Mortgage Loans that are cross-collateralized and cross-defaulted.
While not cross-collateralized and cross-defaulted, Loan #2 and #3
represent two separate notes secured by the same Mortgaged Property and are
treated as cross-collateralized and cross-defaulted for the purposes of the
Prospectus Supplement
3 Certain ratios including Cut-Off Date Balance/Unit or SF, DSCR, LTV and
Balloon LTV are calculated on a combined basis for Mortgage Loans that are
secured by multiple Mortgaged Properties or are cross-collateralized and
cross-defaulted.
4 "ARD" indicates the anticipated repayment date for hyper-amortizing loans.
Forty-two of the Mortgage Loans in the Mortgage Pool are hyper-amortizing
loans. See "Description of the Mortgage Loans".
5 The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related Note. For those
Mortgage loans utilizing an actual/360 interest calculation methodology,
the actual amortization to a zero balance may be longer.
6 In general for each Mortgaged Property, "Percent Leased" was determined
based on a rent roll provided by the related borrower. In certain cases,
"Percent Leased" was determined based on an appraisal, executed lease,
operating statement or occupancy report. "Percent Leased as of Date"
indicates the
date as of which "Percent Leased" was determined based on such
information. For hospitality properties, the data shown is the average
daily occupancy rate, generally for 1997 or the preceding twelve month
period.
7 "Largest Tenant" refers to the tenant that represents the greatest
percentage of the total square footage at the related Mortgaged Property.
8 Indicates prepayment provisions from the first regularly scheduled payment
date, as stated in the Mortgage Loan. "YM" represents yield maintenance and
"YM1", "YM3" and "YM5" represent the greater of yield maintenance or one
percent, three percent and five percent of the outstanding principal
balance at such time, respectively. The stated percentages represent
specified percentage Prepayment Premiums. "Open" represents a period during
which principal prepayments are permitted without payment of a Prepayment
Premium. For each Mortgage Loan, the sum of the numbers set forth under the
prepayment provision categories represent the number of months in the
original term to maturity or ARD for which such provision applies.
9 "Seasoning" represents the approximate number of months elapsed from the
date of the first regularly scheduled payment or Due Date to the Cut-Off
Date.
10 The "Administrative Cost Rate" is the sum of the primary and master
servicing fees and the trustee fee. The Administrative Cost Rate indicated
for each Mortgage Loan will be calculated based on either a 30/360 or an
actual/360 interest calculation methodology. For purposes of the Pooling
and Servicing agreement, all actual/360 rates will be recomputed on a
30/360 basis.
II-35
<PAGE>
Footnotes to Appendix II
11 Note 1 of the Eastridge Mall loan has an amortization term of 480 months
which is based on the following stepped schedule of principal and fixed
interest payments: November 1, 1971 to and including December 1, 1988 (206
months): $208,265; January 1, 1989 to and including October 1, 2006 (214
months): $232,485; November 1, 2006 to and including October 1, 2011 (60
months): $177,345.
12 Note 1 of the Eastridge Mall loan has a Prepayment Premium equal to the sum
of the applicable specified percentage premium and the product of ten and
the average of contingent interest for the preceeding three fiscal years.
Contingent interest is defined as (a) 1.25% of the outstanding principal
balance plus (b) prior years' accrued contingent interest, if any, up to
10% of available gross income. Available gross income is equal to (a) all
income received at the Mortgaged Property plus (b) the net income of any
reimbursable items less (c) $3,960,000. Assuming the Note is prepaid as of
the Cut-off Date according to its terms (including, but not limited to, the
10% of available gross income restriction) without any modification,
amendment or waiver, the prepayment penalty would be approximately 13.5% of
the outstanding principal balance. See Risk Factors - Effect of Prepayment
Premiums.
13 The Edgewater Development loan has the following stepped fixed interest
schedule: February 1, 1992 to and including January 1, 1993 (12 months) -
2.50%; February 1, 1993 to and including January 1, 1994 (12 months) -
4.00%; February 1, 1994 to and including January 1, 1995 (12 months) -
7.75%; February 1, 1995 to and including January 1, 1996 (12 months) -
9.00%; February 1, 1996 to and including January 1, 2000 (48 months) -
10.25%; February 1, 2000 to and including January 1, 2002 (24 months) -
10.50%. Amortization equals the sum of (i) 100% of the amount by which
income attributable to the Metropolitan Life lease exceeds the sum of (x)
miscellaneous expenses and (y) fixed interest; (ii) 25% of the amount by
which net cash flow exceeds the sum of (x) fixed interest and (y) the sum
due under (i) above; and (iii) an amount equal to the amount by which
contingent interest exceeds 11%. Contingent interest is calculated as 35%
of the amount by which net cash flow exceeds the sum of fixed interest and
amortization, subject to an annual interest (fixed and contingent) cap of
11% per annum.
14 The applicable Prepayment Premium for the Edgewater Loan is the Edgewater
Final Contingent Interest. See "DESCRIPTION OF THE MORTGAGE POOL- Certain
Terms and Conditions of the Mortgage Loans-Contingent Interest Loans"
herein. The Edgewater Final Contingent Interest is to be equal to the
greater of: (a) 25% of the greater of (i) the net proceeds from any sale of
the Mortgaged Property to a third property, (ii) the net proceeds from any
refinancing of the Mortgaged Property by a third party, and (iii) the net
appraised value of the Mortgaged Property; and (b) an amount sufficient to
provide the mortgagee an internal rate of retun (taking into account all
fixed and Contingent Interest paid during the life of the Edgewater Loan)
equal to 11% per annum; provided that the Edgewater Final Contingent
Interest cannot exceed an amount sufficient to provide the mortgagee an
internal rate of return (taking into account all fixed and Contingent
Interest paid during the life of the Edgewater Loan) equal to 13% per
annum. Assuming the Note is prepaid as of the Cut-off Date according to its
terms without modification, amendments or waiver, the calculated Edgewater
Final Contingent Interest would exceed the amount due under a conventional
yield maintenance formula. See Risk Factors-Effect of Prepayment Premiums.
However, the Edgewater Final Contingent Interest will not be distributed in
the same manner as a Prepayment Premium. Instead, ___% and ___% of any
Edgewater Final Contingent Interest will be distributed to the holders of
the Class A-1 and Class X Certificates, respectively, and any amount
remaining will be distributed to the holders of the Class V Certificates.
II-36
<PAGE>
Footnotes to Appendix II
15 With the exception of Phoenix Inn - Wilsonville, all of the Phoenix Inn
loans have a common borrower. In addition, all of the Phoenix Inn loans are
cross-defaulted and cross-collateralized, except Phoenix Inn - Eugene
which is cross-defaulted but not cross-collateralized with the other
Phoenix Inn loans. In addition, the Phoenix Inn - Eugene loan is recourse
to the principals of the borrower.
II-37
<PAGE>
APPENDIX III
Significant Loan Summaries
<TABLE>
<CAPTION>
Loan No. 1 - Two Chatham Center Loan and Property
<S> <C> <C> <C>
- ---------------------------- ------------------- ------------------------- ---------------------
Cut-off Date Balance: $41,939,454.47 Balloon Balance: $36,660,803.56
- ---------------------------- ------------------- ------------------------- ---------------------
Loan Type: Principal and Property Type: Mixed Use
Interest
- ---------------------------- ------------------- ------------------------- ---------------------
Origination Date: April 9, 1998 Location: Pittsburgh, PA
- ---------------------------- ------------------- ------------------------- ---------------------
Maturity Date:* May 1, 2008 Year Renovated: 1989
- ---------------------------- ------------------- ------------------------- ---------------------
Initial Mortgage Rate: 7.02% Appraised Value $56,000,000
- ---------------------------- ------------------- ------------------------- ---------------------
Annual Debt Service: $3,359,897.04 Current LTV: 74.9%
- ---------------------------- ------------------- ------------------------- ---------------------
DSCR: 1.31 Balloon LTV: 65.5%
- ---------------------------- ------------------- ------------------------- ---------------------
Underwritten Net Cash Flow: $4,409,050 Occupancy 93.3%
- ---------------------------- ------------------- ------------------------- ---------------------
Occupancy Date: 2/16/98
- ---------------------------- ------------------- ------------------------- ---------------------
*For purposes hereof, it is assumed that the maturity date of the Chatham Loan
is the Optional Prepayment Date, as described below.
</TABLE>
The Loan
The Two Chatham Center Loan (the "Chatham Loan") is secured by a first
leasehold mortgage on Building II at Chatham Center, a 285,887 square foot, 16
story Class A office building and a six level, 2,300 space enclosed parking
garage located in Pittsburgh, Pennsylvania (the "Chatham Property"). The Chatham
Loan was originated by Midland on April 9, 1998.
The Borrower. The borrower is Chatham II Limited Partnership, a Delaware
single-purpose limited partnership (the "Chatham Borrower"). The general partner
of the Chatham Borrower is Chatham II Holding Corporation, a Delaware
corporation. The sole stockholders of Chatham II Holding Corporation are Lukas
P. Georgiadis and Francis P. Greenburger. Messrs. Georgiadis and Greenburger,
through affiliated entities, also control the majority of the limited
partnership interests in the Chatham Borrower.
Security. The Chatham Loan is secured by a Leasehold Mortgage, an
Assignment of Leases and Rents, UCC Financing Statements and certain additional
security documents. The Leasehold Mortgage is a first lien on a leasehold
interest in the Chatham Property. The Chatham Loan is non-recourse, subject to
certain limited exceptions.
Payment Terms. The Mortgage Rate is fixed at 7.02% until May 1, 2008 (the
"Optional Prepayment Date"), at which time the Mortgage Rate will adjust to the
greater of (a) 9.02% or (b) the then applicable yield rate on U.S. Treasury
obligations maturing during the month in which the maturity date of the Chatham
Loan occurs plus 2%; provided that the adjusted Mortgage Rate cannot exceed
12.02%. Although, the Chatham Loan has a stated term of 360 months, it is
assumed for purposes hereof that it has a term of 120 months with a maturity
date of the Optional Prepayment Date. The Chatham Loan has an original
amortization term of 360 months. The Chatham Loan requires monthly payments of
principal and interest of $279,991.42 until the Optional Prepayment Date. If the
Chatham Loan is not prepaid on such date, all of the cash flow from the Chatham
Property is to be applied as described in "Lockbox" below. If not sooner
satisfied, all unpaid principal and accrued but unpaid interest is due on May 1,
2028. The Chatham Loan accrues interest computed on the basis of the actual
number of days elapsed each month in a 360-day year.
Lockbox. All gross income from the Chatham Property is deposited into a
lockbox account controlled by the lender. Prior to the Optional Prepayment Date,
disbursements from such account are made as follows: (a) to fund required
reserves for the payment of taxes, insurance and ground rents; (b) to fund other
reserves required under the related Mortgage; (c) to pay all principal and
interest then due with respect to the Chatham Loan; (d) to pay all other amounts
owed the lender with respect to the Chatham Loan; (e) to the Chatham Borrower
for the payment of operating expenses, management fees and leasing commissions;
and (f) to the Chatham Borrower. Subsequent to the Optional Prepayment Date
until the earlier of May 1, 2028 or until the Chatham Loan is paid in
III-1
<PAGE>
full, disbursements from such account are made as follows: (a) to fund required
reserves for the payment of taxes, insurance and ground rents; (b) to pay all
principal and interest (at the initial Mortgage Rate) then due with respect to
the Chatham Loan; (c) to fund other reserves required under the related
Mortgage; (d) to pay budgeted operating expenses approved by the lender; (d) to
pay earned management fees and leasing commissions; (e) to pay all remaining
interest then due with respect to the Chatham Loan; (f) to pay all outstanding
principal under the Chatham Loan; and (g) to pay all other amounts owed the
lender with respect to the Chatham Loan.
Prepayment/Defeasance. No prepayment or defeasance is permitted prior to
the earlier of (a) May 1, 2001, or (b) two years following the date of the
assignment of the Chatham Loan in connection with a securitization. Thereafter,
until February 1, 2008, any prepayment must be in the form of a defeasance. Any
such defeasance will include release of the related Chatham Property and the
pledge of substitute collateral in the form of direct, non-callable United
States Treasury obligations providing for payments prior, but as close as
possible, to all successive dates on which a payment of principal or interest
under the Chatham Loan is due, with each such payment being equal to or greater
than such scheduled principal or interest payment due on such date. From and
after February 1, 2008, the Chatham Loan may be prepaid without the payment of
any prepayment consideration
Transfer of Properties or Interest in Borrower. Except as described below,
the lender will have the option to declare the Chatham Loan immediately due and
payable upon the transfer of the Chatham Property or any ownership interest in
the Chatham Borrower. The Chatham Loan documents provide for a one-time right of
the Chatham Borrower to transfer the Chatham Property and the Chatham Borrower's
obligations under the Chatham Loan to a third party approved by the lender if
(i) no event of default (or event which could ripen into an event of default)
has occurred, (ii) the proposed transferee reasonably satisfies the lender that
it possesses the managerial experience and financial resources necessary to
operate the Chatham Property during the term of the Chatham Loan, (iii) the
proposed transferee assumes the obligations of the Chatham Borrower, (iv) a
written confirmation is received from the applicable rating agencies to the
effect that the proposed transfer will not result in a downgrade, qualification
of withdrawal of the ratings given any of the Certificates, and (v) a specified
assumption fee, all reasonably required documents, a title policy endorsement
and reimbursement for all of its costs and expenses has been received by the
lender. The Chatham Loan documents also prohibit, without the lender's prior
consent, any transfer of any beneficial interest in the Chatham Borrower or its
general partner, including, without limitation, (a) a 49% or more transfer
(voluntary or involuntary) or pledge of the ownership interests in the Chatham
Borrower or its general partner, (b) the change, removal or resignation of such
general partner, or the pledge of its partnership interest in the Chatham
Borrower; provided, however, that transfers are allowed for estate planning
purposes of the limited partners of the Chatham Borrower.
Escrow/Reserves. There is a tax, insurance and ground rent reserve which
requires deposits in an amount sufficient to pay taxes, insurance premiums and
ground rent when due. There is a reserve for tenant improvements and leasing
commissions which requires monthly deposits of $32,510.67 which is to be applied
to any re-leasing costs applicable generally to the leasing of space in the
Chatham Property. There is also a reserve for tenant improvements and leasing
commissions funded at closing in the amount of $371,944.00 which is to be
applied to any re-leasing costs associated with the extension of a lease to
Aetna Life Insurance Company. The Borrower also deposits $4,753.33 into a
reserve to provide funds for ongoing future capital improvements to the Chatham
Property. A reserve in the amount of $2,500,000.00 was established at closing to
provide funds for the refurbishing of the parking garage portion of the Chatham
Property. Such refurbishing, which is to include sealing of the plaza,
replacement of expansion joints, concrete crack repair and restriping, has
commenced and is expected to take nine months to complete.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited without the prior consent of the Lender.
The Property
The Chatham Property consists of Building II at Chatham Center and a six
level 2,300 space enclosed parking garage is located in the Uptown section of
Pittsburgh, Pennsylvania. Building II was constructed in 1982, and is a 285,887
square foot, 16 story Class A office building. The related parking garage
contains 2,300 spaces and is the largest parking garage in Pittsburgh. Chatham
Center is a multi-use complex which, in addition to the Chatham Property,
includes a 200 unit high rise condominium, a 225,000 square foot office building
and a 404 room hotel. Chatham Center is located adjacent or near to the
Pittsburgh Civic Arena and Duquesne University. The
III-2
<PAGE>
ground lease underlying the Chatham Property provides for annual rent of
$68,850.00 and terminates in 2051. The Urban Redevelopment Authority of
Pittsburgh, an agency whose charter is to acquire and direct the re-use of land
for Pittsburgh, is the lessor under such ground lease. Cross-easements exist
among the various portions of Chatham Center allowing the shared use of the
garage and plaza, and providing for the sharing of the related costs of
maintenance and security expenses.
Major tenants of Building II include Travelers (61,999 square feet), CNA
Insurance (51,694 square feet) and Firemen's Fund Insurance Co. (26,914 square
feet). The Chatham Property is currently 99.3% leased. Occupancy rates for 1995
and 1996 were 96% and 98%, respectively. Chatham II tenants account for $250,000
(approximately 5.2%) of the total annual income from the garage.
Management
Building II of the Chatham Property has been owned and managed by the
Borrower since 1989. The parking garage portion of the Chatham Property has been
operated by Central Parking Systems, an unrelated third party manager, since
1988.
III-3
<PAGE>
<TABLE>
<CAPTION>
Loan Nos. 2 and 3- Eastridge Mall Loans and Property Certain of
the following information is based upon the aggregation of the
separate information for each of the two promissory notes that
comprise this Loan.
<S> <C> <C> <C>
- ---------------------------- ------------------- ---------------------------- ------------------
Cut-off Date Balance: DSCR: 1.38
- ---------------------------- ------------------- ---------------------------- ------------------
Note 1: $20,495,015.40 Underwritten Cash Flow: $5,562,617
- ---------------------------- ------------------- ---------------------------- ------------------
Note 2: $10,424,632.04 Underwritten NOI: $6,242,593
- ---------------------------- ------------------- ---------------------------- ------------------
Loan Type: Principal and Balloon Balance: $2,589,296
Interest
- ---------------------------- ------------------- ---------------------------- ------------------
Origination Date: Property Type: Retail
- ---------------------------- ------------------- ---------------------------- ------------------
Note 1: September 28, 1971 Location: San Jose, CA
- ---------------------------- ------------------- ---------------------------- ------------------
Note 2: December 15, 1978 Year Renovated: 1994
- ---------------------------- ------------------- ---------------------------- ------------------
Maturity Date: October 1, 2011 Tenants: 106
- ---------------------------- ------------------- ---------------------------- ------------------
Mortgage Rate: Appraised Value $60,000,000
- ---------------------------- ------------------- ---------------------------- ------------------
Note 1: 8.75% Current LTV: 51.5%
- ---------------------------- ------------------- ---------------------------- ------------------
Note 2: 9.00% Balloon LTV: 4.3%
- ---------------------------- ------------------- ---------------------------- ------------------
Annual Debt Service: Current Occupancy: 57.8%
- ---------------------------- ------------------- ---------------------------- ------------------
Through 10/1/06: Occupancy Date: 3/31/98
- ---------------------------- ------------------- ---------------------------- ------------------
Note 1: $2,789,820
- ---------------------------- ------------------- ---------------------------- ------------------
Note 2: $1,251,530
- ---------------------------- ------------------- ---------------------------- ------------------
11/1/06 to
Maturity:
- ---------------------------- ------------------- ---------------------------- ------------------
Note 1: $2,128,140
- ---------------------------- ------------------- ---------------------------- ------------------
Note 2: $1,251,530
- ---------------------------- ------------------- ---------------------------- ------------------
</TABLE>
The Loans
The Eastridge Mall Loans (the "Eastridge Mall Loans") are each secured by
one first deed of trust on the 960,222 square foot regional mall located on 66.2
acres in San Jose, California (the "Eastridge Mall Property"). The Eastridge
Mall Loans consist of two separate notes, each of which matures on October 1,
2011. The first such note ("Eastridge Mall Note 1") was originated by Teachers
Insurance and Annuity Association of America on September 28, 1971, as a fully
amortizing loan with a fixed interest rate of 8.75%, together with contingent
interest equal to 1.25% per annum on the outstanding principal of such Note.
Such contingent interest is payable from a specified portion of the gross income
from the related Mortgaged Property and to the extent not paid, accrues and is
payable in future periods. The Eastridge Mall Note 1 provides for stepped annual
debt service as follows (11/1/71 through 12/1/88 - $2,499,180; 1/1/89 through
10/1/2006 - $2,789,820; and 11/1/2006 through 10/1/2011 - $2,128,140). The
second note ("Eastridge Mall Note 2") was originated on December 15, 1978, as a
balloon loan based upon a 420 month amortization period and with a fixed
interest rate of 9.00%.
The Borrower. The borrower is a trust whose sole beneficiary is the
Equitable Life Insurance Company of America (the "Eastridge Mall Borrower").
Security. The Eastridge Mall Loans are each secured by one Deed of Trust,
UCC Financing Statements and certain additional security documents. Such deed of
trust is a first lien on a fee interest in the Eastridge Mall Property. The
Eastridge Mall Loan are each non-recourse, subject to certain limited
exceptions.
Payment Terms. The Eastridge Mall Loans require aggregate monthly payments
of principal and interest of $336,779.17 through October 1, 2006, and
$281,639.17 thereafter until maturity on October 1, 2011, at which time all
unpaid principal and accrued but unpaid interest is due. The Eastridge Mall
Loans accrue interest computed on an 30/360 basis.
Prepayment. As the first 180 months of the term of each of Eastridge Mall
Note 1 and Eastridge Mall Note 2 has expired, the Eastridge Mall Loans may be
prepaid in upon the payment of the applicable Prepayment Premium. Such
Prepayment Premium is calculated as follows: (1) for the Eastridge Mall Note 1,
ten times the average annual contingent interest paid during the three years
preceding such prepayment plus the applicable percentage prepayment (3% for 12
months, 2.5% for 12 months, 2% for 12 months, 1.5% for 12 months and 1% for 252
months); and (2) for the Eastridge Mall Note 2, the applicable percentage
prepayment (5% for 12 months, 4.5% for 12 months, 4% for 12 months, 3.5% for 12
months, 3% for 12 months, 2.5% for 12 months, 2% for 12 months, 1.5% for 12
months and 1% for 117 months).
III-4
<PAGE>
Transfer of Properties or Interest in Borrower. The Eastridge Mall
Borrower is only required to provide the lender with notice of any conveyances,
transfers or changes in ownership related to the Eastridge Mall Borrower or
Eastridge Mall Properties.
Escrow/Reserves. There are no escrow reserves for Taxes, Insurance or
other matters in the Eastridge Mall Loan.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited without the prior consent of the Lender.
The Property
The Eastridge Mall Property is a two- and partial three-level regional
mall containing approximately 1,380,000 net rentable square feet (including
out-parcels), with Macy's (175,000 square feet), J.C. Penney (approximately
246,000 square feet) and Sears (approximately 251,000 square feet) as its
current anchor tenants. Macy's and J.C. Penney each own and occupy their
respective sites, which sites are not part of the Eastridge Mall Property. The
Eastridge Mall Property contains 960,222 net rentable square feet. Excluding
leases for a period of less than one year, the Eastridge Mall Property is
approximately 58% leased as of March 31, 1998. Additionally, a number of small
free-standing convenience stores, as well as a Circuit City electronics store
are located on out-parcels, and the Eastridge Mall Borrower operates an ice
skating rink on the Eastridge Mall Property.
The Eastridge Mall Property is located approximately 4 miles east of
downtown San Jose, Santa Clara County, California. It was built in 1971 and
renovated during 1994.
Management
The Property is managed by ERE Yarmouth, a real estate investment advisor
formed when Australia's Lend Lease Corp. purchased Equitable's Real Estate
Investment Management. According to Inman News, an on-line real estate
publication, as of April, 1997, ERE Yarmouth ranked as the largest U.S. manager
of tax-exempt real estate assets, serving approximately 300 major U.S.
corporation, public and union pension funds and international investors.
III-5
<PAGE>
<TABLE>
<CAPTION>
Loan Nos. 4, 5, 6, 7, 8, 9 and 10 - Phoenix Inn Loans and Properties
<S> <C> <C> <C>
- -------------------------------- --------------------- ------------------------- ---------------
Cut-off Date Balances: Year Built:
- -------------------------------- --------------------- ------------------------- ---------------
Beaverton: $4,750,536 Beaverton: 1997
- -------------------------------- --------------------- ------------------------- ---------------
Vancouver: $4,404,143 Vancouver: 1996
- -------------------------------- --------------------- ------------------------- ---------------
Salem: $4,057,750 Salem: 1990
- -------------------------------- --------------------- ------------------------- ---------------
Lake Oswego: $3,265,994 Lake Oswego: 1993
- -------------------------------- --------------------- ------------------------- ---------------
Tigard: $2,894,858 Tigard: 1995
- -------------------------------- --------------------- ------------------------- ---------------
Eugene: $2,578,785 Eugene: 1994
- -------------------------------- --------------------- ------------------------- ---------------
Wilsonville: $2,771,146 Wilsonville: 1997
- -------------------------------- --------------------- ------------------------- ---------------
Loan Type: Principal and Hotel Rooms:
Interest
- -------------------------------- --------------------- ------------------------- ---------------
Origination Date: 12/29/1997 Beaverton: 98
- -------------------------------- --------------------- ------------------------- ---------------
Maturity Date: 1/1/2008 Vancouver: 98
- -------------------------------- --------------------- ------------------------- ---------------
Mortgage Rate: 7.870% Salem: 88
- -------------------------------- --------------------- ------------------------- ---------------
Annual Debt Service: Lake Oswego: 62
- -------------------------------- --------------------- ------------------------- ---------------
Beaverton: $477,140 Tigard: 56
- -------------------------------- --------------------- ------------------------- ---------------
Vancouver: $442,348 Eugene: 97
- -------------------------------- --------------------- ------------------------- ---------------
Salem: $407,557 Wilsonville: 56
- -------------------------------- --------------------- ------------------------- ---------------
Lake Oswego: $328,034 Current LTV (All 69.7%
Hotels):
- -------------------------------- --------------------- ------------------------- ---------------
Tigard: $290,757 Balloon LTV (All 48.2%
Hotels):
- -------------------------------- --------------------- ------------------------- ---------------
Eugene: $288,404 Occupancy:
- -------------------------------- --------------------- ------------------------- ---------------
Wilsonville: $278,332 Beaverton: 91.5%
- -------------------------------- --------------------- ------------------------- ---------------
DSCR: 1.43 Vancouver: 78.3%
- -------------------------------- --------------------- ------------------------- ---------------
Aggregate Underwritten Cash $3,582,775 Salem: 72.7%
Flow:
- -------------------------------- --------------------- ------------------------- ---------------
Aggregate Underwritten NOI: 4,025,696 Lake Oswego: 85.8%
- -------------------------------- --------------------- ------------------------- ---------------
Balloon Balance: Tigard: 87.3%
- -------------------------------- --------------------- ------------------------- ---------------
Beaverton: $3,368,355 Eugene: 90.2%
- -------------------------------- --------------------- ------------------------- ---------------
Vancouver: $3,122,745 Wilsonville: 66.9%
- -------------------------------- --------------------- ------------------------- ---------------
Salem: $2,877,136 Occupancy as of Date:
- -------------------------------- --------------------- ------------------------- ---------------
Lake Oswego: $2,315,743 Beaverton: 2/28/98
- -------------------------------- --------------------- ------------------------- ---------------
Tigard: $2,052,591 Vancouver: 2/28/98
- -------------------------------- --------------------- ------------------------- ---------------
Eugene: $1,412,551 Salem: 3/01/98
- -------------------------------- --------------------- ------------------------- ---------------
Wilsonville: $1,964,874 Lake Oswego: 3/31/98
- -------------------------------- --------------------- ------------------------- ---------------
Property Type: Hospitality Tigard: 4/06/98
- -------------------------------- --------------------- ------------------------- ---------------
Location: Eugene: 4/06/98
- -------------------------------- --------------------- ------------------------- ---------------
Beaverton Hotel: Beaverton, OR Wilsonville: 2/28/98
- -------------------------------- --------------------- ------------------------- ---------------
Vancouver Hotel: Vancouver, WA
- -------------------------------- --------------------- ------------------------- ---------------
Salem Hotel: Salem, OR
- -------------------------------- --------------------- ------------------------- ---------------
Lake Oswego Hotel: Lake Oswego, OR
- -------------------------------- --------------------- ------------------------- ---------------
Tigard Hotel: Tigard, OR
- -------------------------------- --------------------- ------------------------- ---------------
Eugene Hotel: Eugene, OR
- -------------------------------- --------------------- ------------------------- ---------------
Wilsonville Hotel: Wilsonville, OR
- -------------------------------- --------------------- ------------------------- ---------------
</TABLE>
The Loans
The "Phoenix Inn Loans" consist of seven separate Mortgage Loans secured
by first mortgages on the related hospitality properties (the "Phoenix Inn
Properties"). All of the Phoenix Inn Loans were originated on December 29, 1997
and have maturity dates of January 1, 2008.
The Borrower. The borrower for the Phoenix Inn Loans (excepting the Phoenix
Inn-Wilsonville Loan is Phoenix Inns, L.L.C. of Oregon, an Oregon limited
liability company wholly-owned by VIP's Motor Inns, Inc., which is a subsidiary
of VIP's Industries, Inc. Phoenix Inns, L.L.C. of Oregon is a single purpose,
bankruptcy remote limited liability company formed in October, 1997 and as such
was not included in VIP's Industries' 1996
III-6
<PAGE>
fiscal statements. The borrower for the Phoenix Inn-Wilsonville Loan is
Wilsonville Inns Properties, L.L.C. of Oregon, an Oregon limited liability
company also wholly-owned by VIP's Motor Inns, Inc. On September 30, 1997, the
end of VIP's Industries financial year, it reported assets of $31,229,273,
stockholder's equity of $7,543,770, and revenues of $13,206,085.
Security. The Phoenix Inn Loans are secured by first mortgage liens on the
fee interest of the related Phoenix Inn Property, with the exception of the
Phoenix Inn-Eugene Loan, which is secured by a first mortgage on the related
borrower's leasehold interest in the Phoenix Inn-Eugene Property. The ground
lease is fully subordinated to the related Mortgaged and expires in the year
2026. The rent under the ground lease is comprised of: (a) a minimum rent based
on 10% of the fair market value of the Property; and (b) a royalty rent equal to
10% of the net cash flow. The Phoenix Inn Loans are non-recourse, with the
exception of the Phoenix Inn-Eugene Loan, which provides for recourse against
the principals of the related borrower. All of the Phoenix Inn Loans are
cross-collateralized and cross-defaulted, with the exception of the Phoenix
Inn-Eugene Loan, which is only cross-defaulted.
Payment Terms. Each Phoenix Inn Loan has a fixed Mortgage Rate equal to
7.870%, an original term of 120 months and an original amortization term of 240
months.
Prepayment. During the first 60 months of the term of each of the Phoenix
Inn Loans, no prepayments are allowed. During the immediately succeeding 57
months, prepayments may be prepaid in upon the payment of the applicable yield
maintenance prepayment premium. No such prepayment premium is required for
prepayments occurring during the last three months of the loan term.
Transfer of Properties or Interest in Borrower. Except as described below,
the lender will have the option to declare the Phoenix Inn Loans immediately due
and payable upon the transfer (without the lender's prior written consent) of a
Phoenix Inn Property or more than a 10% ownership interest in any borrower under
a Phoenix Inn Loan. The respective Phoenix Inn Loan documents allow the related
borrower up to two transfers of the related Phoenix Inn Property if: (i) such
borrower's obligations under the related Phoenix Inn Loan are assumed by a
transferee approved by the lender in writing; (ii) a specified assumption fee
has been received by the lender; and (iii) the lender is reimbursed for all of
its expenses, including attorney's fees, incurred in connection with the
transfer. The respective Phoenix Inn Loan documents also allow transfers: (a)
occurring by devise, descent or operation of law upon the death of a member,
general partner or stockholder of the related borrower; and (b) among the
current members of the related borrower or their respective immediate family
members.
Escrow/Reserves. All of the Phoenix Inn Loans require reserves for taxes,
insurance and anticipated future capital expenditures. The following are the
estimated current balances of the anticipated future capital expenditures escrow
accounts for each of the Phoenix Inn Loans: (a) Phoenix Inn-Beaverton, estimated
at $32,081, not to exceed $76,860, (b) Phoenix Inn - Vancouver, $31,029.23, not
to exceed $74,280, (c) Phoenix Inn - Salem, $27,543, not to exceed $65,988, (d)
Phoenix Inn - Lake Oswego, $21,859, not to exceed $52,296, (e) Phoenix Inn -
Tigard $19,548, not to exceed $46,824, (f) Phoenix Inn - Eugene $30,813, not to
exceed $73,824, and (g) Phoenix Inn - Wilsonville $17,967.08, not to exceed
$43,068.
Subordination/Other Debt. Subordinate indebtedness and encumbrances are
prohibited without the prior consent of the Lender.
The Properties
The Phoenix Inn - Beaverton has 98 rooms and a gross building area of
62,339 square feet. The hotel is located within three miles of $10 billion of
high-tech manufacturing facilities, including Intel's $2.2 billion project. For
the 12 full months 3/1/97-2/28/98, total occupancy was 91.5% with an average
daily rate of $69.12.
The Phoenix Inn - Vancouver has 98 rooms and gross building area of 56,211
square feet. The hotel is located on Mill Plain Boulevard, which connects
downtown Vancouver with unincorporated Clark County to the east. It is located
in an area that has experienced substantial growth since the opening of
Interstate 205 bridge in 1983. Total occupancy and average daily rates for the
current year are 78.3% and $65.11, respectively.
III-7
<PAGE>
The Phoenix Inn - Salem has 88 rooms and gross building area of 47,304
square feet. The hotel is located in a commercial corridor with a variety of
commercial and retail development serving a surrounding area of stable
residential neighborhoods. Total occupancy and average daily rates for the
current year are 72.7% and $63.42, respectively.
The Phoenix Inn - Lake Oswego has 62 rooms and gross building area of
37,540 square feet. Commercial development in the hotel's area include two class
"A" office campuses and a variety of bank branches and support restaurants.
Total occupancy and average daily rates for the current year are 85.8% and
$70.46, respectively.
The Phoenix Inn - Tigard has 56 rooms and gross building area of 33,350
square feet. The hotel is well located in a heavily commercially developed
neighborhood, including Class "A" suburban office space, the Washington Square
Regional Mall and other retail. Total occupancy and average daily rates for the
current year are 87.3% and $69.92, respectively.
The Phoenix Inn - Eugene has 97 rooms and gross building area of 57,000
square feet. The hotel is located adjacent to the University of Oregon campus
and is approximately two miles east of Eugene's central business district. Total
occupancy and average daily rates for the current year are 90.2% and $64.17,
respectively.
The Phoenix Inn - Wilsonville contains 56 units and has gross building
area of 33,979 square feet. The hotel opened in April 1997 and had a strong
occupancy ranging from 70% to 80% in May through August of 1997. Work on several
infrastructure public works projects in the immediate vicinity of the hotel,
including the construction of a freeway off-ramp and the widening of adjacent
roads, commenced in the fall of 1999 and are scheduled to be completed in the
winter of 1998. The effect of such construction, with the associated noise and
traffic disruptions, upon the hotel's operations has been more severe than
originally anticipated. Occupancy declined in November and December of 1997 due
to the construction activity and has averaged between 50% and 60% since January
1998. The current anticipated scheduled completion date for such construction is
June 1998. Average daily rates for the current year are $66.97.
All of the Phoenix Inn hotels are limited service, mini-suites hotels
consisting of rooms of varying design with a half wall separating the sleeping
area from the working area. Each room generally includes a couch, desk,
telephone, wet-bar, microwave, refrigerator, coffeemaker, TV, ironing board/iron
and two telephones. Some rooms also include jacuzzi's. The Phoenix Inn
properties generally include an indoor or outdoor pool, Jacuzzi, fitness center,
meeting rooms and a continental breakfast area. Complimentary services include a
continental breakfast buffet, guest laundry, a daily newspaper and fax and copy
services.
Management
The Phoenix Inn hotels are operated by VIP's Motor Inns, Inc.
III-8
<PAGE>
MORGAN STANLEY July 8, 1998
Real Estate Debt Capital Markets
Mortgage Capital Market
MORGAN STANLEY DEAN WITTER
CMBS New Issue
Preliminary Term Sheet
Expected Pricing Date: July 15, 1998
__________________________________
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
as Depositor
Morgan Stanley Mortgage Capital Inc.
Midland Loan Services, Inc. and PNC Bank, N.A.
Residential Funding Corporation
as Mortgage Loan Sellers
Midland Loan Services, Inc.
as Master Servicer and Special Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
___________________________________
MORGAN STANLEY DEAN WITTER RESIDENTIAL FUNDING SECURITIES CORPORATION
____________
Selling Agent
PNC CAPITAL MARKETS
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS SUPPLEMENT AND PROSPECTUS AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES SHOULD MAKE THEIR INVESTMENT DECISION BASED ONLY
UPON THE INFORMATION PROVIDED THEREIN. CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN HAVE THE MEANINGS GIVEN TO SUCH TERMS IN THE PROSPECTUS SUPPLEMENT.
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Rating Weighted Expected Final
Subordination (S&P/ Average Principal Distribution Pass-Through
Class Amount(1) Levels Moody's) Life(3) Window(3)(4) Date(3) Rate(5)
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
A-1 $ 277,000,000 28.00% AAA/Aaa 5.43 1-113 12/15/07 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
A-2 581,412,000 28.00 AAA/Aaa 9.64 113-118 05/15/08 [6.40%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
X 1,192,238,941(2) ---- AAAr/Aaa 9.51 ---- 03/15/23 (7)
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
B 59,611,000 23.00 AA/Aa2 9.82 118-119 06/15/08 [6.53%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
C 59,612,000 18.00 A/A2 9.90 119-119 06/15/08 [6.65%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
D 62,593,000 12.75 BBB/Baa2 10.51 119-141 04/15/10 WAPT-[0.50%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
E 20,862,000 11.00 BBB-/Baa3 12.08 141-154 05/15/11 WAPT-[0.13%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
F(6) 53,650,000 6.50 BB+/NR 14.21 154-176 03/15/13 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
G(6) 11,923,000 5.50 BB/NR 14.72 176-178 05/15/13 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
H(6) 8,942,000 4.75 BB-/NR 15.06 178-186 01/15/14 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
J(6) 14,905,000 3.50 B+/NR 16.51 186-210 01/15/16 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
K(6) 8,939,000 2.75 B/NR 18.04 210-223 02/15/17 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
L(6) 11,924,000 1.75 NR/B3 19.11 223-233 12/15/17 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
M(6) 8,940,000 1.00 NR/Caa2 19.58 233-236 03/15/18 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
N(6) 11,925,941 0.00 NR/NR 21.52 236-296 03/15/23 [6.19%]
- ---------- --------------- ------------ ----------- ----------- ------------- ---------------- -------------
<FN>
Notes: (1) In the case of each such Class, subject to a permitted
variance of plus or minus 5%.
(2) Class X Notional Amount is equal to the sum of all Certificate
Balances outstanding from time to time.
(3) Based on a prepayment speed of 0% CPR and the Maturity Assumptions
described in the Prospectus Supplement.
(4) Principal Window is the period (expressed in terms of months and
commencing with the month of the first Distribution Date) during
which distributions of principal are expected to be made to the
holders of each designated Class in accordance with the Maturity
Assumptions.
(5) Other than the Class X, Class D and Class E Certificates, each
Class of Certificates will accrue interest generally at a fixed
rate of interest except in limited circumstances as described in
the Prospectus Supplement. The Pass-Through Rates shown above are
for indicative purposes only and will be finalized at time of
pricing.
(6) To be offered privately.
(7) The Pass-Through Rate on the Class X Certificates on each
Distribution Date will equal, in general, the excess, if any, of
the Weighted Average Net Mortgage Rate over the Weighted Average
Pass Through Rate of the Principal Balance Certificates.
</FN>
</TABLE>
T-1
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
I. Issue Characteristics
Issue Type: Public: Class X, A-1, A-2, B, C, D and E
Private (Rule 144A): Class F, G, H, J, K, L, M and N
Publicly $1,061,090,000 monthly pay, multi-class sequential pay
Offered commercial mortgage REMIC Pass-Through Certificates,
Securities: including four fixed-rate principal and interest classes
(A-1, A-2, B and C), two weighted average pass through
principal and interest classes (D and E) and one variable
rate interest only class (X).
Other $131,148,841 monthly pay, multi-class sequential pay
Certificates: commercial mortgage REMIC Pass-Through Certificates,
consisting of eight fixed rate principal and interest
classes (F, G, H, J, K, L, M and N) all of which will be
offered privately.
Collateral: The collateral consists of a $1,192,238,941 pool of
fixed-rate commercial and multifamily Mortgage Loans
Sellers: Morgan Stanley Mortgage Capital Inc., Midland Loan
Services, Inc., PNC Bank, N.A. and Residential Funding
Corporation.
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Manager: Residential Funding Securities Corporation
Master Servicer: Midland Loan Services, Inc.
Special Servicer: Midland Loan Services, Inc.
Trustee/Fiscal LaSalle National Bank/ABN Amro Bank N.V.
Agent:
Expected Pricing July 15, 1998
Date:
Expected Closing July 22, 1998
Date:
Distribution The 15th of each month (or if such day is not a business
Dates: day, the next business day), commencing in August, 1998
Minimum 5,000 for Class A Certificates; $50,000 for class X, B, C,
Denominations: D and E Certificates
Settlement Terms: DTC, Euroclear and Cedel, same day funds, with accrued
interest
Legal/Regulatory Class A-1, A-2 and X Certificates are expected to be
Status: eligible for exemptive relief under ERISA. No Class of
Certificates is SMMEA eligible. Risk Factors: THE
CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY NOT BE
SUITABLE
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY NOT BE
SUITABLE FOR ALL INVESTORS. SEE THE "RISK FACTORS" SECTION
OF THE PROSPECTUS SUPPLEMENT AND THE "RISK FACTORS" SECTION
OF THE PROSPECTUS.
T-2
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
II. Structure Characteristics
The Certificates (other than the Class X, D and E Certificates) are fixed-rate,
monthly pay, multi-class, sequential pay REMIC Pass-Through Certificates. The
Class D and E Certificates are weighted average coupon REMIC Pass-Through
Certificates. The Class X Certificates are variable rate interest only REMIC
Pass-Through Certificates. All Classes of Certificates derive their cash flows
from the entire pool of Mortgage Loans other than the Contingent Interest.
Class X(1)
Class A-1 AAA/Aaa $277.0MM
[6.19%]
Class A-2 AAA/Aaa $581.4MM
[6.40%]
Class B AA/Aa2 $59.6MM
[6.53%]
Class C A/A2 $59.6MM
[6.65%]
Class D BBB/Baa2 $62.6MM
WAPT - [0.50%]
Class E BBB-/Baa3 $20.9MM
WAPT - [0.13%]
Class F BB+/NR $53.7MM
[6.19%]
Class G BB/NR $11.9MM
[6.19%]
Class H BB-/NR $8.9MM
[6.19%]
Class J B+/NR $14.9MM
[6.19%]
Class K B/NR $14.9MM
[6.19%]
Class L NR/B3 $11.9MM
[6.19%]
Class M NR/Caa2 $8.9MM
[6.19%]
Class N NR/NR $11.9MM
[6.19%]
NR = Not Rated
Note: (1) See footnote 7 on page T-1.
T-3
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Interest Each Class of Certificates will be entitled on each
Distributions: Distribution Date to interest accrued at its
Pass-Through Rate on the outstanding Certificate
Balance or Notional Amount of such Class, as applicable.
Pass-Through Rates: Class A-1: [6.19%]
Class A-2: [6.40%]
Class B: [6.53%]
Class C: [6.65%]
Class D: [WAPT - 0.50%]
Class E: [WAPT - 0.13%]
Class F: [6.19%]
Class G: [6.19%]
Class H: [6.19%]
Class J: [6.19%]
Class K: [6.19%]
Class L: [6.19%]
Class M: [6.19%]
Class N: [6.19%]
Class X: See footnote 7 on page T-1.
The Pass-Through Rate for each class of Principal Balance
Certificates for any Distribution Date will not exceed the
Weighted Average Pass-Through ("WAPT") rate for such
Distribution Date.
Principal Principal Principal will be distributed on each Distribution
Distributions: Date to the most senior Class (i.e., the Class with the
earliest alphabetical/numerical Class designation) of the
Principal Balance Certificates outstanding, until its
Certificate Balance is reduced to zero (sequential order).
If, due to losses, the Certificate Balances of the Class B
through Class N Certificates are reduced to zero, payments
of principal to the Class A-1 and A-2 Certificates will be
made on a pro rata basis.
Prepayment Premium Any Prepayment Premium collected with respect to a Mortgage
Allocation: Loan during any particular Collection Period will be
distributed on the following Distribution Date as follows:
The holders of the respective Classes of Principal Balance
Certificates (other than the Privately Offered Certificates)
then entitled to distributions of principal from the
Principal Distribution Amount for such Distribution Date,
will be entitled to an aggregate amount equal to the lesser
of (a) such Prepayment Premium and (b) such Prepayment
Premium multiplied by a fraction, the numerator of which is
equal to the excess, if any, of the Pass-Through Rate
applicable to the most senior of such Classes of
Certificates then outstanding (or, in the case of two
Classes of Class A Certificates, the
T-4
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
one with the earlier payment priority), over the relevant
Discount Rate (as defined herein), and the denominator of
which is equal to the excess, if any, of the Mortgage Rate
for the prepaid Mortgage Loan, over the relevant Discount
Rate.
