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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: 333-22681-2
SEQUOIA MORTGAGE FUNDING CORPORATION (AS SPONSOR OF THE SEQUOIA MORTGAGE TRUST
2, THE
ISSUER OF COLLATERALIZED MORTGAGE BONDS UNDER AN INDENTURE DATED AS OF OCTOBER
1, 1997)
SEQUOIA MORTGAGE FUNDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 91-1771827
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
591 REDWOOD HIGHWAY, SUITE 3100 94941
MILL VALLEY, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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(415) 389-7373
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT SECURITIES REGISTERED PURSUANT
TO SECTION 12(b) OF THE ACT: 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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SEQUOIA MORTGAGE TRUST 2 BONDS
INDEX
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PAGE
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PART I
ITEM 1. BUSINESS.................................................... 1
ITEM 2. PROPERTIES.................................................. 1
ITEM 3. LEGAL PROCEEDINGS........................................... 1
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 1
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS..................................................... 1
ITEM 6. SELECTED FINANCIAL DATA..................................... 1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................... 1
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.................................... 1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 2
ITEM 11. EXECUTIVE COMPENSATION...................................... 2
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 2
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 2
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K......................................................... 2
SIGNATURES............................................................. 3
INDEX TO EXHIBITS...................................................... 4
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PART I
ITEM 1. BUSINESS
Not Applicable.
ITEM 2. PROPERTIES
Sequoia Mortgage Funding Corporation (the "Depositor") 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 Depositor is not aware of any material pending legal proceedings
involving either the bonds issued by Sequoia Mortgage Trust 2 ("Trust 2" or the
"Issuer"), established pursuant to the Deposit Trust Agreement, dated October 1,
1997, by and between the Depositor and Wilmington Trust Company as owner trustee
(the "Owner Trustee"); the Master Servicing Agreement, as amended, dated as of
June 26, 1997, between Redwood Trust, Inc., as owner (the "Owner") and Merrill
Lynch Credit Corporation as master servicer (the "Master Servicer"); the
Depositor; the Issuer; the Owner Trustee; the Owner or the Master Servicer
which relates to the bonds.
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 Trust 2 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 Depositor, there is no established public
trading market for the Bonds issued under Trust 2.
All of the Bonds issued by Trust 2 are held by the Depository Trust Company
("DTC") which in turn maintains records of holders of beneficial interests in
such Bonds. Based on information obtained by the Trusts from DTC, as of December
31, 1997, there were fewer than 300 holders of the Bonds issued by Trust 2.
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 Depositor and its accountants.
1
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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 Depositor is a wholly-owned subsidiary of Redwood Trust, Inc., a
Maryland corporation. Sequoia Mortgage Trust 2 is a Delaware statutory business
trust wholly-owned by the Depositor.
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:
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EXHIBIT NO. DESCRIPTION
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99.1 Statement of Compliance of the Seller/Servicer of Trust 2
99.2 Annual Report of Independent Accountant with respect to the
Seller/Servicer's overall servicing operations under Trust 2
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2
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Depositor has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
By: SEQUOIA MORTGAGE FUNDING CORPORATION
As Depositor
By: /s/ GEORGE E. BULL III
---------------------------------------
George E. Bull III
Chairman of the Board
and Chief Executive Officer
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 Depositor
and in the capacities and on the dates indicated: indicated:
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SIGNATURE POSITION DATE
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/s/ GEORGE E. BULL III Chairman of the Board, March 26, 1998
- -------------------------------------------------------- Director
George E. Bull III (Principal Executive
Officer
/s/ DOUGLAS B. HANSEN* President, Director March 26, 1998
- --------------------------------------------------------
Douglas B. Hansen
/s/ FREDERICK H. BORDEN* Secretary, Director March 26, 1998
- --------------------------------------------------------
Frederick H. Borden
/s/ VICKIE L. RATH* Treasurer, Assistant March 26, 1998
- -------------------------------------------------------- Secretary
Vickie L. Rath (Principal Accounting
Officer)
(Principal Financial
Officer)
Director March , 1998
- --------------------------------------------------------
John Connolly IV*
Director March , 1998
- --------------------------------------------------------
Craig Severance*
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INDEX TO EXHIBITS
ITEM 14(C)
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EXHIBIT NO. DESCRIPTION
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99.1 Statement of Compliance of the Seller/Servicer of Trust 2...
99.2 Annual Report of Independent Accountant with respect to the
Seller/Servicer's overall servicing operations under Trust
2...........................................................
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EXHIBIT 99.1
OFFICER'S CERTIFICATE
ANNUAL STATEMENT AS TO COMPLIANCE
Re: Norwest Bank, as Trustee for Sequoia Trust 2 ("Issuer"),
Merrill Lynch Corporation ("Company"), Servicing Agreement
dated as of March 7, 1997 ("Agreement")
Pursuant to the above Agreement, the Company hereby states:
1. A review of the activities of the Servicer during the 1997
calendar year and of its performance under the Agreement has been made under
the supervision of each of the undersigned officers, and
2. To the best of each such officer's knowledge, based on such
review, the Company has fulfilled all of its obligations under the Agreement in
all material respects throughout such year.
Dated: March 25, 1998
Merrill Lynch Credit Corporation
By: /s/ Linzy S. Banks
Linzy S. Banks
Vice President
By: /s John M. Wheeler
John M. Wheeler
Senior Vice President
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EXHIBIT 99.2
[DELOTTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT ACCOUNTANT'S REPORT ON
MANAGEMENT'S ASSERTION ABOUT COMPLIANCE WITH
UNIFORM SINGLE ATTESTATION PROGRAM REQUIREMENTS
Merrill Lynch Credit Corporation and subsidiaries:
We have examined management's assertion about Merrill Lynch Credit
Corporation's compliance with the minimum servicing standards identified in the
Mortgage Bankers Association of America's Uniform Single Attestation Program
for Mortgage Bankers (USAP) as of and for the fiscal year ended December 26,
1997, included in the accompanying management assertion. Management is
responsible for Merrill Lynch Credit Corporation's compliance with those
minimum servicing standards. Our responsibility is to express an opinion on
management's assertion about the entity'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 Merrill Lynch Credit Corporation'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 determining on Merrill Lynch Credit Corporation's
compliance with the minimum servicing standards.
In our opinion, management's assertion that Merrill Lynch Credit Corporation
complied with the aforementioned minimum servicing standards as of and for the
fiscal year ended December 26, 1997 is fairly stated, in all material respects.
/s/ Delotte & Touche LLP
February 23, 1998
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[MERRILL LYNCH CREDIT CORPORATION LETTERHEAD]
February 23, 1998
Delotte & Touche LLP
2801 Independent Drive
Jacksonville, FL 32202
Ladies and Gentlemen:
As of and for the year ended December 26, 1997, Merrill Lynch Credit
Corporation and subsidiaries (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 the same period, the Company had in effect fidelity
bond and errors and omissions insurance coverage in the amounts of $325,000,000
and $11,000,000 respectively.
/s/ Michael A. Johnston
Michael A. Johnston
Chairman/Chief Executive Officer
/s/ Kevin M. O'Hanlon
Kevin M. O'Hanlon
President/Chief Operating Officer
/s/ Francis X. Ervin, Jr.
Francis X. Ervin, Jr.
Senior Vice President/Chief
Financial Officer
/s/ Steven T. Hardy
Steven T. Hardy
Vice President/Controller
