PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED OCTOBER 29, 1997)
$1,961,117,000 (APPROXIMATE)
FIRST UNION-LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1997-C2
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
(DEPOSITOR)
----------
The Series 1997-C2 Commercial Mortgage Pass-Through Certificates (the
"Certificates") will consist of eighteen classes (each, a "Class") of
Certificates, including the eight Classes of Certificates offered hereby
(collectively, the "Offered Certificates"). The Certificates, in the aggregate,
will represent the entire undivided beneficial ownership interest in a trust
fund (the "Trust Fund") to be established by First Union Commercial Mortgage
Securities, Inc. (the "Depositor"), that is expected to consist primarily of a
segregated pool (the "Mortgage Pool") of 422 conventional, fixed rate mortgage
loans (the "Mortgage Loans") secured by either first liens or first and second
liens on commercial and multifamily properties
(Continued on next page)
----------
PROSPECTIVE INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH UNDER
"RISK FACTORS" BEGINNING ON PAGE S-27 OF THIS PROSPECTUS SUPPLEMENT
AND ON PAGE 18 OF THE PROSPECTUS.
----------
PROCEEDS OF THE ASSETS IN THE TRUST FUND WILL BE THE SOLE SOURCE OF PAYMENTS ON
THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES WILL NOT REPRESENT AN
INTEREST IN OR OBLIGATION OF THE DEPOSITOR, EITHER UNDERWRITER, THE
MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE LOANS WILL BE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
----------
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.
----------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
=============================================================================================================================
INITIAL ASSUMED FINAL
CERTIFICATE % OF INITIAL PASS-THROUGH DISTRIBUTION EXPECTED
CLASS BALANCE(1) POOL BALANCE(1) RATE DATE(2) CUSIP NO. RATING(3)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 ...... $220,000,000 10.0% 6.479% March 18, 2004 33736L AP 0 Aaa/AAA/AAA
Class A-2 ...... $384,000,000 17.4% 6.600% May 18, 2007 33736L AQ 8 Aaa/AAA/AAA
Class A-3 ...... $982,521,000 44.6% 6.650% December 18, 2007 33736L AR 6 Aaa/AAA/AAA
Class B ........ $110,175,000 5.0% 6.790% October 18, 2011 33736L AS 4 Aa2/AA/AA
Class C ........ $110,175,000 5.0% 7.020% September 18, 2012 33736L AT 2 A2/A/A
Class D ........ $121,194,000 5.5% 7.120% November 18, 2012 33736L AU 9 Baa2/BBB/BBB
Class E ........ $ 33,052,000 1.5% 7.120% November 18, 2012 33736L AV 7 Baa3/BBB-/BBB-
Class IO ....... (4) N/A (4) November 18, 2027 33736L AW 5 Aaa/NR/AAA
==============================================================================================================================
</TABLE>
(1) Subject to a permitted variance of plus or minus 5%.
(2) The Assumed Final Distribution Date has been determined on the basis of the
assumptions set forth in "Description of the Certificates--Assumed Final
Distribution Date; Rated Final Distribution Date" herein and a 0% CPR (as
defined herein). The "Rated Final Distribution Date" is November 18, 2029,
the first Distribution Date that follows the second anniversary of the end
of the amortization term for the Mortgage Loan that, as of the Cut-off
Date, has the longest remaining amortization term. See "Description of the
Certificates--Assumed Final Distribution Date; Rated Final Distribution
Date" and "Ratings" herein.
(3) By each of Moody's Investors Service, Inc., Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. and Duff & Phelps
Credit Rating Co.
(4) The Class IO Certificates will not have a Certificate Balance nor will they
entitle the holders thereof to receive distributions of principal, but will
entitle such holders to receive payments of the aggregate interest accrued
on the notional amount of each of the Class IO Components, as described
herein. The aggregate of such notional amounts will initially equal
approximately $2,203,502,325. See "Description of the
Certificates--Certificate Balances and Notional Amount" and "--Pass-Through
Rates" herein.
----------
The Offered Certificates will be offered by Lehman Brothers Inc. and First
Union Capital Markets Corp. (together, the "Underwriters") from time to time 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, before deducting expenses payable by the Depositor, will be
approximately $2,167,640,662, which includes accrued interest. See "Method of
Distribution" herein.
The Offered Certificates are offered by the Underwriters when, as and if
issued and delivered to and accepted by the Underwriters, subject to prior sale
and subject to the Underwriters' right to reject orders in whole or in part. It
is expected that the Offered Certificates will be delivered in book-entry form
through the Same-Day Funds Settlement System of The Depository Trust Company on
or about November 25, 1997.
----------
LEHMAN BROTHERS FIRST UNION CAPITAL MARKETS CORP.
----------
The date of this Prospectus Supplement is November 19, 1997.
<PAGE>
(cover continued)
(each, a "Mortgaged Property"). As of November 1, 1997 (the "Cut-off Date"), the
Mortgage Loans had an aggregate principal balance (the "Initial Pool Balance")
of approximately $2,203,502,325, after application of all payments of principal
due on or before such date, whether or not received. First Union National Bank
(in such capacity, the "Master Servicer"), directly or through one or more
subservicers, and CRIIMI MAE Services Limited Partnership (the "Special
Servicer"), will service the Mortgage Loans. The Offered Certificates bear the
class designations and have the characteristics set forth in the table above.
Simultaneously with the issuance of the Offered Certificates, the Private
Certificates (as defined herein) will be issued. Only the Offered Certificates
are offered hereby.
The Depositor will acquire certain of the Mortgage Loans from First Union
National Bank and certain of the Mortgage Loans from an affiliate of Lehman
Brothers Inc. (each, in such capacity, a "Mortgage Loan Seller"). On or before
the date the Certificates are issued, the Depositor will transfer the Mortgage
Loans, without recourse, to LaSalle National Bank, as trustee of the Trust Fund
(the "Trustee"), in exchange for the Certificates.
As and to the extent described herein, the Private Certificates will be
subordinate to the Offered Certificates; the Class B, Class C, Class D and Class
E Certificates will be subordinate to the Class A-1, Class A-2, Class A-3 and
Class IO Certificates; the Class C, Class D and Class E Certificates will be
subordinate to the Class B Certificates; the Class D and Class E Certificates
will be subordinate to the Class C Certificates; and the Class E Certificates
will be subordinate to the Class D Certificates. Distributions of interest on
and principal of the Certificates will be made, to the extent of available
funds, on the 18th day of each month or, if any such 18th day is not a business
day, then on the next succeeding business day, commencing December 18, 1997
(each, a "Distribution Date"). As described herein, distributions allocable to
interest accrued on each Class of Offered Certificates (other than the Class IO
Certificates) will be made on each Distribution Date based on the pass-through
rate (the "Pass-Through Rate") applicable to such Class and the principal amount
(the "Certificate Balance") of such Class outstanding immediately prior to such
Distribution Date. As described herein, distributions allocable to interest
accrued on the Class IO Certificates will be made on each Distribution Date in
an amount equal to the aggregate amount of interest which has accrued on the
notional amount of each of the Class IO Components (as defined herein). The
Class IO Certificates will have fourteen Class IO Components, each with a
designation and a notional amount that corresponds with the designation and
Certificate Balance of a Class of Sequential Pay Certificates (as defined
herein). Interest will accrue on the notional amount of each Class IO Component
based on the Pass-Through Rate of such Class IO Component. The Pass-Through Rate
applicable to each Class IO Component will be equal to the Weighted Average Net
Mortgage Rate (as defined herein) minus the Pass-Through Rate applicable to the
corresponding Class of Sequential Pay Certificates. As described herein,
distributions allocable to principal of the Offered Certificates will be made
sequentially to the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D
and Class E Certificates, in that order, until the respective Classes of
Certificates are retired. The Class IO Certificates will not have a Certificate
Balance, nor will they entitle the holders thereof to distributions of
principal. The holders of the Certificates may also receive portions of any
Prepayment Premiums and Yield Maintenance Charges (each as defined herein) to
the extent described herein. See "Description of the
Certificates--Distributions" herein.
The yield to maturity on each Class of Offered Certificates (other than the
Class IO Certificates) will depend on, among other things, the rate and timing
of principal payments (including by reason of prepayments, defaults and
liquidations) on the Mortgage Loans that are applied in reduction of the
Certificate Balance of such Class. THE YIELD TO MATURITY ON THE CLASS IO
CERTIFICATES WILL BE HIGHLY SENSITIVE TO THE RATE AND TIMING OF PRINCIPAL
PAYMENTS (INCLUDING BY REASON OF PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE
MORTGAGE LOANS AND INVESTORS IN THE CLASS IO CERTIFICATES SHOULD FULLY CONSIDER
THE ASSOCIATED RISKS, INCLUDING THE RISK THAT A RAPID RATE OF PREPAYMENT OF THE
MORTGAGE LOANS COULD RESULT IN THE FAILURE OF SUCH INVESTORS TO FULLY RECOUP
THEIR INITIAL INVESTMENTS. The allocation to any Class of Offered Certificates
of any Prepayment Premium or Yield Maintenance Charge may be insufficient to
offset fully the adverse effects on the anticipated yield to maturity resulting
from the corresponding principal prepayment. Any delay in collection of a
Balloon Payment (as defined herein) due at the maturity of a Mortgage Loan will
likely extend the weighted average life of the Class or Classes of Offered
Certificates entitled to distributions in respect of principal as of the date
such Balloon Payment was due. See "Description of the Certificates--Certificate
Balances and Notional Amount" and "--Distributions," "Yield and Maturity
Considerations" and "Servicing of the Mortgage Loans--Modifications, Waivers and
Amendments" herein, and "Yield and Maturity Considerations" and "Risk
Factors--Prepayments; Average Life of Certificates; Yields" in the Prospectus.
As described herein, three separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes (the REMICs formed thereby, "REMIC I," "REMIC II"
and "REMIC III", respectively). The Offered Certificates will constitute
"regular interests" in the related REMIC. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus.
There is currently no secondary market for the Offered Certificates. Each
of the Underwriters currently intends to make a secondary market in the Offered
Certificates, but has no obligation to do so. See "Risk Factors--The
Certificates--Limited Liquidity" herein.
THE PROSPECTUS THAT ACCOMPANIES THIS PROSPECTUS SUPPLEMENT CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING THAT IS NOT CONTAINED HEREIN, AND
PROSPECTIVE INVESTORS ARE URGED TO READ BOTH THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT IN FULL TO OBTAIN MATERIAL INFORMATION CONCERNING THE OFFERED
CERTIFICATES. SALES OF THE OFFERED CERTIFICATES MAY NOT BE CONSUMMATED UNLESS
THE PURCHASER HAS RECEIVED A COPY OF BOTH THE PROSPECTUS AND THIS PROSPECTUS
SUPPLEMENT.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, 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 DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
S-2
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF PROSPECTUS SUPPLEMENT ......................................... S-5
RISK FACTORS ............................................................. S-27
The Certificates ....................................................... S-27
Limited Liquidity .................................................... S-27
Certain Yield and Maturity Considerations ............................ S-27
Potential Conflicts of Interest ...................................... S-28
The Mortgage Loans ..................................................... S-29
Risks of Lending on Income-Producing Properties ...................... S-29
Credit Lease Mortgaged Properties .................................... S-30
Factors Affecting Lease Enhancement Policy Proceeds .................. S-31
Nonrecourse Mortgage Loans ........................................... S-31
Environmental Law Considerations ..................................... S-31
Balloon Payments ..................................................... S-31
Risk of Subordinated Debt ............................................ S-32
DESCRIPTION OF THE MORTGAGE POOL ......................................... S-32
General ................................................................ S-32
Mortgage Loan History .................................................. S-33
Certain Terms and Conditions of the Mortgage Loans ..................... S-34
Mortgage Rates; Calculations of Interest ............................. S-34
Due Dates ............................................................ S-34
Amortization ......................................................... S-34
Prepayment Provisions ................................................ S-34
Secondary Financing .................................................. S-35
Nonrecourse Obligations .............................................. S-35
"Due-on-Sale" and "Due-on-Encumbrance" Provisions ................ S-35
Cross-Default and Cross-Collateralization of Certain Mortgage Loans .. S-35
Low Income Housing Tax Credits ....................................... S-35
Assessments of Property Condition ...................................... S-36
Property Inspections ................................................. S-36
Appraisals ........................................................... S-36
Environmental Assessments ............................................ S-36
Engineering Assessments .............................................. S-36
Earthquake Analyses .................................................. S-36
Credit Lease Loans ..................................................... S-37
Additional Mortgage Loan Information ................................... S-39
The Mortgage Pool .................................................... S-39
The Mortgage Loan Sellers .............................................. S-53
Assignment of the Mortgage Loans; Repurchases .......................... S-53
Representations and Warranties; Repurchases ............................ S-53
Changes in Mortgage Pool Characteristics ............................... S-55
SERVICING OF THE MORTGAGE LOANS .......................................... S-55
General ................................................................ S-55
The Master Servicer and Special Servicer ............................... S-56
The Special Servicer ................................................... S-57
Servicing and Other Compensation and Payment of Expenses ............... S-58
Modifications, Waivers and Amendments .................................. S-59
The Controlling Class Representative ................................... S-60
Limitation on Liability of Controlling Class Representative .......... S-61
REO Properties; Sale of Mortgage Loans ................................. S-61
Inspections; Collection of Operating Information ....................... S-62
DESCRIPTION OF THE CERTIFICATES .......................................... S-63
General ................................................................ S-63
Registration and Denominations ......................................... S-63
S-3
<PAGE>
PAGE
----
Certificate Balances and Notional Amount ............................... S-64
Pass-Through Rates ..................................................... S-64
Distributions .......................................................... S-65
General .............................................................. S-65
The Available Distribution Amount .................................... S-65
Application of the Available Distribution Amount ..................... S-66
Distributable Certificate Interest ................................... S-69
Principal Distribution Amount ........................................ S-69
Treatment of REO Properties .......................................... S-70
Allocation of Prepayment Premiums and Yield Maintenance Charges ...... S-70
Subordination; Allocation of Losses and Certain Expenses ............... S-71
P&I Advances ........................................................... S-73
Appraisal Reductions ................................................... S-74
Reports to Certificateholders; Available Information ................... S-74
Trustee Reports ....................................................... S-74
Other Information ..................................................... S-77
Book-Entry Certificates ............................................... S-77
Assumed Final Distribution Date; Rated Final Distribution Date ......... S-78
Voting Rights .......................................................... S-79
Termination ............................................................ S-79
The Trustee ............................................................ S-80
Duties of the Fiscal Agent ............................................. S-80
YIELD AND MATURITY CONSIDERATIONS ........................................ S-81
Yield Considerations ................................................... S-81
General .............................................................. S-81
Rate and Timing of Principal Payment ................................. S-81
Losses and Shortfalls ................................................ S-82
Pass-Through Rates ................................................... S-82
Certain Relevant Factors ............................................. S-82
Delay in Payment of Distributions .................................... S-83
Unpaid Distributable Certificate Interest ............................ S-83
Yield Sensitivity of the Class IO Certificates ....................... S-83
Price/Yield Tables ..................................................... S-83
Weighted Average Life .................................................. S-85
USE OF PROCEEDS .......................................................... S-88
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .................................. S-88
ERISA CONSIDERATIONS ..................................................... S-89
LEGAL INVESTMENT ......................................................... S-91
METHOD OF DISTRIBUTION ................................................... S-92
LEGAL MATTERS ............................................................ S-92
RATINGS .................................................................. S-92
INDEX OF PRINCIPAL DEFINITIONS ........................................... S-94
ANNEX A--CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS ................... A-1
ANNEX B--TERM SHEET ...................................................... B-1
ANNEX C--FORM OF DISTRIBUTION DATE STATEMENT ............................. C-1
ANNEX D--FORM OF DELINQUENT LOAN STATUS REPORT ........................... D-1
ANNEX E--FORM OF HISTORICAL LOAN MODIFICATION REPORT ..................... E-1
ANNEX F--FORM OF HISTORICAL LOSS ESTIMATE REPORT ......................... F-1
ANNEX G--FORM OF REO STATUS REPORT ....................................... G-1
ANNEX H--FORM OF WATCH LIST REPORT ....................................... H-1
ANNEX I--OPERATING STATEMENT ANALYSIS .................................... I-1
ANNEX J--NOI ADJUSTMENT WORKSHEET ........................................ J-1
ANNEX K--COMPARATIVE FINANCIAL STATUS REPORT ............................. K-1
S-4
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary
may be defined elsewhere in this Prospectus Supplement or in the Prospectus.
An "Index of Principal Definitions" is included at the end of both this
Prospectus Supplement and the Prospectus. Terms that are used but not defined
in this Prospectus Supplement have the meanings specified in the Prospectus.
All percentages of the Mortgage Loans, or of any specified group of Mortgage
Loans, referred to herein without further description are approximate
percentages by aggregate Cut-off Date Balance. References to percentages of
Mortgaged Properties are references to the percentages of the Initial Pool
Balance represented by the aggregate Cut-off Date Balance of the related
Mortgage Loans. All numerical information provided herein with respect to the
Mortgage Loans is provided on an approximate basis.
<TABLE>
<CAPTION>
WEIGHTED
MOODY'S/DCR/ INITIAL PERCENT OF PASS- AVERAGE CASH FLOW OR
STANDARD & CERTIFICATE INITIAL POOL CREDIT THROUGH LIFE PRINCIPAL
CLASS POOR'S RATING BALANCES(1) BALANCE(1) SUPPORT DESCRIPTION RATE (YEARS)(2) WINDOW(2)
----- ------------- ----------- ------------ ------- ----------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 .. Aaa/AAA/AAA $220,000,000 10.0% 28.00% Fixed Coupon 6.479% 3.72 12/97-03/04
Class A-2 .. Aaa/AAA/AAA $384,000,000 17.4% 28.00% Fixed Coupon 6.600% 7.76 03/04-05/07
Class A-3 .. Aaa/AAA/AAA $982,521,000 44.6% 28.00% Fixed Coupon 6.650% 9.76 05/07-12/07
Class B .... Aa2/AA/AA $110,175,000 5.0% 23.00% Fixed Coupon 6.790% 12.04 12/07-10/11
Class C .... A2/A/A $110,175,000 5.0% 18.00% Fixed Coupon 7.020% 14.61 10/11-09/12
Class D .... Baa2/BBB/BBB $121,194,000 5.5% 12.50% Fixed Coupon 7.120% 14.92 09/12-11/12
Class E .... Baa3/BBB-/BBB- $ 33,052,000 1.5% 11.00% Fixed Coupon 7.120% 14.98 11/12-11/12
Class IO ... Aaa/AAA/NR (3) N/A N/A Variable IO Strip (4) N/A 12/97-11/27
Class F .... (5) $ 66,105,000 3.0% 8.00% WAC 7.500%(6) 16.43 11/12-09/15
Class G .... (5) $ 49,578,000 2.2% 5.75% WAC 7.500%(6) 18.82 09/15-06/17
Class H .... (5) $ 16,527,208 0.8% 5.00% WAC 7.500%(6) 19.63 06/17-09/17
Class J .... (5) $ 44,070,046 2.0% 3.00% WAC 6.000%(6) 20.84 09/17-01/20
Class K .... (5) $ 22,035,023 1.0% 2.00% WAC 6.000%(6) 23.24 01/20-02/22
Class L .... (5) $ 27,543,779 1.2% 0.75% WAC 6.000%(6) 24.73 02/22-04/23
Class M .... (5) $ 16,526,269 0.8% 0.00% WAC 6.000%(6) 28.13 04/23-11/27
</TABLE>
- ----------
(1) Subject to a permitted variance of plus or minus 5.0%.
(2) Based on 0% CPR and the other assumptions set forth under "Yield and
Maturity Considerations--Weighted Average Life" herein.
(3) The Class IO Certificates will not have a Certificate Balance nor will
they entitle the holders thereof to receive distributions of principal.
See "--Description of the Certificates--Certificate Balances and Notional
Amount" herein.
(4) Holders of the Class IO Certificates will be entitled to receive
distributions of interest in an amount equal to the aggregate interest
accrued on the notional amount of each of the Class IO Components, as
described herein. See "--Description of the Certificates--Pass-Through
Rates" herein.
(5) Not offered hereby. Accordingly, any information herein regarding the
terms of such Class of Certificates is provided solely because of its
potential relevance to a prospective purchaser of an Offered Certificate.
(6) With respect to each Distribution Date, the Pass-Through Rate will equal
the lesser of the rate set forth above and the applicable Weighted
Average Net Mortgage Rate (as defined herein).
S-5
<PAGE>
Title of Certificates ................First Union-Lehman Brothers Commercial
Mortgage Trust II, Commercial Mortgage
Pass-Through Certificates, Series
1997-C2 (the "Certificates"), to be
issued in eighteen classes (each, a
"Class") to be designated as: (i) the
Class A-1, Class A-2 and Class A-3
Certificates (collectively the "Class A
Certificates"); (ii) the Class B, Class
C, Class D, Class E, Class F, Class G,
Class H, Class J, Class K, Class L and
Class M Certificates (collectively with
the Class A Certificates, the
"Sequential Pay Certificates"); (iii)
the Class IO Certificates (collectively
with the Sequential Pay Certificates,
the "REMIC Regular Certificates"); and
(iv) the Class R-I, Class R-II and Class
R-III Certificates (collectively, the
"REMIC Residual Certificates"). Only
the Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D, Class E and
Class IO Certificates (collectively, the
"Offered Certificates") are offered
hereby. The Class F, Class G, Class H,
Class J, Class K, Class L, Class M and
REMIC Residual Certificates
(collectively, the "Private
Certificates") have not been registered
under the Securities Act of 1933, as
amended (the "Securities Act"), and are
not offered hereby.
Depositor ............................First Union Commercial Mortgage
Securities, Inc., a North Carolina
corporation. The Depositor is a wholly
owned subsidiary of First Union National
Bank, which is also one of the Mortgage
Loan Sellers and the Master Servicer.
The Depositor also is an affiliate of
First Union Capital Markets Corp.
("First Union Capital"), one of the
Underwriters. Neither the Depositor nor
any of its affiliates has insured or
guaranteed the Offered Certificates. See
"The Depositor" in the Prospectus.
Master Servicer ......................First Union National Bank ("FUNB"), a
national banking association which has
its principal office located in
Charlotte, North Carolina and which is a
subsidiary of First Union Corporation, a
North Carolina corporation registered as
a bank holding company under the Bank
Holding Company Act of 1956, as amended.
The Master Servicer is one of the
Mortgage Loan Sellers and an affiliate
of the Depositor and of First Union
Capital, one of the Underwriters. See
"Servicing of the Mortgage Loans--The
Master Servicer and Special Servicer"
and "--Servicing and Other Compensation
and Payment of Expenses" herein.
Special Servicer .....................CRIIMI MAE Services Limited Partnership, a
Maryland limited partnership. The
Special Servicer will be responsible for
performing certain servicing functions
with respect to the Mortgage Loans that,
in general, are in default or as to
which default is imminent, for
administering any REO Property (as
defined herein) and for performing
certain other servicing functions with
respect to the Mortgage Pool under the
Pooling and Servicing Agreement. The
Controlling Class of Sequential Pay
Certificates (as defined herein) will
have the right, subject to certain
conditions described herein, to replace
the Special Servicer and to select a
representative (the "Controlling Class
Representative") from whom the Special
Servicer will seek advice and approval
and take direction under certain
circum-
S-6
<PAGE>
stances, as described herein. It is
anticipated that the Special Servicer or
an affiliate of the Special Servicer
will purchase all or a significant
portion of the Private Certificates on
or about the Closing Date (as defined
below). See "Servicing of the Mortgage
Loans--The Master Servicer and Special
Servicer" and "--Servicing and Other
Compensation and Payment of Expenses"
herein.
Trustee ..............................LaSalle National Bank, a nationally
chartered bank and a wholly owned
subsidiary of the Fiscal Agent.
Fiscal ...............................Agent ABN AMRO Bank N.V., a Netherlands
banking corporation and the corporate
parent of the Trustee.
Mortgage Loan Sellers ................An affiliate of Lehman Brothers Inc.,
which is one of the Underwriters (such
affiliate, the "Lehman Seller"), and
FUNB. FUNB is also the Master Servicer
and an affiliate of the Depositor and
First Union Capital, one of the
Underwriters. See "Description of the
Mortgage Pool--The Mortgage Loan
Sellers" herein.
Cut-off Date .........................November 1, 1997.
Closing Date .........................On or about November 25, 1997.
Registration of the Offered
Certificates .........................The Offered Certificates of each Class
will initially be represented by one or
more global Certificates registered in
the name of Cede & Co., as nominee of
The Depository Trust Company ("DTC").
No person acquiring an interest in any
Offered Certificate (any such person, a
"Certificate Owner") will be entitled
to receive such Certificate in fully
registered, certificated form (a
"Definitive Offered Certificate"),
except under the limited circumstances
described under "Description of
theCertificates--Registration and
Denominations" herein and "Description
of the Certificates--Book-Entry
Registration and Definitive
Certificates" in the Prospectus.
Instead, DTC will effect payments and
transfers in respect of the Offered
Certificates by means of its electronic
recordkeeping services, acting through
certain participating organizations (
"Participants"). This may result in
certain delays in receipt of payments by
an investor and may restrict an
investor's ability to pledge its
Certificates. Unless and until
Definitive Offered Certificates of any
Class are issued to the related
Certificate Owners, all references
herein to the rights of holders of such
Class of Offered Certificates are to the
rights of those Certificate Owners as
such rights may be exercised through DTC
and its participants, except as
otherwise specified herein.
Denominations ........................The Offered Certificates of each Class
will be issued, maintained and
transferred on the book-entry records of
DTC and its Participants in
denominations of $10,000 actual
principal amount (or $100,000 notional
amount with respect to the Class IO
Certificates), and in integral multiples
of $1 in excess thereof.
The Mortgage Pool ....................The Mortgage Pool will consist of 422
conventional, fixed rate Mortgage Loans.
The Mortgage Loans have an aggregate
Cut-off Date Balance of $2,203,502,325
(the "Initial Pool Balance"), subject
to a variance of plus or minus 5.0%. The
S-7
<PAGE>
"Cut-off Date Balance" of each Mortgage
Loan will equal the unpaid principal
balance thereof as of the Cut-off Date,
after reduction for all payments of
principal due on or before such date,
whether or not received. For purposes of
the numerical information provided
herein, each of the Mortgage Loans is
deemed to be secured by one Mortgaged
Property, whether or not such Mortgaged
Property is comprised of more than one
parcel.
Generally, all of the Mortgage Loans are
non-recourse obligations of the related
borrowers. No Mortgage Loan will be
insured or guaranteed by any
governmental entity or private insurer.
Four hundred and twenty (420) of the
Mortgage Loans, or 99.8%, are each
secured by a first mortgage lien, and
two of the Mortgage Loans, or 0.2%, are
each secured by a Mortgage that creates
a second mortgage lien (with the related
first mortgage lien securing a Mortgage
Loan that is also in the Mortgage Pool),
on the borrower's fee simple estate (or,
with respect to 14 Mortgage Loans, or
3.8%, on the borrower's leasehold
estate)in income producing real property
(each, a "Mortgaged Property").
Set forth below are the number of Mortgage
Loans, and the approximate percentage of
the Initial Pool Balance represented by
such Mortgage Loans, that are secured by
Mortgaged Properties operated for each
indicated purpose:
PERCENTAGE OF
NUMBER OF INITIAL POOL
PROPERTY TYPE MORTGAGE LOANS BALANCE
------------- -------------- -------------
Multifamily ............ 136(1) 31.1%
Retail ................. 122(2) 30.6%
Office ................. 32 9.3%
Hospitality ............ 33(3) 8.9%
Health Care ............ 16(4) 4.1%
Industrial/Retail ...... 3 2.7%
Industrial/Warehouse ... 10 2.2%
Mobile Home Park ....... 2 0.2%
Self-Storage ........... 2 0.2%
Mixed Use .............. 1 0.1%
Credit Lease Loans(5) .. 65 10.8%
----------
(1) Including eight Mortgage Loans, or
0.8%, secured by properties which
are eligible to receive low-income
housing tax credits pursuant to
Section 42 of the Internal Revenue
Code of 1986 (the "Code" and such
properties, the "Section 42
Properties").
(2) Including 71 Mortgage Loans, or
22.5%, secured by anchored retail
properties and 51 Mortgage Loans, or
8.1%, secured by unanchored retail
properties.
(3) All but two of such Mortgage Loans
are secured by properties which are
affiliated with recognized
hotel/motel franchisors.
S-8
<PAGE>
(4) Including five Mortgage Loans, or
0.7%, secured by assisted living
facilities; three Mortgage Loans, or
1.1%, secured by congregate care
facilities; and seven Mortgage
Loans, or 1.3%, secured by skilled
nursing care facilities and one
Mortgage Loan, or 1.1%, secured by a
skilled nursing care facility and a
congregate care facility.
(5) Including 56 Mortgage Loans, or
6.3%, secured by retail properties;
three Mortgage Loans, or 3.4%,
secured by office properties; and
six Mortgage Loans, or 1.1%, secured
by health and fitness or mixed-use
properties or solely by the
Mortgagor's leasehold interest in a
retail property.
The Mortgaged Properties are located
throughout 38 states. Set forth below
are the number of Mortgage Loans, and
the approximate percentage of the
Initial Pool Balance represented by such
Mortgage Loans, that are secured by
Mortgage Properties located in the
states with concentrations of Mortgage
Loans above 5.0%:
PERCENTAGE OF
NUMBER OF INITIAL POOL
STATE MORTGAGE LOANS BALANCE
----- -------------- ------------
Florida .... 58 14.4%
New York ... 21 11.3%
Texas ...... 54 10.4%
California . 38 9.6%
Georgia .... 34 5.1%
----------
All of the Mortgage Loans bear interest at
annualized rates ("Mortgage Rates") that
will remain fixed for their respective
remaining loan terms, except as
described herein. Except with respect to
one Mortgage Loan, scheduled payments of
principal and interest on the Mortgage
Loans ("Monthly Payments") are due
monthly on the first day of each month.
See "Description of the Mortgage
Pool--Certain Terms and Conditions of
the Mortgage Loans--Due Dates" and
"--Mortgage Rates; Calculations of
Interest" herein.
Three hundred twenty-nine (329) of the
Mortgage Loans, or 82.8%, provide for
Monthly Payments based on amortization
schedules significantly longer than
their respective remaining terms to
maturity. As a result, such Mortgage
Loans ("Balloon Loans"), will have
substantial principal amounts due and
payable (each such amount, together with
the corresponding payment of interest, a
"Balloon Payment") on their respective
scheduled maturity dates, unless prepaid
prior thereto. Four of the Balloon
Loans, or 2.9% (which are Credit Lease
Loans), provide for increases in the
amount of their respective Monthly
Payments at specified times in the
future which coincide with rent
increases on the underlying Credit
Leases. Seven of the Mortgage Loans, or
2.5%, are ARD Loans, as described
herein. See "Description of the Mortgage
Pool--Certain Terms and Conditions of
the Mortgage Loans--Amortization"
herein. The remaining 86 Mortgage Loans,
or 14.6%, are self-amortizing. Fourteen
(14) of such self-amortizing Mortgage
Loans, or 1.5% (which are Credit
S-9
<PAGE>
Lease Loans), provide for increases in
the amount of their respective Monthly
Payment at specified times in the future
as set forth in Annex A which coincide
with rent increases on the underlying
Credit Leases. See "Risk Factors--The
Mortgage Loans--Balloon Payments" herein
and "Risk Factors--Balloon Payments;
Borrower Default" in the Prospectus.
As of the Cut-off Date, all but one of the
Mortgage Loans, or 99.6%, restrict or
prohibit voluntary principal
prepayments. In general, the Mortgage
Loans: (i) prohibit voluntary
prepayments of principal for a period (a
"Lockout Period") ending on a date
specified in the related Mortgage Note
(as defined herein) and, in general,
thereafter impose a Yield Maintenance
Charge and/or Prepayment Premium (each
as defined herein) for most of their
respective remaining terms to maturity
(399 Mortgage Loans, or 93.6%); (ii)
prohibit voluntary prepayments of
principal for a Lockout Period and
thereafter permit voluntary principal
prepayments in whole without material
restrictions (10 Mortgage Loans, or
1.8%); or (iii) permit voluntary
principal prepayments provided that the
prepayment is accompanied by a Yield
Maintenance Charge or by a Prepayment
Premium for most of their respective
remaining terms to maturity (12 Mortgage
Loans, or 4.2%). With respect to the 391
Mortgage Loans which impose Yield
Maintenance Charges, 358 of such
Mortgage Loans, or 93.5%, provide for
the calculation of the Yield Maintenance
Charge using a discount rate equal to
the applicable Treasury Rate (as set
forth in the related Mortgage Note), 30
of such Mortgage Loans, or 6.1%, provide
for the calculation of the Yield
Maintenance Charge using a discount rate
equal to the applicable Treasury Rate
plus 0.5%, and three of such Mortgage
Loans, or 0.4%, provide for the
calculation of the Yield Maintenance
Charge using a discount rate equal to
the applicable Treasury Rate plus 1.0%.
See "Description of the Mortgage
Pool--Certain Terms and Conditions of
the Mortgage Loans--Prepayment
Provisions" and "--Additional Mortgage
Loan Information" herein. The ability of
the Master Servicer or the Special
Servicer to waive or modify the terms of
any Mortgage Loan relating to the
payment of a Prepayment Premium or Yield
Maintenance Charge is limited as
described herein. See "Servicing of the
Mortgage Loans--Modifications, Waivers
and Amendments" herein. The Depositor
makes no representation as to the
enforceability of the provision of any
Mortgage Note requiring the payment of a
Prepayment Premium or Yield Maintenance
Charge, or of the collectability of any
Prepayment Premium or Yield Maintenance
Charge.
One hundred twenty-one (121) of the
Mortgage Loans, or 31.6%, provide that
the holder of the Mortgage, following
notice from the borrower that the
borrower intends to prepay the Mortgage
Loan as permitted by the related
Mortgage Note, may require the borrower,
in lieu of prepayment, to pledge to such
holder "Defeasance Collateral" and
thereupon obtain a release of the
Mortgaged Property from the lien of the
related Mortgage. In general,
"Defeasance Collateral" is required to
consist of direct,
S-10
<PAGE>
non-callable United States Treasury
obligations that provide for payments
prior, but as close as possible, to all
successive Due Dates and the scheduled
maturity date, with each such payment
being equal to or greater than (with any
excess to be returned to the borrower)
than the Monthly Payment and, in the
case of the scheduled maturity date, the
Balloon Payment, due on such date. The
Pooling and Servicing Agreement will
require the Master Servicer or the
Special Servicer to require each
borrower that proposes to prepay its
Mortgage Loan to pledge instead
Defeasance Collateral, but in each case
subject to certain conditions, including
confirmation from each Rating Agency
that acceptance of a pledge of the
Defeasance Collateral in lieu of a full
prepayment will not result in a
downgrade, withdrawal or qualification
of the rating then assigned by it to any
Class of Certificates.
Sixty-five (65) of the Mortgage Loans, or
10.8% (the "Credit Lease Loans"), are
secured by Mortgages on Mortgaged
Properties that are, in each case,
subject to a lease (a "Credit Lease") to
a tenant (each a "Tenant" and,
collectively, the "Tenants") which
possesses (or whose parent or other
affiliate which guarantees the Credit
Lease obligation possesses) the rating
indicated in the Credit Lease Table. See
"Description of the Mortgage
Pool--Credit Lease Loans" herein.
Scheduled monthly rent payments (the
"Monthly Rental Payments") under the
Credit Leases are generally sufficient
to pay in full and on a timely basis all
interest and principal scheduled to be
paid with respect to the related Credit
Lease Loans other than the Balloon
Payments with respect to Credit Lease
Loans which are Balloon Loans.
The Credit Leases generally provide that
the Tenant is responsible for all costs
and expenses incurred in connection with
the maintenance and operation of the
related Mortgaged Property and that, in
the event of a casualty or condemnation
of a material portion of the related
Mortgaged Property, (i) the Tenant is
obligated to continue making payments,
(ii) the Tenant must make an offer to
purchase the applicable Mortgaged
Property for an amount not less than the
unpaid principal balance plus accrued
interest on the related Credit Lease
Loan or (iii) the Trustee on behalf of
the Certificateholders will have the
benefit of certain non-cancelable credit
lease enhancement insurance policies
(the "Lease Enhancement Policies")
obtained to cover certain casualty
and/or condemnation risks. See
"Description of the Mortgage
Pool--Credit Lease Loans" herein.