For purposes of the foregoing, the "Discount Rate" is the
rate which, when compounded monthly, is equivalent to the
Treasury Rate when compounded semi-annually.
Credit Each Class of Certificates (other than Classes A-1, A-2 and
Enhancement: X) will be subordinate to all other Classes with an earlier
alphabetical Class designation.
Advancing: The Master Servicer, the Trustee and Fiscal Agent (in that
order) will each be obligated to make P&I Advances and
Servicing Advances, including delinquent property taxes and
insurance premiums, but only to the extent that such
Advances are deemed recoverable.
Realized Losses Realized Losses and Expense Losses, if any, will be
and Expense Losses: allocated to the Class N, Class M, Class L, Class K, Class
J, Class H, Class G, Class F, Class E, Class D, Class C and
Class B Certificates, in that order, and then to Classes A-1
and A-2, pro rata, in each case reducing amounts payable
thereto. Any interest shortfall of any Class of Certificates
will result in unpaid interest for such Class which,
together with interest thereon compounded monthly at
one-twelfth the applicable Pass-Through Rate for such Class,
will be payable in subsequent periods, subject to available
funds.
Prepayment Interest For any Distribution Date, any Net Aggregate Prepayment
Shortfalls: Interest Shortfall not offset by the Master Servicing Fee
(but not to exceed 0.029% per loan), will be allocated to
the Certificates pro rata, in each case reducing interest
otherwise payable thereon. Any interest shortfall of any
Class of Certificates will result in unpaid interest for
such Class which, together with interest thereon compounded
monthly at one-twelfth the applicable Pass-Through Rate for
such Class, will be payable in subsequent periods, subject
to available funds.
Appraisal An appraisal reduction generally will be created in the
Reductions: amount, if any, by which the Principal Balance of a
Specially Serviced Mortgage Loan (plus other amounts overdue
in connection with such loan) exceeds 90% of the appraised
value of the related Mortgaged Property. The Appraisal
Reduction Amount will reduce proportionately the amount of
P&I Advances for such loan, which reduction will result, in
general, in a reduction of interest distributable to the
most subordinate Class of Principal Balance Certificate
outstanding.
T-5
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
An Appraisal Reduction will be reduced to zero as of the
date the related Mortgage Loan has been brought current for
at least three consecutive months.
Operating Adviser: The Operating Adviser, which may be appointed by the
Controlling Class, will have the right to be notified by the
Special Servicer with respect to certain actions regarding
Specially Serviced Mortgage Loans. Examples include the
right to make certain modifications, foreclose, sell, bring
an REO Property into environmental compliance or accept
substitute or additional collateral. In addition, subject to
satisfaction of certain conditions, the Operating Adviser
will have the right to direct the Trustee to remove the
Special Servicer and appoint a successor Special Servicer
that must be acceptable to each Rating Agency.
Controlling Class: The Controlling Class will generally be the holder of more
than 50% of the aggregate Certificate Balance most
subordinate Class of Certificates outstanding at any time
(or if the aggregate Certificate Balance of such class of
Certificates is less than 25% of original aggregate
Certificate Balance of the initial Certificate Balance of
such Class, the next most subordinate Class of Principal
Balance Certificates).
Special Servicer: In general, the Special Servicer has the right to modify the
terms of a Specially Serviced Mortgage Loan if it determines
that such modification would increase the net present value
of the proceeds to the Trust, provided that the Special
Servicer generally may not extend the maturity date of a
Mortgage Loan beyond two years prior to the Rated Final
Distribution Date.
Optional The Depositor, then the Master Servicer, then the Special
Termination: Servicer, then majority holders of the Controlling Class,
and then the holder of a majority of the R-I Certificates
will have the option to purchase, in whole but not in part,
the remaining assets of the Trust on or after the
Distribution Date on which the aggregate Certificate Balance
of all Classes of Certificates then outstanding is less than
or equal to 1% of the Initial Pool Balance. Such purchase
price will generally be at a price equal to the unpaid
aggregate Stated Principal Balance of the Mortgage Loans,
plus accrued and unpaid interest and unreimbursed Advances.
T-6
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Reports to The Trustee will prepare and deliver monthly
Certificateholders: Certificateholder Reports. The Special Servicer will prepare
and deliver to the Trustee a monthly Special Servicer Report
summarizing the status of each Specially Serviced Mortgage
Loan. The Master Servicer and the Special Servicer will
prepare and deliver to the Trustee an annual report setting
forth, among other things, the debt service coverage ratios
for each Mortgage Loan, as available. Each of the reports
will be available to the Certificateholders. A report
containing information regarding the Mortgage Loans will be
available electronically.
T-7
<PAGE>
III. Originators Morgan Stanley Mortgage Capital Inc.
The Mortgage Pool includes 142 Mortgage Loans, representing
approximately 49.1% of the Initial Pool Balance, either
acquired or originated by or on behalf of Morgan Stanley
Mortgage Capital Inc. ("MSMC"). MSMC is a subsidiary of
Morgan Stanley & Co. Incorporated that was formed to
originate and purchase mortgage loans secured by commercial
and multifamily real estate.
Midland Loan Services, Inc. and PNC Bank, N.A.
The Mortgage Pool includes 109 Mortgage Loans, representing
approximately 32.7% of the Initial Pool Balance, either
acquired or originated by or on behalf of Midland Loan
Services, Inc. ("Midland") or by PNC Bank National
Association ("PNC"). Of the above 109 Mortgage Loans, PNC
originated 41 with an aggregate principal balance of
$201,300,000. In addition, Midland has originated 63 with an
aggregate principal balance of $183,125,300, and Midland
purchased five with an aggregate principal balance of
$7,395,000
On April 3, 1998, Midland Loan Services, L.P. was acquired
by Midland Loan Services, Inc., a newly formed, wholly owned
subsidiary of PNC.
Residential Funding Corporation
The Mortgage Pool includes 71 Mortgage Loans, representing
approximately 18.2% of the Initial Pool Balance, either
acquired or originated by or on behalf of Residential Funding
Corporation ("RFC"). RFC is a direct wholly owned subsidiary
of GMAC Mortgage Group, Inc. RFC Commercial is a division of
RFC which originates and acquires loans secured by mortgages
on commercial and multifamily real estate. Residential
Funding Securities Corporation is an affiliate of RFC.
T-8
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
IV. Collateral Description
Summary: The Mortgage Pool consists of a $1,192,238,941 pool of 322
fixed-rate mortgage loans secured by first liens (with the
exception of one mortgage loan representing 0.27% of the
Initial Pool Balance which is secured by a second lien) on
commercial and multifamily properties located throughout 40
states. As of the Cut-Off Date, the Mortgage Loans have a
weighted average mortgage rate of 7.454% and a weighted
average remaining term to maturity of 132 months. See the
Description of the Mortgage Pool and the Appendices to the
Prospectus Supplement for more detailed collateral
information.
T-9
<PAGE>
$1,061,090,000
(Approximate)
Commercial Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Property Summary
<TABLE>
<CAPTION>
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Weighted Weighted
Average Average
Aggregate Initial Weighted Remaining Debt Weighted
Balance as Pool Average Term to Service Average
Number of Cut-Off Balance Mortgage Maturity Coverage Loan to
Property Type of Date ($) as of Cut Rate (%) (mos) Ratio (x) Value (%)
Loans -Off Date(%)
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 94 376,669,668 31.59 7.652 142 1.41 69.6
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Multifamily 108 347,435,764 29.14 7.144 127 1.44 72.9
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Office 36 144,524,262 12.12 7.579 117 1.35 68.7
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Hospitality 26 106,277,181 8.91 7.805 125 1.51 65.5
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Industrial 25 84,397,329 7.08 7.541 140 1.38 70.7
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Mixed Use 2 55,404,718 4.65 7.110 132 1.31 75.9
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Mobile Home Park 15 36,283,197 3.04 7.190 116 1.39 69.7
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Self Storage 12 24,188,932 2.03 7.375 148 1.59 64.4
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Garage 2 10,310,409 0.86 7.214 117 1.50 74.9
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Nursing Home/Assisted 2 6,747,481 0.57 7.966 214 2.37 45.0
Living
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
Total: 322 $1,192,238,941 100.0% 7.454% 132 1.42x 70.3%
- -------------------------- -------- ------------- ----------- ----------- ------------ ---------- ----------
</TABLE>
GEOGRAPHIC DISTRIBUTION
Percent by
Aggregate
Cut-Off Date
State Balance (%)
----- ------------
California 22.89
Pennsylvania 7.42
New Jersey 5.50
Texas 5.08
North Carolina 4.81
Florida 4.28
Illinois 4.21
Ohio 3.76
Massachusetts 3.57
Georgia 3.38
Arizona 2.91
Washington 2.73
Kentucky 2.35
Colorado 2.26
Oregon 2.19
New York 2.10
West Virginia 2.00
Louisiana 1.88
Missouri 1.85
Indiana 1.80
Oklahoma 1.72
Nevada 1.48
Maryland 1.38
Michigan 1.31
New Hampshire 1.10
Mississippi 0.90
Tennessee 0.78
Virginia 0.58
Iowa 0.53
Nebraska 0.43
Connecticut 0.42
South Carolina 0.42
Kansas 0.41
New Mexico 0.34
Utah 0.34
Maine 0.28
Minnesota 0.27
Idaho 0.15
Rhode Island 0.13
Vermont 0.10
T-10
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
Number of Pages
---------------
Table of Contents 1
REMIC Certificate Report 1
Other Related Information 2
Asset Backed Facts Sheets 1
Delinquency Loan Detail 1
Mortgage Loan Characteristics 2
Loan Level Listing 1
Total Pages Included In This Package 9
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
Page 1 of 9
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
<TABLE>
<CAPTION>
Original Opening Principal Principal Negative Closing Interest Interest Pass-through
Class Fact Value(1) Balance Payment Adj. Of Loss Amortization Balance Payment Adjustment Rate (2)
CUSIP Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Per $1,000 Next Rate (3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total P&I Payment 0.00
</TABLE>
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest
equals Accrual
(3) Estimated
Page 2 of 9
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Other Related Information
Page 3 of 9
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Other Related Information
Page 4 of 9
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
<TABLE>
<CAPTION>
Distribution Delinq 1 Month Delinq 2 months Delinq 3+ Months Foreclosure/Bankruptcy REO Modification Prepayments Curr. Weighted Avg.
Date # Balance # Balance # Balance # Balance # Balance # Balance Coupon Remit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/15/98 0 0 0 0 0 0 0 0 0 0 0 0
0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000% 0.00% 0.000%
</TABLE>
Note: Foreclosure and REO Totals are Included in the
Appropriate Delinquency Aging Category
Page 5 of 9
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Delinquent Loan Detail
<TABLE>
<CAPTION>
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Bankruptcy REO
Control # Date Advance Advances** Advances Description (1) Transfer Date Date Date Date
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A. P&I Advance - Loan in Grace Period 1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 months
B. P&I Advance - Late Payment but 3. P&I Advance - Loan delinquent 3 months or more
< one month delinq 4. Matured Balloon/Assumed Scheduled payment
</TABLE>
** Outstanding P&I Advances include the current period P&I Advance
Page 6 of 9
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Pool Total
Distribution of Principal Balances
<TABLE>
<CAPTION>
- ------------------------------------------- ----------------------------------------------------------------------------------------
(2) Current Scheduled Number of (2) Scheduled Based on
Balances Loans Balance Balance
- ------------------------------------------- ----------------------------------------------------------------------------------------
<S> <C> <C>
$0 to $500.000
$500,000 to $1,000,000
$1,000,000 to $1,500,000
$1,500,000 to $2,000,000
$2,000,000 to $2,500,000
$2,500,000 to $3,000,000
$3,000,000 to $3,500,000
$3,500,000 to $4,000,000
$4,000,000 to $5,000,000
$5,000,000 to $6,000,000
$6,000,000 to $7,000,000
$7,000,000 to $8,000,000
$8,000,000 to $9,000,000
$9,000,000 to $10,000,000
$10,000,000 to $11,000,000
$11,000,000 to $12,000,000
$12,000,000 to $13,000,000
$13,000,000 to $14,000,000
$14,000,000 to $15,000,000
$15,000,000 & Above
- ------------------------------------------- --------------------------- ------------------------------------- ----------------------
Total 0 0 0.00%
- ------------------------------------------- --------------------------- ------------------------------------- ----------------------
Average Scheduled Balance is 0
Maximum Scheduled Balance is 0
Minimum Scheduled Balance is 0
</TABLE>
<TABLE>
Distribution of Property Types
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Property Types Number of Loans (2) Scheduled Balance Based on Balance
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C> <C> <C>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
</TABLE>
<TABLE>
Distribution of Mortgage Interest Rates
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Current Mortgage Number of Loans (2)Scheduled Balance Based on Balance
Interest Rate
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C>
7.000% or less
7.000% to 7.125%
7.125% to 7.375%
7.375% to 7.625%
7.625% to 7.875%
7.875% to 8.125%
8.125% to 8.375%
8.375% to 8.625%
8.625% to 8.875%
8.875% to 9.125%
9.125% to 9.375%
9.375% to 9.625%
9.625% to 9.875%
9.875% to 10.125%
10.125% & Above
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
W/Avg Mortgage Interest Rate is 0.0000%
Minimum Mortgage Interest Rate is 0.0000%
Maximum Mortgage Interest Rate is 0.0000%
</TABLE>
<TABLE>
Geographic Distribution
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Geographic Location Number of Loans (2) Scheduled Balance Based on Balance
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C> <C> <C> <C>
California
Maryland
Virginia
Georgia
Florida
New Jersey
Arizona
Pennsylvania
Texas
Rhode Island
North Carolina
New York
Kentucky
Utah
Connecticut
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Page 7 of 9
</TABLE>
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Pool Total
Loan Seasoning
<TABLE>
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Number of Years Number of Loans (2) Scheduled Balance Based on Balance
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C> <C> <C> <C>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Weighted Average Seasoning is 0.00
</TABLE>
<TABLE>
Distribution of Remaining Term
Fully Amortizing
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Fully Amortizing Number of Loans (2) Scheduled Balance Based on Balance
Mortgage Loans
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C>
60 months or less
61 to 120 months
121 to 180 months
181 to 240 months
240 to 360 months
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Weighted Average Months to Maturity is 0
</TABLE>
<TABLE>
Distribution of DSCR
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Debt Service Number of Loans (2) Scheduled Balance Based on Balance
Coverage Ratio (1)
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C>
0.500 or less
0.500 or 0.l625
0.625 to 0.750
0.750 to 0.875
0.875 to 1.000
1.000 to 1.125
1.125 to 1.250
1.250 to 1.375
1.375 to 1.500
1.500 to 1.625
1.625 to 1.750
1.750 to 1.875
1.875 to 2.000
2.000 to 2.125
2.125 & above
Unknown
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Weighted Average Debt Service Coverage Rate is 0.000
</TABLE>
<TABLE>
Distribution of Amortization Type
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Amortization Type Number of Loans (2) Scheduled Balance Based on Balance
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C> <C> <C> <C>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
</TABLE>
<TABLE>
Distribution of Remaining Term Balloon Loans
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Balloon
Mortgage Loans Number of Loans (2) Scheduled Balance Based on Balance
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C>
12 months or less
13 to 14 months
25 to 36 months
37 to 48 months
49 to 60 months
61 to 120 months
121 to 180 months
181 to 240 months
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Weighted Average Months to Maturity is 0
</TABLE>
<TABLE>
NOI Aging
<CAPTION>
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
NOI Date Number of Loans (2) Scheduled Balance Based on Balance
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
<S> <C>
1 year or less
1 to 2 years
2 Years or More
Unknown
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
Total 0 0 0.00%
- ------------------------------------ ---------------------------------- ---------------------------------- -------------------------
</TABLE>
(1) Debt Service Coverage Ratios are calculated as described in the
prospectus, values are updated periodically as new NOI figures became
available from borrowers on an asset level.
Neither the Trustee, Servicer, Special Servicer or Underwriter makes
any representation as to the accuracy of the data provided by the
borrower for this calculation.
Page 8 of 9
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
<TABLE>
Loan Level Detail
<CAPTION>
- ------------ ------------- ----------- ---------- ------- ------ --------- -------- ------- ------ ---------- ----------- --------
Appraisal Property Operating Ending Loan
Disclosure Reduction Type Code Maturity Statement Principal Note Sched Prepayment Status
Control Amounts Date DSCR NOI Date Balance Rate P&I Prepayment Date Code (1)
- ------------ ------------- ----------- ---------- ------- ------ -------- ---------- ------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
*NOI and DSCR, if available and reportable under the terms of the trust
agreement, are based on information obtained from the related borrower, and no
other party to the agreement shall be held liable for the accuracy or
methodology used to determine such figures.
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Legend: A. P&I Adv. - in Grace Period 1. P&I Adv - delinquent 1 month
2. P&I Adv - delinquent 2 months
3. P&I Adv. - delinquent 3+ months
4. Mat. Balloon/Assumed P&I
B. P&I Adv. - < one month delinq 5. Prepaid in Full
6. Specially Served
7. Foreclosure
8. Bankruptcy
9. REO
10. DPO
11. Modification
- ------------------------------------------------------------------------------------------------------------------------------------
Page 9 of 9
</TABLE>
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
Specially Serviced Loan Detail
<TABLE>
<CAPTION>
- -------------------- -------------------- ----------- ------------ --------------- ---------------- --------------------------------
Beginning Specially Comments
Disclosure Scheduled Interest Maturity Property Serviced
Control # Balance Rate Date Type Status Code (1)
- -------------------- -------------------- ----------- ------------ --------------- ---------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------- -------------------- ----------- ------------ --------------- ---------------- --------------------------------
- -------------------- -------------------- ----------- ------------ --------------- ---------------- --------------------------------
(1) Legend:
1) Request for wavier of Prepayment Penalty 4) Loan with Borrower Bankruptcy 7) Loans Paid Off
2) Payment Default 5) Loan in Process of Foreclosure 8) Loans Returned to Master Servicer
3) Request for Loan Modification or Workout 6) Loan now REO Property
Appendix A
</TABLE>
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
<TABLE>
Modified Loan Detail
<CAPTION>
- --------------------- ---------------------- ---------------------------------------------------------------------------------------
Disclosure Control Modification Date Modification Description
- --------------------- ---------------------- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------- ---------------------- ---------------------------------------------------------------------------------------
Appendix B
</TABLE>
<PAGE>
ABN AMRO Statement Date: 08/15/98
LaSalle National Bank Payment Date: 08/15/98
Prior Payment: N/A
Record Date: 07/31/98
Commercial Mortgage Acceptance Corp.
Midland Loan Services, L.P., as Master Servicer
Commercial Mortgage Pass-Through Certificates
Series 1998-C1
Administrator:
Alyssa Stahl (800) 246-5761
135 S. LaSalle Street Suite 1625 ABN AMRO Acct: 99-9999-99-9
Chicago, IL 60603
<TABLE>
Realized Loss Detail
<CAPTION>
- ------- ----------- ------------- --------- ------------ ----------- --------------- ----------- ----------- -------------- --------
Beginning Gross Aggregate Net Net Proceeds
Dist. Disclosure Appraisal Appraisal Scheduled Gross Proceeds as a Liquidation Liquidation as a % of Realized
Date Control # Date Value Balance Proceeds % of Sched. Expenses Proceeds Sched. Balance Loss
Principal
- --------- ------------ ------------ --------- ------------ ---------- --------------- ---------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------- ------------ ------------ --------- ------------ ---------- --------------- ----------- --------- --------------- --------
Current Total 0.00 0.00 0.00 0.00 0.00
Cumulative 0.00 0.00 0.00 0.00 0.00
- --------- ------------ ------------ --------- ------------ ---------- --------------- ----------- --------- --------------- --------
Appendix C
</TABLE>
<PAGE>
Commercial Mortgage Acceptance Corp.
Depositor
Commercial Mortgage Pass-Through Certificates
(Issuable in Series)
Commercial Mortgage Acceptance Corp. (the "Depositor") from time to time
will offer Commercial Mortgage Pass-Through Certificates (the "Offered
Certificates") in "Series" by means of this Prospectus and a separate Prospectus
Supplement for each Series. The Offered Certificates, together with any other
Commercial Mortgage Pass-Through Certificates of such Series, are collectively
referred to herein as the "Certificates." The Certificates of each Series will
evidence beneficial ownership interests in a trust fund (the "Trust Fund") to be
established by the Depositor. The Certificates of a Series may be divided into
two or more "Classes", which may have different interest rates and which may
receive principal payments in differing proportions and at different times.
(continued on next page)
The Certificates do not represent an obligation of or an interest in the
Depositor or any affiliate thereof. Unless so specified in the related
Prospectus Supplement, neither the Certificates nor the Mortgage Loans are
insured or guaranteed by any governmental agency or instrumentality or by any
other person or entity. See "RISK FACTORS."
Prospective Investors should consider the material risks discussed herein
under "RISK FACTORS" at page 6 and such information as may be set forth under
the caption "RISK FACTORS" in the related Prospectus Supplement before
purchasing any of the Offered Certificates.
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. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, as more fully described under
"PLAN OF DISTRIBUTION" herein and in the related Prospectus Supplement. Certain
offerings of the Certificates, as specified in the related Prospectus
Supplement, may be made in one or more transactions exempt from the registration
requirements of the Securities Act of 1933, as amended. Such offerings are not
being made pursuant to the Registration Statement of which this Prospectus forms
a part.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of the Certificates offered hereby unless accompanied
by a Prospectus Supplement.
The date of this Prospectus is May 13, 1998.
<PAGE>
(cover page continued)
In addition, rights of the holders of certain Classes to
receive principal and interest may be subordinated to those of other Classes.
Each Trust Fund will consist of a pool (the "Mortgage Pool") of one or more
mortgage loans secured by first or junior liens on fee simple or leasehold
interests in commercial real estate properties, multifamily residential
properties and/or mixed-use properties and related property and interests,
conveyed to such Trust Fund by the Depositor, and other assets, including any
Credit Enhancement described in the related Prospectus Supplement. See
"DESCRIPTION OF THE CERTIFICATES--General" herein. The percentage of any
mixed-use property used for commercial purposes will be set forth in the
Prospectus Supplement. Multifamily properties (consisting of apartments,
congregate care facilities and/or mobile home parks) and general commercial
properties (consisting of retail properties, including shopping centers, office
buildings, mini-warehouses, warehouses, industrial properties and/or other
similar types of properties) will represent security for a material
concentration of the Mortgage Loans in any Trust Fund, based on principal
balance at the time such Trust Fund is formed. See "DESCRIPTION OF THE MORTGAGE
POOL" in the Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Mortgage Pool may also include installment contracts for the
sale of such types of properties. Such mortgage loans and installment contracts
are hereinafter referred to as the "Mortgage Loans." The Mortgage Loans will
have fixed or adjustable interest rates. Some Mortgage Loans will fully amortize
over their remaining terms to maturity and others will provide for balloon
payments at maturity. The Mortgage Loans will provide for recourse against only
the Mortgaged Properties or provide for recourse against the other assets of the
obligors thereunder. The Mortgage Loans will be newly originated or seasoned,
and will be acquired by the Depositor either directly or through one or more
affiliates. The Mortgage Loans may be originated by affiliated entities,
including Midland Loan Services, Inc. and/or unaffiliated entities. See "RISK
FACTORS." Information regarding each Series of Certificates, including interest
and principal payment provisions for each Class, as well as information
regarding the size, composition and other characteristics of the Mortgage Pool
relating to such Series, will be furnished in the related Prospectus Supplement.
The Mortgage Loans will be master serviced by Midland Loan Services, Inc.
The Depositor, as specified in the related Prospectus Supplement, may
elect to treat all or a specified portion of the collateral securing any Series
of Certificates as a "real estate mortgage investment conduit" (a "REMIC"), or
an election may be made to treat the arrangement by which a Series of
Certificates is issued as a REMIC. If such election is made, each Class of
Certificates of a Series will be either Regular Certificates or Residual
Certificates, as specified in the related Prospectus Supplement. If no such
election is made, the Trust Fund, as specified in the related Prospectus
Supplement, will be classified as a grantor trust for federal income tax
purposes. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" herein.
With respect to each Series, all of the Offered Certificates will be rated
in one of the four highest ratings categories by one or more nationally
recognized statistical rating organizations. There will have been no public
market for the Certificates of any Series prior to the offering thereof. No
assurance can be given that such a secondary market will develop as a result of
such offering or, if it does develop, that it will continue. The Depositor does
not intend to make an application to list any Series of Certificates on a
national securities exchange or quote any Series of Certificates in an automated
quotation system of a registered securities association.
ii
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to each Series of Certificates will,
among other things, set forth with respect to such Series of Certificates: (i)
the identity of each Class within such Series; (ii) the initial aggregate
principal amount, the interest rate (the "Pass-Through Rate") (or the method for
determining it) and the authorized denominations of each Class of Certificates
of such Series; (iii) certain information concerning the Mortgage Loans relating
to such Series, including the principal amount, type and characteristics of such
Mortgage Loans on the date of issue of such Series of Certificates; (iv) the
circumstances, if any, under which the Certificates of such Series are subject
to redemption prior to maturity; (v) the final scheduled distribution date of
each Class of Certificates of such Series; (vi) the method used to calculate the
aggregate amount of principal available and required to be applied to the
Certificates of such Series on each Distribution Date; (vii) the order of the
application of principal and interest payments to each Class of Certificates of
such Series and the allocation of principal to be so applied; (viii) the extent
of subordination of any Subordinate Certificates; (ix) the principal amount of
each Class of Certificates of such Series that would be outstanding on specified
Distribution Dates, if the Mortgage Loans relating to such Series were prepaid
at various assumed rates; (x) the Distribution Dates for each Class of
Certificates of such Series; (xi) relevant financial information with respect to
the mortgagor(s) and the Mortgaged Properties underlying the Mortgage Loans
relating to such Series, if applicable; (xii) information with respect to the
terms of the Subordinate Certificates or Residual Certificates, if any, of such
Series; (xiii) additional information with respect to the Credit Enhancement, if
any, relating to such Series; (xiv) additional information with respect to the
plan of distribution of such Series; and (xv) whether the Certificates of such
Series will be registered in the name of the nominee of The Depository Trust
Company or another depository.
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each Series of
Certificates will contain, a summary of the material terms of the documents
referred to herein and therein, but neither contains nor will contain all of the
information set forth in the Registration Statement (the "Registration
Statement") of which this Prospectus and the related Prospectus Supplement is a
part. For further information, reference is made to such Registration Statement
and the exhibits thereto which the Depositor has filed with the Securities and
Exchange Commission (the "Commission"), under the Securities Act of 1933, as
amended (the "1933 Act"). Statements contained in this Prospectus and any
Prospectus Supplement as to the contents of any contract or other document
referred to are summaries and in each instance reference is made to the copy of
the contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of the Registration Statement may be obtained from the
Commission, upon payment of the prescribed charges, or may be examined free of
charge at the Commission's offices. Reports and other information filed with the
Commission can be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission 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 the Agreement pursuant to which a Series of Certificates is issued
will be provided to each person to whom a Prospectus and the related Prospectus
Supplement are delivered, upon written or oral request directed to: Commercial
Mortgage Acceptance Corp., 201 West 10th Street, 6th Floor, Kansas City,
Missouri 64105, Attention: Clarence Krantz, telephone number (816) 435-5000. The
Commission maintains an Internet Web site that contains reports, proxy
information statements and other information regarding registrants that file
electronically with the Commission. The address of such Internet Web site is
http://www.sec.gov.
iii
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
With respect to the Trust Fund for each Series, there are incorporated
herein by reference all documents and reports filed or caused to be filed by the
Depositor with respect to such Trust Fund pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
after the date of this Prospectus and prior to the termination of the offering
of the Offered Certificates evidencing an interest in such Trust Fund. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or more
Classes of Certificates, upon request, a copy of any or all such documents or
reports incorporated herein by reference, in each case to the extent such
documents or reports relate to one or more of such Classes of such Certificates,
other than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). The Depositor has determined that
its financial statements are not material to the offering of any of the Offered
Certificates. See "FINANCIAL INFORMATION." Requests to the Depositor should be
directed to: Commercial Mortgage Acceptance Corp., 210 West 10th Street, 6th
Floor, Kansas City, Missouri 64105, Attention: Clarence Krantz, telephone number
(816) 435-5000.
REPORTS
In connection with each distribution and annually, Certificateholders will
be furnished with statements containing information with respect to principal
and interest payments and the related Trust Fund, as described herein and in the
applicable Prospectus Supplement for such Series. Any financial information
contained in such reports most likely will not have been examined or reported
upon by an independent public accountant. See "DESCRIPTION OF THE
CERTIFICATES--Reports to Certificateholders." The Master Servicer for each
Series will furnish periodic statements setting forth certain specified
information relating to the Mortgage Loans to the related Trustee, and, in
addition, annually will furnish such Trustee with a statement from a firm of
independent public accountants with respect to the examination of certain
documents and records relating to the servicing of the Mortgage Loans in the
related Trust Fund. See "SERVICING OF THE MORTGAGE LOANS--Evidence of
Compliance." Copies of the monthly and annual statements provided by the Master
Servicer to the Trustee will be furnished to Certificateholders of each Series
upon request addressed to the Trustee for the related Trust Fund.
The Depositor intends to apply for relief from the reporting requirements
of Sections 13, 15(d) and 16(a) of the 1934 Act. In lieu of filing the periodic
reports required by those sections, the Master Servicer, on behalf of the
related Trust Fund, will file with the Commission on Form 8-K the monthly
reports and information set forth in the related Prospectus Supplement. See "THE
POOLING AND SERVICING AGREEMENT--Reports to Certificateholders; Available
Information" in the related Prospectus Supplement. The Depositor does not intend
to file periodic reports under the 1934 Act with respect to the related Trust
Fund for any Series of Certificates following the completion of the reporting
period required by Rule 15d-1 under the 1934 Act.
iv
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT...................iii
ADDITIONAL INFORMATION..................iii
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE.................iv
REPORTS..................................iv
SUMMARY OF PROSPECTUS.................... 1
RISK FACTORS............................. 6
Limited Liquidity; Lack of Market for
Resale..............................6
Limited Assets as Security for
Investment in Certificates;
No Personal Liability...............6
Effects of Prepayments on Average
Life of Certificates and Yields.....6
Risks Associated with Lending on
Income Producing Properties.........7
Potential Conflicts of Interest........8
Certain Tax Considerations of
Variable Rate Certificates......... 9
Limited Nature of Credit Ratings.......9
Potential Inability to Verify
Underwriting Standards.............10
Nonrecourse Mortgage Loans;
Limited Recovery...................10
Inclusion of Delinquent and
Non-Performing Mortgage Loans
May Adversely Affect Yields........10
Junior Mortgage Loans.................10
Balloon Payments......................10
Extensions and Modifications of
Defaulted Mortgage Loans;
Additional Servicing Fees..........11
Risks Related to the Mortgagor's
Form of Entity and Sophistication..11
Credit Enhancement Limitations........11
Risks to Subordinated Certificate-
holders; Lower Payment Priority.....12
Taxable Income in Excess of
Distributions Received.............13
Due-on-Sale Clauses and Assignments
of Leases and Rents................13
Environmental Risks...................13
Certain Federal Tax Considerations
Regarding Residual Certificates....14
ERISA Considerations..................14
Special Hazard Losses.................15
Control; Decisions by Certificate-
holders.............................15
Book-Entry Registration...............15
THE DEPOSITOR............................15
THE MASTER SERVICER......................16
USE OF PROCEEDS..........................16
DESCRIPTION OF THE CERTIFICATES..........16
General...............................17
Distributions on Certificates.........18
Accounts..............................18
Amendment.............................20
Termination...........................21
Reports to Certificateholders.........22
The Trustee...........................22
THE MORTGAGE POOLS.......................22
General...............................22
Assignment of Mortgage Loans..........24
Mortgage Underwriting Standards
and Procedures.....................25
Representations and Warranties........26
SERVICING OF THE MORTGAGE LOANS..........27
General...............................27
Collections and Other Servicing
Procedures.........................27
Insurance.............................28
Fidelity Bonds and Errors and
Omissions Insurance................30
Servicing Compensation and Payment
of Expenses........................30
Advances..............................31
Modifications, Waivers and Amendments.31
Evidence of Compliance................31
v
<PAGE>
Certain Matters With Respect to the
Master Servicer, the Special
Servicer, the Trustee and the
Depositor..........................32
Events of Default.....................33
Rights Upon Event of Default..........34
CREDIT ENHANCEMENT.......................35
General...............................35
Subordinate Certificates..............35
Reserve Funds.........................36
Cross-Support Features................37
Certificate Guarantee Insurance.......37
Limited Guarantee.....................37
Letter of Credit......................37
Pool Insurance Policies; Special
Hazard Insurance Policies..........37
Surety Bonds..........................38
Fraud Coverage........................38
Mortgagor Bankruptcy Bond.............38
CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS.....................38
General...............................39
Types of Mortgage Instruments.........39
Personalty............................40
Installment Contracts.................40
Junior Mortgages; Rights of Senior
Mortgagees or Beneficiaries........40
Foreclosure...........................42
Environmental Risks...................48
Enforceability of Certain Provisions..51
Soldiers' and Sailors' Relief Act.....53
Applicability of Usury Laws...........53
Alternative Mortgage Instruments......54
Leases and Rents......................54
Secondary Financing; Due-on-
Encumbrance Provisions..............55
Certain Laws and Regulations..........55
Type of Mortgaged Property............56
Criminal Forfeitures..................56
Americans With Disabilities Act.......56
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES.......................57
General...............................57
Federal Income Tax Consequences For
REMIC Certificates.................58
General...............................58
Qualification as a REMIC..............58
Taxation of REMIC Regular
Certificates.......................61
Taxation of the REMIC.................68
Taxation of Holders of Residual
Certificates.......................70
Reporting Requirements and Backup
Withholding........................75
Tax Treatment of Foreign Investors....76
Administrative Matters................77
Federal Income Tax Consequences For
Certificates As To Which
No REMIC Election Is Made...........78
Tax Status as a Grantor Trust.........78
Tax Status of Certificates............79
Pass-Through Certificates.............79
Stripped Certificates.................80
Sale of Certificates..................82
Reporting Requirements and Backup
Withholding........................82
Treatment of Foreign Investors........83
STATE TAX CONSIDERATIONS.................83
ERISA CONSIDERATIONS.....................83
Prohibited Transactions...............84
Unrelated Business Taxable
Income-Residual Interests..........85
LEGAL INVESTMENT.........................86
PLAN OF DISTRIBUTION.....................86
LEGAL MATTERS............................87
FINANCIAL INFORMATION....................87
RATINGS..................................87
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SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each Series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of such Series. An Index of
Definitions is included at the end of this Prospectus.
Title of
Certificates........Commercial Mortgage Pass-Through Certificates, issuable in
Series Certificates (the "Certificates").
Depositor...........Commercial Mortgage Acceptance Corp., a wholly-owned sub-
sidiary of Midland Loan Services, Inc. See "THE DEPOSITOR."
Master Servicer.....Midland Loan Services, Inc., a wholly-owned subsidiary of
PNC Bank, National Association. See "SERVICING OF THE
MORTGAGE LOANS--General."
Special Servicer....The special servicer (the "Special Servicer"), if any, for
each Series of Certificates, which may be an affiliate of
the Depositor, will be named, or the circumstances in
accordance with which a Special Servicer will be appointed,
will be described in the related Prospectus Supplement. See
"SERVICING OF THE MORTGAGE LOANS--General."
Trustee.............The trustee (the "Trustee") for each Series of Certificates
will be named in the related Prospectus Supplement. See
"DESCRIPTION OF THE CERTIFICATES--The Trustee."
The Trust Fund......Each Series of Certificates will represent in the aggregate
the entire beneficial ownership interest in a Trust Fund
consisting primarily of the following:
A. Mortgage Pool..The primary assets of each Trust Fund will consist of a
pool of mortgage loans (the "Mortgage Pool") secured by
first or junior mortgages, deeds of trust or similar
security instruments (each, a "Mortgage")on, or installment
contracts ("Installment Contracts") for the sale of, fee
simple or leasehold interests in commercial real estate
property, multifamily residential property and/or mixed-use
property, and related property and interests (each such
interest or property, as the case may be, a "Mortgaged
Property"). Multifamily properties (consisting of
apartments, congregate care facilities and/or mobile home
parks) and general commercial properties (consisting of
retail properties, including shopping centers, office
buildings, mini-warehouses, warehouses, industrial
properties and/or other similar types of properties) will
represent security for a material concentration of the
Mortgage Loans in any Trust Fund, based on principal balance
at the time such Trust Fund is formed. Each such mortgage
loan or Installment Contract is herein referred to as a
"Mortgage Loan." The Mortgage Loans will not be guaranteed
or insured by the Depositor or any of its affiliates. The
Prospectus Supplement will indicate whether the Mortgage
Loans will be guaranteed or insured by any governmental
agency or instrumentality or
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other person. The Mortgage Loans will have the additional
characteristics described under "THE MORTGAGE POOLS" herein
and "DESCRIPTION OF THE MORTGAGE POOL" in the related
Prospectus Supplement. All Mortgage Loans will have been
purchased by the Depositor on or before the date of initial
issuance of the related Series of Certificates.
All Mortgage Loans will be of one or more of the following
types: Mortgage Loans with fixed interest rates; Mortgage
Loans with adjustable interest rates; Mortgage Loans whose
principal balances fully amortize over their remaining terms
to maturity; Mortgage Loans whose principal balances do not
fully amortize, but instead provide for a substantial
principal payment at the stated maturity of the loan;
Mortgage Loans that provide for recourse against only the
Mortgaged Properties; and Mortgage Loans that provide for
recourse against the other assets of the related mortgagors.
Certain Mortgage Loans may provide that scheduled interest
and principal payments thereon are applied first to interest
accrued from the last date to which interest has been paid
to the date such payment is received and the balance thereof
is applied to principal, and other Mortgage Loans may
provide for payment of interest in advance rather than in
arrears. Each Mortgage Loan may contain prohibitions on
prepayment or require payment of a premium or a yield
maintenance penalty in connection with a prepayment, in each
case as described in the related Prospectus Supplement. The
Mortgage Loans may provide for payments of principal,
interest or both, on due dates that occur monthly,
quarterly, semi-annually or at such other interval as is
specified in the related Prospectus Supplement. See
"DESCRIPTION OF THE MORTGAGE POOL" in the related Prospectus
Supplement.
The Depositor will not originate any Mortgage Loan, unless
provided in the Prospectus Supplement; however, some or all
of the Mortgage Loans may be originated by affiliates of the
Depositor.
B. Accounts......The Master Servicer generally will be required to establish
and maintain one or more accounts (the "Collection Account")
in the name of the Trustee on behalf of the
Certificateholders into which the Master Servicer will, to
the extent described herein and in the related Prospectus
Supplement, deposit all payments and collections received or
advanced with respect to the Mortgage Loans. The Trustee
generally will be required to establish an account (the
"Distribution Account") into which the Master Servicer will
deposit amounts held in the Collection Account from which
distributions of principal and interest will be made. Such
distributions will be made to the Certificateholders in the
manner described in the related Prospectus Supplement. Funds
held in the Collection Account and Distribution Account may
be invested in certain short-term, investment grade
obligations.
C. Credit
Enhancement...If so provided in the related Prospectus Supplement, pro-
tection against certain defaults and losses with respect to
one or more Classes of
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Certificates of a Series or the related Mortgage Loans
("Credit Enhancement"). Credit Enhancement may be in the
form of a letter of credit, the subordination of one or more
Classes of the Certificates of such Series, the
establishment of one or more reserve funds, surety bonds,
certificate guarantee insurance, limited guarantees, or
another type of credit support, or a combination thereof. It
is unlikely that Credit Enhancement will protect against all
risks of loss or guarantee repayment of the entire principal
balance of the Certificates and interest thereon. The amount
and types of coverage, the identification of the entity
providing the coverage (if applicable) and related
information with respect to each type of Credit Enhancement,
if any, will be described in the applicable Prospectus
Supplement for a Series of Certificates. See "RISK
FACTORS--Credit Enhancement Limitations" and "CREDIT
ENHANCEMENT--General."
Description of
Certificates........The Certificates of each Series will be issued pursuant to
a Pooling and Servicing Agreement (the "Agreement") and will
represent in the aggregate the entire beneficial ownership
interest in the related Trust Fund. If so specified in the
applicable Prospectus Supplement, Certificates of a given
Series may be issued in several Classes, which may pay
interest at different rates, may represent different
allocations of the right to receive principal and interest
payments, and certain of which may be subordinated to other
Classes in the event of shortfalls in available cash flow
from the underlying Mortgage Loans. Alternatively, or in
addition, Classes may be structured to receive principal
payments in sequence. Each Class in a group of sequential
pay Classes would be entitled to be paid in full before the
next Class in the group is entitled to receive any principal
payments. A Class of Certificates may also provide for
payments of principal only or interest only or for
disproportionate payments of principal and interest. Each
Series of Certificates (including any Class or Classes of
Certificates of such Series not offered hereby) will
represent in the aggregate the entire beneficial ownership
interest in the Trust Fund. See "PROSPECTUS SUPPLEMENT" for
a listing of additional characteristics of the Certificates
that will be included in the Prospectus Supplement for each
Series.
The Certificates will not be guaranteed or insured by the
Depositor or any of its affiliates. Unless so specified in
the related Prospectus Supplement, neither the Certificates
nor the Mortgage Loans are insured or guaranteed by any
governmental agency or instrumentality or by any other
person or entity. See "RISK FACTORS--Limited Assets as
Security for Investment in Certificates; No Personal
Liability" and "DESCRIPTION OF THE CERTIFICATES."
Distributions on Certificates......Distributions of
principal and interest on the Certificates of each Series
will be made to the registered holders thereof on the day
(the "Distribution Date") specified in the related
Prospectus Supplement, beginning in the period specified in
the related Prospectus Supplement following the
establishment of the related Trust Fund.
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<PAGE>
With respect to each Series of Certificates on each
Distribution Date, the Trustee (or such other paying agent
as may be identified in the applicable Prospectus
Supplement) will distribute to the Certificateholders the
amounts described in the related Prospectus Supplement that
are due to be paid on such Distribution Date. In general,
such amounts will include previously undistributed payments
of principal (including principal prepayments, if any) and
interest on the Mortgage Loans received by the Master
Servicer or the Special Servicer, if any, after a date
specified in the related Prospectus Supplement (the "Cut-off
Date") and prior to the day preceding each Distribution Date
specified in the related Prospectus Supplement.
Advances............With respect to each Series of Certificates, the related
Prospectus Supplement will set forth the obligations of the
Master Servicer and the Special Servicer, if any, as part of
their servicing responsibilities, to make certain advances
with respect to delinquent payments on the Mortgage Loans,
payments of taxes, assessments, insurance premiums and other
required payments. See "SERVICING OF THE MORTGAGE
LOANS--Advances."
Termination.........The obligations of the parties to the Agreement for each
Series will terminate upon: (i) the purchase of all of the
assets of the related Trust Fund, as described in the
related Prospectus Supplement; (ii) the later of (a) the
distribution to Certificateholders of that Series of final
payment with respect to the last outstanding Mortgage Loan
or (b) the disposition of all property acquired upon
foreclosure or deed-in-lieu of foreclosure with respect to
the last outstanding Mortgage Loan and the remittance to the
Certificateholders of all funds due under the Agreement;
(iii) the sale of the assets of the related Trust Fund after
the principal amounts of all Certificates have been reduced
to zero under circumstances set forth in the Agreement; or
(iv) mutual consent of the parties and all
Certificateholders. With respect to each Series, the Trustee
will give or cause to be given written notice of termination
of the Agreement to each Certificateholder and, unless
otherwise specified in the applicable Prospectus Supplement,
the final distribution under the Agreement will be made only
upon surrender and cancellation of the related Certificates
at an office or agency specified in the notice of
termination. See "DESCRIPTION OF THE
CERTIFICATES--Termination."
Risk Factors........There are material risks associated with an investment in
the Certificates. See "RISK FACTORS."
Listing of
Certificates........The Depositor does not currently intend to make an applica-
tion to list any Series of Certificates on a national
securities exchange or quote any Series of Certificates in
the automated quotation system of a registered securities
association. See "RISK FACTORS--Limited Liquidity; Lack of
Market for Resale."
