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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT
OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO _________.
COMMISSION FILE NUMBER: 333-28031-1
HEADLANDS MORTGAGE SECURITIES INC. (AS SPONSOR UNDER A SALE AND SERVICING
AGREEMENT DATED AS OF AUGUST 1, 1997 PROVIDING FOR THE ISSUANCE OF HELOC NOTES,
SERIES 1997-1)
HEADLANDS MORTGAGE SECURITIES INC.
(Exact Name of registrant as specified in its charter)
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DELAWARE 68-0397342
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
1100 LARKSPUR LANDING CIRCLE, SUITE 101, 94939
LARKSPUR, CALIFORNIA (Zip code)
(Address of principal executive offices)
(415) 461-6790
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: Securities registered pursuant to Section 12(g) of the Act:
NONE NONE
(Title of class) (Title of class)
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-affiliates of
Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of specified date within 60 days prior to the date of filing:
NOT APPLICABLE
Documents incorporated by reference:
NOT APPLICABLE
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HEADLANDS MORTGAGE SECURITIES INC.
HELOC NOTES, SERIES 1997-1
INDEX
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Page
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PART I ............................................................. 3
ITEM 1 - BUSINESS...................................... 3
ITEM 2 - PROPERTIES.................................... 3
ITEM 3 - LEGAL PROCEEDINGS............................. 3
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.............................. 3
PART II ............................................................. 3
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS................... 3
ITEM 6 - SELECTED FINANCIAL DATA....................... 3
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 3
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA... 3
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........ 3
PART III ............................................................. 4
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT................................ 4
ITEM 11 - EXECUTIVE COMPENSATION........................ 4
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT......................... 4
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 4
PART IV ............................................................. 4
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K........................... 4
SIGNATURES ........................................................... 5
INDEX TO EXHIBITS .................................................... 6
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PART I
ITEM 1 - BUSINESS
Not Applicable.
ITEM 2 - PROPERTIES
Headlands Mortgage Securities Inc. (the "Sponsor") will furnish
information regarding the Mortgaged Properties by reference to the Annual
Compliance Certificates to be filed herein under Item 14.
ITEM 3 - LEGAL PROCEEDINGS
The Sponsor is not aware of any material pending legal proceedings
involving either the HELOC Notes, Series 1997-1 (the "Trust"), established
pursuant to the Sale and Servicing Agreement (the "Agreement") dated August 1,
1997, among First National Bank of Chicago, as trustee (the "Trustee"),
Headlands Mortgage Securities Inc., as Sponsor, Headlands Home Equity Loan
Trust 1997-1, as issuer (the "Issuer"), and Headlands Mortgage Company, as
servicer (the "Servicer"); the Trustee; the Sponsor; the Issuer or the Servicer
which relates to the Trust.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted to a vote of the holders of beneficial
interests in the Trust through the solicitation of proxies or otherwise.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
To the best knowledge of the Sponsor, there is no established public trading
market for the Certificates.
All of the HELOC Notes issued by the Trust are held by the Depository
Trust Company ("DTC") which in turn maintains records of holders of beneficial
interests in such HELOC Notes. Based on information obtained by the Trust from
DTC, as of December 31, 1998, there were four (4) holders of the HELOC Notes.
ITEM 6 - SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Not Applicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Not Applicable.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes of accountants or disagreements on accounting or
financial disclosures between the Sponsor and its accountants.
3
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PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not Applicable.
ITEM 11 - EXECUTIVE COMPENSATION
Not Applicable.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Sponsor is a wholly-owned subsidiary of Headlands Mortgage Company,
a California corporation. Headlands Home Equity Loan Trust 1997-1 is a Delaware
statutory business trust wholly-owned by the Sponsor.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
Not applicable.
2. Financial Statement Schedules:
Not applicable.
3. Exhibits:
Exhibit No. Description
----------- -----------
99.1 Statement of Compliance of the Servicer.
99.2 Annual Report of Independent Accountant
with respect to the Servicer's overall
servicing operations.
99.3 Statement of Compliance of the Issuer
under the Indenture.
4
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Sponsor has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
By: HEADLANDS MORTGAGE SECURITIES INC.,
As Sponsor
By: /s/ Gilbert J. MacQuarrie
-------------------------
Name: Gilbert J. MacQuarrie
Title: Vice President, Treasurer and
Secretary
Date: March 26, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Sponsor
and in the capacities and on the dates indicated:
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Signature Position Date
- --------------------------- ------------------------------------------------- ---------------
/s/ Peter T. Paul President and Director March 26, 1998
- --------------------------- (Principal Executive Officer)
Peter T. Paul
/s/ Becky S. Poisson Vice President and Director March 26, 1998
- ---------------------------
Becky S. Poisson
/s/ Gilbert J. MacQuarrie Vice President, Treasurer, Secretary and Director March 26, 1998
- --------------------------- (Principal Financial Officer and Principal
Gilbert J. MacQuarrie Accounting Officer)
/s/ Steven M. Abreu Vice President and Director March 26, 1998
- ---------------------------
Steven M. Abreu
- --------------------------- Director March __, 1998
Kenneth Siprelle
- --------------------------- Director March __, 1998
John Edmonds
/s/ Kristen Decker
- --------------------------- Vice President March 26, 1998
Kristen Decker
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5
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INDEX TO EXHIBITS
Item 14(C)
Exhibit No. Description
- ----------- -----------
99.1 Statement of Compliance of the Servicer.
99.2 Annual Report of Independent Accountant with respect to the
Servicer's overall servicing operations.
