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: 333-16679-3
Headlands Mortgage Securities Inc. (as Sponsor under a Pooling and Servicing
Agreement dated as of June 1, 1997 providing for the issuance of the Mortgage
Pass-Through Certificates, Series 1997-3)
HEADLANDS MORTGAGE SECURITIES INC.
(Exact Name of registrant as specified in its charter)
Delaware 68-0397342
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
1100 Larkspur Landing Circle, Suite 101,
Larkspur, California
(Address of principal executive 94939
offices) (Zip code)
(415) 461-6790
(Registrant's telephone number, including area code)
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)
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
<PAGE>
HEADLANDS MORTGAGE SECURITIES INC.
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1997-3
INDEX
Page
----
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............ 8
PART IV ..................................................................... 8
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K....................................... 8
SIGNATURES ................................................................. 10
INDEX TO EXHIBITS............................................................ 11
2
<PAGE>
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 Mortgage Pass-Through Certificates Series 1997-3 (the
"Trust"), established pursuant to the Pooling and Servicing Agreement (the
"Agreement") dated June 1, 1997 among The Bank of New York, as trustee (the
"Trustee"), Headlands Mortgage Securities Inc., as Sponsor and Headlands
Mortgage Company, as servicer (the "Servicer"); the Trustee; the Sponsor; 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 Class A-I Certificates, Class A-II Certificates, Class B
Certificates, Class X Certificates and Class PO Certificates issued by the Trust
are held by the Depository Trust Company ("DTC") which in turn maintains records
of holders of beneficial interests in such Certificates. Based on information
obtained by the Trust from DTC, as of December 31, 1997, there were 36 holders
of the Class A Certificates, 3 holders of the Class B Certificates, 16 holders
of the Class C Certificates, 1 holder of the Class PO Certificates, 1 holder of
the Class R Certificates and 1 holder of the Class X Certificates.
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
<PAGE>
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 following table sets forth (i) the name and address of each
entity owning more than 5% of the outstanding principal amount of each Class of
Certificates of the Trust; (ii) the principal amount of the Class of
Certificates owned by each and (iii) the percent that the principal amount of
the Class of Certificates owned by such entity represents of the outstanding
principal amount of such Class of Certificates. The information set forth in the
table for the Certificates is based upon information obtained by the Trust from
DTC and represents ownership of beneficial interest in the Certificates held by
DTC. The Sponsor is not aware of any Schedules 13D or 13G filed with the
Securities and Exchange Commission in respect of the Certificates.
Class A-I-1
Name and Address Principal Amount % of Class
Chase Manhattan Bank/Chemical $32,914,587 100%
4 New York Plaza
Proxy Department, 13th Floor
New York, NY 10004
Class A-I-2
Name and Address Principal Amount % of Class
Chase Manhattan Bank/Chemical $7,042,375 100%
4 New York Plaza
Proxy Department, 13th Floor
New York, NY 10004
Class A-I-3
Name and Address Principal Amount % of Class
Citibank, N.A. $22,070,000 100%
P.O. Box 30576
Tampa, FL 33630-3576
Class A-I-4
Name and Address Principal Amount % of Class
Bank of New York $2,667,000 35.8%
925 Patterson Plank Rd.
Secaucus, NJ 07094
4
<PAGE>
Chase Manhattan Bank, Trust $980,000 13.1%
4 New York Plaza
13th Floor
New York, NY 10004
Deutsche Morgan Grenfell Inc. $900,000 12.0%
1251 - 6th Avenue
New York, NY 10020
Name not found $850,000 11.4%
Citibank, N.A. $830,000 11.1%
P.O. Box 30576
Tampa, FL 33630-3576
Northern Trust Company $690,000 9.3%
801 S. Canal, C-IN
Chicago, IL 60607
Class A-I-5
Name and Address Principal Amount % of Class
SSB - Custodian $20,964,307 100%
Global Corp. Action Dept. JAB5W
P.P. Box 1631
Boston, MA 02105-1631
Class A-I-6
Name and Address Principal Amount % of Class
Bank of New York $4,495,693 21.4%
925 Patterson Plank Road
Secaucus, NJ 07094
Name not found $5,280,000 25.1%
Northern Trust Company $3,640,000 17.3%
801 S. Canal, C-IN
Chicago, IL 60607
Union Bank of California, N.A. $1,990,000 9.5%
Safekeeping Department
475 Sansome Street, 11th Floor
San Francisco, CA 94145
Wells Fargo Bank, N.A. $1,790,000 8.5%
26610 West Agoura Rd.
Calabasas, CA 91307
Boston Safe Deposit and Trust Company $1,400,000 6.7%
c/o Mellon Bank N.A.