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<PAGE>
Material Federal
Income Tax
Consequences........The Certificates of each Series will constitute either
(i) "Regular Interests" ("Regular Certificates") and
"Residual Interests" ("Residual Certificates") in a Trust
Fund treated as a REMIC under Sections 860A through 860G of
the Internal Revenue Code of 1986 (the "Code"), or (ii)
interests in a Trust Fund treated as a grantor trust under
applicable provisions of the Code. For the treatment of
Regular Certificates, Residual Certificates or grantor trust
certificates under the Code, see "MATERIAL FEDERAL INCOME
TAX CONSEQUENCES" herein and in the related Prospectus
Supplement. The information contained in these sections is
supported by the opinion of Morrison & Hecker L.L.P.,
counsel to the Depositor. Potential purchasers of
Certificates, however, are advised to consult their own tax
advisers regarding the purchase of Certificates.
ERISA
Considerations......A fiduciary of an employee benefit plan and certain other
retirement plans and arrangements that is subject to the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code (each, a "Plan")
should carefully review with its legal advisors whether the
purchase or holding of Senior Certificates may give rise to
a transaction that is prohibited or is not otherwise
permissible either under ERISA or Section 4975 of the Code.
Subordinate Certificates may not be purchased by or
transferred to a Plan. See "ERISA CONSIDERATIONS" herein and
in the related Prospectus Supplement.
Legal Investment....The related Prospectus Supplement will indicate whether the
Offered Certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984. Accordingly, investors whose
investment authority is subject to legal restrictions 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 related
Prospectus Supplement.
Rating..............At the date of issuance, as to each Series, each Class of
Offered Certificates will be rated not lower than investment
grade by one or more nationally recognized statistical
rating agencies (each, a "Rating Agency"). See "RATING"
herein and "RATINGS" in the related Prospectus Supplement.
5
<PAGE>
RISK FACTORS
Investors should consider, in connection with the purchase of Offered
Certificates, among other things, the following factors and certain other
factors as may be set forth in "RISK FACTORS" in the related Prospectus
Supplement.
Limited Liquidity; Lack of Market for Resale
There can be no assurance that a secondary market for the Certificates of
any Series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such Series
remain outstanding. The Depositor does not currently intend to make an
application to list any Series of Certificates on a national securities exchange
or quote any Series of Certificates on an automated quotation system of a
Registered Securities Association. The market value of Certificates will
fluctuate with changes in prevailing rates of interest. Consequently, any sale
of Certificates by a holder in any secondary market that may develop may be at a
discount from 100% of their original principal balance or from their purchase
price. Furthermore, secondary market purchasers may look only hereto, to the
related Prospectus Supplement and to the reports to Certificateholders delivered
pursuant to the Agreement as described herein under the heading "DESCRIPTION OF
THE CERTIFICATES--Reports to Certificateholders" and "SERVICING OF THE MORTGAGE
LOANS--Evidence of Compliance" for information concerning the Certificates.
Certificateholders will have only those redemption rights and the Certificates
will be subject to early retirement only under the circumstances described
herein or in the related Prospectus Supplement. See "DESCRIPTION OF THE
CERTIFICATES--Termination."
Limited Assets as Security for Investment in Certificates; No
Personal Liability
A Series of Certificates will have a claim against or security interest in
the Trust Funds for another Series only if so specified in the related
Prospectus Supplement. If the related Prospectus Supplement does not specify
that a Series of Certificates will have a claim against or security interest in
the Trust Funds for another Series and the related Trust Fund is insufficient to
make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Distribution Account, the Collection Account
and any accounts maintained as Credit Enhancement, may be withdrawn under
certain conditions, as described in the related Prospectus Supplement. In the
event of such withdrawal, such amounts will not be available for future payment
of principal of or interest on the Certificates. If so provided in the
Prospectus Supplement for a Series of Certificates consisting of one or more
Classes of Subordinate Certificates, on any Distribution Date in respect of
which losses or shortfalls in collections on the Mortgaged Properties have been
realized, the amount of such losses or shortfalls will be borne first by one or
more Classes of the Subordinate Certificates, and, thereafter, by the remaining
Classes of Certificates in the priority and manner and subject to the
limitations specified in such Prospectus Supplement.
In general, neither the Depositor, nor any partner, director, officer,
employee or agent of the Depositor, will be liable to the related Trust Fund or
the Certificateholders for any action taken, or for refraining from the taking
of any action in good faith pursuant to the Agreement. As a result, if the
assets of the related Trust Fund are depleted, the Certificateholders will not
be able to recover any amounts from such persons, provided the applicable
standard of care has been met.
Effects of Prepayments on Average Life of Certificates and Yields
Prepayments on the Mortgage Loans in any Trust Fund generally will result
in a faster rate of principal payments on one or more Classes of the related
Certificates than if payments on such Mortgage
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<PAGE>
Loans were made as scheduled. Thus, the prepayment experience on the Mortgage
Loans may affect the average life of each Class of related Certificates. The
rate of principal payments on pools of mortgage loans varies between pools and
from time to time is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors, as well as Acts of God.
Accordingly, there can be no assurance as to the rate of prepayment on the
Mortgage Loans in any Trust Fund or that the rate of payments will conform to
any model described in any Prospectus Supplement. If prevailing interest rates
fall significantly below the applicable rates borne by the Mortgage Loans
included in a Trust Fund, principal prepayments are likely to be higher than if
prevailing rates remain at or above the rates borne by those Mortgage Loans. As
a result, the actual maturity of any Class of Certificates could occur
significantly earlier than expected. Alternatively, the actual maturity of any
Class of Certificates could occur significantly later than expected as a result
of prepayment premiums or the existence of defaults on the Mortgage Loans,
particularly at or near their maturity dates. In addition, the Master Servicer
or the Special Servicer, if any, may have the option under the Agreement for
such Series to extend the maturity of the Mortgage Loans following a default in
the payment of a balloon payment, which would also have the effect of extending
the average life of each Class of related Certificates. A Series of Certificates
may include one or more Classes of Certificates with priorities of payment over
other Classes of Certificates, including Classes of Offered Certificates, and,
as a result, yields on such Series may be more sensitive to prepayments on the
Mortgage Loans in the related Trust Fund. A Series of Certificates may include
one or more Classes offered at a significant premium or discount. Yields on such
Classes of Certificates will be sensitive, and in some cases extremely
sensitive, to prepayments on Mortgage Loans. With respect to interest only or
disproportionately interest weighted Classes purchased at a premium, such
Classes may not return their purchase prices under rapid repayment scenarios.
See "YIELD AND MATURITY CONSIDERATIONS" in the related Prospectus Supplement.
When considering the effects of prepayments on the average life and yield
of a Certificate, an investor should also consider provisions of the related
Agreement that permit the optional early termination of the Class of
Certificates to which such Certificate belongs. If so specified in the related
Prospectus Supplement, a Series of Certificates may be subject to optional early
termination through the repurchase of the Mortgage Properties in the related
Trust Fund by the party or parties specified therein, under the circumstances
and in the manner set forth therein. See "DESCRIPTION OF THE
CERTIFICATES--Termination."
Risks Associated with Lending on Income Producing Properties
Mortgage loans made with respect to multifamily or commercial properties
may entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single-family
properties. For example, the ability of a mortgagor to repay a loan secured by
an income-producing property typically is dependent primarily upon the
successful operation of such property rather than any independent income or
assets of the mortgagor; thus, the value of an income-producing property is
directly related to the net operating income derived from such property. In
contrast, the ability of a mortgagor to repay a single-family loan typically is
dependent primarily upon the mortgagor's household income, rather than the
capacity of the property to produce income; thus, other than in geographical
areas where employment is dependent upon a particular employer or an industry,
the mortgagor's income tends not to reflect directly the value of such property.
A decline in the net operating income of an income-producing property will
likely affect both the performance of the related loan as well as the
liquidation value of such property, whereas a decline in the income of a
mortgagor on a single-family property will likely affect the performance of the
related loan but may not affect the liquidation value of such property.
Further, the concentration of default, foreclosure and loss risks for
Mortgage Loans in a particular Trust Fund or the related Mortgaged Properties
will generally be greater than for pools of single-family
7
<PAGE>
loans both because the Mortgage Loans in a Trust Fund will generally consist of
a smaller number of loans than would a single-family pool of comparable
aggregate unpaid principal balance and because of the higher principal balance
of individual Mortgage Loans.
The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the businesses operated by such tenants in
connection with such property, the creditworthiness of such tenants or both; the
risks associated with such loans may be offset by the number of tenants or, if
applicable, a diversity of types of businesses operated by such tenants. A
number of the Mortgage Loans may be secured by liens on owner-occupied Mortgaged
Properties or on Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the borrower or single tenant, as
applicable, may have a disproportionately greater effect on the net operating
income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants. Furthermore, the value of any
mortgaged property may be adversely affected by risks generally incident to
interests in real property, including changes in general or local economic
conditions and/or specific industry segments; declines in real estate values;
declines in rental or occupancy rates; increases in interest rates, real estate
tax rates and other operating expenses; changes in governmental rules,
regulations and fiscal policies, including environmental legislation; natural
disasters; and other factors beyond the control of the Master Servicer or the
Special Servicer, if any.
Additional risk may be presented by the type and use of a particular
mortgaged property. For instance, mortgaged properties that operate as
hospitals, nursing homes or convalescent homes may present special risks to
mortgagees due to the significant governmental regulation of the ownership,
operation, maintenance, control and financing of health care institutions.
Mortgages encumbering mortgaged properties that are owned by the mortgagor under
a condominium form of ownership are subject to the declaration, by-laws and
other rules and regulations of the condominium association. Hotel and motel
properties are often operated pursuant to franchise, management or operating
agreements that may be terminable by the franchiser or operator. Moreover, the
transferability of a hotel's operating, liquor and other licenses upon a
transfer of the hotel, whether through purchase or foreclosure, is subject to
local law requirements. In addition, mortgaged properties that are multifamily
residential properties or cooperatively owned multifamily properties may be
subject to rent control laws, which could impact the future cash flows of such
properties. Any such risks will be more fully described in the related
Prospectus Supplement under the captions "RISK FACTORS" and "DESCRIPTION OF THE
MORTGAGE POOL."
If applicable, certain legal aspects of the Mortgage Loans for a Series of
Certificates may be described in the related Prospectus Supplement. See also
"CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS."
Potential Conflicts of Interest
The Special Servicer, if any, for a Series of Certificates, will have
considerable latitude in determining whether to liquidate or modify defaulted
Mortgage Loans. See "SERVICING OF THE MORTGAGE LOANS--Modifications, Waivers and
Amendments". If the Special Servicer or anyone else who purchases Mortgage Loans
and has the power to appoint the Special Servicer, investors in the Offered
Certificates should consider that, although the Special Servicer will be
obligated to act in accordance with the terms of the related Agreement and will
be governed by the servicing standards described herein, it may have interests
when dealing with defaulted Mortgage Loans that are in conflict with those of
holders of the Offered Certificates.
8
<PAGE>
Certain Tax Considerations of Variable Rate Certificates
There are certain tax matters as to which counsel to the Depositor is
unable to opine at the time of the issuance of the Prospectus due to uncertainty
in the law. Specifically, the treatment of Interest Weighted Certificates and
variable rate regular Certificates are subject to unsettled law which creates
uncertainty as to the exact method of income accrual which should control. The
REMIC will accrue income using a method which is consistent with certain
regulations; however, there can be no assurance that such method would be
controlling if the IRS were to assert a different method for accruing income.
See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Federal Income Tax Consequences
For REMIC Certificates--Taxation of REMIC Regular Certificates--Interest
Weighted Certificates" and "--Taxation of REMIC Regular Certificates--Variable
Rate Regular Certificates."
Limited Nature of Credit Ratings
Any rating assigned by a Rating Agency to a Class of Certificates will
reflect only its assessment of the likelihood that holders of such Certificates
will receive payments to which such Certificateholders are entitled under the
related Agreement. Such rating will not constitute an assessment of the
likelihood that principal prepayments on the related Mortgage Loans will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
related Trust Fund. Furthermore, such rating will not address the possibility
that prepayment of the related Mortgage Loans at a higher or lower rate than
anticipated by an investor may cause such investor to experience a lower than
anticipated yield or that an investor that purchases a Certificate at a
significant premium, or a Certificate that is entitled to disproportionately
low, nominal or no principal distributions, might fail to recoup its initial
investment under certain prepayment scenarios. Each Prospectus Supplement will
identify any payment to which holders of Offered Certificates of the related
Series are entitled that is not covered by the applicable rating. See "--Credit
Enhancement Limitations."
The amount, type and nature of Credit Enhancement, if any, provided with
respect to a Series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating Classes of the Certificates of such
Series. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, there can be no assurance
that the historical data supporting any such actuarial analysis will accurately
reflect future experience, or that the data derived from a large pool of
mortgage loans will accurately predict the delinquency, foreclosure of loss
experience of any particular pool of Mortgage Loans. In other cases, such
criteria may be based upon determinations of the values of the Mortgaged
Properties that provide security for the Mortgage Loans. However, no assurance
can be given that those values will not decline in the future. If the commercial
or multifamily residential real estate markets should experience an overall
decline in property values such that the outstanding principal balances of the
Mortgage Loans in a particular Trust Fund and any secondary financing on the
related Mortgaged Properties become equal to a greater than the value of the
Mortgaged Properties, the rates of delinquencies, foreclosures and losses could
be higher than those now generally experienced by institutional lenders. In
addition, adverse economic conditions (which may or may not affect real property
values) may affect the timely payment by mortgagors of scheduled payments of
principal and interest on the Mortgage Loans and, accordingly, the rates of
delinquencies, foreclosures and losses with respect to any Trust Fund. To the
extent that such losses are not covered by Credit Enhancement, such losses may
be borne, at least in part, by the holders of one or more Classes of
Certificates of the related Series. See "RATING".
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Potential Inability to Verify Underwriting Standards
The Mortgage Loans included in a Trust Fund may be originated by entities
affiliated with the Depositor or by unaffiliated entities. Unaffiliated
originators may use underwriting criteria that are different from that used by
affiliates of the Depositor. The Prospectus Supplement relating to each Series
will, to the extent verifiable, specify the originator or originators relating
to the Mortgage Loans, which may include, among others, commercial banks,
savings and loan associations, other financial institutions, mortgage banks,
credit companies, insurance companies, real estate developers or other HUD
approved lenders, and the underwriting criteria to the extent available in
connection with originating the Mortgage Loans. In certain cases, the Depositor
may not be able to verify the underwriting standards used to originate a
Mortgage Loan (e.g., if the Mortgage Loans being purchased from a Seller were
acquired by the Seller in the open market or were originated over a long period
of time pursuant to varying underwriting standards which cannot now be
confirmed). In general, the Depositor will not engage in the reunderwriting of
Mortgage Loans that it acquires. Instead, the Depositor will rely on the
representations and warranties made by the Seller, and the Seller's obligation
to repurchase a Mortgage Loan in the event that a representation or warranty was
not true when made.
Nonrecourse Mortgage Loans; Limited Recovery
It is anticipated that a substantial portion of the Mortgage Loans included
in any Trust Fund will be nonrecourse loans or loans for which recourse may be
restricted or unenforceable. As to such Mortgage Loans, in the event of
mortgagor default, recourse may be had only against the specific multifamily or
commercial property and such other assets, if any, as have been pledged to
secure the Mortgage Loan. With respect to those Mortgage Loans that provide for
recourse against the mortgagor and its assets generally, there can be no
assurance that such recourse will ensure a recovery in respect of a defaulted
Mortgage Loan greater than the liquidation value of the related Mortgaged
Property.
Inclusion of Delinquent and Non-Performing Mortgage Loans May Adversely Affect
Yields
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular Series of Certificates may include Mortgage Loans that are past due
or are non-performing. If so specified in the related Prospectus Supplement, the
servicing of such Mortgage Loans will be performed by a Special Servicer. Credit
Enhancement, if provided with respect to a particular Series of Certificates,
may not cover all losses related to such delinquent or non-performing Mortgage
Loans, and investors should consider the risk that the inclusion of such
Mortgage Loans in the Trust Fund may adversely affect the rate of defaults and
prepayments on Mortgaged Properties and the yield on the Certificates of such
Series.
Junior Mortgage Loans
Certain of the Mortgage Loans may be junior mortgage loans. The primary
risk to holders of mortgage loans secured by junior liens is the possibility
that a foreclosure of a related senior lien would extinguish the junior lien and
that adequate funds will not be received in connection with such foreclosure to
pay the debt held by the holder of such junior mortgage loan after satisfaction
of all related senior liens. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Junior Mortgages; Rights of Senior Mortgagees or Beneficiaries" and
"--Foreclosure" for a discussion of additional risks to holders of mortgage
loans secured by junior liens.
Balloon Payments
Certain of the Mortgage Loans as of the Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their
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stated maturity. Mortgage loans with balloon payments involve a greater degree
of risk because the ability of a mortgagor to make a balloon payment typically
will depend upon its ability either to refinance the loan or to sell the related
mortgaged property in a timely manner. The ability of a mortgagor to accomplish
either of these goals will be affected by a number of factors, including the
level of available mortgage rates at the time of sale or refinancing, the
mortgagor's equity in the related mortgaged property, the financial condition
and operating history of the mortgagor and the related mortgaged property, tax
laws, rent control laws (with respect to certain multifamily properties and
mobile home parks), reimbursement rates (with respect to certain hospitals,
nursing homes and congregate care facilities), renewability of operating
licenses, prevailing general economic conditions and the availability of credit
for commercial or multifamily, as the case may be, real properties generally.
Neither the Depositor or any affiliate will be required to refinance any
Mortgage Loan.
Extensions and Modifications of Defaulted Mortgage Loans; Additional Servicing
Fees
In order to maximize recoveries on defaulted Mortgage Loans, a Master
Servicer or Special Servicer, if any, will be permitted (within the parameters
specified in the related Prospectus Supplement) to extend and modify Mortgage
Loans that are in default or as to which a payment default is reasonably
foreseeable, including in particular with respect to balloon payments. In
addition, a Master Servicer or a Special Servicer, if any, may receive workout
fees, management fees, liquidation fees or other similar fees based on receipts
from or proceeds of such Mortgage Loans. Although a Master Servicer or Special
Servicer, if any, generally will be required to determine that any such
extension or modification is reasonably likely to produce a greater recovery
amount than liquidation, there can be no assurance that such flexibility with
respect to extensions or modifications or payment of a workout fee will increase
the amount of receipts from or proceeds of Mortgage Loans that are in default or
as to which a payment default is reasonably foreseeable.
Risks Related to the Mortgagor's Form of Entity and Sophistication
Mortgage loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of mortgage loans made to individuals. For example, an entity, as opposed
to an individual, may be more inclined to seek legal protection from its
creditors, such as a mortgagee, under the bankruptcy laws. Unlike individuals
involved in bankruptcies, various types of entities generally do not have
personal assets and creditworthiness at stake. The bankruptcy of a mortgagor may
impair the ability of the mortgagee to enforce its rights and remedies under the
related mortgage. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS--Foreclosure--Bankruptcy Laws." The mortgagor's sophistication may
increase the likelihood of protracted litigation or bankruptcy in default
situations. The more sophisticated a mortgagor is, the more likely it will be
aware of its rights, remedies and defenses against its mortgagee and the more
likely it will have the resources to make effective use of all of its rights,
remedies and defenses.
Credit Enhancement Limitations
The Prospectus Supplement for a Series of Certificates will describe any
Credit Enhancement in the related Trust Fund, which may include letters of
credit, insurance policies, surety bonds, limited guarantees, reserve funds or
other types of credit support, or combinations thereof. Use of Credit
Enhancement will be subject to the conditions and limitations described herein
and in the related Prospectus Supplement and is not expected to cover all
potential losses or risks or guarantee repayment of the entire principal balance
of the Certificates and interest thereon.
A Series of Certificates may include one or more Classes of Subordinate
Certificates (which may include Offered Certificates), if so provided in the
related Prospectus Supplement. Although
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subordination is intended to reduce the risk to holders of Senior Certificates
of delinquent distributions or ultimate losses, the amount of subordination will
be limited and may decline or be reduced to zero under certain circumstances. In
addition, if principal payments on one or more Classes of Certificates of a
Series are made in a specified order of priority, any limits with respect to the
aggregate amount of claims under any related Credit Enhancement may be exhausted
before the principal of the lower priority Classes of Certificates of such
Series has been repaid. As a result, the impact of significant losses and
shortfalls on the Mortgaged Properties may fall primarily upon those Classes of
Certificates having a lower priority of payment. Moreover, if a form of Credit
Enhancement covers more than one Series of Certificates, holders of Certificates
of one Series will be subject to the risk that such Credit Enhancement will be
exhausted by the claims of the holders of Certificates of one or more other
Series.
The amount, type and nature of Credit Enhancement, if any, established with
respect to a Series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating Classes of the Certificates of such
Series. Such criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. Such analysis is often the basis
upon which each Rating Agency determines the amount of Credit Enhancement
required with respect to each such Class. There can be no assurance that the
historical data supporting any such actuarial analysis will accurately reflect
future experience nor any assurance that the data derived from a large pool of
mortgage loans accurately predicts the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. No assurance can be given
with respect to any Mortgage Loan that the appraised value of the related
Mortgaged Property has remained or will remain at its level as of the
origination date of such Mortgage Loan. Moreover, there is no assurance that
appreciation of real estate values generally will limit loss experiences on
commercial or multifamily properties. If the commercial or multifamily
residential real estate markets should experience an overall decline in property
values such that the outstanding principal balances of the Mortgage Loans in a
particular Trust Fund and any secondary financing on the related Mortgaged
Properties become equal to or greater than the value of the Mortgaged
Properties, the rates of delinquencies, foreclosures and losses could be higher
than those now generally experienced by institutional lenders for similar
mortgage loans. In addition, adverse economic conditions (which may or may not
affect real property values) may affect the timely payment by mortgagors of
scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the rates of delinquencies, foreclosures and losses with respect to
any Trust Fund. To the extent that such losses are not covered by Credit
Enhancement, such losses will be borne, at least in part, by the holders of one
or more Classes of the Certificates of the related Series. See "--Limited Nature
of Credit Ratings," "DESCRIPTION OF THE CERTIFICATES" and "CREDIT ENHANCEMENT."
Risks to Subordinated Certificateholders; Lower Payment Priority
If so provided in the related Prospectus Supplement, a Series of
Certificates may include one or more Classes of Subordinate Certificates (which
may include Offered Certificates). If losses or shortfalls in collections on
Mortgaged Properties are realized, the amount of such losses or shortfalls will
be borne first by one or more Classes of the Subordinate Certificates. The
remaining amount of such losses or shortfalls, if any, will be borne by the
remaining Classes of Certificates in the priority and subject to the limitations
specified in such Prospectus Supplement. In addition to the foregoing, any
Credit Enhancement, if applicable, may be used by the Certificates of a higher
priority of payment before the principal of the lower priority Classes of
Certificates of such Series has been repaid. Therefore, the impact of
significant losses and shortfalls on the mortgaged properties may fall primarily
upon those Classes of Certificates with a lower payment priority.
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Taxable Income in Excess of Distributions Received
A holder of a certificate in a Class of Subordinate Certificates could be
allocated taxable income attributable to accruals of interest and original issue
discount in excess of cash distributed to such holder if mortgage loans were in
default giving rise to delays in distributions. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Federal Income Tax Consequences For REMIC Certificates--Taxation
of REMIC Regular Certificates--Subordinate Certificates--Effects of Defaults,
Delinquencies and Losses" herein.
Due-on-Sale Clauses and Assignments of Leases and Rents
Mortgages may contain a due-on-sale clause, which permits the mortgagee to
accelerate the maturity of the mortgage loan if the mortgagor sells, transfers
or conveys the related mortgaged property or its interest in the mortgaged
property. Mortgages may also include a debt-acceleration clause, which permits
the mortgagee to accelerate the debt upon a monetary or non-monetary default of
the mortgagor. Such clauses are generally enforceable subject to certain
exceptions. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
when an acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable.
The related Prospectus Supplement will describe whether and to what extent
the Mortgage Loans will be secured by an assignment of leases and rents pursuant
to which the mortgagor typically assigns its right, title and interest as
landlord under the leases on the related Mortgaged Property and the income
derived therefrom to the mortgagee as further security for the related Mortgage
Loan, while retaining a license to collect rents for so long as there is no
default. In the event the mortgagor defaults, the license terminates and the
mortgagee is entitled to collect rents. Such assignments are typically not
perfected as security interests prior to the mortgagee's taking possession of
the related mortgaged property and/or appointment of a receiver. Some state laws
may require that the mortgagee take possession of the mortgaged property and
obtain a judicial appointment of a receiver before becoming entitled to collect
the rents. In addition, if bankruptcy or similar proceedings are commenced by or
in respect of the mortgagor, the mortgagee's ability to collect the rents may be
adversely affected. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Leases and
Rents."
Environmental Risks
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination of
a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), a mortgagee may be liable as an "owner" or
"operator" for costs of addressing releases or threatened releases of hazardous
substances that require remedy at a property, if agents or employees of the
mortgagee have become sufficiently involved in the operations of the mortgagor,
regardless of whether the environmental damage or threat was caused by a prior
owner. A mortgagee also risks such liability on foreclosure of the mortgage.
Each Agreement will generally provide that the Master Servicer or the Special
Servicer, if any, acting on behalf of the Trust Fund, may not acquire title to a
Mortgaged Property securing a Mortgage Loan or take over its operation unless
the Master Servicer or Special Servicer, as applicable, has previously
determined, based upon a report prepared by a person who regularly conducts
environmental audits, that: (i) the Mortgaged Property is in compliance with
applicable environmental laws, and there are no circumstances present at the
Mortgaged Property relating to the use, management
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or disposal of any hazardous substances, hazardous materials, wastes or
petroleum based materials for which investigation, testing, monitoring,
containment, clean-up or remediation could be required under any federal, state
or local law or regulation; or (ii) if the Mortgaged Property is not so in
compliance or such circumstances are so present, then it would be in the best
economic interest of the Trust Fund to acquire title to the Mortgaged Property
and further to take such actions as would be necessary and appropriate to effect
such compliance and/or respond to such circumstances, which may include
obtaining an environmental insurance policy. The related Prospectus Supplement
may impose additional restrictions on the ability of the Master Servicer or the
Special Servicer, if any, to take any of the foregoing actions. See "CERTAIN
LEGAL ASPECTS OF THE MORTGAGE LOANS--Environmental Risks."
Certain Federal Tax Considerations Regarding Residual Certificates
Holders of Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their receipt
of cash payments, as described in "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Federal Income Tax Consequences For REMIC Certificates--Taxation
of Holders of Residual Certificates." Accordingly, under certain circumstances,
holders of Offered Certificates that constitute Residual Certificates may have
taxable income and tax liabilities arising from such investment during a taxable
year in excess of the cash received during such period. The requirement that
holders of Residual Certificates report their pro rata share of the taxable
income and net loss of the REMIC will continue until the Certificate balances of
all Classes of Certificates of the related Series have been reduced to zero,
even though holders of Residual Certificates have received full payment of their
stated interest and principal. A portion (or, in certain circumstances, all) of
such Certificateholder's share of the REMIC taxable income may be treated as
"excess inclusion" income to such holder that (i) generally, will not be subject
to offset by losses from other activities, (ii) for a tax-exempt holder, will be
treated as unrelated business taxable income and (iii) for a foreign holder,
will not qualify for exemption from withholding tax. Individual holders of
Residual Certificates may be limited in their ability to deduct servicing fees
and other expenses of the REMIC. In addition, Residual Certificates are subject
to certain restrictions on transfer. In particular, the transfer of a Residual
Interest to certain "Disqualified Organizations" is prohibited. If transfer
occurs in violation of such prohibition, a tax is imposed on the transfer. In
addition, the transfer of a "noneconomic residuary interest" by a Residual
Certificateholder will be disregarded under certain circumstances with the
transferor remaining liable for any taxable income derived from the Residual
Interest by the transferee Residual Certificateholder. See "MATERIAL FEDERAL
INCOME TAX CONSEQUENCES--Federal Income Tax Consequences For REMIC
Certificates--Taxation of Holders of Residual Certificates--Restrictions on
Ownership and Transfer of Residual Certificates." Because of the special tax
treatment of Residual Certificates, the taxable income arising in a given year
on Residual Certificates will not be equal to the taxable income associated with
investment in a corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. Therefore, the after-tax yield on the
Residual Certificates may be significantly less than that of a corporate bond or
stripped instrument having similar cash flow characteristics.
ERISA Considerations
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations that govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
Series. See "ERISA CONSIDERATIONS."
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Special Hazard Losses
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer and Special Servicer, if any, for any Trust Fund will each be required
to use its best efforts in accordance with the servicing standard to cause the
borrower on each Mortgage Loan serviced by it to maintain such insurance
coverage in respect of the related Mortgaged Property as is required under the
related Mortgage, including hazard insurance; provided that, as and to the
extent described herein and in the related Prospectus Supplement, each of the
Master Servicer and the Special Servicer, if any, may satisfy its obligation to
cause hazard insurance to be maintained with respect to any Mortgaged Property
through the acquisition of a blanket policy or master force placed policy. In
general, the standard form of fire and extended coverage policy covers physical
damage to or destruction of the improvements of the property by fire, lightning,
explosion, smoke, windstorm and hail, and riot, strike and civil commotion,
subject to the conditions and exclusions specified in each policy. Although the
policies covering the Mortgaged Properties will be underwritten by different
insurers under different state laws in accordance with different applicable
state forms, and therefore will not contain identical terms and conditions, most
such policies typically do not cover any physical damage resulting from war,
revolution, governmental actions, floods and other water-related causes, earth
movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and other kinds of risks not specified in the preceding
sentence. Unless the related Mortgage specifically requires the mortgagor to
insure against physical damage arising from such causes, then, to the extent any
consequent losses are not covered by Credit Enhancement, such losses may be
borne, at least in part, by the holders of one or more Classes of Certificates
of the related Series. See "SERVICING OF THE MORTGAGE LOANS--Insurance."
Control; Decisions by Certificateholders
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate balance of all outstanding
Certificates of a Series or a similar means of allocating decision-making under
the related Agreement, which will be specified in the related Prospectus
Supplement ("Voting Rights", will be required to direct, and will be sufficient
to bind all Certificateholders of such Series to, certain actions, including
amending the related Agreement in certain circumstances. See "SERVICING OF THE
MORTGAGE LOANS--Events of Default," "--Rights Upon Event of Default" and
"DESCRIPTION OF THE CERTIFICATES--Amendment."
Book-Entry Registration
The related Prospectus Supplement may provide that one or more Classes of
the Certificates initially will be represented by one or more certificates
registered in the name of the nominee for The Depository Trust Company, and will
not be registered in the names of the Certificateholders or their nominees.
Because of this, unless and until definitive certificates are issued, beneficial
owners of the Certificates of such Class or Classes will not be recognized by
the Trustee as "Certificateholders" (as that term is to be used in the related
Agreement). Hence, until such time as definitive certificates are issued, the
beneficial owners will be able to exercise the rights of Certificateholders only
indirectly through The Depository Trust Company and its participating
organizations. See "DESCRIPTION OF THE CERTIFICATES--General."
THE DEPOSITOR
Commercial Mortgage Acceptance Corp. was incorporated in the State of
Missouri on September 17, 1996. The Depositor is a wholly owned, limited purpose
finance subsidiary of Midland Loan Services, Inc. The principal executive
offices of the Depositor are located at 210 West 10th Street, 6th Floor, Kansas
City, Missouri 64105. Its telephone number is (816) 435-5000.
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The Depositor will have no servicing obligations or responsibilities with
respect to any Series of Certificates, Mortgage Pool or Trust Fund. The
Depositor does not have, nor is it expected in the future to have, any
significant assets.
The Depositor was organized, among other things, for the purposes of
establishing trusts, selling beneficial interests therein and acquiring and
selling mortgage assets to such trusts. Neither the Depositor, its parent nor
any of the Depositor's affiliates will insure or guarantee distributions on the
Certificates of any Series.
The assets of the Trust Funds will be acquired by the Depositor directly or
through one or more affiliates.
THE MASTER SERVICER
Midland Loan Services, L.P., was organized under the laws of the State of
Missouri in 1992 as a limited partnership. On April 3, 1998, substantially all
of the assets of Midland Loan Services, L.P., were acquired by Midland Loan
Services, Inc. ("Midland"), a newly formed, wholly-owned subsidiary of PNC Bank,
National Association. Midland is a real estate financial services company which
provides loan servicing and asset management for large pools of commercial and
multifamily real estate assets and which originates commercial real estate
loans. Midland's address is 210 West 10th Street, 6th Floor, Kansas City,
Missouri 64105.
The size of the loan portfolio which the Master Servicer was servicing as
of the end of the most recent calendar quarter will be set forth in each
Prospectus Supplement. The delinquency experience of the Master Servicer (and
for periods prior to April 3, 1998, of the Master Servicer's predecessor in
interest) as of the end of its three most recent fiscal years and the most
recent calendar quarter for which such information is available on the portfolio
of loans relating to commercial mortgage pass-through certificates master
serviced by it will be summarized in each Prospectus Supplement. There can be no
assurance that such experience will be representative of the results that may be
experienced with respect to any particular Mortgage Pool.
USE OF PROCEEDS
The Depositor will apply all or substantially all of the net proceeds from
the sale of each Series of Offered Certificates to purchase the Mortgage Loans
relating to such Series, to repay any indebtedness that has been incurred to
obtain funds to acquire Mortgage Loans, to obtain Credit Enhancement, if any,
for the Series and to pay costs of structuring, issuing and underwriting the
Certificates. The maturity and interest rate of such indebtedness, if any, will
be set forth in "USE OF PROCEEDS" in the related Prospectus Supplement.
DESCRIPTION OF THE CERTIFICATES*
The Certificates of each Series will be issued pursuant to a separate
Pooling and Servicing Agreement (the "Agreement") to be entered into among the
Depositor, the Master Servicer, the Special Servicer, if any, and the Trustee
for that Series and any other parties described in the applicable Prospectus
Supplement, substantially in the form filed as an exhibit to the Registration
Statement of
________________________
*Whenever in this Prospectus the terms "Certificates," "Trust Fund" and
"Mortgage Pool" are used, such terms will be deemed to apply unless the context
indicates otherwise, to a specific Series of Certificates, the Trust Fund
underlying the related Series and the related Mortgage Pool.
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which this Prospectus is a part or in such other form as may be described in the
applicable Prospectus Supplement. The following summaries describe the material
provisions expected to be common to each Series and the Agreement with respect
to the underlying Trust Fund. However, the Prospectus Supplement for each Series
will describe more fully the Certificates and the provisions of the related
Agreement, which may be different from the summaries set forth below.
At the time of issuance, the Offered Certificates of each Series will be
rated "investment grade," typically one of the four highest generic rating
categories, by at least one nationally recognized statistical rating
organization. Each of such rating organizations specified in the applicable
Prospectus Supplement as rating the Offered Certificates of the related Series
is hereinafter referred to as a "Rating Agency." 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.
General
The Certificates of each Series will be issued in registered or book-entry
form and will represent beneficial ownership interests in the trust fund (the
"Trust Fund") created pursuant to the Agreement for such Series. The Trust Fund
for each Series will primarily comprise, to the extent provided in the
Agreement: (i) the Mortgage Loans conveyed to the Trustee pursuant to the
Agreement; (ii) all payments on or collections in respect of the Mortgage Loans
due after the Cut-off Date; (iii) any Mortgaged Property acquired on behalf of
the Trust Fund through foreclosure or deed-in-lien of foreclosure (upon
acquisition, any "REO Property"); (iv) all revenue received in respect of REO
Property; (v) insurance policies with respect to such Mortgage Loans; (vi) any
assignments of leases, rents and profits, security agreements and pledges; (vii)
any indemnities or guaranties given as additional security for such Mortgage
Loans; (viii) the Trustee's right, title and interest in and to any reserve or
escrow accounts established pursuant to any of the Mortgage Loan documents
(each, a "Reserve Account"); (ix) the Collection Account; (x) the Distribution
Account and the REO Account; (xi) any environmental indemnity agreements
relating to such Mortgaged Properties; (xii) the rights and remedies under each
related Mortgage Loan Purchase and Sale Agreement; and (xiii) the proceeds of
any of the foregoing (excluding interest earned on deposits in any Reserve
Account, to the extent such interest belongs to the related mortgagor). In
addition, the Trust Fund for a Series may include various forms of Credit
Enhancement. See "CREDIT ENHANCEMENT." Such other assets will be described more
fully in the related Prospectus Supplement.
If so specified in the applicable Prospectus Supplement, Certificates of a
given Series may be issued in several Classes, which may pay interest at
different rates, may represent different allocations of the right to receive
principal and interest payments, and certain of which may be subordinated to
other Classes in the event of shortfalls in available cash flow from the
underlying Mortgage Loans. Alternatively, or in addition, Classes may be
structured to receive principal payments in sequence. Each Class in a group of
sequential pay Classes would be entitled to be paid in full before the next
Class in the group is entitled to receive any principal payments. A Class of
Certificates may also provide for payments of principal only or interest only or
for disproportionate payments of principal and interest. Subordinate
Certificates of a given Series of Certificates may be offered in the same
Prospectus Supplement as the Senior Certificates of such Series or may be
offered in a separate offering document. Each Class of Certificates of a Series
will be issued in the minimum denominations specified in the related Prospectus
Supplement.
The Prospectus Supplement for any Series including Classes similar to any
of those described above will contain a complete description of their material
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of Classes; (ii) the
risk that interest only, or disproportionately interest weighted, Classes
purchased at a premium may not
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return their purchase prices under rapid prepayment scenarios; and (iii) the
degree to which an investor's yield is sensitive to principal prepayments.
The Offered Certificates of each Series will be freely transferable and
exchangeable at the office specified in the related Agreement and Prospectus
Supplement; provided, however, that certain Classes of Certificates may be
subject to transfer restrictions described in the related Prospectus Supplement.
If specified in the related Prospectus Supplement, the Certificates may be
transferable only on the books of The Depository Trust Company or another
depository identified in such Prospectus Supplement.
Distributions on Certificates
Distributions of principal and interest on the Certificates of each Series
will be made to the registered holders thereof ("Certificateholders") by the
Trustee (or such other paying agent as may be identified in the related
Prospectus Supplement) on the day (the "Distribution Date") specified in the
related Prospectus Supplement, beginning in the period specified in the related
Prospectus Supplement following the establishment of the related Trust Fund.
Distributions for each Series will be made by check mailed to the address of the
person entitled thereto as it appears on the certificate register for such
Series maintained by the Trustee or by wire transfer if so specified in the
related Prospectus Supplement. The final distribution in retirement of the
Certificates of each Series will be made only upon presentation and surrender of
the Certificates at the office or agency specified in the notice to the
Certificateholders of such final distribution. In addition, the Prospectus
Supplement relating to each Series will set forth the applicable due period,
prepayment period, record date, Cut-off Date and determination date in respect
of each Series of Certificates.
With respect to each Series of Certificates on each Distribution Date, the
Trustee (or such other paying agent as may be identified in the applicable
Prospectus Supplement) will distribute to the Certificateholders the amounts
described in the related Prospectus Supplement that are due to be paid on such
Distribution Date. In general, such amounts will include previously
undistributed payments of principal (including principal prepayments, if any)
and interest on the Mortgage Loans received by the Master Servicer or the
Special Servicer, if any, after a date specified in the related Prospectus
Supplement (the "Cut-off Date") and prior to the day preceding each Distribution
Date specified in the related Prospectus Supplement.
Accounts
It is expected that the Agreement for each Series of Certificates will
provide that the Trustee establish an account (the "Distribution Account") into
which the Master Servicer will deposit amounts held in the Collection Account
from which Certificateholder distributions will be made with respect to a given
Distribution Date. On each Distribution Date, the Trustee will apply amounts on
deposit in the Distribution Account generally to make distributions of interest
and principal to the Certificateholders in the manner and in the amounts
described in the related Prospectus Supplement.
It is also expected that the Agreement for each Series of Certificates will
provide that the Master Servicer establish and maintain one or more accounts
(the "Collection Account") in the name of the Trustee for the benefit of
Certificateholders. The Master Servicer will generally be required to deposit
into the Collection Account all amounts received on or in respect of the
Mortgage Loans. The Master Servicer will be entitled to make certain withdrawals
from the Collection Account to, among other things: (i) remit certain amounts
for the related Distribution Date into the Distribution Account; (ii) pay
Property Protection Expenses, taxes, assessments and insurance premiums and
certain third-party expenses in accordance with the Agreement; (iii) pay accrued
and unpaid servicing fees and other servicing compensation to the Master
Servicer and the Special Servicer, if any; and (iv) reimburse the Master
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Servicer, the Special Servicer, if any, the Trustee and the Depositor for
certain expenses and provide indemnification to the Depositor, the Master
Servicer and the Special Servicer, if any, as described in the Agreement.
"Property Protection Expenses" comprise 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, as more
fully described in the related Agreement. The applicable Prospectus Supplement
may provide for additional circumstances in which the Master Servicer will be
entitled to make withdrawals from the Collection Account.
The amount at any time credited to the Collection Account or the
Distribution Account may be invested in Permitted Investments that are payable
on demand or in general mature or are subject to withdrawal or redemption on or
before the business day preceding the next succeeding Master Servicer Remittance
Date, in the case of the Collection Account, or the business day preceding the
next succeeding Distribution Date, in the case of the Distribution Account. The
Master Servicer will be required to remit amounts on deposit in the Collection
Account that are required for distribution to Certificateholders to the
Distribution Account on or before the business day preceding the related
Distribution Date (the "Master Servicer Remittance Date"). The income from the
investment of funds in the Collection Account and the Distribution Account in
Permitted Investments will constitute additional servicing compensation for the
Master Servicer, and the risk of loss of funds in the Collection Account and the
Distribution Account resulting from such investments will be borne by the Master
Servicer. The amount of each such loss will be required to be deposited by the
Master Servicer in the Collection Account or the Distribution Account, as the
case may be, promptly as realized.
It is expected that the Agreement for each Series of Certificates will
provide that an account (the "REO Account") will be established and maintained
in order to be used in connection with REO Properties and, if specified in the
related Prospectus Supplement, certain other Mortgaged Properties. To the extent
set forth in the Agreement, certain withdrawals from the REO Account will be
made to, among other things, (i) make remittances to the Collection Account as
required by the Agreement; (ii) pay taxes, assessments, insurance premiums,
other amounts necessary for the proper operation, management and maintenance of
the REO Properties and such other Mortgaged Properties and certain third-party
expenses in accordance with the Agreement; and (iii) provide for the
reimbursement of certain expenses in respect of the REO Properties and such
other Mortgaged Properties.
The amount at any time credited to the REO Account may be invested in
Permitted Investments that are payable on demand or mature, or are subject to
withdrawal or redemption, on or before the business day preceding the day on
which such amounts are required to be remitted to the Master Servicer for
deposit in the Collection Account. The income from the investment of funds in
the REO Account in Permitted Investments will be for the benefit of the Master
Servicer, or the Special Servicer, if applicable, and the risk of loss of funds
in the REO Account resulting from such investments will be borne by the Master
Servicer, or the Special Servicer, if applicable.
"Permitted Investments" will generally consist of one or more of the
following, unless the Rating Agencies rating Certificates of a Series require
other or additional investments:
(i) direct obligations of, or obligations guaranteed as to full and timely
payment of principal and interest by, the United States or any agency or
instrumentality thereof, provided that such obligations are backed by the full
faith and credit of the United States of America;
(ii) direct obligations of the Federal Home Loan Mortgage Corporation
("FHLMC") (debt obligations only), the Federal National Mortgage Association
("Fannie Mae") (debt obligations only), the Federal Farm Credit System
(consolidated systemwide bonds and notes only), the Federal Home Loan Banks
(consolidated debt obligations only), the Student Loan Marketing Association
(debt obligations
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only), the Financing Corp. (consolidated debt obligations only) and the
Resolution Funding Corp. (debt obligations only);
(iii) federal funds, time deposits in, or certificates of deposit of, or
bankers' acceptances, or repurchase obligations, all having maturities of not
more than 365 days, issued by any bank or trust company, savings and loan
association or savings bank, depositing institution or trust company having the
highest short-term rating available from each Rating Agency rating the
Certificates of a Series;
(iv) commercial paper having a maturity of 365 days or less (including both
non-interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the date
of issuance thereof and demand notes that constitute vehicles for investment in
commercial paper) that is rated by each Rating Agency rating the Certificates of
a Series in its highest short-term unsecured rating category;
(v) shares of taxable money market funds or mutual funds that seek to
maintain a constant net asset value and have been rated by each Rating Agency
rating the Certificates of a Series as Permitted Investments with respect to
this definition;
(vi) if previously confirmed in writing to the Trustee, any other demand,
money market or time deposit, or any other obligation, security or investment,
as may be acceptable to each Rating Agency rating the Certificates of a Series
as a permitted investment of funds backing securities having ratings equivalent
to each such Rating Agency's highest initial rating of the Certificates; and
(vii) such other obligations as are acceptable as Permitted Investments to
each Rating Agency rating the Certificates of a Series;
provided, however, that (a) if Standard and Poor's Rating Service, a division of
the McGraw-Hill Companies, Inc. ("S&P") is a Rating Agency for such Series, none
of such obligations or securities listed above may have an "r" highlighter
affixed to its rating if rated by S&P; (b) except with respect to units of money
market funds pursuant to clause (v) above, each such obligation or security will
have a fixed dollar amount of principal due at maturity which cannot vary or
change; and (c) except with respect to units of money market funds pursuant to
clause (v) above, if any such obligation or security provides for a variable
rate of interest, interest will be tied to a single interest rate index plus a
single fixed spread (if any) and move proportionately with that index; and
provided, further, that such instrument continues to qualify as a "cash flow
investment" pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and that no instrument or security will be a Permitted
Investment if (i) such instrument or security evidences a right to receive only
interest payments or (ii) the right to receive principal and interest payments
derived from the underlying investment provides a yield to maturity in excess of
120% of the yield to maturity at par of such underlying investment as of the
date of its acquisition.