Except with respect to 21 Mortgage Loans,
or 2.5%, all of the Mortgage Loans were
originated in 1997.
Set forth below is certain information
regarding the Mortgage Loans and the
Mortgaged Properties as of the Cut-off
Date (all weighted averages set forth
below are based on the Cut-off Date
Balances of the respective Mortgage
Loans). Such information is more fully
described, and additional information
regarding the Mortgage Loans and the
Mortgaged Properties is set forth, in
the tables under "Description of The
Mortgage Pool--Additional Mortgage Loan
Information" herein and in Annex A
hereto:
S-11
<PAGE>
Minimum Cut-off Date Balance ............ $449,722
Maximum Cut-off Date Balance ............ $45,416,841
Average Cut-off Date Balance ............ $ 5,221,569
Minimum Mortgage Rate ................... 7.065%
Maximum Mortgage Rate ................... 10.500%
Weighted Average Mortgage Rate .......... 8.207%
Minimum Remaining Term to Maturity
(months) ............................... 45
Maximum Remaining Term to Maturity
(months) ............................... 360
Weighted Average Remaining Term to
Maturity (months) ...................... 151
Minimum Remaining Amortization
Term (months) .......................... 120
Maximum Remaining Amortization
Term (months) .......................... 360
Weighted Average Remaining Amorti-
zation Term (months) ................... 324
Minimum Cut-off Date DSC Ratio .......... 1.15x(1)(2)
Maximum Cut-off Date DSC Ratio .......... 2.50x(2)
Weighted Average Cut-off Date DSC
Ratio .................................. 1.36x(2)
Minimum Cut-off Date LTV Ratio .......... 29.0%(2)
Maximum Cut-off Date LTV Ratio .......... 83.0%(2)(3)
Weighted Average Cut-off Date LTV
Ratio .................................. 72.1%(2)
Minimum Maturity Date LTV Ratio ......... 7.7%(2)(4)
Maximum Maturity Date LTV Ratio ......... 75.1%(2)(4)
Weighted Average Maturity Date LTV
Ratio .................................. 60.8%(2)(4)
----------
(1) Except with respect to one Mortgage
Loan, or 0.7%, the only Mortgage
Loans (excluding Credit Lease Loans)
with DSC Ratios below 1.20x are
Mortgage Loans secured by Section 42
Properties.
(2) Calculated without regard to the
Credit Lease Loans.
(3) The only Mortgage Loans (excluding
Credit Lease Loans) with Cut-off
Date LTV Ratios in excess of 81.5%
are Mortgage Loans secured by
Section 42 Properties.
(4) Includes Balloon Loans only.
Two hundred eight (208) of the Mortgage
Loans, or 49.8% (the "Lehman Loans"),
will be acquired by the Depositor from
the Lehman Seller, which either
originated each such Mortgage Loan or
acquired it in connection with its
commercial and multifamily mortgage loan
conduit program. Two hundred fourteen
(214) of the Mortgage Loans, or 50.2%
(the "FUNB Loans"), will be acquired by
the Depositor from FUNB, which either
originated each such Mortgage Loan or
acquired it in connection with its
commercial and multifamily mortgage loan
conduit program. See "Description of the
Mortgage Pool" herein.
On or prior to the Closing Date, the
Depositor will cause the Mortgage Loan
Sellers to assign the Mortgage Loans,
without recourse (except as set forth in
the next sentence), to the Trustee for
the benefit of the holders of the
Certificates (the "Certificate-
S-12
<PAGE>
holders"). In connection with such
assignment, each Mortgage Loan Seller
will make certain representations and
warranties regarding the characteristics
of its Mortgage Loans and, as more
particularly described herein, will
agree to cure any material breach
thereof or, in the absence of such a
cure, to repurchase the affected
Mortgage Loan. See "Description of the
Mortgage Pool--Representations and
Warranties; Repurchases" herein.
Description of the Certificates ......The Certificates will be issued pursuant
to a Pooling and Servicing Agreement, to
be dated as of November 1, 1997, among
the Depositor, the Master Servicer, the
Special Servicer, the Trustee and the
Fiscal Agent (the "Pooling and Servicing
Agreement"), and will represent in the
aggregate the entire beneficial
ownership interest in a trust fund (the
"Trust Fund") consisting of the
Mortgage Pool and certain related
assets.
A. Certificate Balances and
Notional Amount ......................Upon initial issuance, and in each case
subject to a permitted variance of plus
or minus 5.0%, the respective Classes of
Sequential Pay Certificates will have
the Certificate Balances set forth in
the table at the beginning of this
Summary.
The "Certificate Balance" of any Class of
Sequential Pay 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 other
assets in the Trust Fund. As more
particularly described herein, the
Certificate Balance of a Class of
Sequential Pay Certificates will be
reduced on each Distribution Date by any
distributions of principal actually made
on such Class of Certificates on such
Distribution Date, and further by any
losses on the Mortgage Loans (herein
referred to as "Realized Losses ") and
certain Trust Fund expenses (herein
referred to as "Additional Trust Fund
Expenses ") actually allocated to such
Class of Certificates on such
Distribution Date.
The Class IO Certificates will not have a
Certificate Balance, but will represent
the right to receive distributions of
interest in an amount equal to the
aggregate interest accrued on the
notional amount of each of the Class IO
Components, as described herein. The
Class IO Certificates will have fourteen
components (each a "Class IO Component
"), each corresponding to a different
Class of Sequential Pay Certificates.
Each Class IO Component will have the
same letter and/or numerical designation
as the corresponding Class of Sequential
Pay Certificates. The notional amount of
each Class IO Component will equal the
Certificate Balance of the corresponding
Class of Sequential Pay Certificates
outstanding from time to time. On the
Closing Date, the aggregate of the
notional amounts of all the Class IO
Components will equal approximately
$2,203,502,325, which amount will equal
the Initial Pool Balance. References
herein to the "notional amount" of the
Class IO Certificates shall mean the
aggregate of the notional amounts of all
the Class IO Components. See
"Description of the
Certificates--Certificate Balances and
Notional Amount" herein.
S-13
<PAGE>
The REMIC Residual Certificates will not
have Certificate Balances or notional
amounts, but will represent the right to
receive certain limited amounts not
otherwise payable on the REMIC Regular
Certificates.
B. Pass-Through Rates ................The Pass-Through Rate applicable to each
Class of Offered Certificates (other
than the Class IO Certificates) for each
Distribution Date is fixed at the
respective rate per annum set forth with
respect to such Class in the table at
the beginning of this Summary. The
Pass-Through Rate applicable to each
Class of the Private Certificates (other
than the REMIC Residual Certificates)
for each Distribution Date is the lesser
of (a) the respective rate per annum set
forth in respect of such Class in the
table at the beginning of this Summary
and (b) the Weighted Average Net
Mortgage Rate for such Distribution
Date. The Pass-Through Rate applicable
to each Class IO Component for any
Distribution Date will be equal to the
Weighted Average Net Mortgage Rate for
such Distribution Date minus the
Pass-Through Rate then applicable to the
corresponding Class of Sequential Pay
Certificates. The REMIC Residual
Certificates will not bear interest.
The "Weighted Average Net Mortgage Rate"
for each Distribution Date is the
weighted average of the Net Mortgage
Rates for the Mortgage Loans as of the
commencement of the related Collection
Period (as defined herein), weighted on
the basis of their respective Stated
Principal Balances outstanding
immediately prior to such Distribution
Date. The "Net Mortgage Rate" for each
Mortgage Loan will generally equal (x)
the Mortgage Rate in effect for such
Mortgage Loan as of the Cut-off Date,
minus (y) the applicable Administrative
Cost Rate (as defined herein) for such
Mortgage Loan; provided that if any
Mortgage Loan does not accrue interest
on the basis of a 360-day year
consisting of twelve 30-day months
(which is the basis on which interest
accrues in respect of the REMIC Regular
Certificates), then, solely for the
purposes of calculating the Weighted
Average Net Mortgage Rate, the Mortgage
Rate referred to in clause (x) will, to
the extent appropriate, be adjusted from
accrual period to accrual period to
compensate for such difference. The
"Stated Principal Balance" of each
Mortgage Loan outstanding at any time
represents the principal balance of such
Mortgage Loan ultimately due and payable
thereon and will generally equal the
Cut-off Date Balance thereof, reduced on
each Distribution Date (to not less than
zero) by (i) any payments or other
collections (or advances in lieu
thereof) of principal of such Mortgage
Loan that are due or received, as the
case may be, during the related
Collection Period (as defined herein)
and distributed on the Certificates on
such date and (ii) the principal portion
of any Realized Loss incurred in respect
of such Mortgage Loan during the related
Collection Period for such Distribution
Date. See "Description of the
Certificates--Pass-Through Rates"
herein.
C. Distributions .....................Distributions on the Certificates will be
made by the Trustee, to the extent of
available funds, on the 18th day of each
month or, if any such 18th day is not a
business day, then on the next
succeeding
S-14
<PAGE>
business day, commencing December 18,
1997 (each, a "Distribution Date"). The
total of all payments or other
collections (or advances in lieu
thereof) on or in respect of the
Mortgage Loans (other than Prepayment
Premiums and Yield Maintenance Charges,
which are separately distributable in
respect of the Certificates) that are
available for distribution to
Certificateholders on any Distribution
Date (less certain fees and expenses set
forth in the Pooling and Servicing
Agreement) is herein referred to as the
"Available Distribution Amount" for such
date. See "Description of the
Certificates--Distributions--The
Available Distribution Amount" herein.
On each Distribution Date, the Trustee
will (except as otherwise described
under "Description of the
Certificates--Termination" herein) apply
the Available Distribution Amount for
such date for the following purposes and
in the following order of priority, in
each case to the extent of remaining
available funds:
(1) to distributions of interest to the
holders of the Class A-1, Class A-2,
Class A-3 and Class IO Certificates
(in each case, so long as any such
Class remains outstanding), pro
rata, in accordance with the
respective amounts of Distributable
Certificate Interest (as defined
herein) on such Classes of
Certificates on such Distribution
Date, in an amount equal to all
Distributable Certificate Interest
in respect of each such Class of
Certificates for such Distribution
Date and, to the extent not
previously paid, for all prior
Distribution Dates;
(2) to distributions of principal to the
holders of the Class A-1
Certificates in an amount (not to
exceed the then outstanding
Certificate Balance of such Class of
Certificates) equal to the Principal
Distribution Amount (as defined
herein) for such Distribution Date;
(3) after the Class A-1 Certificates
have been retired, to distributions
of principal to the holders of the
Class A-2 Certificates in an amount
(not to exceed the then outstanding
Certificate Balance of such Class of
Certificates) equal to the Principal
Distribution Amount for such
Distribution Date, less any portion
thereof distributed in respect of
the Class A-1 Certificates;
(4) after the Class A-1 and Class A-2
Certificates have been retired, to
distributions of principal to the
holders of the Class A-3
Certificates in an amount (not to
exceed the then outstanding
Certificate Balance of such Class of
Certificates) equal to the Principal
Distribution Amount for such
Distribution Date, less any portion
thereof distributed in respect of
the Class A-1 and/or Class A-2
Certificates;
(5) to distributions to the holders of
the Class A-1, Class A-2 and Class
A-3 Certificates, pro rata, in
accordance with the amount of
Realized Losses and Additional Trust
Fund Expenses, if any, previously
allocated to such Classes of
Certificates and for which no
reimbursement has previously been
received, to reimburse such holders
for such
S-15
<PAGE>
Realized Losses and Additional Trust
Fund Expenses, if any;
(6) to distributions of interest to the
holders of the Class B Certificates
in an amount equal to all
Distributable Certificate Interest
in respect of such Class of
Certificates for such Distribution
Date and, to the extent not
previously paid, for all prior
Distribution Dates;
(7) after the Class A-1, Class A-2 and
Class A-3 Certificates have been
retired, to distributions of
principal to the holders of the
Class B Certificates in an amount
(not to exceed the then outstanding
Certificate Balance of such Class of
Certificates) equal to the Principal
Distribution Amount for such
Distribution Date, less any portion
thereof distributed in respect of
the Class A-1, Class A-2 and/or
Class A-3 Certificates;
(8) to distributions to the holders of
the Class B Certificates to
reimburse such holders for all
Realized Losses and Additional Trust
Fund Expenses, if any, previously
allocated to such Class of
Certificates and for which no
reimbursement has previously been
received;
(9) to distributions of interest to the
holders of the Class C Certificates
in an amount equal to all
Distributable Certificate Interest
in respect of such Class of
Certificates for such Distribution
Date and, to the extent not
previously paid, for all prior
Distribution Dates;
(10) after the Class A-1, Class A-2,
Class A-3 and Class B Certificates
have been retired, to distributions
of principal to the holders of the
Class C Certificates in an amount
(not to exceed the then outstanding
Certificate Balance of such Class of
Certificates) equal to the Principal
Distribution Amount for such
Distribution Date, less any portion
thereof distributed in respect of
the Class A-1, Class A-2, Class A-3
and/or Class B Certificates;
(11) to distributions to the holders of
the Class C Certificates to
reimburse such holders for all
Realized Losses and Additional Trust
Fund Expenses, if any, previously
allocated to such Class of
Certificates and for which no
reimbursement has previously been
received;
(12) to distributions of interest to the
holders of the Class D Certificates
in an amount equal to all
Distributable Certificate Interest
in respect of such Class of
Certificates for such Distribution
Date and, to the extent not
previously paid, for all prior
Distribution Dates;
(13) after the Class A-1, Class A-2,
Class A-3, Class B and Class C
Certificates have been retired, to
distributions of principal to the
holders of the Class D Certificates
in an amount (not to exceed the then
outstanding Certificate Balance of
such Class of Certificates) equal to
the Principal Distribution Amount
for such Distribution Date,
S-16
<PAGE>
less any portion thereof distributed
in respect of the Class A-1, Class
A-2, Class A-3, Class B and/or Class
C Certificates;
(14) to distributions to the holders of
the Class D Certificates to
reimburse such holders for all
Realized Losses and Additional Trust
Fund Expenses, if any, previously
allocated to such Class of
Certificates and for which no
reimbursement has previously been
received;
(15) to distributions of interest to the
holders of the Class E Certificates
in an amount equal to all
Distributable Certificate Interest
in respect of such Class of
Certificates for such Distribution
Date and, to the extent not
previously paid, for all prior
Distribution Dates;
(16) after the Class A-1, Class A-2,
Class A-3, Class B, Class C and
Class D Certificates have been
retired, to distributions of
principal to the holders of the
Class E Certificates in an amount
(not to exceed the then outstanding
Certificate Balance of such Class of
Certificates) equal to the Principal
Distribution Amount for such
Distribution Date, less any portion
thereof distributed in respect of
the Class A-1, Class A-2, Class A-3,
Class B, Class C and/or Class D
Certificates;
(17) to distributions to the holders of
the Class E Certificates to
reimburse such holders for all
Realized Losses and Additional Trust
Fund Expenses, if any, previously
allocated to such Class of
Certificates and for which no
reimbursement has previously been
received; and
(18) to distributions to the holders of
the respective Classes of Private
Certificates (other than the REMIC
Residual Certificates, which are not
expected to receive distributions)
as described herein (provided that
no distributions of principal will
be made in respect of any Class of
Private Certificates until the
aggregate Certificate Balance of the
Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D and Class
E Certificates has been reduced to
zero). See "Description of the
Certificates--Distributions--
Application of the Available
Distribution Amount" herein;
provided that, on each Distribution Date,
if any, after the aggregate of the
Certificate Balances of the Subordinate
Certificates (as defined herein) has
been reduced to zero prior to retirement
of the Class A Certificates as a result
of the allocation of Realized Losses and
Additional Trust Fund Expenses, and in
any event on the final Distribution Date
in connection with a termination of the
Trust Fund (see "Description of the
Certificates--Termination" herein), the
payments of principal to be made as
contemplated by clauses (2), (3) and (4)
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 Certificate Balances of such
Classes
S-17
<PAGE>
of Certificates, and without regard to
the Principal Distribution Amount for
such date.
The "Distributable Certificate Interest"
in respect of any Class of Sequential
Pay Certificates for any Distribution
Date will generally equal one month's
interest at the applicable Pass-Through
Rate accrued on the Certificate Balance
of such Class of Certificates
outstanding immediately prior to such
Distribution Date, reduced (to not less
than zero) by such Class' allocable
share (in each case, calculated as
described herein) of any Net Aggregate
Prepayment Interest Shortfall (as
described herein) for such Distribution
Date. The "Distributable Certificate
Interest" in respect of the Class IO
Certificates for any Distribution Date
will generally equal the aggregate of
one month's interest accrued at the
applicable Pass-Through Rate on the
notional amount of each Class IO
Component outstanding immediately prior
to such Distribution Date, reduced (to
not less than zero) by such Class'
allocable share (calculated as described
herein) of any Net Aggregate Prepayment
Interest Shortfall for such Distribution
Date. Interest payable on the REMIC
Regular Certificates will be calculated
on a 30/360 basis (as defined herein).
See "Servicing of the Mortgage
Loans--Servicing and Other Compensation
and Payment of Expenses" and
"Description of the Certificates--
Distributions--Distributable Certificate
Interest" herein.
The "Principal Distribution Amount" for
any Distribution Date will generally
equal the aggregate of the following
(without duplication): (a) the aggregate
of the principal portions of all
Scheduled Payments (other than Balloon
Payments) and the principal portion of
any Assumed Scheduled Payments (as
defined herein) due or deemed due on or
in respect of the Mortgage Loans for
their respective Due Dates (as defined
herein) occurring during the related
Collection Period; (b) the aggregate of
all principal prepayments received on
the Mortgage Loans during the related
Collection Period; (c) with respect to
any Mortgage Loan as to which the
related stated maturity date occurred
during or prior to the related
Collection Period, any payment of
principal made by or on behalf of the
related borrower during the related
Collection Period (including any Balloon
Payment), net of any portion of such
payment that represents a recovery of
the principal portion of any Scheduled
Payment (other than a Balloon Payment)
due or the principal portion of any
Assumed Scheduled Payment deemed due, in
respect of such Mortgage Loan on a Due
Date during or prior to the related
Collection Period and not previously
recovered; (d) the aggregate of all
liquidation proceeds, insurance
proceeds, condemnation awards and
proceeds of Mortgage Loan repurchases
that were received on or in respect of
the Mortgage Loans during the related
Collection Period and that were
identified and applied by the Master
Servicer as recoveries of principal, in
each case net of any portion of such
amounts that represents a recovery of
the principal portion of any Scheduled
Payment (other than a Balloon Payment)
due or of the principal portion of
S-18
<PAGE>
any Assumed Scheduled 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 recovered; and (e) for each
Distribution Date after the initial
Distribution Date, the excess, if any,
of the Principal Distribution Amount for
the immediately preceding Distribution
Date, over the aggregate distributions
of principal made on the Certificates on
such immediately preceding Distribution
Date.
The "Scheduled Payment" due on any
Mortgage Loan on any related Due Date is
the amount of the Monthly Payment that
is or would have been, as the case may
be, due thereon on such date, without
regard to any waiver, modification or
amendment granted or agreed to by the
Special Servicer or otherwise resulting
from a bankruptcy or similar proceeding
involving the related borrower, and
assuming that each prior Scheduled
Payment has been timely made. The
"Assumed Scheduled Payment" is an amount
deemed due (i) in respect of a Balloon
Loan that is delinquent in respect of
its Balloon Payment beyond the first
Determination Date (as defined herein)
after its stated maturity date and (ii)
in respect of each REO Mortgage Loan (as
defined herein). The Assumed Scheduled
Payment deemed due on any such Balloon
Loan on its stated maturity date and on
each successive related Due Date that it
remains or is deemed to remain
outstanding will equal the Scheduled
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 loan's
amortization schedule, if any, in effect
as of the Closing Date. The Assumed
Scheduled Payment deemed due on any REO
Mortgage Loan on each Due Date that the
related REO Property (as defined herein)
remains part of the Trust Fund will
equal the Scheduled Payment that would
have been due in respect of such
predecessor Mortgage Loan on such Due
Date had it remained outstanding (or, if
such Mortgage Loan was a Balloon Loan
and such Due Date coincides with or
follows what had been its stated
maturity date, the Assumed Scheduled
Payment that would have been deemed due
in respect of such Mortgage Loan on such
Due Date had it remained outstanding).
The "Determination Date" will be the
10th day of each month (or, if not a
business day, the next preceding
business day). See "Description of the
Certificates--Distributions--Principal
Distribution Amount" herein.
Reimbursements of previously allocated
Realized Losses and Additional Trust
Fund Expenses will not constitute
distributions of principal for any
purpose and will not result in an
additional reduction in the Certificate
Balance of the Class of Certificates in
respect of which any such reimbursement
is made.
The holders of the Certificates may also
receive portions of any Prepayment
Premiums and Yield Maintenance Charges
to the extent described under
"Description of the
Certificates--Distributions--Allocation
of Prepayment Premiums and Yield
Maintenance Charges" herein. Such
distributions will be in addition to the
distributions of interest, if any, made
to such
S-19
<PAGE>
holders from the Available Distribution
Amount on each Distribution Date.
P&I Advances .........................Subject to a recoverability determination,
as described herein, and further subject
to the reduced advancing obligations in
respect of certain Required Appraisal
Loans (as defined herein) and certain
Mortgage Loans as to which the Monthly
Payment has been reduced as part of a
modification or otherwise, the Master
Servicer will be required to make
advances (each, a "P&I Advance ") with
respect to each Distribution Date in an
amount that is generally equal to the
aggregate of all Scheduled Payments
(other than Balloon Payments) and any
Assumed Scheduled Payments, net of
related Servicing Fees and any related
Principal Recovery Fees (each as defined
herein), due or deemed due, as the case
may be, on or in respect of the Mortgage
Loans during the related Collection
Period, in each case to the extent that
such amount was not paid by or on behalf
of the related borrower or otherwise
collected as of the close of business on
the last day of the related Collection
Period. Pursuant to the terms of the
Pooling and Servicing Agreement, if the
Master Servicer fails to make a required
P&I Advance, the Trustee shall then be
obligated to make such P&I Advance, and
if the Trustee fails to make a required
P&I Advance, the Fiscal Agent will then
be obligated to make such P&I Advance,
in each case subject to a recoverability
determination, as described herein. No
default by the Trustee will be deemed to
have occurred if the Fiscal Agent makes
such P&I Advance in a timely manner, as
set forth in the Pooling and Servicing
Agreement.
As more fully described herein, the Master
Servicer (or the Trustee or Fiscal
Agent, as applicable) will be entitled
to interest on any P&I Advance made by
it, and each of the Master Servicer, the
Special Servicer, the Trustee and the
Fiscal Agent will be entitled to
interest on certain reimbursable
servicing expenses incurred by any of
them. Such interest will accrue from the
date any such P&I Advance is made or
such servicing expense is incurred at a
rate per annum equal to the "prime rate"
published in the "Money Rates" section
of The Wall Street Journal, as such
"prime rate" may change from time to
time (the "Reimbursement Rate "); and
such interest will be compounded
annually and will be paid,
contemporaneously with the reimbursement
of such P&I Advance or servicing
expense, out of general collections on
the Mortgage Pool then on deposit in the
Certificate Account. See "Description of
the Certificates--P&I Advances" herein
and "Description of the
Certificates--Advances in Respect of
Delinquencies" and "Description of the
Pooling Agreements--Certificate Account"
in the Prospectus.
Compensating Interest Payments .......To the extent of its servicing
compensation for the related Collection
Period, including Prepayment Interest
Excesses (as defined below) received
during such Collection Period, the
Master Servicer is required to make a
non-reimbursable payment (a
"Compensating Interest Payment ") with
respect to each Distribution Date to
cover the aggregate of any Prepayment
Interest Shortfalls incurred during such
Collection Period. A
S-20
<PAGE>
"Prepayment Interest Shortfall" is a
shortfall in the collection of a full
month's interest (net of the related
Master Servicing Fee and the Additional
Servicing Fee) and without regard to any
Prepayment Premium or Yield Maintenance
Charge actually collected) on any
Mortgage Loan by reason of a full or
partial principal prepayment made prior
to its Due Date in any Collection
Period. A "Prepayment Interest Excess"
is a payment of interest (net of the
related Master Servicing Fee and the
Additional Servicing Fee) made in
connection with any fullor partial
prepayment of a Mortgage Loan after its
DueDate in any Collection Period, which
payment of interest is intended to cover
the period on and after such Due Date
(exclusive of any Prepayment Premium or
Yield Maintenance Charge actually
collected). The "Net Aggregate
Prepayment Interest Shortfall" for any
Distribution Date will be the amount, if
any, by which (a) the aggregate of any
Prepayment Interest Shortfalls incurred
during the related Collection Period
exceeds (b) any Compensating Interest
Payment made by the Master Servicer with
respect to such Distribution Date. See
"Servicing of the Mortgage
Loans--Servicing and Other Compensation
and Payment of Expenses" and
"Description of the Certificates--
Distributions--Distributable Certificate
Interest" herein.
Subordination; Allocation of Losses
and Certain Expenses .................The rights of holders of the Class B,
Class C, Class D, Class E and the
Private Certificates (collectively, the
"Subordinate Certificates "), to receive
distributions of amounts collected or
advanced on the Mortgage Loans will, in
each case, be subordinated, to the
extent described herein, to the rights
of holders of the Class A and Class IO
Certificates (collectively, the "Senior
Certificates ") and each other such
Class of Subordinate Certificates, if
any, with an earlier alphabetical Class
designation. This subordination is
intended to enhance the likelihood of
timely receipt by the holders of the
Senior Certificates of the full amount
of Distributable Certificate Interest
payable in respect of such Classes of
Certificates on each Distribution Date,
and the ultimate receipt by the holders
of each Class of the Class A
Certificates of principal equal to the
entire related Certificate Balance.
Similarly, but to decreasing degrees,
this subordination is also intended to
enhance the likelihood of timely receipt
by the holders of the Class B, Class C,
Class D and Class E Certificates of the
full amount of Distributable Certificate
Interest payable in respect of such
Classes of Certificates on each
Distribution Date, and the ultimate
receipt by the holders of such
Certificates of, in the case of each
such Class, principal equal to the
entire related Certificate Balance. The
protection afforded to the holders of
the Offered Certificates by means of the
subordination referred to above will be
accomplished by (i) the application of
the Available Distribution Amount on
each Distribution Date in the order
described above in this Summary under
"--Description of the
Certificates--Distributions" and (ii) by
the allocation of Realized Losses and
Additional Trust Fund Expenses as
described below. No other form of credit
support will be
S-21
<PAGE>
available for the benefit of the holders
of the Offered Certificates.
On each Distribution Date, following all
distributions on the Certificates to be
made on such date, the aggregate of all
Realized Losses and Additional Trust
Fund Expenses that have been incurred
since the Cut-off Date through the end
of the related Collection Period and
that have not previously been so
allocated will be allocated, subject to
the limitations described herein, first
to the Private Certificates in the order
described in the Pooling and Servicing
Agreement, and then to the Class E,
Class D, Class C and Class B
Certificates, in that order, until the
Certificate Balance of each such Class
has been reduced to zero. Thereafter any
additional Realized Losses and
Additional Trust Fund Expenses will be
allocated, subject to the limitations
described herein, to the Class A-1,
Class A-2 and Class A-3 Certificates,
pro rata, in proportion to their
outstanding Certificate Balances (in
each such case, in reduction of the
related Certificate Balance). See
"Description of the
Certificates--Subordination; Allocation
of Losses and Certain Expenses" herein.
Any Realized Loss or Additional Trust Fund
Expenses allocated in reduction of the
Certificate Balance of any Class of
Sequential Pay Certificates will result
in a corresponding reduction in the
notional amount of the related Class IO
Component.
Treatment of REO Properties ..........Notwithstanding that a Mortgaged Property
may be acquired on behalf of the
Certificateholders through foreclosure,
deed in lieu of foreclosure or otherwise
(upon acquisition, an "REO Property "),
the related Mortgage Loan will be
treated, for purposes of determining (i)
distributions on the Certificates, (ii)
allocations of Realized Losses and
Additional Trust Fund Expenses to the
Certificates and (iii) the amount of
fees payable to the Trustee, the Master
Servicer and the Special Servicer under
the Pooling and Servicing Agreement, as
having remained outstanding until such
REO Property is liquidated. In
connection therewith, operating revenues
and other proceeds derived from such REO
Property (net of related operating
costs, including certain reimbursements
payable to the Master Servicer or the
Special Servicer in connection with the
operation and disposition of such REO
Property) will be "applied" by the
Master Servicer as principal, interest
and other amounts that would have been
"due" on such Mortgage Loan, and the
Master Servicer will be required to make
P&I Advances in respect of such Mortgage
Loan, in all cases as if such Mortgage
Loan had remained outstanding.
Optional Termination .................Each of the Master Servicer, the Special
Servicer, the Depositor, Lehman Brothers
Inc. and the Majority Subordinate
Certificateholder (as defined herein)
will have an option to purchase all of
the Mortgage Loans and REO Properties,
and thereby effect termination of the
Trust Fund and early retirement of the
then outstanding Certificates, on any
Distribution Date on which the aggregate
Stated Principal Balance of the Mortgage
Pool is less than 1% of the Initial Pool
Balance. See "Description of the
Certificates--Termination" herein and in
the Prospectus.
S-22
<PAGE>
Certain Investment Considerations.....The yield to maturity of a Class A-1,
Class A-2, Class A-3, Class B, Class C,
Class D or Class E Certificate purchased
at a discount or premium will be
affected by the rate of prepayments and
other unscheduled collections of
principal on or in respect of the
Mortgage Loans and the allocation
thereof to reduce the principal balance
of such Certificate. An investor should
consider, in the case of any such
Certificate purchased at a discount, the
risk that a slower than anticipated rate
of prepayments could result in a lower
than anticipated yield and, in the case
of any such Certificate purchased at a
premium, the risk that a faster than
anticipated rate of prepayments could
result in a lower than anticipated
yield. IN ADDITION, THE YIELD TO
MATURITY OF THE CLASS IO CERTIFICATES
WILL BE HIGHLY SENSITIVE TO THE RATE AND
TIMING OF PRINCIPAL PAYMENTS (INCLUDING
BY REASON OF PREPAYMENTS, DEFAULTS AND
LIQUIDATIONS) ON THE MORTGAGE LOANS, AND
INVESTORS IN THE CLASS IO CERTIFICATES
SHOULD FULLY CONSIDER THE ASSOCIATED
RISKS, INCLUDING THE RISK THAT A RAPID
RATE OF PREPAYMENTS AND/OR LIQUIDATIONS
IN RESPECT OF THE MORTGAGE LOANS COULD
RESULT IN THE FAILURE OF SUCH INVESTORS
TO FULLY RECOUP THEIR INITIAL
INVESTMENTS. See "Yield and Maturity
Considerations" herein and in the
Prospectus. The allocation to any Class
of any Prepayment Premium or Yield
Maintenance Charge may be insufficient
to offset fully any adverse effects on
the anticipated yield to maturity
resulting from the corresponding
principal prepayment. See "Description
of Certificates--Distributions--
Allocation of Prepayment Premiums and
Yield Maintenance Charges" herein.
In addition, insofar as an investor's
initial investment in any Offered
Certificate is returned in the form of
payments of principal thereon, there can
be no assurance that such amounts can be
reinvested in comparable alternative
investments with comparable yields.
Investors in the Offered Certificates
should consider that, as of the Cut-off
Date, certain of the Mortgage Loans may
be prepaid at any time and the remainder
may be prepaid at any time after the
expiration of the applicable Lock-Out
Period (as defined herein), subject, in
most cases, to the payment of a
Prepayment Premium or Yield Maintenance
Charge. See "Description of the Mortgage
Pool--Certain Terms and Conditions of
the Mortgage Loans--Prepayment
Provisions" herein. Accordingly, the
rate of prepayments on the Mortgage
Loans is likely to be inversely related
to the level of prevailing market
interest rates (and, presumably, to the
yields on comparable alternative
investments).
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, with the resulting REMICs
being herein referred to as "REMIC I,"
"REMIC II" and "REMIC III." The assets
of REMIC I will consist of the Mortgage
Loans, any REO Properties acquired on
behalf of the Certificateholders and the
Certificate Account (see "Description of
the Pooling Agreements--Certificate
Account" in the
S-23
<PAGE>
Prospectus). For federal income tax
purposes, (a) the separate
noncertificated regular interests in
REMIC I will be the "regular interests"
in REMIC I and will constitute the
assets of REMIC II, (b) the Class R-I
Certificates will be the sole class of
"residual interests" in REMIC I, (c) the
separate noncertificated regular
interests in REMIC II will be the
"regular interests" in REMIC II and will
constitute the assets of REMIC III, (d)
the Class R-II Certificates will be sole
class of "residual interests" in REMIC
II, (e) the REMIC Regular Certificates
(or, in the case of the Class IO
Certificates, the Class IO Components)
will be the "regular interests" in REMIC
III and generally will be treated as
debt instruments of REMIC III, and (f)
the Class R-III Certificates will be the
sole class of "residual interests" in
REMIC III.
The Class A-1, Class A-2, Class A-3, Class
B, Class C, Class D and Class E
Certificates will not, and the Class IO
Certificates will, be treated as having
been issued with original issue discount
for federal income tax reporting
purposes. The prepayment assumption that
will be used for purposes of computing
the accrual of original issue discount,
market discount and premium, if any, for
federal income tax purposes will be
equal to a CPR of 0%, except that it is
assumed that the ARD Loans pay their
respective outstanding principal
balances on their related Anticipated
Repayment Dates. However, no
representation is made that the Mortgage
Loans will prepay at that rate or at any
other rate.
The Offered Certificates will be treated
as "real estate assets" within the
meaning of Section 856(c)(5)(A) of the
Code. In addition, interest (including
original issue discount) on the Offered
Certificates will be interest described
in Section 856(c)(3)(B) of the Code.
However, the Offered Certificates will
generally only be considered assets
described in Section 7701(a)(19)(C) of
the Code to the extent that the Mortgage
Loans are secured by residential
property and, accordingly, an investment
in the Offered Certificates may not be
suitable for certain thrift
institutions.
For further information regarding the
federal income tax consequences of
investing in the Offered Certificates,
see "Certain Federal Income Tax
Consequences" herein and in the
Prospectus.
ERISA Considerations .................A fiduciary of any employee benefit plan
or other retirement arrangement subject
to the Employee Retirement Income
Security Act of 1974, as amended
("ERISA "), or Section 4975 of the Code
(a "Plan ") should review carefully with
its legal advisors 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 to an investment therein.
Lehman Brothers Inc. has received from the
U.S. Department of Labor (the "DOL ") an
individual Prohibited Transaction
Exemption that generally exempts from
the application of
S-24
<PAGE>
certain of the prohibited transaction
provisions of Sections 406(a) and (b)
and 407(a) of ERISA and the excise taxes
imposed on such prohibited transactions
by Section 4975(a) and (b) of the Code,
transactions relating to the purchase,
sale and holding of pass-through
certificates underwritten by Lehman
Brothers Inc. provided that certain
conditions are satisfied.
The Depositor expects that the Prohibited
Transaction Exemption will generally
apply to the Senior Certificates, but it
will not apply to the other Classes of
Offered Certificates. ACCORDINGLY,
EXCEPT AS DESCRIBED HEREIN, THE CLASS B,
CLASS C, CLASS D AND CLASS E
CERTIFICATES SHOULD NOT BE ACQUIRED BY A
PLAN OR ANY INVESTOR HOLDING ASSETS OF A
PLAN. PURCHASERS USING INSURANCE COMPANY
GENERAL ACCOUNT FUNDS TO EFFECT SUCH
PURCHASE SHOULD CONSIDER THE
AVAILABILITY OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 (60 FED. REG.
35925, JULY 12, 1995) ISSUED BY THE DOL.
SEE "ERISA CONSIDERATIONS" HEREIN AND IN
THE PROSPECTUS.