99.3 Statement of Compliance of the Issuer under the Indenture.
6
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EXHIBIT 99.1
[HEADLANDS MORTGAGE COMPANY LETTERHEAD]
March 26, 1998
First National Bank of Chicago
One North State Street, 9th Floor
Chicago, IL 60602-0126
Attn: Corporate Trust Administration Department
Capital Markets Assurance Corporation Credit Enhancement
885 Third Avenue
New York, NY 10022-4834
Attn: Managing Director
Standard & Poor's
26 Broadway
New York, NY 10004
Moody's (Residential Monitoring Group)
4th Floor, 99 Church Street
New York, NY 10007
RE: Headlands HELOC Notes, Series 1997-1; Annual Compliance
-------------------------------------------------------
Certificate
- -----------
Ladies and Gentlemen:
Pursuant to Section 3.09 of the Sale and Servicing Agreement, with respect
to Headlands HELOC Notes, Series 1997-1, the undersigned officer of Headlands
Mortgage Company, in its capacity as Servicer under the Sale and Servicing
Agreement certifies that:
1. a review of the activities of the Servicer and performance under the
Sale and Servicing Agreement during the year ended December 31, 1997,
has been made under the undersigned's supervision; and
2. To the best of the undersigned's knowledge following reasonable
inquiry, the Servicer is has fulfilled all of its material obligations
under the Sale and Servicing Agreement throughout the fiscal year ended
December 31, 1997, and there has been no default in the fulfillment of
any such obligation.
Very truly yours
HEADLANDS MORTGAGE COMPANY
as Servicer
By: /s/ Gilbert J. MacQuarrie
-----------------------------------------------------
Gilbert J. MacQuarrie
Vice President, Treasurer, Secretary and Director
GJM:pt
7
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EXHIBIT 99.2
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Headlands Mortgage Company:
We have examined management's assertion about Headlands Mortgage Company's (the
Company) compliance with the minimum servicing standards set forth in the
Mortgage Bankers Association of America's (MBA's) Uniform Single Attestation
Program for Mortgage Bankers (USAP) as of and for the year ended December 31,
1997 included in the accompanying management assertion. Management is
responsible for the Company's compliance with those minimum servicing standards.
Our responsibility is to express an opinion on management's assertion about the
Company's compliance based on our examination.
Our examination was made in accordance with standards established by the
American Institute of Certified Public Accountants and, accordingly, included
examining, on a test basis, evidence about the Company's compliance with the
minimum servicing standards and performing such other procedures as we
considered necessary in the circumstances. We believe that our examination
provides a reasonable basis for our opinion. Our examination does not provide a
legal determination on the Company's compliance with the minimum servicing
standards.
In our opinion, management's assertion that the Company has complied in all
material respects with the aforementioned minimum servicing standards as of
and for the year ended December 31, 1997 is fairly stated, in all material
respects.
February 13, 1998
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[HEADLANDS MORTGAGE COMPANY LETTERHEAD]
As of and for the year ended December 31, 1997, Headlands Mortgage Company (the
Company) has complied in all material respects with the minimum servicing
standards set forth in the Mortgage Bankers Association of America's Uniform
Single Attestation Program for Mortgage Bankers. As of and for this same
period, the Company had in effect a fidelity bond and errors and omissions
policy both in the amount of $5.5 million.
/s/ Dennis Tussey
---------------------------
Dennis Tussey
Senior Vice President
Loan Administration March 26, 1998
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EXHIBIT 99.3
[HEADLANDS MORTGAGE SECURITIES, INC., LETTERHEAD]
March 26, 1998
First National Bank of Chicago
One North State Street, 9th Floor
Chicago, IL 60602-0126
Attn: Corporate Trust Administration Department
Capital Markets Assurance Corporation Credit Enhancement
885 Third Avenue
New York, NY 10022-4834
Attn: Managing Director
RE: Headlands HELOC Notes, Series 1997-1; Annual Compliance
-------------------------------------------------------
Certificate
-----------
Ladies and Gentlemen:
Pursuant to Section 3.9 of the Indenture and otherwise in compliance with
the requirements of the Trust Indenture Act, Section 314(a)(4), with respect to
Headlands HELOC Notes, Series 1997-1, the undersigned officer of Headlands
Mortgage Securities, Inc., in its capacity as Manager of Headlands Home Equity
Loan Trust (the "Issuer") certifies that:
1. a review of the activities of the Issuer and performance under the
Indenture during the year ended December 31, 1997, has been made under
the undersigned's supervision; and
2. To the best of the undersigned's knowledge following reasonable
inquiry, the Issuer is in compliance with all conditions and covenants
under which it is obligated pursuant to the Indenture, and there has
been no default in the compliance of any such condition or covenant.
Very truly yours
HEADLANDS HOME EQUITY LOAN TRUST
By: HEADLANDS MORTGAGE SECURITIES, INC.
as Manager
By: /s/ Gilbert J. MacQuarrie
-----------------------------------------------------
Gilbert J. MacQuarrie
Vice President, Treasurer, Secretary and Director
GJM:pt
8