Amendment
Generally, the Agreement for each Series will provide that it may be
amended from time to time by the parties thereto, without the consent of any of
the Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement
any provisions therein that may be inconsistent with any other provisions
therein or this Prospectus or the related Prospectus Supplement, (iii) to amend
any provision thereof to the extent necessary or desirable to maintain the
rating or ratings assigned to each of the Classes of Certificates by each Rating
Agency or (iv) to make any other provisions with respect to matters or questions
arising under the Agreement that will not (a) be inconsistent with the
provisions of the Agreement or this Prospectus or the related Prospectus
Supplement, (b) result in the downgrading, withdrawal or
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qualification of the rating or ratings then assigned to any outstanding Class of
Certificates and (c) adversely affect in any material respect the interests of
any Certificateholder.
Each Agreement will also provide that it may be amended from time to time
by the parties thereto with the consent of the holders of each of the Classes of
Regular Certificates representing not less than a percentage specified in the
related Agreement of all Classes of Certificates affected by the amendment for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Agreement or of modifying in any manner the rights
of the Certificateholders; provided, however, that no such amendment shall: (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans that are required to be distributed on any Certificate without
the consent of each affected Certificateholder; (ii) change the percentage of
Certificates the holders of which are required to consent to any action or
inaction under the Agreement, without the consent of the holders of all
Certificates then outstanding; or (iii) alter the obligations of the Master
Servicer or the Trustee, without the consent of the holders of all Certificates
representing all of the Voting Rights of the Class or Classes affected thereby
(unless such amendment is permitted pursuant to the preceding paragraph) to make
an advance.
Further, the Agreement for each Series may provide that the parties
thereto, at any time and from time to time, without the consent of the
Certificateholders, may amend the Agreement to modify, eliminate or add to any
of its provisions to such extent as shall be necessary to maintain the
qualification of any REMIC related to such Series or to prevent the imposition
of any additional material state or local taxes, at all times that any of the
Certificates are outstanding, provided, however, that such action, as evidenced
by an opinion of counsel (paid for as an expense of the Trust Fund), is
necessary or helpful to maintain such qualification or to prevent the imposition
of any such taxes, and would not adversely affect in any material respect the
interest of any Certificateholder.
The related Prospectus Supplement will specify the method for allocating
Voting Rights among holders of Certificates of a Class.
The Agreement relating to each Series may provide that no amendment to
such Agreement will be made unless there has been delivered in accordance with
such Agreement an opinion of counsel to the effect that such amendment will not
cause such Series to fail to qualify as a REMIC at any time that any of the
Certificates are outstanding.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the amendment of the related Agreement required by the
Rating Agencies rating the Certificates of such Series.
Termination
The obligations of the parties to the Agreement for each Series will
terminate upon: (i) the purchase of all of the assets of the related Trust Fund,
as described in the related Prospectus Supplement; (ii) the later of (a) the
distribution to Certificateholders of that Series of final payment with respect
to the last outstanding Mortgage Loan or (b) the disposition of all property
acquired upon foreclosure or deed-in-lieu of foreclosure with respect to the
last outstanding Mortgage Loan and the remittance to the Certificateholders of
all funds due under the Agreement; (iii) the sale of the assets of the related
Trust Fund after the principal amounts of all Certificates have been reduced to
zero under circumstances set forth in the Agreement; or (iv) mutual consent of
the parties and all Certificateholders. With respect to each Series, the Trustee
will give or cause to be given written notice of termination of the Agreement to
each Certificateholder and the final distribution under the Agreement will be
made only upon surrender and cancellation of the related Certificates at an
office or agency specified in the notice of termination.
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Reports to Certificateholders
Concurrently with each distribution for each Series, the Trustee (or such
other paying agent as may be identified in the applicable Prospectus Supplement)
will forward to each Certificateholder a statement setting forth such
information relating to such distribution as is specified in the Agreement and
described in the applicable Prospectus Supplement.
The Trustee
The Depositor will select a bank or trust company to act as trustee (the
"Trustee") under the Agreement for each Series and the Trustee will be
identified, and its obligations under that Agreement will be described, in the
applicable Prospectus Supplement. The Rating Agencies rating Certificates of a
Series may require the appointment of a fiscal agent to guarantee certain
obligations of the Trustee. Such fiscal agent will be a party to the Agreement.
In such event, the fiscal agent will be identified, and its obligations under
the Agreement will be described, in the applicable Prospectus Supplement. See
"SERVICING OF THE MORTGAGE LOANS--Certain Matters with Respect to the Master
Servicer, the Special Servicer, the Trustee and the Depositor."
THE MORTGAGE POOLS
General
Each Mortgage Pool will consist of mortgage loans secured by first or
junior mortgages, deeds of trust or similar security instruments (each, a
"Mortgage") on, or installment contracts ("Installment Contracts") for the sale
of, fee simple or leasehold interests in commercial real estate property,
multifamily residential property, and/or mixed-use property, and related
property and interests (each such interest or property, as the case may be, a
"Mortgaged Property"). Multifamily properties (consisting of apartments,
congregate care facilities and/or mobile home parks) and general commercial
properties (consisting of retail properties, including shopping centers, office
buildings, mini-warehouses, warehouses, industrial properties and/or other
similar types of properties) will represent security for a material
concentration of the Mortgage Loans in any Trust Fund, based on principal
balance at the time such Trust Fund is formed. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS--General," "--Types of Mortgage Instruments," "--Installment
Contracts" and "--Junior Mortgages; Rights of Senior Mortgagees or
Beneficiaries" for more detailed information regarding the characteristics of
such types of mortgage loans. A Mortgage Pool will not include securities of the
type listed in the definition of Permitted Investments. Each such mortgage loan
or Installment Contract is herein referred to as a "Mortgage Loan."
All Mortgage Loans will be of one or more of the following types:
1. Mortgage Loans with fixed interest rates;
2. Mortgage Loans with adjustable interest rates;
3. Mortgage Loans whose principal balances fully amortize over their
remaining terms to maturity;
4. Mortgage Loans whose principal balances do not fully amortize, but
instead provide for a substantial principal payment at the stated
maturity of the loan;
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5. Mortgage Loans that provide for recourse against only the Mortgaged
Properties; and
6. Mortgage Loans that provide for recourse against the other assets of
the related mortgagors.
Certain Mortgage Loans ("Simple Interest Loans") may provide that
scheduled interest and principal payments thereon are applied first to interest
accrued from the last date on which interest has been paid to the date such
payment is received and the balance thereof is applied to principal, and other
Mortgage Loans may provide for payment of interest in advance rather than in
arrears.
Mortgage Loans may also be secured by one or more assignments of leases
and rents, management agreements or operating agreements relating to the
Mortgaged Property and in some cases by certain letters of credit, cash
collateral deposits, personal guarantees or combinations thereof. Pursuant to an
assignment of leases and rents, the obligor on the related promissory note,
bond, mortgage consolidation agreement, installment contract or other similar
instrument (each, a "Note") assigns its right, title and interest as landlord
under each lease and the income derived therefrom to the related mortgagee,
while retaining a license to collect the rents for so long as there is no
default. If the obligor defaults, the license terminates and the related
mortgagee is entitled to collect the rents from tenants to be applied to the
monetary obligations of the obligor. State law may limit or restrict the
enforcement of the assignment of leases and rents by a mortgagee until the
mortgagee takes possession of the related mortgaged property and/or a receiver
is appointed. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Leases and
Rents."
If so specified in the related Prospectus Supplement, a Trust Fund may
include a number of Mortgage Loans with a single obligor or related obligors
thereunder. In the event that the Mortgage Pool securing Certificates for any
Series includes a Mortgage Loan or a group of Mortgage Loans of a single obligor
or group of affiliated obligors representing 10% or more of the principal amount
of such Certificates, the Prospectus Supplement will contain information,
including financial information, regarding the credit quality of the obligors.
The Mortgage Loans will be newly originated or seasoned, and will be acquired by
the Depositor either directly or through one or more affiliates.
Unless otherwise specified in the Prospectus Supplement for a Series, the
Mortgage Loans will not be insured or guaranteed by the United States, any
governmental agency, any private mortgage insurer or any other person or entity.
The Prospectus Supplement relating to each Series will, to the extent
verifiable, specify the originator or originators relating to the Mortgage
Loans, which may include, among others, commercial banks, savings and loan
associations, other financial institutions, mortgage banks, credit companies,
insurance companies, real estate developers or other HUD approved lenders, and
the underwriting criteria to the extent available in connection with originating
the Mortgage Loans. See "RISK FACTORS--Potential Inability to Verify
Underwriting Standards" herein. The criteria applied by the Depositor in
selecting the Mortgage Loans to be included in a Mortgage Pool will vary from
Series to Series. The Prospectus Supplement relating to each Series also will
provide specific information regarding the characteristics of the Mortgage
Loans, as of the Cut-off Date, including, among other things: (i) the aggregate
principal balance of the Mortgage Loans; (ii) the types of properties securing
the Mortgage Loans and the aggregate principal balance of the Mortgage Loans
secured by each type of property; (iii) the interest rate or range of interest
rates of the Mortgage Loans; (iv) the origination dates and the original and,
with respect to seasoned Mortgage Loans, remaining terms to stated maturity of
the Mortgage Loans; (v) the loan-to-value ratios at origination and, with
respect to seasoned Mortgage Loans, current loan balance-to-original value
ratios of the Mortgage Loans; (vi) the geographic distribution of the Mortgaged
Properties underlying the Mortgage Loans; (vii) the minimum interest rates,
margins, adjustment caps, adjustment frequencies, indices and other similar
information applicable to adjustable rate Mortgage
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Loans; (viii) the debt service coverage ratios relating to the Mortgage Loans;
and (ix) payment delinquencies, if any, relating to the Mortgage Loans. The
applicable Prospectus Supplement will also specify any materially inadequate,
incomplete or obsolete documentation relating to the Mortgage Loans and other
characteristics of the Mortgage Loans relating to each Series. If specified in
the applicable Prospectus Supplement, the Depositor may segregate the Mortgage
Loans in a Mortgage Pool into separate "Mortgage Loan Groups" (as described in
the related Prospectus Supplement) as part of the structure of the payments of
principal and interest on the Certificates of a Series. In such case, the
Depositor will disclose the above-specified information by Mortgage Loan Group.
The Depositor will file a current report on Form 8-K (the "Form 8-K") with
the Commission within 15 days after the initial issuance of each Series of
Certificates (each, a "Closing Date"), as specified in the related Prospectus
Supplement, which will set forth information with respect to the Mortgage Loans
included in the Trust Fund for a Series as of the related Closing Date. The Form
8-K will be available to the Certificateholders of the related Series promptly
after its filing.
Assignment of Mortgage Loans
At the time of issuance of the Certificates of each Series, the Depositor
will cause the Mortgage Loans to be assigned to the Trustee, together with all
scheduled payments of interest and principal due after the Cut-off Date (whether
received) and all payments of interest and principal received by the Depositor
or the Master Servicer on or with respect to the Mortgage Loans after the
Cut-off Date (other than payments of principal and interest due on or prior to
the Cut-off Date). The Trustee, concurrently with such assignment, will execute
and deliver Certificates evidencing the beneficial ownership interests in the
related Trust Fund to the Depositor in exchange for the Mortgage Loans. Each
Mortgage Loan will be identified in a schedule appearing as an exhibit to the
Agreement for the related Series (the "Mortgage Loan Schedule"). The Mortgage
Loan Schedule will include, among other things, as to each Mortgage Loan,
information as to its outstanding principal balance as of the close of business
on the Cut-off Date, as well as information respecting the interest rate, the
scheduled monthly (or other periodic) payment of principal and interest as of
the Cut-off Date, the maturity date of each Note and the address of each
property securing the Note.
In addition, the Depositor will, as to each Mortgage Loan, deliver to the
Trustee: (i) the Note, endorsed to the order of the Trustee without recourse;
(ii) the Mortgage and an executed assignment thereof in favor of the Trustee or
otherwise as required by the Agreement; (iii) any assumption, modification or
substitution agreements relating to the Mortgage Loan; (iv) a mortgagee's title
insurance policy (or owner's policy in the case of an Installment Contract),
together with its endorsements, or an attorney's opinion of title issued as of
the date of origination of the Mortgage Loan; (v) if the security agreement
and/or assignment of leases, rents and profits is separate from the Mortgage, an
executed assignment of such security agreement and/or re-assignment of such
assignment of leases, rents and profits to the Trustee; and (vi) such other
documents as may be described in the Agreement (such documents collectively, the
"Mortgage Loan File"). Unless otherwise expressly permitted by the Agreement,
all documents included in the Mortgage Loan File are to be original executed
documents, provided, however, that in instances in which the original recorded
Mortgage, mortgage assignment or any document necessary to assign the
Depositor's interest in Installment Contracts to the Trustee, as described in
the Agreement, has been retained by the applicable jurisdiction or has not yet
been returned from recordation, the Depositor may deliver a photocopy thereof
certified to be the true and complete copy of the original thereof submitted for
recording.
The Trustee will hold the Mortgage Loan File for each Mortgage Loan in
trust for the benefit of all Certificateholders. Pursuant to the Agreement, the
Trustee is obligated to review the Mortgage Loan File for each Mortgage Loan
within a specified number of days after the execution and delivery of the
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Agreement. If any document in the Mortgage Loan File is found to be defective in
any material respect, the Trustee will promptly notify the Depositor, the Master
Servicer and the Seller.
Mortgage Underwriting Standards and Procedures
The underwriting procedures and standards for Mortgage Loans included in a
Mortgage Pool will be specified in the related Prospectus Supplement to the
extent such procedures and standards are known or available. Such Mortgage Loans
may be originated by an affiliate of the Depositor or third parties in
contemplation of the transactions contemplated by this Prospectus and the
related Prospectus Supplement or may have been originated by third-parties and
acquired by the Depositor directly or through its affiliates in negotiated
transactions.
The originator of a Mortgage Loan generally will have applied underwriting
procedures intended to evaluate, among other things, the income derived from the
Mortgaged Property, the capabilities of the management of the project, including
a review of management's past performance record, its management reporting and
control procedures (to determine its ability to recognize and respond to
problems) and its accounting procedures to determine cash management ability,
the obligor's credit standing and repayment ability and the value and adequacy
of the Mortgaged Property as collateral. With respect to certain Mortgage Loans,
the Depositor may be unable to verify the underwriting standards and procedures
used by a particular originator, in which case, such fact will be disclosed in
the related Prospectus Supplement. Mortgage Loans insured by the Federal Housing
Administration ("FHA"), a division of the United States Department of Housing
and Urban Development ("HUD"), will have been originated by mortgage lenders
that were at the time of origination approved by HUD as FHA mortgagees in the
ordinary course of their real estate lending activities and will comply with the
underwriting policies of FHA. In general, the Depositor will not engage in the
reunderwriting of Mortgage Loans that it acquires. Instead, the Depositor will
rely on the representations and warranties made by the Seller, and the Seller's
obligation to repurchase a Mortgage Loan in the event that a representation or
warranty was not true when made. See "RISK FACTORS--Potential Inability to
Verify Underwriting Standards."
If so specified in the related Prospectus Supplement, the adequacy of a
Mortgaged Property as security for repayment will generally have been determined
by appraisal by appraisers selected in accordance with preestablished guidelines
for appraisers established by or acceptable to the loan originator. In general,
originators of commercial and multifamily mortgage loans require each mortgaged
property to be appraised by an independent appraiser in accordance with MAI
Standards. Furthermore, if so specified in the related Prospectus Supplement,
the appraiser must have personally inspected the property and verified that it
was in good condition and that construction, if new, has been completed.
Generally, the appraisal will have been based upon a cash flow analysis and/or a
market data analysis of recent sales of comparable properties and, when deemed
applicable, a replacement cost analysis based on the current cost of
constructing or purchasing a similar property.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. Further, there is no assurance that appreciation of real
estate values generally will limit loss experiences on commercial properties or
multifamily residential properties. If the commercial real estate market should
experience an overall decline in property values such that the outstanding
balances of the Mortgage Loans and any additional financing on the Mortgaged
Properties in a particular Mortgage Pool become equal to or greater than the
value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now generally experienced in
the mortgage lending industry. To the extent that such losses are not covered by
the methods of Credit Enhancement or the insurance policies described herein
and/or in the related Prospectus Supplement, the ability of the Trust Fund to
pay principal of and interest on the Certificates may be adversely affected.
Even if credit support covers all losses resulting from
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defaults and foreclosure, the effect of defaults and foreclosures may be to
increase prepayment experience on the Mortgage Loans, thus shortening weighted
average life and affecting yield to maturity.
Representations and Warranties
The seller of a Mortgage Loan to the Depositor (the "Seller"), which may
be an affiliate of the Depositor, will have made representations and warranties
in respect of the Mortgage Loans sold by such Seller to the Depositor. Such
representations and warranties will generally include, among other things: (i)
with respect to each Mortgaged Property, that title insurance (or if not yet
issued, a pro forma or specimen policy or a "marked-up" commitment for title
insurance furnished by the related title insurance company for purposes of
closing) and any required hazard insurance was effective at the origination of
each Mortgage Loan, and that each policy (or pro forma or specimen policy or
"marked-up" commitment for title insurance) remained in effect on the date of
purchase of the Mortgage Loan from the Seller; (ii) that the Seller was the sole
owner and holder of such Mortgage Loan and had full right and authority to sell
and assign such Mortgage Loan; (iii) with respect to each Mortgaged Property,
that each Mortgage constituted a valid first lien on the Mortgaged Property
(subject only to permissible title insurance exceptions); (iv) that there were
no delinquent tax or assessment liens against the Mortgaged Property; and (v)
that no scheduled payment of principal and interest under any Mortgage Loan was
30 days or more past due as of the related Cut-off Date. The Prospectus
Supplement for a Series will identify each Seller and specify the
representations and warranties being made by the Seller.
All of the representations and warranties of a Seller in respect of a
Mortgage Loan generally will have been made as of the date on which such Seller
sold the Mortgage Loan to the Depositor. The related Prospectus Supplement will
indicate if a different date is applicable. A substantial period of time may
have elapsed between such date and the date of the initial issuance of the
Series of Certificates evidencing an interest in such Mortgage Loan. Since the
representations and warranties of the Seller do not address events that may
occur following the sale of a Mortgage Loan by the Seller, the repurchase
obligation of the Seller described below will not arise if, on or after the date
of the sale of a Mortgage Loan by the Seller to the Depositor, the relevant
event occurs that would have given rise to such an obligation. However, the
Depositor will not include any Mortgage Loan in the Trust Fund for any Series of
Certificates if anything has come to the Depositor's attention that would cause
it to believe that the representations and warranties of the Seller will not be
accurate and complete in all material respects in respect of such Mortgage Loan
as of the date of sale of the Mortgage Loans or such other date specified in the
applicable Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Depositor will make certain representations and warranties for
the benefit of Certificateholders of a Series in respect of a Mortgage Loan that
relate to the period commencing on the date of sale of such Mortgage Loan to the
Depositor.
Upon the discovery of the breach of any representation or warranty made by
the Seller in respect of a Mortgage Loan that materially and adversely affects
the interests of the Certificateholders of the related Series, if the Seller
cannot cure such breach within 85 days following discovery of the breach or the
Seller's receipt of notice of such breach, such Seller generally will be
obligated to substitute a similar replacement mortgage loan for such Mortgage
Loan, if so provided in the related Prospectus Supplement, or repurchase such
Mortgage Loan at a purchase price equal to 100% of the unpaid principal balance
thereof at the date of repurchase, plus (a) unpaid accrued interest at the
applicable rate (in the absence of a default) to, but not including, the date of
repurchase, (b) the amount of any unreimbursed advances made with respect to
Property Protection Expenses, (c) interest on all advances made with respect to
such Mortgage Loan at the rate specified in the related Agreement, (d) the
amount of any unpaid servicing compensation (other than servicing fees) and
Trust Fund expenses allocable to such Mortgage Loan, and (e) the amount of any
expenses reasonably incurred by the Master Servicer, the Special Servicer, if
any, or the Trustee in respect of such repurchase obligation. The Master
Servicer will be required to enforce
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such obligation of the Seller for the benefit of the Trustee and the
Certificateholders in accordance with servicing standards for the applicable
Agreement. This repurchase obligation, and substitution obligation, if
applicable, will generally constitute the sole remedy or remedies available to
the Trustee for the benefit of the Certificateholders of such Series for a
breach of a representation or warranty by a Seller, and the Depositor and the
Master Servicer will have no liability to the Trust Fund for any such breach.
The applicable Prospectus Supplement will indicate whether any additional
remedies will be available to the Trustee or the Certificateholders. No
assurance can be given that a Seller will carry out its repurchase obligation
with respect to the Mortgage Loans.
If specified in the related Prospectus Supplement, the Seller may deliver
to the Trustee, within a specified number of days following the issuance of a
Series of Certificates, Mortgage Loans in substitution for any one or more of
the Mortgage Loans initially included in the Trust Fund (i) which do not conform
in one or more respects to the description thereof contained in the related
Prospectus Supplement, (ii) as to which a breach of a representation or warranty
is discovered, which breach materially and adversely affects the interests of
the Certificateholders, or (iii) as to which a document in the related Mortgage
Loan File is defective in any material respect. The related Prospectus
Supplement will describe any required characteristics of any such substituted
Mortgage Loans.
SERVICING OF THE MORTGAGE LOANS
General
The servicer of the Mortgage Loans (the "Master Servicer") will be Midland
Loan Services, Inc., the parent of the Depositor and a wholly-owned subsidiary
of PNC Bank, National Association. The Prospectus Supplement for the related
Series will set forth certain information concerning the Master Servicer. The
Master Servicer will be responsible for servicing the Mortgage Loans pursuant to
the Agreement for the related Series. The Master Servicer's collection
procedures will be described under "THE POOLING AND SERVICING
AGREEMENT--Servicing of the Mortgage Loans; Collection of Payments" and
"--Collection Activities" in the related Prospectus Supplement. To the extent so
specified in the related Prospectus Supplement, one or more Special Servicers
may be a party to the related Agreement or may be appointed by holders of
certain Classes of Certificates representing a certain percentage specified in
the related Agreement of such Class or Classes of Certificates or by another
specified party. Certain information with respect to the Special Servicer will
be set forth in such Prospectus Supplement. A Special Servicer for any Series of
Certificates may be the Master Servicer or an affiliate of the Depositor or the
Master Servicer and may hold, or be affiliated with the holder of, Subordinate
Certificates of such Series. A Special Servicer may be entitled to any of the
rights, and subject to any of the obligations, described herein in respect of a
Master Servicer. In general, a Special Servicer's duties will relate to
defaulted Mortgage Loans or those Mortgage Loans that otherwise require special
servicing ("Specially Serviced Mortgage Loans"), including instituting
foreclosures and negotiating work-outs and will also include asset management
activities with respect to any REO Property. The related Prospectus Supplement
will describe the rights, obligations and compensation of any Special Servicer
for a particular Series of Certificates. The Master Servicer or Special Servicer
generally may subcontract the servicing of all or a portion of the Mortgage
Loans to one or more sub-servicers provided certain conditions are met. Such
sub-servicer may be an affiliate of the Depositor and may have other business
relationships with the Depositor and its affiliates.
Collections and Other Servicing Procedures
The Master Servicer and the Special Servicer, if any, will make reasonable
efforts to collect all payments called for under the Mortgage Loans and will,
consistent with the related Agreement, follow such collection procedures as it
deems necessary or desirable. Consistent with the above and unless
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otherwise specified in the related Prospectus Supplement, the Master Servicer or
the Special Servicer, if applicable, may, in its discretion, waive any late
payment charge or penalty fees in connection with a late payment of a Mortgage
Loan and, if so specified in the related Prospectus Supplement, may extend the
due dates for payments due on a Note.
It is expected that the Agreement for each Series will provide that the Master
Servicer establish and maintain one or more escrow accounts (each, an "Escrow
Account") in which the Master Servicer will be required to deposit amounts
received from each mortgagor, if required by the terms of the related Mortgage
Loan documents, for the payment of taxes, assessments, certain mortgage and
hazard insurance premiums and other comparable items ("Escrow Payments"). The
Special Servicer, if any, will be required to remit amounts received for such
purposes on Mortgage Loans serviced by it to the Master Servicer for deposit
into the Escrow Account, and will be entitled to direct the Master Servicer to
make withdrawals from the Escrow Account as may be required for servicing of
such Mortgage Loans. Withdrawals from the Escrow Account generally may be made
(i) to effect timely payment of taxes, assessments, mortgage and hazard
insurance premiums and other comparable items, (ii) to transfer funds to the
Collection Account to reimburse the Master Servicer or the Trustee, as
applicable, for any advance with interest thereon relating to Escrow Payments,
(iii) to restore or repair the Mortgaged Properties, (iv) to clear and terminate
such account, (v) to pay interest to mortgagors on balances in the Escrow
Account, if required by the terms of the related Mortgage Loan documents or by
applicable law and (vi) to remove amounts not required to be deposited therein.
The related Prospectus Supplement may provide for other permitted withdrawals
from the Escrow Account. The Master Servicer will be entitled to all income on
the funds in the Escrow Account invested in Permitted Investments not required
to be paid to mortgagors by the terms of the related Mortgage Loan documents or
by applicable law. The Master Servicer will be responsible for the
administration of the Escrow Account.
Insurance
The Agreement for each Series will require that the Master Servicer use
its best efforts to cause each mortgagor to maintain insurance in accordance
with the related Mortgage Loan documents, which generally will include a
standard fire and hazard insurance policy with extended coverage. To the extent
required by the related Mortgage Loan, the coverage of each such standard hazard
insurance policy will be in an amount that is at least equal to the lesser of
(i) the full replacement cost of the improvements and equipment securing such
Mortgage Loan or (ii) the outstanding principal balance owing on such Mortgage
Loan or such amount as is necessary to prevent any reduction in such policy by
reason of the application of co-insurance and to prevent the Trustee thereunder
from being deemed to be a co-insurer, in each case with a replacement cost
rider. The Master Servicer will also use its reasonable efforts to cause each
mortgagor to maintain (i) insurance providing coverage against 12 months of rent
interruptions and (ii) such other insurance as provided in the related Mortgage
Loan. Subject to the requirements for modification, waiver or amendment of a
Mortgage Loan (See "--Modifications, Waivers and Amendments"), the Master
Servicer may in its reasonable discretion consistent with the servicing standard
set forth in the related Agreement waive the requirement of a Mortgage Loan that
the related mortgagor maintain earthquake insurance on the related Mortgaged
Property. If a Mortgaged Property is located at the time of origination of the
related Mortgage Loan in a federally designated special flood hazard area, the
Master Servicer will also use its best efforts to cause the related mortgagor to
maintain flood insurance in an amount equal to the lesser of the unpaid
principal balance of the related Mortgage Loan and the maximum amount obtainable
with respect to the Mortgage Loan. The related Agreement will provide that the
Master Servicer will be required to maintain the foregoing insurance if the
related mortgagor fails to maintain such insurance to the extent such insurance
is available at commercially reasonable rates and to the extent the Trustee, as
mortgagee, has an insurable interest. The cost of any such insurance maintained
by the Master Servicer will be advanced by the Master Servicer. The Master
Servicer or the Special Servicer, if any, will cause to be maintained fire and
hazard insurance with
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extended coverage on each REO Property in an amount that is at least equal to
the full replacement cost of the improvements and equipment. The cost of any
such insurance with respect to an REO Property will be payable out of amounts on
deposit in the related REO Account or will be advanced by the Master Servicer.
The Special Servicer will maintain flood insurance providing substantially the
same coverage as described above on any REO Property that was located in a
federally designated special flood hazard area at the time the related mortgage
loan was originated. The Special Servicer will maintain with respect to each REO
Property (i) public liability insurance, (ii) loss of rent endorsements and
(iii) such other insurance as provided in the related Mortgage Loan. Any such
insurance that is required to be maintained with respect to any REO Property
will only be so required to the extent such insurance is available at
commercially reasonable rates. The related Agreement will provide that the
Master Servicer or Special Servicer, as applicable, may satisfy its obligation
to cause hazard insurance policies to be maintained by maintaining a master
force placed insurance policy insuring against losses on the Mortgage Loans or
REO Properties, as the case may be. The incremental cost of such insurance
allocable to any particular Mortgage Loan or REO Property, if not borne by the
related mortgagor, will be advanced by the Master Servicer. Alternatively, the
Master Servicer or Special Servicer, as applicable, may satisfy its obligation
by maintaining, at its expense, a blanket policy (i.e., not a master force
placed policy) insuring against losses on the Mortgage Loans or REO Properties,
as the case may be. If such a blanket or master force placed policy contains a
deductible clause, the Master Servicer or the Special Servicer, as applicable,
will be obligated to deposit in the Collection Account all sums that would have
been deposited therein but for such clause to the extent any such deductible
exceeds the deductible limitation that pertained to the related Mortgage Loan,
or in the absence of any such deductible limitation, the deductible limitation
that is consistent with the servicing standard under the related Agreement.
In general, the standard form of fire and hazard extended coverage
insurance policy will cover physical damage to, or destruction of, the
improvements on the Mortgaged Property caused by fire, lightning, explosion,
smoke, windstorm, hail, riot, strike and civil commotion, subject to the
conditions and exclusions particularized in each policy. Since the standard
hazard insurance policies relating to the Mortgage Loans will be underwritten by
different insurers and will cover Mortgaged Properties located in various
states, such policies will not contain identical terms and conditions. The most
significant terms thereof, however, generally will be determined by state law
and conditions. Most such policies typically will not cover any physical damage
resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mudflows), nuclear reaction, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive. Any losses incurred with respect to Mortgage Loans due to
uninsured risks (including earthquakes, mudflows and floods) or insufficient
hazard insurance proceeds could affect distributions to the Certificateholders.
The standard hazard insurance policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which, in
effect, will require the insured at all times to carry insurance of a specified
percentage (generally 80% to 90%) of the full replacement value of the
dwellings, structures and other improvements on the Mortgaged Property in order
to recover the full amount of any partial loss. If the insured's coverage falls
below this specified percentage, such clause will provide that the insurer's
liability in the event of partial loss will not exceed the greater of (i) the
actual cash value (the replacement cost less physical depreciation) of the
structures and other improvements damaged or destroyed and (ii) such proportion
of the loss, without deduction for depreciation, as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
dwellings, structures and other improvements.
The Prospectus Supplement may describe other provisions concerning the
insurance policies required to be maintained under the related Agreement.
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Unless otherwise specified in the applicable Prospectus Supplement, no
pool insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or guarantee insurance will be maintained with respect to the
Mortgage Loans nor will any Mortgage Loan be subject to FHA insurance.
The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under the National Housing Act of 1934,
as amended, and the United States Housing Act of 1937, as amended. To the extent
specified in the related Prospectus Supplement, all or a portion of the Mortgage
Loans may be insured by the FHA. The Master Servicer will be required to take
such steps as are reasonably necessary to keep such insurance in full force and
effect.
Fidelity Bonds and Errors and Omissions Insurance
The Agreement for each Series will generally require that the Master
Servicer and the Special Servicer, if applicable, obtain and maintain in effect
a fidelity bond or similar form of insurance coverage (which may provide blanket
coverage) or any combination thereof insuring against loss occasioned by fraud,
theft or other intentional misconduct of the officers and employees of the
Master Servicer and the Special Servicer, if applicable. The related Agreement
will allow the Master Servicer and the Special Servicer, if applicable, to
self-insure against loss occasioned by the errors and omissions of the officers
and employees of the Master Servicer and the Special Servicer, if applicable, so
long as certain criteria set forth in the Agreement are met.
Servicing Compensation and Payment of Expenses
The Master Servicer's principal compensation for its activities under the
Agreement for each Series will come from the payment to it or retention by it,
with respect to each Mortgage Loan, of a "Servicing Fee" (as defined in the
related Prospectus Supplement). The exact amount and calculation of such
Servicing Fee will be established in the Prospectus Supplement and Agreement for
the related Series. Since the aggregate unpaid principal balance of the Mortgage
Loans will generally decline over time, the Master Servicer's servicing
compensation will ordinarily decrease as the Mortgage Loans amortize.
In addition, the Agreement for a Series may provide that the Master
Servicer is entitled to receive, as additional compensation, (i) Prepayment
Premiums, late fees and certain other fees collected from mortgagors and (ii)
any interest or other income earned on funds deposited in the Collection Account
and Distribution Account (as described under "DESCRIPTION OF THE
CERTIFICATES--Accounts") and, except to the extent such income is required to be
paid to the related mortgagors, the Escrow Account.
The Master Servicer will generally pay the fees of the Trustee.
The amount and calculation of the fee for the servicing of Specially
Serviced Mortgage Loans (the "Special Servicing Fee") will be described in the
Prospectus Supplement and the Agreement for the related Series.
In addition to the compensation described above, the Master Servicer and
the Special Servicer, if applicable, (or any other party specified in the
applicable Prospectus Supplement) may retain, or be entitled to the
reimbursement of, such other amounts and expenses as are described in the
applicable Prospectus Supplement.
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Advances
The applicable Prospectus Supplement will set forth the obligations, if
any, of the Master Servicer and the Special Servicer, if applicable, to make any
advances with respect to delinquent payments on Mortgage Loans, payments of
taxes, assessments, insurance premiums and Property Protection Expenses or
otherwise. Any such advances will be made in the form and manner described in
the Prospectus Supplement and Agreement for the related Series. In general, the
Master Servicer or the Special Servicer, if any, will be entitled to
reimbursement for any advance equal to the amount of such advance, plus interest
thereon at the rate specified in the related Agreement, 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 clause, from any other
amounts from time to time on deposit in the Collection Account, which amounts
may include funds that would otherwise be applied to the reduction of the
principal balance of the Certificates for such Series. The monthly statements to
Certificateholders will disclose the amount of any advances made during the
prior month. See "THE POOLING AND SERVICING AGREEMENT--Advances" in the related
Prospectus Supplement.
Modifications, Waivers and Amendments
The Agreement for each Series will provide the Master Servicer or the
Special Servicer, if any, with the discretion to modify, waive or amend certain
of the terms of any Mortgage Loan without the consent of the Trustee or any
Certificateholder subject to certain conditions set forth therein, including the
condition that such modification, waiver or amendment will not result in such
Mortgage Loan ceasing to be a "qualified mortgage" under the REMIC Regulations.
Evidence of Compliance
The Agreement for each Series will generally provide that on or before a
specified date in each year, with the first such date being a specified number
of months after the Cut-off Date, there will be furnished to the related Trustee
a statement of a firm of independent certified public accountants to the effect
that such firm has examined certain documents and records relating to the
servicing of the Mortgage Loans under the related Agreement or the servicing of
mortgage loans similar to the Mortgage Loans under substantially similar
agreements for the preceding twelve (12) months and that the assertion of
management of the Master Servicer or Special Servicer, as applicable, that it
maintained an effective internal control system over the servicing of such
mortgage loans is fairly stated in all material respects, based upon established
criteria, which statement meets the standards applicable to accountant's reports
intended for general distribution. The Prospectus Supplement may provide that
additional reports of independent certified public accountants relating to the
servicing of mortgage loans may be required to be delivered to the Trustee.
In addition, the Agreement for each Series will generally provide that the
Master Servicer and the Special Servicer, if any, will each deliver to the
Trustee, the Depositor and each Rating Agency, annually on or before a date
specified in the Agreement, a statement signed by an officer of the Master
Servicer or the Special Servicer, as applicable, to the effect that, based on a
review of its activities during the preceding calendar year, to the best of such
officer's knowledge, the Master Servicer or the Special Servicer, as applicable,
has fulfilled in all material respects its obligations under the Agreement
throughout such year or, if there has been a default in the fulfillment of any
such obligation, specifying each default known to such officer.
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Certain Matters With Respect to the Master Servicer, the Special Servicer, the
Trustee and the Depositor
The Agreement for each Series will also provide that none of the
Depositor, the Master Servicer, the Special Servicer, if any, or any director,
officer, employee or agent of the Depositor, the Master Servicer or the Special
Servicer, if any, will be under any liability to the Trust Fund or the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement, or for errors in judgment;
provided, however, that neither the Depositor, the Master Servicer, the Special
Servicer, if any, nor any such person will be protected against any liability
for a breach of any representations or warranties under the Agreement or that
would otherwise be imposed by reason of willful misfeasance, misrepresentations,
bad faith, fraud or negligence or, in the case of the Master Servicer or Special
Servicer, if any, a breach of the servicing standards set forth in the Agreement
in the performance of its duties or by reason of negligent disregard of its
obligations and duties thereunder. The Agreement will further provide that the
Depositor, the Master Servicer, the Special Servicer, if any, and any director,
officer, employee or agent of the Depositor, the Master Servicer, the Special
Servicer, if any, will be entitled to indemnification by the Trust Fund for any
loss, liability or expense incurred in connection with any legal action relating
to the Agreement or the Certificates, other than any loss, liability or expense
incurred by reason of its respective willful misfeasance, misrepresentation, bad
faith, fraud or negligence or, in the case of the Master Servicer or the Special
Servicer, if any, a breach of the servicing standard set forth in the Agreement
in the performance of duties thereunder or by reason of negligent disregard of
its respective obligations and duties thereunder. Any loss resulting from such
indemnification will reduce amounts distributable to Certificateholders. The
Prospectus Supplement will specify any variations to the foregoing required by
the Rating Agencies rating Certificates of a Series.
In addition, the Agreement will generally provide that none of the
Depositor, the Master Servicer or the Special Servicer, if any, will be under
any obligation to appear in, prosecute or defend any legal action unless such
action is related to its duties under the Agreement and which in its opinion
does not involve it in any expense or liability. The Master Servicer or the
Special Servicer, if any, may, however, in its discretion undertake any such
action that is related to its respective obligations under the related Agreement
and that it may deem necessary or desirable with respect to the Agreement and
the rights and duties of the parties thereto and the interests of the holders of
Certificates thereunder. In such event, the legal expenses and costs of such
action and any liability resulting therefrom (except any liability related to
the Master Servicer's or the Special Servicer's, if any, obligations to service
the Mortgage Loans in accordance with the servicing standard under the
Agreement) will be expenses, costs and liabilities of the Trust Fund, and the
Master Servicer or Special Servicer, if applicable, will be entitled to be
reimbursed therefor and to charge the Collection Account.
Any person into which the Master Servicer or the Special Servicer, if any,
may be merged or consolidated, or any person resulting from any merger or
consolidation to which the Master Servicer or the Special Servicer, if any, is a
party, or any person succeeding to the business of the Master Servicer or the
Special Servicer, if any, will be the successor of the Master Servicer or the
Special Servicer, as applicable, under the Agreement, and will be deemed to have
assumed all of the liabilities and obligations of the Master Servicer or the
Special Servicer, as applicable, under the Agreement, if each of the Rating
Agencies has confirmed in writing that such merger or consolidation or
succession will not result in a downgrading, withdrawal or qualification of the
rating then assigned by such Rating Agency to any Class of the Certificates. The
related Prospectus Supplement will describe any additional restrictions on such
a merger or consolidation.
Generally, and in addition to the transactions permitted pursuant to the
preceding paragraph, the Master Servicer or the Special Servicer, if any, may
assign its rights and delegate its duties and
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obligations under the Agreement in connection with the sale or transfer of a
substantial portion of its mortgage servicing or asset management portfolio;
provided that certain conditions are met, including the written consent of the
Trustee and written confirmation by each of the Rating Agencies that such
assignment and delegation by the Master Servicer or the Special Servicer, as
applicable, 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. The related Prospectus Supplement will describe any additional
restrictions on such assignment.
The Agreement will also provide that the Master Servicer or the Special
Servicer, if any, may not otherwise resign from its obligations and duties as
Master Servicer or Special Servicer thereunder, except upon the determination
that performance of its duties is no longer permissible under applicable law and
provided that such determination is evidenced by an opinion of counsel delivered
to the Trustee. No such resignation or removal may become effective until the
Trustee or a successor Master Servicer or Special Servicer, as the case may be,
has assumed the obligations of the Master Servicer or the Special Servicer, as
applicable, under the Agreement.
The Trustee under each Agreement will be named in the applicable
Prospectus Supplement. The commercial bank or trust company serving as Trustee
may have normal banking relationships with the Depositor, the Master Servicer,
the Special Servicer, if any, and/or any of their respective affiliates.
The Trustee may resign from its obligations under the Agreement at any
time, in which event a successor Trustee will be appointed. In addition, the
Depositor may remove the Trustee if the Trustee ceases to be eligible to act as
Trustee under the Agreement or if the Trustee becomes insolvent, at which time
the Depositor will become obligated to appoint a successor Trustee. The Trustee
may also be removed at any time by the holders of Certificates evidencing the
percentage of Voting Rights specified in the applicable Prospectus Supplement.
Any resignation and removal of the Trustee, and the appointment of a successor
Trustee, will not become effective until acceptance of such appointment by the
successor Trustee.
The Depositor is not obligated to monitor or supervise the performance of
the Master Servicer, Special Servicer, if any, or the Trustee under the
Agreement.
Events of Default
Events of default with respect to the Master Servicer or the Special
Servicer, if any, as applicable (each, an "Event of Default") under the
Agreement for each Series will consist of, in summary form, (i) any failure by
the Master Servicer or the Special Servicer, if any, to remit to the Collection
Account or any failure by the Master Servicer to remit to the Trustee for
deposit into the Distribution Account any amount required to be so remitted
pursuant to the Agreement; (ii) any failure by the Master Servicer or Special
Servicer, as applicable, duly to observe or perform in any material respect any
of its other covenants or agreements or the breach of its representations or
warranties (which breach materially and adversely affects the interests of the
Certificateholders, the Trustee, the Master Servicer or the Special Servicer, if
any, with respect to any Mortgage Loan) under the Agreement, which in each case
continues unremedied for 30 days after the giving of written notice of such
failure to the Master Servicer or the Special Servicer, as applicable, by the
Depositor or the Trustee, or to the Master Servicer or Special Servicer, if any,
the Depositor and the Trustee by the holders of Certificates evidencing Voting
Rights of at least 25% of any affected Class; (iii) confirmation in writing by
any of the Rating Agencies that the then current rating assigned to any Class of
Certificates would be withdrawn, downgraded or qualified unless the Master
Servicer or Special Servicer, as applicable, is removed; (iv) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings and certain actions by, on behalf of or against the Master
Servicer or Special Servicer, as applicable, indicating its
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insolvency or inability to pay its obligations; or (v) any failure by the Master
Servicer or the Special Servicer, as applicable, to make a required advance. The
related Prospectus Supplement may provide for other Events of Default to the
extent required by the Rating Agencies rating Certificates of a Series.
Rights Upon Event of Default
As long as an Event of Default remains unremedied, the Trustee may, and at
the written direction of the holders of Certificates entitled to 25% of the
aggregate Voting Rights of all Certificates will, terminate all of the rights
and obligations of the Master Servicer or Special Servicer, as the case may be.
Notwithstanding the foregoing, upon any termination of the Master Servicer or
the Special Servicer, as applicable, under the Agreement the Master Servicer or
the Special Servicer, as applicable, will continue to be entitled to receive all
accrued and unpaid servicing compensation through the date of termination plus,
in the case of the Master Servicer, all advances and interest thereon as
provided in the Agreement. The Agreement for the applicable Series may specify
that the Special Servicer is entitled under certain circumstances to continue to
receive workout fees and other similar fees after it is terminated.