Ratings ..............................It is a condition of their issuance that
the Offered Certificates receive the
ratings from each of Moody's Investors
Service, Inc. ( "Moody's "), Duff &
Phelps Credit Rating Co. ( "DCR") and,
except for the Class IO Certificates,
Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies,
Inc. ( "Standard & Poor's" and, together
with Moody's and DCR, the "Rating
Agencies ") set forth on the cover page
of this Prospectus Supplement. The
ratings on the Offered Certificates
address the likelihood of the timely
receipt by holders thereof of all
distributions of interest to which they
are entitled and, except in the case of
the Class IO Certificates, distributions
of principal by the Rated Final
Distribution Date set forth on the cover
page of this Prospectus Supplement. 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. A security rating does not
represent any assessment of (i) the
likelihood or frequency of principal
prepayments or default interest 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
and Yield Maintenance Charges will be
received. Also, 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 Class IO Certificates
might not fully recover their investment
in the event of rapid prepayments of the
Mortgage Loans (including both voluntary
and involuntary prepayments). Therefore,
such security rating addresses credit
risk and not the risk of prepayment. As
described herein, the amounts payable
with respect to the Class IO
Certificates consist only of interest.
The Class IO Certificates' notional
amount upon which interest is calculated
is reduced by the allocation of Realized
Losses and prepayments, whether
voluntary or involuntary. The rating
does not address the timing or magnitude
of reductions of the notional amounts of
the Class IO Components, but only the
obligation to pay interest
S-25
<PAGE>
timely on the notional amount as reduced
from time to time. Accordingly, the
ratings of the Class IO Certificates
should be evaluated independently from
similar ratings on other types of
securities. A downgrade, qualification
or withdrawal of a rating with respect
to the Enhancement Insurer, a provider
of a residual value insurance policy, a
Tenant or a Guarantor may adversely
affect the ratings of the Offered
Certificates. See "Ratings" herein and
"Risk Factors--Limited Nature of
Ratings" in the Prospectus.
Legal Investment .....................Any Offered Certificates rated in the
category of "AAA" or "AA" (or the
equivalent) by at least one Rating
Agency will constitute "mortgage related
securities" pursuant to the
SecondaryMortgage Market Enhancement Act
of 1984, as amended ( "SMMEA "). All
other Offered Certificates ( "Non-SMMEA
Certificates ") will not constitute
"mortgage related securities" for
purposes of SMMEA. As a result, the
appropriate characterization of the
Non-SMMEA Certificates under various
legal investment restrictions, and thus
the ability of investors subject to
these restrictions to purchase the
Non-SMMEA Certificates of any Class, may
be subject to significant interpretative
uncertainties. In addition, institutions
whose investment activities are subject
to review by federal or state regulatory
authorities may be or may become subject
to restrictions on the investment by
such institutions in certain forms of
mortgage backed securities. Investors
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.
S-26
<PAGE>
RISK FACTORS
Prospective purchasers of the Offered Certificates of any Class should
consider, among other things, the following risk factors (as well as the risk
factors set forth under "Risk Factors" in the Prospectus) in connection with an
investment therein.
THE CERTIFICATES
Limited Liquidity. There is currently no secondary market for the Offered
Certificates. While each of the Underwriters currently intends to make a
secondary market in the Offered Certificates, neither is under any 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 the Offered
Certificates with liquidity of investment or that it will continue for the life
of the Offered Certificates. Any such secondary market may provide less
liquidity to investors than any comparable market for securities that evidence,
for example, interests solely in single-family mortgage loans. The Certificates
will not be listed on any securities exchange.
Certain Yield and Maturity Considerations. The yield on the Class IO
Certificates and any other Classes of Offered Certificates that are purchased at
a discount or premium will be affected by the rate and timing of principal
payments applied or otherwise resulting in reduction of the Certificate Balance
of such Class of Certificates (or, in the case of the Class IO Certificates, the
notional amount of any Class IO Component), which in turn will be affected by
(i) the rate and timing of principal payments and collections on the Mortgage
Loans, particularly unscheduled payments or collections in the form of voluntary
prepayments of principal or unscheduled recoveries of principal due to defaults,
casualties or condemnations whether before or after the scheduled maturity date
of the related Mortgage Loans, and (ii) the order of priority of distributions
of principal in respect of the Sequential Pay Certificates. The rate and timing
of unscheduled payments and collections of principal on the Mortgage Loans is
impossible to accurately predict and will be affected by a variety of factors,
including, without limitation, the level of prevailing interest rates,
restrictions on voluntary prepayments contained in the Mortgage Notes, the
availability of mortgage credit and other economic, demographic, geographic, tax
and legal factors. In general, however, if prevailing interest rates fall
significantly below the Mortgage Rates on the Mortgage Loans, borrowers under
the Mortgage Loans will have an increased incentive to prepay. As described
herein, the Principal Distribution Amount for each Distribution Date will be
distributable entirely in reduction of the Certificate Balance of the Class A-1,
Class A-2 and Class A-3 Certificates, in that order (unless the aggregate
Certificate Balance of the Subordinate Certificates has been reduced to zero),
in each such case until the related Certificate Balance thereof is reduced to
zero, and will thereafter be distributable in its entirety in respect of each
remaining Class of Sequential Pay Certificates, sequentially in alphabetical
order of Class designation, until the related Certificate Balance of each such
Class is, in turn, reduced to zero. See "Description of the
Certificates--Distributions--Application of the Available Distribution Amount"
herein. Accordingly, the actual rate of principal payments on the Mortgage Loans
may have different effects on the yields of the respective Classes of Offered
Certificates. Any payment in reduction of the Certificate Balance of a Class of
Sequential Pay Certificates will also result in a corresponding reduction in the
notional amount of the related Class IO Component. Thus, the yield on the Class
IO Certificates will be extremely sensitive to the rate and timing of principal
payments on the Mortgage Loans, and the more quickly the notional amount of any
Class IO Component is reduced, the greater will be the negative effect on their
yields, to the extent such effect is not offset by distributions of a portion of
any applicable Prepayment Premiums or Yield Maintenance Charges to the holders
thereof, as described under "Description of the
Certificates--Distributions--Allocation of Prepayment Premiums and Yield
Maintenance Charges" herein. In addition, the Mortgage Loans may not require the
payment of Prepayment Premiums or Yield Maintenance Charges in the event of
involuntary prepayments resulting from casualty or condemnation. Furthermore, in
the event of a liquidation of a Mortgage Loan following a default, the
liquidation proceeds may be insufficient to cover any Prepayment Premium or
Yield Maintenance Charge, together with all principal, interest and other sums
that may be due and owing in respect of such Mortgage Loan, and the obligation
to pay such Prepayment Premium or Yield Maintenance Charge under those
circumstances may be unenforceable. Accordingly, prospective investors in the
Class IO Certificates should consider the associated risks, including the risk
that a rapid rate of prepayments on the Mortgage Loans could result in the
failure of such investors to fully recoup their initial investments.
S-27
<PAGE>
The yield on any Offered Certificate also will be affected by the rate and
timing of losses attributable to defaults on the Mortgage Loans, the severity of
such losses and the extent to which such losses and related expenses are applied
in reduction of the actual or notional principal amount of such Certificate or
otherwise reduce the amount of funds available for distribution to the holder of
such Certificate. To the extent described herein, the Private Certificates are
subordinate in right and time of payment to the Offered Certificates and will
bear shortfalls in collections and losses incurred in respect of the Mortgage
Loans prior to the Offered Certificates; and the Class B, Class C, Class D and
Class E Certificates are subordinate in right and time of payment to the Senior
Certificates and will bear such shortfalls and losses prior to the Senior
Certificates, in reverse alphabetical order of Class designation. The Class A-1,
Class A-2 and Class A-3 Certificates will bear shortfalls in collections and
losses incurred in respect of the Mortgage Loans pro rata, in proportion to
their respective outstanding Certificate Balances. However, until the first
Distribution Date after the aggregate of the Certificate Balances of the
Subordinate Certificates has been reduced to zero, (i) the Class A-3
Certificates will receive principal payments only after the Certificate Balances
of the Class A-2 and Class A-1 Certificates have been reduced to zero and (ii)
the Class A-2 Certificates will receive principal payments only after the
Certificate Balance of the Class A-1 Certificates has been reduced to zero. As a
result, the shortfalls and losses allocated to the Class A-1, Class A-2 and
Class A-3 Certificates will have a greater effect on the Class A-3 Certificates
than on the Class A-1 and Class A-2 Certificates and, depending on the timing of
such shortfalls or losses, a greater effect on the Class A-2 Certificates than
on the Class A-1 Certificates. Any Realized Loss or Additional Trust Fund
Expenses allocated in reduction of the Certificate Balance of any Class of
Sequential Pay Certificates will result in a corresponding reduction in the
notional amount of the corresponding Class IO Component. See "Description of the
Certificates--Distributions" and "--Subordination; Allocation of Losses and
Certain Expenses" herein and "Yield and Maturity Considerations" herein and in
the Prospectus.
The Pass-Through Rate applicable to each Class IO Component will be
variable and will be equal to the Weighted Average Net Mortgage Rate from time
to time minus the Pass-Through Rate on the Class of Sequential Pay Certificates
related to such Class IO Component. Accordingly, the Pass-Through Rate
applicable to each such Class IO Component and, correspondingly, the yield on
the Class IO Certificates will be sensitive to changes in the relative
composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments and liquidations. See "Description of the
Certificates--Distributions" and "Subordination; Allocation of Losses and
Certain Expenses" herein and "Yield and Maturity Considerations" herein and in
the Prospectus.
Potential Conflicts of Interest. Subject to certain conditions described
herein, the Pooling and Servicing Agreement will permit the holder (or holders)
of the majority of the Voting Rights (as defined herein) allocated to the Class
of Sequential Pay Certificates that has the latest alphabetical Class
designation and that has a Certificate Balance that is greater than 25% of its
original Certificate Balance (or, if no Class of Sequential Pay Certificates has
a Certificate Balance that is greater than 25% of its original Certificate
Balance, the then outstanding Class of Sequential Pay Certificates with the
latest alphabetical Class designation) to replace the Special Servicer or any
successor thereafter appointed and to select the Controlling Class
Representative from whom the Special Servicer will seek advice and approval and
take direction under certain circumstances, as described herein. The replacement
Special Servicer may be a Certificateholder of such Class or an affiliate of any
such Certificateholder. As described herein, any such Special Servicer will have
considerable latitude in determining to liquidate or modify defaulted Mortgage
Loans. In addition, the Special Servicer will perform certain servicing
functions with respect to the Mortgage Loans, pursuant to the Pooling and
Servicing Agreement. See "Servicing of the Mortgage Loans--Modifications,
Waivers and Amendments" herein. It is contemplated that the initial Special
Servicer or an affiliate thereof may purchase some or all of the Certificates of
one or more Classes of Private Certificates, including the initial Controlling
Class of Sequential Pay Certificates, and the Special Servicer or an affiliate
thereof is not prohibited from purchasing the Certificates of any other Class.
Although the Special Servicer will be obligated to observe the terms of the
Pooling and Servicing Agreement and will be governed by the servicing standard
described herein, it may, especially if it is itself a Certificateholder, have
interests when dealing with defaulted Mortgage Loans that are in conflict with
those of holders of Offered Certificates. For instance, a Special Servicer that
is a Certificateholder could seek to mitigate the potential for loss to its
Class from a troubled Mortgage Loan by deferring enforcement in the hope of
maximizing future proceeds. However, such action could result in less proceeds
to the Trust Fund than would have been realized if earlier action had been
taken. In connection with the servicing of the Specially Serviced Mortgage
Loans, the Special Servicer may, at the direction of the Controlling Class
Representative, take actions with respect to such Specially Serviced Mortgage
Loans that could adversely affect the holders of some or all of the Classes of
Offered Certificates. It is possible that the Controlling Class Representative
S-28
<PAGE>
may direct the Special Servicer to take actions which conflict with the
interests of the holders of certain Classes of Offered Certificates.
THE MORTGAGE LOANS
Risks of Lending on Income-Producing Properties. The Mortgaged Properties
consist entirely of income-producing real estate. Lending on the security of
income-producing real estate is generally viewed as exposing a lender to a
greater risk of loss than lending on the security of single-family residences.
Income property lending typically involves larger loans than single-family
lending. In addition, and unlike loans made on the security of single family
residences, repayment of loans made on the security of income-producing real
property depends upon the ability of the related real estate project (i) to
generate income sufficient to pay operating expenses and leasing commissions, to
make necessary repairs, tenant improvements and capital improvements and to pay
debt service and (ii) in the case of loans that do not fully amortize over their
terms, to retain sufficient value to permit the borrower to pay off the loan at
maturity by sale or refinancing. A number of factors, many beyond the control of
the property owner, can affect the ability of an income-producing real estate
project to generate sufficient net operating income to pay debt service and/or
to maintain its value. Among these factors are economic conditions generally and
in the area of the project, the age, quality and design of the project and the
degree to which it competes with other projects in the area, changes or
continued weakness in specific industry segments, increases in operating costs,
the willingness and ability of the owner to provide capable property management
and maintenance and, in the case of Mortgaged Properties that are retail,
industrial/warehouse or office properties, the degree to which the project's
revenue is dependent upon a single tenant or user (as is the case with Mortgaged
Properties related to Credit Lease Loans), a small group of tenants, tenants
concentrated in a particular business or industry and the competition to any
such tenants. If leases are not renewed or replaced, if tenants default and/or
if rental rates fall and/or if operating expenses increase, the borrower's
ability to repay the loan may be impaired and the resale value of the property,
which is substantially dependent upon the property's ability to generate income,
may decline. In addition, there are other factors, including changes in zoning
or tax laws, the availability of credit for refinancing, and changes in interest
rate levels that may adversely affect the value of a project (and thus the
borrower's ability to sell or refinance) without necessarily affecting the
ability to generate current income.
In addition, particular types of income properties are exposed to
particular risks. For instance, office properties may require their owners to
expend significant amounts of cash to pay for general capital improvements,
tenant improvements and costs of re-leasing space. Also, office properties that
are not equipped to accommodate the needs of modern businesses may become
functionally obsolete and thus non-competitive. 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, the tenants who reside in a particular project
within such a market may easily move to alternative projects with more desirable
amenities or locations. The rent limitations imposed on Section 42 Properties
may adversely affect the ability of the applicable borrowers to increase rents
to maintain such Mortgaged Properties in proper condition during periods of
rapid inflation or declining market value of such Mortgaged Properties. In
addition, the income restrictions on tenants imposed by Section 42 of the Code
may reduce the number of eligible tenants in such Mortgaged Properties and
result in a reduction in occupancy rates applicable thereto. See "Description of
the Mortgage Pool--Certain Terms and Conditions of the Mortgage Loans--Low
Income Housing Tax Credits" herein. Shopping centers, in general, are affected
by the health of the retail industry, which is currently undergoing a
consolidation and is experiencing changes due to the growing market share of
"off-price" retailing, and a particular shopping center may be adversely
affected by the bankruptcy or decline in drawing power of an anchor tenant, a
shift in consumer demand due to demographic changes (for example, population
decreases or changes in average age or income) and/or changes in consumer
preference (for example, to discount retailers). See "Description of the
Mortgage Pool--Additional Mortgage Loan Information--Certain Lease Matters"
herein. Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment (for
example, a decline in defense spending), and a particular industrial property
that suited the needs of its original tenant may be difficult to re-let to
another tenant or may become functionally obsolete relative to newer properties.
See "Risk Factors--Risks Associated with Certain Mortgage Loans and Mortgaged
Properties" in the Prospectus.
In the case of retail properties, the failure of an anchor tenant to renew
its lease, the termination of an anchor tenant's lease, the bankruptcy or
economic decline of an anchor tenant, or the cessation of the business of an
anchor
S-29
<PAGE>
at its store, notwithstanding its continued payment of rent after "going dark",
can have a particularly negative effect on the economic performance of a
shopping center property given the importance of anchor tenants in attracting
traffic to other stores within the same shopping center. In addition, the
failure of one or more major tenants, such as an anchor tenant, to operate from
its premises may entitle other tenants to rent reductions or the right to
terminate their leases. For several Mortgage Loans, the land and improvements
utilized by an anchor or other tenant are not subject to the related Mortgage.
Mortgage Loans secured by liens on residential health care facilities pose
risks not associated with loans secured by liens on other types of
income-producing real estate. Providers of long-term nursing care, assisted
living and other medical services are subject to federal and state laws that
relate to the adequacy of medical care, distribution of pharmaceuticals, rate
setting, equipment, personnel, operating policies and additions to facilities
and services and, to the extent dependent on patients whose fees are reimbursed
by private insurers, to the reimbursement policies of such insurers. The failure
of any of such borrower to maintain or renew any required license or regulatory
approval could prevent it from continuing operations at a Mortgaged Property (in
which case no revenues would be received from such property or portion thereof
requiring licensing) or, if applicable, bar it from participation in government
reimbursement programs. Furthermore, in the event of foreclosure, there can be
no assurance that the Trustee or any other purchaser at a foreclosure sale would
be entitled to the rights under such licenses and such party may have to apply
in its own right for such a license. There can be no assurance that a new
license could be obtained or that the related Mortgage Property would be
adaptable to other uses. To the extent any nursing home receives a significant
portion of its revenues from government reimbursement programs, primarily
Medicaid and Medicare, such revenue may be subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings, policy
interpretations, delays by fiscal intermediaries and government funding
restrictions. Moreover, governmental payors have employed cost-containment
measures that limit payments to health care providers, and there are currently
under consideration various proposals in the United States Congress that could
materially change or curtail those payments. Accordingly, there can be no
assurance that payments under government reimbursement programs will, in the
future, be sufficient to fully reimburse the cost of caring for program
beneficiaries. If not, net operating income of the Mortgaged Properties that
receive substantial revenues from those sources, and consequently the ability of
the related borrowers to meet their Mortgage Loan obligations, could be
adversely affected. Under applicable federal and state laws and regulations,
including those that govern Medicare and Medicaid programs, only the provider
who actually furnished the related medical goods and services may sue for or
enforce its rights to reimbursement. Accordingly, in the event of foreclosure,
none of the Trustee, the Master Servicer, the Special Servicer or a subsequent
lessee or operator of the property would generally be entitled to obtain from
federal or state governments any outstanding reimbursement payments relating to
services furnished at the respective properties prior to such foreclosure.
Various factors, including location, quality and franchise affiliation (or
lack thereof), affect the economic viability of a hotel. Adverse economic
conditions, either local, regional or national, may limit the amount that may be
charged for a room and may result in a reduction in occupancy levels. The
construction of competing hotels or motels can have similar effects. Because
hotel rooms generally are rented for short periods of time, hotel properties
tend to respond more quickly to adverse economic conditions and competition than
do other commercial properties. The successful operation of a hotel with a
franchise affiliation may depend in part upon the strength of the franchisor,
the public perception of the franchise service mark and the continued existence
of any franchise license agreement. The transferability of a franchise license
agreement may be restricted, and a lender or other person that acquires title to
a hotel property as a result of foreclosure may be unable to succeed to the
borrower's rights under any franchise license agreement. Furthermore, the
ability of a hotel to attract customers, and some of such hotel's revenues, may
depend in large part on its having a liquor license. Such a license may not be
transferable (for example, in connection with a foreclosure).
Credit Lease Mortgaged Properties. Sixty-five (65) of the Mortgage Loans,
or 10.8%, are Credit Lease Loans. The payment of interest and principal on
Credit Lease Loans is dependent principally on the payment by each Tenant or
guarantor of the Tenant's Credit Lease (the "Guarantor"), if any, of Monthly
Rental Payments and other payments due under the terms of its Credit Lease. A
downgrade in the credit rating of the Tenant and/or the Guarantor may have a
related adverse effect on the rating of the Offered Certificates. In addition,
because the ability of a Credit Lease to service the related Credit Lease Loan
is dependent on revenue from a single Tenant, in the event of a default under a
Credit Lease or the associated guarantee, as the case may be, the Mortgagor may
not have the ability to make required payments on such Credit Lease Loan until
the premises are re-let. If a payment default on the Credit Lease Loan occurs,
the Special Servicer may be entitled to foreclose upon or otherwise realize upon
the related Mortgaged
S-30
<PAGE>
Property to recover amounts due under the Credit Lease Loan, and will also be
entitled to pursue any available remedies against the defaulting Tenant and any
Guarantor. Other than with respect to three Credit Lease Loans, or 0.3%, each
Credit Lease Loan which is a Balloon Loan is insured to the extent of the
related Balloon Payment through a residual value insurance policy. Pursuant to
the terms of such policies, if a default occurs under such Credit Lease Loans
and no recovery is available from the related Mortgagor, the Tenant or any
Guarantor, the Special Servicer will be entitled or able to recover in full the
amount of the Balloon Payment due under such Credit Lease Loan after the
maturity date for such Credit Lease Loan. With respect to defaults other than
with respect to Balloon Payments (and defaults with respect to Balloon Payments
of the Credit Lease Loans which are Balloon Loans but do not benefit from a
residual value insurance policy), it is unlikely that the Special Servicer will
be able to recover in full the amounts then due under such Credit Lease Loans.
See "Description of the Mortgage Pool--Credit Lease Loans" herein.
Factors Affecting Lease Enhancement Policy Proceeds. With respect to each
Credit Lease Loan which is not secured by a Bond-Type Lease (as defined herein),
the Trustee is the beneficiary of a non-cancelable Lease Enhancement Policy (as
defined herein) obtained to cover certain lease termination (and abatement with
respect to losses arising out of a condemnation) events arising out of a
casualty to, or condemnation of, the related Mortgaged Property issued by Chubb
Custom Insurance Company (the "Enhancement Insurer"), which, as of the Cut-off
Date, was rated "AAA" by Standard & Poor's and "Aaa" by Moody's. The Lease
Enhancement Policy is subject to certain limited exclusions and does not insure
interest on Credit Lease Loans for a period of greater than 75 days past the
date of the occurrence of a Casualty or Condemnation Right (each as defined
herein). The Enhancement Insurer is not required to pay amounts due under the
Credit Lease Loan other than principal and, subject to the limitation above,
accrued interest, and therefore is not required to pay any Prepayment Premium or
Yield Maintenance Charge due thereunder or any amounts the related Mortgagor is
obligated to pay thereunder as reimbursement for outstanding Servicing Advances.
Certificateholders may be adversely affected by any failure by the
Enhancement Insurer to pay under the terms of the Lease Enhancement Policies,
and any downgrade of the credit rating of the Enhancement Insurer (or the
provider of a residual value insurance policy) may adversely affect the ratings
of the Offered Certificates. See "Description of the Mortgage Pool--Credit Lease
Loans" herein.
Nonrecourse Mortgage Loans. The Mortgage Loans are not insured or
guaranteed by any governmental entity or private mortgage insurer. The Depositor
has not undertaken any evaluation of the significance of the recourse provisions
of Mortgage Loans that may permit recourse against the related borrower or
another person in the event of a default. Accordingly, investors should consider
all of the Mortgage Loans to be nonrecourse loans as to which recourse in the
case of default will be limited to the related Mortgaged Property.
Environmental Law Considerations. Contamination of real property may give
rise to a lien on that property to assure payment of the cost of clean-up or, in
certain circumstances, may result in liability to the lender for that cost. Such
contamination may also reduce the value of a property. A "Phase I" environmental
site assessment was performed at each of the Mortgaged Properties. See
"Description of the Mortgage Pool--Assessments of Property
Condition--Environmental and Engineering Assessments" herein.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to taking
possession of the property through foreclosure or otherwise or assuming control
of its operation. Such requirement effectively precludes enforcement of the
security for the related Mortgage 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 a material adverse environmental condition at the Mortgaged Property.
However, there can be no assurance that the requirements of the Pooling and
Servicing Agreement will effectively insulate the Trust Fund from potential
liability for a materially adverse environmental condition at any Mortgaged
Property. See "Description of the Pooling Agreements--Realization Upon Defaulted
Mortgage Loans", "Risk Factors--Environmental Risks" and "Certain Legal Aspects
of Mortgage Loans and Leases--Environmental Considerations" in the Prospectus.
Balloon Payments. Three hundred twenty-nine (329) of the Mortgage Loans, or
82.8%, do not fully amortize over their terms to maturity. Balloon Loans involve
a greater risk to a lender than fully-amortizing loans because the ability of a
borrower to make a Balloon Payment typically will depend upon its ability either
to fully refinance the loan or to sell the related mortgaged property at a price
sufficient to permit the borrower to make the Balloon Payment.
S-31
<PAGE>
Moreover, and whether or not losses are ultimately sustained, any delay in the
collection of a Balloon Payment that would otherwise be distributable in respect
of a Class of Offered Certificates will likely extend the weighted average life
of such Class. The ability of a borrower to effect a refinancing or sale will be
affected by a number of factors, including the value of the related Mortgaged
Property, the level of available mortgage rates at the time of sale or
refinancing, the borrower's equity in the Mortgaged Property, the financial
condition and operating history of the borrower and the Mortgaged Property, tax
laws, prevailing general economic conditions and the availability of credit for
loans secured by multifamily or commercial, as the case may be, real properties
generally. See "Risk Factors--Balloon Payments; Borrower Default" in the
Prospectus.
In order to maximize recoveries on defaulted Mortgage Loans, the Pooling
and Servicing Agreement permits the Special Servicer to extend and modify
Mortgage Loans that are in material default or as to which a payment default
(including the failure to make a Balloon Payment) is imminent; subject, however,
to the limitations described under "Servicing of the Mortgage
Loans--Modifications, Waivers and Amendments" herein. There can be no assurance,
however, that any such extension or modification will increase the present value
of recoveries in a given case. Any delay in collection of a Balloon Payment that
would otherwise be distributable in respect of a Class of Offered Certificates,
whether such delay is due to borrower default or to modification of the related
Mortgage Loan, will likely extend the weighted average life of such Class of
Offered Certificates. See "Yield and Maturity Considerations" herein and in the
Prospectus.
Risk of Subordinated Debt. The Mortgaged Properties securing nine Mortgage
Loans, or 2.7%, are encumbered by subordinated debt. The existence of
subordinated debt encumbering any Mortgaged Property may increase the difficulty
of refinancing the related Mortgage Loan at maturity and the possibility that
reduced cash flow could result in deferred maintenance. Also, in the event that
the holder of the subordinated debt has filed for bankruptcy or been placed in
involuntary receivership, foreclosing on the Mortgaged Property could be
delayed. See "Certain Legal Aspects of Mortgage Loans and Leases--Subordinate
Financing" and "--Due-on-Sale and Due-on-Encumbrance" in the Prospectus.
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 422 conventional, fixed rate Mortgage
Loans, with an Initial Pool Balance of $2,203,502,325, which will equal the
aggregate Cut-off Date Balance of such Mortgage Loans. The Cut-off Date Balances
of the Mortgage Loans range from $449,722 to $45,416,841, and the Mortgage Loans
have an average Cut-off Date Balance of $5,221,569. All percentages of the
Mortgage Loans, or of any specified group of Mortgage Loans, referred to herein
without further description are approximate percentages by aggregate Cut-off
Date Balance. References to percentages of Mortgaged Properties referred to
herein without further description are references to the percentages of the
Initial Pool Balance represented by the aggregate Cut-off Date Balance of the
related Mortgage Loans. For purposes of calculations herein, as shown on Annex A
hereto, each of the Mortgage Loans is deemed to be secured by one Mortgaged
Property, whether or not such Mortgaged Property is comprised of more than one
parcel. In the case of Mortgage Loans secured by multiple Mortgaged Properties
located in more than one state, such Mortgaged Properties are, for purposes of
calculations herein, deemed to be located only in the state of the Mortgaged
Property or Properties having the highest appraised value. All numerical
information provided herein with respect to the Mortgage Loans is provided on an
approximate basis.
All of the Mortgage Loans are evidenced by promissory notes (each a
"Mortgage Note"). Four hundred and twenty (420) of the Mortgage Loans, or 99.8%,
are secured by a mortgage, deed of trust or other similar security instrument (a
"Mortgage") that creates a first mortgage lien, and two of the Mortgage Loans,
or 0.2%, are each secured by a Mortgage that creates a second mortgage lien
(with the related first mortgage lien securing a Mortgage Loan that is also in
the Mortgage Pool), on a fee simple estate (or with respect to 14 Mortgage
Loans, or 3.8%, on the borrower's leasehold estate) in an income-producing real
property (each, a "Mortgaged Property").
S-32
<PAGE>
Set forth below are the number of Mortgage Loans, and the approximate
percentage of the Initial Pool Balance represented by such Mortgage Loans, that
are secured by Mortgaged Properties operated for each indicated purpose:
PERCENTAGE OF
NUMBER OF INITIAL POOL
PROPERTY TYPE MORTGAGE LOANS BALANCE
------------- -------------- ---------
Multifamily .......................... 136(1) 31.1%
Retail ............................... 122(2) 30.6%
Office ............................... 32 9.3%
Hospitality .......................... 33(3) 8.9%
Health Care .......................... 16(4) 4.1%
Industrial/Retail .................... 3 2.7%
Industrial/Warehouse ................. 10 2.2%
Mobile Home Park ..................... 2 0.2%
Self-Storage ......................... 2 0.2%
Mixed Use ............................ 1 0.1%
Credit Lease Loans ................... 65(5) 10.8%
- ----------
(1) Including eight Mortgage Loans, or 0.8%, secured by properties which are
eligible to receive low-income housing tax credits pursuant to Section 42
of the Internal Revenue Code of 1986 (the "Code" and such properties, the
"Section 42 Properties").
(2) Including 71 Mortgage Loans, or 22.5%, secured by anchored retail
properties and 51 Mortgage Loans, or 8.1%, secured by unanchored retail
properties.
(3) All but two of such Mortgage Loans are secured by properties which are
affiliated with recognized hotel/motel franchisors.
(4) Including five Mortgage Loans, or 0.7%, secured by assisted living
facilities; three Mortgage Loans, or 1.1%, secured by congregate care
facilities; seven Mortgage Loan, or 1.3%, secured by skilled nursing care
facilities and one Mortgage Loan or 1.1%, secured by a skilled nursing care
facility and a congregate care facility.
(5) Including 56 Mortgage Loans, or 6.3%, secured by retail properties; three
Mortgage Loans, or 3.4%, secured by office properties; and six Mortgage
Loans, or 1.1%, secured by health and fitness or mixed-use properties or
solely by Mortgagor's leasehold interest in a retail property.
The Mortgaged Properties are located throughout 38 states. Set forth below
are the number of Mortgage Loans, and the approximate percentage of the Initial
Pool Balance represented by such Mortgage Loans, that are secured by Mortgaged
Properties located in the states with concentrations of Mortgage Loans above
5.0%:
PERCENTAGE OF
NUMBER OF INITIAL POOL
STATE MORTGAGE LOANS BALANCE
----- -------------- ---------
Florida ............................... 58 14.4%
New York .............................. 21 11.3%
Texas ................................. 54 10.4%
California ............................ 38 9.6%
Georgia ............................... 34 5.1%
No Mortgage Loan or group of Mortgage Loans to one borrower or group of
related borrowers exceeds 2.8% of the Initial Pool Balance. See "--Additional
Mortgage Loan Information."
MORTGAGE LOAN HISTORY
Two hundred eight (208) of the Mortgage Loans, or 49.8% (the "Lehman
Loans"), will be acquired by the Depositor from the Lehman Seller, which either
originated each such Mortgage Loan or acquired it in connection with its
commercial and multifamily mortgage loan conduit program. Two hundred fourteen
(214) of the Mortgage Loans, or 50.2% (the "FUNB Loans"), will be acquired by
the Depositor from FUNB, which either originated each such Mortgage Loan or
acquired it in connection with its commercial and multifamily mortgage loan
conduit program. All but 21 of the Mortgage Loans, or 2.5%, were originated in
1997.
S-33
<PAGE>
None of the Mortgage Loans was 30 days or more delinquent as of the Cut-off
Date, and no Mortgage Loan has been more than 30 days delinquent during the 12
months preceding the Cut-off Date.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at Mortgage Rates that will remain fixed for their remaining terms,
except after the Anticipated Repayment Date with respect to seven of the
Mortgage Loans. See "--Amortization" below. Two hundred (200) of the Mortgage
Loans, or 45.5%, accrue interest on the basis (a "30/360 basis") of a 360-day
year consisting of twelve 30-day months, and 222 of the Mortgage Loans, or
54.5%, accrue interest on the basis (an "actual/360 basis") of the actual number
of days elapsed over a 360 day year.
Due Dates. All but one of the Mortgage Loans have Due Dates (that is, the
dates upon which the related Monthly Payments first become due) that occur on
the first day of each month. For purposes of calculating the Cut-off Date
Balance, the November 1997 Due Date of the remaining Mortgage Loan is deemed to
be on the Cut-off Date.
Amortization. Three hundred twenty-nine (329) of the Mortgage Loans, or
82.8%, provide for Monthly Payments based on amortization schedules
significantly longer than their respective terms to maturity. Four of the
Balloon Loans, or 2.9% (which are Credit Lease Loans), provide for increases in
the amount of their respective Monthly Payments at specified times in the future
which coincide with rent increases on the underlying Credit Leases. Seven of the
Mortgage Loans (the "ARD Loans"), or 2.5%, provide that if the unamortized
principal amount thereof is not repaid on a date (the "Anticipated Repayment
Date") set forth in the related Mortgage Note, the Mortgage Loan will accrue
additional interest at the rate set forth therein and the borrower will be
required to apply excess monthly cash flow generated by the Mortgaged Property
(as determined in the related Mortgage) to the repayment of principal
outstanding on the Mortgage Loan. With respect to such Mortgage Loans, no
Prepayment Premiums or Yield Maintenance Charges will be due in connection with
any principal prepayment after the Anticipated Repayment Date. Eighty-six (86)
of the Mortgage Loans, or 14.6%, are self-amortizing. Fourteen (14) of such
self-amortizing Mortgage Loans, or 1.4%, which are Credit Lease Loans, provide
for increases in the amount of their respective Monthly Payments at specified
times in the future which coincide with rent increases on the underlying Credit
Leases. See "Risk Factors--Balloon Payments" herein.
Prepayment Provisions. As of the Cut-off Date, 421 of the Mortgage Loans,
or 99.6%, restrict or prohibit voluntary principal prepayment. In general, the
Mortgage Loans either (i) prohibit voluntary prepayments of principal for a
period (a "Lockout Period") ending on a date specified in the related Mortgage
Note and thereafter, in general, require that prepayments made for most of their
respective terms to maturity be accompanied by a Prepayment Premium and/or Yield
Maintenance Charge in excess of the amount prepaid (399 Mortgage Loans, or
93.6%); (ii) prohibit voluntary payments of principal for a Lockout Period and
thereafter permit voluntary principal prepayments in whole without material
restrictions (10 Mortgage Loans, or 1.8%) or (iii) permit voluntary principal
payments provided that the prepayment is accompanied by a Yield Maintenance
Charge or a Prepayment Premium for most of their respective terms to maturity
(12 Mortgage Loans, or 4.2%). With respect to 391 of the Mortgage Loans which
impose Yield Maintenance Charges, 358 of such Mortgage Loans, or 93.5% of such
Mortgage Loans, provide for the calculation of the Yield Maintenance Charge
using a discount rate equal to the applicable Treasury Rate (as set forth in the
related Mortgage Note), 30 of such Mortgage Loans, or 6.1% of such Mortgage
Loans, provide for the calculation of the Yield Maintenance Charge using a
discount rate equal to the applicable Treasury Rate plus 0.5%, and three of such
Mortgage Loans, or 0.4% of such Mortgage Loans, provide for the calculation of
the Yield Maintenance Charge using a discount rate equal to the applicable
Treasury Rate plus 1.0%. See "--Additional Mortgage Loan Information" herein.
Prepayment Premiums and Yield Maintenance Charges, if and to the extent
collected, will be distributed to the holders of the Offered Certificates as
described herein under "Description of the
Certificates--Distributions--Allocation of Prepayment Premiums and Yield
Maintenance Charges." The Depositor makes no representation as to the
enforceability of the provisions of any Mortgage Note requiring the payment of a
Prepayment Premium or Yield Maintenance Charge, or of the collectability of any
Prepayment Premium or Yield Maintenance Charge.