Three Mellon Bank Center, Room 153-3015
Pittsburgh, PA 15259
5
<PAGE>
Class A-I-7
Name and Address Principal Amount % of Class
Morgan Stanley & Co. Inc. $2,035,712 100%
One Pierreport Plaza, 7th Floor
Brooklyn, NY 11201
Class A-II-1
Name and Address Principal Amount % of Class
Chase Manhattan Bank, Chemical $11,822,692 100%
4 New York Plaza
Proxy Department, 13th Floor
New York, NY 10004
Class A-II-2
Name and Address Principal Amount % of Class
First Union National Bank $7,782,000 100%
401 South Tryon Street
Charlotte, NC 28288
Class A-II-3
Name and Address Principal Amount % of Class
Morgan Stanley & Co. Inc. $2,242,000 100%
One Pierreport Plaza, 7th Floor
Brooklyn, NY 11201
Class A-II-4
Name and Address Principal Amount % of Class
SSB - Custodian $14,000,000 100%
Global Corp. Action Dept. JAB5W
P.P. Box 1631
Boston, MA 02105-1631
Class B-1
Name and Address Principal Amount % of Class
Bankers Trust Company $6,403,360 100%
c/o BT Services Tennessee Inc.
648 Gressmere Park Drive
Nashville, TN 37211
6
<PAGE>
Class B-2
Name and Address Principal Amount % of Class
Bankers Trust Company $4,074,866 100%
c/o BT Services Tennessee Inc.
648 Gressmere Park Drive
Nashville, TN 37211
Class B-3
Name and Address Principal Amount % of Class
Chase Manhattan Bank $2,910,617 100%
4 New York Plaza
13th Floor
New York, NY 10004
Class C-1
Name and Address Principal Amount % of Class
Bear, Stearns Securities Corp. $15,000,000 49.5%
One Metrotech Center North
4th Floor
Brooklyn, NY 11201-3862
Chase Manhattan Bank $4,000,000 13.2%
4 New York Plaza
13th Floor
New York, NY 10004
Northern Trust Company $3,315,851 10.9%
801 S. Canal, C-IN
Chicago, IL 60607
SSB - Custodian $3,000,000 9.9%
Global Corp. Action Dept. JAB5W
P.P. Box 1631
Boston, MA 02105-1631
Investors Bank & Trust/M.F. Custody $2,500,000 8.2%
200 Clarendon Street
15th Floor, Hancock Tower
Boston, MA 02116
Bankers Trust Company $2,500,000 8.2%
c/o BT Services Tennessee Inc.
648 Gressmere Park Drive
Nashville, TN 37211
7
<PAGE>
Class C-2
Name and Address Principal Amount % of Class
Morgan Stanley & Co. Incorporated $30,315,851 100%
One Pierreport Plaza, 7th Floor
Brooklyn NY 11201
Class C-3
Name and Address Principal Amount % of Class
Fiduciary Trust Company $23,020,000 60.0%
International
Two World Trade Center, 96th Floor
New York, NY 10048-0772
Northern Trust Company $3,859,167 10.0%
801 S. Canal, C-IN
Chicago, IL 60607
Boston Safe Deposit and Trust Company $3,434,492 9.0%
c/o Mellon Bank N.A.
Three Mellon Bank Center, Room
153-3015
Pittsburgh, PA 15259
SSB - Custodian $2,550,000 6.7%
Global Corp. Action Dept. JAB5W
P.P. Box 1631
Boston, MA 02105-1631
Class X
Name and Address Principal Amount % of Class
Morgan Stanley & Co. Incorporated $23,107,105 100%
One Pierreport Plaza, 7th Floor
Brooklyn, NY 11201
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.
8
<PAGE>
3. Exhibits:
Exhibit No. Description
----------- -----------
99.1. Statement of Compliance of the Master
Servicer.
99.2 Annual Report of Independent
Accountant with respect to the Master
Servicer's overall servicing
operations.
9
<PAGE>
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:
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, March 26, 1998
- ----------------------------- Secretary and Director
Gilbert J. MacQuarrie (Principal Financial Officer and
Principal 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
10
<PAGE>
INDEX TO EXHIBITS
Item 14(C)
Exhibit No. Description
- ----------- -----------
99.1 Statement of Compliance of the Master Servicer.
99.2 Annual Report of Independent Accountant with respect to the
Master Servicer's overall servicing operations.
11
Exhibit 99.1
HEADLANDS MORTGAGE SECURITIES INC.
Mortgage Pass-Through Certificates Series 1997-3
Officer's Certificate
In connection with the above-referenced trust and pursuant to Section 3.13 of
the related Pooling and Servicing Agreement ("Agreement"), Headlands Mortgage
Company (as "Master Servicer") hereby confirms the following:
(i) a review of the activities of the Master Servicer during 1997 and of
performance under the Agreement has been made under the undersigned's
supervision; and
(ii) to the best of the undersigned's knowledge, based on such review, the
Master Servicer has fulfilled all of its obligations under the Agreement
for the calendar year 1997.
HEADLANDS MORTGAGE SECURITIES INC.
By: /s/ Gilbert J. MacQuarrie
------------------------------------------------
Gilbert J. MacQuarrie
Vice President, Treasurer and Secretary
12
Exhibit 99.2
[KPMG Peat Marwick LLP Letterhead]
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.
/s/ KPMG Peat Marwick LLP
San Francisco, California
February 13, 1998
13
<PAGE>
[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.
HEADLANDS MORTGAGE COMPANY
By: /s/ Dennis Tussey
----------------------------------------------
Dennis Tussey
Senior Vice President,
Loan Administration