The holders of Certificates evidencing not less than 66 2/3% of the
aggregate Voting Rights of the Certificates may, on behalf of all holders of
Certificates, waive any default by the Master Servicer or Special Servicer, if
any, in the performance of its obligations under the Agreement and its
consequences, except a default in making any required deposits to (including
advances) or payments from the Collection Account or the Distribution Account or
in remitting payments as received, in each case in accordance with the
Agreement. Upon any such waiver of a past default, such default will cease to
exist, and any Event of Default arising therefrom will be deemed to have been
remedied for every purpose of the Agreement. No such waiver will extend to any
subsequent or other default or impair any right consequent thereon.
On and after the date of termination, the Trustee will succeed to all
authority and power of the Master Servicer or the Special Servicer, as
applicable, under the Agreement and will be entitled to similar compensation
arrangements to which the Master Servicer or the Special Servicer, as
applicable, would have been entitled. If the Trustee is unwilling or unable so
to act, or if the holders of Certificates evidencing a majority of the aggregate
Voting Rights so request or if the Trustee is not rated in one of its two
highest long-term unsecured debt rating categories by each of the Rating
Agencies rating the Certificates of such Series, the Trustee must appoint, or
petition a court of competent jurisdiction for the appointment of, an
established mortgage loan servicing institution, the appointment of which will
not result in the downgrading, withdrawal or qualification of the rating or
ratings then assigned to any Class of Certificates as evidenced in writing by
each Rating Agency rating the Certificates of such Series, to act as successor
to the Master Servicer or the Special Servicer, as applicable, under the
Agreement. Pending such appointment, the Trustee will be obligated to act in
such capacity. The Trustee and any such successor may agree upon the servicing
compensation to be paid, which in no event may be greater than the compensation
payable to the Master Servicer or the Special Servicer, as the case may be,
under the Agreement.
No Certificateholder will have any right under the Agreement to institute
any proceeding with respect to the Agreement or the Mortgage Loans, unless, with
respect to the Agreement, such holder previously shall have given to the Trustee
a written notice of a default under the Agreement and of the continuance
thereof, and unless also the holders of Certificates representing a majority of
the aggregate Voting Rights allocated to each affected Class have made written
request of the Trustee to institute such proceeding in its own name as Trustee
under the Agreement and have offered to the Trustee such reasonable indemnity as
it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Trustee, for 30 days after its receipt of such
notice, request and offer of indemnity, has neglected or refused to institute
such proceeding.
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The Trustee will have no obligation to institute, conduct or defend any
litigation under the Agreement or in relation thereto at the request, order or
direction of any of the holders of Certificates, unless such holders of
Certificates have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby.
CREDIT ENHANCEMENT
General
If specified in the related Prospectus Supplement for any Series, credit
enhancement may be provided with respect to one or more Classes thereof or the
related Mortgage Loans ("Credit Enhancement"). Credit Enhancement may be in the
form of a letter of credit, the subordination of one or more Classes of the
Certificates of such Series, the establishment of one or more reserve funds,
surety bonds, certificate guarantee insurance, the use of cross-support
features, limited guarantees or another method of Credit Enhancement described
in the related Prospectus Supplement, or any combination of the foregoing.
It is unlikely that Credit Enhancement will provide protection against all
risks of loss or guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur that exceed the amount
covered by Credit Enhancement or that are not covered by Credit Enhancement,
Certificateholders will bear their allocable share of deficiencies. See "RISK
FACTORS--Credit Enhancement Limitations."
If Credit Enhancement is provided with respect to a Series, or the related
Mortgage Loans, the applicable Prospectus Supplement will include a description
of (a) the amount payable under such Credit Enhancement, (b) any conditions to
payment thereunder not otherwise described herein, (c) the conditions (if any)
under which the amount payable under such Credit Enhancement may be reduced and
under which such Credit Enhancement may be terminated or replaced and (d) the
material provisions of any agreement relating to such Credit Enhancement.
Additionally, the applicable Prospectus Supplement will set forth certain
information with respect to the issuer of any third-party Credit Enhancement,
including (i) a brief description of its principal business activities, (ii) its
principal place of business, the jurisdiction of organization and the
jurisdictions under which it is chartered or licensed to do business, (iii) if
applicable, the identity of regulatory agencies that exercise primary
jurisdiction over the conduct of its business and (iv) its total assets and its
stockholders' or policyholders' surplus, if applicable, as of the date specified
in such Prospectus Supplement. If the holders of any Certificates of any Series
will be materially dependent upon the issuer of any third party Credit
Enhancement for timely payment of interest and/or principal on their
Certificates, the Depositor will file a current report on Form 8-K within 15
days after the initial issuance of such Certificates, which will include any
material information regarding such issuer, including audited financial
statements to the extent required.
Subordinate Certificates
If so specified in the related Prospectus Supplement, one or more Classes
of a Series may be Subordinate Certificates. If so specified in the related
Prospectus Supplement, the rights of the holders of subordinate Certificates
(the "Subordinate Certificates") to receive distributions of principal and
interest from the Distribution Account on any Distribution Date will be
subordinated to such rights of the holders of senior Certificates (the "Senior
Certificates") to the extent specified in the related Prospectus Supplement. In
addition, subordination may be effected by the allocation of losses first to
Subordinate Certificates in reduction of the principal balance of such
Certificates until the principal balance thereof is
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reduced to zero before any losses are allocated to Senior Certificates. The
Agreement may require a trustee that is not the Trustee to be appointed to act
on behalf of holders of Subordinate Certificates.
A Series may include one or more Classes of Subordinate Certificates
entitled to receive cash flows remaining after distributions are made to all
other Classes designated as being senior thereto. Such right to receive payments
will effectively be subordinate to the rights of holders of such senior
designated Classes of Certificates. A Series may also include one or more
Classes of Subordinate Certificates that will be allocated losses prior to any
losses being allocated to Classes of Subordinate Certificates designated as
being senior thereto. If so specified in the related Prospectus Supplement, the
subordination of a Class may apply only in the event of (or may be limited to)
certain types of losses not covered by insurance policies or other Credit
Enhancement, such as losses arising from damage to property securing a Mortgage
Loan not covered by standard hazard insurance policies.
The related Prospectus Supplement will describe any such subordination in
greater detail and set forth information concerning, among other things, to the
extent applicable, (i) the amount of subordination of a Class or Classes of
Subordinate Certificates in a Series, (ii) the circumstances in which such
subordination will be applicable, (iii) the manner, if any, in which the amount
of subordination will decrease over time, (iv) the manner of funding any related
reserve fund, (v) the conditions under which amounts in any applicable reserve
fund will be used to make distributions to holders of Senior Certificates and/or
to holders of Subordinate Certificates or be released from the applicable Trust
Fund and (vi) if one or more Classes of Subordinate Certificates of a Series are
Offered Certificates, the sensitivity of distributions on such Certificates
based on certain prepayment assumptions. See "RISK FACTORS--Risks to
Subordinated Certificateholders; Lower Payment Priority" herein.
Reserve Funds
If specified in the related Prospectus Supplement, one or more reserve
funds (each, a "Reserve Fund") may be established with respect to one or more
Classes of the Certificates of a Series, in which cash, a letter of credit,
Permitted Investments or a combination thereof, in the amounts, if any, so
specified in the related Prospectus Supplement will be deposited. Such Reserve
Funds may also be funded over time by depositing therein a specified amount of
the distributions received on the applicable Mortgage Loans if specified in the
related Prospectus Supplement. The Depositor may pledge the Reserve Funds to a
separate collateral agent specified in the related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for one or more Classes of
Certificates of a Series will be applied by the Trustee for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
Reserve Fund may be provided to increase the likelihood of timely payments of
principal of and interest on the Certificates, if required as a condition to the
rating of such Series by any Rating Agency. If so specified in the related
Prospectus Supplement, Reserve Funds may be established to provide limited
protection, in an amount satisfactory to a Rating Agency, against certain types
of losses not covered by insurance policies or other Credit Enhancement. Reserve
Funds may also be established for other purposes and in such amounts as will be
specified in the related Prospectus Supplement. Following each Distribution Date
amounts in any Reserve Fund in excess of any amount required to be maintained
therein may be released from the Reserve Fund under the conditions and to the
extent specified in the related Prospectus Supplement and will not be available
for further application by the Trustee.
Moneys deposited in any Reserve Fund generally will be permitted to be
invested in Permitted Investments. Generally, any reinvestment income or other
gain from such investments will be credited to the related Reserve Fund for such
Series, and any loss resulting from such investments will be charged to such
Reserve Fund. If specified in the related Prospectus Supplement, such income or
other gain may be
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payable to the Master Servicer as additional servicing compensation, and any
loss resulting from such investment will be borne by the Master Servicer. The
Reserve Fund, if any, for a Series will be a part of the Trust Fund only if the
related Prospectus Supplement so specifies. If the Reserve Fund is not a part of
the Trust Fund, the right of the Trustee to make draws on the Reserve Fund will
be an asset of the Trust Fund.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purpose for which funds in the Reserve Fund may be applied to
make distributions to Certificateholders and use of investment earnings, if any,
from the Reserve Fund.
Cross-Support Features
If the Mortgage Pool for a Series is divided into separate Mortgage Loan
Groups, each securing a separate Class or Classes of a Series, Credit
Enhancement may be provided by a cross-support feature that requires that
distributions be made on Senior Certificates secured by one Mortgage Loan Group
prior to distributions on Subordinate Certificates secured by another Mortgage
Loan Group within the Trust Fund. The related Prospectus Supplement for a Series
that includes a cross-support feature will describe the manner and conditions
for applying such cross-support feature.
Certificate Guarantee Insurance
If so specified in the related Prospectus Supplement, certificate
guarantee insurance, if any, with respect to a Series of Certificates will be
provided by one or more insurance companies. Such certificate guarantee
insurance will guarantee, with respect to one or more Classes of Certificates of
the applicable Series, timely distributions of interest and full distributions
of principal on the basis of a schedule of principal distributions set forth in
or determined in the manner specified in the related Prospectus Supplement. If
so specified in the related Prospectus Supplement, the certificate guarantee
insurance will also guarantee against any payment made to a Certificateholder
that is subsequently recovered as a "voidable preference" payment under the
Bankruptcy Code. A copy of the certificate guarantee insurance for a Series, if
any, will be filed with the Commission as an exhibit to the Form 8-K to be filed
with the Commission within 15 days of issuance of the Certificates of the
applicable Series.
Limited Guarantee
If so specified in the Prospectus Supplement with respect to a Series of
Certificates, Credit Enhancement may be provided in the form of a limited
guarantee issued by a guarantor named therein.
Letter of Credit
Alternative Credit Enhancement with respect to one or more Classes of
Certificates of a Series of Certificates may be provided by the issuance of a
letter of credit by the bank or financial institution specified in the
applicable Prospectus Supplement. The coverage, amount and frequency of any
reduction in coverage provided by a letter of credit issued with respect to one
or more Classes of Certificates of a Series will be set forth in the Prospectus
Supplement relating to such Series.
Pool Insurance Policies; Special Hazard Insurance Policies
If so specified in the Prospectus Supplement relating to a Series of
Certificates, the Depositor will obtain a pool insurance policy for the Mortgage
Loans in the related Trust Fund. The pool insurance
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policy will cover any loss (subject to the limitations described in a related
Prospectus Supplement) by reason of default to the extent a related Mortgage
Loan is not covered by any primary mortgage insurance policy. The amount and
terms of any such coverage will be set forth in the Prospectus Supplement.
If so specified in the applicable Prospectus Supplement, for each Series
of Certificates as to which a pool insurance policy is provided, the Depositor
will also obtain a special hazard insurance policy for the related Trust Fund in
the amount set forth in such Prospectus Supplement. The special hazard insurance
policy will, subject to the limitations described in the applicable Prospectus
Supplement, protect against loss by reason of damage to Mortgaged Properties
caused by certain hazards not insured against under the standard form of hazard
insurance policy for the respective states in which the Mortgaged Properties are
located. The amount and terms of any such coverage will be set forth in the
Prospectus Supplement.
Surety Bonds
If so specified in the Prospectus Supplement relating to a Series of
Certificates, Credit Enhancement with respect to one or more Classes of
Certificates of a Series may be provided by the issuance of a surety bond issued
by a financial guarantee insurance company specified in the applicable
Prospectus Supplement. The coverage, amount and frequency or any reduction in
coverage provided by a surety bond will be set forth in the Prospectus
Supplement relating to such Series.
Fraud Coverage
If so specified in the applicable Prospectus Supplement, losses resulting
from fraud, dishonesty or misrepresentation in connection with the origination
or sale of the Mortgage Loans may be covered to a limited extent by (i)
representations and warranties to the effect that no such fraud, dishonesty or
misrepresentation had occurred, (ii) a Reserve Fund, (iii) a letter of credit or
(iv) some other method. The amount and terms of any such coverage will be set
forth in the Prospectus Supplement.
Mortgagor Bankruptcy Bond
If so specified in the applicable Prospectus Supplement, losses resulting
from a bankruptcy proceeding relating to a mortgagor or obligor affecting the
Mortgage Loans in a Trust Fund with respect to a Series of Certificates will be
covered under a mortgagor bankruptcy bond (or any other instrument that will not
result in a withdrawal, downgrading or qualification of the rating of the
Certificates of a Series by any of the Rating Agencies that rated any
Certificates of such Series). Any mortgagor bankruptcy bond or such other
instrument will provide for coverage in an amount and with such terms meeting
the criteria of the Rating Agencies rating any Certificates of the related
Series, which amount and terms will be set forth in the related Prospectus
Supplement.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains a general summary of the material legal
aspects of mortgage loans. Because many of the legal aspects of mortgage loans
are governed by applicable state laws (which may vary substantially), the
following summaries do not purport to be complete, to reflect the laws of any
particular state, to reflect all the laws applicable to any particular Mortgage
Loan or to encompass the laws of all states in which the properties securing the
Mortgage Loans are situated. The summaries are qualified in their entirety by
reference to the applicable federal and state laws governing the Mortgage Loans.
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General
All of the Mortgage Loans are loans evidenced by a note or bond that is
secured by a lien and security interest in property created under related
security instruments, which may be mortgages, deeds of trust or deeds to secure
debt, depending upon the prevailing practice and law in the state in which the
Mortgaged Property is located. As used herein, unless the context otherwise
requires, the term "mortgage" includes mortgages, deeds of trust and deeds to
secure debt. Any of the foregoing mortgages will create a lien upon, or grant a
title interest in, the mortgaged property, the priority of which will depend on
the terms of the mortgage, the existence of any separate contractual
arrangements with others holding interests in the mortgaged property, the order
of recordation of the mortgage in the appropriate public recording office and
the actual or constructive knowledge of the mortgagee as to any unrecorded
liens, leases or other interests affecting the mortgaged property. Mortgages
typically do not possess priority over governmental claims for real estate
taxes, assessments and, in some states, for reimbursement of remediation costs
of certain environmental conditions. See "--Environmental Risks" below. In
addition, the Code provides priority to certain tax liens over the lien of the
mortgage. The mortgagor is generally responsible for maintaining the property in
good condition and for paying real estate taxes, assessments and hazard
insurance premiums associated with the property.
Types of Mortgage Instruments
A mortgage either creates a lien against or constitutes a conveyance of an
interest in real property between two parties -- a mortgagor (the borrower and
usually the owner of the subject property) and a mortgagee (the lender). A deed
of trust is a three-party instrument, wherein a trustor (the equivalent of a
mortgagor), grants the property to a trustee, in trust with a power of sale, for
the benefit of a beneficiary (the lender) as security for the payment of the
secured indebtedness. A deed to secure debt is a two party instrument wherein
the grantor (the equivalent of a mortgagor) conveys title to, as opposed to
merely creating a lien upon, the subject property to the grantee (the lender)
until such time as the underlying debt is repaid, generally with a power of sale
as security for the indebtedness evidenced by the related note. In a case where
the borrower is a land trust, there would be an additional party because legal
title to the property is held by a land trustee under a land trust agreement for
the benefit of the borrower. At origination of a mortgage loan involving a land
trust, the borrower may execute a separate undertaking to make payments on the
mortgage note. In no event is the land trustee personally liable for the
mortgage note obligation. As used herein, unless the context otherwise requires,
the term "mortgagor" includes a mortgagor under a mortgage, a trustor under a
deed of trust and a grantor under a deed to secure debt, and the term
"mortgagee" includes a mortgagee under a mortgage, a beneficiary under a deed of
trust and a grantee under a deed to secure debt. The mortgagee's authority under
a mortgage, the trustee's authority under a deed of trust and the grantee's
authority under a deed to secure debt are governed by the express provisions of
the mortgage, the law of the state in which the real property is located,
certain federal laws and, in some cases, in deed of trust transactions, the
directions of the beneficiary. The Mortgage Loans (other than Installment
Contracts) will consist of loans secured by mortgages.
The real property covered by a mortgage is most often the fee estate in
land and improvements. However, a mortgage may encumber other interests in real
property such as a tenant's interest in a lease of land, leasehold improvements
or both, and the leasehold estate created by such lease. A mortgage covering an
interest in real property other than the fee estate requires special provisions
in the instrument creating such interest, in the mortgage or in a separate
agreement with the landlord or other party to such instrument, to protect the
mortgagee against termination of such interest before the mortgage is paid.
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Personalty
Certain types of mortgaged properties, such as nursing homes, hotels,
motels and industrial plants, are likely to derive a significant part of their
value from personal property that does not constitute "fixtures" under
applicable state real property law, and hence, would not be subject to the lien
of a mortgage. Such property is generally pledged or assigned as security to the
mortgagee under the Uniform Commercial Code ("UCC"). In order to perfect its
security interest therein, the mortgagee generally must file UCC financing
statements and, to maintain perfection of such security interest, file
continuation statements generally every five years. In certain cases, Mortgage
Loans secured in part by personal property may be included in a Trust Fund even
if the security interest in such personal property was not perfected or the
requisite UCC filings were allowed to lapse.
Installment Contracts
The Mortgage Loans may also consist of Installment Contracts (also
sometimes called contracts for deed). Under an Installment Contract, the seller
(referred to in this section as the "mortgagee") retains legal title to the
property and enters into an agreement with the purchaser (referred to in this
section as the "mortgagor") for the payment of the purchase price, plus
interest, over the term of such Installment Contract. Only after full
performance by the mortgagor of the Installment Contract is the mortgagee
obligated to convey title to the property to the mortgagor. As with mortgage or
deed of trust financing, during the effective period of the Installment
Contract, the mortgagor is generally responsible for maintaining the property in
good condition and for paying real estate taxes, assessments and hazard
insurance premiums associated with the property.
The method of enforcing the rights of the mortgagee under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing or able to enforce the Installment Contract strictly
according to its terms. The terms of Installment Contracts generally provide
that upon a default by the mortgagor, the mortgagor loses his or her right to
occupy the property, the entire indebtedness is accelerated and the mortgagor's
equitable interest in the property is forfeited. The mortgagee in such a
situation does not have to foreclose in order to obtain title to the property,
although in some cases both a quiet title action to clear title to the property
(if the mortgagor has recorded notice of the Installment Contract) and an
ejectment action to recover possession may be necessary. In a few states,
particularly in cases of a default during the early years of an Installment
Contract, ejectment of the mortgagor and a forfeiture of his or her interest in
the property will be permitted. However, in most states, laws (analogous to
mortgage laws) have been enacted to protect mortgagors under Installment
Contracts from the harsh consequences of forfeiture. These laws may require the
mortgagee to pursue a judicial or nonjudicial foreclosure with respect to the
property, give the mortgagor a notice of default and some grace period during
which the Installment Contract may be reinstated upon full payment of the
default amount. Additionally, the mortgagor may have a post-foreclosure
statutory redemption right, and, in some states, a mortgagor with a significant
equity investment in the property may be permitted to share in the proceeds of
any sale of the property after the indebtedness is repaid or may otherwise be
entitled to a prohibition of the enforcement of the forfeiture clause.
Junior Mortgages; Rights of Senior Mortgagees or Beneficiaries
Some of the Mortgage Loans may be secured by junior mortgages that are
subordinate to senior mortgages held by other lenders or institutional
investors. In such cases, the rights of the Trust Fund (and therefore the
Certificateholders), as mortgagee under a junior mortgage, will be subordinate
to those of the mortgagee under the senior mortgage, including the prior rights
of the senior mortgagee to: (i) receive rents, hazard insurance proceeds and
condemnation proceeds; and (ii) cause the property securing the Mortgage Loan to
be sold upon the occurrence of a default under the senior mortgage, thereby
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extinguishing the lien of the junior mortgage, unless the Master Servicer or
Special Servicer, if applicable, either asserts such subordinate interest in the
related property in the foreclosure of the senior mortgage or satisfies the
defaulted senior loan. As discussed more fully below, in many states a junior
mortgagee may satisfy a defaulted senior loan in full, or may cure such default
and bring the senior loan current, in either event adding the amounts expended
to the balance due on the junior loan. Absent a provision in the senior mortgage
or the existence of a recorded request for notice in compliance with applicable
state law (if any), no notice of default is typically required to be given to
the junior mortgagee.
The form of the mortgage used by many institutional lenders confers on the
mortgagee the right both to receive all proceeds collected under any hazard
insurance policy and all awards made in connection with any condemnation
proceedings, and to apply such proceeds and awards to any indebtedness secured
by such mortgage in such order as the mortgagee may determine. Thus, in the
event improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property (or any part thereof) is taken by
condemnation, the mortgagee under the senior mortgage will have the prior right
to collect any applicable insurance proceeds and condemnation awards and to
apply the same to the indebtedness secured by the senior mortgage. However, the
laws of certain states may provide that, unless the security of the mortgagee
has been impaired, the mortgagor must be allowed to use any applicable insurance
proceeds or partial condemnation awards to restore the property.
The form of mortgage used by many institutional lenders also typically
contains a "future advance" clause that provides that additional amounts
advanced to or on behalf of the mortgagor by the mortgagee are to be secured by
the mortgage. Such a clause is valid under the laws of most states. In some
states, however, the priority of any advance made under the clause depends upon
whether the advance was an "obligatory" or "optional" advance. If the mortgagee
is obligated to advance the additional amounts, the advance may be entitled to
receive the same priority as amounts initially made under the mortgage,
notwithstanding that other junior mortgages or other liens may have encumbered
the property between the date of recording of the senior mortgage and the date
of the future advance, and that the mortgagee had actual knowledge of such
intervening junior mortgages or other liens at the time of the advance. If the
mortgagee is not obligated to advance the additional amounts and has actual
knowledge of any such intervening junior mortgages or other liens, the advance
may be subordinate to such intervening junior mortgages or other liens. In many
other states, all advances under a "future advance" clause are given the same
priority as amounts initially made under the mortgage so long as such advances
do not exceed a specified "credit limit" amount stated in the recorded mortgage.
Another provision typically found in the form of the mortgage used by many
institutional lenders obligates the mortgagor: (i) to pay all taxes and
assessments affecting the property prior to delinquency; (ii) to pay, when due,
all other encumbrances, charges and liens affecting the property that may be
prior to the lien of the mortgage; (iii) to provide and maintain hazard
insurance on the property; (iv) to maintain and repair the property and not to
commit or permit any waste thereof; and (v) to appear in and defend any action
or proceeding purporting to affect the property or the rights of the mortgagee
under the mortgage. Upon a failure of the mortgagor to perform any of these
obligations, the mortgage typically provides the mortgagee the option to perform
the obligation itself, with the mortgagor agreeing to reimburse the mortgagee
for any sums expended by the mortgagee in connection therewith. All sums so
expended by the mortgagee also typically become part of the indebtedness secured
by the mortgage. The form of mortgage used by many institutional lenders also
typically requires the mortgagor to obtain the consent of the mortgagee as to
all actions affecting the mortgaged property, including, without limitation, all
leasing activities (including new leases and termination or modification of
existing leases), any alterations, modifications or improvements to the
buildings and other improvements forming a part of the mortgaged property and
all property management activities affecting the mortgaged property (including
new management or leasing agreements or any termination or modification of
existing management or leasing agreements). Tenants will often refuse to execute
a lease unless the mortgagee executes a written
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agreement with the tenant not to disturb the tenant's possession of its premises
in the event of a foreclosure. A senior mortgagee may refuse to consent to
matters approved by a junior mortgagee with the result that the value of the
security for the junior mortgage is diminished. For example, a senior mortgagee
may decide not to approve a lease or refuse to grant to a tenant such a
non-disturbance agreement. If, as a result, the lease is not executed, the value
of the mortgaged property may be diminished.
Foreclosure
Foreclosure is a legal procedure that allows the mortgagee to recover its
mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage and, by reason thereof, the indebtedness has been
accelerated, the mortgagee has the right to institute foreclosure proceedings to
sell the mortgaged property at public auction to satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary from
state to state. Although there are other foreclosure procedures available in
some states that are either infrequently used or available only in certain
limited circumstances, the two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage. In either case, the actual foreclosure of the mortgage
will be accomplished pursuant to a public sale of the mortgaged property by a
designated official or by the trustee under a deed of trust. The purchaser at
any such sale acquires only the estate or interest in the mortgaged property
encumbered by the mortgage. For example, if the mortgage only encumbered a
tenant's leasehold interest in the property, such purchaser will only acquire
such leasehold interest, subject to the tenant's obligations under the lease to
pay rent and perform other covenants contained therein.
Judicial Foreclosure. A judicial foreclosure of a mortgage is a judicial
action conducted in a court having jurisdiction over a Mortgaged Property
initiated by the service of legal pleadings upon all necessary parties having an
interest in the real property. Delays in completion of foreclosure may
occasionally result from difficulties in locating the necessary parties to the
action. As a judicial foreclosure is a lawsuit, it is subject to all of
procedures, delays and expenses attendant to litigation, sometimes requiring up
to several years to complete if contested. At the completion of a judicial
foreclosure, if the mortgagee prevails, the court ordinarily issues a judgment
of foreclosure and appoints a referee or other designated official to conduct a
public sale of the property. Such sales are made in accordance with procedures
that vary from state to state. If the mortgage covered the tenant's interest in
a lease and leasehold estate, the purchaser will acquire such tenant's interest
subject to the tenant's obligations under the lease to pay rent and perform
other covenants contained therein.
Non-Judicial Foreclosure. In the majority of cases, foreclosure of a deed
of trust (and in some instances, other types of mortgage instruments) is
accomplished by a non-judicial trustee's sale pursuant to a provision in the
deed of trust that authorizes the trustee, generally following a request from
the beneficiary, to sell the mortgaged property at public sale upon any default
by the mortgagor under the terms of the note or deed of trust. In addition to
the specific contractual requirements set forth in the deed of trust, a
non-judicial trustee's sale is also typically subject to any applicable judicial
or statutory requirements imposed in the state where the mortgaged property is
located. The specific requirements that must be satisfied by a trustee prior to
the trustee's sale vary from state to state. Examples of the varied requirements
imposed by certain states are: (i) that notices of both the mortgagor's default
and the mortgagee's acceleration of the debt be provided to the mortgagor; (ii)
that the trustee record a notice of default and a notice of sale and send a copy
of such notice to the mortgagor, any other person having an interest in the real
property, including any junior lienholders, any person who has recorded a
request for a copy of a notice of default and notice of sale, any successor in
interest to the mortgagor and to certain other persons; (iii) that the
mortgagor, or any other person having a junior encumbrance on the real estate,
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may, during a reinstatement period, cure the default by paying the entire amount
in arrears, plus, in certain states, certain allowed costs and expenses incurred
by the mortgagee in connection with the default; and (iv) the method
(publication, posting, recording, etc.), timing, content, location and other
particulars as to any required public notices of the trustee's sale. A notice of
sale must be posted in a public place and, in most states, published for a
specified period of time in one or more newspapers. The mortgagor or junior
lienholder may then have the right, during a reinstatement period required in
some states, to cure the default by paying the entire actual amount in arrears
(without regard to the acceleration of the indebtedness), plus the lender's
costs and expenses (in some states, limited to reasonable costs and expenses)
incurred in enforcing the obligation. Generally, state law controls the amount
of foreclosure expenses and costs, including attorneys' fees which may be
recovered by a mortgagee. In other states, the mortgagor or the junior
lienholder is not provided a period to reinstate the loan, but has only the
right to pay off the entire debt to prevent the foreclosure sale. Foreclosure of
a deed to secure debt is also generally accomplished by a non-judicial sale
similar to that required by a deed of trust, except that the mortgagee or its
agent, rather than a trustee, is typically empowered to perform the sale in
accordance with the terms of the deed to secure debt and applicable law.
Limitations on Mortgagee's Rights. In case of foreclosure under a mortgage
or a deed of trust, the sale by the referee or other designated official or the
trustee is often a public sale. Because of the difficulty a potential buyer at
any foreclosure sale might have in determining the exact status of title to the
mortgaged property, the potential existence of redemption rights (see "--Rights
of Redemption" below) and because the physical condition and financial
performance of the mortgaged property may have deteriorated during the
foreclosure proceedings and/or for a variety of other reasons, a third party may
be unwilling to purchase the property at the foreclosure sale. Some states
require that the mortgagee disclose all known facts materially affecting the
value of the mortgaged property to potential bidders at a trustee's sale. Such
disclosure may have an adverse affect on the trustee's ability to sell the
mortgaged property or the sale price thereof. Potential buyers may be reluctant
to purchase property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company and other decisions that have followed its
reasoning. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under the federal
Bankruptcy Code, as amended from time to time (11 U.S.C.) (the "Bankruptcy
Code"), and, therefore, could be rescinded in favor of the bankrupt's estate,
if: (i) the foreclosure sale was held while the debtor was insolvent and not
more than one year prior to the filing of the bankruptcy petition; and (ii) the
price paid for the foreclosed property did not represent "fair consideration"
("reasonably equivalent value" under the Bankruptcy Code). Although the
reasoning and result of Durrett in respect of the Bankruptcy Code was rejected
by the United States Supreme Court in May 1994, the case could nonetheless be
persuasive to a court applying a state fraudulent conveyance law that has
provisions similar to those construed in Durrett. Furthermore, a bankruptcy
trustee or debtor in possession could possibly avoid a foreclosure sale by
electing to proceed under state fraudulent conveyance law, and the period of
time for which a foreclosure sale could be subject to avoidance under such law
is often greater than one year. For these reasons, it is common for the
mortgagee to purchase the property from the trustee, referee or other designated
official for an amount equal to the outstanding principal amount of the secured
indebtedness, together with accrued and unpaid interest and the expenses of
foreclosure, in which event, if the amount bid by the mortgagee equals the full
amount of such debt, interest and expenses, the secured debt would be
extinguished, or for a lesser amount in order to preserve its right to seek a
deficiency judgment if such is available under state law and under the terms of
the Mortgage Loan documents. Thereafter, the mortgagee assumes the burdens of
ownership and management of the property (frequently, through the employment of
a third party management company), including third party liability, paying
operating expenses and real estate taxes and making repairs, until a sale of the
property to a third party can be arranged. The costs of operating and
maintaining commercial property may be significant and may be greater than the
income derived from that property. The costs of management and operation of
those mortgaged properties that are hotels, motels or nursing or convalescent
homes or
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hospitals may be particularly significant, because of the expertise, knowledge
and, with respect to nursing or convalescent homes or hospitals, regulatory
compliance required to run such operations and the effect that foreclosure and a
change in ownership may have on the public's and the industry's (including
franchisors') perception of the quality of such operations. The mortgagee will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may not equal the
mortgagee's investment in the property. Moreover, a mortgagee commonly incurs
substantial legal fees and court costs in acquiring a mortgaged property through
contested foreclosure and/or bankruptcy proceedings. In addition, a mortgagee
may be responsible under federal or state law for the cost of cleaning up a
mortgaged property that is environmentally contaminated. See "--Environmental
Risks" below. There may also be state transfer taxes due and payable upon
obtaining such properties at foreclosure and such taxes could be substantial. As
a result, a mortgagee could realize an overall loss on a mortgage loan even if
the related mortgaged property is sold at foreclosure or resold after it is
acquired through foreclosure for an amount equal to the full outstanding
principal amount of the mortgage loan, plus accrued interest.
The holder of a junior mortgage that forecloses on a mortgaged property
does so subject to senior mortgages and any other prior liens, and may be
obliged to keep senior mortgage loans current in order to avoid foreclosure of
its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a "due-on-sale" clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
Courts may also apply general equitable principles in connection with
foreclosure proceedings to limit a mortgagee's remedies. These equitable
principles are generally designed to relieve the mortgagor from the legal effect
of his defaults under the loan documents to the extent such effect is determined
to be harsh or unfair. Examples of judicial remedies that have been fashioned
include requiring mortgagees to undertake affirmative and expensive actions to
determine the causes of the mortgagor's default and the likelihood that the
mortgagor will be able to reinstate the loan, requiring the mortgagees to
reinstate loans or recast payment schedules in order to accommodate mortgagors
who are suffering from temporary financial disability, and limiting the rights
of mortgagees to foreclose if the default under the mortgage instrument is not
monetary, such as the mortgagor's failing to maintain the property adequately or
executing a second mortgage affecting the property. Finally, some courts have
been faced with the issue of whether federal or state constitutional provisions
reflecting due process concerns for adequate notice require that mortgagors
under deeds of trust or mortgages receive notices in addition to the statutorily
prescribed minimum. For the most part, these cases have upheld the notice
provisions as being reasonable or have found that the sale by a trustee under a
deed of trust, or under a mortgage having a power of sale, does not involve
sufficient state action to afford constitutional protections to the mortgagor.
In addition, some states may have statutory protection such as the right of the
borrower to reinstate mortgage loans after commencement of foreclosure
proceedings but prior to a foreclosure sale.
Under the REMIC Regulations and the related Agreement, the Master Servicer
or Special Servicer, if any, may be permitted (and in some cases may be
required) to hire an independent contractor to operate any REO Property. The
costs of such operation may be significantly greater than the costs of direct
operation by the Master Servicer or Special Servicer, if any. See "SERVICING OF
THE MORTGAGE LOANS--Collections and Other Servicing Procedures."
Rights of Redemption. The purposes of a foreclosure are to enable the
mortgagee to realize upon its security and to bar the mortgagor, and all persons
who have an interest in the property that is subordinate to the mortgage being
foreclosed, from any exercise of their "equity of redemption." The doctrine of
equity of redemption provides that, until the property covered by a mortgage has
been sold in accordance with a properly conducted foreclosure sale, those having
an interest that is subordinate to that
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of the foreclosing mortgagee may redeem the property by paying the entire debt
with interest. In addition, in some states, when a foreclosure action has been
commenced, the redeeming party must pay certain costs of such action. Those
having an equity of redemption must generally be made parties and joined in the
foreclosure proceeding in order for their equity of redemption to be cut off and
terminated. Equity of redemption is generally a common-law (non-statutory) right
that only exists prior to completion of the foreclosure sale, is not waivable by
the mortgagor and must be exercised prior to foreclosure sale.
In contrast to the doctrine of equity of redemption, in some states, the
mortgagor and foreclosed junior lienors are given a statutory period after the
completion of a foreclosure in which to redeem the property from the foreclosure
sale by payment of a redemption price. Some states require the payment of the
entire principal balance of the loan, accrued interest and expenses of
foreclosure, others require the payment of the foreclosure sale price, while
other states require the payment of only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the ability of the mortgagee
to sell the foreclosed property. The exercise of a statutory right of redemption
may defeat the title of any purchaser at a foreclosure sale or any purchaser
from the mortgagee subsequent to a foreclosure sale. Consequently, the practical
effect of the redemption right is often to force the mortgagee to retain the
property and pay the expenses of ownership until the redemption period has run.
Whether the mortgagee has any rights to recover these expenses from a mortgagor
who redeems the property depends on the applicable state statute. Certain states
permit a mortgagee to invalidate an attempted exercise of a statutory redemption
right by waiving its right to any deficiency judgment. In some states, there is
no right to redeem property after a trustee's sale under a deed of trust.
Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held for more than three years following the
year in which the property is acquired. With respect to a Series of Certificates
for which an election is made to qualify the Trust Fund or a part thereof as a
REMIC, the Agreement will permit foreclosed property to be held for more than
three years if the Trustee receives (i) an extension from the IRS or (ii) an
opinion of counsel to the effect that holding such property for such period is
permissible under the REMIC Regulations.
Mortgagors under Installment Contracts generally do not have the benefits
of redemption periods such as those that exist in the same jurisdiction for
mortgage loans. If redemption statutes do exist under state laws for Installment
Contracts, the redemption period may be shorter than for mortgages.
Anti-Deficiency Legislation. Some of the Mortgage Loans will be
nonrecourse loans as to which, in the event of default by a mortgagor, recourse
may be had only against the specific property pledged to secure the related
Mortgage Loan and not against the mortgagor's other assets. Even if a mortgage
by its terms provides for recourse against the mortgagor, certain states have
imposed prohibitions against or limitations upon such recourse. For example,
some state statutes limit the right of the mortgagee to obtain a deficiency
judgment against the mortgagor following foreclosure or sale under a deed of
trust. A deficiency judgment is a personal judgment against the former mortgagor
equal in most cases to the difference between the net amount realized upon the
public sale of the real property and the amount due to the mortgagee. Other
statutes require the mortgagee to exhaust the security afforded under a mortgage
by foreclosure in an attempt to satisfy the full debt before bringing a personal
action against the mortgagor. In certain states, the mortgagee has the option of
bringing a personal action against the mortgagor on the debt without first
exhausting its security; however, in some of these states, a mortgagee choosing
to pursue such an action may be deemed to have elected its remedy and may be
precluded from exercising any remedies with respect to the security.
Consequently, the practical effect of the election requirement, when applicable,
is that mortgagees will usually proceed first against the security rather than
bringing personal action against the mortgagor. Other statutory provisions limit
any deficiency judgment against the former mortgagor following a judicial sale
to the excess of the outstanding debt over the fair market value of the property
at the time of the public sale. The purpose of these statutes is generally to
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prevent a mortgagee from obtaining a large deficiency judgment against the
former mortgagor as a result of low bids, or the absence of bids, at the
judicial sale.
Cross-Collateralization. Certain of the Mortgage Loans may be secured by
more than one mortgage covering properties located in more than one state.
Because of various state laws governing foreclosure or the exercise of a power
of sale and because, in general, foreclosure actions are brought in state court
and the courts of one state cannot exercise jurisdiction over property in
another state, it may be necessary upon a default under such a loan to foreclose
on the related mortgages in a particular order rather than simultaneously in
order to ensure that the lien of the mortgages is not impaired or released.
Leasehold Risks. Certain of the Mortgage Loans may be secured by a
mortgage encumbering the mortgagor's leasehold interest under a ground lease.
Leasehold mortgages are subject to certain risks not associated with mortgages
encumbering a fee ownership interest in the mortgaged property. The most
significant of these risks is that the ground lease creating the leasehold
estate could terminate, thereby depriving the leasehold mortgagee of its
security. The ground lease may terminate if, among other reasons, the ground
lessee breaches or defaults in its obligations under the ground lease or there
is a bankruptcy of the ground lessee or the ground lessor. Examples of
protective provisions that may be included in the related ground lease, or a
separate agreement between the ground lessee, the ground lessor and the
mortgagee, in order to minimize such risk are the right of the mortgagee to
receive notices from the ground lessor of any defaults by the mortgagor; the
right to cure such defaults, with adequate cure periods; if a default is not
susceptible of cure by the mortgagee, the right to acquire the leasehold estate
through foreclosure or otherwise prior to any termination of the ground lease;
the ability of the ground lease to be assigned to and by the mortgagee or a
purchaser at a foreclosure sale and for a release of the assigning ground
lessee's liabilities thereunder; the right of the mortgagee to enter into a
ground lease with the ground lessor on the same terms and conditions as the old
ground lease in the event of a termination thereof; and provisions for
disposition of any insurance proceeds or condemnation awards payable upon a
casualty to, or condemnation of, the mortgaged property. In addition to the
foregoing protections, the leasehold mortgage may prohibit the ground lessee
from treating the ground lease as terminated in the event of the ground lessor's
bankruptcy and rejection of the ground lease by the trustee for the
debtor-ground lessor, and may assign to the mortgagee the debtor-ground lessee's
right to reject a lease pursuant to Section 365 of the Bankruptcy Code, although
the enforceability of such assignment has not been established. An additional
manner in which to obtain protection against the termination of the ground lease
is to have the ground lessor enter into a mortgage encumbering the fee estate in
addition to the mortgage encumbering the leasehold interest under the ground
lease. Additional protection is afforded to the mortgagee, because if the ground
lease is terminated, the mortgagee may nonetheless possess rights contained in
the fee mortgage. Without the protections described in this paragraph, a
leasehold mortgagee may be more likely to lose the collateral securing its
leasehold mortgage. No assurance can be given that any or all of the above
described provisions will be obtained in connection with any particular Mortgage
Loan.
Bankruptcy Laws. Mortgagors often file bankruptcy to delay or prevent
exercise of remedies under loan documents. Numerous statutory and common law
provisions, including the Bankruptcy Code and state laws affording relief to
debtors, may interfere with and delay the ability of a mortgagee to obtain
payment of the loan, to realize upon collateral and/or to enforce a deficiency
judgment. For example, under the Bankruptcy Code virtually all actions
(including foreclosure actions and deficiency judgment proceedings) related to
the "bankrupt" borrower are automatically stayed upon the filing of the
bankruptcy petition and often no interest or principal payments are made during
the course of the bankruptcy proceeding (although "adequate protection" payments
for anticipated diminution, if any, in the value of the mortgaged property may
be made). The delay and consequences thereof caused by such automatic stay can
be significant. A particular mortgagor may become subject to the Bankruptcy Code
either by a voluntary or involuntary petition with respect to such mortgagor or,
by virtue of the doctrine of
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"substantive consolidation" by an affiliate of such mortgagor becoming a debtor
under the Bankruptcy Code. Additionally, the filing of a petition in bankruptcy
by or on behalf of a junior lienor or junior mortgagee may stay the senior
mortgagee from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the mortgagee are met, the amount and terms of a mortgage or deed
of trust secured by property of the debtor may be modified under certain
circumstances. The outstanding amount of the loan secured by the real property
may be reduced to the then current value of the property (with a corresponding
partial reduction of the amount of the mortgagee's security interest), thus
leaving the mortgagee a general unsecured creditor for the difference between
such value and the outstanding balance of the loan. Other modifications may
include the reduction in the amount of each scheduled payment, which reduction
may result from a reduction in the rate of interest and/or the alteration of the
repayment schedule (with or without affecting the unpaid principal balance of
the loan) and/or an extension (or acceleration) of the final maturity date. Some
bankruptcy courts have approved plans, based on the particular facts of the
reorganization case before them, that effected the curing of a mortgage loan
default by paying arrearages over a number of years. A bankruptcy court may also
permit a debtor to de-accelerate a secured loan and to reinstate the loan even
though the mortgagee had accelerated such loan and final judgment of foreclosure
had been entered in state court (provided no sale of the property had yet
occurred) prior to the filing of the debtor's petition, even if the full amount
due under the original loan is never repaid. Other types of significant
modifications to the terms of the mortgage may be acceptable to the bankruptcy
court, often depending on the particular facts and circumstances of the specific
case.
Federal bankruptcy law may also interfere with or affect the ability of a
mortgagee to enforce an assignment of rents and leases or a security interest in
hotel or nursing home revenues related to the mortgaged property. In connection
with a bankruptcy proceeding involving a mortgagor, Section 362 of the
Bankruptcy Code automatically stays any attempts by the mortgagee to enforce any
such assignment or security interest. The legal proceedings necessary to resolve
such a situation can be time-consuming and may result in significant delays in
the receipt of the rents or hotel or nursing home revenues. Rents or hotel or
nursing home revenues may also be lost (i) if the assignment or security
interest is not fully documented or perfected under state law prior to
commencement of the bankruptcy proceeding; (ii) to the extent such rents or
hotel or nursing home revenues are used by the mortgagor to maintain the
mortgaged property or for other court authorized expenses; (iii) to the extent
other collateral may be substituted therefor; and (iv) if the bankruptcy court
determines that it is necessary or appropriate "based on the equities of the
case."
To the extent a mortgagor's ability to make payment on a mortgage loan is
dependent on payments under a lease of the related property, such ability may be
impaired by the commencement of a bankruptcy proceeding relating to the lessee
under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in an automatic stay barring the
commencement or continuation of any state court proceeding for past due rent,
for accelerated rent, for damages or for a summary eviction order with respect
to a default under the lease that occurred prior to the filing of the lessee's
petition.