One hundred twenty-one (121) of the Mortgage Loans, or 31.6%, provide that
the holder of the Mortgage, following notice from the borrower that the borrower
intends to prepay the Mortgage Loan as permitted by the related Mortgage Note,
may require the borrower, in lieu of prepayment, to pledge to such holder
"Defeasance Collateral" and thereupon obtain a release of the Mortgaged Property
from the lien of the related Mortgage. In general, "Defeasance Collateral" is
required to consist of direct, non-callable United States Treasury obligations
that provide
S-34
<PAGE>
for payments prior, but as close as possible, to all successive Due Dates and
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 and,
in the case of the scheduled maturity date, the Balloon Payment, due on such
date. The Pooling and Servicing Agreement will require the Master Servicer or
the Special Servicer to require each borrower that proposes to prepay its
Mortgage Loan to pledge instead Defeasance Collateral, but in each case subject
to certain conditions, including (i) that the defeasance would not have an
adverse effect on the REMIC status of any of REMIC I, REMIC II or REMIC III
(accordingly, no defeasance would be required prior to the second anniversary of
the Closing Date) and (ii) receipt of confirmation from each Rating Agency that
acceptance of a pledge of the Defeasance Collateral in lieu of a full prepayment
will not result in a downgrade, withdrawal or qualification of the rating then
assigned by it to any Class of Certificates.
Neither the Master Servicer nor the Special Servicer will be permitted to
waive or modify the terms of any Mortgage Loan prohibiting voluntary prepayments
during a Lockout Period or requiring the payment of a Prepayment Premium or
Yield Maintenance Charge except under the circumstances described in "Servicing
of the Mortgage Loans--Modifications, Waivers and Amendments" herein.
Secondary Financing. The Mortgaged Properties securing nine Mortgage Loans,
or 2.7%, are encumbered by subordinated debt. With limited exception, all of the
Mortgage Loans either prohibit the related borrower from encumbering the
Mortgaged Property with additional secured debt or require the lender's consent
prior to so encumbering such property. See "--Due-on-Sale and Due-on-Encumbrance
Provisions" below. Other than as indicated above, the Depositor has not
confirmed if any other subordinate financing currently encumbers any Mortgaged
Property.
Nonrecourse Obligations. The Mortgage Loans are generally nonrecourse
obligations of the related borrowers and, upon any such borrower's default in
the payment of any amount due under the related Mortgage Loan, the holder
thereof may look only to the related Mortgaged Property for satisfaction of the
borrower's obligations. In addition, in those cases where recourse to a borrower
or guarantor is purportedly permitted, the Depositor has not undertaken an
evaluation of the financial condition of any such person, and prospective
investors should thus consider all of the Mortgage Loans to be nonrecourse.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. All of the Mortgages
contain "due-on-sale" and "due-on-encumbrance" clauses that, in general, permit
the holder of the Mortgage to accelerate the maturity of the related Mortgage
Loan if the borrower sells or otherwise transfers or encumbers the related
Mortgaged Property or prohibit the borrower from doing so without the consent of
the holder of the Mortgage. However, certain of the Mortgage Loans permit one or
more transfers of the related Mortgaged Property. As provided in the Pooling and
Servicing Agreement, the Master Servicer or the Special Servicer, on behalf of
the Trust Fund, will determine, in a manner consistent with the servicing
standard described herein under "Servicing of the Mortgage Loans--General,"
whether to exercise any right the holder of any Mortgage may have under any such
clause to accelerate payment of the related Mortgage Loan upon, or to withhold
its consent to, any transfer or further encumbrance of the related Mortgaged
Property.
Cross-Default and Cross-Collateralization of Certain Mortgage Loans.
Twenty-four (24) of the Mortgage Loans, or 7.3%, are cross-collateralized and
cross-defaulted with one or more Mortgage Loans in the Mortgage Pool as
indicated in Annex A. No Mortgage Loans are cross-collateralized or
cross-defaulted with any loans which are not included in the Mortgage Pool. The
Master Servicer or the Special Servicer, as the case may be, will determine
whether to enforce the cross-default and cross-collateralization rights upon a
mortgage loan default with respect to any of these Mortgage Loans. The
Certificateholders will not have any right to participate in or control any such
determination. No other Mortgage Loans are subject to cross-collateralization or
cross-default provisions.
Low Income Housing Tax Credits. Eight of the Mortgaged Properties, or 0.8%,
are eligible to receive low-income housing tax credits ("Tax Credits") pursuant
to Section 42 of the Code ("Section 42 Properties"). Section 42 of the Code
provides a Tax Credit for owners of residential rental property meeting the
definition of low-income housing who have received a tax credit allocation from
the state or local allocating agency.
At the time the project is "placed in service" (that is, when the first
unit is available for occupancy), the property owner must make an irrevocable
election of one of two set-aside rules, either (i) at least 20% of the units
must be rented to tenants with incomes of 50% or less of the median income (as
defined below), or (ii) at least 40% of the units must be rented to tenants with
incomes of 60% or less of the median income. The aggregate amount of Tax
S-35
<PAGE>
Credits the owner is entitled to is based upon the percentage of total units
made available to qualified tenants. Median income is determined by the U.S.
Department of Housing and Urban Development ("HUD") for each metropolitan area
or county in the United States and is adjusted annually.
The Tax Credit provisions require that gross rent for each low-income unit
not exceed 30% of the annual HUD median income, adjusted for the household size
expected to occupy the particular unit. The gross rent charged for a unit must
take into account an allowance for utilities. If utilities are paid by the
tenant, then the maximum allowable Tax Credit rent is reduced according to
utility allowances, as provided in regulations of the Internal Revenue Service.
Under the Tax Credit provisions, a property owner must comply with the
tenant income restrictions and rental restrictions over a 15-year compliance
period, which provide for an annual adjustment of rent according to published
area median income statistics. In addition, agreements governing the property
may require an "extended use period" which has the effect of extending the
income and rental restrictions for an additional period (typically 15 years).
In the event a Tax Credit project does not maintain compliance with the Tax
Credit restrictions on tenant income or rental rates, the owners of the Tax
Credit project may lose the Tax Credits related to the period of the
noncompliance and face the partial recapture of previously taken Tax Credits.
The loss of Tax Credits, and the possibility of recapture of Tax Credits already
taken, may provide significant incentive for project owners to keep the Tax
Credit project in compliance and to fund property operating deficits.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. All of the Mortgaged Properties were inspected in
connection with the origination or acquisition of the related Mortgage Loans to
assess their general condition. No inspection revealed any patent structural
deficiency or any deferred maintenance considered material and adverse to the
interests of the holders of the Offered Certificates and for which adequate
reserves have not been established.
Appraisals. All of the Mortgaged Properties were appraised by a state
certified appraiser or an appraiser belonging to the Appraisal Institute. The
primary purpose of each appraisal was to provide an opinion of the fair market
value of the related Mortgaged Property. There can be no assurance that another
appraiser would have arrived at the same opinion of value.
Environmental Assessments. A "Phase I" environmental site assessment was
performed with respect to all the Mortgaged Properties in connection with the
origination of the related Mortgage Loans. In certain cases, additional
environmental testing, as recommended by such "Phase I" assessment, was
performed. In each case where environmental assessments recommended remediation,
the originator determined that the necessary remediation had been undertaken in
a satisfactory manner, was being undertaken in a satisfactory manner or that
such remediation would be adequately addressed post-closing. In some instances,
the originator required that reserves be established to cover the estimated cost
of such remediation.
Engineering Assessments. In connection with the origination of 387 of the
Mortgage Loans, or 96.9%, a licensed engineer inspected the related Mortgaged
Property to assess the structure, exterior walls, roofing, interior structure
and mechanical and electrical systems. No engineering inspections were made with
respect to the remaining 35 Mortgage Loans (including Credit Lease Loans), or
3.1%, which were determined by the related Mortgage Loan Seller to be either
"new construction" or a "substantially rehabilitated property" pursuant to its
underwriting guidelines. The resulting reports indicated certain deferred
maintenance items and/or recommended capital improvements with respect to
certain of such Mortgaged Properties. Generally, with respect to such Mortgaged
Properties, the related borrowers were required to deposit with the lender an
amount equal to at least 125% of the licensed engineer's estimated cost of the
recommended repairs, corrections or replacements to assure their completion.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on 35 of the 38 Mortgaged Properties located in the State of
California in order to evaluate the structural and seismic condition of the
property and to assess, based primarily on statistical information, the maximum
probable loss for the property in an earthquake scenario. The resulting reports,
which were prepared not earlier than January 1997, concluded that in the event
of an earthquake, only two of the Mortgaged Properties are likely to suffer a
maximum probable loss in excess of 25% of the amount of the estimated
replacement cost of the improvements. Each of those two Mortgaged Properties is
covered by earthquake insurance in an amount at least equal to the outstanding
principal balance of the related Mortgage Loan. Two of the Mortgage Loans are
required to be covered by such insurance through the maturity date thereof. With
respect to one Mortgage Loan, or 0.1%, the related Mortgaged Property, a mobile
home park, was determined to not be located in an area of material seismic risk,
and no such analysis was performed.
S-36
<PAGE>
CREDIT LEASE LOANS
Each Credit Lease has a primary lease term (the "Primary Term") that
expires on or after the scheduled final maturity date of the related Credit
Lease Loan. The Credit Lease Loans are scheduled to be fully repaid from (i)
Monthly Rental Payments made over the Primary Term of the related Credit Lease
and (ii) with respect to Credit Lease Loans which are Balloon Loans, Monthly
Rental Payments and the related Balloon Payments (which Balloon Payments, in the
case of Credit Lease Loans which have the benefit of residual value insurance
policies, may be repaid from amounts paid by the related insurer pursuant to
such policies). Certain of the Credit Leases give the Tenant the right to extend
the term of the Credit Lease by one or more renewal periods after the end of the
Primary Term.
The amount of the Monthly Rental Payments payable by each Tenant (plus, in
the case of 14 Mortgage Loans, or 1.0% (control numbers 340, 298, 334, 303, 324,
382, 347, 415, 359, 417, 388, 387, 385, 362), the amount in the debt service
reserve account, which will be drawn upon through the date of the termination of
any rent credits) is equal to or greater than the scheduled payment of all
principal, interest and other amounts due each month on the related Credit Lease
Loan. In the case of Credit Lease Loans with debt service reserve accounts,
withdrawals of funds on deposit in the debt service reserve account will be used
to supplement Monthly Rental Payments in an amount necessary to fully amortize
such Mortgage Loans.
Set forth in the table below (the "Credit Lease Table") for each Credit
Lease Loan, is the name of the Tenant, the Cut-off Date balance of the related
Credit Lease Loan, the Guarantor, if any, the rating of the Tenant or Guarantor
and the Credit Lease type.
<TABLE>
<CAPTION>
NUMBER PROPERTY LEASE CREDIT
TENANT/GUARANTOR OF LOANS BALANCE TYPE TYPE (1) RATING (2)
---------------- -------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C>
Rite Aid Pharmacy/
Rite Aid Corporation .............. 25 $ 40,645,628 Retail NN BBB+/Baa1
Blue Cross Blue Shield ............. 1 30,000,000 Office B A/NR(3)
Office Depot ....................... 1 24,140,144 Office NNN BB+/Baa2
Circuit City ....................... 5 23,263,531 Retail B NAIC2
Hartford Fire ...................... 1 20,078,226 Office NN AA/Aa3 (3)
Garden Ridge ....................... 2 19,223,363 Retail NNN (4)
Bally Total Fitness/Bally Total ....
Fitness Holding Corp. ............. 4 17,224,559 Other NNN B+/B3
Revco/Revco D.S. Inc. .............. 10 13,368,129 Retail NN N.A./Baa1
Kmart .............................. 1 11,673,663 Retail NNN B+/Ba3
Walmart ............................ 1 7,341,749 Retail NNN AA/Aa2
Eckerd ............................. 4 6,332,318 Retail NNN A-/Baa1
Eckerd ............................. 1 1,513,702 Retail NN A-/Baa1
Walgreen ........................... 2 5,277,018 Retail NN A+/Aa3
Albertson's, Inc. .................. 1 5,158,010 Retail NN A+/Aa3
Barnes & Noble, Inc. ............... 1 4,989,871 Mixed Use NNN BB/Ba2
Pep Boys ........................... 1 2,447,077 Ground Lease NNN BBB+/Baa2
Thrifty-Payless .................... 1 2,262,166 Retail NN N.A./Baa2
Sunbelt Rentals/
Ashtead Group, PLC ................ 2 1,891,245 Retail NN (4)
Orleans CVS, Inc./
CVS Corporation 1 1,153,040 Retail NNN A-/A3
-- ------------
Total CTLs 65 $237,983,438
== ============
- ----------
(1) "NNN" means Triple Net Lease; "NN" means Double Net Lease; "B" means
Bond-Type Lease.
(2) Such ratings are the rating assigned to the related Tenant or Guarantor, as
applicable, by Standard & Poor's and Moody's, respectively (or, in the case
of Circuit City, the National Association of Insurance Commissioners) as of
November 7, 1997. The various rating categories of any rating organization,
and the ratings presented above, reflect differing analyses depending on
the obligation being rated. The ratings presented above do not consistently
rate the same type of obligation. For example, in the case of Blue Cross
Blue Shield and Hartford Fire, the ratings set forth above have been
assigned with respect to such entities' claims-paying ability. In other
cases, the ratings are with respect to senior unsecured debt or some other
obligation of the particular Tenant/Guarantor. For a description of the
ratings, refer to the respective rating organization's published criteria.
Ratings may be changed or withdrawn at any time.
(3) Standard & Poor's/Moody's claims paying ability rating.
(4) Private rating; not publicly available.
</TABLE>
S-37
<PAGE>
Each Credit Lease generally provides that the related Tenant must pay all
real property taxes and assessments levied or assessed against the related
Mortgaged Property, and except as discussed below in the case of certain of the
Double Net Leases, all charges for utility services, insurance and other
operating expenses incurred in connection with the operation of the related
Mortgaged Property.
Generally, each Credit Lease Loan provides that if the Tenant defaults
beyond applicable notice and grace periods in the performance of any covenant or
agreement in such Credit Lease (a "Credit Lease Default"), then the holder of
the related Mortgage may require the related Mortgagor either (i) to terminate
such Credit Lease or (ii) refrain from the exercise of any of its rights
thereunder. A Credit Lease Default will constitute a default under the related
Credit Lease Loan.
In addition, most of the Credit Leases permit the Tenant, at its own
expense, and generally with the consent of the Mortgagor, to make such
alterations or improvements on the related Mortgaged Property as the Tenant may
deem necessary or desirable, and one Credit Lease permits the related Tenant to
demolish any part of a building, provided that the Tenant restores the building
to a structure whose value is equal to or greater than that of the original
building. Such actions, if undertaken by the Tenant, will not affect the
Tenant's obligations under the Credit Lease.
Lease termination rights and rent abatement rights, if any, provided
Tenants in the Credit Leases may be divided into three categories: (i)
termination and abatement rights directly arising from certain casualty
occurrences or condemnations ("Casualty or Condemnation Rights"), (ii)
termination and abatement rights arising from a Mortgagor's default relating to
its obligations under a Credit Lease to perform required maintenance, repairs or
replacements with respect to the related Mortgaged Property ("Maintenance
Rights") and (iii) termination and abatement rights arising from a Mortgagor's
default in the performance of various other obligations under the Credit Lease,
including remediating environmental conditions not caused by the Tenant,
enforcement of restrictive covenants affecting other property owned by the
Mortgagor in the area of the related Mortgaged Property and complying with laws
affecting such Mortgaged Property or common areas related to such Mortgaged
Property ("Additional Rights"). Certain Credit Leases ("Bond-Type Leases")
provide neither Casualty or Condemnation Rights, Maintenance Rights nor
Additional Rights and the Tenants thereunder are required, at their expense, to
maintain their related Mortgaged Property in good order and repair. Other Credit
Leases provide Casualty or Condemnation Rights and may provide Additional Rights
("Triple Net Leases"). The Tenants under Triple Net Leases are required, at
their expense, to maintain their Mortgaged Properties, including the roof and
structure, in good order and repair. Additionally, certain of the Credit Leases
provide Casualty or Condemnation Rights and Maintenance Rights and may provide
Additional Rights ("Double Net Leases"). If the Mortgagor defaults in the
performance of certain obligations under a Triple Net Lease or a Double Net
Lease and the Tenant exercises its Additional Rights or Maintenance Rights,
there could be a disruption in the stream of Monthly Rental Payments available
to pay principal and interest to the Credit Lease Loans. Generally, Additional
Rights and Maintenance Rights are mitigated by repair and maintenance reserves,
debt service coverage ratios in excess of 1.0x and, prior to the disbursement of
such Mortgage Loan, receiving Tenant estoppel certificates (i.e., Tenant
certificates confirming the non-existence of landlord default).
Credit Leases with respect to six of the Mortgage Loans, or 2.4%, are
Bond-Type Leases, Credit Leases with respect to 16 Mortgaged Properties, or
4.3%, are Triple Net Leases and Credit Leases with respect to 43 of the
Mortgaged Properties, or 4.1%, are Double Net Leases.
At the end of the term of the Credit Leases, Tenants are generally
obligated to surrender the related Mortgaged Properties in good order and in its
original condition received by the Tenant, except for ordinary wear and tear and
repairs required to be performed by the Mortgagor.
Pursuant to the terms of each Credit Lease Assignment, the related
Mortgagor has assigned to the mortgagee of the related Credit Lease Loan, as
security for such Mortgagor's obligations thereunder, such Mortgagor's rights
under the Credit Leases and its rights to all income and profits to be derived
from the operation and leasing of the related Mortgaged Property including, but
not limited to, an assignment of any guarantee of the Tenant's obligations under
the Credit Lease and an assignment of the right to receive all Monthly Rental
Payments due under the Credit Leases. Pursuant of the terms of the Credit Lease
Assignments, each Tenant is obligated under its Credit Lease to make all Monthly
Rental Payments either to the related Mortgagor or directly to the owner of the
related Credit Lease Loan. Repayment of the Credit Lease Loans and other
obligations of the Mortgagors are expected to be funded from such Monthly Rental
Payments. Notwithstanding the foregoing, the Mortgagors remain liable for all
obligations under the Credit Lease Loans (subject to the non-recourse provisions
thereof).
S-38
<PAGE>
Each Credit Lease Loan that provides the Tenant with a Casualty or
Condemnation Right has the benefit of a noncancelable Lease Enhancement Policy
issued by the Enhancement Insurer. Each Lease Enhancement Policy provides,
subject to customary exclusions, that in the event of a permitted termination by
a Tenant of its Credit Lease as a result of a casualty or condemnation, the
Enhancement Insurer will pay to the Master Servicer on behalf of the Trustee the
"Loss of Rents" (that is, a lump sum payment of all outstanding principal plus,
subject to the limitation below, accrued interest on the Credit Lease Loan). The
Enhancement Insurer is not required to pay interest for a period greater than 75
days past the date of the exercise of a Casualty or Condemnation Right. All of
the Lease Enhancement Policies were issued by Chubb Custom Insurance Company
which, as of the Cut-off Date, was rated "AAA" by Standard & Poor's and "Aaa" by
Moody's. If the Credit Lease permits the Tenant to abate all or a portion of the
rent in the event of a condemnation, the "Loss of Rents" will be in an amount
equal to the portion of any Monthly Rental Payments not made by such Tenant for
the period from the date the abatement commences until the earlier of the date
the abatement ceases or the expiration date of the initial term of such Credit
Lease. The Enhancement Insurer is not required to pay amounts due under the
Credit Lease Loan other than principal and, subject to the limitation above,
accrued interest, and therefore is not required to pay any Prepayment Premium or
Yield Maintenance Charge due thereunder or any amounts the Mortgagor is
obligated to pay thereunder to reimburse the Master Servicer or the Trustee for
outstanding servicing advances.
Each Lease Enhancement Policy contains certain exclusions from coverage,
including loss arising from damage or destruction directly or indirectly caused
by war, insurrection, rebellion, revolution, usurped power, pollutants or
radioactive matter, or from a taking (other than by condemnation).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A
hereto.
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annex A hereto. Certain additional information regarding
the Mortgage Loans is contained herein under "--Assignment of the Mortgage
Loans; Repurchases" and "--Representations and Warranties; Repurchases," and in
the Prospectus under "Description of the Trust Funds" and "Certain Legal Aspects
of Mortgage Loans."
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-off Date. For purposes
of the tables and Annex A:
(i) References to "DSC Ratio" are references to debt service coverage
ratios. 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 (that is, cash that remains after average cost
of non-capital expenses of operation, tenant improvements, leasing
commissions and replacement reserves during the term of the Mortgage Loan)
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. The DSC Ratio for any Mortgage Loan (other than a
Credit Lease Loan) is the ratio of "Net Cash Flow" produced by the related
Mortgaged Property to the annualized amount of debt service that will be
payable under that Mortgage Loan commencing after the origination date. The
Net Cash Flow for a Mortgaged Property is the "net cash flow" of such
Mortgaged Property as set forth in, or determined by the applicable
Mortgage Loan Seller on the basis of, Mortgaged Property operating
statements, generally unaudited, and certified rent rolls (as applicable)
supplied by the related borrower in the case of multifamily, mixed use,
retail, mobile home park, industrial, self storage and office properties
(each a "Rental Property"). In general, the applicable Mortgage Loan Seller
relied on full year operating statements, rolling 12-month operating
statements and/or applicable year-to-date financial statements, if
available, and on rent rolls for all Rental Properties that were current as
of a date not earlier than six months prior to the respective date of
origination in determining Net Cash Flow for the Mortgaged Properties.
References to "Cut-off Date DSC Ratio" are references to the DSC Ratio as
of the Cut-off Date.
In general, "net cash flow" is the revenue derived from the use and
operation of a Mortgaged Property less operating expenses (such as
utilities, administrative expenses, repairs and maintenance, tenant
improvement costs, leasing commissions, management fees and advertising),
fixed expenses (such as insurance, real estate taxes and, if applicable,
ground lease payments) and replacement reserves and an allowance for
vacancies and credit losses. Net cash flow does not reflect interest
expenses and non-cash items such as depreciation and amortization, and
generally does not reflect capital expenditures, but does reflect reserves
for replacements and an allowance for vacancies and credit losses.
S-39
<PAGE>
In determining the "revenue" component of Net Cash Flow for each
Rental Property, the applicable Mortgage Loan Seller generally relied on
the most recent rent roll (as applicable) supplied and, where the actual
vacancy shown thereon and the market vacancy was less than 5.0%, assumed a
5.0% vacancy in determining revenue from rents, except that in the case of
certain anchored shopping centers and certain single tenant properties,
space occupied by such anchor or single tenants may have been disregarded
in performing the vacancy adjustment due to the length of the related
leases or creditworthiness of such tenants, in accordance with the
respective Mortgage Loan Seller's underwriting standards. In determining
rental revenue for multifamily, self storage and mobile home park
properties, the applicable Mortgage Loan Seller either reviewed rental
revenue shown on the certified rolling 12-month operating statements or
annualized the rental revenue and reimbursement of expenses shown on rent
rolls or operating statements with respect to the prior one to twelve month
periods. For the other Rental Properties, the applicable Mortgage Loan
Seller generally annualized rental revenue shown on the most recent
certified rent roll (as applicable), after applying the vacancy factor,
without further regard to the terms (including expiration dates) of the
leases shown thereon. In the case of hospitality properties, gross receipts
were determined on the basis of historical operating levels shown on the
borrower-supplied operating statements, but in no case in excess of rolling
12-month operating statements. In the case of residential health care
facilities, receipts were based on historical occupancy levels, historical
operating revenues and the then current occupancy rates. Private occupancy
rates were within the then current market ranges and vacancy levels were a
minimum of 5%. In general, any non-recurring items and non-property related
revenue were eliminated from the calculation except in the case of
residential health care facilities.
In determining the "expense" component of Net Cash Flow for each
Mortgaged Property, the Mortgage Loan Seller generally relied on full-year
or year-to-date financial statements, rolling 12-month operating statements
and/or year-to-date financial statements supplied by the related borrower,
except that (a) if tax or insurance expense information more current than
that reflected in the financial statements was available, the newer
information was used, (b) property management fees were generally assumed
to be 3.0% to 6.0% of effective gross revenue (except with respect to
hospitality properties, where a minimum of 4.0% of gross receipts was
assumed, and single tenant properties, where fees as low as 1.5% of
effective gross receipts were assumed), (c) assumptions were made with
respect to reserves for leasing commissions, tenant improvement expenses
and capital expenditures and (d) expenses were assumed to include annual
replacement reserves equal to (1) in the case of retail, office and
industrial properties, not less than $0.05 and not more than $0.66 per
square foot net rentable commercial area, (2) in the case of multifamily
properties, not less than $150 or more than $500 per residential unit per
year, depending on the condition of the property, (3) in the case of
hospitality properties, generally 4.0% of the gross revenues received by
the property owner on an ongoing basis, (4) in the case of residential
healthcare facilities, $200 to $445 per bed per year, (5) in the case of
the mobile home parks, not less than $22 or more than $50 per pad per year
and (6) in the case of self storage facilities, not less than $0.10 or more
than $0.19 per square foot per year. In addition, in some instances, the
applicable Mortgage Loan Seller recharacterized as capital expenditures
those items reported by borrowers as operating expenses (thus increasing
"net cash flow") where such Mortgage Loan Seller determined appropriate.
THE BORROWERS' FINANCIAL INFORMATION USED TO DETERMINE NET CASH FLOW
WAS IN MOST CASES UNAUDITED, AND NEITHER THE MORTGAGE LOAN SELLERS NOR THE
DEPOSITOR VERIFIED THEIR ACCURACY.
(ii) References to "Cut-off Date LTV Ratio" are references to the
ratio, expressed as a percentage, of the Cut-off Date Balance of a Mortgage
Loan to the appraised value of the related Mortgaged Property as shown on
the most recent third-party appraisal thereof available to the related
Mortgage Loan Seller.
(iii) References to "Maturity Date LTV Ratio" are references to the
ratio, expressed as a percentage, of the expected balance of a Balloon Loan
on its scheduled maturity date (prior to the payment of any Balloon
Payment) to the appraised value of the related Mortgaged Property as shown
on the most recent third-party appraisal thereof available to the related
Mortgage Loan Seller prior to the Cut-off Date.
(iv) References to "Loan per Sq Ft, Unit, Bed, Pad or Room" are, for
each Mortgage Loan secured by a lien on a multifamily property (including a
mobile home park), hospitality property or healthcare facility,
respectively, references to the Cut-off Date Balance of such Mortgage Loan
divided by the number of dwelling units, pads, guest rooms or beds,
respectively that the related Mortgaged Property comprises, and, for each
Mortgage Loan secured by a lien on a retail, industrial/warehouse, self
storage or office property, references to
S-40
<PAGE>
the Cut-off Date Balance of such Mortgage Loan divided by the net rentable
square foot area of the related Mortgaged Property.
(v) References to "Year Built" are references to the year that a
Mortgaged Property was originally constructed or substantially renovated.
With respect to any Mortgaged Property which was constructed in phases, the
"Year Built" refers to the year that the first phase was originally
constructed.
(vi) References to "weighted averages" are references to averages
weighted on the basis of the Cut-off Date Balances of the related Mortgage
Loans.
(vii) References to "Underwriting Reserves" represent estimated annual
capital costs, as used by the applicable Mortgage Loan Seller in
determining Net Cash Flow.
(viii) References to "Administrative Cost Rate" for each Mortgage Loan
represent the sum of the Master Servicing Fee Rate for such Mortgage Loan
and 0.0125% which percentage represents the sum of the Additional Servicing
Fee Rate and trustee fee rate with respect to each Mortgage Loan.
(ix) References to "Remaining Term to Maturity" represent, with
respect to each Mortgage Loan, the number of months remaining from the
Cut-off Date to the stated maturity date of such Mortgage Loan.
(x) References to "Remaining Amortization Term" represent, with
respect to each Mortgage Loan, the number of months remaining from the
Cut-off Date to the month in which such Mortgage Loan would fully amortize
in accordance with such loan's amortization schedule without regard to any
Balloon Payment, if any, due on such Mortgage Loan.
(xi) References to "L" represent, with respect to each Mortgage Loan,
the period during which prepayments of principal are prohibited. The number
indicated in the parentheses indicates the duration in years of such
period. References to "% ( )" represent the percentage of Prepayment
Premium percentages and the duration such Prepayment Premium is assessed.
References to "O ( )" represent the period for which no (A) Prepayment
Premium or Yield Maintenance Charge is assessed or (B) defeasance can be
required. References to "YM1% ( )" represent the period for which the
Prepayment Premium for such Mortgage Loan is equal to the greater of the
Yield Maintenance Charge for such Mortgage Loan and 1.0% of such Mortgage
Loan's outstanding principal balance. References to "YM ( )" represent the
period for which the Yield Maintenance Charge is assessed.
(xii) References to "DEF" represent, with respect to each applicable
Mortgage Loan, the right of the related holder of the Mortgage to require
the related borrower, in lieu of prepayment, to pledge to such holder
Defeasance Collateral during the period in which a Prepayment Premium or
Yield Maintenance Charge is required.
(xiii) References to "Occupancy Percentage" are, with respect to any
Mortgaged Property, references to (a) in the case of multifamily properties
and assisted living/congregate care facilities, the percentage of units
rented, (b) in the case of office and retail properties, the percentage of
the net rentable square footage rented, and (c) in the case of self-storage
facilities, either the percentage of the net rentable square footage rented
or the percentage of units rented (depending on borrower reporting).
(xiv) References to "Stated Remaining Term" are references to the
remaining term to maturity for each Mortgage Loan (or remaining number of
months to the Anticipated Repayment Date with respect to each ADR Loan).
(xv) References to "Original Term to Maturity" are references to the
term from origination to maturity for each Mortgage Loan (or the term from
origination to the Anticipated Repayment Date with respect to each ARD
Loan).
The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
The DSC Ratio, Cut-off Date LTV Ratio and the Maturity Date LTV Ratio
calculations for the Mortgage Loans are exclusive of Credit Lease Loans because
the Credit Lease Loans were originated primarily on the basis of the
creditworthiness of the related Tenants or Guarantors.
S-41
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE LOANS BY STATE
(ALL MORTGAGE LOANS)
% BY
AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
STATE OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- ----- -------- ------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
AL ................ 6 $ 25,881,922 1.2% $ 4,313,654 $ 7,230,000 73.8%
AR ................ 2 5,783,872 0.3 2,891,936 3,795,978 69.8
AZ ................ 18 83,657,918 3.8 4,647,662 17,360,000 72.1
CA ................ 38 211,737,245 9.6 5,572,033 22,988,718 72.8
CO ................ 5 17,485,431 0.8 3,497,086 7,986,834 69.7
CT ................ 7 41,739,807 1.9 5,962,830 20,078,226 72.5
FL ................ 58 317,926,524 14.4 5,481,492 24,140,144 69.9
GA ................ 34 111,791,654 5.1 3,287,990 9,763,390 72.3
ID ................ 1 2,760,569 0.1 2,760,569 2,760,569 74.6
IL ................ 5 42,810,559 1.9 8,562,112 28,773,665 73.2
IN ................ 7 21,162,848 1.0 3,023,264 3,993,109 65.7
KS ................ 7 21,145,015 1.0 3,020,716 7,155,350 76.8
LA ................ 1 19,977,150 0.9 19,977,150 19,977,150 79.9
MA ................ 8 60,521,745 2.7 7,565,218 29,121,268 75.2
MD ................ 12 54,050,299 2.5 4,504,192 7,408,285 74.0
MI ................ 10 56,808,969 2.6 5,680,897 28,887,122 77.5
MN ................ 5 18,390,301 0.8 3,678,060 5,415,475 73.3
MO ................ 6 64,988,377 2.9 10,831,396 29,000,000 68.7
MS ................ 2 5,011,416 0.2 2,505,708 2,598,995 74.9
NC ................ 13 51,766,194 2.3 3,982,015 7,476,817 74.0
NE ................ 2 1,983,080 0.1 991,540 1,299,431 78.3
NH ................ 1 2,848,000 0.1 2,848,000 2,848,000 69.1
NJ ................ 13 77,505,212 3.5 5,961,939 16,491,481 69.6
NV ................ 2 23,265,259 1.1 11,632,630 18,665,259 76.6
NY ................ 21 248,888,549 11.3 11,851,836 45,416,841 70.3
OH ................ 18 58,859,462 2.7 3,269,970 16,276,911 74.1
OK ................ 2 7,676,604 0.3 3,838,302 5,280,462 69.4
OR ................ 1 3,997,673 0.2 3,997,673 3,997,673 72.7
PA ................ 15 77,892,222 3.5 5,192,815 19,958,798 70.7
RI ................ 1 3,398,622 0.2 3,398,622 3,398,622 71.6
SC ................ 6 24,102,759 1.1 4,017,127 8,082,804 73.8
TN ................ 7 39,204,657 1.8 5,600,665 8,494,274 73.9
TX ................ 54 229,834,237 10.4 4,256,190 28,670,846 72.1
UT ................ 3 35,399,154 1.6 11,799,718 30,000,000 75.8
VA ................ 18 85,081,249 3.9 4,726,736 35,250,000 73.5
WA ................ 7 24,663,643 1.1 3,523,378 7,014,139 74.6
WI ................ 4 21,327,931 1.0 5,331,983 9,749,977 73.3
WV ................ 2 2,176,196 0.1 1,088,098 1,156,200 NAP
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
STATE DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- ----- ------------ ------------ ------------ --------- --------
<S> <C> <C> <C> <C> <C>
AL ................ 1.31x 1.20x 1.42x 95.7% 8.22%
AR ................ 1.25 1.23 1.31 100.0 7.96
AZ ................ 1.38 1.23 1.76 93.6 8.19
CA ................ 1.33 1.20 1.64 96.3 8.16
CO ................ 1.32 1.25 1.49 97.6 8.48
CT ................ 1.36 1.28 1.47 97.7 7.62
FL ................ 1.38 1.20 2.50 97.4 8.30
GA ................ 1.35 1.18 2.07 96.9 8.68
ID ................ 1.27 1.27 1.27 100.0 7.75
IL ................ 1.27 1.25 1.37 96.3 8.22
IN ................ 1.45 1.25 1.70 98.1 8.89
KS ................ 1.34 1.15 1.44 98.3 8.17
LA ................ 1.27 1.27 1.27 94.6 7.94
MA ................ 1.33 1.26 1.57 96.8 8.61
MD ................ 1.40 1.22 1.54 95.7 8.19
MI ................ 1.26 1.21 1.38 98.0 8.13
MN ................ 1.37 1.25 1.46 94.7 9.15
MO ................ 1.46 1.24 2.08 95.1 8.09
MS ................ 1.30 1.25 1.35 88.3 8.20
NC ................ 1.35 1.23 1.67 96.5 8.07
NE ................ 1.25 1.25 1.25 96.2 7.91
NH ................ 1.42 1.42 1.42 NAP 8.25
NJ ................ 1.31 1.18 1.45 92.9 8.19
NV ................ 1.29 1.28 1.29 93.1 8.21
NY ................ 1.43 1.20 2.02 96.3 8.06
OH ................ 1.34 1.21 1.41 98.9 8.24
OK ................ 1.37 1.30 1.40 99.1 8.58
OR ................ 1.29 1.29 1.29 95.1 8.19
PA ................ 1.29 1.21 1.39 97.1 8.16
RI ................ 1.37 1.37 1.37 100.0 8.27
SC ................ 1.31 1.20 1.50 92.7 8.46
TN ................ 1.34 1.21 1.55 94.7 7.99
TX ................ 1.38 1.20 1.71 95.8 8.18
UT ................ 1.32 1.17 1.46 99.9 7.36
VA ................ 1.28 1.20 1.43 91.6 7.98
WA ................ 1.29 1.21 1.39 93.8 8.49
WI ................ 1.34 1.15 1.46 93.5 8.69
WV ................ NAP NAP NAP 100.0 8.50
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-42
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE LOANS BY PROPERTY TYPE
(ALL MORTGAGE LOANS)
% BY
AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
PROPERTY TYPE OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- ------------- -------- -------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Multifamily ................ 136 $ 684,255,137 31.1% $ 5,031,288 $33,449,419 76.7%
Retail ..................... 122 673,267,134 30.6 5,518,583 38,206,000 72.5
Office ..................... 32 204,089,365 9.3 6,377,793 22,901,796 67.6
Hospitality ................ 33 195,766,774 8.9 5,932,326 29,000,000 63.9
Health Care ................ 16 90,158,951 4.1 5,634,934 23,372,304 68.5
Industrial/Retail .......... 3 59,513,700 2.7 19,837,900 45,416,841 66.0
Industrial/Warehouse ....... 10 48,026,349 2.2 4,802,635 8,783,677 68.8
Mobile Home Park ........... 2 4,890,822 0.2 2,445,411 2,998,549 71.2
Self Storage ............... 2 3,940,655 0.2 1,970,328 2,692,537 60.7
Mixed Use .................. 1 1,610,000 0.1 1,610,000 1,610,000 70.0
Credit Lease--Retail ....... 56 139,103,561 6.3 2,483,992 11,673,663 NAP
Credit Lease--Office ....... 3 74,218,370 3.4 24,739,457 30,000,000 NAP
Credit Lease--Other ........ 6 24,661,507 1.1 4,110,251 5,415,475 NAP
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
PROPERTY TYPE DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- ------------- ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Multifamily ................ 1.30x 1.15x 2.02x 95.6% 8.05%
Retail ..................... 1.32 1.20 1.66 95.6 8.15
Office ..................... 1.50 1.22 2.00 94.7 8.41
Hospitality ................ 1.54 1.40 2.50 NAP 8.37
Health Care ................ 1.41 1.29 2.07 93.4 8.63
Industrial/Retail .......... 1.34 1.31 1.45 100.0 8.30
Industrial/Warehouse ....... 1.36 1.30 1.52 95.9 8.65
Mobile Home Park ........... 1.43 1.30 1.65 90.8 7.97
Self Storage ............... 1.57 1.49 1.62 91.4 8.39
Mixed Use .................. 1.44 1.44 1.44 87.1 7.47
Credit Lease--Retail ....... NAP NAP NAP 100.0 8.39
Credit Lease--Office ....... NAP NAP NAP 100.0 7.55
Credit Lease--Other ........ NAP NAP NAP 100.0 9.49
........................... ---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-43
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE DSC RATIOS
(ALL MORTGAGE LOANS)
% BY
RANGE OF AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG. .