In addition, the Bankruptcy Code generally provides that a bankruptcy
trustee or debtor in possession may, subject to approval of the bankruptcy
court, either (i) assume the lease and retain it or assign it to a third party
or (ii) reject the lease. If the lease is assumed, the bankruptcy trustee or
debtor in possession (or assignee, if applicable) must cure any defaults under
the lease, compensate the lessor for its losses and provide the lessor with
"adequate assurance" of future performance. Such remedies may be insufficient,
however, as the lessor may be forced to continue under the lease with a lessee
that is a poor credit risk or an unfamiliar tenant if the lease was assigned,
and any assurances provided to the lessor may, in fact, be inadequate.
Furthermore, there may be a significant period of time between the date that a
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lessee files a bankruptcy petition and the date that the lease is assumed or
rejected. Although the lessee is obligated to make all lease payments currently
with respect to the post-petition period, there is a risk that such payments
will not be made due to the lessee's poor financial condition. If the lease is
rejected, the lessor will be treated as an unsecured creditor with respect to
its claim for damages for termination of the lease, and the lessor must relet
the mortgaged property before the flow of lease payments will recommence. In
addition, pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's
damages for lease rejection are limited.
In a bankruptcy or similar proceeding, action may be taken seeking the
recovery, as a preferential transfer, of certain payments made by the mortgagor
under the related Mortgage Loan to the Trust Fund. Payments on long-term debt
may be protected from recovery as preferences if they are payments in the
ordinary course of business made on debts incurred in the ordinary course of
business. Whether any particular payment would be protected depends upon the
facts specific to a particular transaction. If a Mortgage Loan includes any
guaranty, and the guaranty waives any rights of subrogation or contribution,
then certain payments by the mortgagor to the Trust Fund also may be avoided and
recovered as fraudulent conveyances.
A trustee in bankruptcy or a debtor in possession or various creditors who
extend credit after a case is filed, in some cases, may be entitled to collect
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the mortgagee. In certain circumstances, a trustee in bankruptcy or
debtor in possession may have the power to grant liens senior to or pari passu
with the lien of a mortgage, and analogous state statutes and general principles
of equity may also provide a mortgagor with means to halt a foreclosure
proceeding or sale and enforce a restructuring of a mortgage loan on terms a
mortgagee would not otherwise accept.
A trustee in bankruptcy or a debtor in possession, in some cases, also may
be entitled to subordinate the lien created by the mortgage loan to other liens
or the claims of general unsecured creditors. Generally, this requires proof of
"unequitable conduct" by the mortgagee. However, various courts have expanded
the grounds for equitable subordination to apply to various non-pecuniary claims
for such items as penalties and fines. A court may find that any prepayment
charge, various late payment charges and other claims by mortgagees may be
subject to equitable subordination on these grounds.
A trustee in bankruptcy or a debtor in possession, in some cases, also may
be entitled to avoid all or part of any claim or lien by the mortgagee if and to
the extent a judgment creditor, or a bona fide purchaser of real estate, could
have done so outside of bankruptcy. Generally, this involves some defect in the
language, execution or recording of the mortgage loan documents.
Environmental Risks
Real property pledged as security to a mortgagee may be subject to
environmental risks arising from the presence of hazardous or toxic substances
on, under, adjacent to, or in such property. The environmental condition of
mortgaged properties may be affected by the actions and operations of tenants
and occupants of such properties. Of particular concern may be those mortgaged
properties that are, or have been, the site of manufacturing, industrial or
disposal activity or have been built with or contain asbestos-containing
material or other indoor pollutants. In addition, current and future
environmental laws, ordinances or regulations, including new requirements
developed by federal agencies pursuant to the mandates of the Clean Air Act
Amendments of 1990, may impose additional compliance obligations on business
operations that can be met only by significant capital expenditures.
A mortgagee may be exposed to risks related to environmental conditions
such as the following: (i) a diminution in the value of a mortgaged property;
(ii) the potential that the mortgagor may default on
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a mortgage loan due to the mortgagor's inability to pay high remediation costs
or difficulty in bringing its operations into compliance with environmental
laws; (iii) in certain circumstances as more fully described below, liability
for clean-up costs or other remedial actions, which liability could exceed the
value of such mortgaged property or the unpaid balance of the related mortgage
loan; or (iv) the inability to sell the related Mortgage Loan in the secondary
market or lease the property to potential tenants. In certain circumstances, a
mortgagee may choose not to foreclose on contaminated property rather than risk
incurring liability for remedial actions.
In addition, a mortgagee may be obligated to disclose environmental
conditions on a property to government entities and/or to prospective buyers
(including prospective buyers at a foreclosure sale or following foreclosure).
Such disclosure may decrease the amount that prospective buyers are willing to
pay for the affected property, sometimes substantially, and thereby decrease the
ability of the mortgagee to recoup its investment in a loan upon foreclosure.
In certain states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. In these cases, a mortgagee
that becomes the owner of a property through foreclosure, deed in lieu of
foreclosure or otherwise, may be required to clean up the contamination before
selling or otherwise transferring the property.
Under federal and certain states' laws, the owner's failure to perform
remedial actions required under environmental laws may in certain circumstances
give rise to a lien on the mortgaged property to ensure the reimbursement of
remedial costs incurred by federal and state regulatory agencies. In several
states such lien has priority over the lien of an existing mortgage against such
property. Since the costs of remedial action could be substantial, the value of
a mortgaged property as collateral for a mortgage loan could be adversely
affected by the existence of an environmental condition giving rise to a lien.
Under certain circumstances, it is possible that environmental cleanup
costs, or the obligation to take remedial actions, can be imposed on a mortgagee
such as the Trust Fund with respect to each Series. Under the laws of some
states and under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), strict liability may be
imposed on present and past "owners" and "operators" of contaminated real
property for the costs of clean-up. Excluded from CERCLA's definition of "owner"
or "operator", however, is a person "who without participating in the management
of the facility, holds indicia of ownership primarily to protect his security
interest." This is known as the "secured creditor exemption." Judicial decisions
interpreting the secured creditor exemption had varied widely, and one decision,
United States v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir. 1990), cert.
denied, 498 U.S. 1046 (1991), had indicated that a lender's mere power to affect
and influence a borrower's operations might be sufficient to lead to liability
on the part of the lender. However, on September 30, 1996, the Asset
Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996
(the "Lender Liability Act") became law. The Lender Liability Act clarifies the
secured creditor exemption to impose liability only on a secured lender who
exercises control over operational aspects of the facility and thus is
"participating in management." A number of environmentally related activities
before the loan is made and during its pendency, as well as "workout" steps to
protect a security interest, are identified as permissible to protect a security
interest without triggering liability. The Lender Liability Act also identifies
the circumstances in which foreclosure and post-foreclosure activities will not
trigger CERCLA liability.
The Lender Liability Act also amends the Solid Waste Disposal Act to limit
the liability of lenders holding a security interest for costs of cleaning up
contamination from underground storage tanks. However, the Lender Liability Act
has no effect on state environmental laws similar to CERCLA that may impose
liability on mortgagees and other persons, and not all of those laws provide for
a secured creditor exemption. Liability under many of these federal and state
laws may exist even if the mortgagee
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did not cause or contribute to the contamination and regardless of whether the
mortgagee has actually taken possession of a mortgaged property through
foreclosure, deed in lieu of foreclosure or otherwise. Moreover, such liability
is not limited to the original or unamortized principal balance of a loan or to
the value of the property securing a loan.
CERCLA's "innocent landowner" defense to strict liability may be available
to a mortgagee that has taken title to a mortgaged property and has performed an
appropriate environmental site assessment that does not disclose existing
contamination and that meets other requirements of the defense. However, it is
unclear whether the environmental site assessment must be conducted upon loan
origination, prior to foreclosure or both, and uncertainty exists as to what
kind of environmental site assessment must be performed in order to qualify for
the defense.
Beyond statute-based environmental liability, there exist common law
causes of action that can be asserted to redress hazardous environmental
conditions on a property (e.g., actions based on nuisance for so called toxic
torts resulting in death, personal injury or damage to property). Although it
may be more difficult to hold a mortgagee liable in such cases, unanticipated or
uninsured liabilities of the mortgagor may jeopardize the mortgagor's ability to
meet its loan obligations.
At the time the Mortgage Loans were originated, it is possible that no
environmental assessment or a very limited environmental assessment of the
Mortgaged Properties was conducted.
The related Agreement will provide that the Master Servicer or the Special
Servicer, if any, acting on behalf of the Trust Fund, may not acquire title to
any Mortgaged Property or take over its operation unless the Master Servicer or
the Special Servicer, if any, has previously determined, based upon a phase I or
other specified environmental assessment prepared by a person who regularly
conducts such environmental assessments, that (a) the Mortgaged Property is in
compliance with applicable environmental laws or that it would be in the best
economic interest of the Trust Fund to take the actions necessary to comply with
such laws and (b) there are no circumstances or conditions present at the
Mortgaged Property relating to Hazardous Materials for which some investigation,
remediation or clean-up action could be required or that it would be in the best
economic interest of the Trust Fund to take such actions with respect to such
Mortgaged Property. This requirement effectively precludes enforcement of the
security for the related Note until a satisfactory environmental assessment is
obtained and/or any required remedial action is taken. This requirement will
reduce the likelihood that a given Trust Fund will become liable for any
environmental conditions affecting a Mortgaged Property, but will make it more
difficult to realize on the security for the Mortgage Loan. There can be no
assurance that any environmental assessment obtained by the Master Servicer or
the Special Servicer, if any, will detect all possible environmental conditions
or that the other requirements of the Agreement, even if fully observed by the
Master Servicer or the Special Servicer, if any, will in fact insulate a given
Trust Fund from liability for environmental conditions.
"Hazardous Materials" are generally defined as any dangerous, toxic or
hazardous pollutants, chemicals, wastes or substances, including, without
limitation, those so identified pursuant to CERCLA or any other environmental
laws now existing, and specifically including, without limitation, asbestos and
asbestos-containing materials, polychlorinated biphenyls, radon gas, petroleum
and petroleum products, urea formaldehyde and any substances classified as being
"in inventory," "usable work in process" or similar classification that would,
if classified as unusable, be included in the foregoing definition.
If a mortgagee is or becomes liable for clean-up costs, it may bring an
action for contribution against the current owners or operators, the owners or
operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but such persons or entities may be
without substantial assets, bankrupt or otherwise judgment proof. Furthermore,
such action against the mortgagor
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may be adversely affected by the limitations on recourse in the loan documents.
Similarly, in some states anti-deficiency legislation and other statutes
requiring the mortgagee to exhaust its security before bringing a personal
action against the mortgagor (see "--Anti-Deficiency Legislation" above) may
curtail the mortgagee's ability to recover from its mortgagor the environmental
clean-up and other related costs and liabilities incurred by the mortgagee.
Accordingly, it is possible that such costs could become a liability of the
Trust Fund and occasion a loss to the Certificateholders. Shortfalls occurring
as the result of imposition of any clean-up costs will be addressed in the
Prospectus Supplement and Agreement for the related Series.
Other environmental laws that may affect the value of a mortgaged
property, or impose cleanup costs or liabilities, including those related to
asbestos, radon, lead paint and underground storage tanks.
Certain federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") in the event of the remodeling, renovation or demolition of a building.
Such laws, as well as common law standards, may impose liability for releases of
ACMs and may allow third parties to seek recovery from owners or operators of
real properties for personal injuries associated with such releases. In
addition, federal law requires that building owners inspect their facilities for
ACMs and presumed ACMs (consisting of thermal system insulation, surfacing
materials and asphalt and vinyl flooring in buildings constructed prior to 1981)
and transfer all information regarding ACMs and presumed ACMs in their
facilities to successive owners.
The United States Environmental Protection Agency (the "EPA") has
concluded that radon gas, a naturally occurring substance, is linked to
increased risks of lung cancer. Although there are no current federal or state
requirements mandating radon gas testing, the EPA and the United States Surgeon
General recommend testing residences for the presence of radon and that
abatement measures be undertaken if radon concentrations in indoor air meet or
exceed four picocuries per liter.
Under the Residential Lead-Based Paint Hazard Reduction Act of 1992 (the
"Lead Paint Act"), owners of residential housing constructed prior to 1978 are
required to disclose to potential residents or purchasers any known lead-paint
hazards. The Lead Paint Act creates a private right of action with treble
damages available for any failure to so notify. In addition, the ingestion of
lead-based paint chips or dust particles by children can result in lead
poisoning, and the owner of a property where such circumstances exist may be
held liable for such injuries. Finally, federal law mandates that detailed
worker safety standards must be complied with where construction, alteration,
repair or renovation of structures that contain lead, or materials that contain
lead, is contemplated.
Underground storage tanks ("USTs") are, and in the past have been,
frequently located at properties used for industrial, retail and other business
purposes. Federal law, as well as the laws of most states, currently require
USTs used for the storage of fuel or hazardous substances and waste to meet
certain standards designed to prevent releases from the USTs into the
environment. USTs installed prior to the implementation of these standards, or
that otherwise do not meet these standards, are potential sources of
contamination to the soil and groundwater. Land owners may be liable for the
costs of investigating and remediating soil and groundwater contamination that
may emanate from leaking USTs.
Enforceability of Certain Provisions
Default Interest; Late Charges; and Prepayment Fees. Some of the Mortgage
Loans may contain provisions requiring the mortgagor to pay late charges or
additional interest if required payments are not timely made, and in some
circumstances, may prohibit payments for a specified period and/or condition
prepayments upon the mortgagor's payment of prepayment fees or yield maintenance
penalties. In certain states there may be limitations upon the enforceability of
such provisions, and no assurance can be given
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that any of such provisions related to any Mortgage Loan will be enforceable.
Some of the Mortgage Loans may also contain provisions prohibiting any
prepayment of the loan prior to maturity or requiring the payment of a
prepayment fee in connection with any such prepayment. Even if enforceable, a
requirement for such prepayment fees may not deter mortgagors from prepaying
their mortgage loans. Although certain states will allow the enforcement of such
provisions upon a voluntary prepayment of a mortgage loan, in other states such
provisions may be unenforceable after a mortgage loan has been outstanding for a
certain number of years or if enforcement would be unconscionable, or the
allowed amount of any prepayment fee may be limited (i.e., to a specified
percentage of the original principal amount of the mortgage loan, to a specified
percentage of the outstanding principal balance of a mortgage loan or to a fixed
number of months' interest on the prepaid amount). In certain states there may
be limitations upon the enforceability of prepayment fee provisions applicable
in connection with a default by the mortgagor or an involuntary acceleration of
the secured indebtedness, and no assurance can be given that any of such
provisions related to any mortgage loan will be enforceable under such
circumstances. The applicable laws of certain states may also treat certain
prepayment fees as usurious if in excess of statutory limits. See
"--Applicability of Usury Laws" below.
Due-on-Sale Provisions. The enforceability of due-on-sale and
due-on-encumbrance provisions has been the subject of legislation or litigation
in many states, and in some cases, typically involving single family residential
mortgage transactions, their enforceability has been limited or denied under
applicable state law. However, the Garn-St. Germain Depository Institutions Act
of 1982 (the "Garn-St. Germain Act"), which generally preempts state
constitutional, statutory and case law that prohibits the enforcement of
due-on-sale clauses and permits mortgagees to enforce these clauses in
accordance with their terms, subject to certain exceptions. As a result,
due-on-sale clauses have become generally enforceable except in those states
whose legislatures have exercised their authority to regulate the enforceability
of such clauses with respect to mortgage loans that were: (i) originated or
assumed during the "window period" under the Garn-St. Germain Act, which ended
in all cases not later than October 15, 1982; and (ii) originated by lenders
other than national banks, federal savings institutions or federal credit
unions. The Federal Home Loan Mortgage Corporation has taken the position in its
published mortgage servicing standards that, out of a total of eleven "window
period states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah)
have enacted statutes extending, on various terms and for varying periods, the
prohibition on enforcement of due-on-sale clauses with respect to certain
categories of loans that were originated or assumed during the "window period"
applicable to such state. Also, the Garn-St. Germain Act does "encourage"
lenders to permit assumption of loans at the original rate of interest or at
some other rate less than the average of the original rate and the market rates.
The Agreement for each Series generally will provide that if any Mortgage
Loan contains a provision in the nature of a "due-on-sale" clause, which by its
terms provides that: (i) such Mortgage Loan shall (or may at the mortgagee's
option) become due and payable upon the sale or other transfer of an interest in
the related Mortgaged Property or (ii) such Mortgage Loan may not be assumed
without the consent of the related mortgagee in connection with any such sale or
other transfer, then, for so long as such Mortgage Loan is included in the Trust
Fund, the Master Servicer or the Special Servicer, if any, on behalf of the
Trustee, shall take such actions as it deems to be in the best interest of the
Trust Fund in accordance with the servicing standard set forth in the Agreement,
and may waive or enforce any due-on-sale clause contained in the related Note or
Mortgage.
In addition, under the federal Bankruptcy Code, due-on-sale clauses may
not be enforceable in bankruptcy proceedings and may, under certain
circumstances, be eliminated in any modified mortgage resulting from such
bankruptcy proceeding.
Acceleration on Default. It is expected that the Mortgage Loans will
include a "debt-acceleration" clause, which permits the mortgagee to accelerate
the full debt upon a monetary or
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nonmonetary default of the mortgagor. The courts of all states will enforce such
acceleration clauses in the event of a material payment default if appropriate
notices of default have been effectively given. However, the equity courts of
any state may refuse to foreclose a mortgage when an acceleration of the
indebtedness would be inequitable or unjust or the circumstances would render
the acceleration unconscionable. Furthermore, in some states, the mortgagor may
avoid foreclosure and reinstate an accelerated loan by paying only the defaulted
amounts and, in certain states, the costs and attorneys' fees incurred by the
mortgagee in collecting such defaulted payments.
State courts also are known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a mortgagee's practice of accepting late payments from
the mortgagor may be deemed a waiver of the forfeiture clause. State courts also
may impose equitable grace periods for payment of arrearages or otherwise permit
reinstatement of the Installment Contract following a default. Not infrequently,
if a mortgagor under an Installment Contract has significant equity in the
property, equitable principles will be applied to reform or reinstate the
Installment Contract or to permit the mortgagor to share the proceeds upon a
foreclosure sale of the property if the sale price exceeds the debt.
Soldiers' and Sailors' Relief Act
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a mortgagor who enters military service (including
the Army, Navy, Air Force, Marines, Coast Guard, members of the National Guard
or any Reserves who are called to active duty status after the origination of
their mortgage loan and officers of the U.S. Public Health Service assigned to
duty with the military) after the origination of such mortgagor's mortgage loan
may not be charged interest (including fees and charges) above an annual rate of
6% during the period of such mortgagor's active duty status, unless a court
orders otherwise upon application of the mortgagee. Any shortfall in interest
collections resulting from the application of the Relief Act, to the extent not
covered by any applicable Credit Enhancement, could result in losses to the
holders of the Certificates. In addition, the Relief Act imposes limitations
that would impair the ability of the Master Servicer or the Special Servicer, if
any, to foreclose on an affected Mortgage Loan during the mortgagor's period of
active duty status and, under certain circumstances, during an additional three
months thereafter. Thus, in the event that such a Mortgage Loan goes into
default, there may be delays and losses occasioned by the inability to realize
upon the Mortgaged Property in a timely fashion. Because the Relief Act applies
to mortgagors who enter military service (including reservists who are later
called to active duty) after origination of the related mortgage loan, no
information can be provided as to the number of Mortgage Loans that may be
affected by the Relief Act. The Relief Act may also be applicable if the
mortgagor is an entity owned or controlled by a person in a military service.
Applicability of Usury Laws
State and federal usury laws limit the interest that mortgagees are
entitled to receive on a mortgage loan. In determining whether a given
transaction is usurious, courts may include charges in the form of "points" and
"fees" in the determination of the "interest" charged in connection with a loan,
but may exclude payments in the form of "reimbursement of foreclosure expenses"
or other charges found to be distinct from "interest". If, however, the amount
charged for the use of the money loaned is found to exceed a statutorily
established maximum rate, the form employed and the degree of overcharge are
both immaterial. Statutes differ in their provision as to the consequences of a
usurious loan. One type of statute requires the mortgagee to forfeit the
interest above the applicable limit or imposes a specified penalty. Under this
statutory scheme, the mortgagor may have the recorded mortgage or deed of trust
cancelled upon paying its debt with lawful interest, or the mortgagee may
foreclose, but only for the debt plus lawful interest, in either case, subject
to any applicable credit for excessive interest collected from the
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mortgagor and any penalty owed by the mortgagee. A second type of statute is
more severe. A violation of this type of usury law results in the invalidation
of the transaction, thereby permitting the mortgagor to have the recorded
mortgage or deed of trust cancelled without any payment and prohibiting the
mortgagee from foreclosing.
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ("Title V"), provides that state usury limitations do
not apply to certain types of residential (including multifamily, but not other
commercial) first mortgage loans originated by certain lenders after March 31,
1980. A similar federal statute was in effect with respect to mortgage loans
made during the first three months of 1980. The statute authorized any state to
reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal law.
In addition, even where Title V is not so rejected, any state is authorized by
law to adopt a provision limiting discount points or other charges on mortgage
loans covered by Title V. Certain states have taken action to reimpose interest
rate limits and/or to limit discount points or other charges.
Alternative Mortgage Instruments
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state to
state, resulting in difficulties in determining whether a particular alternative
mortgage instrument originated by a state-chartered lender was in compliance
with applicable law. These difficulties were alleviated substantially with
respect to residential (including multifamily, but not other commercial)
mortgage loans as a result of the enactment of Title VIII of the Garn-St.
Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any state
law to the contrary: (i) state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative mortgage
instruments by national banks; (ii) state-chartered credit unions may originate
alternative mortgage instruments in accordance with regulations promulgated by
the National Credit Union Administration (the "NCUA") with respect to
origination of alternative mortgage instruments by federal credit unions; and
(iii) all other non-federally chartered housing creditors, including
state-chartered savings and loan associations, state-chartered savings banks and
mortgage banking companies, may originate alternative mortgage instruments in
accordance with the regulations promulgated by the Federal Home Loan Bank Board
(now the Office of Thrift Supervision) with respect to origination of
alternative mortgage instruments by federal savings and loan associations. Title
VIII authorized any state to reject applicability of the provisions of Title
VIII by adopting, prior to October 15, 1985, a law or constitutional provision
expressly rejecting the applicability of such provisions. Certain states have
taken such action. A mortgagee's failure to comply with the applicable federal
regulations in connection with the origination of an alternative mortgage
instrument could subject such mortgage loan to state restrictions that would not
otherwise be applicable.
Leases and Rents
Some of the Mortgage Loans may be secured by an assignment of leases and
rents, either through assignment provisions incorporated in the mortgage,
through a separate assignment document or both. Under an assignment of leases
and rents, the mortgagor typically assigns to the mortgagee the mortgagor's
right, title and interest as landlord under each lease and the income derived
therefrom, while retaining a revocable license to collect the rents for so long
as there is no default under the mortgage loan documentation. In the event of
such a default, the license terminates and the mortgagee may be entitled to
collect rents. A mortgagee's failure to perfect properly its interest in rents
may result in the loss of a substantial pool of funds that could otherwise serve
as a source of repayment for the loan. Some state laws may require that in
addition to recording properly the assignment of leases and rents, the mortgagee
must also take possession of the property and/or obtain judicial appointment of
a receiver before such
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mortgagee is entitled to collect rents. Although mortgagees actually taking
possession of the property may become entitled to collect the rents therefrom,
such mortgagees may also incur potentially substantial risks attendant to such
possession, including liability for environmental clean-up costs and other risks
inherent to property ownership and operation. In addition, if a bankruptcy or
similar proceeding is commenced by or in respect of the mortgagor, the
mortgagee's ability to collect the rents may also be adversely affected.
Secondary Financing; Due-on-Encumbrance Provisions
Some of the Mortgage Loans may not restrict secondary financing, thereby
permitting the mortgagor to use the Mortgaged Property as security for one or
more additional loans. Some of the Mortgage Loans may preclude secondary
financing (often by permitting the senior mortgagee to accelerate the maturity
of its loan if the mortgagor further encumbers the Mortgaged Property) or may
require the consent of the senior mortgagee; however, such provisions may be
unenforceable in certain jurisdictions under certain circumstances. The
Agreement for each Series will generally provide that 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 mortgagee's
option) become due and payable upon the creation of any lien or other
encumbrance on the related Mortgaged Property; or (ii) requires the consent of
the related mortgagee to the creation of any such lien or other encumbrance on
the related Mortgaged Property; then for so long as such Mortgage Loan is
included in a given Trust Fund, the Master Servicer or, if such Mortgage Loan is
a Specially Serviced Mortgage Loan, the Special Servicer, if any, on behalf of
such Trust Fund, will exercise (or decline to exercise) any right it may have as
the mortgagee of record with respect to such Mortgage Loan to (x) accelerate the
payments thereon or (y) withhold its consent to the creation of any such lien or
other encumbrance, in a manner consistent with the servicing standard set forth
in the Agreement.
If a mortgagor encumbers a mortgaged property with one or more junior
liens, the senior mortgagee is subjected to additional risk, such as the
following. First, the mortgagor may have difficulty servicing and repaying
multiple loans. In addition, if the junior loan permits recourse to the
mortgagor and the senior loan does not, a mortgagor may be more likely to repay
sums due on the junior loan than those due on the senior loan. Second, acts of
the senior mortgagee that prejudice the junior mortgagee or impair the junior
mortgagee's security may create a superior equity in favor of the junior
mortgagee. For example, if the mortgagor and the senior mortgagee agree to an
increase in the principal amount of, or the interest rate payable on, the senior
loan, the senior mortgagee may lose its priority to the extent an existing
junior mortgagee is prejudiced or the mortgagor is additionally burdened. Third,
if the mortgagor defaults on the senior loan and/or any junior loan or loans,
the existence of junior loans and actions taken by junior mortgagees can impair
the security available to the senior mortgagee and can interfere with, delay and
in certain circumstances even prevent the taking of action by the senior
mortgagee. Fourth, the bankruptcy of a junior mortgagee may operate to stay
foreclosure or similar proceedings by the senior mortgagee.
Certain Laws and Regulations
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgaged Property, which could, together with the
possibility of limited alternative uses for a particular Mortgaged Property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of and interest on the related Mortgage Loan.
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The Internal Revenue Code of 1986, as amended, provides priority to
certain tax liens over the lien of a mortgage. In addition, substantive
requirements are imposed on mortgagees in connection with the origination and
servicing of mortgage loans by numerous federal and some state consumer
protection laws. These laws include the federal Truth-in-Lending Act, Real
Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair Credit
Billing Act, Fair Credit Reporting Act, and related statutes. These federal laws
impose specific statutory liabilities upon lenders who originate mortgage loans
and who fail to comply with the provisions of the law. In some cases, this
liability may affect assignees of the mortgage loans.
Type of Mortgaged Property
A mortgagee may be subject to additional risk depending upon the type and
use of the mortgaged property in question. For instance, mortgaged properties
that are hospitals, nursing homes or convalescent homes may present special
risks to mortgagees in large part due to significant governmental regulation of
the ownership, operation, maintenance, control and financing of health care
institutions. Mortgages encumbering mortgaged properties that are owned by the
mortgagor under a condominium form of ownership are subject to the declaration,
by-laws and other rules and regulations of the condominium association.
Mortgaged properties that are hotels or motels may present additional risks to
mortgagees in that: (i) such properties are typically operated pursuant to
franchise, management and operating agreements that may be terminable by the
franchisor, manager or operator; and (ii) the transferability of operating,
liquor and other licenses to the entity acquiring such properties either through
purchase or foreclosure is subject to the vagaries of local law requirements. In
addition, mortgaged properties that are multifamily residential properties or
cooperatively owned multifamily properties may be subject to rent control laws,
which could impact the future cash flows of such properties. See "RISK
FACTORS--Risks Associated with Lending on Income Producing Properties."
Criminal Forfeitures
Various federal and state laws (collectively, the "Forfeiture Laws")
provide for the civil or criminal forfeiture of certain property (including real
estate) used or intended to be used to commit or facilitate the commission of a
violation of certain laws (typically criminal laws), or purchased with the
proceeds of such violations. Even though the Forfeiture Laws were originally
intended as tools to fight organized crime and drug related crimes, the current
climate appears to be to expand the scope of such laws. Certain of the
Forfeiture Laws (i.e., the Racketeer Influenced and Corrupt Organizations law
and the Comprehensive Crime Control Act of 1984) provide for notice, opportunity
to be heard and for certain defenses for "innocent lienholders." However, given
the uncertain scope of the Forfeiture Laws and their relationship to existing
constitutional protections afforded property owners, no assurance can be made
that enforcement of a Forfeiture Law with respect to any Mortgaged Property
would not deprive the Trust Fund of its security for the related Mortgage Loan.
Americans With Disabilities Act
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove structural, architectural and communication barriers
from existing places of public accommodation to the extent "readily achievable."
In addition, under the ADA, alterations to a place of public accommodation or a
commercial facility are to be made so that, to the maximum extent feasible, such
altered portions are readily accessible to and usable by disabled individuals.
The "readily achievable" standard takes into account, among other factors, the
financial resources of the affected site, owner, landlord or other applicable
person. In addition to imposing a possible financial burden on the
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mortgagor in its capacity as owner or landlord, the ADA may also impose such
requirements on a foreclosing mortgagee who succeeds to the interest of the
mortgagor as owner or landlord. Furthermore, since the "readily achievable"
standard may vary depending on the financial condition of the owner or landlord,
a foreclosing mortgagee who is financially more capable than the mortgagor of
complying with the requirements of the ADA may be subject to more stringent
requirements than those to which the mortgagor is subject.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of the
Certificates. This discussion was prepared by Morrison & Hecker L.L.P., counsel
to the Depositor ("Counsel") and, to the extent it expresses opinions or
conclusions as to federal income tax law, represents the opinion of Counsel as
to such matters. The discussion below is based upon the Internal Revenue Code of
1986, as amended (the "Code"), the regulations promulgated thereunder,
including, where applicable, proposed regulations, and the administrative
rulings and court decisions all as in effect and existing on the date hereof
and, all of which are subject to change, possibly on a retroactive basis, or
possible differing interpretations. This discussion is directed primarily to
investors who will hold Certificates as "capital assets" (generally, property
held for investment) within the meaning of Section 1221 of the Code. The
discussion below does not purport to address all federal income tax consequences
that may be applicable to particular categories or classes of investors some of
which (such as banks, insurance companies and foreign investors) may be subject
to special rules under the federal income tax laws. In addition to the federal
income tax consequences described herein, potential investors should consider
the state and local tax consequences, if any, of the purchase, ownership and
disposition of the Certificates. See "STATE TAX CONSIDERATIONS."
Certificateholders are advised to consult their own tax advisors concerning the
federal, state, local or other tax consequences to them of the purchase,
ownership and disposition of the Certificates offered hereunder.
Taxpayers and preparers of tax returns (including those filed by any REMIC
or other issuer) should be aware that under applicable Treasury regulations a
provider of advice on specific issues of law is not considered an income tax
return preparer unless the advice (i) is given with respect to events that have
occurred at the time the advice is rendered and is not given with respect to the
consequences of contemplated actions, and (ii) is directly relevant to the
determination of an entry on a tax return. Accordingly, taxpayers should consult
their own tax advisors and tax return preparers regarding the preparation of any
item on a tax return, even where the anticipated tax treatment has been
discussed herein.
The Prospectus Supplement for each series of Certificates will indicate
whether a REMIC election (or elections) will be made for the related Trust and,
if such an election is to be made, will identify all "regular interests" and
"residual interests" in the REMIC. The applicable Prospectus Supplement will
also specify if a REMIC election will not be made for a portion of the Trust
Fund. If so specified, such portion may be treated as a grantor trust for
federal income tax purposes. See "--Federal Income Tax Consequences For
Certificates As To Which No REMIC Election Is Made." For purposes of this tax
discussion, references to a "Certificateholder" or a "holder" are to the
beneficial owner of a Certificate.
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Federal Income Tax Consequences
For REMIC Certificates
General
The following discussion addresses securities ("REMIC Certificates")
representing interests in a Trust, or a portion thereof, which the Trustee will
covenant to elect to have treated as a REMIC under Sections 860A through 860G
(the "REMIC Provisions") of the Code.
An election to be treated as a REMIC for federal income tax purposes may
be made for a Trust Fund relating to a Series of Certificates. Such an election
will generally be made if the related Trust Fund would not qualify as a grantor
trust under subpart E, Part I of Subchapter J of the Code. In such a case,
Morrison & Hecker L.L.P., counsel to the Depositor, will deliver its opinion to
the effect that the Trust Fund issuing Certificates of that Series will be
treated as one or more REMICs for federal income tax purposes provided that the
provisions of the applicable Agreement are complied with and the statutory and
regulatory requirements concerning REMICs are satisfied, and the Certificates
offered thereby will be considered to be "Regular Interests" or "Residual
Interests" in the REMICs, as specified in the related Prospectus Supplement.
The following discussion is based in part upon the rules governing
original issue discount that are set forth in Sections 1271-1273 and 1275 of the
Code and in the Treasury regulations issued thereunder (the "OID Regulations"),
and in part upon the REMIC Provisions and the Treasury regulations issued
thereunder (the "REMIC Regulations"). The OID Regulations, which are effective
with respect to debt instruments issued on or after April 4, 1994, do not
adequately address certain issues relevant to, and in some instances provide
that they are not applicable to, securities such as the Certificates.
Qualification as a REMIC
In order for the Trust Fund to qualify as a REMIC, there must be ongoing
compliance on the part of the Trust Fund with the requirements set forth in the
Code. The Trust Fund must fulfill an asset test, which requires that no more
than a de minimus portion of its assets, as of the close of the third calendar
month beginning after the "Startup Day" (which for purposes of this discussion
is the date of issuance of the Certificates) and at all times thereafter, may
consist of assets other than "qualified mortgages" and "permitted investments."
The REMIC Regulations provide a "safe harbor" pursuant to which the de minimus
requirement is met if at all times the aggregate adjusted basis of the
nonqualified assets is less than one percent of the aggregate adjusted basis of
all the REMIC's assets. An entity that fails to meet the safe harbor may
nevertheless demonstrate that it holds no more than a de minimus amount of
nonqualified assets. A REMIC also must provide "reasonable arrangements" to
prevent its residual interest from being held by "disqualified organizations"
and applicable tax information to transferors or agents that violate this
requirement. Accordingly, the Agreement for each Series will contain provisions
to assure that the asset and reasonable arrangements tests will be met at all
times that the Certificates are outstanding. See "--Taxation of Holders of
Residual Certificates--Restrictions on Ownership and Transfer of Residual
Certificates."
A qualified mortgage is any obligation that is principally secured by an
interest in real property and that is either transferred to the REMIC on the
Startup Day or is purchased by the REMIC within a three-month period thereafter
pursuant to a fixed-price contract in effect on the Startup Day. Qualified
mortgages include whole mortgage loans, such as the Mortgage Loans, provided, in
general, (i) the fair market value of the real property security (including
buildings and structural components thereof) is at least 80% of the principal
balance of the Mortgage Loan either at origination or as of the Startup Day (an
original loan-to-value ratio of not more than 125% with respect to the real
property security); or (ii)
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substantially all the proceeds of the Mortgage Loan or the underlying mortgage
loan were used to acquire, improve or protect an interest in real property that,
at the origination date, was the only security for the Mortgage Loan or
underlying mortgage loan. If the Mortgage Loan has been substantially modified
other than in connection with a default or reasonably foreseeable default, it
must meet the loan-to-value test in (i) of the preceding sentence as of the date
of the last such modification or at closing. A qualified mortgage includes a
qualified replacement mortgage, which is any property that would have been
treated as a qualified mortgage if it were transferred to the REMIC pool on the
Startup Day and that is received either (i) in exchange for any qualified
mortgage within a three-month period thereafter or (ii) in exchange for a
"defective obligation" within a two-year period thereafter. A "defective
obligation" includes (i) a mortgage in default or as to which default is
reasonably foreseeable, (ii) a mortgage as to which a customary representation
or warranty made at the time of transfer to the REMIC pool has been breached,
(iii) a mortgage that was fraudulently procured by the mortgagor, and (iv) a
mortgage that was not in fact principally secured by real property (but only if
such mortgage is disposed of within 90 days of discovery). A Mortgage Loan that
is "defective" as described in clause (iv) that is not sold or, if within two
years of the Startup Day, exchanged, within 90 days of discovery, ceases to be a
qualified mortgage after such 90-day period. For purposes of this opinion, where
the applicable Prospectus Supplement provides for a fixed retained yield with
respect to the Mortgaged Properties underlying a Series of Certificates,
references to the Mortgaged Properties will be deemed to refer to that portion
of the Mortgaged Properties held by the Trust Fund which does not include the
fixed retained yield.
Permitted investments include cash flow investments, qualified reserve
assets and foreclosure property. A cash flow investment is any investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceed 13 months,
until the next scheduled distribution to holders of interests in the REMIC.
Foreclosure property is real property acquired by the REMIC in connection with
default or imminent default of a qualified mortgage and generally held for not
more than three years after the year in which such property is acquired, with
extensions granted by the Internal Revenue Service ("IRS").
In addition to the foregoing requirements, the various interests in a
REMIC also must meet certain requirements. All of the interests in a REMIC must
be either of the following: (i) one or more Classes of regular interests or (ii)
a single Class of residual interests on which distributions, if any, are made
pro rata. A regular interest is an interest in a REMIC that is issued on the
Startup Day with fixed terms, is designated as a regular interest, and
unconditionally entitles the holder to receive a specified principal amount (or
other similar amount), and provides that interest payments (or other similar
amounts), if any, at or before maturity either are payable based on a fixed rate
or a qualified variable rate or consist of a specified, nonvarying portion of
the interest payments on some or all of the qualified mortgages. A qualified
variable rate includes a rate based on a weighted average of rates on some or
all of the REMIC's qualified mortgages, which in turn bear a fixed rate or
qualified variable rate. A residual interest is an interest in a REMIC other
than a regular interest that is issued on the Startup Day and is designated as a
residual interest.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any prohibited transactions tax,
contributions tax, tax on "net income from foreclosure property" or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related Master Servicer, Special Servicer or Trustee in any case out of its
own funds, provided that such person has sufficient assets to do so, and
provided further that such tax arises out of a breach of such person's
obligations under the related Agreement and in respect of compliance with
applicable laws and regulations. Any such tax not borne by a Master Servicer,
Special Servicer or Trustee will be charged against the related Trust Fund
resulting in a reduction in amounts payable to holders of the related REMIC
Certificates.
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If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related Certificates may not be accorded the
status or given the tax treatment described below. Section 860D(b)(2) of the
Code provides that if (i) an entity ceases to be a REMIC, (ii) the Secretary of
the Treasury determines that such cessation was inadvertent, (iii) no later than
a reasonable time after the discovery of the event resulting in such cessation,
steps are taken so that such entity is once more a REMIC, and (iv) such entity,
and each person holding an interest in such entity at any time during a period
specified, agrees to make such adjustments as may be required by the Secretary
of the Treasury with respect to such period, then, notwithstanding such
terminating event, the entity will be treated as continuing to be a REMIC or
such cessation will be disregarded, whichever the Secretary of the Treasury
determines to be appropriate. Although the Code authorizes the Treasury
Department to issue regulations providing relief in the event of an inadvertent
termination of REMIC status, no such regulations have been issued. Any such
relief, moreover, may be accompanied by sanctions, such as the imposition of a
corporate tax on all or a portion of the Trust Fund's income for the period in
which the requirements for such status are not satisfied.
Status of REMIC Certificates. If a REMIC election is made with respect to
a Series of Certificates, (i) Certificates held by a domestic building and loan
association will constitute "a regular or a residual interest in a REMIC" within
the meaning of Code Section 7701(a)(19)(C)(xi) (assuming that at least 95% of
the REMIC's assets consist of cash, government securities, "loans secured by an
interest in real property" and other types of assets described in Code Section
7701(a)(19)(C)(i)-(x) (except that if the underlying mortgage loans are not
residential mortgage loans, the Certificates will not so qualify)); and (ii)
Certificates held by a real estate investment trust will constitute "real estate
assets" within the meaning of Code Section 856(c)(4)(A), and income with respect
to the Certificates will be considered "interest on obligations secured by
mortgages on real property or on interests in real property" within the meaning
of Code Section 856(c)(3)(B) (assuming, for both purposes, that at least 95% of
the REMIC's assets are qualifying assets). If less than 95% of the REMIC's
assets consist of assets described in (i) or (ii) above, then a Certificate will
qualify for the corresponding tax treatment in (i) or (ii) in the proportion
that such REMIC assets are qualifying assets. The determination as to the
percentage of the REMIC's assets that constitute assets described in the
foregoing sections of the Code will be made with respect to each calendar
quarter based on the average adjusted basis of each category of the assets held
by the REMIC during such calendar quarter. The Trustee will report those
determinations to Certificateholders in the manner and at the times required by
applicable Treasury regulations.
Holders of Certificates should be aware that (i) Certificates held by a
regulated investment company will not constitute "government securities" within
the meaning of Code Section 851(b)(4)(A)(i); and Certificates held by a real
estate investment trust will not constitute "Government Securities" within the
meaning of Code Section 856(c)(4)(A). REMIC Certificates held by certain
financial institutions will constitute an "evidence of indebtedness" within the
meaning of Code Section 582(c)(i).
It is possible that various reserves or funds will reduce the proportion
of REMIC assets that qualify under the standards described above.
Tiered REMIC Structures. For certain Series of Certificates, two or more
separate elections may be made to treat designated portions of the related Trust
Fund as REMICs ("Tiered REMICs") for federal income tax purposes. Upon the
issuance of any such Series of Certificates, counsel to the Depositor will
deliver its opinion generally to the effect that, assuming compliance with all
provisions of the related Agreement, the Tiered REMICs will each qualify as a
REMIC and the Certificates issued by the Tiered REMICs will be considered to
evidence ownership of Regular Certificates or Residual Certificates in the
related REMIC within the meaning of the REMIC Regulations of the Code.
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The Tiered REMICs will be treated as one REMIC solely for purposes of
determining whether the Certificates will be "real estate assets" within the
meaning of Section 856(c)(4)(A) of the Code and "loans secured by an interest in
real property" under Section 7701(a)(19)(C) of the Code, and whether the income
on such Certificates is interest described in Section 856(c)(3)(B) of the Code.
Taxation of REMIC Regular Certificates
Interest and Acquisition Discount. Certificates representing Regular
Interests in a REMIC ("Regular Certificates") are generally taxable to
Certificateholders in the same manner as evidences of indebtedness issued by the
REMIC. Stated interest on the Regular Certificates will be taxable as ordinary
income and taken into account using the accrual method of accounting, regardless
of the Certificateholder's normal accounting method. Reports will be made
annually to the IRS and to holders of Regular Certificates that are not excepted
from the reporting requirements regarding amounts treated as interest (including
accrual of original issue discount) on Regular Certificates.
Certificates on which interest is not paid currently ("Compound Interest
Certificates") will, and certain of the other Certificates constituting Regular
Interests may be issued with original issue discount ("OID") within the meaning
of Code Section 1273. Rules governing OID are set forth in Sections 1271-1275 of
the Code and the OID Regulations. Although Section 1272(a)(6) of the Code
contains specific provisions governing the calculation of OID on securities,
such as the Certificates, on which principal is required to be prepaid based on
prepayments of the underlying assets, regulations interpreting those provisions
have not yet been issued. Further, the application of the OID Regulations to the
Regular Certificates remains unclear in other respects because the OID
Regulations either do not address, or are subject to varying interpretations
with regard to, several relevant issues.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Regular Certificate and its issue price. The
issue price of a Regular Certificate of a Class will generally be the initial
offering price at which a substantial amount of the Certificates in the Class is
sold to the public, and will be treated by the Depositor as including, in
addition, the amount paid by the Certificateholder for accrued interest that
relates to a period prior to the issue date of such Regular Certificate. The
stated redemption price at maturity is the sum of all payments on the
Certificate other than any "qualified stated interest payments."
A holder of a Regular Certificate must include OID in gross income as
ordinary income as it accrues under a method taking into account an economic
accrual of the discount. In general, OID must be included in income in advance
of the receipt of the cash representing that income. The amount of OID on a
Regular Certificate will be considered to be zero if it is less than a de
minimus amount determined under the Code.