CUT-OFF DATE NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
DSC RATIOS (X) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- -------------- -------- -------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Credit Lease Loans ........ 65 $ 237,983,438 10.8% $ 3,661,284 $30,000,000 NAP
1.15-1.19 ................. 5 23,109,724 1.0 4,621,945 16,491,481 79.3%
1.20-1.24 ................. 32 234,107,480 10.6 7,315,859 38,206,000 76.1
1.25-1.29 ................. 78 468,892,595 21.3 6,011,444 35,250,000 75.2
1.30-1.34 ................. 85 454,785,352 20.6 5,350,416 45,416,841 73.1
1.35-1.39 ................. 51 253,809,751 11.5 4,976,662 20,000,000 70.8
1.40-1.44 ................. 35 148,614,575 6.7 4,246,131 12,250,000 69.5
1.45-1.49 ................. 28 166,293,207 7.5 5,939,043 29,000,000 70.6
1.50-1.54 ................. 11 31,325,783 1.4 2,847,798 6,389,097 65.0
1.55-1.59 ................. 8 25,489,395 1.2 3,186,174 6,234,626 64.3
1.60-1.64 ................. 7 25,115,492 1.1 3,587,927 6,700,000 57.0
1.65-1.69 ................. 7 41,893,544 1.9 5,984,792 19,093,718 71.3
1.70-1.74 ................. 3 28,843,381 1.3 9,614,460 16,965,000 58.0
1.75-1.79 ................. 2 23,460,174 1.1 11,730,087 16,460,174 61.8
2.00-2.04 ................. 2 25,098,975 1.1 12,549,487 22,901,796 64.4
2.05-2.09 ................. 2 9,100,000 0.4 4,550,000 7,000,000 51.2
2.50 ...................... 1 5,579,458 0.3 5,579,458 5,579,458 34.9
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
RANGE OF WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
DSC RATIOS (X) DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- -------------- ----------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Credit Lease Loans ........ NAP NAP NAP 100.0% 8.24%
1.15-1.19 ................. 1.18x 1.15x 1.18x 97.5 7.88
1.20-1.24 ................. 1.21 1.20 1.24 95.4 7.84
1.25-1.29 ................. 1.27 1.24 1.29 95.0 8.19
1.30-1.34 ................. 1.31 1.29 1.34 96.9 8.24
1.35-1.39 ................. 1.36 1.34 1.39 95.1 8.35
1.40-1.44 ................. 1.41 1.39 1.43 95.8 8.29
1.45-1.49 ................. 1.45 1.44 1.49 96.9 8.19
1.50-1.54 ................. 1.51 1.49 1.54 96.9 8.67
1.55-1.59 ................. 1.56 1.54 1.58 95.5 8.51
1.60-1.64 ................. 1.61 1.59 1.63 92.5 8.64
1.65-1.69 ................. 1.65 1.64 1.67 93.1 8.07
1.70-1.74 ................. 1.71 1.70 1.71 99.9 8.10
1.75-1.79 ................. 1.78 1.76 1.78 88.0 8.15
2.00-2.04 ................. 2.00 2.00 2.02 88.3 8.46
2.05-2.09 ................. 2.08 2.07 2.08 99.5 8.00
2.50 ...................... 2.50 2.50 2.50 NAP 8.90
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
The weighted average Cut-off Date DSCR is 1.36x.
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-44
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE LTV RATIOS
(ALL MORTGAGE LOANS)
% BY
RANGE OF AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
CUT-OFF DATE NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
LTV RATIOS (%) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- -------------- -------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Credit Lease Loans ........ 65 $ 237,983,438 10.8% $3,661,284 $30,000,000 NAP
25.01-30.00 ............... 1 2,100,000 0.1 2,100,000 2,100,000 29.0%
30.01-35.00 ............... 1 5,579,458 0.3 5,579,458 5,579,458 34.9
35.01-40.00 ............... 1 1,893,030 0.1 1,893,030 1,893,030 37.1
40.01-45.00 ............... 2 8,393,198 0.4 4,196,599 6,700,000 42.2
45.01-50.00 ............... 5 9,615,853 0.4 1,923,171 3,984,774 47.3
50.01-55.00 ............... 9 34,860,861 1.6 3,873,429 9,985,351 54.0
55.01-60.00 ............... 19 84,404,331 3.8 4,442,333 19,958,798 58.1
60.01-65.00 ............... 30 193,394,987 8.8 6,446,500 45,416,841 63.8
65.01-70.00 ............... 45 229,525,690 10.4 5,100,571 29,000,000 68.2
70.01-75.00 ............... 147 716,056,726 32.5 4,871,134 35,250,000 73.3
75.01-80.00 ............... 91 652,656,652 29.6 7,172,051 38,206,000 78.3
80.01-85.00 6 27,038,101 1.2 4,506,350 7,014,139 80.9
--- -------------- ----- ---------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 422 $2,203,502,325 100.0% $5,221,569 $45,416,841 72.1%
=== ============== ===== ========== =========== ====
<CAPTION>
RANGE OF WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
LTV RATIOS (%) DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- -------------- ------------ ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Credit Lease Loans ........ NAP NAP NAP 100.0% 8.24%
25.01-30.00 ............... 2.07x 2.07x 2.07x 99.5 8.15
30.01-35.00 ............... 2.50 2.50 2.50 NAP 8.90
35.01-40.00 ............... 1.70 1.70 1.70 NAP 8.90
40.01-45.00 ............... 1.59 1.47 1.62 93.3 8.87
45.01-50.00 ............... 1.41 1.28 1.49 94.6 8.95
50.01-55.00 ............... 1.59 1.30 1.76 93.1 8.38
55.01-60.00 ............... 1.46 1.30 2.08 92.4 8.73
60.01-65.00 ............... 1.52 1.25 2.02 93.7 8.41
65.01-70.00 ............... 1.35 1.22 1.65 95.1 8.33
70.01-75.00 ............... 1.35 1.20 1.67 95.9 8.23
75.01-80.00 ............... 1.28 1.15 1.63 96.1 7.97
80.01-85.00 1.26 1.15 1.35 95.7 8.02
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
The weighted average Cut-off Date LTV Ratio is 72.08%.
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-45
<PAGE>
<TABLE>
<CAPTION>
MATURITY DATE LTV RATIOS
(ALL BALLOON LOANS OTHER THAN CREDIT LEASE LOANS)
% BY
RANGE OF AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
MATURITY DATE NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
LTV RATIOS (%) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- ------------- -------- ------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
5.01-10.00 ................ 3 $ 3,500,000 0.2% $ 1,166,667 $ 1,950,000 62.3%
20.01-25.00 ................ 1 2,156,589 0.1 2,156,589 2,156,589 75.7
25.01-30.00 ................ 4 46,337,787 2.7 11,584,447 23,372,304 66.4
30.01-35.00 ................ 4 13,409,145 0.8 3,352,286 5,579,458 43.6
35.01-40.00 ................ 5 19,272,856 1.1 3,854,571 7,000,000 65.2
40.01-45.00 ................ 12 41,720,813 2.4 3,476,734 16,965,000 60.2
45.01-50.00 ................ 18 89,535,624 5.1 4,974,201 29,000,000 62.0
50.01-55.00 ................ 26 119,701,853 6.9 4,603,917 19,958,798 64.4
55.01-60.00 ................ 40 325,895,144 18.7 8,147,379 45,416,841 70.5
60.01-65.00 ................ 70 349,672,889 20.1 4,995,327 33,449,419 73.8
65.01-70.00 ................ 97 465,193,309 26.7 4,795,807 35,250,000 74.9
70.01-75.00 ................ 35 257,679,238 14.8 7,362,264 29,121,268 78.9
75.01-80.00 1 7,014,139 0.4 7,014,139 7,014,139 80.4
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 316 $1,741,089,384 100.0% $ 5,509,777 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
RANGE OF WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
MATURITY DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
LTV RATIOS (%) DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- ------------- ------------ ------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
5.01-10.00 ................ 1.35x 1.30x 1.49x 100.0% 8.08%
20.01-25.00 ................ 1.23 1.23 1.23 94.1 8.00
25.01-30.00 ................ 1.32 1.20 1.62 95.2 8.51
30.01-35.00 ................ 1.95 1.49 2.50 89.4 9.02
35.01-40.00 ................ 1.60 1.26 2.08 97.3 8.37
40.01-45.00 ................ 1.54 1.15 2.02 92.4 8.38
45.01-50.00 ................ 1.47 1.27 1.76 96.2 8.24
50.01-55.00 ................ 1.43 1.24 1.78 92.5 8.46
55.01-60.00 ................ 1.33 1.20 1.64 95.9 8.19
60.01-65.00 ................ 1.33 1.20 1.61 96.9 8.14
65.01-70.00 ................ 1.34 1.20 1.65 95.6 8.11
70.01-75.00 ................ 1.28 1.20 1.40 95.2 8.12
75.01-80.00 1.29 1.29 1.29 92.5 8.54
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 1.35x 1.15x 2.50x 95.6% 8.19%
==== ==== ==== ==== ====
</TABLE>
The weighted average Maturity Date LTV Ratio is 60.81%.
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-46
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE RATES
(ALL MORTGAGE LOANS)(1)
% BY
AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
RANGE OF NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
MORTGAGE RATES OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(2)
- -------------- -------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
7.000- 7.249 ............. 3 $ 78,749,072 3.6% $26,249,691 $30,000,000 72.0%
7.250- 7.499 ............. 12 150,849,461 6.8 12,570,788 38,206,000 77.9
7.500- 7.749 ............. 44 245,575,678 11.1 5,581,265 35,250,000 74.8
7.750- 7.999 ............. 62 324,440,114 14.7 5,232,905 29,000,000 72.4
8.000- 8.249 ............. 81 366,072,373 16.6 4,519,412 28,773,665 74.7
8.250- 8.499 ............. 65 410,827,776 18.6 6,320,427 45,416,841 70.8
8.500- 8.749 ............. 64 309,952,971 14.1 4,843,015 29,121,268 71.8
8.750- 8.999 ............. 32 123,555,706 5.6 3,861,116 19,958,798 64.8
9.000- 9.249 ............. 39 109,322,670 5.0 2,803,145 8,082,804 66.0
9.250- 9.499 ............. 10 38,219,747 1.7 3,821,975 9,749,977 61.2
9.500- 9.749 ............. 3 4,805,377 0.2 1,601,792 2,736,203 69.4
9.750- 9.999 ............. 1 4,344,815 0.2 4,344,815 4,344,815 NAP
10.000-10.249 ............. 5 32,103,107 1.5 6,420,621 9,763,390 NAP
10.500-10.749 ............. 1 4,683,455 0.2 4,683,455 4,683,455 74.0
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
RANGE OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
MORTGAGE RATES DSC RATIO(2) DSC RATIO(2) DSC RATIO(2) RATE(3) RATE
- -------------- ------------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
7.000- 7.249 ............. 1.44x 1.44x 1.44x 100.0% 7.17%
7.250- 7.499 ............. 1.27 1.20 1.44 98.3 7.44
7.500- 7.749 ............. 1.30 1.18 1.76 95.0 7.60
7.750- 7.999 ............. 1.39 1.20 2.08 96.8 7.89
8.000- 8.249 ............. 1.32 1.17 2.07 95.2 8.10
8.250- 8.499 ............. 1.40 1.23 2.00 96.3 8.34
8.500- 8.749 ............. 1.35 1.15 1.67 95.5 8.61
8.750- 8.999 ............. 1.44 1.20 2.50 94.5 8.87
9.000- 9.249 ............. 1.37 1.22 1.62 96.8 9.09
9.250- 9.499 ............. 1.38 1.29 1.49 87.7 9.35
9.500- 9.749 ............. 1.28 1.15 1.35 96.3 9.52
9.750- 9.999 ............. NAP NAP NAP 100.0 9.88
10.000-10.249 ............. NAP NAP NAP 100.0 10.13
10.500-10.749 ............. 1.44 1.44 1.44 97.0 10.50
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
The weighted average Mortgage Rate is 8.207%.
(1) One of the Mortgage Loans accrues interest at an adjustable interest rate.
The "Mortgage Rate" for such Mortgage Loan is deemed to be the floor below
which such adjustable rate cannot be reduced, as set forth in the related
Mortgage Note.
(2) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(3) Occupancy Rates were calculated without reference to Hospitality
properties.
S-47
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL TERMS TO MATURITY
(ALL MORTGAGE LOANS)
RANGE OF % BY
ORIGINAL TERMS AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
TO MATURITY NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
(MONTHS) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- -------------- -------- ------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
49- 60 ................... 1 $ 28,670,846 1.3% $28,670,846 $28,670,846 72.0%
73- 84 ................... 42 178,502,678 8.1 4,250,064 17,970,413 71.1
85- 96 ................... 1 4,699,778 0.2 4,699,778 4,699,778 69.1
97-108 ................... 1 1,798,719 0.1 1,798,719 1,798,719 75.0
109-120 ................... 239 1,196,141,707 54.3 5,004,777 45,416,841 72.4
121-132 ................... 2 10,297,420 0.5 5,148,710 7,000,000 79.3
133-144 ................... 4 17,224,559 0.8 4,306,140 5,415,475 NAP
145-156 ................... 1 2,919,341 0.1 2,919,341 2,919,341 74.9
169-180 ................... 35 362,677,282 16.5 10,362,208 38,206,000 71.7
205-216 ................... 2 4,911,687 0.2 2,455,843 3,019,414 65.3
217-228 ................... 2 2,533,698 0.1 1,266,849 1,513,702 NAP
229-240 ................... 57 158,397,319 7.2 2,778,900 24,140,144 72.1
241-252 ................... 1 1,153,040 0.1 1,153,040 1,153,040 NAP
253-264 ................... 11 64,360,557 2.9 5,850,960 11,673,663 68.3
265-276 ................... 1 4,978,679 0.2 4,978,679 4,978,679 56.9
289-300 ................... 13 120,817,560 5.5 9,293,658 30,000,000 68.6
325-336 ................... 1 2,156,589 0.1 2,156,589 2,156,589 75.7
349-360 ................... 8 41,260,866 1.9 5,157,608 16,491,481 79.1
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ............... 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
RANGE OF
ORIGINAL TERMS WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
TO MATURITY CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
(MONTHS) DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- -------------- ------------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
49- 60 ................... 1.44x 1.44x 1.44x 100.0% 7.24%
73- 84 ................... 1.38 1.20 2.50 93.3 8.42
85- 96 ................... 1.36 1.36 1.36 91.0 9.15
97-108 ................... 1.34 1.34 1.34 99.0 7.71
109-120 ................... 1.34 1.20 2.07 95.7 8.24
121-132 ................... 1.27 1.27 1.27 100.0 7.78
133-144 ................... NAP NAP NAP 100.0 10.06
145-156 ................... 1.31 1.31 1.31 100.0 7.88
169-180 ................... 1.37 1.20 2.08 96.0 7.88
205-216 ................... 1.65 1.65 1.65 93.1 7.89
217-228 ................... NAP NAP NAP 100.0 7.90
229-240 ................... 1.36 1.25 1.67 99.8 8.26
241-252 ................... NAP NAP NAP 100.0 8.75
253-264 ................... 1.44 1.40 1.47 100.0 8.89
265-276 ................... 1.59 1.59 1.59 NAP 9.24
289-300 ................... 1.46 1.15 2.00 94.5 8.15
325-336 ................... 1.23 1.23 1.23 94.1 8.00
349-360 ................... 1.20 1.15 1.35 97.2 7.79
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
The weighted average original term to maturity is 154 months.
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates are calculated without reference to Hospitality properties.
S-48
<PAGE>
<TABLE>
<CAPTION>
REMAINING TERMS TO MATURITY
(ALL MORTGAGE LOANS)
% BY
RANGE OF AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
REMAINING TERMS NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
TO MATURITY (MONTHS) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- -------------------- -------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
37- 48 ................... 1 $ 9,061,380 0.4% $ 9,061,380 $ 9,061,380 72.5%
49- 60 ................... 1 28,670,846 1.3 28,670,846 28,670,846 72.0
73- 84 ................... 43 183,202,456 8.3 4,260,522 17,970,413 71.1
97-108 ................... 1 1,798,719 0.1 1,798,719 1,798,719 75.0
109-120 ................... 240 1,203,141,707 54.6 5,013,090 45,416,841 72.4
121-132 ................... 1 3,297,420 0.1 3,297,420 3,297,420 74.9
133-144 ................... 4 17,224,559 0.8 4,306,140 5,415,475 NAP
145-156 ................... 1 2,919,341 0.1 2,919,341 2,919,341 74.9
169-180 ................... 34 353,615,902 16.0 10,400,468 38,206,000 71.6
205-216 ................... 3 5,931,683 0.3 1,977,228 3,019,414 65.3
217-228 ................... 20 34,885,725 1.6 1,744,286 7,341,749 NAP
229-240 ................... 38 125,025,297 5.7 3,290,139 24,140,144 72.1
241-252 ................... 6 24,416,571 1.1 4,069,429 6,428,181 NAP
253-264 ................... 6 41,097,026 1.9 6,849,504 11,673,663 68.3
265-276 ................... 1 4,978,679 0.2 4,978,679 4,978,679 56.9
289-300 ................... 13 120,817,560 5.5 9,293,658 30,000,000 68.6
325-336 ................... 1 2,156,589 0.1 2,156,589 2,156,589 75.7
349-360 ................... 8 41,260,866 1.9 5,157,608 16,491,481 79.1
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
RANGE OF WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
REMAINING TERMS CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
TO MATURITY (MONTHS) DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- -------------------- ------------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
37- 48 ................... 1.22x 1.22x 1.22x 100.0% 7.50%
49- 60 ................... 1.44 1.44 1.44 100.0 7.24
73- 84 ................... 1.38 1.20 2.50 93.2 8.44
97-108 ................... 1.34 1.34 1.34 99.0 7.71
109-120 ................... 1.34 1.20 2.07 95.7 8.24
121-132 ................... 1.27 1.27 1.27 100.0 8.38
133-144 ................... NAP NAP NAP 100.0 10.06
145-156 ................... 1.31 1.31 1.31 100.0 7.88
169-180 ................... 1.38 1.20 2.08 95.9 7.89
205-216 ................... 1.65 1.65 1.65 94.3 7.99
217-228 ................... NAP NAP NAP 100.0 8.14
229-240 ................... 1.36 1.25 1.67 99.7 8.29
241-252 ................... NAP NAP NAP 100.0 8.21
253-264 ................... 1.44 1.40 1.47 100.0 9.29
265-276 ................... 1.59 1.59 1.59 NAP 9.24
289-300 ................... 1.46 1.15 2.00 94.5 8.15
325-336 ................... 1.23 1.23 1.23 94.1 8.00
349-360 ................... 1.20 1.15 1.35 97.2 7.79
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................ 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
The weighted average remaining term to maturity is 151 months.
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-49
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCES
(ALL MORTGAGE LOANS)
% BY
RANGE OF AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG.
CUT-OFF DATE NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
BALANCES($) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1)
- ------------ -------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
0.01- 2,000,000.00 ..... 115 $ 163,601,366 7.4% $ 1,422,621 $ 2,000,000 67.9%
2,000,000.01- 4,000,000.00 ..... 138 394,157,002 17.9 2,856,210 4,000,000 71.3
4,000,000.01- 6,000,000.00 ..... 67 324,167,137 14.7 4,838,315 5,912,058 72.1
6,000,000.01- 8,000,000.00 ..... 40 272,949,826 12.4 6,823,746 7,991,880 70.4
8,000,000.01-10,000,000.00 ..... 19 171,827,266 7.8 9,043,540 9,986,732 72.0
10,000,000.01-12,000,000.00 .... 5 56,166,368 2.5 11,233,274 11,954,284 71.7
12,000,000.01-14,000,000.00 .... 6 77,811,115 3.5 12,968,519 14,000,000 74.0
14,000,000.01-16,000,000.00 .... 2 29,640,099 1.3 14,820,049 14,859,825 78.6
16,000,000.01-18,000,000.00 .... 8 135,425,979 6.1 16,928,247 17,970,413 73.4
18,000,000.01-20,000,000.00 .... 6 116,184,243 5.3 19,364,040 20,000,000 74.5
20,000,000.01-22,000,000.00 .... 2 41,393,801 1.9 20,696,900 21,315,575 69.2
22,000,000.01-24,000,000.00 .... 3 69,262,819 3.1 23,087,606 23,372,304 70.3
24,000,000.01-26,000,000.00 .... 1 24,140,144 1.1 24,140,144 24,140,144 NAP
28,000,000.01-30,000,000.00 .... 6 174,452,901 7.9 29,075,483 30,000,000 74.6
32,000,000.01-34,000,000.00 .... 1 33,449,419 1.5 33,449,419 33,449,419 79.6
34,000,000.01-36,000,000.00 .... 1 35,250,000 1.6 35,250,000 35,250,000 75.0
38,000,000.01-40,000,000.00 .... 1 38,206,000 1.7 38,206,000 38,206,000 76.4
44,000,000.01-46,000,000.00 .... 1 45,416,841 2.1 45,416,841 45,416,841 64.9
--- -------------- ----- ----------- ----------- ----
Total/Avg/Wtd. Avg./
Min/Max: ..................... 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1%
=== ============== ===== =========== =========== ====
<CAPTION>
RANGE OF WTD. AVG. MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
BALANCES($) DSC RATIO(1) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- ------------ ------------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
0.01- 2,000,000.00 ..... 1.37x 1.15x 1.70x 97.2% 8.40%
2,000,000.01- 4,000,000.00 ..... 1.35 1.17 2.07 96.5 8.36
4,000,000.01- 6,000,000.00 ..... 1.38 1.20 2.50 94.8 8.33
6,000,000.01- 8,000,000.00 ..... 1.36 1.20 2.08 94.7 8.24
8,000,000.01-10,000,000.00 ..... 1.37 1.20 1.70 96.8 8.37
10,000,000.01-12,000,000.00 .... 1.33 1.30 1.35 96.8 8.53
12,000,000.01-14,000,000.00 .... 1.30 1.21 1.41 96.7 7.98
14,000,000.01-16,000,000.00 .... 1.25 1.20 1.30 96.7 8.30
16,000,000.01-18,000,000.00 .... 1.41 1.18 1.78 95.3 8.08
18,000,000.01-20,000,000.00 .... 1.38 1.27 1.65 95.8 8.12
20,000,000.01-22,000,000.00 .... 1.22 1.22 1.22 98.5 7.50
22,000,000.01-24,000,000.00 .... 1.53 1.29 2.00 94.1 8.27
24,000,000.01-26,000,000.00 .... NAP NAP NAP 100.0 8.41
28,000,000.01-30,000,000.00 .... 1.34 1.25 1.45 97.9 7.88
32,000,000.01-34,000,000.00 .... 1.33 1.33 1.33 99.5 7.43
34,000,000.01-36,000,000.00 .... 1.25 1.25 1.25 86.4 7.63
38,000,000.01-40,000,000.00 .... 1.20 1.20 1.20 95.4 7.47
44,000,000.01-46,000,000.00 .... 1.31 1.31 1.31 100.0 8.34
---- ---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ..................... 1.36x 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ==== ====
</TABLE>
The average Cut-off Date Balance is $5,221,569.
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-50
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL AMORTIZATION TERMS
(ALL MORTGAGE LOANS)
% BY
ORIGINAL AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG. WTD. AVG.
AMORTIZATION NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
TERM(MONTHS) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1) DSC RATIO(1)
- ------------ -------- ------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
109-120 .................... 1 $ 2,100,000 0.1% $ 2,100,000 $ 2,100,000 29.0% 2.07x
133-144 .................... 4 17,224,559 0.8 4,306,140 5,415,475 NAP NAP
169-180 .................... 6 26,016,733 1.2 4,336,122 9,000,000 61.3 1.46
181-192 .................... 3 3,500,000 0.2 1,166,667 1,950,000 62.3 1.35
205-216 .................... 3 24,989,913 1.1 8,329,971 20,078,226 65.3 1.65
217-228 .................... 2 2,533,698 0.1 1,266,849 1,513,702 NAP NAP
229-240 .................... 56 125,919,726 5.7 2,248,567 16,276,911 68.0 1.41
241-252 .................... 1 1,153,040 0.1 1,153,040 1,153,040 NAP NAP
253-264 .................... 10 49,531,660 2.2 4,953,166 11,673,663 71.6 1.38
265-276 .................... 1 4,978,679 0.2 4,978,679 4,978,679 56.9 1.59
277-288 .................... 3 43,363,507 2.0 14,454,502 24,140,144 NAP NAP
289-300 .................... 98 481,293,247 21.8 4,911,156 30,000,000 66.4 1.47
301-312 .................... 4 60,699,000 2.8 15,174,750 38,206,000 76.8 1.21
313-324 .................... 2 3,180,587 0.1 1,590,293 2,234,690 62.8 1.41
325-336 .................... 19 88,931,681 4.0 4,680,615 9,382,540 72.0 1.32
349-360 .................... 209 1,268,086,295 57.5 6,067,399 45,416,841 74.4 1.32
--- -------------- ----- ----------- ----------- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 422 $2,203,502,325 100.0% $ 5,221,569 $45,416,841 72.1% 1.36x
=== ============== ===== =========== =========== ==== ====
<CAPTION>
ORIGINAL MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
AMORTIZATION CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
TERM(MONTHS) DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- ------------ ------------ ------------ --------- ----------
<S> <C> <C> <C> <C>
109-120 .................... 2.07x 2.07x 99.5% 8.15%
133-144 .................... NAP NAP 100.0 10.06
169-180 .................... 1.30 1.62 95.9 8.48
181-192 .................... 1.30 1.49 100.0 8.08
205-216 .................... 1.65 1.65 98.6 7.23
217-228 .................... NAP NAP 100.0 7.90
229-240 .................... 1.25 2.02 99.1 8.43
241-252 .................... NAP NAP 100.0 8.75
253-264 .................... 1.26 1.47 100.0 8.30
265-276 .................... 1.59 1.59 NAP 9.24
277-288 .................... NAP NAP 100.0 9.17
289-300 .................... 1.22 2.50 94.9 8.28
301-312 .................... 1.20 1.44 96.8 7.47
313-324 .................... 1.28 1.47 97.0 8.87
325-336 .................... 1.25 1.53 95.8 8.29
349-360 .................... 1.15 1.78 95.7 8.13
---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ====
</TABLE>
The weighted average original amortization term is 327 months.
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
S-51
<PAGE>
<TABLE>
<CAPTION>
AMORTIZATION TYPES
(ALL MORTGAGE LOANS)
% BY
AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG. WTD. AVG.
AMORTIZATION NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
TYPES OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1) DSC RATIO(1)
- ------------ -------- ------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balloon(3) ................. 329 $1,825,528,886 82.8% $5,548,720 $45,416,841 72.1% 1.35x
Fully Amortizing ........... 86 321,791,438 14.6 3,741,761 30,000,000 69.0 1.44
ARD Loans(4) ............... 7 56,182,000 2.5 8,026,000 17,360,000 79.2 1.32
--- -------------- ----- ---------- ----------- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: .................. 422 $2,203,502,325 100.0% $5,221,569 $45,416,841 72.1% 1.36x
=== ============== ===== ========== =========== ==== ====
<CAPTION>
MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
AMORTIZATION CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
TYPES DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- ------------ ------------ ------------ --------- ----------
<S> <C> <C> <C> <C>
Balloon(3) ................. 1.15x 2.50x 95.8% 8.19%
Fully Amortizing ........... 1.15 2.07 97.6 8.29
ARD Loans(4) ............... 1.27 1.45 94.7 8.15
---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ====
</TABLE>
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) Occupancy Rates were calculated without reference to Hospitality
properties.
(3) Includes seven Mortgage Loans, or 3.8%, which require payments of interest
only for one to three years prior to beginning to make payments that
amortize the Mortgage Loan.
(4) These Mortgage Loans require payments of interest only for a period of 23
months from origination prior to beginning to make payments that amortize
the Mortgage Loan.
OCCUPANCY RATES
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
% BY
RANGE OF AGGREGATE AGGREGATE AVERAGE HIGHEST WTD. AVG. WTD. AVG.
OCCUPANCY NUMBER CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
RATES(%) OF LOANS BALANCE BALANCE BALANCE BALANCE LTV RATIO(1) DSC RATIO(1)
- ------------ -------- ------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Not Applicable ............. 33 $ 195,766,774 8.9% $5,932,326 $29,000,000 63.9% 1.54x
60.01- 65.00 ............... 1 5,788,599 0.3 5,788,599 5,788,599 68.1 1.35
70.01- 75.00 ............... 2 7,578,015 0.3 3,789,008 5,853,430 77.5 1.24
75.01- 80.00 ............... 2 12,803,227 0.6 6,401,614 6,528,304 57.9 1.29
80.01- 85.00 ............... 8 47,067,205 2.1 5,883,401 16,460,174 70.7 1.54
85.01- 90.00 ............... 31 174,075,215 7.9 5,615,330 35,250,000 69.4 1.41
90.01- 95.00 ............... 77 415,014,628 18.8 5,389,800 29,121,268 73.4 1.32
95.01-100.00 ............... 268 1,345,408,661 61.1 5,020,182 45,416,841 73.6 1.32
--- -------------- ----- ---------- ----------- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 422 $2,203,502,325 100.0% $5,221,569 $45,416,841 72.1% 1.36x
=== ============== ===== ========== =========== ==== ====
<CAPTION>
MINIMUM MAXIMUM WTD. AVG. WTD. AVG.
AMORTIZATION CUT-OFF DATE CUT-OFF DATE OCCUPANCY MORTGAGE
TYPES DSC RATIO(1) DSC RATIO(1) RATE(2) RATE
- ------------ ------------ ------------ --------- ----------
<S> <C> <C> <C> <C>
Not Applicable ............. 1.40x 2.50x NAP 8.37%
60.01- 65.00 ............... 1.35 1.35 63.0% 8.15
70.01- 75.00 ............... 1.20 1.40 72.7 8.30
75.01- 80.00 ............... 1.28 1.30 78.1 9.07
80.01- 85.00 ............... 1.20 1.78 83.7 8.17
85.01- 90.00 ............... 1.21 2.00 87.8 8.24
90.01- 95.00 ............... 1.15 1.66 93.5 8.34
95.01-100.00 ............... 1.15 2.07 98.8 8.13
---- ---- ---- ----
Total/Avg/Wtd. Avg./
Min/Max: ................. 1.15x 2.50x 96.1% 8.21%
==== ==== ==== ====
</TABLE>
(1) The DSC Ratio and LTV ratio information shown above do not reflect the 65
Credit Lease Loans, representing 10.80% of the Initial Pool Balance, which
typically have debt service coverage ratios below 1.20x and loan to value
ratios in excess of 80%.
(2) The weighted average occupancy rate is 96.07%, excluding Hospitality
properties.
S-52
<PAGE>
THE MORTGAGE LOAN SELLERS
On or about November 25, 1997 (the "Closing Date"), the Depositor will
acquire the Mortgage Loans from the Mortgage Loan Sellers pursuant to separate
agreements (the "Mortgage Loan Purchase Agreements"). The Mortgage Loan Sellers
acquired or originated the Mortgage Loans as described above under "--Mortgage
Loan History."
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES
On or prior to the Closing Date, the Depositor will transfer the Mortgage
Loans, without recourse, to the Trustee for the benefit of the
Certificateholders. In connection with such transfer, the Depositor will require
each Mortgage Loan Seller to deliver to the Trustee or to a document custodian
appointed by the Trustee (a "Custodian"), among other things, the following
documents with respect to each Mortgage Loan (collectively, as to each Mortgage
Loan, the "Mortgage File"): (i) the original Mortgage Note, endorsed, without
recourse, to the order of the Trustee; (ii) the original or a copy of the
Mortgage, together with an original or copy of any intervening assignments of
the Mortgage, in each case with evidence of recording indicated thereon; (iii)
the original or a copy of any related assignment of leases and of any
intervening assignments thereof (if such item is a document separate from the
Mortgage), with evidence of recording indicated thereon; (iv) an original
assignment of the Mortgage in favor of the Trustee and in recordable form; (v)
an original assignment of any related assignment of leases (if such item is a
document separate from the Mortgage) in favor of the Trustee and in recordable
form; (vi) originals or copies of all written modification agreements in those
instances in which the terms or provisions of the Mortgage or Mortgage Note have
been modified; (vii) the original or a copy of the policy or certificate of
lender's title insurance issued on the date of the origination of such Mortgage
Loan, or, if such policy has not been issued, an irrevocable, binding commitment
to issue such title insurance policy; (viii) any file copies of any UCC
financing statements and related amendments and continuation statements in the
possession of the applicable Mortgage Loan Seller and (ix) an original
assignment in favor of the Trustee of any financing statement executed and filed
in favor of the related Mortgage Loan Seller in the relevant jurisdiction.
The Trustee or a Custodian on its behalf will be required to review each
Mortgage File within a specified period following its receipt thereof. If any of
the above-described documents is found during the course of such review to be
missing from any Mortgage File or defective, and in either case such omission or
defect materially and adversely affects the interests of the Certificateholders,
the applicable Mortgage Loan Seller, if it cannot deliver the document or cure
the defect (other than omissions solely due to a document not having been
returned by the related recording office) within a period of 90 days following
its receipt of notice thereof, will be obligated pursuant to the applicable
Mortgage Loan Purchase Agreement (the relevant rights under which will be
assigned by the Depositor to the Trustee) to repurchase the affected Mortgage
Loan at a price (the "Purchase Price") generally equal to the sum of (i) the
unpaid principal balance of such Mortgage Loan, (ii) unpaid accrued interest on
such Mortgage Loan (calculated at the Mortgage Rate) to but not including the
Due Date in the Collection Period in which the purchase is to occur, and (iii)
certain servicing expenses that are reimbursable to the Master Servicer or the
Special Servicer plus any interest thereon and on any P&I Advances; provided
that such Mortgage Loan Seller will have an additional 90-day period to deliver
the document or cure the defect, as the case may be, if it is diligently
proceeding to effect such delivery or cure and has delivered to the Trustee an
officer's certificate that describes the reasons that such delivery or cure was
not effected within the first 90-day cure period and the actions it proposes to
take to effect such delivery or cure, and which states that it anticipates such
delivery or cure will be effected within the additional 90-day period. The
foregoing repurchase obligation will constitute the sole remedy available to the
Certificateholders and the Trustee for any uncured failure to deliver, or any
uncured defect in, a constituent Mortgage Loan document. The applicable Mortgage
Loan Seller will be solely responsible for such repurchase obligation, and such
obligation will not be the responsibility of the Depositor or any of its other
affiliates.
The Pooling and Servicing Agreement will require the Master Servicer
promptly to cause each of the assignments described in clauses (iv), (v) and
(ix) of the second preceding paragraph to be submitted for recording in the real
property records of the jurisdiction in which the related Mortgaged Property is
located. See "Description of the Pooling Agreements--Assignment of Mortgage
Loans; Repurchases" in the Prospectus.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
In each Mortgage Loan Purchase Agreement, the applicable Mortgage Loan
Seller will represent and warrant with respect to each related Mortgage Loan
(subject to certain exceptions specified in the related Mortgage Loan
S-53
<PAGE>
Purchase Agreement), as of the Closing Date, or as of such other date
specifically provided in the representation and warranty, among other things,
generally that: (i) the information set forth in the schedule of Mortgage Loans
attached to the applicable Mortgage Loan Purchase Agreement (which contains
certain of the information set forth in Annex A) is true and correct in all
material respects as of the Cut-off Date; (ii) if such Mortgage Loan was
originated by the applicable Mortgage Loan Seller or an affiliate thereof, then,
as of the date of its origination, such Mortgage Loan complied in all material
respects with, or was exempt from, all requirements of federal, state or local
law relating to the origination of such Mortgage Loan and, if such Mortgage Loan
was not originated by the applicable Mortgage Loan Seller or an affiliate
thereof, then, to the best of such Seller's knowledge after having performed the
type of due diligence customarily performed by prudent institutional commercial
and multifamily mortgage lenders, as of the date of its origination, such
Mortgage Loan complied in all material respects with, or was exempt from, all
requirements of federal, state or local law relating to the origination of such
Mortgage Loan; (iii) the applicable Mortgage Loan Seller owns the Mortgage Loan,
has good and marketable title thereto, has full right and authority to sell,
assign and transfer the Mortgage Loan and is transferring the Mortgage Loan free
and clear of any and all liens, pledges, charges or security interests; (iv) the
proceeds of such Mortgage Loan have been fully disbursed and there is no
requirement for future advances thereunder; (v) to the actual knowledge of the
applicable Mortgage Loan Seller, each of the related Mortgage Note, related
Mortgage, related assignment of leases, if any, and other agreements executed in
connection therewith is the legal, valid and binding obligation of the maker
thereof (subject to any non-recourse provisions therein and any state
anti-deficiency legislation), enforceable in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally, and
by general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law), and a legal opinion to such
effect was obtained by the originator of such Mortgage Loan at the time of
origination; and, as of the date of its origination, there was no valid offset,
defense, counterclaim or right to rescission with respect to any of the related
Mortgage Note, Mortgage or other agreements executed in connection with such
Mortgage Loan, and, as of the Cut-off Date, to the actual knowledge of the
applicable Mortgage Loan Seller, there is no valid offset, defense, counterclaim
or right to rescission with respect to such Mortgage Note, Mortgage(s) or other
agreements; (vi) the assignment of the related Mortgage in favor of the Trustee
constitutes the legal, valid and binding assignment of such Mortgage to the
Trustee (subject to customary limitations); (vii) the related Mortgage (or, in
the case of a cross-collateralized Mortgage Loan, a related Mortgage) is a valid
and enforceable first lien on the related Mortgaged Property (or, in the case of
a cross-collateralized Mortgage Loan, the related primary Mortgaged Property),
which Mortgaged Property is free and clear of all encumbrances and liens having
priority over or on a parity with the first lien of such Mortgage, except for
(a) liens for real estate taxes and special assessments not yet due and payable,
(b) covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being customarily acceptable to mortgage lending
institutions generally or specifically reflected in the appraisal of such
Mortgaged Property made in connection with the origination of such Mortgage
Loan, (c) other matters to which like properties are commonly subject which do
not, individually or in the aggregate, materially interfere with the benefits of
the security intended to be provided by such Mortgage or materially affect the
value or marketability of such Mortgaged Property and (d) if such Mortgage
secures a cross-collateralized Mortgage Loan, any lien securing a related
cross-collateralized Mortgage Loan; (viii) to the actual knowledge of the
applicable Mortgage Loan Seller, all taxes and governmental assessments that
prior to the Cut-off Date became due or owing in respect of, and affect, the
related Mortgaged Property (or, in the case of a cross-collateralized Mortgage
Loan, the related primary Mortgaged Property) have been paid, or an escrow of
funds in an amount sufficient to cover such payments has been established; (ix)
as of the date of its origination, there was no proceeding pending for the total
or partial condemnation of the related Mortgaged Property that materially
affects the value thereof, and such Mortgaged Property was free of material
damage; and, as of the Cut-off Date, the applicable Mortgage Loan Seller has not
received any notice of the commencement of any proceeding for the total or
partial condemnation of the related Mortgaged Property (or, in the case of a
cross-collateralized Mortgage Loan, the related primary Mortgaged Property) that
materially affects the value thereof, and such Mortgaged Property is free of
material damage; (x) as of the date of its origination, all insurance required
under the Mortgage for such Mortgage Loan was in full force and effect with
respect to the related Mortgaged Property (or, in the case of a
cross-collateralized Mortgage Loan, the related primary Mortgaged Property);
(xi) as of the Cut-off Date, no Mortgage Loan is, or in the prior 12 months, has
been, 30 days or more past due in respect of any Scheduled Payment; and (xii)
one or more environmental site assessments were performed with respect to the
related Mortgaged Property (or, in the case of a cross-collateralized Mortgage
Loan, the related primary Mortgaged Property) during the
S-54
<PAGE>
18-month period preceding the Cut-off Date, and the Seller, having made no
independent inquiry other than to review the report(s) prepared in connection
with the assessment(s) referenced herein, has no knowledge of any material and
adverse environmental condition or circumstance affecting such Mortgaged
Property that was not disclosed in such report(s).
In the case of a breach of any of the foregoing representations and
warranties that materially and adversely affects the interests of the
Certificateholders, the applicable Mortgage Loan Seller, if it cannot cure such
breach within a period of 90 days following its receipt of notice thereof, will
be obligated pursuant to the applicable Mortgage Loan Purchase Agreement (the
relevant rights under which will be assigned by the Depositor to the Trustee) to
repurchase the affected Mortgage Loan at the applicable Purchase Price; provided
that such Mortgage Loan Seller will have an additional 90-day period to cure
such breach if it is diligently proceeding with such cure and has delivered to
the Trustee an officer's certificate that describes the reasons that a cure was
not effected within the first 90-day cure period and the actions it proposes to
take to effect such cure and which states that it anticipates such cure will be
effected within the additional 90-day period.
The foregoing repurchase obligation will constitute the sole remedy
available to the Certificateholders and the Trustee for any uncured breach of
the applicable Mortgage Loan Seller's representations and warranties regarding
the applicable Mortgage Loans. The applicable Mortgage Loan Seller will be the
sole warranting party in respect of the Mortgage Loans sold by such Mortgage
Loan Seller to the Depositor, and neither the Depositor nor any of its other
affiliates will be obligated to repurchase any such affected Mortgage Loan in
connection with a breach of the applicable Mortgage Loan Seller's
representations and warranties if the applicable Mortgage Loan Seller defaults
on its obligation to do so. See "Description of the Pooling
Agreements--Representations and Warranties; Repurchases" in the Prospectus.
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 time the Offered Certificates are issued. Prior to the
issuance of the Offered Certificates, a Mortgage Loan may be removed from the
Mortgage Pool if the Depositor deems such removal necessary or appropriate or if
it is prepaid. The Depositor believes that the information set forth herein will
be representative of the characteristics of the Mortgage Pool as it will be
constituted at the time the Offered Certificates are issued, although the range
of Mortgage Rates, maturities and certain other characteristics of the Mortgage
Loans in the Mortgage Pool may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Closing Date and
will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates. If Mortgage Loans are removed from or
added to the Mortgage Pool as described in the preceding paragraph, such removal
or addition will be noted in the Form 8-K.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, will be required to service and administer the Mortgage Loans on
behalf of the Trustee for the benefit of the Certificateholders, in accordance
with applicable law, the terms of the Pooling and Servicing Agreement and the
terms of the respective Mortgage Loans and, to the extent consistent with the
foregoing, in the same manner in which, and with the same care, skill, prudence
and diligence with which, the Master Servicer or the Special Servicer, as the
case may be, generally services and administers similar mortgage loans (a) for
other third-parties, giving due consideration to customary and usual standards
of practice of prudent institutional commercial mortgage lenders servicing their
own loans and to the maximization of the recovery on such Mortgage Loans on a
net present value basis, or (b) held in its own portfolio, whichever servicing
procedure is of a higher standard, but without regard to (i) any relationship
that the Master Servicer or the Special Servicer, as the case may be, or any
affiliate thereof may have with the related borrower; (ii) the ownership of any
Certificate by the Master Servicer or the Special Servicer, as the case may be,
or by any affiliate thereof; (iii) the right of the Master Servicer or the
Special Servicer, as the case may be, to receive compensation or
S-55
<PAGE>
other fees for its services rendered pursuant to the Pooling and Servicing
Agreement; (iv) the obligations of the Master Servicer or the Special Servicer,
as the case may be, to make Advances (as defined herein); (v) the ownership,
servicing or management for others of any other mortgage loans or real property;
and (vi) any obligation of the Master Servicer, as a Mortgage Loan Seller or as
an affiliate thereof, to pay any indemnity with respect to or repurchase any
Mortgage Loan.
Set forth below, following the subsection captioned "--The Master Servicer
and Special Servicer," is a description of certain pertinent provisions of the
Pooling and Servicing Agreement relating to the servicing of the Mortgage Loans.
Reference is also made to the Prospectus, in particular to the section captioned
"Description of the Pooling Agreements," for important information in addition
to that set forth herein regarding the terms and conditions of the Pooling and
Servicing Agreement as they relate to the rights and obligations of the Master
Servicer and Special Servicer thereunder. The Special Servicer generally will
have all of the rights to indemnity and reimbursement, and limitations on
liability, that the Master Servicer is described as having in the Prospectus and
the Special Servicer rather than the Master Servicer will perform the servicing
duties described in the Prospectus with respect to Specially Serviced Mortgage
Loans and REO Properties (each as described herein). In addition to the
circumstances for resignation of the Master Servicer set forth in the
Prospectus, the Master Servicer and the Special Servicer shall have the right to
resign at any other time provided that (i) each of the Rating Agencies confirms
in writing that the successor's appointment will not result in a withdrawal,
qualification or downgrade of any rating or ratings assigned to any Class of
Certificates, (ii) the resigning party pays all costs and expenses in connection
with such transfer, and (iii) the successor accepts appointment prior to the
effectiveness of such resignation. See "Certain Matters Regarding the Master
Servicer and the Depositor" in the Prospectus.
THE MASTER SERVICER AND SPECIAL SERVICER
FUNB, in its capacity as master servicer under the Pooling and Servicing
Agreement (in such capacity, the "Master Servicer") will be responsible for
servicing the Mortgage Loans (other than Specially Serviced Mortgage Loans and
REO Properties). Although the Master Servicer is authorized to employ agents,
including sub-servicers, to directly service the Mortgage Loans for which it is
responsible, the Master Servicer will remain liable for its servicing
obligations under the Pooling and Servicing Agreement. The Master Servicer is a
wholly owned subsidiary of First Union Corporation. The Master Servicer's
principal servicing offices are located at One First Union Center, TW9, 301
South College Street, Charlotte, North Carolina 28288-1075.
Effective June 5, 1997, First Union National Bank of Georgia and First
Union National Bank of Florida were merged with and into First Union National
Bank of North Carolina, which changed its name to First Union National Bank
effective as of such date. Effective July 31, 1997, each of First Union Bank of
Connecticut, First Union National Bank of Maryland, First Union National Bank of
South Carolina, First Union National Bank of Tennessee, First Union National
Bank of Virginia and First Union National Bank of Washington, D.C. were merged
with and into First Union National Bank.
As of September 30, 1997, the Master Servicer and its affiliates serviced
approximately 2,062 commercial and multifamily loans, totaling approximately
$9.9 billion in aggregate outstanding principal amounts, including loans
securitized in mortgage-backed securitization transactions.
The initial Special Servicer will be CRIIMI MAE Services Limited
Partnership, a Maryland limited partnership, the general partner of which is
CRIIMI MAE Management, Inc. 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 imminent, for administering
any REO Property and for performing certain other functions with respect to all
Mortgage Loans, such as conducting property inspections, collecting financial
statements, rent-rolls and other financial data on the Mortgaged Properties, and
preparing related reports, as set forth in the Pooling and Servicing Agreement.
As of September 30, 1997, the Special Servicer was responsible for the servicing
of approximately 2,700 commercial and multifamily loans with an aggregate
principal balance of approximately $11 billion, the collateral for which is
located in 49 states. It is anticipated that the Special Servicer or an
affiliate of the Special Servicer will purchase all or a significant portion of
certain Classes of the Private Certificates on or about the Closing Date. The
Special Servicer's principal offices are located at 11200 Rockville Pike,
Rockville, Maryland 20852.
The information set forth herein concerning the Master Servicer and the
Special Servicer has been provided by the Master Servicer and Special Servicer,
respectively, and none of the Depositor or either Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
S-56
<PAGE>
THE SPECIAL SERVICER
The Pooling and Servicing Agreement permits the holder (or holders) of the
majority of the Voting Rights allocated to the Controlling Class of Sequential
Pay Certificates to replace the Special Servicer and to select a representative
(the "Controlling Class Representative") from whom the Special Servicer will
seek advice and approval and take direction under certain circumstances. See
"Servicing of the Mortgage Loans--The Controlling Class Representative." The
"Controlling Class of Sequential Pay Certificates" is the Class of Sequential
Pay Certificates that has the latest alphabetical Class designation and that has
a Certificate Balance that is greater than 25% of its original Certificate
Balance; provided that if no Class of Sequential Pay Certificates has a
Certificate Balance that is greater than 25% of its original Certificate
Balance, the then outstanding Class of Sequential Pay Certificates with the
latest alphabetical Class designation will be the "Controlling Class of
Sequential Pay Certificates." The Class A-1, Class A-2 and Class A-3
Certificates will be treated as one Class for determining the Controlling Class
of Sequential Pay Certificates. Any such replacement of a Special Servicer will
be subject to, among other things, (i) the delivery of notice of the proposed
replacement to the Rating Agencies and receipt of notice from the Rating
Agencies that the replacement will not result in a qualification, downgrade or
withdrawal of any of the then current ratings assigned to the Certificates, and
(ii) the written agreement of the successor Special Servicer to be bound by the
terms and conditions of the Pooling and Servicing Agreement. Subject to the
foregoing, any Certificateholder or affiliate thereof may be appointed as
Special Servicer. See "Description of Certificates--Voting Rights" herein.
The Special Servicer will be responsible for servicing and administering
any Mortgage Loan as to which (a) any Monthly Payment shall be delinquent 45 or
more days (or, in the case of a Balloon Payment, if the Master Servicer
determines that the related borrower has obtained a binding commitment to
refinance, such longer period of delinquency (not to exceed 120 days) within
which such refinancing is expected to occur); (b) the Master Servicer shall have
determined that a default in making a Monthly Payment is likely to occur within
30 days and is likely to remain unremedied for at least 60 days (or, in the case
of a Balloon Payment, if the Master Servicer determines that the related
borrower has obtained commitment to refinance, such longer period of delinquency
(not to exceed 120 days) within which such refinancing is expected to occur);
(c) there shall have occurred a default (other than as described in clause (a)
above) that materially impairs the value of the Mortgaged Property as security
for the Mortgage Loan or otherwise materially adversely affects the interests of
Certificateholders and that continues unremedied for the applicable grace period
under the terms of the Mortgage Loan (or, if no grace period is specified, for
30 days); (d) a decree or order under any bankruptcy, insolvency or similar law
shall have been entered against the related borrower and such decree or order
shall have remained in force, undischarged or unstayed for a period of 60 days;
(e) the related borrower shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency or similar proceedings of or relating
to such related borrower or of or relating to all or substantially all of its
property; (f) the related borrower shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or
(g) the Master Servicer shall have received notice of the commencement of
foreclosure or similar proceedings with respect to the related Mortgaged
Property (each event described in clauses (a) through (g) above, a "Servicing
Transfer Event").
If a Servicing Transfer Event occurs with respect to any Mortgage Loan, the
Master Servicer is required to transfer certain of its servicing
responsibilities with respect thereto to the Special Servicer. Notwithstanding
such transfer, the Master Servicer will continue to receive payments on such
Mortgage Loan (including amounts collected by the Special Servicer), to make
certain calculations with respect to such Mortgage Loan, and to make remittances
(including, if necessary, P&I Advances) and prepare certain reports to the
Trustee with respect to such Mortgage Loan. If title to the related Mortgaged
Property is acquired by the Trust Fund (upon acquisition, an "REO Property"),
whether through foreclosure, deed in lieu of foreclosure or otherwise, the
Special Servicer will continue to be responsible for the operation and
management thereof. Mortgage Loans serviced by the Special Servicer are referred
to herein as "Specially Serviced Mortgage Loans" and, together with any REO
Properties, constitute "Specially Serviced Trust Fund Assets." The Master
Servicer will have no responsibility for the Special Servicer's performance of
its duties under the Pooling and Servicing Agreement.
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan (and
will become a "Corrected Mortgage Loan" as to which the Master Servicer will
re-assume servicing responsibilities):
S-57
<PAGE>
(w) with respect to the circumstances described in clause (a) of the
second preceding paragraph, when the related borrower has made three
consecutive full and timely Monthly Payments under the terms of such
Mortgage Loan (as such terms may be changed or modified in connection with
a bankruptcy or similar proceeding involving the related borrower or by
reason of a modification, waiver or amendment granted or agreed to by the
Special Servicer);
(x) with respect to any of the circumstances described in clauses (b),
(d), (e) and (f) of the second preceding paragraph, when such circumstances
cease to exist in the good faith, reasonable judgment of the Special
Servicer, but, with respect to any bankruptcy or insolvency proceedings
described in clauses (d), (e) and (f), no later than the entry of an order
or decree dismissing such proceeding;
(y) with respect to the circumstances described in clause (c) of the
second preceding paragraph, when such default is cured; and
(z) with respect to the circumstances described in clause (g) of the
second preceding paragraph, when such proceedings are terminated;
so long as at that time no other circumstance identified in such clauses (a)
through (g) then exists.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its servicing activities will be the Master Servicing Fee. The "Master Servicing
Fee" will be payable monthly on a loan-by-loan basis from amounts received in
respect of interest on each Mortgage Loan, will be calculated on the basis of a
360-day year consisting of twelve 30-day months, will accrue at the related
Master Servicing Fee Rate and will be computed on the basis of the same
principal amount respecting which any related interest payment due on the
Mortgage Loan is computed. The "Master Servicing Fee Rate" will be a per annum
rate equal to: 0.090% in the case of 323 Mortgage Loans (or 76.5%), 0.115% in
the case of six Mortgage Loans (or 3.8%), 0.120% in the case of one Mortgage
Loan (or 0.1%), 0.135% in the case of one Mortgage Loan (or 0.1%), 0.140% in the
case of 21 Mortgage Loans (or 5.2%), 0.150% in the case of 14 Mortgage Loans (or
2.6%), 0.165% in the case of 41 Mortgage Loans (or 9.3%) and 0.170% in the case
of 15 Mortgage Loans (or 2.5%).
If a borrower voluntarily prepays a Mortgage Loan on a date that is prior
to its Due Date in such Collection Period, the amount of interest (net of
related Master Servicing Fees and Additional Servicing Fees (as defined herein))
that accrues on the Mortgage Loan during such Collection Period will be less
(such shortfall, a "Prepayment Interest Shortfall") than the amount of interest
(net of related Master Servicing Fees and the Additional Servicing Fees and
without regard to any Prepayment Premium or Yield Maintenance Charge actually
collected) that would have accrued on the Mortgage Loan through its Due Date. If
such a principal prepayment occurs during any Collection Period after the Due
Date for such Mortgage Loan in such Collection Period, the amount of interest
(net of related Master Servicing Fees, Additional Servicing Fees and the Trustee
Fee) that accrues and is collected on the Mortgage Loans during such Collection
Period will exceed (such excess, a "Prepayment Interest Excess") the amount of
interest (net of related Master Servicing Fees, Additional Servicing Fees and
the Trustee Fee and without regard to any Prepayment Premium or Yield
Maintenance Charge actually collected) that would have been collected on the
Mortgage Loan during such Collection Period if the borrower had not prepaid. Any
Prepayment Interest Excesses collected will be paid to the Master Servicer as
additional servicing compensation. However, with respect to each Distribution
Date, the Master Servicer will be required to deposit into the Certificate
Account (such deposit, a "Compensating Interest Payment"), without any right of
reimbursement therefor, an amount equal to the lesser of (i) its servicing
compensation for the related Collection Period, including any Prepayment
Interest Excesses received during such Collection Period, and (ii) the aggregate
of any Prepayment Interest Shortfalls experienced during the related Collection
Period. Compensating Interest Payments will not cover shortfalls in Mortgage
Loan interest accruals that result from any liquidation of a defaulted Mortgage
Loan, or of any REO Property acquired in respect thereof, that occurs during a
Collection Period prior to the related Due Date therein.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities will be the Special Servicing Fee (together
with the Master Servicing Fee and the Additional Servicing Fee, the "Servicing
Fees") and, under the circumstances described herein, Principal Recovery Fees.
The "Special Servicing Fee" will be calculated on the basis of a 360-day year
consisting of twelve 30-day months, will accrue at a rate (the
S-58
<PAGE>
"Special Servicing Fee Rate") equal to 0.25% per annum and will be computed on
the basis of the same principal amount respecting which any related interest
payment on the related Specially Serviced Mortgage Loan is computed. However,
earned Special Servicing Fees will be payable out of general collections on the
Mortgage Loans then on deposit in the Certificate Account. The Special Servicing
Fee with respect to any Specially Serviced Mortgage Loan will cease to accrue if
such loan is liquidated or becomes a Corrected Mortgage Loan. The Special
Servicer will be entitled to a "Principal Recovery Fee" with respect to each
Specially Serviced Trust Fund Asset and Corrected Mortgage Loan, which Principal
Recovery Fee generally will be in an amount equal to 0.25% of all amounts
received in respect thereof and allocable as a recovery of principal. However,
no Principal Recovery Fee will be payable in connection with, or out of
Liquidation Proceeds (as defined in the Prospectus) resulting from, the purchase
of any Specially Serviced Trust Fund Asset or Corrected Mortgage Loan (i) by a
Mortgage Loan Seller (as described herein under "Description Of The Mortgage
Pool--Assignment of the Mortgage Loans; Repurchases" and "--Representations and
Warranties; Repurchases," (ii) by the Master Servicer, the Special Servicer, the
Depositor, Lehman Brothers Inc. or the Majority Subordinate Certificateholder as
described herein under "Description Of The Certificates--Termination" or (iii)
in certain other limited circumstances.
The Special Servicer, in addition to its duties with respect to the
Specially Serviced Mortgage Loans, will be responsible for (i) conducting (or
retaining a third party to conduct) inspections of each Mortgaged Property and
(ii) collecting and making certain calculations based on annual and quarterly
operating statements and rent rolls with respect to each Mortgaged Property. The
Special Servicer will be entitled to a monthly fee (the "Additional Servicing
Fee") for performing the duties set forth in clauses (i) and (ii) above payable
monthly on a loan-by-loan basis from amounts received in respect of interest on
each Mortgage Loan, which monthly fee will be calculated on the basis of a
360-day year consisting of twelve 30-day months, will accrue at a per annum rate
of 0.01% (the "Additional Servicing Fee Rate") and will be computed on the basis
of the same principal amount respecting which any related interest payment due
on the related Mortgage Loan is computed. The Special Servicer will be entitled
to any loan service charges, statement charges or other charges earned by it.
As additional servicing compensation, the Master Servicer or the Special
Servicer will be entitled to retain all assumption and modification fees, late
charges, penalty interest and Prepayment Interest Excesses collected from
borrowers on Mortgage Loans. In addition, each of the Master Servicer and the
Special Servicer is authorized to invest or direct the investment of funds held
in those accounts maintained by it that relate to the Mortgage Loans or REO
Properties, as the case may be, in certain short-term United States government
securities and other permitted investment grade obligations, and the Master
Servicer and the Special Servicer each will be entitled to retain any interest
or other income earned on such funds held in those accounts maintained by it,
but shall be required to cover any losses on investments of funds held in those
accounts maintained by it, from its own funds without any right to
reimbursement.
Each of the Master Servicer and Special Servicer will, in general, be
required to pay all ordinary expenses incurred by it in connection with its
servicing activities under the Pooling and Servicing Agreement, including the
fees of any sub-servicers retained by it, and will not be entitled to
reimbursement therefor except as expressly provided in the Pooling and Servicing
Agreement. However, each of the Master Servicer and Special Servicer will be
permitted to pay certain of such expenses (including certain expenses incurred
as a result of a Mortgage Loan default) directly out of the Certificate Account
and at times without regard to the relationship between the expense and the
funds from which it is being paid. See "Description of the
Certificates--Distributions" herein and "Description of the Pooling
Agreements--Certificate Account" and "--Servicing Compensation and Payment of
Expenses" in the Prospectus.
As and to the extent described herein under "Description of the
Certificates--P&I Advances," the Master Servicer, the Special Servicer, the
Trustee and the Fiscal Agent will be each entitled to receive interest, at the
Reimbursement Rate, on any reimbursable servicing expenses incurred by it. Such
interest will compound annually and will be paid, contemporaneously with the
reimbursement of the related servicing expense, from general collections on the
Mortgage Loans then on deposit in the Certificate Account.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Pooling and Servicing Agreement will permit the Special Servicer to
modify, waive or amend any term of any Mortgage Loan if (a) it determines, in
accordance with the servicing standard described under "--General"
S-59
<PAGE>
above, that it is appropriate to do so and (b) except as described in the
following paragraph, such modification, waiver or amendment, will not (i) affect
the amount or timing of any scheduled payments of principal, interest or other
amount (including Prepayment Premiums and Yield Maintenance Charges) payable
under the Mortgage Loan, (ii) affect the obligation of the related borrower to
pay a Prepayment Premium or Yield Maintenance Charge or permit a principal
prepayment during the applicable Lockout Period, (iii) except as expressly
provided by the related Mortgage or in connection with a material adverse
environmental condition at the related Mortgaged Property, result in a release
of the lien of the related Mortgage on any material portion of such Mortgaged
Property without a corresponding principal prepayment or (iv) in the judgment of
the Special Servicer, materially impair the security for the Mortgage Loan or
reduce the likelihood of timely payment of amounts due thereon.
Notwithstanding clause (b) of the preceding paragraph, the Special Servicer
may (i) reduce the amounts owing under any Specially Serviced Mortgage Loan by
forgiving principal, accrued interest and/or any Prepayment Premium or Yield
Maintenance Charge, (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) forbear in the enforcement of any right granted under any
Mortgage Note or Mortgage relating to a Specially Serviced Mortgage Loan, (iv)
extend the maturity date of any Mortgage Loan, and/or (v) accept a principal
prepayment during any Lockout Period; provided that (x) the related borrower is
in default with respect to the Specially Serviced Mortgage Loan or, in the
judgment of the Special Servicer, such default is reasonably foreseeable, (y) in
the sole, good faith judgment of the Special Servicer, such modification, waiver
or amendment would increase the recovery to Certificateholders on a net present
value basis documented to the Trustee and (z) such modification, waiver or
amendment does not result in a tax being imposed on the Trust Fund or cause any
REMIC created pursuant to the Pooling and Servicing Agreement to fail to qualify
as a REMIC at any time the Certificates are outstanding. In no event, however,
will the Special Servicer be permitted to (i) extend the maturity date of a
Mortgage Loan beyond a date that is two years prior to the Rated Final
Distribution Date, (ii) extend the maturity date of any Mortgage Loan which has
a Mortgage Rate below the then prevailing interest rate for comparable loans, as
determined by the Special Servicer, unless such Mortgage Loan is a Balloon Loan
that has failed to make the Balloon Payment at its scheduled maturity and such
Balloon Loan is not a Specially Serviced Mortgage Loan (other than by reason of
failure to make the Balloon Payment) and has not been delinquent in the
preceding 12 months (other than with respect to the Balloon Payment), in which
case the Special Servicer may make up to three one-year extensions at the
existing Mortgage Rate for such Mortgage Loan (such limitation of extensions
made at a below market rate shall not limit the ability of the Special Servicer
to extend the maturity date of any Mortgage Loan at an interest rate at or in
excess of the prevailing rate for comparable loans at the time of such
modification), (iii) if the Mortgage Loan is secured by a ground lease, extend
the maturity date of such Mortgage Loan beyond a date which is 10 years prior to
the expiration of the term of such ground lease, (iv) reduce the Mortgage Rate
to a rate below the then prevailing interest rate for comparable loans, as
determined by the Special Servicer or (v) defer interest due on any Mortgage
Loan in excess of 10% of the Stated Principal Balance of such Mortgage Loan or
defer the collection of interest on any Mortgage Loan without accruing interest
on such deferred interest at a rate at least equal to the Mortgage Rate of such
Mortgage Loan.
The Special Servicer will be required to notify the Trustee and the Master
Servicer of any modification, waiver or amendment of any term of any Mortgage
Loan, and to deliver to the Trustee or the related Custodian, for deposit in the
related Mortgage File, an original counterpart of the agreement related to such
modification, waiver or amendment, promptly (and in any event within 10 business
days) following the execution thereof. Copies of each agreement whereby any such
modification, waiver or amendment of any term of any Mortgage Loan is effected
are required to be available for review during normal business hours at the
offices of the Special Servicer. See "Description of the Certificates--Reports
to Certificateholders; Available Information" herein.
THE CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative will be entitled to advise the Special
Servicer with respect to the following actions of the Special Servicer, and the
Special Servicer will not be permitted to take any of the following actions as
to which the Controlling Class Representative has objected in writing within ten
business days of being notified thereof (provided that if such written objection
has not been received by the Special Servicer within such ten business day
period, then the Controlling Class Representative'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;
S-60
<PAGE>
(ii) any modification of a monetary term of a Mortgage Loan other than
a modification consisting of the extension of the maturity date of a
Mortgage Loan for one year or less;
(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--Termination" herein);
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws;
(v) any acceptance of substitute or additional collateral for a
Mortgage Loan;
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause; and
(vii) any acceptance of an assumption agreement releasing a borrower
from liability under a Mortgage Loan.
In addition, the Controlling Class Representative may direct the Special
Servicer to take, or to refrain from taking, such other actions as the
Controlling Class Representative may deem advisable or as to which provision is
otherwise made in the Pooling and Servicing Agreement; provided that no such
direction and no objection contemplated by the prior paragraph 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 standards described under "--General" above, or expose the Master
Servicer, the Special Servicer, the Trust Fund or the Trustee to liability, or
materially expand the scope of the Special Servicer's responsibilities under the
Pooling and Servicing Agreement or cause the Special Servicer to act or fail to
act in a manner which, in the reasonable judgment of the Special Servicer, is
not in the best interests of the Certificateholders.
Limitation on Liability of Controlling Class Representative
The Controlling Class Representative 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; provided, however, that the Controlling Class
Representative will not be protected against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations or
duties. By its acceptance of a Certificate, each Certificateholder confirms its
understanding that the Controlling Class Representative may take actions that
favor the interests of one or more Classes of the Certificates over other
Classes of the Certificates, and that the Controlling Class Representative may
have special relationships and interests that conflict with those of holders of
some Classes of the Certificates; and, absent willful misfeasance, bad faith or
negligence on the part of the Controlling Class Representative, each
Certificateholder agrees to take no action against the Controlling Class
Representative or any of its officers, directors, employees, principals or
agents as a result of such a special relationship or conflict.
REO PROPERTIES; SALE OF MORTGAGE LOANS
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders pursuant to foreclosure proceedings instituted by the
Special Servicer or otherwise, the Special Servicer, on behalf of such holders,
will be required to sell the Mortgaged Property by the end of the third calendar
year following the year of acquisition, unless (i) the Internal Revenue Service
grants an extension of time to sell such property (an "REO Extension") or (ii)
it obtains an opinion of counsel generally to the effect that the holding of the
property for more than three years after the end of the calendar year in which
it was acquired will not result in the imposition of a tax on the Trust Fund or
cause any REMIC created pursuant to the Pooling and Servicing Agreement to fail
to qualify as a REMIC under the Code. Subject to the foregoing, the Special
Servicer will generally be required to solicit bids for any Mortgaged Property
so acquired in such a manner as will be reasonably likely to realize a fair
price for such property. The Special Servicer may retain an independent
contractor to operate and manage any REO Property; however, the retention of an
independent contractor will not relieve the Special Servicer of its obligations
with respect to such REO Property.
S-61
<PAGE>
In general, the Special Servicer or an independent contractor employed by
the Special Servicer at the expense of the Trust Fund will be obligated to
operate and manage any Mortgaged Property acquired as REO Property in a manner
that would, to the extent commercially feasible, maximize the Trust Fund's net
after-tax proceeds from such property. After the Special Servicer reviews the
operation of such property and consults with the Trustee to determine the Trust
Fund's federal income tax reporting position with respect to the income it is
anticipated that the Trust Fund would derive from such property, the Special
Servicer could determine (particularly in the case of an REO Property that is a
hospitality or residential health care facility) that it would not be
commercially feasible to manage and operate such property in a manner that would
avoid the imposition of a tax on "net income from foreclosure property," within
the meaning of Section 857(b)(4)(B) of the Code or a tax on "prohibited
transactions" under Section 860F of the Code (either such tax referred to herein
as an "REO Tax"). To the extent that income the Trust Fund receives from an REO
Property is subject to a tax on (i) "net income from foreclosure property" such
income would be subject to federal tax at the highest marginal corporate tax
rate (currently 35%) or (ii) "prohibited transactions," such income would be
subject to federal tax at a 100% rate. The determination as to whether income
from an REO Property would be subject to an REO Tax will depend on the specific
facts and circumstances relating to the management and operation of each REO
Property. Generally, income from an REO Property that is directly operated by
the Special Servicer would be apportioned and classified as "service" or
"non-service" income. The "service" portion of such income could be subject to
federal tax either at the highest marginal corporate tax rate or at the 100%
rate on "prohibited transactions," and the "non-service" portion of such income
could be subject to federal tax at the highest marginal corporate tax rate or,
although it appears unlikely, at the 100% rate applicable to "prohibited
transactions." Any REO Tax imposed on the Trust Fund's income from an REO
Property would reduce the amount available for distribution to
Certificateholders. Certificateholders are advised to consult their tax advisors
regarding the possible imposition of REO Taxes in connection with the operation
of commercial REO Properties by REMICs. See "Certain Federal Income Tax
Consequences" herein and "Certain Federal Income Tax Consequences--REMICs" in
the Prospectus.
In certain circumstances the Special Servicer may offer to sell any
defaulted Mortgage Loan if the Special Servicer determines, consistent with the
Servicing Standard, that such sale would be in the best economic interest of the
Trust Fund. In connection with such a sale, the Special Servicer is not
obligated to accept the highest bid if the Special Servicer determines, in
accordance with the Servicing Standard, that rejection of the highest bid would
be in the best interest of the Certificateholders.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer will be required to perform or cause to be performed a
physical inspection of a Mortgaged Property as soon as practicable after the
related Mortgage Loan becomes a Specially Serviced Mortgage Loan. In addition,
the Special Servicer will be required to inspect or cause to be inspected each
Mortgaged Property at least once per calendar year if, in a given calendar year,
it has not already done so. The Special Servicer will be required to prepare a
written report of each such inspection performed by it that describes the
condition of the Mortgaged Property and that specifies the existence with
respect thereto of any sale, transfer or abandonment or any material change in
its condition or value.
The Special Servicer is also required to use reasonable efforts to collect
from the related borrower and review the quarterly and annual operating
statements of each Mortgaged Property and to cause annual operating statements
to be prepared for each REO Property. Each of the Mortgages requires the related
borrower to deliver an annual property operating statement. However, there can
be no assurance that any operating statements required to be delivered will in
fact be delivered, nor is the Special Servicer likely to have any practical
means of compelling such delivery in the case of an otherwise performing
Mortgage Loan.