Under this de minimus rule, OID on a Regular Certificate will be
considered to be zero if such OID is less than .25% of the stated redemption
price at maturity of the Regular Certificate multiplied by the weighted average
maturity of the Regular Certificate. Although not specifically addressed by
regulations, it is assumed that the schedule of distributions used in
determining weighted average maturity should be based on the assumed rate of
prepayment of the Mortgage Loans and the anticipated reinvestment rate, if any
relating to the Regular Certificates (the "Prepayment Assumption"). The
Prepayment Assumption with respect to a Series of Regular Certificates will be
set forth in the related Prospectus Supplement. The holder of a Regular
Certificate includes any de minimus OID in income pro rata as stated principal
payments are received.
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If the interval between the issue date and the first Distribution Date on
a Regular Certificate is longer than the interval between subsequent
Distribution Dates (and interest paid on the first Distribution Date is less
than would have been earned if the stated interest rate were applied to
outstanding principal during each day in such interval), the stated interest
distributions on such Regular Certificate technically do not constitute
qualified stated interest. In such case a special rule, applying solely for the
purpose of determining whether OID is de minimus, provides that the interest
shortfall for the long first period (i.e., the interest that would have been
earned if interest had been paid on the first Distribution Date for each day the
Regular Certificate was outstanding) is treated as made at a fixed rate if the
value of the rate on which the payment is based is adjusted in a reasonable
manner to take into account the length of the interval. Regular Certificate
holders should consult their own tax advisors to determine the issue price and
stated redemption price at maturity of a Regular Certificate.
Qualified stated interest is interest that is unconditionally payable at
least annually during the entire term of the Certificate at either (a) a single
fixed rate that appropriately takes into account the length of the interval
between payments or (b) the current values of (i) a single "qualified floating
rate" or (ii) a single "objective rate" (each a "Single Variable Rate"). A
"current value" is the value of a variable rate on any day that is no earlier
than three months prior to the first day on which that value is in effect and no
later than one year following that day. A qualified floating rate is a rate the
variations in which reasonably can be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Regular Certificate is denominated (e.g., LIBOR). Such a rate remains qualified
even though it is multiplied by a fixed, positive multiple not exceeding 1.35,
increased or decreased by a fixed rate, or both. Certain combinations of rates
constitute a single qualified floating rate, including (a) interest stated at a
fixed rate for an initial period of less than one year followed by a qualified
floating rate, if the value of the qualified floating rate on the issue date is
intended to approximate the fixed rate, and (b) two or more qualified floating
rates that can reasonably be expected to have approximately the same values
throughout the term of the Regular Certificate. A combination of such rates is
conclusively presumed to be a single qualified floating rate if the values of
all rates on the issue date are within .25 percentage points of each other. A
variable rate that is subject to an interest rate cap, floor, "governor" or
similar restriction on rate adjustment may be a qualified floating rate only if
such restriction is fixed throughout the term of the instrument, or is not
reasonably expected as of the issue date to cause the yield on the debt
instrument to differ significantly from the expected yield absent the
restriction. An objective rate is a rate, other than a qualified floating rate,
determined by a single formula that is fixed throughout the term of the Regular
Certificate and is based on (i) one or more qualified floating rates (including
a multiple or inverse of a qualified floating rate); (ii) one or more rates each
of which would be a qualified floating rate for a debt instrument denominated in
a foreign currency; (iii) the yield or the changes in the price of one or more
items of "actively traded" personal property other than stock or debt of the
issuer or a related party, (iv) a combination of rates described in (i), (ii) or
(iii); or (v) other rates designated by the IRS in the Internal Revenue
Bulletin. Each rate described in (i) through (v) above will not be considered an
objective rate, however, if it is reasonably expected that the average value of
the rate during the first half of the Regular Certificate's term will differ
significantly from the average value of the rate during the final half of its
term. The rules for determining the qualified stated interest payable with
respect to certain variable rate Regular Certificates not bearing interest at a
Single Variable Rate are discussed below under "--Variable Rate Regular
Certificates." In the case of the Compound Interest Certificates, Interest
Weighted Certificates (as defined below) and certain of the other Regular
Certificates, none of the payments under the instrument will be considered
qualified stated interest, and thus the aggregate amount of all payments will be
included in the stated redemption price at maturity. Because Certificateholders
are entitled to receive interest only to the extent that payments are made on
the Mortgage Loans, interest might not be considered to be "unconditionally
payable."
The holder of a Regular Certificate issued with OID must include in gross
income, for all days during its taxable year on which it holds such Regular
Certificate, the sum of the "daily portions" of such
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OID. Under Code Section 1272(a)(6), the amount of OID to be included in income
by a holder of a debt instrument, such as a Regular Certificate, that is subject
to acceleration due to prepayments on other debt obligations securing such
instrument, is computed by taking into account the anticipated rate of
prepayments assumed in pricing the debt instrument (the "Prepayment
Assumption"). The IRS has not yet issued regulations that address Prepayment
Assumptions; however, the Conference Committee Report to the Tax Reform Act of
1986 indicates that the assumed rate of prepayments used in pricing can be used
for purposes of OID calculations if such assumption is reasonable for comparable
transactions. The amount of OID includible in income by a Certificateholder will
be computed by allocating to each day during a taxable year a pro-rata portion
of the OID that accrued during the relevant accrual period. The amount of OID
that will accrue during an accrual period (generally the period between interest
payments or compounding dates) is the excess (if any) of (i) the sum of (a) the
present value of all payments remaining to be made on the Regular Certificate as
of the close of the accrual period and (b) the payments during the accrual
period of amounts included in the stated redemption price of the Regular
Certificate, over (ii) the "adjusted issue price" of the Regular Certificate at
the beginning of the accrual period. The adjusted issue price of a Regular
Certificate is the sum of its issue price plus prior accruals of OID, if any,
reduced by the total payments, other than qualified stated interest payments,
made with respect to such Regular Certificate in all prior periods. Code Section
1272(a)(6) requires the present value of the remaining payments to be determined
on the basis of three factors: (i) the original yield to maturity of the Regular
Certificate (determined on the basis of compounding at the end of each accrual
period and properly adjusted for the length of the accrual period); (ii) events
(including actual prepayments) that have occurred before the end of the accrual
period; and (iii) the assumption that the remaining payments (including actual
prepayments) will be made in accordance with the original Prepayment Assumption.
The effect of this method will be to increase (or decrease) the portion of OID
required to be included in income by a Certificateholder taking into account
whether prepayments with respect to the Mortgage Loans are accruing faster
(slower) than the Prepayment Assumption. Although OID will be reported to
Certificateholders based on the Prepayment Assumption, there is no assurance
that Mortgage Loans will be prepaid at that rate and no representation is made
to Certificateholders that Mortgage Loans will be prepaid at that rate or at any
other rate.
A subsequent holder of a Regular Certificate will also be required to
include OID in gross income. If such a holder purchases a Regular Certificate
for an amount that exceeds its adjusted issue price the holder will be entitled
(as will an initial holder who pays more than a Regular Certificate's issue
price) to offset such OID by comparable economic accruals of portions of such
excess.
Certain Classes of Certificates may represent more than one Class of
Regular Interests. The Trustee intends, based on the OID Regulations, to
calculate OID on such Certificates as if, solely for the purposes of computing
OID, the separate Regular Interests were a single debt instrument.
Interest Weighted Certificates. It is not clear how income should be
accrued with respect to Regular Certificates the payments on which consist
solely or primarily of a specified portion of the interest payments on qualified
mortgages held by the REMIC ("Interest Weighted Certificate"). The Depositor
intends to take the position that all of the income derived from an Interest
Weighted Certificate should be treated as OID and that the amount and rate of
accrual of such OID should be calculated by treating the Interest Weighted
Certificate as a Compound Interest Certificate. However, the IRS could assert
that income derived from an Interest Weighted Certificate should be calculated
as if the Interest Weighted Certificate were a Certificate purchased at a
premium equal to the excess of the price paid by such Certificateholder for the
Interest Weighted Certificate over its stated principal amount, if any. Under
this approach, a Certificateholder would be entitled to amortize such premium
only if it has in effect an election under Section 171 of the Code with respect
to all taxable debt instruments held by such holder, as described below.
Alternatively, the IRS could assert that the Interest Weighted Certificate
should be taxable under the final regulations under Section 1275 governing debt
issued with contingent principal
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payments, in which case a Certificateholder might recognize income at a slower
rate than if the Interest Weighted Certificate were treated as a Compound
Interest Certificate. If the contingent payment rules were applicable to
Interest Weighted Certificates (which, as 1272(a)(6) instruments, are
specifically excluded from the scope of the contingent payment regulations)
income on certain Certificates would be computed under the "noncontingent bond
method." The noncontingent bond method would generally apply in a manner similar
to the method prescribed by the Code under Section 1272(a)(6). See "--Variable
Rate Regular Certificates." Because of uncertainty in the law, Counsel to the
Depositor will not render any opinion on these issues.
Variable Rate Regular Certificates. Regular Certificates bearing interest
at one or more variable rates are subject to certain special rules. The
qualified stated interest payable with respect to certain variable rate debt
instruments not bearing interest at a Single Variable Rate generally is
determined under the OID Regulations by converting such instruments into fixed
rate debt instruments. Instruments qualifying for such treatment generally
include those providing for stated interest at (i) more than one qualified
floating rates or (ii) a single fixed rate and (a) one or more qualified
floating rates or (b) a single "qualified inverse floating rate" (each, a
"Multiple Variable Rate"). A floating rate is a qualified floating rate if
variations in the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds, where such rate is subject to a
fixed multiple that is greater than 0.65, but not more than 1.35. Such rate may
also be increased or decreased by a fixed spread or subject to a fixed cap or
floor, or a cap or floor that is not reasonably expected as of the issue date to
affect the yield of the instrument significantly. An objective rate (other than
a qualified floating rate) is a rate that is determined using a single fixed
formula and that is based on objective financial or economic information,
provided that such information is not (i) within the control of the issuer or a
related party or (ii) unique to the circumstances of the issuer or a related
party. A qualified inverse floating rate is an objective rate equal to a fixed
rate reduced by a qualified floating rate, the variations in which can
reasonably be expected to inversely reflect contemporaneous variations in the
cost of newly borrowed funds (disregarding permissible rate caps, floors,
governors and similar restrictions such as are described above).
Purchasers of Regular Certificates bearing a variable rate of interest
should be aware that there is uncertainty concerning the application of Code
Section 1272(a)(6) and the OID Regulations to such Certificates. In the absence
of other authority, the Depositor intends to be guided by the provisions of the
OID Regulations governing variable rate debt instruments in adapting the
provisions of Code Section 1272(a)(6) to such Certificates for the purpose of
preparing tax reports furnished to the IRS and Certificateholders. In that
regard, in determining OID with respect to Regular Certificates bearing interest
at a Single Variable Rate, (a) all stated interest with respect to a Regular
Certificate is treated as qualified stated interest and (b) the amount and
accrual of OID, if any, is determined under the OID rules applicable to fixed
rate debt instruments discussed above by assuming that the Single Variable Rate
is a fixed rate equal to (i) in the case of a qualified floating rate or
qualified inverse floating rate, the issue date value of the rate or (ii) in the
case of any other objective rate, a fixed rate that reflects the yield that is
reasonably expected for the Regular Certificate. Interest and OID attributable
to the Regular Certificates bearing interest at a Multiple Variable Rate
similarly will be taken into account under a methodology that converts the
Certificate into an equivalent fixed rate debt instrument. However, in
determining the amount and accrual of OID, the assumed fixed rates are (a) for
each qualified floating rate, the value of each such rate as of the issue date
(with appropriate adjustment for any differences in intervals between interest
adjustment dates); (b) for a qualified inverse floating rate, the value of the
rate as of the issue date; and (c) for any other objective rate, the fixed rate
that reflects the yield that is reasonably expected for the Certificate. In the
case of a Certificate that provides for stated interest at a fixed rate in one
or more accrual periods and either one or more qualified floating rates or a
qualified inverse floating rate in other accrual periods, the fixed rate is
initially converted into a qualified floating rate (or a qualified inverse
floating rate, if the Certificate provides for a qualified inverse floating
rate). The qualified floating rate or qualified inverse floating rate that
replaces the fixed rate must be such that the fair market value of the
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Regular Certificate as of its issue date is approximately the same as the fair
market value of an otherwise identical debt-instrument that provides for either
the qualified floating rate or the qualified inverse floating rate. Subsequent
to converting the fixed rate into either a qualified floating rate or a
qualified inverse floating rate, the Regular Certificate is then treated as
converted into an equivalent fixed rate debt instrument in the manner described
above. If the interest paid or accrued with respect to a Single Variable Rate or
Multiple Variable Rate Certificate during an accrual period differs from the
assumed fixed interest rate, such difference will be an adjustment (to interest
or OID, as applicable) to the Certificateholder's taxable income for the taxable
period or periods to which such difference relates.
Purchasers of Certificates bearing a variable rate of interest should be
aware that the provisions of the OID Regulations governing variable rate debt
instruments are limited in scope and may not apply to some Regular Certificates
having variable rates. If such a Certificate is not subject to the provisions of
the OID Regulations governing variable rate debt instruments, it may be subject
to the provisions of the OID Regulations applicable to debt instruments having
contingent payments. Prospective purchasers of variable rate Regular
Certificates should consult their tax advisers concerning the appropriate tax
treatment of such Certificates.
Constant Yield Election for Interest. Under the OID Regulations, holders
of Regular Certificates generally may elect to include all accrued interest on a
Regular Certificate in gross income using the constant yield to maturity method.
For purposes of this election, interest includes stated interest, OID, de
minimus OID, market discount, de minimus market discount and unstated interest,
as adjusted by any premium. If a holder of a Regular Certificate makes such an
election and (i) the Regular Certificate has amortizable bond premium, the
holder is deemed to have made an election to amortize bond premium with respect
to all debt instruments having amortizable bond premium that such
Certificateholder owns or acquires or (ii) the Regular Certificate has market
discount, the holder is deemed to have made an election to include market
discount in income currently for all debt instruments having market discount
acquired during the year of the election or thereafter. See "--Market Discount"
and "--Premium." The election to accrue interest, discount and premium on a
constant yield method is irrevocable without the consent of the IRS. A holder of
a Regular Certificate should consult its tax adviser before making this
election.
Market Discount. A purchaser of a Regular Certificate may also be subject
to the market discount rules of Code Section 1276 if the stated redemption price
at maturity (or the revised issue price where OID has accrued on such
Certificate) exceeds the basis of the Certificate in the hands of the purchaser.
Such purchaser generally will be required to recognize accrued market discount
as ordinary income as payments of principal are received on such Regular
Certificate, or upon the sale or exchange of the Regular Certificate. In general
terms, until regulations are promulgated, market discount may be treated as
accruing, at the election of the Certificateholder, either (i) under a constant
yield method, taking into account the Prepayment Assumption, or (ii) in
proportion to accruals of OID (or, if there is no OID, in proportion to accruals
of stated interest) allocated to such period in relation to the sum of such
interest together with the remaining interest as of the end of such period. A
holder of a Regular Certificate having market discount may also be required to
defer a portion of the interest deductions attributable to any indebtedness
incurred or continued to purchase or carry the Regular Certificate. The deferred
portion of such interest expense in any taxable year generally will not exceed
the accrued market discount on the Regular Certificate for such year. Any such
deferred interest expense is, in general, allowed as a deduction not later than
the year in which the related market discount income is recognized or the
Regular Certificate is disposed of. As an alternative to the inclusion of market
discount in income on the foregoing basis, the Certificateholder may elect to
include such market discount in income currently as it accrues on all market
discount instruments acquired by such holder in that taxable year or thereafter,
in which case the interest deferral rule will not apply. Such election will
apply to all taxable debt instruments (including all Regular Interests) held by
the Certificateholder at the beginning of the taxable year in which the election
is made, and to all taxable debt instruments acquired thereafter by such holder,
and will be
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irrevocable without the consent of the IRS. In Revenue Procedure 92-67, the IRS
set forth procedures for taxpayers (1) electing under Code Section 1278(b) to
include market discount in income currently, (2) electing under rules of Code
Section 1276(b) to use a constant interest rate to determine accrued market
discount on a bond where the holder of the bond is required to determine the
amount of accrued market discount at a time prior to the holder's disposition of
the bond, and (3) requesting consent to revoke an election under Code Section
1278(b). Purchasers who purchase Regular Certificates at a market discount
should consult their tax advisors regarding the elections for recognition of
such discount.
Market discount with respect to a Regular Certificate will be considered
to be zero if such market discount is less than 0.25% of the remaining stated
redemption price at maturity of such Regular Certificate multiplied by the
weighted average maturity of the Regular Certificates (determined as described
above under "--Original Issue Discount") remaining after the date of purchase.
Treasury regulations implementing the market discount rules have not yet been
issued, and therefore investors should consult their own tax advisors regarding
the application of these rules as well as the advisability of making any of the
elections with respect thereto.
Premium. A Certificateholder who purchases a Regular Certificate (other
than an Interest Weighted Certificate, to the extent described above) at a cost
greater than its stated redemption price at maturity, generally will be
considered to have purchased the Certificate at a premium. The Certificateholder
may elect under Code Section 171 to amortize such premium as an offset to
interest income on such Certificate (and not as a separate deduction item) on a
constant yield method. See "--Constant Yield Election for Interest."
Although no regulations addressing the computation of premium accrual on
collateralized mortgage obligations or Regular Interests have been issued, the
legislative history of the Tax Reform Act of 1986 (the "1986 Act") indicates
that premium is to be accrued in the same manner as market discount.
Accordingly, it appears that the accrual of premium on a Regular Certificate
will be calculated using the Prepayment Assumption. If a Certificateholder makes
an election to amortize premium on a Certificate, such election will apply to
all taxable debt instruments (including all Regular Interests) held by the
holder at the beginning of the taxable year in which the election is made, and
to all taxable debt instruments acquired thereafter by such holder, and will be
irrevocable without the consent of the IRS. Purchasers who pay a premium for
Regular Certificates should consult their tax advisers regarding the election to
amortize premium and the method to be employed.
Final Treasury regulations were issued in December 1997 which address the
amortization of bond premiums (the "Premium Regulations"). The preamble to the
Premium Regulations indicate that they do not apply to Regular Interests in a
REMIC or any pool of debt instruments the yield on which may be affected by
prepayments. The Premium Regulations describe the yield method of amortizing
premium and provide that a bond holder may offset the premium against
corresponding interest income only as that income is taken into account under
the bond holder's method of accounting. For instruments that may be called or
prepaid prior to maturity, a bond holder will be deemed to exercise its option
and an issuer will be deemed to exercise its redemption right in a manner that
maximizes the holder's yield. A holder of a debt instrument may elect to
amortize bond premium under the Premium Regulations for the taxable year
containing the effective date, with the election applying to all the holder's
debt instruments held on the first day of the taxable year. Because the Premium
Regulations are specifically not applicable to Regular Certificates purchasers
who pay a premium for their Regular Certificates should consult their tax
advisors regarding any election to amortize premium and the method to be
employed.
Subordinate Certificates--Effects of Defaults, Delinquencies and Losses. As
described above under "CREDIT ENHANCEMENT --Subordinate Certificates," certain
Series of Certificates may contain one or more Classes of Subordinate
Certificates. Holders of Subordinate Certificates will be
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required to accrue interest and OID with respect to such Certificates on the
accrual method without giving effect to delays and reductions in distributions
attributable to defaults or delinquencies on any Mortgage Loans, except possibly
to the extent that it can be established that such amounts are uncollectible. As
a result, the amount of income reported by a holder of a Subordinate Certificate
in any period could significantly exceed the amount of cash distributed to such
holder in that period.
Although not entirely clear, and to the extent the bad debt rules of
Section 166 of the Code apply, it appears a Certificateholder that is a
corporation or otherwise holds such Certificates in connection with a trade or
business should generally be allowed to deduct as an ordinary loss any loss
sustained on account of partial or complete worthlessness of a Regular
Certificate. Although similarly unclear, a noncorporate Certificateholder
generally should be allowed to deduct as a short-term capital loss any loss
sustained on account of complete worthlessness of a Regular Certificate. A
noncorporate Certificateholder alternatively, depending on the factual
circumstances, may be allowed a capital loss deduction as the principal balance
of a Subordinate Certificate is reduced by reason of realized losses resulting
from liquidated Mortgage Loans; however, the IRS could contend that a
noncorporate Certificateholder should be allowed such losses only after all
Mortgage Loans in the Trust Fund have been liquidated or the Subordinate
Certificates otherwise have been retired. Special rules are applicable to banks
and thrift institutions, including rules regarding reserves for bad debts.
Holders of Subordinate Certificates should consult their own tax advisers
regarding the appropriate timing, character and amount of any loss sustained
with respect to Subordinate Certificates.
Allocation of Expenses in a Single Class REMIC. As a general rule, all of
the servicing, administrative and other non-interest expenses of a REMIC will be
taken into account by holders of the Residual Certificates. In the case of a
single class REMIC, however, the expenses and a matching amount of additional
income will be allocated, under temporary Treasury regulations, among the
holders of REMIC Regular Certificates and the holders of REMIC Residual
Certificates on a daily basis in proportion to the relative amounts of income
accruing to each Certificateholder on that day. In general terms, a single class
REMIC is one that either (i) would qualify, under existing Treasury regulations,
as a grantor trust if it were not a REMIC (treating all interests as ownership
interests, even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and is structured with the
principal purpose of avoiding the single class REMIC rules. Unless otherwise
stated in the applicable Prospectus Supplement, the expenses of the REMIC will
be allocated to holders of the related REMIC Residual Certificates in their
entirety and not to holders of the related REMIC Regular Certificates. If the
REMIC is considered to be a "single-class REMIC" and a Regular Interest
Certificateholder is an individual or a "pass-through interest holder"
(including certain pass-through entities but not including real estate
investment trusts), such expenses will be deductible only to the extent that
such expenses, plus other "miscellaneous itemized deductions" of the
Certificateholder, exceed 2% of such Certificateholder's adjusted gross income.
In addition, Code Section 68 provides that the amount of itemized deductions
otherwise allowable for the taxable year for an individual whose adjusted gross
income exceeds the applicable amount (for 1998, estimated to be $124,500, or
$62,250, in the case of a separate return of a married individual within the
meaning of Code Section 7703, which amounts will be adjusted annually for
inflation) (the "Applicable Amount") will be reduced by the lesser of (i) 3% of
the excess of adjusted gross income over the Applicable Amount or (ii) 80% of
the amount of itemized deductions otherwise allowable for such taxable year. The
partial or total disallowance of these deductions may have a significant adverse
impact on the yield of the Regular Certificate to such a holder.
Sale or Exchange of Regular Certificates. A Regular Interest
Certificateholder's tax basis in its Regular Certificate is the price such
holder pays for a Certificate, plus amounts of OID or market discount included
in income and reduced by any payments received (other than qualified stated
interest payments) and any amortized premium. Gain or loss recognized on a sale,
exchange or redemption of a Regular Certificate, measured by the difference
between the amount realized and the Regular Certificate's basis as
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so adjusted, will generally be capital gain or loss, assuming that the Regular
Certificate is held as a capital asset. If, however, a Certificateholder is a
bank, thrift or similar institution described in Section 582 of the Code, gain
or loss realized on the sale or exchange of a Certificate will be taxable as
ordinary income or loss.
Gain from the disposition of a Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent of the excess, if
any, of (i) the amount that would have been includible in the holder's income if
the yield on such Regular Certificate had equaled 110% of the applicable federal
rate (as defined in Code Section 1274(d)) as of the beginning of such holder's
holding period, over (ii) the amount of ordinary income actually recognized by
the holder with respect to such Regular Certificate prior to its sale. In
addition, all or a portion of any gain from the sale of a Certificate that might
otherwise be capital gain may be treated as ordinary income (i) if such
Certificate is held as part of a "Conversion Transaction" as defined in Code
Section 1258(c), in an amount equal to the interest that would have accrued on
the holder's net investment in the conversion transaction at 120% of the
appropriate applicable federal rate under Code Section 1274(d) in effect at the
time the taxpayer entered into the transaction reduced by any amount treated as
ordinary income with respect to any prior disposition of property that was held
as part of such transaction, or (ii) if, in the case of a noncorporate taxpayer,
an election is made under Code Section 163(d)(4) to have net capital gains taxed
as investment income at ordinary income rates for purposes of the rule that
limits the deduction of interest on indebtedness incurred to purchase or carry
property held for investment to a taxpayer's net investment income. A sale of a
REMIC Regular Certificate will be part of a "conversion transaction" if
substantially all of the holder's expected return is attributable to the time
value of the holder's net investment, and (i) the holder entered the contract to
sell the REMIC Regular Certificate substantially contemporaneously with
acquiring the REMIC Regular Certificate, (ii) the REMIC Regular Certificate is
part of a straddle, (iii) the REMIC Regular Certificate is marketed or sold as
producing capital gains, or (iv) other transactions to be specified in Treasury
regulations that have not yet been issued.
As of date of this Prospectus the maximum marginal tax rate on ordinary
income for individual taxpayers is 39.6%. The maximum marginal tax rate on
long-term capital gains for non-corporate taxpayers is 20%. The maximum marginal
tax rate on both ordinary income and long-term capital gains of corporate
taxpayers is 35% subject to certain higher marginal tax rates which phase out
the benefits of the guaranteed corporate tax rate structure. Net capital gain
realized on a capital asset which is sold after being held by 12 months or less
is subject to tax at ordinary income tax rates. Any gain realized on a capital
asset which is sold after being held for more than 12 months but not more than
18 months is subject to tax at ordinary income tax rates, subject to a maximum
tax rate of 28% (a "mid-term capital gain"). Gain realized on a sale of a
capital asset after a holding period of more than 18 months is subject to tax at
20%, assuming that the taxpayer is otherwise in a rate bracket equal to or
greater than 20%.
Taxation of the REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level taxation. Rather,
except in the case of a "Single-Class REMIC," the taxable income or net loss of
a REMIC is taken into account by the holders of Residual Interests. The Regular
Interests are generally treated as debt of the REMIC and taxed accordingly. See
"--Taxation of REMIC Regular Certificates" above.
Calculation of REMIC Income. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual having the calendar year as a taxable year, with
certain adjustments as required under Code Section 860C(b). The "daily portions"
of REMIC taxable income or net loss will be includible as ordinary income or
loss in determining the federal taxable income of holders of Residual
Certificates. See "--Taxation of Holders
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of Residual Certificates." In general, the taxable income or net loss will be
the difference between (i) the gross income produced by the REMIC's assets,
including stated interest and any OID or market discount on loans and other
assets, plus any cancellation of indebtedness income due to the allocation of
realized losses to the Regular Certificates, and (ii) deductions, including
stated interest and OID accrued on Regular Certificates, amortization of any
premium with respect to loans and servicing fees and other expenses of the
REMIC.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the Regular Interests and the Residual Interests on the "Startup
Day" (generally, the day that the interests are issued). That aggregate basis
will be allocated among the assets of the REMIC in proportion to their
respective fair market values.
The OID provisions of the Code apply to loans to individuals originated on
or after March 2, 1984, and the market discount provisions apply to all loans.
Subject to possible application of the de minimus rules, the method of accrual
by the REMIC of OID or market discount income on such loans will be equivalent
to the method under which holders of Regular Certificates accrue OID (i.e.,
under the constant yield method taking into account the Prepayment Assumption).
The REMIC will deduct OID on the Regular Certificates in the same manner that
the holders of the Certificates include such discount in income, but without
regard to the de minimus rules. See "--Taxation of REMIC Regular Certificates"
above.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the life
of the loans (taking into account the Prepayment Assumption) on a constant yield
method. Although the law is somewhat unclear regarding the recovery of premium
attributable to loans originated on or before such date, it is possible that
such premium may be recovered in proportion to payments of loan principal.
Prohibited Transactions Tax and Other Taxes. The REMIC will be subject to
a 100% tax on any net income derived from a "prohibited transaction." For this
purpose, net income will be calculated without taking into account any losses
from prohibited transactions or any deductions attributable to any prohibited
transaction that resulted in a loss. In general, prohibited transactions include
(i) subject to limited exceptions, the sale or other disposition of any
qualified mortgage transferred to the REMIC; (ii) subject to a limited
exception, the sale or other disposition of a cash flow investment; (iii) the
receipt of any income from assets not permitted to be held by the REMIC pursuant
to the Code; or (iv) the receipt of any fees or other compensation for services
rendered by the REMIC. Notwithstanding (i) and (iv), it is not a prohibited
transaction to sell REMIC pool property to prevent a default on Regular
Certificates as a result of a default on qualified mortgages or to facilitate a
clean-up call (generally, an optional termination to save administrative costs
when no more than a small percentage of the Certificates is outstanding). It is
anticipated that a REMIC will not engage in any prohibited transactions in which
it would recognize a material amount of net income. In addition, subject to a
number of limited exceptions for cash contributions, a tax is imposed at the
rate of 100% on amounts contributed to a REMIC after the close of the
three-month period beginning on the Startup Day. It is not anticipated that any
such contributions will occur or that any such tax will be imposed.
Net Income from Foreclosure Property. REMICs also are subject to federal
income tax at the highest corporate rate on "net income from foreclosure
property," determined by reference to the rules applicable to real estate
investment trusts. Generally, property acquired by deed in lieu of foreclosure
would be treated as "foreclosure property" for a period ending with the third
calendar year following the year of acquisition of such property, with a
possible extension. "Net income from foreclosure property" generally means gain
from the sale of a foreclosure property that is inventory property and gross
income
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from foreclosure property other than qualifying rents and other qualifying
income for a real estate investment trust. It is not anticipated that any REMIC
will recognize "net income from foreclosure property" subject to federal income
tax.
Liquidation of the REMIC. If a REMIC and the Trustee adopt a plan of
complete liquidation, within the meaning of Code Section 860F(a)(4)(A)(i) and
sell all the REMIC's assets (other than cash) within a 90-day period beginning
on the date of the adoption of the plan of liquidation, the REMIC will recognize
no gain or loss on the sale of its assets, provided that the REMIC credits or
distributes in liquidation all the sale proceeds plus its cash (other than
amounts retained to meet claims against the REMIC) to holders of Regular
Certificates and Residual Certificate holders within the 90-day period.
Taxation of Holders of Residual Certificates
The holder of a Certificate representing a residual interest (a "Residual
Certificate") will take into account the "daily portion" of the taxable income
or net loss of the REMIC for each day during the taxable year on which such
holder held the Residual Certificate. The daily portion is determined by
allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the REMIC for such quarter, and by allocating that
amount among the holders (on such day) of the Residual Certificates in
proportion to their respective holdings on such day. For this purpose, the
taxable income or net loss of the REMIC, in general, will be allocated to each
day in the calendar quarter ratably using such reasonable convention as set
forth in the Prospectus Supplement including, as applicable, a "30 days per
month/90 days per quarter/360 days per year" convention. The related Prospectus
Supplement will indicate whether a different allocation method will be used.
Ordinary income derived from Residual Certificates will be "portfolio income"
for taxpayers subject to Code Section 469 limitation on the deductibility of
"passive losses."
A holder of a Residual Certificate that is an individual or a
"Pass-Through Interest Holder" (including certain pass-through entities, but not
including real estate investment trusts) will be unable to deduct servicing fees
payable on the loans or other administrative expenses of the REMIC for a given
taxable year to the extent that such expenses, when aggregated with the Residual
Interest Certificateholder's other miscellaneous itemized deductions for that
year, do not exceed 2% of such holder's adjusted gross income. In addition, Code
Section 68 provides that the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds the
Applicable Amount will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the Applicable Amount, or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year. The amount of
additional taxable income reportable by Certificateholders that are subject to
the limitations of either Section 67 or Section 68 of the Code may be
substantial.
As a result, such investors may have aggregate taxable income in excess of
the aggregate amount of cash received on such Certificates with respect to
interest at the pass-through rate on such Certificates or discount thereon.
Furthermore, in determining the alternative minimum taxable income of such a
Certificateholder that is an individual, estate or trust, or a "pass-through
entity" beneficially owned by one or more individuals, estates or trusts, no
deduction will be allowed for such holder's allocable portion of servicing fees
and other miscellaneous itemized deductions of the REMIC, even though an amount
equal to the amount of such fees and other deductions will be included in such
holder's gross income. Moreover, where there is fixed retained yield with
respect to the Mortgage Loans underlying a series of Certificates or where the
servicing fees are in excess of reasonable servicing compensation, the
transaction will be subject to the application of the "stripped bond" and
"stripped coupon" rules of the Code, as described below under "--Federal Income
Tax Consequences For Certificates As To Which No Remic Election Is
Made--Stripped Certificates--Discount or Premium on Stripped Certificates."
Accordingly, such Certificates may not be appropriate investments for
individuals, estates or trusts, or
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pass-through entities beneficially owned by one or more individuals, estates or
trusts. Such prospective investors should consult with their tax advisors prior
to making an investment in such Certificates.
The holder of a Residual Certificate must report its proportionate share
of the taxable income of the REMIC regardless of whether or not it receives cash
distributions from the REMIC attributable to such income or loss. The reporting
of taxable income without corresponding distributions could occur, for example,
in certain REMICs in which the loans held by the REMIC were issued or acquired
at a discount, since mortgage prepayments cause recognition of discount income,
while the corresponding portion of the prepayment could be used in whole or in
part to make principal payments on Regular Interests issued without any discount
or at an insubstantial discount. When there is more than one Class of Regular
Certificates that distribute principal sequentially, this mismatching of income
and deductions is particularly likely to occur in the early years following
issuance of the Regular Certificates when distributions in reduction of
principal are being made in respect of earlier maturing Classes of Certificates
to the extent that such Classes are not issued with substantial discount. If
taxable income attributable to such a mismatching is realized in general, losses
would be allowed in later years as distributions on the later Classes of Regular
Certificates are made. (If this occurs, it is likely that cash distributions to
holders of Residual Certificates will exceed taxable income in later years.)
Taxable income may also be greater in the earlier years of certain REMICs as a
result of the fact that interest expense deductions, as a percentage of
outstanding principal of Regular Certificates, will typically increase over time
as lower yielding Certificates are paid, whereas interest income with respect to
loans will generally remain constant over time as a percentage of outstanding
loan principal.
In any event, because the holder of a Residual Interest is taxed on the
net income of the REMIC, the taxable income derived from a Residual Certificate
in a given taxable year will not be equal to the taxable income associated with
investment in a corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. Therefore, the after-tax yield on the
Residual Certificate will most likely be less than that of such a bond or
instrument.
Basis. A Residual Certificateholder will not be permitted to amortize
directly the cost of its Residual Certificate as an offset to its share of the
taxable income of the related REMIC. However, such taxable income will not
include cash received by the REMIC that represents a recovery of the REMIC's
basis in its assets. Such recovery of basis by the REMIC will have the effect of
amortization of the issue price of the Residual Certificates over their life.
However, in view of the possible acceleration of the income of Residual
Certificateholders discussed previously under "--Taxation of Holders of Residual
Certificates," the period of time over which such issue price is effectively
amortized may be longer than the economic life of the Residual Certificates.
A Residual Certificate may have a negative value if the net present value
of anticipated tax liabilities exceeds the present value of anticipated cash
flows. If a Residual Certificate has a negative value, it is not clear whether
its issue price would be considered to be zero or such negative amount for
purposes of determining the REMIC's basis in its assets. The REMIC Regulations
do not address whether residual interests could have a negative basis and a
negative issue price. The Depositor does not intend to treat a Class of Residual
Certificates as having a value of less than zero for purposes of determining the
bases of the related REMIC in its assets. The preamble to the REMIC Regulations
states that the Service may provide future guidance on the proper tax treatment
of payments made by a transferor of such a residual interest to induce the
transferee to acquire the interest, and Residual Certificateholders should
consult their own tax advisors in this regard.
Further, to the extent that the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in a Residual Certificate is
greater than the corresponding portion of the REMIC's basis in the Mortgage
Loans, the Residual Certificateholder will not recover a portion of such basis
until
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termination of the REMIC, unless future Treasury regulations provide for
periodic adjustments to the REMIC income otherwise reportable by such holder.
The REMIC Regulations do not currently so provide. See "--Sale or Exchange"
below regarding possible treatment of a loss upon termination of the REMIC as a
capital loss.
Limitation on Losses. The amount of the REMIC's net loss that a
Certificateholder may take into account currently is limited to the holder's
adjusted basis at the end of the calendar quarter in which such loss arises. A
holder's basis in a Residual Certificate will initially equal such holder's
purchase price, and will subsequently be increased by the amount of the REMIC's
taxable income allocated to the holder, and decreased (but not below zero) by
the amount of distributions made and the amount of the REMIC's net loss
allocated to the holder. Any disallowed loss may be carried forward
indefinitely, but may be used only to offset income of the REMIC generated by
the same REMIC. The ability of Residual Interest Certificateholders to deduct
net losses may be subject to additional limitations under the Code, as to which
such holders should consult their tax advisers.
Distributions. Distributions on a Residual Certificate, if any, will
generally not result in any additional taxable income or loss to a holder of a
Residual Certificate. If the amount of such distribution exceeds a holder's
adjusted basis in the Residual Certificate, however, the holder will recognize
gain (treated as gain from the sale of the Residual Certificate) to the extent
of such excess. If the Residual Certificate is property held for investment,
such gain will generally be capital in nature.
Limitations on Offset or Exemption of REMIC Income: Excess Inclusions and
UBTI. The portion of a Residual Interest Certificateholder's REMIC taxable
income consisting of "excess inclusion" income may not be offset by other
deductions or losses, including net operating losses, on such
Certificateholder's federal income tax return. The Small Business Job Protection
Act of 1996 eliminated a prior law exception to this rule for certain
organizations taxed under Section 593 (thrift institutions) with respect to
Residual Certificates with significant value. This change is effective for
Residual Certificates acquired in taxable years beginning after December 31,
1995. If the holder of a Residual Certificate is an organization subject to the
tax on unrelated business taxable income ("UBTI") imposed by Code Section 511,
such as a pension fund or other exempt organization, such Residual Interest
Certificateholder's excess inclusion income will be treated as unrelated
business taxable income of such Certificateholder. In addition, under Treasury
regulations yet to be issued, if a real estate investment trust, a regulated
investment company, a common trust fund or certain cooperatives were to own a
Residual Certificate, a portion of dividends (or other distributions) paid by
the real estate investment trust (or other entity) would be treated as excess
inclusion income. If a Residual Certificate is owned by a foreign person, excess
inclusion income is subject to tax at a rate of 30%, which rate may not be
reduced by treaty and is not eligible for treatment as "portfolio interest." See
"--Tax Treatment of Foreign Investors--Residual Certificates." Although not
entirely clear, the REMIC Regulations indicate that the significant value
determination is made only on the Startup Day.
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to a
Residual Certificate, over the daily accruals for such quarterly period of (i)
120% of the long term applicable federal rate on the Startup Day multiplied by
(ii) the adjusted issue price of such Residual Certificate at the beginning of
such quarterly period. The adjusted issue price of a Residual Interest at the
beginning of each calendar quarter will equal its issue price (calculated in a
manner analogous to the determination of the issue price of a Regular Interest),
increased by the aggregate of the daily accruals for prior calendar quarters,
and decreased (but not below zero) by the amount of loss allocated to a holder
and the amount of distributions made on the Residual Certificate before the
beginning of the quarter. Accordingly, the portion of the REMIC pool's taxable
income that will be treated as excess inclusions will be a larger portion of
such income as the adjusted issue price of the Residual Certificates diminishes.
For this purpose, the long-term applicable
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federal rate, which is announced monthly by the Treasury Department, is an
interest rate that is based on the average market yield of outstanding
marketable obligations of the United States government having remaining
maturities in excess of nine years.
Alternative Minimum Tax. The 1996 Act also provides new rules affecting
the determination of alternative minimum taxable income ("AMTI") of a Residual
Certificate holder. First, AMTI is calculated without regard to the special rule
that taxable income cannot be less than excess inclusion income for the year.
Second, AMTI for a taxable year cannot be less than excess inclusion income for
the year. Finally, any AMTI net operating loss deduction is computed without
regard to excess inclusions. These changes are effective for tax years beginning
after December 31, 1986, unless a Residual Certificate holder elects to have the
rules apply only to tax years beginning after August 20, 1996.
Under the REMIC Regulations, in certain circumstances, transfers of
Residual Certificates may be disregarded. See "--Restrictions on Ownership and
Transfer of Residual Certificates" and "--Tax Treatment of Foreign Investors."
Sale or Exchange. A holder of a Residual Certificate will recognize gain
or loss on the sale or exchange of a Residual Certificate equal to the
difference, if any, between the amount realized and such Certificateholder's
adjusted basis in the Residual Certificate at the time of such sale or exchange.
Any such loss may be a capital loss subject to limitation; gain which might
otherwise be capital may be treated as ordinary income under certain
circumstances. See "--Sale or Exchange of Regular Certificates" above. Except to
the extent provided in regulations, which have not yet been issued, the "wash
sale" rules of Code Section 1091 will disallow any loss upon disposition or a
Residual Certificate if the selling Certificateholder acquires any Residual
Interest in a REMIC or similar mortgage pool within six months before or after
such disposition. Any such disallowed loss would be added to the Residual
Interest Certificateholder's adjusted basis in the newly acquired Residual
Interest.
Restrictions on Ownership and Transfer of Residual Certificates. As a
condition to qualification as a REMIC, reasonable arrangements must be made to
prevent the ownership of a Residual Interest by any "Disqualified Organization."
"Disqualified Organizations" include the United States, any state or political
subdivision thereof, any foreign government, any international organization, or
any agency or instrumentality of any of the foregoing (provided, that such term
does not include an instrumentality if all of its activities are subject to tax
and a majority of its board of directors is not selected by any such
governmental entity.), a rural electric or telephone cooperative described in
Section 1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
Sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income. Accordingly, the applicable Agreement will prohibit
Disqualified Organizations from owning a Residual Certificate. In addition, no
transfer of a Residual Certificate will be permitted unless the proposed
transferee shall have furnished to the Trustee an affidavit representing and
warranting that it is neither a Disqualified Organization nor an agent or
nominee acting on behalf of a Disqualified Organization and the transferor
provides a statement in writing to the Depositor and the Trustee that it has no
actual knowledge that the statement is false.
The Prospectus Supplement relating to a Series of Certificates may provide
that a Residual Certificate may not be purchased by or transferred to any person
that is not a U.S. Person or may describe the circumstances and restrictions
pursuant to which such a transfer may be made. The term "U.S. Person" means a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof or an estate or trust that is subject to U.S.
federal income tax regardless of the source of its income.
If a Residual Certificate is transferred to a Disqualified Organization
(in violation of the restrictions set forth above), a tax will be imposed on the
transferor of such Residual Certificate at the
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time of the transfer pursuant to Code Section 860E(e)(2) equal to the product of
(i) the present value (discounted using the "applicable federal rate" for
obligations whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the Residual Certificate) of
the total anticipated excess inclusions with respect to such Residual
Certificate for periods after the transfer and (ii) the highest marginal federal
income tax rate applicable to corporations. In addition, if a Disqualified
Organization is the record holder of an interest in a pass-through entity
(including, among others, a partnership, trust, real estate investment trust,
regulated investment company or any person holding as nominee) that owns a
Residual Certificate, the pass-through entity will be required to pay tax equal
to its product of (i) the amount of excess inclusion income of the REMIC for
such taxable year allocable to the interest held by such Disqualified
Organization; multiplied by (ii) the highest marginal federal income tax rate
imposed on corporations by Code Section 11(b)(1).
Such a tax generally would be imposed on the transferor of the Residual
Certificate, except that where such transfer is through an agent (including a
broker, nominee, or other middleman) for a Disqualified Organization, the tax
would instead be imposed on such agent. A transferor of a Residual Certificate
would in no event, however, be liable for such tax with respect to a transfer if
the transferee furnishes to the transferor an affidavit that the transferee is
not a Disqualified Organization and, as of the time of the transfer, the
transferor does not have actual knowledge that such affidavit is false. The tax
also may be waived by the Treasury Department if the Disqualified Organization
promptly disposes of the Residual Certificate and the transferor pays income tax
at the highest corporate rate on the excess inclusion for the period the
Residual Certificate is actually held by the Disqualified Organization.
In addition, if a "Pass-Through Entity" has excess inclusion income with
respect to a Residual Certificate during a taxable year and a Disqualified
Organization is the record holder of an equity interest in such entity, then a
tax is imposed on such entity equal to the product of (i) the amount of excess
inclusions that are allocable to the interest in the Pass-Through Entity during
the period such interest is held by such Disqualified Organization and (ii) the
highest marginal federal corporate income tax rate. Such tax would be deductible
from the ordinary gross income of the Pass-Through Entity for the taxable year.
The Pass-Through Entity would not be liable for such tax if it has received an
affidavit from such record holder that (i) states under penalty of perjury that
it is not a Disqualified Organization or (ii) furnishes a social security number
and states under penalties of perjury that the social security number is that of
the transferee, provided that during the period such person is the record holder
of the Residual Certificate, the Pass-Through Entity does not have actual
knowledge that such affidavit is false.