Copies of the inspection reports and operating statements referred to above
are required to be available for review by Certificateholders during normal
business hours at the offices of the Special Servicer. See "Description of the
Certificates--Reports to Certificateholders; Available Information" herein.
S-62
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The First Union-Lehman Brothers Commercial Mortgage Trust II, Commercial
Mortgage Pass-Through Certificates, Series 1997-C2 (the "Certificates") will be
issued pursuant to a Pooling and Servicing Agreement, to be dated as of November
1, 1997, among the Depositor, the Master Servicer, the Special Servicer, the
Trustee and the Fiscal Agent (the "Pooling and Servicing Agreement"). The
Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (the "Trust Fund") consisting primarily of: (i) the
Mortgage Loans and all payments and other collections in respect of the Mortgage
Loans received or applicable to periods after the Cut-off Date (exclusive of
payments of principal and interest due, and principal prepayments received, on
or before the Cut-off Date); (ii) any REO Property acquired on behalf of the
Trust Fund; (iii) such funds or assets as from time to time are deposited in the
Certificate Account (see "Description of the Pooling Agreements--Certificate
Account" in the Prospectus); and (iv) certain rights of the Depositor under the
Mortgage Loan Purchase Agreements relating to Mortgage Loan document delivery
requirements and the representations and warranties of the Mortgage Loan Sellers
regarding the Mortgage Loans.
The Certificates will consist of eighteen classes (each, a "Class") to be
designated as: (i) the Class A-1 Certificates, the Class A-2 Certificates and
the Class A-3 Certificates (collectively, the "Class A Certificates"); (ii) 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, Class
L Certificates and the Class M Certificates (collectively with the Class A
Certificates, the "Sequential Pay Certificates"); (iii) the Class IO
Certificates (collectively with the Sequential Pay Certificates, the "REMIC
Regular Certificates"); and (iv) the Class R-I Certificates, the Class R-II
Certificates and the Class R-III Certificates (collectively, the "REMIC Residual
Certificates").
Only the Class A-1, Class A-2, Class A-3, Class IO, Class B, Class C, Class
D and Class E Certificates (collectively, the "Offered Certificates") are
offered hereby. The Class F, Class G, Class H, Class J, Class K, Class L, Class
M and the REMIC Residual Certificates (collectively, the "Private Certificates")
have not been registered under the Securities Act, and are not offered hereby.
Accordingly, information herein regarding the terms of the Private Certificates
is provided solely because of its potential relevance to a prospective purchaser
of an Offered Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry format through the
facilities of The Depository Trust Company ("DTC"). Each Class of Offered
Certificates will be issued in denominations of not less than $10,000 actual
principal amount (or $100,000 notional amount with respect to the Class IO
Certificates), and in integral multiples of $1 in excess thereof.
Each Class of Offered Certificates will initially be represented by one or
more global Certificates registered in the name of the nominee of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede & Co. No
beneficial owner of an Offered Certificate (each, a "Certificate Owner") will be
entitled to receive a fully registered, certificated form of such Certificate (a
"Definitive Offered Certificate"), except under the limited circumstances
described in the Prospectus under "Description of the Certificates--Book-Entry
Registration and Definitive Certificates." Unless and until Definitive Offered
Certificates are issued in respect of a Class of Offered Certificates,
beneficial ownership interests in such Class will be recorded and transferred on
the book-entry records of DTC and its participating organizations (the
"Participants"), and all references to actions by holders of a Class of Offered
Certificates will refer to actions taken by DTC upon instructions received from
the related Certificate Owners through the Participants in accordance with DTC
procedures, and all references herein to payments, notices, reports and
statements to the holders of a Class of Offered Certificates will refer to
payments, notices, reports and statements to DTC or Cede & Co., as the
registered holder thereof, for distribution to the related Certificate Owners
through the Participants in accordance with DTC procedures. The form of such
payments and transfers may result in certain delays in receipt of payments by an
investor and may restrict an investor's ability to pledge its securities. None
of the Depositor, the Master Servicer, the Special Servicer, the Trustee or the
Fiscal Agent or any of their
S-63
<PAGE>
respective affiliates will have any liability for any actions taken by DTC or
its nominee, including, without limitation, actions for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in Offered Certificates held by Cede & Co., as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests. See "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" and "Risk Factors--Book-Entry
Registration" in the Prospectus.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Upon initial issuance, and in each case subject to a permitted variance of
plus or minus 5%, the respective Classes of Sequential Pay Certificates will
have the Certificate Balances representing the approximate percentage of the
Initial Pool Balance as set forth in the following table:
INITIAL PERCENT OF
CERTIFICATE INITIAL POOL
CLASS OF CERTIFICATES BALANCE BALANCE
--------------------- --------- --------
Class A-1 Certificates ...................... $220,000,000 10.0%
Class A-2 Certificates ...................... $384,000,000 17.4%
Class A-3 Certificates ...................... $982,521,000 44.6%
Class B Certificates ........................ $110,175,000 5.0%
Class C Certificates ........................ $110,175,000 5.0%
Class D Certificates ........................ $121,194,000 5.5%
Class E Certificates ........................ $ 33,052,000 1.5%
Private Certificates ........................ $242,385,325 11.0%
(other than the REMIC
Residual Certificates)
The "Certificate Balance" of any Class of Sequential Pay 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
Certificate Balance of each Class of Sequential Pay Certificates will be reduced
on each Distribution Date by any distributions of principal actually made on
such Class of Certificates on such Distribution Date, and further by any
Realized Losses and Additional Trust Fund Expenses actually allocated to such
Class of Certificates on such Distribution Date.
The Class IO Certificates will not have a Certificate Balance, but will
represent the right to receive distributions of interest in an amount equal to
the aggregate interest accrued on the notional amount of each of the Class IO
Components, as described herein. The Class IO Certificates will have fourteen
components (each a "Class IO Component"), each corresponding to a different
Class of Sequential Pay Certificates. Each such Class IO Component will have the
same letter and/or numerical designation as a Class of Sequential Pay
Certificates. The notional amount of each such Class IO Component will equal the
Certificate Balance of the corresponding Class of Sequential Pay Certificates
outstanding from time to time. On the Closing Date, the aggregate of the
notional amounts of all the Class IO Components will equal approximately
$2,203,502,325, which amount will equal the Initial Pool Balance. References
herein to the "notional amount" of the Class IO Certificates shall mean the
aggregate of the notional amounts of the Class IO Components.
The REMIC Residual Certificates will not have Certificate Balances or
notional amounts, but will represent the right to receive on each Distribution
Date any portion of the Available Distribution Amount (as defined below) for
such date that remains after the required distributions have been made on all
the REMIC Regular Certificates.
PASS-THROUGH RATES
The Pass-Through Rate applicable to each Class of Offered Certificates
(other than the Class IO Certificates) for each Distribution Date is fixed at
the respective rate per annum set forth with respect to such Class in the table
at the beginning of the Summary. The Pass-Through Rate applicable to each Class
of the Private Certificates (other than the REMIC Residual Certificates) for
each Distribution Date is the lesser of (a) the respective rate per annum set
forth in respect of such Class in the table at the beginning of the Summary and
(b) the Weighted Average Net Mortgage Rate for such Distribution Date. The
Pass-Through Rate applicable to each Class IO Component for any
S-64
<PAGE>
Distribution Date will be equal to the Weighted Average Net Mortgage Rate for
such Distribution Date minus the Pass-Through Rate then applicable to the
corresponding Class of Sequential Pay Certificates. The REMIC Residual
Certificates will not bear interest.
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans as of the
commencement of the related Collection Period, weighted on the basis of their
respective Stated Principal Balances outstanding immediately prior to such
Distribution Date. The "Net Mortgage Rate" for each Mortgage Loan will generally
equal (x) the Mortgage Rate in effect for such Mortgage Loan as of the Cut-off
Date, minus (y) the applicable Administrative Cost Rate; provided that if any
Mortgage Loan does not accrue interest on the basis of a 360-day year consisting
of twelve 30-day months (which is the basis on which interest accrues in respect
of the REMIC Regular Certificates), then, solely for purposes of calculating the
Weighted Average Net Mortgage Rate, the Mortgage Rate referred to in clause (x)
will, to the extent appropriate, be adjusted from accrual period to accrual
period to compensate for such difference. The "Stated Principal Balance" of each
Mortgage Loan outstanding at any time will generally be an amount equal to the
Cut-off Date Balance thereof, reduced on each Distribution Date (to not less
than zero) by (i) any payments or other collections (or advances in lieu
thereof) of principal of such Mortgage Loan that are due or received, as the
case may be, during the related Collection Period and are distributed on the
Certificates on such Distribution Date and (ii) the principal portion of any
Realized Loss incurred in respect of such Mortgage Loan during the related
Collection Period. Notwithstanding the foregoing, if any Mortgage Loan is paid
in full, liquidated or otherwise removed from the Trust Fund, 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.
The "Collection Period" for each Distribution Date will be the period that
begins immediately following the Determination Date in the month preceding the
month in which such Distribution Date occurs (or, in the case of the initial
Distribution Date, immediately following the Cut-off Date) and ends on and
includes the Determination Date in the same month as such Distribution Date. The
"Determination Date" will be the 10th day of each month (or, if not a business
day, the next preceding business day).
DISTRIBUTIONS
General. Distributions on the Certificates will be made by the Trustee, to
the extent of available funds, on the 18th day of each month or, if any such
18th day is not a business day, then on the next succeeding business day with
the same force and effect and no additional interest shall accrue, commencing
December 18, 1997 (each, a "Distribution Date"). Except as described below, all
such distributions will be made to the persons in whose names the Certificates
are registered (the "Certificateholders") at the close of business on the last
business day of the month preceding the month in which the related Distribution
Date occurs and shall be made by wire transfer of immediately available funds,
if such Certificateholder shall have provided wiring instructions no less than
five business days prior to such record date, or otherwise by check mailed to
the address of such Certificateholder as it appears in the Certificate register.
The final distribution on any Certificate (determined without regard to any
possible future reimbursement of any Realized Loss or Additional Trust Fund
Expense previously allocated to such Certificate) will be made only upon
presentation and surrender of such Certificate at the location that will be
specified in a notice of the pendency of such final distribution. All
distributions made with respect to a Class of Certificates will be allocated pro
rata among the outstanding Certificates of such Class based on their respective
percentage interests in such Class.
The Available Distribution Amount. The aggregate amount available for
distributions of interest and principal to Certificateholders on each
Distribution Date (the "Available Distribution Amount") will, in general, equal
the sum of the following amounts:
(a) the total amount of all cash received on or in respect of the
Mortgage Loans and any REO Properties by the Master Servicer as of the
close of business on the related Determination Date and not previously
distributed with respect to the Certificates, exclusive of any portion
thereof that represents one or more of the following:
(i) any Monthly Payments collected but due on a Due Date after
the related Collection Period,
(ii) any Prepayment Premiums and Yield Maintenance Charges, and
(iii) all amounts in the Certificate Account that are payable or
reimbursable to any person other than the Certificateholders,
including any Servicing Fees and Trustee Fees;
S-65
<PAGE>
(b) all P&I Advances made by the Master Servicer with respect to such
Distribution Date;
(c) any Compensating Interest Payment made by the Master Servicer to
cover the aggregate of any Prepayment Interest Shortfalls experienced
during the related Collection Period. See "Servicing of the Mortgage
Loans--Servicing and Other Compensation and Payment of Expenses" herein,
"--P&I Advances" below and "Description of the Pooling
Agreements--Certificate Account" in the Prospectus.
Any Prepayment Premiums and Yield Maintenance Charges actually collected
will be distributed separately from the Available Distribution Amount. See
"--Distributions--Allocation of Prepayment Premiums and Yield Maintenance
Charges" herein.
Application of the Available Distribution Amount. On each Distribution
Date, the Trustee will (except as otherwise described under "--Termination"
below) apply amounts on deposit in the Certificate Account, to the extent of the
Available Distribution Amount, in the following order of priority:
(1) to distributions of interest to the holders of the Class A-1,
Class A-2 and Class A-3 and Class IO Certificates (in each case, so long as
any such Class remains outstanding), pro rata, in accordance with the
respective amounts of Distributable Certificate Interest (as defined
herein) in respect of such Classes of Certificates on such Distribution
Date, in an amount equal to all Distributable Certificate Interest in
respect of each such Class of Certificates for such Distribution Date and,
to the extent not previously paid, for all prior Distribution Dates;
(2) to distributions of principal to the holders of the Class A-1
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount (as defined herein) for such Distribution Date;
(3) after the Class A-1 Certificates have been retired, to
distributions of principal to the holders of the Class A-2 Certificates in
an amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1 Certificates;
(4) after the Class A-1 and Class A-2 Certificates have been retired,
to distributions of principal to the holders of the Class A-3 Certificates
in an amount (not to exceed the then outstanding Certificate Balance of
such Class of Certificates) equal to the Principal Distribution Amount for
such Distribution Date, less any portion thereof distributed in respect of
the Class A-1 and/or Class A-2 Certificates;
(5) to distributions to the holders of the Class A-1, Class A-2 and
Class A-3 Certificates, pro rata, in accordance with the amount of Realized
Losses and Additional Trust Fund Expenses, if any, previously allocated to
such Classes of Certificates and for which no reimbursement has previously
been received, to reimburse such holders for all such Realized Losses and
Additional Trust Fund Expenses, if any;
(6) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(7) after the Class A-1, Class A-2 and Class A-3 Certificates have
been retired, to distributions of principal to the holders of the Class B
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class B Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2 and/or Class A-3 Certificates on such
Distribution Date;
(8) to distributions to the holders of the Class B Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(9) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(10) after the Class A-1, Class A-2, Class A-3 and Class B
Certificates have been retired, to distributions of principal to the
holders of the Class C Certificates in an amount (not to exceed the then
outstanding Certificate
S-66
<PAGE>
Balance of the Class C Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2, Class A-3 and/or Class B Certificates
on such Distribution Date;
(11) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(12) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(13) after the Class A-1, Class A-2, Class A-3, Class B and Class C
Certificates have been retired, to distributions of principal to the
holders of the Class D Certificates in an amount (not to exceed the then
outstanding Certificate Balance of the Class D Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class A-3,
Class B and/or Class C Certificates on such Distribution Date;
(14) to distributions to the holders of the Class D Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(15) to distributions of interest to the holders of the Class E
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(16) after the Class A-1, Class A-2, Class A-3, Class B, Class C and
Class D Certificates have been retired, to distributions of principal to
the holders of the Class E Certificates in an amount (not to exceed the
then outstanding Certificate Balance of such Class of Certificates) equal
to the Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1, Class A-2, Class
A-3, Class B, Class C and/or Class D Certificates;
(17) to distributions to the holders of the Class E Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(18) to distributions of interest to the holders of the Class F
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(19) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D and Class E Certificates have been retired, to distributions of
principal to the holders of the Class F Certificates in an amount (not to
exceed the then outstanding Certificate Balance of such Class of
Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and/or Class E
Certificates;
(20) to distributions to the holders of the Class F Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(21) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(22) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E and Class F Certificates have been retired, to
distributions of principal to the holders of the Class G Certificates in an
amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E and/or
Class F Certificates;
S-67
<PAGE>
(23) to distributions to the holders of the Class G Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(24) to distributions of interest to the holders of the Class H
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(25) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F and Class G Certificates have been retired, to
distributions of principal to the holders of the Class H Certificates in an
amount (not to exceed the then outstanding Certificate Balance of such
Class of Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E, Class
F and/or Class G Certificates;
(26) to distributions to the holders of the Class H Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(27) to distributions of interest to the holders of the Class J
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(28) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F, Class G and Class H Certificates have been
retired, to distributions of principal to the holders of the Class J
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D,
Class E, Class F, Class G and/or Class H Certificates;
(29) to distributions to the holders of the Class J Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(30) to distributions of interest to the holders of the Class K
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(31) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F, Class G, Class H and Class J Certificates have
been retired, to distributions of principal to the holders of the Class K
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of such Class of Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D,
Class E, Class F, Class G, Class H and/or Class J Certificates;
(32) to distributions to the holders of the Class K Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to each such Class of Certificates
and for which no reimbursement has previously been received;
(33) to distributions of interest to the holders of the Class L
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(34) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J and Class K
Certificates have been retired, to distributions of principal to the
holders of the Class L Certificates in an amount (not to exceed the then
outstanding Certificate Balance of such Class of Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J
and/or Class K Certificates;
(35) to distributions to the holders of the Class L Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to each such Class of Certificates
and for which no reimbursement has previously been received;
(36) to distributions of interest to the holders of the Class M
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
S-68
<PAGE>
(37) after the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L
Certificates have been retired, to distributions of principal to the
holders of the Class M Certificates in an amount (not to exceed the then
outstanding Certificate Balance of such Class of Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J,
Class K and/or Class L Certificates;
(38) to distributions to the holders of the Class M Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to each such Class of Certificates
and for which no reimbursement has previously been received; and
(39) to distributions to the holders of the Class R-I Certificates in
an amount equal to the balance, if any, of the Available Distribution
Amount remaining after the distributions to be made on such Distribution
Date as described in clauses (1) through (38) above;
provided that, on each Distribution Date, if any, after the aggregate of the
Certificate Balances of the Subordinate Certificates has been reduced to zero
prior to retirement of the Class A Certificates as a result of the allocations
of Realized Losses and Additional Trust Fund Expenses, and in any event on the
final Distribution Date in connection with a termination of the Trust Fund (see
"Description of the Certificates--Termination" herein), the payments of
principal to be made as contemplated by clauses (2), (3) and (4) 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
Certificate Balances of such Classes of Certificates, and without regard to the
Principal Distribution Amount for such date.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates for each
Distribution Date will equal the Accrued Certificate Interest in respect of such
Class of Certificates for such Distribution Date, net of such Class's allocable
share (calculated as described below) of the aggregate of any Prepayment
Interest Shortfalls resulting from voluntary principal prepayments made on the
Mortgage Loans during the related Collection Period that are not covered by the
Master Servicer's Compensating Interest Payment for such Distribution Date (the
aggregate of such Prepayment Interest Shortfalls that are not so covered, as to
such Distribution Date, the "Net Aggregate Prepayment Interest Shortfall").
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates for each Distribution Date will equal one month's interest at
the Pass-Through Rate applicable to such Class of Certificates for such
Distribution Date accrued on the related Certificate Balance outstanding
immediately prior to such Distribution Date. The "Accrued Certificate Interest"
in respect of the Class IO Certificates for any Distribution Date will equal the
aggregate of one month's interest at the applicable Pass-Through Rate on the
notional amount of each Class IO Component outstanding immediately prior to such
Distribution Date. Accrued Certificate Interest will be calculated on a basis of
a 360-day year consisting of twelve 30-day months.
The portion of the Net Aggregate Prepayment Interest Shortfall for any
Distribution Date that is allocable to each Class of REMIC Regular Certificates
will equal the product of (a) such Net Aggregate Prepayment Interest Shortfall,
multiplied by (b) a fraction, the numerator of which is equal to the Accrued
Certificate Interest in respect of such Class of Certificates for such
Distribution Date, and the denominator of which is equal to the aggregate
Accrued Certificate Interest in respect of all Classes of REMIC Regular
Certificates for such Distribution Date.
Principal Distribution Amount. The "Principal Distribution Amount" for each
Distribution Date will generally equal the aggregate of the following (without
duplication):
(a) the aggregate of the principal portions of all Scheduled Payments
(other than Balloon Payments) due, and the principal portions of any
Assumed Scheduled Payments deemed due, on or in respect of the Mortgage
Loans for their respective Due Dates occurring during the related
Collection Period;
(b) the aggregate of all principal prepayments received on the
Mortgage Loans during the related Collection Period;
(c) with respect to any Mortgage Loan as to which the related stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal made by or on behalf of the related borrower
during the related Collection Period (including any Balloon Payment), net
of any portion of such payment that represents a recovery of the principal
portion of any Scheduled Payment (other than a Balloon Payment) due or the
principal portion of any Assumed Scheduled Payment deemed due, in respect
of such Mortgage Loan on a Due Date during or prior to the related
Collection Period and not previously recovered;
S-69
<PAGE>
(d) the aggregate of all Liquidation Proceeds, Insurance Proceeds
(each as defined in the Prospectus), condemnation awards and proceeds of
Mortgage Loan repurchases that were received on or in respect of Mortgage
Loans during the related Collection Period and that were identified and
applied by the Master Servicer as recoveries of principal, in each case net
of any portion of such amounts that represents a recovery of the principal
portion of any Scheduled Payment (other than a Balloon Payment) due, or of
the principal portion of any Assumed Scheduled 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 recovered; and
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of the Principal Distribution Amount
for the immediately preceding Distribution Date, over the aggregate
distributions of principal made on the Certificates on such immediately
preceding Distribution Date.
The "Scheduled Payment" due on any Mortgage Loan on any related Due Date is
the amount of the Monthly Payment that is or would have been, as the case may
be, due thereon on such date, without regard to any waiver, modification or
amendment of such Mortgage Loan granted or agreed to by the Special Servicer or
otherwise resulting from a bankruptcy or similar proceeding involving the
related borrower, and assuming that each prior Scheduled Payment has been made
in a timely manner. The "Assumed Scheduled Payment" is an amount deemed due (i)
in respect of any Balloon Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its stated maturity
date and (ii) in respect of an REO Mortgage Loan. The Assumed Scheduled Payment
deemed due on any such Balloon Loan on its stated maturity date and on each
successive related Due Date that it remains or is deemed to remain outstanding
will equal the Scheduled 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 loan's amortization schedule,
if any, in effect as of the Closing Date. The Assumed Scheduled Payment deemed
due on any REO Mortgage Loan on each Due Date that the related REO Property
remains part of the Trust Fund will equal the Scheduled Payment that would have
been due in respect of such Mortgage Loan on such Due Date had it remained
outstanding (or, if such Mortgage Loan was a Balloon Mortgage Loan and such Due
Date coincides with or follows what had been its stated maturity date, the
Assumed Scheduled Payment that would have been deemed due in respect of such
Mortgage Loan on such Due Date had it remained outstanding).
Distributions of the Principal Distribution Amount will constitute the only
distributions of principal on the Certificates. Reimbursements of previously
allocated Realized Losses and Additional Trust Fund Expenses will not constitute
distributions of principal for any purpose and will not result in an additional
reduction in the Certificate Balance of the Class of Certificates in respect of
which any such reimbursement is made.
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 will be treated, for
purposes of determining (i) distributions on the Certificates, (ii) allocations
of Realized Losses and Additional Trust Fund Expenses to the Certificates, and
(iii) the amount of Trustee Fees and Servicing Fees payable under the Pooling
and Servicing Agreement, as having remained outstanding until such REO Property
is liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property (net of related operating costs) will be
"applied" by the Master Servicer as principal, interest and other amounts that
would have been "due" on such Mortgage Loan, and the Master Servicer will be
required to make P&I Advances in respect of such Mortgage Loan, in all cases as
if such Mortgage Loan had remained outstanding. References to "Mortgage Loan" or
"Mortgage Loans" in the definitions of "Principal Distribution Amount" and
"Weighted Average Net Mortgage Rate" are intended to include any Mortgage Loan
as to which the related Mortgaged Property has become an REO Property (an "REO
Mortgage Loan").
Allocation of Prepayment Premiums and Yield Maintenance Charges. In the
event a borrower is required to pay any Yield Maintenance Charge or any
Prepayment Premium, the amount of such payments actually collected will be
distributed in respect of the Offered Certificates as set forth below. "Yield
Maintenance Charges" are fees paid or payable, as the context requires, as a
result of a prepayment of principal on a Mortgage Loan, which fees have been
calculated (based on Scheduled Payments on such Mortgage Loan) to compensate the
holder of the Mortgage for reinvestment losses based on the value of a discount
rate at or near the time of prepayment. Any other fees paid or payable, as the
context requires, as a result of a prepayment of principal on a Mortgage Loan,
which are calculated based upon a specified percentage (which may decline over
time) of the amount prepaid are considered "Prepayment Premiums."
S-70
<PAGE>
On each Distribution Date, any Prepayment Premium or Yield Maintenance
Charge collected on a Mortgage Loan during the related Collection Period will be
distributed as follows: The holders of each Class of Sequential Pay Certificates
(other than an Excluded Class thereof) then entitled to distributions of
principal on such Distribution Date will be entitled to an amount equal to (a)
the amount of such Prepayment Premium or Yield Maintenance Charge, multiplied by
(b) a fraction (which in no event may be greater than one), the numerator of
which is equal to the excess, if any, of the Pass-Through Rate of such Class of
Sequential Pay Certificates, over the relevant Discount Rate (as defined below),
and the denominator of which is equal to the excess, if any, of the Mortgage
Rate of the prepaid Mortgage Loan, over the relevant Discount Rate, and (c) a
fraction, the numerator of which is equal to the amount of principal
distributable on such Class of Sequential Pay Certificates on such Distribution
Date, and the denominator of which is the Principal Distribution Amount for such
Distribution Date. If there is more than one Class of Sequential Pay
Certificates (other than an Excluded Class thereof) entitled to distributions of
principal on any particular Distribution Date on which a Prepayment Premium or
Yield Maintenance Charge is distributable, the aggregate amount of such
Prepayment Premium or Yield Maintenance Charge will be allocated among all such
Classes up to, and on a pro rata basis in accordance with their respective
entitlements thereto in accordance with, the foregoing sentence. The portion, if
any, of the Prepayment Premium or Yield Maintenance Charge remaining after any
such payments to the holders of the Sequential Pay Certificates will be
distributed to the holders of the Class IO Certificates. For purposes of the
foregoing, an "Excluded Class" of Sequential Pay Certificates is any Class
thereof other than the Class A-1, Class A-2, Class A-3, Class B, Class C, Class
D, Class E, Class F and Class G Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates will be
equal to the yield (when compounded monthly) on the U.S. Treasury issue (primary
issue) with a maturity date closest to the maturity date for the prepaid
Mortgage Loan. In the event that there are two such U.S. Treasury issues (a)
with the same coupon, the issue with the lower yield will be utilized, and (b)
with maturity dates equally close to the maturity date for the prepaid Mortgage
Loan, the issue with the earliest maturity date will be utilized.
For an example of the foregoing allocation of Prepayment Premiums and Yield
Maintenance Charges, see Annex B hereto. The Depositor makes no representation
as to the enforceability of the provision of any Mortgage Note requiring the
payment of a Prepayment Premium or Yield Maintenance Charge, or of the
collectability of any Prepayment Premium or Yield Maintenance Charge. See
"Description of the Mortgage Pool--Certain Terms and Conditions of the Mortgage
Loans-Prepayment Provisions" herein.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
The rights of holders of the Class B, Class C, Class D and Class E
Certificates and each Class of the Private Certificates (collectively, the
"Subordinate Certificates") to receive distributions of amounts collected or
advanced on the Mortgage Loans will be subordinated, to the extent described
herein, to the rights of holders of the Class A and Class IO Certificates
(collectively, the "Senior Certificates") and each other such Class of
Subordinate Certificates, if any, with an earlier alphabetical Class
designation. This subordination is intended to enhance the likelihood of timely
receipt by the holders of the Senior Certificates of the full amount of
Distributable Certificate Interest payable in respect of such Classes of
Certificates on each Distribution Date, and the ultimate receipt by the holders
of each Class of the Class A Certificates of principal in an amount equal to the
entire related Certificate Balance. Similarly, but to decreasing degrees, this
subordination is also intended to enhance the likelihood of timely receipt by
the holders of the Class B, the Class C, the Class D and the Class E
Certificates of the full amount of Distributable Certificate Interest payable in
respect of such Classes of Certificates on each Distribution Date, and the
ultimate receipt by the holders of such Certificates of, in the case of each
such Class thereof, principal equal to the entire related Certificate Balance.
The protection afforded to the holders of the Class E Certificates by means of
the subordination of the Private Certificates, to the holders of the Class D
Certificates by means of the subordination of the Class E and the Private
Certificates, to the holders of the Class C Certificates by means of the
subordination of the Class D, the Class E and the Private Certificates, to the
holders of the Class B Certificates by means of the subordination of the Class
C, the Class D, the Class E and the Private Certificates, and to the holders of
the Senior Certificates by means of the subordination of the Subordinate
Certificates, will be accomplished by (i) the application of the Available
Distribution Amount on each Distribution Date in accordance with the order of
priority described under "--Distributions--Application of the Available
Distribution Amount" above and (ii) by the allocation of Realized Losses and
Additional Trust Fund Expenses as described below. Until the first Distribution
Date after the aggregate of the Certificate Balances of the Subordinate
Certificates has been reduced to zero, the Class A-3 Certificates will receive
principal payments only after the Certificate Balances of the Class A-2 and
Class A-1
S-71
<PAGE>
Certificates have been reduced to zero and the Class A-2 Certificates will
receive principal payments only after the Certificate Balance of the Class A-1
Certificates has been reduced to zero. However, the Class A-1, Class A-2, Class
A-3 and Class IO Certificates will bear shortfalls in collections and losses
incurred in respect of the Mortgage Loans concurrently. No other form of credit
support will be available for the benefit of the holders of the Offered
Certificates.
On each Distribution Date, following all distributions on the Certificates
to be made on such date, the aggregate of all Realized Losses and Additional
Trust Fund Expenses that have been incurred since the Cut-off Date through the
end of the related Collection Period and that have not previously been allocated
as described below will be allocated among the respective Classes of Sequential
Pay Certificates (in each case in reduction of their respective Certificate
Balances) as follows, but in the aggregate only to the extent that the aggregate
Certificate Balance of all Classes of Sequential Pay Certificates remaining
outstanding after giving effect to the distributions on such Distribution Date
exceeds the aggregate Stated Principal Balance of the Mortgage Pool that will be
outstanding immediately following such Distribution Date: first, to the Class M
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; second, to the Class L Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
third, to the Class K Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fourth, to the Class J
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; fifth, to the Class H Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
sixth, to the Class G Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; seventh, to the Class F
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; eighth, to the Class E Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
ninth, to the Class D Certificates, until the remaining Certificate Balance of
such Class of Certificates is zero; tenth, to the Class C Certificates, until
the remaining Certificate Balance of such Class of Certificates is reduced to
zero; eleventh, to the Class B Certificates, until the remaining Certificate
Balance of such Class of Certificates is reduced to zero; and, last, to the
Class A-1 Certificates, the Class A-2 Certificates and the Class A-3
Certificates, pro rata, in proportion to their respective outstanding
Certificate Balances, until the remaining Certificate Balances of such Classes
of Certificates are reduced to zero.
Any Realized Loss or Additional Trust Fund Expenses allocated in reduction
of the Certificate Balance of any Class of Sequential Pay Certificates will
result in a corresponding reduction in the notional amount for the Class IO
Component of the Class IO Certificates that is related to such Class of
Sequential Pay Certificates.
"Realized Losses" are losses arising from the inability to collect all
amounts due and owing under any defaulted Mortgage Loan, including by reason of
the fraud or bankruptcy of the borrower or a casualty of any nature at the
related 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 in effect
from time to time to but not including the Due Date in the Collection Period in
which the liquidation occurred and (ii) certain related unreimbursed servicing
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 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.
"Additional Trust Fund Expenses" include, among other things, (i) any
Special Servicing Fees or Principal Recovery Fees paid to the Special Servicer,
(ii) any interest paid to the Master Servicer, the Trustee and/or the Fiscal
Agent in respect of unreimbursed Advances, and (iii) any of certain
unanticipated, non-Mortgage Loan specific expenses of the Trust Fund, including
certain indemnities and reimbursements to the Trustee and the Fiscal Agent of
the type described under "Description of the Pooling Agreements--Certain Matters
Regarding the Trustee" in the Prospectus (the Fiscal Agent having the same
rights to indemnity and reimbursement described thereunder with respect to the
Trustee), certain indemnities and reimbursements to the Master Servicer, the
Special Servicer and the Depositor of the type described under "Description of
the Pooling Agreements--Certain Matters Regarding the Master Servicer and the
Depositor" in the Prospectus (the Special Servicer having the same rights to
indemnity and reimbursement as described thereunder with respect to the Master
Servicer), and certain federal, state and local taxes, and certain tax related
expenses, payable from the assets of the Trust Fund and described under "Certain
Federal Income Tax Consequences--Prohibited Transactions Tax and Other Taxes" in
the Prospectus and "Servicing of the
S-72
<PAGE>
Mortgage Loans--REO Properties" herein. Additional Trust Fund Expenses will
reduce amounts payable to Certificateholders and, subject to the distribution
priorities described above, may result in a loss on one or more Classes of
Offered Certificates.
P&I ADVANCES
On or about each Distribution Date, the Master Servicer will be obligated,
subject to the recoverability determination described in the next paragraph, to
make advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as provided in the Pooling and Servicing Agreement, from
funds held in the Certificate Account that are not required to be distributed to
Certificateholders (or paid to any other Person pursuant to the Pooling and
Servicing Agreement) on such Distribution Date, in an amount that is generally
equal to the aggregate of all Scheduled Payments (other than Balloon Payments)
and any Assumed Scheduled Payments, net of related Servicing Fees and, if any,
Principal Recovery Fees, due or deemed due, as the case may be, in respect of
the Mortgage Loans during the related Collection Period, in each case to the
extent such amount was not paid by or on behalf of the related borrower or
otherwise collected as of the close of business on the related Determination
Date. The Master Servicer's obligations to make P&I Advances in respect of any
Mortgage Loan will continue until liquidation of such Mortgage Loan or
disposition of any REO Property acquired in respect thereof. However, if the
Monthly Payment on any Mortgage Loan has been reduced in connection with a
bankruptcy or similar proceeding or a modification, waiver or amendment granted
or agreed to by a Special Servicer, the Master Servicer will be required to
advance only the amount of the reduced Monthly Payment (net of related Servicing
Fees and, if any, Principal Recovery Fees) in respect of subsequent
delinquencies. In addition, if it is determined that an Appraisal Reduction
Amount (as defined below) exists with respect to any Required Appraisal Loan (as
defined below), then, with respect to the Distribution Date immediately
following the date of such determination and with respect to each subsequent
Distribution Date for so long as such Appraisal Reduction Amount exists, the
Master Servicer will be required in the event of subsequent delinquencies to
advance in respect of such Mortgage Loan only an amount equal to the product of
(i) the amount of the P&I Advance that would otherwise be required without
regard to this sentence, multiplied by (ii) a fraction, the numerator of which
is equal to the Stated Principal Balance of such Mortgage Loan, net of such
Appraisal Reduction Amount, and the denominator of which is equal to the Stated
Principal Balance of such Mortgage Loan. Pursuant to the terms of the Pooling
and Servicing Agreement, if the Master Servicer fails to make a P&I Advance
required to be made, the Trustee shall then be required to make such P&I
Advance, and if the Trustee fails to make a P&I Advance required to be made, the
Fiscal Agent will then be required to make such P&I Advance, in each case,
subject to the recoverability standard described below. No default by the
Trustee will be deemed to have occurred if the Fiscal Agent makes such P&I
Advance in a timely manner, as set forth in the Pooling and Servicing Agreement.
See "--Appraisal Reductions" below.
The Master Servicer (or the Trustee or Fiscal Agent, as applicable) will be
entitled to recover any P&I Advance made out of its own funds from any amounts
collected in respect of the Mortgage Loan (net of related Servicing Fees with
respect to collections of interest and net of related Principal Recovery Fees
with respect to collections of principal) as to which such P&I Advance was made
whether such amounts are collected in the form of late payments, Insurance
Proceeds or Liquidation Proceeds, or any other recovery of the related Mortgage
Loan or REO Property ("Related Proceeds"). Neither the Master Servicer, the
Trustee nor the Fiscal Agent will be obligated to make any P&I Advance that it
determines in accordance with the servicing standards described herein, would,
if made, not be recoverable from Related Proceeds (a "Nonrecoverable P&I
Advance"), and the Master Servicer (or the Trustee or the Fiscal Agent, as
applicable) will be entitled to recover, from general funds on deposit in the
Certificate Account, any P&I Advance made that it later determines to be a
Nonrecoverable P&I Advance. See "Description of the Certificates--Advances in
Respect of Delinquencies" and "Description of the Pooling
Agreements--Certificate Account" in the Prospectus.