Noneconomic Residual Interests. Under the REMIC Regulations, if a Residual
Certificate is a "noneconomic residual interest," as described below, a transfer
of a Residual Certificate to a non-U.S. Person will be disregarded for all
federal tax purposes if a significant purpose of the transfer was to impede the
assessment or collection of tax. If a transfer of a Residual Interest is
disregarded, the transferor would be liable for any federal income tax imposed
upon the taxable income derived by the transferee from the REMIC. A Residual
Certificate is a "noneconomic residual interest" unless, at the time of the
transfer (i) the present value of the expected future distributions on the
Residual Certificate at least equals the product of the present value of the
anticipated excess inclusions and the highest rate of tax imposed on
corporations for the year in which the transfer occurs and (ii) the transferor
reasonably expects that the transferee will receive distributions from the REMIC
at or after the time at which the taxes accrue on the anticipated excess
inclusions in an amount sufficient to satisfy the accrued taxes. The present
value is calculated based on the Prepayment Assumption, using a discount rate
equal to the applicable federal rate under Code Section 1274(d)(1) that would
apply to a debt instrument issued on the date the noneconomic residual interest
was transferred and whose term ended on the close of the last quarter in which
excess inclusions were expected to accrue with respect to the Residual Interest
at the time of transfer. A significant purpose to impede the assessment or
collection of tax exists if the transferor, at the time of transfer, knew or
should have known that the transferee would be unwilling or
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unable to pay taxes on its share of the taxable income of the REMIC. Under the
REMIC Regulations, a transferor is presumed not to have improper knowledge if
(i) the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and, as a result of
the investigation, the transferor found that the transferee had historically
paid its debts as they came due and found no significant evidence to indicate
that the transferor will not continue to pay its debts as they come due in the
future; and (ii) the transferee represents to the transferor that it understands
that, as the holder of the noneconomic residual interest, the transferee may
incur tax liabilities in excess of any cash flows generated by the residual
interest and that the transferee intends to pay taxes associated with holding of
residual interest as they become due. The Agreement will require the transferee
of a Residual Certificate to state as part of the affidavit described above
under the heading "--Disqualified Organizations" that such transferee (i) has
historically paid its debts as they come due, (ii) intends to continue to pay
its debts as they come due in the future, (iii) understands that, as the holder
of a noneconomic residual interest, it may incur tax liabilities in excess of
any cash flows generated by the Residual Certificate, and (iv) intends to pay
any and all taxes associated with holding the Residual Certificate as they
become due. The transferor must have no reason to believe that such statement is
untrue. A similar type of limitation exists with respect to certain transfers of
Residual Interests by foreign persons to U.S. Persons. See "--Tax Treatment of
Foreign Investors."
Mark-to-Market Rules. ..A "negative value" Residual Interest (and any
Residual Interest or arrangement that the IRS deems to have substantially the
same economic effect) is not treated as a security and thus may not be marked to
market under final Treasury regulations under Section 475 of the Code that
generally require a securities dealer to mark to market securities held for sale
to customers. In general, a Residual Interest has negative value if, as of the
date a taxpayer acquires the Residual Interest, the present value of the tax
liabilities associated with holding the Residual Interest exceeds the sum of (i)
the present value of the expected future distributions on the Residual Interest,
and (ii) the present value of the anticipated tax savings associated with
holding the Residual Interest as the REMIC generates losses. In addition, in the
Preamble to the temporary Treasury regulations, the IRS requested comments
regarding whether additional rules are needed to carry out the purposes of
Section 475 of the Code. Consequently, the IRS may further limit, prospectively
or retroactively, the definition of "security" for purposes of Section 475 of
the Code by carving out of such definition all Residual Interests.
Reporting Requirements and Backup Withholding
A Certificateholder, other than a Residual Interest Certificateholder,
may, under certain circumstances, be subject to "backup withholding" at the rate
of 31% with respect to distributions or the proceeds of a sale of Certificates
to or through brokers that represent interest or original issue discount on the
Certificates. This withholding generally applies if the holder of a Certificate
(i) fails to furnish the Trustee with its taxpayer identification number
("TIN"); (ii) furnishes the Trustee an incorrect TIN; (iii) fails to report
properly interest, dividends or other "reportable payments" as defined in the
Code; or (iv) under certain circumstances, fails to provide the Trustee or such
holder's securities broker with a certified statement, signed under penalty of
perjury, that the TIN provided is its correct TIN and that the holder is not
subject to backup withholding. Backup withholding will not apply, however, with
respect to certain payments made to Certificateholders, including payments to
certain exempt recipients (such as exempt organizations) and to certain Non-U.S.
Persons. Holders of the Certificates should consult their tax advisers as to
their qualification for exemption from backup withholding and the procedure for
obtaining the exemption.
The Trustee will report to the Certificateholders and to the Master
Servicer for each calendar year the amount of any "reportable payments" during
such year and the amount of tax withheld, if any, with respect to payments on
the Certificates. Any amounts withheld from distribution on Regular Certificates
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would be allowed as a credit against such Certificateholders, federal income tax
liability or would be refunded by the IRS.
Tax Treatment of Foreign Investors
Regular Certificates. Under the Code, unless interest (including OID) paid
on a Certificate (other than a Residual Certificate) is considered to be
"effectively connected" with a trade or business conducted in the United States
by a nonresident alien individual, foreign partnership or foreign corporation
(each, a "Non-U.S. Person") such interest will normally qualify as portfolio
interest (except if (i) the recipient is a holder, directly or by attribution,
of 10% or more of the capital or profits interest in the issuer or (ii) the
recipient is a controlled foreign corporation as to which the issuer is a
related person) and will not be subject to the 30% United States withholding
tax. Upon receipt of appropriate ownership statements signed under penalties of
perjury, identifying the beneficial owner and stating, together with other
statements, that the beneficial owner of the Regular Certificate is a Non-U.S.
Person, the issuer normally will be relieved of obligations to withhold tax from
such interest payments. These provisions supersede the generally applicable
provisions of United States law that would otherwise require the issuer to
withhold at a 30% rate (unless reduced or eliminated by an applicable tax
treaty) on, among other things, interest and other fixed or determinable, annual
or periodic income paid to Non-U.S. Persons. Holders of Certificates, including
"stripped certificates" (i.e., Certificates that separate ownership of principal
payments and interest payments on the Mortgage Loans), however, may be subject
to withholding to the extent that the Mortgage Loans were originated on or
before July 18, 1984.
Interest and OID of Certificateholders who are foreign persons are not
subject to withholding if they are effectively connected with a United States
business conducted by the Certificateholder. They will, however, generally be
subject to United States federal income tax at regular rates.
Residual Certificates. Payments to holders of Residual Certificates who
are foreign persons will generally be treated as interest and be subject to
United States withholding tax at 30% or any lower applicable treaty rate.
Holders should assume that such income does not qualify for exemption from
United States withholding tax as portfolio interest. If the amounts paid to
Residual Certificateholders who are Non-U.S. Persons are effectively connected
with the conduct of a trade or business within the United States by such
Non-U.S. Person, 30% (or lower treaty rate) withholding will not apply. Instead,
the amounts paid to such Non-U.S. Persons will be subject to United States
federal income tax at regular rates. It is clear that, to the extent that a
payment represents a portion of REMIC taxable income that constitutes excess
inclusion income, a holder of a Residual Certificate will not be entitled to an
exemption from or reduction of the 30% (or lower treaty rate) withholding tax.
See "--Taxation of Holders of Residual Certificates--Limitations on Offset or
Exemption of REMIC Income: Excess Inclusions". If the payments are subject to
United States withholding tax, they generally will be taken into account for
withholding tax purposes only when paid or distributed (or when the Residual
Certificate is disposed of). The Treasury has statutory authority, however, to
promulgate regulations that would require such amounts to be taken into account
at an earlier time in order to prevent the avoidance of tax. Such regulations
could, for example, require withholding prior to the distribution of cash in the
case of Residual Certificates that do not have significant value.
If a Residual Certificate has tax avoidance potential, a transfer of a
Residual Certificate to a Non-U.S. Persons will be disregarded for all federal
tax purposes. A Residual Certificate has tax avoidance potential unless, at the
time of the transfer, the transferor reasonably expects that the REMIC will
distribute to the transferee Residual Interest holder amounts that will equal at
least 30% of each excess inclusion, and that such amounts will be distributed at
or after the time at which the excess inclusion accrues and not later than the
close of the calendar year following the calendar year of accrual. If a Non-U.S.
Person transfers a Residual Certificate to a U.S. Person, and if the transfer
has the effect of allowing
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the transferor to avoid tax on accrued excess inclusions, then the transfer is
disregarded and the transferor continues to be treated as the owner of the
Residual Certificate for purposes of the withholding tax provisions of the Code.
See "--Taxation of Holders of Residual Certificates--Limitations on Offset or
Exemption of REMIC Income: Excess Inclusions."
On April 22, 1996, the IRS issued proposed regulations which, if adopted
in final form, could have an affect on the United States taxation of foreign
investors holding Regular Certificates or Residual Certificates. The proposed
regulations would apply to payments after December 31, 1997. Investors who are
Non-U.S. Persons should consult their tax advisors regarding the specific tax
consequences to them of owning Regular Certificates or Residual Certificates.
Administrative Matters
The REMIC's books must be maintained on a calendar year basis and the
REMIC must file an annual federal income tax return. The REMIC will also be
subject to the procedural and administrative rules of the Code applicable to
partnerships, including the determination of any adjustments to, among other
things, items of REMIC income, gain, loss, deduction or credit by the IRS in a
unified administrative proceeding.
In general, the Trustee will, to the extent permitted by applicable law,
act as agent of the REMIC, and will file REMIC federal income tax returns on
behalf of the related REMIC. Reports of accrued interest and OID will be made
annually to the IRS and to individuals, estates, non-exempt and non-charitable
trusts, and partnerships who are either holders of record of Regular
Certificates or beneficial owners who own Regular Certificates through a broker
or middleman as nominee. All brokers, nominees and all other non-exempt holders
of record of Regular Certificates (including corporations, non-calendar year
taxpayers, securities or commodities dealers, real estate investment trusts,
investment companies, common trust funds, thrift institutions and charitable
trusts) may request such information for any calendar quarter by telephone or in
writing by contacting the person designated in IRS Publication 938 with respect
to a particular Series of Regular Certificates. Holders through nominees must
request such information from the nominee.
The IRS's Form 1066 has an accompanying Schedule Q, Quarterly Notice to
Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation.
Treasury regulations require that Schedule Q be furnished by the REMIC to each
Residual Certificateholder by the end of the month following the close of each
calendar quarter (41 days after the end of a quarter under proposed Treasury
regulations) in which the REMIC is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the IRS concerning Code Section 67
expenses (see "--Taxation of the REMIC--Calculation of REMIC Income" above)
allocable to such holders. Furthermore, under such regulations, information must
be furnished quarterly to Residual Certificateholders, furnished annually to
holders of Regular Certificates, and filed annually with the IRS concerning the
percentage of the REMIC's assets meeting the qualified asset tests described
above under "--Qualification as a REMIC--Status of REMIC Certificates."
The holder of the largest percentage interest of the Residual Certificates
will be designated as and will act as the "tax matters person" with respect to
the REMIC in all respects. In general, the Trustee will act as attorney in fact
and agent for the tax matters person and, subject to certain notice requirements
and various restrictions and limitations, generally will have the authority to
act on behalf of the REMIC and the Residual Interest Certificateholders in
connection with the administrative and judicial review of items
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of income, deduction, gain or loss of the REMIC, as well as the REMIC's
classification. Residual Interest Certificateholders generally will be required
to report such REMIC items consistently with their treatment on the related
REMIC's tax return and may in some circumstances be bound by a settlement
agreement between the Trustee as attorney in fact and agent for tax matters
person, and the IRS concerning any such REMIC item. Adjustments made to the
REMIC tax return may require a Residual Interest Certificateholder to make
corresponding adjustments on its return, and an audit of the REMIC's tax return,
or the adjustments resulting from such an audit, could result in an audit of a
Residual Interest Certificateholder's return. No REMIC will be registered as a
tax shelter pursuant to Section 6111 of the Code because it is not anticipated
that any REMIC will have a net loss for any of the first five taxable years of
its existence. Any person that holds a Residual Certificate as a nominee for
another person may be required to furnish to the related REMIC, in a manner to
be provided in Treasury regulations, the name and address of such person and
other information.
Federal Income Tax Consequences For Certificates
As To Which No REMIC Election Is Made
Tax Status as a Grantor Trust
General. If the applicable Prospectus Supplement so specifies with respect
to a Series of Certificates, the Certificates of such Series will not be treated
as regular or residual interests in a REMIC for federal income tax purposes but
instead will be treated as an undivided beneficial ownership interest in the
Mortgage Loans. Under such circumstances the arrangement, pursuant to which the
Mortgage Loans will be held and the Certificates will be issued, will be
classified for federal income tax purposes as a grantor trust under Subpart E,
Part 1 of Subchapter J of the Code and not as an association taxable as a
corporation. In such a case, Morrison & Hecker L.L.P., counsel to the Depositor,
will deliver its opinion to the effect that the arrangement by which the
Certificates of that Series are issued will be treated as a grantor trust as
long as all of the provisions of the applicable Trust Agreement are complied
with and the statutory and regulatory requirements are satisfied.
In some Series ("Pass-Through Certificates"), there will be no separation
of the principal and interest payments on the Mortgage Loans. In such
circumstances, a Certificateholder will be considered to have purchased an
undivided interest in each of the Mortgage Loans. In other cases ("Stripped
Certificates"), sale of the Certificates will produce a separation in the
ownership of the principal payments and interest payments on the Mortgage Loans.
Each Certificateholder will be required to report on its federal income tax
return its pro rata share of the gross income derived from the Mortgage Loans
(not reduced by the amount payable as fees to the Trustee, the Master Servicer
and the Special Servicer, if any, and similar fees provided that such amounts
are reasonable compensation for services rendered (collectively, the "Servicing
Fee")), at the same time and in the same manner as such items would have been
reported under the Certificateholder's tax accounting method had it held its
interest in the Mortgage Loans directly, received directly its share of the
amounts received with respect to the Mortgage Loans and paid directly its share
of the Servicing Fees. In the case of Pass-Through Certificates, such gross
income will consist of a pro rata share of all of the income derived from all of
the Mortgage Loans and, in the case of Stripped Certificates, such income will
consist of a pro rata share of the income derived from each stripped bond or
stripped coupon in which the Certificateholder owns an interest. The holder of a
Certificate will generally be entitled to deduct such Servicing Fees under
Section 162 or Section 212 of the Code to the extent that such Servicing Fees
represent "reasonable" compensation for the services rendered by the Trustee,
the Master Servicer and the Special Servicer, if any. In the case of a
noncorporate holder, however, Servicing Fees (to the extent not otherwise
disallowed, e.g., because they exceed reasonable compensation) will be
deductible in computing such holder's regular tax liability only to the extent
that such fees, when added to other miscellaneous itemized deductions, exceed 2%
of adjusted gross income and may not be deductible to any extent in computing
such holder's alternative
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minimum tax liability. In addition, Section 68 of the Code provides that the
amount of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the Applicable Amount will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over the
applicable amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year.
Tax Status of Certificates
In the case of Stripped Certificates there is no specific legal authority
existing regarding whether the character of the Certificates, for federal income
tax purposes, will be the same as the Mortgage Loans. The IRS could take the
position that the Mortgage Loans' character is not carried over to the
Certificates in such circumstances. Pass-Through Certificates will be, and,
although the matter is not free from doubt, Stripped Certificates should be
considered to represent, "real estate assets" within the meaning of Section
856(c)(6)(B) of the Code, "loans secured by an interest in real property" within
the meaning of Section 7701(a)(19)(C) of the Code provided that the real
property securing the loan is of the type specified in such Code Section;
"obligation(s) principally secured by an interest in real property" within the
meaning of Section 860G(a)(3)(A) of the Code; and interest income attributable
to the Certificates should be considered to represent "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of Section 856(c)(3)(B) of the Code. However, Mortgage Loans secured
by non-residential real property will not constitute "loans secured by an
interest in real property" within the meaning of Section 7701(a)(19)(C) of the
Code. In addition, it is possible that various reserves or funds underlying the
Certificates may cause a proportionate reduction in the above-described
qualifying status categories of Certificates.
Pass-Through Certificates
Discount or Premium on Pass-Through Certificates. The holder's purchase
price of a Pass-Through Certificate is to be allocated among the Mortgage Loans
in proportion to their fair market values, determined as of the time of purchase
of the Certificates. In the typical case, the Depositor believes it is
reasonable for this purpose to treat each Mortgage Loan as having a fair market
value proportional to the share of the aggregate principal balances of all of
the Mortgage Loans that it represents, since the Mortgage Loans will have a
relatively uniform interest rate and other common characteristics. To the extent
that the portion of the purchase price of a Certificate allocated to a Mortgage
Loan (other than to a right to receive any accrued interest thereon and any
undistributed principal payments) is less than or greater than the portion of
the principal balance of the Mortgage Loan allocable to the Certificate, the
interest in the Mortgage Loan allocable to the Certificate will be deemed to
have been acquired at a discount or premium, respectively.
Original Issue Discount. The treatment of any discount will depend on
whether the discount represents OID or market discount. In the case of a
Mortgage Loan with OID in excess of a prescribed de minimus amount, a holder of
a Certificate will be required to report as interest income in each taxable year
its share of the amount of OID that accrues during that year, determined under a
constant yield method by reference to the initial yield to maturity of the
Mortgage Loan, in advance of receipt of the cash attributable to such income and
regardless of the method of federal income tax accounting employed by that
holder. OID with respect to a Mortgage Loan could arise for example by virtue of
the financing of points by the originator of the Mortgage Loan, or by virtue of
the charging of points by the originator of the Mortgage Loan in an amount
greater than a statutory de minimus exception, in circumstances under which the
points are not currently deductible pursuant to applicable Code provisions.
However, the OID Regulations provide that if a holder acquires an obligation at
a price that exceeds its stated redemption price, the holder will not include
any OID in gross income. In addition, if a subsequent holder acquires an
obligation for an amount that exceeds its adjusted issue price the subsequent
holder will be entitled to
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offset the OID with economic accruals of portions of such excess. Accordingly,
if the Mortgage Loans acquired by a Certificateholder are purchased at a price
that exceeds the adjusted issue price of such Mortgage Loans, any OID will be
reduced or eliminated.
Market Discount. Certificateholders also may be subject to the market
discount rules of Sections 1276-1278 of the Code. A Certificateholder that
acquires an interest in Mortgage Loans with more than a prescribed de minimus
amount of "market discount" (generally, the excess of the principal amount of
the Mortgage Loans over the purchaser's purchase price) will be required under
Section 1276 of the Code to include accrued market discount in income as
ordinary income in each month, but limited to an amount not exceeding the
principal payments on the Mortgage Loans received in that month and, if the
Certificates are sold, the gain realized. Such market discount would accrue in a
manner to be provided in Treasury regulations. The legislative history of the
1986 Act indicates that, until such regulations are issued, such market discount
would in general accrue either (i) on the basis of a constant interest rate or
(ii) in the ratio of (a) in the case of Mortgage Loans not originally issued
with OID, stated interest payable in the relevant period to total stated
interest remaining to be paid at the beginning of the period or (b) in the case
of Mortgage Loans originally issued at a discount, OID in the relevant period to
total OID remaining to be paid.
Section 1277 of the Code provides that the excess of interest paid or
accrued to purchase or carry a loan with market discount over interest received
on such loan is allowed as a current deduction only to the extent such excess is
greater than the market discount that accrued during the taxable year in which
such interest expense was incurred. In general, the deferred portion of any
interest expense will be deductible when such market discount is included in
income, including upon the sale, disposition or repayment of the loan. A holder
may elect to include market discount in income currently as it accrues, on all
market discount obligations acquired by such holder during the taxable year such
election is made and thereafter, in which case the interest deferral rule
discussed above will not apply.
A Certificateholder who purchases a Certificate at a premium generally
will be deemed to have purchased its interest in the underlying Mortgage Loans
at a premium. A Certificateholder who holds a Certificate as a capital asset may
generally elect under Section 171 of the Code to amortize such premium as an
offset to interest income on the Mortgage Loans (and not as a separate deduction
item) on a constant yield method. The legislative history of the 1986 Act
suggests that the same rules that will apply to the accrual of market discount
(described above) will generally also apply in amortizing premium with respect
to Mortgage Loans originated after September 27, 1985. If a holder makes an
election to amortize premium, such election will apply to all taxable debt
instruments held by such holder at the beginning of the taxable year in which
the election is made, and to all taxable debt instruments acquired thereafter by
such holder, and will be irrevocable without the consent of the IRS. Purchasers
who pay a premium for the Certificates should consult their tax advisers
regarding the election to amortize premium and the method to be employed.
Although the law is somewhat unclear regarding recovery of premium allocable to
Mortgage Loans originated before September 28, 1985, it is possible that such
premium may be recovered in proportion to payments of Mortgage Loan principal.
Stripped Certificates
Discount or Premium on Stripped Certificates. A Stripped Certificate may
represent a right to receive only a portion of the interest payments on the
Mortgage Loans, a right to receive only principal payments on the Mortgage
Loans, or a right to receive certain payments of both interest and principal.
Certain Stripped Certificates ("Ratio Strip Certificates") may represent a right
to receive differing percentages of both the interest and principal on each
Mortgage Loan. Pursuant to Section 1286 of the Code, the separation of ownership
of the right to receive some or all of the interest payments on an obligation
from ownership of the right to receive some or all of the principal payments
results in the
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creation of "stripped bonds" with respect to principal payments and "stripped
coupons" with respect to interest payments. Section 1286 of the Code applies the
OID rules to stripped bonds and stripped coupons. For purposes of computing OID,
a stripped bond or a stripped coupon is treated as a debt instrument issued on
the date that such stripped interest is purchased with an issue price equal to
its purchase price or, if more than one stripped interest is purchased, the
ratable share of the purchase price allocable to such stripped interest. The
Code, the OID Regulations and judicial decisions provide no direct guidance as
to how the interest and OID rules are to apply to Stripped Certificates. Under
the method described above for REMIC Regular Interest Certificates (the "Cash
Flow Bond Method"), a prepayment assumption is used and periodic recalculations
are made which take into account with respect to each accrual period the effect
of prepayments during such period. The 1986 Act prescribed the same method for
debt instruments "secured by" other debt instruments, the maturity of which may
be affected by prepayments on the underlying debt instruments. However, the 1986
Act does not, absent Treasury regulations, appear specifically to cover
instruments such as the Stripped Certificates which technically represent
ownership interests in the underlying Mortgage Loans, rather than being debt
instruments "secured by" those loans. Nevertheless, it is believed that the Cash
Flow Bond Method is a reasonable method of reporting income for such
Certificates, and it is expected that OID will be reported on that basis. In
applying the calculation to such Certificates, the Trustee will treat all
payments to be received with respect to the Certificates, whether attributable
to principal or interest on the loans, as payments on a single installment
obligation and as includible in the stated redemption price at maturity. The IRS
could, however, assert that OID must be calculated separately for each Mortgage
Loan underlying a Certificate. In addition, in the case of Ratio Strip
Certificates, the IRS could assert that OID must be calculated separately for
each stripped coupon or stripped bond underlying a Certificate.
Under certain circumstances, if the Mortgage Loans prepay at a rate faster
than the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Certificateholder's recognition of income. If, however, the
Mortgage Loans prepay at a rate slower than the Prepayment Assumption, in some
circumstances the use of this method may decelerate a Certificateholder's
recognition of income.
In the case of a Stripped Certificate which either embodies only interest
payments on the underlying loans or (if it embodies some principal payments on
the Mortgage Loans) is issued at a price that exceeds the principal payments (an
"Interest Weighted Certificate"), additional uncertainty exists because of the
enhanced potential for applicability of the contingent payment debt instrument
provisions of the OID Regulations.
Under the contingent payment debt instrument provisions, the contingent
instrument is treated as if it were a debt with no contingent payments (the
"noncontingent bond method"). Under this method the issue price is the amount
paid for the instrument and the Certificateholder is in effect put on the cash
method with respect to interest income at a comparable yield of a fixed rate
debt instrument with similar terms. The comparable yield must be a reasonable
yield for the issuer and must not be less than the applicable federal rate. A
projected payment schedule and daily portions of interest accrual is determined
based on the comparable yield. The interest for any accrual period, other than
an initial short period, is the product of the comparable yield and the adjusted
issue price at the beginning of the accrual period (the sum of the purchase
price of the instrument plus accrued interest for all prior accrual periods
reduced by any noncontingent or contingent payments on the debt instrument). If
the amount payable for a period were, however, greater or less than the amount
projected the income included for the period would be increased or decreased
accordingly. Any reduction in the income accrual for a period to an amount below
zero (a "Negative Adjustment") would be treated by a Certificateholder as an
ordinary loss to the extent of prior income accruals and may be carried forward
to offset future interest accruals. At maturity, any remaining Negative
Adjustment or any loss attributable to the Certificateholder's basis would be
treated as a loss from a sale or exchange of the Certificate. If the
loss-generating Mortgage Loan or Mortgage Loans was issued by a natural person,
such loss may be an ordinary loss because loss recognized on
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retirement of a debt instrument issued by a natural person is not a loss from a
sale or exchange. However, the IRS might contend that such loss should be a
capital loss if the Certificateholder held its Certificate as a capital asset. A
loss resulting from total interest inclusions exceeding total net Negative
Adjustments taken into account would be an ordinary loss. If a gain were
recognized on sale or exchange of the Certificate it would be capital in nature
if the Certificate were a capital asset in the hands of the Certificateholder.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates described above are not the only possible interpretations
of the applicable Code provisions. Among other possibilities, the IRS could
contend that (i) in certain Series, each non-Interest Weighted Certificate is
composed of an unstripped undivided ownership interest in Mortgage Loans and an
installment obligation consisting of stripped principal payments; (ii) the
non-Interest Weighted Certificates are subject to the contingent payment OID
Regulations; (iii) each Interest Weighted Certificate is composed of an
unstripped undivided ownership interest in the Mortgage Loans and an installment
obligation consisting of stripped interest payments; or (iv) there are as many
stripped bonds or stripped coupons as there are scheduled payments of principal
and/or interest on each Mortgage Loan.
Sale of Certificates
As a general rule, if a Certificate is sold, gain or loss will be
recognized by the holder thereof in an amount equal to the difference between
the amount realized on the sale and the Certificateholder's adjusted tax basis
in the Certificate. Except as subsequently discussed, such gain or loss will
generally be capital gain or loss if the Certificate is held as a capital asset.
In the case of Pass-Through Certificates, such tax basis will generally equal
the holder's cost of the Certificate increased by any discount income with
respect to the loans represented by such Certificate previously included in
income, and decreased by the amount of any distributions of principal previously
received with respect to the Certificate. Such gain, to the extent not otherwise
treated as ordinary income, will be treated as ordinary income to the extent of
any accrued market discount not previously reported as income. In the case of
Stripped Certificates, the tax basis will generally equal the
Certificateholder's cost for the Certificate, increased by any discount income
with respect to the Certificate previously included in income, and decreased by
the amount of all payments previously received with respect to such Certificate.
Certain financial institutions subject to the provisions of Code Section
582(c), which recognize gain on the sale of a certificate will be taxable at
ordinary income rates on such gain. In addition, gain on the sale of a Standard
Certificate will be treated as ordinary income (i) if a Pass-Through Certificate
is held as part of a "conversion transaction" as defined in Code Section
1258(c), up to the amount of interest that would have accrued on the
Pass-Through Certificateholder's applicable Federal rate in effect at the time
the taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior disposition of property that was held
as a part of such transaction or (ii) in the case of a non-corporate taxpayer,
to the extent such taxpayer has made an election under Code Section 163(d)(4) to
have net capital gains taxed as investment income at ordinary income rates.
Capital gains of certain non-corporate taxpayers generally area subject to a
lower maximum tax rate (28%) than ordinary income of such taxpayers (39.6%) for
property held for more than one year but not more than 18 months, and a still
lower maximum rate (20%) for property held for more than 18 months. The maximum
tax rate for corporations is the same with respect to both ordinary income and
capital gains.
Reporting Requirements and Backup Withholding
The Trustee will furnish, within a reasonable time after the end of each
calendar year, to each Pass-Through Certificateholder or Stripped
Certificateholder at any time during such year, such information (prepared on
the basis described above) as the Trustee deems to be necessary or desirable to
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enable such Certificateholders to prepare their federal income tax returns. Such
information will include the amount or original issue discount accrued on
Certificates held by persons other than Certificateholders exempted from the
reporting requirements. The amounts required to be reported by the Trustee may
not be equal to the proper amount of original issued discount required to be
reported as taxable income by a Certificateholder, other than an original
Certificateholder that purchased at the issue price. In particular, in the case
of Stripped Certificates, unless provided otherwise in the applicable Prospectus
Supplement, such reporting will be based upon a representative initial offering
price of such class of Stripped Certificates. The Trustee will also file such
original issue discount information with the Service. If a Certificateholder
fails to supply an accurate taxpayer identification number or if the Secretary
of the Treasury determines that a Certificateholder has not reported all
interest and dividend income required to be shown on his federal income tax
return, 31% backup withholding may be required in respect of any reportable
payments, as described above under "Material Federal Income Tax
Consequences--Federal Income Tax Consequences For REMIC Certificates--Reporting
Requirements and Backup Withholding".
Treatment of Foreign Investors
To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or original issue discount
paid by the person required to withhold tax under Code Section 1441 or 1442 to
nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or such lower rate as may
be provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the Pass-Through Certificateholder or Stripped
Certificateholder on original issue discount recognized by the Pass-Through
Certificateholder or Stripped Certificateholders on the sale or exchange of such
a Certificate also will be subject to federal income tax at the same rate.
Treasury regulations provide that interest or original issue discount paid
by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will be
subject to the same certification requirements, described above under "--Federal
Income Tax Consequences for REMIC Certificates--Tax Treatment of Foreign
Investors--Regular Certificates".
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES," potential investors should consider the state
income tax consequences of the acquisition, ownership and disposition of the
Certificates. State income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state. Therefore, potential investors
should consult their own tax advisers with respect to the various state tax
consequences of an investment in the Certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA ("ERISA
Plans") and prohibits certain transactions between ERISA Plans and persons who
are "parties in interest" (as defined under ERISA) with respect to assets of
such Plans. Section 4975 of the Code prohibits a similar set of transactions
between certain plans ("Code Plans," and together with ERISA Plans, "Plans") and
persons who are "disqualified persons" (as defined in the Code) with respect to
Code Plans. Certain employee benefit plans, such as governmental plans and
church plans (if no election has been made under Section 410(d) of the Code),
are not subject to the requirements of ERISA or Section 4975 of the Code.
However, a governmental plan or a church plan may be subject to similar
restrictions under other applicable federal
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and state law ("Similar Law"). Any such plan which is qualified under Section
401(a) of the Code and exempt from taxation under Section 501(a) of the Code is,
however, subject to the prohibited transaction rules set forth in Section 503 of
the Code. A fiduciary of a governmental plan or a church plan should make its
own determination as to the need for or availability of any exemptive relief
under Similar Law or Section 503 of the Code.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that investments be made in accordance with
the documents governing the ERISA Plan. Before investing in a Senior
Certificate, an ERISA Plan fiduciary should consider, among other factors,
whether to do so is appropriate in view of the overall investment policy and
liquidity needs of the ERISA Plan. Such fiduciary should especially consider the
sensitivity of the investments to the rate of principal payments (including
prepayments) on the Mortgage Loans, as discussed in the Prospectus Supplement
related to a Series.
Prohibited Transactions
Section 406 of ERISA and Section 4975 of the Code prohibit parties in
interest and disqualified persons with respect to ERISA Plans and Code Plans
from engaging in certain transactions involving such Plans or "plan assets" of
such Plans, unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code and Sections 502(i) and 502(l) of ERISA
provide for the imposition of certain excise taxes and civil penalties on
certain persons that engage or participate in such prohibited transactions. The
Depositor, the Underwriter, the Master Servicer, the Special Servicer, if any,
or the Trustee or certain affiliates thereof may be considered or may become
parties in interest or disqualified persons with respect to a Plan. If so, the
acquisition or holding of Certificates by, on behalf of or with "plan assets" of
such Plan may be considered to give rise to a "prohibited transaction" within
the meaning of ERISA and/or Section 4975 of the Code, unless the administrative
exemption described below or some other exemption is available.
Special caution should be exercised before "plan assets" of a Plan are
used to purchase a Senior Certificate if, with respect to such assets, the
Depositor, the Underwriter, the Master Servicer, the Special Servicer, if any,
or the Trustee or an affiliate thereof either (a) has discretionary authority or
control with respect to the investment or management of such assets or (b) 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.
Further, if the underlying assets included in a Trust Fund were deemed to
constitute "plan assets," certain transactions involved in the operation of the
Trust Fund may be deemed to constitute prohibited transactions under ERISA
and/or the Code. Neither ERISA nor Section 4975 of the Code defines the term
"plan assets."
The U.S. Department of Labor (the "Department") has issued regulations
(the "Regulations") concerning whether a Plan's assets would be deemed to
include an undivided interest in each of 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 and the prohibited
transaction provisions of ERISA and Section 4975 of the Code, if the Plan
acquires an "equity interest" (such as a Senior 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 undivided interest in each of
the underlying assets of the Trust Fund. However, it cannot be predicted in
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advance, nor can there be a 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 each class of equity interests is held by "benefit plan
investors," which are defined as ERISA Plans, Code Plans, individual retirement
accounts and employee benefit plans not subject to ERISA (for example,
governmental plans and church plans), but this exemption is tested immediately
after each acquisition of an equity interest in the entity whether upon initial
issuance or in the secondary market.
Pursuant to the Regulations, if the assets of the Trust Fund were deemed
to be "plan assets" by reason of the investment of assets of a Plan in any
Certificates, the "plan assets" of such Plan would include an undivided interest
in the Mortgage Loans, the mortgages underlying the Mortgage Loans and any other
assets held in the Trust Fund. Therefore, because the Mortgage Loans and other
assets held in the Trust Fund may be deemed to be "plan assets" of each Plan
that purchases Certificates, in the absence of an exemption, the purchase, sale
or holding of Certificates of any Series or Class by or with "plan assets" of a
Plan may result in a prohibited transaction and the imposition of civil
penalties or excise taxes. Depending on the relevant facts and circumstances,
certain prohibited transaction exemptions may apply to the purchase, sale or
holding of Certificates of any Series or Class by a Plan, for example,
Prohibited Transaction Class Exemption ("PTCE") 95-60, which exempts certain
transactions between insurance company general accounts and parties in interest;
PTCE 91-38, which exempts certain transactions between bank collective
investment funds and parties in interest; PTCE 90-1, which exempts certain
transactions between insurance company pooled separate accounts and parties in
interest; or PTCE 84-14, which exempts certain transactions effected on behalf
of a plan by a "qualified professional asset manager." There can be no assurance
that any of these exemptions will apply with respect to any Plan's investment in
any Certificates or, even if an exemption were deemed to apply, that any
exemption would apply to all prohibited transactions that may occur in
connection with such investment. Also, the Department has issued individual
administrative exemptions from application of certain prohibited transaction
restrictions of ERISA and the Code to most underwriters of mortgage-backed
securities (each, an "Underwriter's Exemption"). Such an Underwriter's Exemption
can only apply to mortgage-backed securities which, among other conditions, are
sold in an offering with respect to which such an underwriter serves as the sole
or a managing underwriter, or as a selling or placement agent. If such an
Underwriter's Exemption might be applicable to a Series of Certificates, such as
Senior Certificates, the related Prospectus Supplement will refer to such
possibility. Further, the related Prospectus Supplement may provide that certain
Classes or Series of Certificates, such as Subordinate Certificates, may not be
purchased by, or transferred to, Plans or may only be purchased by, or
transferred to, an insurance company for its general account under circumstances
that would not result in a prohibited transaction.
Any fiduciary or other Plan investor who proposes to invest "plan assets"
of a Plan in Certificates of any Series or Class should consult with its counsel
with respect to the potential consequences under ERISA and Section 4975 of the
Code or, in the case of governmental plans or church plans, Similar Law of any
such acquisition and ownership of such Certificates.
Unrelated Business Taxable Income-Residual Interests
The purchase of a Certificate evidencing an interest in the Residual
Interest in a Series that is treated as a REMIC by any employee benefit or other
plan that is exempt from taxation under Code Section 501(a), including most
varieties of Plans, may give rise to "unrelated business taxable income" as
described in Code Sections 511-515 and 860E. Further, prior to the purchase of
an interest in a Residual Interest, a prospective transferee may be required to
provide an affidavit to a transferor that it is not, nor is it purchasing an
interest in a Residual Interest on behalf of, a "Disqualified Organization,"
which term as defined above includes certain tax-exempt entities not subject to
Code Section 511, such as certain
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governmental plans, as discussed above under "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Federal Income Tax Consequences For REMIC Certificates--Taxation
of Holders of Residual Certificates" and "--Federal Income Tax Consequences for
REMIC Certificates--Taxation of Holders of Residual Certificates--Restrictions
on Ownership and Transfer of Residual Certificates."
Due to the complexity of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is particularly important that
individuals responsible for investment decisions with respect to ERISA Plans and
Code Plans consult with their counsel regarding the consequences under ERISA
and/or the Code of their acquisition and ownership of Certificates.
The sale of Certificates to a Plan is in no respect a representation by
the Depositor, the applicable underwriter or any other service provider with
respect to the Certificates, such as the Trustee, the Master Servicer and the
Special Servicer, if any, 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.
LEGAL INVESTMENT
The related Prospectus Supplement will indicate whether the Offered
Certificates will constitute "mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984 (the "Enhancement Act"). It is
anticipated that the Offered Certificates generally will not constitute
"mortgage related securities" for purposes of the Enhancement Act.
All depository institutions considering an investment in the Certificates
should review the Supervisory Policy Statement on Securities Activities dated
January 28, 1992 (the "Policy Statement") of the Federal Financial Institutions
Examination Council (to the extent adopted by their respective regulators),
which in relevant part prohibits depository institutions from investing in
certain "high-risk" mortgage securities, except under limited circumstances, and
sets forth certain investment practices deemed to be unsuitable for regulated
institutions.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions that
may restrict or prohibit investment in securities that are not "interest
bearing" or "income-paying," and provisions that may restrict or prohibit
investments in securities that are issued in book-entry form.
The appropriate characterization of the Certificates under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase Certificates, may be subject to significant
interpretive uncertainties. All investors whose investment authority is subject
to legal restrictions should consult their own legal advisers to determine
whether, and to what extent, the Certificates will constitute legal investments
for them.
PLAN OF DISTRIBUTION
The Depositor may sell the Certificates offered hereby in Series either
directly or through underwriters. The related Prospectus Supplement or
Prospectus Supplements for each Series will describe the terms of the offering
for that Series and will state the public offering or purchase price of each
Class of Certificates of such Series, or the method by which such price is to be
determined, and the net proceeds to the Depositor from such sale.
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If the sale of any Certificates is made pursuant to an underwriting
agreement pursuant to which one or more underwriters agree to act in such
capacity, such Certificates will be acquired by such underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Firm commitment underwriting and public reoffering by underwriters may
be done through underwriting syndicates or through one or more firms acting
alone. The specific managing underwriter or underwriters, if any, with respect
to the offer and sale of a particular Series of Certificates will be set forth
on the cover of the Prospectus Supplement related to such Series and the members
of the underwriting syndicate, if any, will be named in such Prospectus
Supplement. The Prospectus Supplement will describe any discounts and
commissions to be allowed or paid by the Depositor to the underwriters, any
other items constituting underwriting compensation and any discounts and
commissions to be allowed or paid to the dealers. The obligations of the
underwriters will be subject to certain conditions precedent. The underwriters
with respect to a sale of any Class of Certificates will generally be obligated
to purchase all such Certificates if any are purchased. Pursuant to each such
underwriting agreement, the Depositor will indemnify the related underwriters
against certain civil liabilities, including liabilities under the 1933 Act.
If any Certificates are offered other than through underwriters pursuant
to such underwriting agreements, the related Prospectus Supplement or Prospectus
Supplements will contain information regarding the terms of such offering and
any agreements to be entered into in connection with such offering.
Purchasers of Certificates, including dealers, may, depending on the facts
and circumstances of such purchases, be deemed to be "underwriters" within the
meaning of the 1933 Act in connection with reoffers and sales by them of
Certificates. Certificateholders should consult with their legal advisors in
this regard prior to any such reoffer and sale.
LEGAL MATTERS
Certain legal matters relating to the Certificates offered hereby will be
passed upon for the Depositor by Morrison & Hecker L.L.P., Kansas City,
Missouri, and for the Underwriters as specified in the related Prospectus
Supplement.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related Series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATINGS
It is a condition to the issuance of any Class of Offered Certificates
that they shall have been rated not lower than investment grade, that is, in one
of the four highest categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by Certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result,
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certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped interest certificates in extreme cases might fail
to recoup their initial investments. See "RISK FACTORS--Limited Nature of Credit
Ratings."
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
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INDEX OF DEFINITIONS
1933 Act....................iii
1934 Act.....................iv
1986 Act.....................66
ACMs.........................51
ADA..........................56
Agreement.................3, 16
AMTI.........................73
Applicable Amount............67
Bankruptcy Code..............43
Cash Flow Bond Method........81
CERCLA...................13, 49
Certificateholders...........18
Certificates..................i
Classes.......................i
Closing Date.................24
Code......................5, 57
Code Plans...................83
Collection Account........2, 18
Commission..................iii
Compound Interest
Certificates...............61
Counsel......................57
Credit Enhancement........3, 35
Cut-off Date..............4, 18
Department...................84
Disqualified Organiza-
tions..................14, 73
Distribution Account......2, 18
Distribution Date.........3, 18
Enhancement Act..............86
EPA..........................51
ERISA.....................5, 83
ERISA Plans..................83
Escrow Account...............28
Escrow Payments..............28
Event of Default.............33
Fannie Mae...................19
FHA..........................25
FHLMC........................19
Forfeiture Laws..............56
Form 8-K.....................24
Garn-St. Germain Act.........52
Hazardous Materials..........50
HUD..........................25
Installment Contracts.....1, 22
Interest Weighted
Certificate............63, 81
IRS..........................59
Lead Paint Act...............51
Lender Liability Act.........49
Master Servicer..............27
Master Servicer Remittance
Date......................19
Midland......................16
mid-term capital gain........68
Mortgage..................1, 22
Mortgage Loan.............1, 22
Mortgage Loan File...........24
Mortgage Loan Groups.........24
Mortgage Loan Schedule.......24
Mortgage Loans...............ii
Mortgage Pool.............ii, 1
Mortgaged Property........1, 22
Multiple Variable Rate.......64
NCUA.........................54
Negative Adjustment..........81
noncontingent bond method....81
Non-U.S. Person..............76
Note.........................23
Offered Certificates..........i
OID..........................61
OID Regulations..............58
Pass-Through Certificates....78
Pass-Through Rate...........iii
Permitted Investments........19
Plan..........................5
Plans........................83
Policy Statement.............86
Premium Regulations..........66
Prepayment Assumption....61, 63
Property Protection Expenses.19
PTCE.........................85
Rating Agency.............5, 17
Ratio Strip Certificates.....80
Registration Statement......iii
Regular Certificates......5, 61
Regular Interests.............5
Regulations..................84
Relief Act...................53
REMIC........................ii
REMIC Certificates...........58
REMIC Provisions.............58
REMIC Regulations............58
REO Account..................19
REO Property.................17
Reserve Account..............17
Reserve Fund.................36
Residual Certificate.........70
Residual Certificates.........5
Residual Interests............5
S&P..........................20
Securities Act of 1933......iii
Seller.......................26
Senior Certificates..........35
Series........................i
Servicing Fee............30, 78
Similar Law..................84
Simple Interest Loans........23
Single Variable Rate.........62
Special Servicer..............1
Special Servicing Fee........30
Specially Serviced Mortgage
Loans......................27
Startup Day..............58, 69
Stripped Certificates........78
Subordinate Certificates.....35
Tax Reform Act of 1986...63, 66
Tiered REMICs................60
TIN..........................75
Title V......................54
Title VIII...................54
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Trust Fund................i, 17
Trustee...................1, 22
U.S. Person..................73
UBTI.........................72
UCC..........................40
Underwriter's Exemption......85
USTs.........................51
Voting Rights................15
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