In connection with the recovery by the Master Servicer, the Trustee or the
Fiscal Agent of any P&I Advance made by it or the recovery by the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent of any
reimbursable servicing expense incurred by it (each such P&I Advance or expense,
an "Advance"), the Master Servicer, the Special Servicer, the Trustee or the
Fiscal Agent, as applicable, will be entitled to be paid, out of any amounts
then on deposit in the Certificate Account, interest compounded annually at a
per annum rate (the "Reimbursement Rate") equal to the "prime rate" published in
the "Money Rates" section of The Wall Street Journal, as such "prime rate" may
change from time to time, accrued on the amount of such Advance from the date
made to but not including the date of reimbursement. To the extent not offset or
covered by amounts otherwise
S-73
<PAGE>
payable on the Private Certificates, interest accrued on outstanding Advances
will result in a reduction in amounts payable on the Offered Certificates,
subject to the distribution priorities described herein.
APPRAISAL REDUCTIONS
Upon the earliest of the date (each such date, a "Required Appraisal Date")
that (1) any Mortgage Loan is sixty (60) days delinquent in respect of any
Monthly Payments, (2) any REO Property is acquired on behalf of the Trust Fund,
(3) any Mortgage Loan has been modified by the Special Servicer to reduce the
amount of any Monthly Payment, other than a Balloon Payment, (4) a receiver is
appointed and continues in such capacity in respect of the Mortgaged Property
securing any Mortgage Loan, (5) a borrower with respect to any Mortgage Loan is
subject to any bankruptcy proceeding or (6) a Balloon Payment with respect to
any Mortgage Loan has not been paid on its scheduled maturity date (each such
Mortgage Loan, including an REO Mortgage Loan, a "Required Appraisal Loan"), the
Special Servicer will be required to obtain (within 60 days of the applicable
Required Appraisal Date) an appraisal of the related Mortgaged Property prepared
in accordance with 12 CFR ss.225.62 and conducted in accordance with the
standards of the Appraisal Institute by a Qualified Appraiser, unless such an
appraisal had previously been obtained within the prior three months. A
"Qualified Appraiser" is an independent appraiser, selected by the Special
Servicer, that is a member in good standing of the Appraisal Institute, and,
that, if the state in which the subject Mortgaged Property is located certifies
or licenses appraisers, is certified or licensed in such state, and in each such
case, who has a minimum of five years experience in the subject property type
and market. The cost of such appraisal will be borne by the Special Servicer,
subject to the Special Servicer's right to be reimbursed therefor out of Related
Proceeds or, if not reimbursable therefrom, out of general funds on deposit in
the Certificate Account. As a result of any such appraisal, it may be determined
that an "Appraisal Reduction Amount" exists with respect to the related Required
Appraisal Loan, such determination to be made upon the later of 30 days after
the Required Appraisal Date if no new appraisal is required or upon receipt of a
new appraisal. The Appraisal Reduction Amount for any Required Appraisal Loan
will equal the excess, if any, of (a) the sum of, as of the Determination Date
immediately succeeding the date on which the appraisal is obtained, (i) the
Stated Principal Balance of such Required Appraisal Loan, (ii) to the extent not
previously advanced by or on behalf of the Master Servicer, the Trustee or the
Fiscal Agent, all unpaid interest on the Required Appraisal Loan through the
most recent Due Date prior to such Determination Date at a per annum rate equal
to the related Net Mortgage Rate, (iii) all accrued but unpaid Servicing Fees
and any Additional Trust Fund Expenses in respect of such Required Appraisal
Loan, (iv) all related unreimbursed Advances made by or on behalf of the Master
Servicer, the Special Servicer, the Trustee or the Fiscal Agent with respect to
such Required Appraisal Loan and (v) all currently due and unpaid real estate
taxes and reserves owed for improvements (net of any amount escrowed therefor)
and assessments, insurance premiums, and, if applicable, ground rents in respect
of the related Mortgaged Property, over (b) an amount equal to 90% of the
appraised value (net of any prior liens) of the related Mortgaged Property as
determined by such appraisal.
Notwithstanding the foregoing, if any Required Appraisal Loan as to which
an Appraisal Reduction Amount has been established in accordance with the
preceding paragraph becomes a Corrected Mortgage Loan, then the Appraisal
Reduction Amount shall be deemed to be zero, subject to such Mortgage Loan again
becoming subject to the appraisal requirement described above; provided that, in
the case of any Required Appraisal Loan that has been modified as described in
the immediately preceding paragraph, the Appraisal Reduction Amount will be
deemed to exist for so long as the terms of the modification are in effect.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports. Based on information provided in monthly reports prepared
by the Master Servicer and the Special Servicer and delivered to the Trustee,
the Trustee will prepare and forward either electronically or by first class
mail on each Distribution Date to each Certificateholder, each initial
Certificate Owner and (upon written request made to the Trustee) each subsequent
Certificate Owner (as identified to the reasonable satisfaction of the Trustee),
the Depositor, the Master Servicer, the Special Servicer, the Underwriters and
each Rating Agency:
1. A statement (a "Distribution Date Statement"), substantially in the
form of Annex C hereto, setting forth, among other things, for each
Distribution Date: (i) the amount of the distribution to the holders of
each Class of REMIC Regular Certificates in reduction of the Certificate
Balance thereof; (ii) the amount of the distribution to the holders of each
Class of REMIC Regular Certificates allocable to Distributable Certificate
Interest; (iii) the amount of the distribution to the holders of each Class
of REMIC Regular Certificates allocable
S-74
<PAGE>
to Prepayment Premiums and Yield Maintenance Charges; (iv) the amount of
the distribution to the holders of each Class of REMIC Regular Certificates
in reimbursement of previously allocated Realized Losses and Additional
Trust Fund Expenses; (v) the Available Distribution Amount for such
Distribution Date; (vi) (A) the aggregate amount of P&I Advances made in
respect of such Distribution Date and (B) the aggregate amount of servicing
advances and Nonrecoverable P&I Advances as of the close of business on the
related Determination Date; (vii) the aggregate unpaid principal balance of
the Mortgage Pool outstanding as of the close of business on the related
Determination Date; (viii) the aggregate Stated Principal Balance of the
Mortgage Pool outstanding immediately before and immediately after such
Distribution Date; (ix) the number, aggregate unpaid principal balance,
weighted average remaining term to maturity and weighted average Mortgage
Rate of the Mortgage Loans as of the close of business on the related
Determination Date; (x) the number, aggregate unpaid principal balance (as
of the close of business on the related Determination Date) and aggregate
Stated Principal Balance (immediately after such Distribution Date) of
Mortgage Loans (A) delinquent one month, (B) delinquent two months, (C)
delinquent three or more months, and (D) as to which foreclosure
proceedings have been commenced; (xi) as to each Mortgage Loan referred to
in the preceding clause (x) above, (A) the loan number thereof, (B) the
Stated Principal Balance thereof immediately following such Distribution
Date, (C) whether the delinquency is in respect of its Balloon Payment, (D)
whether a notice of acceleration has been sent to the borrower and, if so,
the date of such notice, (E) whether a Phase I Environmental Assessment of
the related Mortgaged Property has been performed as contemplated by the
Pooling and Servicing Agreement and (F) a brief description of the status
of any foreclosure proceedings or any workout or loan modification
negotiations with the related borrower; (xii) with respect to any Mortgage
Loan as to which a liquidation event occurred during the related Collection
Period (other than a payment in full), (A) the loan number thereof, (B) the
nature of the liquidation event and, in the case of a determination by the
Special Servicer with respect to any defaulted Mortgage Loan or REO
Property that there has been a recovery of all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries that the Special
Servicer has determined in accordance with accepted servicing standards,
will be ultimately recoverable (a "Final Recovery Determination"), a brief
description of the basis for such Final Recovery Determination, (C) the
aggregate of all liquidation proceeds and other amounts received in
connection with such liquidation event (separately identifying the portion
thereof allocable to distributions on the Certificates), and (D) the amount
of any Realized Loss in connection with such liquidation event; (xiii) with
respect to any REO Property included in the Trust Fund as to which a Final
Recovery Determination was made during the related Collection Period, (A)
the loan number of the related Mortgage Loan, (B) a brief description of
the basis for the Final Recovery Determination, (C) the aggregate of all
liquidation proceeds and other amounts received in connection with such
Final Recovery Determination (separately identifying the portion thereof
allocable to distributions on the Certificates), and (D) the amount of any
Realized Loss in respect of the related REO Property in connection with
such Final Recovery Determination; (xiv) the Accrued Certificate Interest
and Distributable Certificate Interest in respect of each Class of REMIC
Regular Certificates for such Distribution Date; (xv) any unpaid
Distributable Certificate Interest in respect of each Class of REMIC
Regular Certificates after giving effect to the distributions made on such
Distribution Date; (xvi) the Pass-Through Rate for each Class of REMIC
Regular Certificates; (xvii) the Principal Distribution Amount for such
Distribution Date, separately identifying the respective components thereof
(and, in the case of any principal prepayment or other unscheduled
collection of principal received during the related Collection Period, the
loan number for the related Mortgage Loan and the amount of such prepayment
or other collection of principal); (xviii) the aggregate of all Realized
Losses incurred during the related Collection Period and, aggregated by
type, all Additional Trust Fund Expenses incurred during the related
Collection Period; (xix) the aggregate of all Realized Losses and
Additional Trust Fund Expenses that remain unallocated immediately
following such Distribution Date; (xx) the Certificate Balance of each
Class of REMIC Regular Certificates (other than the Class IO Certificates)
and the notional amount of each Class IO Component immediately before and
immediately after such Distribution Date, separately identifying any
reduction therein due to the allocation of Realized Losses and Additional
Trust Fund Expenses on such Distribution Date; (xxi) the certificate factor
for each Class of REMIC Regular Certificates immediately following such
Distribution Date; (xxii) the aggregate amount of interest on P&I Advances
paid to the Master Servicer, the Trustee and the Fiscal Agent during the
related Collection Period; (xxiii) the aggregate amount of interest on
servicing advances paid to the Master Servicer, the Special Servicer, the
Trustee and the Fiscal Agent during the related Collection Period; (xxiv)
(A) the aggregate amount of servicing compensation (separately identifying
the amount of each category of compensation) paid to the Master Servicer,
the Special Servicer and, if payable directly out of the Trust Fund without
a reduction in the servicing compensation
S-75
<PAGE>
otherwise payable to the Master Servicer or the Special Servicer, to each
sub-servicer, during the related Collection Period, and (B) such other
information as the Trustee is required by the Code or other applicable law
to furnish to enable Certificateholders to prepare their tax returns and
(xxv) the information contained in the "Loan Payoff Notification Report"
together with, for each applicable Mortgage Loan, the Distribution Date on
which the subject payment is expected to be distributed to
Certificateholders.
2. A "CSSA Loan File" report and a "CSSA Property File" report setting
forth certain information with respect to the Mortgage Loans and the
Mortgaged Properties, respectively.
The Master Servicer or the Special Servicer is required to deliver to
the Trustee prior to each Distribution Date, and the Trustee is required to
deliver to each Certificateholder, the Depositor, the Underwriters and each
Rating Agency on each Distribution Date, the following nine reports
providing the required information as of the Determination Date immediately
preceding the preparation of each such report:
(a) A "Delinquent Loan Status Report" containing substantially the
content set forth in Annex D attached hereto, prepared by each of the
Master Servicer and Special Servicer setting forth, among other things,
those Mortgage Loans that were delinquent 30-59 days, delinquent 60-89
days, delinquent 90 days or more, current but specially serviced, or in
foreclosure but not REO Property.
(b) An "Historical Loan Modification Report" containing substantially
the content set forth in Annex E attached hereto, prepared by the Special
Servicer setting forth, among other things, those Mortgage Loans that have
been modified pursuant to the Pooling and Servicing Agreement (i) during
the related Collection Period and (ii) since the Cut-off Date, showing the
original and the revised terms thereof.
(c) An "Historical Loss Estimate Report" containing substantially the
content set forth in Annex F attached hereto, prepared by the Special
Servicer setting forth, among other things, (i) the aggregate amount of
Liquidation Proceeds and expenses relating to each Final Recovery
Determination, both during the related Collection Period and historically,
and (ii) the amount of Realized Losses occurring during the related
Collection Period, set forth on a loan-by-loan basis.
(d) An "REO Status Report" containing substantially the content set
forth in Annex G attached hereto, prepared by the Special Servicer setting
forth, among other things, with respect to each REO Property then currently
included in the Trust Fund, (i) the acquisition date of such REO Property,
(ii) the amount of income collected with respect to such REO Property (net
of related expenses) and other amounts, if any, received on such REO
Property during the related Collection Period and (iii) the value of the
REO Property based on the most recent appraisal or other valuation thereof
available to the Special Servicer as of such Determination Date (including
any prepared internally by the Special Servicer).
(e) A "Watch List Report" containing substantially the content set
forth in Annex H attached hereto, prepared by the Special Servicer setting
forth, among other things, any Mortgage Loan that is in jeopardy of
becoming a Specially Serviced Mortgage Loan.
(f) A "Loan Payoff Notification Report" setting forther among other
things for each Mortgage Loan where notice of anticipated payoff has been
received, the Control No., the Property Name, the amount of principal
expected to be paid, the expected date of payment and the estimated amount
of Yield Maintenance or Prepayment Premium due.
(g) An "Operating Statement Analysis" containing substantially the
content set forth in Annex I together with copies of the operating
statements and rent rolls (but only to the extent the related borrower is
required by the Mortgage to deliver, or otherwise agrees to provide, such
information). The Special Servicer is required consistent with the
servicing standards described herein to endeavor to obtain such operating
statements and rent rolls.
(h) With respect to any Mortgaged Property or REO Property, an "NOI
Adjustment Worksheet" containing substantially the content set forth in
Annex J for such Mortgaged Property (with the annual operating statements
attached thereto as an exhibit), presenting the computations made in
accordance with the methodology described in the Pooling and Servicing
Agreement to "normalize" the full year net operating income and debt
service coverage numbers used by the Special Servicer in the other reports
referenced above.
(i) A "Comparative Financial Status Report" containing substantially
the content set forth in Annex K setting forth, among other things, the
occupancy, revenue, net operating income and DSCR for each Mortgage
S-76
<PAGE>
Loan or related Mortgaged Property, as applicable, as of the Determination
Date immediately preceding the preparation of such report for each of the
following three periods (to the extent such information is in the Special
Servicer's possession): (i) the most current available year-to-date, (ii)
each of the previous two full fiscal years stated separately; and (iii) the
"base year" (representing the original analysis of information used as of
the Cut-off Date).
The Trustee is to deliver a copy of each Comparative Financial Status Report
that it receives from the Master Servicer or Special Servicer to the Depositor,
the Underwriters, the Master Servicer and each Rating Agency promptly after its
receipt thereof. Any Certificateholder may obtain a copy of each Comparative
Financial Status Report upon written request to the Trustee. Upon specific
written request, the Trustee is to deliver a copy of each NOI Adjustment
Worksheet that it receives from the Master Servicer or Special Servicer to the
Depositor, the Master Servicer, the Underwriters and each Rating Agency. The
Trustee is to deliver on April 30 of each year to each Rating Agency and the
Underwriters, and at any time upon written request, to the Depositor and the
Master Servicer, a copy of each annual Operating Statement Analysis that it
receives from the Special Servicer. Any Certificateholder may obtain a copy of
any NOI Adjustment Worksheet or Operating Statement Analysis in the possession
of the Trustee upon written request and at the expense of such
Certificateholder.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report summarizing
on an annual basis (if appropriate) the items provided to Certificateholders in
the monthly Distribution Date Statements and such other information as may be
required to enable such Certificateholders to prepare their federal income tax
returns. Such information is required to include the amount of original issue
discount accrued on each Class of Certificates held by persons other than
Certificateholders and information regarding the expenses of the Trust Fund.
The information that pertains to Specially Serviced Trust Fund Assets
reflected in reports will be based solely upon the reports delivered by the
Special Servicer to the Trustee prior to related Distribution Date. Absent
manifest error, none of the Master Servicer, the Special Servicer or the Trustee
will be responsible for the accuracy or completeness of any information supplied
to it by a Mortgagor or third party that is included in any reports, statements,
materials or information prepared or provided by the Master Servicer, the
Special Servicer or the Trustee, as applicable.
Other Information. The Pooling and Servicing Agreement requires that the
Master Servicer or the Special Servicer make available at its offices primarily
responsible for administration of the Trust Fund, during normal business hours,
for review by any Certificate Owner owning an interest in an Offered Certificate
or any person identified to the Master Servicer or Special Servicer, as the case
may be, as a prospective transferee of such an interest, originals or copies of,
among other things, the following items: (a) the Pooling and Servicing Agreement
and any amendments thereto, (b) all Distribution Date Statements delivered to
holders of the relevant Class of Offered Certificates since the Closing Date,
(c) all officer's certificates delivered to the Master Servicer since the
Closing Date as described under "Description of the Pooling Agreements--Evidence
as to Compliance" in the Prospectus, (d) all accountants' reports delivered with
respect to the Master Servicer since the Closing Date as described under
"Description of the Pooling Agreements--Evidence as to Compliance" in the
Prospectus, (e) the most recent property inspection report prepared by or on
behalf of the Special Servicer and delivered to the Master Servicer in respect
of each Mortgaged Property, (f) the most recent Mortgaged Property annual
operating statements and rent roll, if any, collected by or on behalf of the
Special Servicer and delivered to the Master Servicer, (g) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Special Servicer, and (h) any and all officers' certificates and
other evidence delivered to the Master Servicer to support the Master Servicer's
or a Special Servicer's determination that any Advance was or, if made, would
not be recoverable from Related Proceeds. Copies of any and all of the foregoing
items will be available from the Master Servicer or Special Servicer, as the
case may be, upon request; however, the Master Servicer or Special Servicer, as
the case may be, will be permitted to require payment of a sum sufficient to
cover the reasonable costs and expenses of providing such information to
Certificateholders, Certificate Owners and their prospective transferees,
including, without limitation, copy charges and reasonable fees for employee
time and for space.
Book-Entry Certificates. Until such time as Definitive Certificates are
issued in respect of the Book Entry Certificates, the foregoing information and
access will be available to the holders of the Book-Entry Certificates only to
the extent it is forwarded by or otherwise available through DTC and DTC
participants. Any beneficial owner of a Book-Entry Certificate who does not
receive information through DTC or its participants may request that Trustee
S-77
<PAGE>
reports be mailed directly to it by written request to the Trustee (accompanied
by evidence of such beneficial ownership) at the Corporate Trust Office of the
Trustee. The manner in which notices and other communications are conveyed by
DTC to DTC Participants, and by DTC Participants to the holders of the
Book-Entry Certificates, will be governed by arrangements among them, subject to
any statutory or regulators requirements as may be in effect from time to time.
The Master Servicer, the Special Servicer, the Trustee and the Depositor are
required to recognize as Certificateholders only those persons in whose names
the Certificates are registered on the books and records of the Certificate
Registrar.
The Trustee will be required to make available monthly to, among others,
Certificateholders, an electronic file containing Mortgage Loan information,
based on reports provided to it by the Master Servicer and the Special Servicer,
in the "CSSA Loan" periodic update file and the "CSSA Property File" with the
Delinquent Loan Status Report, Historical Loan Modification Report, Historical
Loss Estimate Report, REO Status Report and Watch List Report attached (provided
that these reports are delivered to the Trustee in an electronic format
acceptable to the Trustee) via the Trustee's bulletin board. Access to the
bulletin board can be obtained by dialing (714) 282-3990. Those who have an
account on the bulletin board may retrieve the data file for each transaction in
the directory. An account number may be obtained by typing "NEW" upon logging
into the bulletin board. In order to access information from the bulletin board
the user must have available their assigned log-on ID. The Master Servicer may
make the information that is available via the Trustee's bulletin board, also
available via the Internet at www.firstunion.com under the heading "Capital
Markets International-Structured Products.
A Certificate Owner may obtain certain information contained in each
Distribution Date Statement by sending a written request, together with any fee
that LaSalle National Bank may require, to LaSalle National Bank, Corporate
Trust Department, 135 South LaSalle Street, Chicago, Illinois 60603, Attention:
Asset Backed Securities Trust Services Group--First Union-Lehman Brothers
1997-C2 or by calling the Trustee's ASAP System at (312)904-2200 and requesting
statement number 295, or through such other mechanism as the Trustee may have in
place from time to time. Account numbers on the Trustee's ASAP System may be
obtained by calling (312) 904-2200 and following the voice prompts for obtaining
account numbers. Separately, bond factor information may be obtained from the
Trustee by calling (800) 246-5761. The Trustee may disclaim responsibility for
any information therein for which it is not the original source.
Upon written request of any Certificateholder of record made for purposes
of communicating with other Certificateholders with respect to their rights
under the Pooling and Servicing Agreement, the Certificate Registrar will
furnish such Certificateholder with a list of the other Certificateholders then
of record.
ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any Class of REMIC
Regular Certificates is the Distribution Date on which the Certificate Balance
of such Class of Certificates (or, in the case of the Class IO Certificates, the
aggregate of the notional amounts of the respective Class IO Components) would
be reduced to zero based on the assumption that no Mortgage Loan is voluntarily
prepaid prior to its stated maturity date and otherwise
S-78
<PAGE>
based on the "Table Assumptions" set forth under "Yield and Maturity
Considerations--Weighted Average Life" herein, which Distribution Date shall
in each case be as follows:
CLASS DESIGNATION ASSUMED FINAL DISTRIBUTION DATE
----------------- -------------------------------
Class A-1 ........................... March 18, 2004
Class A-2 ........................... May 18, 2007
Class A-3 ........................... December 18, 2007
Class IO ............................ November 18, 2027
Class B ............................. October 18, 2011
Class C ............................. September 18, 2012
Class D ............................. November 18, 2012
Class E ............................. November 18, 2012
Class F ............................. September 18, 2015
Class G ............................. June 18, 2017
Class H ............................. September 18, 2017
Class J ............................. January 18, 2020
Class K ............................. February 18, 2022
Class L ............................. April 18, 2023
Class M ............................. November 18, 2027
The Assumed 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 Offered
Certificates may be later, and could be substantially later, than the related
Assumed Final Distribution Date(s).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR (as defined herein) and no losses on the
Mortgage Loans. Because the rate of principal payments (including prepayments)
on the Mortgage Loans can be expected to exceed the scheduled rate of principal
payments, and could exceed such scheduled rate by a substantial amount, and
because losses may occur in respect of the Mortgage Loans, the actual final
Distribution Date for one or more Classes of the Offered Certificates may be
earlier, and could be substantially earlier, than the related Assumed Final
Distribution Date(s). The rate of principal 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 principal payment experience. See
"Yield and Maturity Considerations" and "Description of the Mortgage Pool"
herein and "Yield and Prepayment Considerations" in the Prospectus.
The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the first Distribution Date that follows the second anniversary
of the end of the amortization term for the Mortgage Loan that, as of the
Cut-off Date, has the longest remaining amortization term. The rating assigned
by a Rating Agency to any Class of Offered Certificates entitled to receive
distributions in respect of principal reflects an assessment of the likelihood
that Certificateholders of such Class will receive, on or before the Rated Final
Distribution Date, all principal distributions to which they are entitled. See
"Ratings" herein.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 100%
of the voting rights for the Certificates (the "Voting Rights") will be
allocated among the respective Classes of Sequential Pay Certificates in
proportion to the Certificate Balances (as adjusted by treating any Appraisal
Reduction Amount as Realized Losses solely for the purposes of adjusting Voting
Rights) of those Classes. Voting Rights allocated to a Class of Certificates
will be allocated among the related Certificateholders in proportion to the
percentage interests in such Class evidenced by their respective Certificates.
The Class A-1, Class A-2 and Class A-3 Certificates will be treated as one Class
for determining the Controlling Class of Sequential Pay Certificates. In
addition, if either the Master Servicer or the Special Servicer is the holder of
any Sequential Pay Certificate, neither of the Master Servicer or Special
Servicer, in its capacity as a Certificateholder, shall have Voting Rights with
respect to matters concerning compensation affecting the Master Servicer or the
Special Servicer. See "Description of the Certificates--Voting Rights" in the
Prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earlier of (i) the final payment (or advance in respect
thereof) or other liquidation of the last Mortgage Loan or REO Property subject
S-79
<PAGE>
thereto, and (ii) the purchase of all of the Mortgage Loans and all of the REO
Properties remaining in the Trust Fund, if any, by the Master Servicer, the
Special Servicer, the Depositor, Lehman Brothers Inc. or any single
Certificateholder that is entitled to greater than 50% of the Voting Rights
allocated to the Class of Sequential Pay Certificates with the latest
alphabetical class designation then outstanding (or if no Certificateholder is
entitled to greater than 50% of the Voting Rights of such Class, the
Certificateholder with the largest percentage of Voting Rights allocated to such
Class) (the "Majority Subordinate Certificateholder") and distribution thereof
to the Certificateholders. Written notice of termination of the Pooling and
Servicing Agreement will be given to each Certificateholder, and the final
distribution will be made only upon surrender and cancellation of the
Certificates at the office of the Trustee or other registrar for the
Certificates or at such other location as may be specified in such notice of
termination.
Any such purchase by the Master Servicer, the Special Servicer, the
Depositor, Lehman Brothers Inc. or the Majority Subordinate Certificateholder of
all the Mortgage Loans and all of the REO Properties, if any, remaining in the
Trust Fund is required to be made at a price equal to (i) the aggregate Purchase
Price of all the Mortgage Loans (other than REO Mortgage Loans) then included in
the Trust Fund, plus (ii) the fair market value of all REO Properties then
included in the Trust Fund, as determined by an appraiser mutually agreed upon
by the Master Servicer and the Trustee, minus (iii) if the purchaser is the
Master Servicer, the aggregate of amounts payable or reimbursable to the Master
Servicer under the Pooling and Servicing Agreement. Such purchase will effect
early retirement of the then outstanding Offered Certificates, but the right of
the Master Servicer, the Special Servicer, Lehman Brothers Inc., the Majority
Subordinate Certificateholder or the Depositor to effect such termination is
subject to the requirement that the then aggregate Stated Principal Balance of
the Mortgage Pool be less than 1% of the Initial Pool Balance.
The purchase price paid in connection with the purchase of all Mortgage
Loans and REO Properties remaining in the Trust Fund, exclusive of any portion
thereof payable or reimbursable (as if such purchase price constituted
liquidation proceeds) to any person other than the Certificateholders, will
constitute part of the Available Distribution Amount for the final Distribution
Date. The Available Distribution Amount for the final Distribution Date will be
distributed by the Trustee generally as described herein under
"--Distributions--Application of the Available Distribution Amount", except that
the distributions of principal on any Class of Sequential Pay Certificates
described thereunder will be made, subject to available funds and the
distribution priorities described thereunder, in an amount equal to the entire
Certificate Balance of such Class remaining outstanding, and except that any
distributions of principal on the respective Classes of Class A Certificates (if
more than one is then outstanding) described thereunder will be made on a pro
rata basis in accordance with their respective Certificate Balances.
THE TRUSTEE
LaSalle National Bank, a nationally chartered bank, will act as Trustee on
behalf of the Certificateholders. The Corporate Trust Department of the Trustee
is located at 135 South LaSalle Street, Chicago, Illinois 60603, Attention:
Asset Backed Securities Trust Services Group--First Union--Lehman Brothers
1997-C2. See "Description of the Pooling Agreements--The Trustee," "--Duties of
the Trustee," "--Certain Matters Regarding the Trustee" and "--Resignation and
Removal of the Trustee" in the Prospectus. As compensation for its services, the
Trustee will be entitled to receive monthly, from general funds on deposit in
the Certificate Account, the Trustee Fee. The "Trustee Fee" for each Mortgage
Loan and REO Loan for any Distribution Date will equal one month's interest for
the most recently ended calendar month (calculated on the basis of a 360-day
year consisting of twelve 30-day months), accrued at the trustee fee rate on the
Stated Principal Balance of such Mortgage Loan or REO Loan, as the case may be,
outstanding immediately following the prior Distribution Date (or, in the case
of the initial Distribution Date, as of the Closing Date). The trustee fee rate
will be a per annum rate set forth in the Pooling and Servicing Agreement.
The Trustee will also have certain duties with respect to REMIC
administration (in such capacity the "REMIC Administrator"). See "Certain
Federal Income Tax Consequences--REMICs--Reporting and Other Administrative
Matters" in the Prospectus.
DUTIES OF THE FISCAL AGENT
ABN AMRO Bank N.V., a banking corporation organized under the laws of The
Netherlands, will act as Fiscal Agent pursuant to the Pooling and Servicing
Agreement. The Fiscal Agent's office is located at 135 South LaSalle
S-80
<PAGE>
Street, Chicago, Illinois 60603. The Fiscal Agent will make no representation as
to the validity or sufficiency of the Pooling and Servicing Agreement, the
Certificates, the Mortgage Loans, this Prospectus Supplement (except for the
first two sentences of this paragraph) or related documents. The duties and
obligations of the Fiscal Agent consist only of making P&I Advances as described
in "--P&I Advances" above. The Fiscal Agent shall not be liable except for the
performance of such duties and obligations. The Fiscal Agent will be entitled to
reimbursement for each P&I Advance made by it in the same manner and to the same
extent as the Trustee and the Master Servicer.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) 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, (i) the Pass-Through Rate for such Certificate (deemed, in the case of a
Class IO Certificate, to equal the weighted average of the Pass-Through Rates
for the respective Class IO Components from time to time), (ii) the rate and
timing of principal payments (including principal prepayments) and other
principal collections on the Mortgage Loans and the extent to which such amounts
are to be applied in reduction of the Certificate Balance or notional amount of
the related Class or Class IO Component, as the case may be, (iii) the rate,
timing and severity of Realized Losses and Additional Trust Fund Expenses and
the extent to which such losses and expenses are allocable in reduction of the
Certificate Balance or notional amount of the related Class or Class IO
Component, as the case may be, and (iv) the timing and severity of any Net
Aggregate Prepayment Interest Shortfalls and the extent to which such shortfalls
are allocable in reduction of the Distributable Certificate Interest payable on
the related Class.
Rate and Timing of Principal Payment. The yield to holders of the Class IO
Certificates will be extremely sensitive to, and the yield to holders of 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 of any Class of Sequential Pay Certificates and,
correspondingly, the notional amount of any Class IO Component. As described
herein, the Principal Distribution Amount for each Distribution Date will
generally be distributable first in respect of the Class A-1 Certificates until
the Certificate Balance thereof is reduced to zero, and thereafter will
generally be distributable entirely in respect of the Class A-2 Certificates,
the Class A-3 Certificates, the Class B Certificates, the Class C Certificates,
the Class D Certificates and the Class E Certificates, in that order, in each
case until the Certificate Balance of such Class of Certificates is reduced to
zero. Any reduction of the Certificate Balance of any Class of Sequential Pay
Certificates will result in a corresponding reduction in the notional amount of
the related Class IO Component. Consequently, the rate and timing of principal
payments that are distributed or otherwise result in reduction of the
Certificate Balance of any Class of Offered Certificates or the notional amount
of a Class IO Component, as the case may be, 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 this
purpose, collections made in connection with liquidations of Mortgage Loans due
to defaults, casualties or condemnations affecting the Mortgaged Properties, or
purchases of Mortgage Loans out of the Trust Fund). Prepayments and, assuming
the respective stated maturity dates therefor have not occurred, liquidations
and purchases of the Mortgage Loans, will result in distributions on the
Certificates of amounts that would otherwise be distributed over the remaining
terms of the Mortgage Loans. 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 Offered
Certificates that are Sequential Pay Certificates) while work-outs are
negotiated or foreclosures are completed. See "Servicing of the Mortgage
Loans--Modifications, Waivers and Amendments" herein and "Description of the
Pooling Agreements--Realization Upon Defaulted Mortgage Loans" and "Certain
Legal Aspects of Mortgage Loans--Foreclosure" in the Prospectus.
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 such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance or notional amount
of a Class IO Component, as the case may be, of such Certificates. An investor
should consider, in the case of any Offered 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
S-81
<PAGE>
the anticipated yield and, in the case of a Class IO Certificate or any other
Offered Certificate purchased at a premium, 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 or otherwise results
in reduction of the principal balance (or notional amount of a Class IO
Component, as applicable) of an Offered Certificate purchased at a discount or
premium, 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. Investors
in the Class IO Certificates should fully consider the risk that a rapid rate of
principal payments on the Mortgage Loans 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 mortgage
loans comparable to 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. Losses and other
shortfalls on the Mortgage Loans will, with the exception of any Net Aggregate
Prepayment Interest Shortfalls, generally be borne by the holders of the
respective Classes of Sequential Pay Certificates, to the extent of amounts
otherwise distributable in respect of their Certificates, in reverse
alphabetical order of their Class designations. Realized Losses and Additional
Trust Fund Expenses will be allocated, as and to the extent described herein, to
the respective Classes of Sequential Pay Certificates (in reduction of the
Certificate Balance of each such Class), in reverse alphabetical order of their
Class designations. Any Realized Loss or Additional Trust Fund Expenses
allocated in reduction of the Certificate Balance of any Class of Sequential Pay
Certificates will result in a corresponding reduction in the notional amount of
the related Class IO Component. As more fully described herein under
"Description of the Certificates--Distributions--Distributable Certificate
Interest," Net Aggregate Prepayment Interest Shortfalls will generally be borne
by the respective Classes of REMIC Regular Certificates on a pro rata basis.
Pass-Through Rates. The Pass-Through Rate applicable to each Class IO
Component will be variable and will be equal to the Weighted Average Net
Mortgage Rate from time to time minus the Pass-Through Rate on the Class of
Sequential Pay Certificates relating to such Class IO Component. Accordingly,
the Pass-Through Rate on the Class IO Components and, correspondingly, the yield
on the Class IO Certificates, will be sensitive to changes in the relative
composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments and liquidations and to changes in the relative sizes of
the Certificate Balances of the respective Classes of Sequential Pay
Certificates.
Certain Relevant Factors. 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, prevailing interest rates, the
terms of the Mortgage Loans (for example, Lockout Periods, provisions requiring
the payment of Prepayment Premiums and Yield Maintenance Charges and
amortization terms that require Balloon Payments), the demographics and relative
economic vitality of the areas in which the Mortgaged Properties are located and
the general supply and demand for rental units, hotel/motel guest rooms, health
care facility beds or comparable commercial space, as applicable, in such areas,
the quality of management of the Mortgaged Properties, the servicing of the
Mortgage Loans, possible changes in tax laws and other opportunities for
investment. See "Risk Factors--The Mortgage Loans" and "Description of the
Mortgage Pool" herein and "Yield and Maturity Considerations--Principal
Prepayments" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. As of the Cut-off Date, all of the Mortgage Loans may be prepaid at any
time after the expiration of the applicable Lockout Period and/or any period
when the holder of a Mortgage may require a borrower to pledge Defeasance
Collateral in lieu of prepaying the related Mortgage Loan (a "Required
Defeasance Period"), subject, in most cases, to the payment of a Prepayment
Premium or a Yield Maintenance Charge. A requirement that a prepayment be
accompanied by a Prepayment Premium or Yield Maintenance Charge may not provide
a sufficient economic disincentive to deter a borrower from refinancing at a
more favorable interest rate.
S-82
<PAGE>
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may 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.
The Depositor makes no 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
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until a date that is scheduled to be at least 18
days following the Due Dates for the Mortgage Loans during the related
Collection Period, 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 Rates and purchase prices (assuming such prices did
not account for such delay).
Unpaid Distributable Certificate Interest. As described under "Description
of the Certificates--Distributions--Application of the Available Distribution
Amount" herein, if the portion of the Available Distribution Amount
distributable in respect of interest on any Class of Offered Certificates on any
Distribution Date is less than the Distributable Certificate Interest then
payable for such Class, the shortfall will be distributable to holders of such
Class of Certificates on subsequent Distribution Dates, to the extent of
available funds. Any such shortfall will not bear interest, however, and will
therefore negatively affect the yield to maturity of such Class of Certificates
for so long as it is outstanding.
Yield Sensitivity of the Class IO Certificates. The yield to maturity on
the Class IO Certificates will be extremely sensitive to the rate and timing of
principal payments (including by reason of prepayments, defaults and
liquidations) on the Mortgage Loans. Accordingly, investors in the Class IO
Certificates should fully consider the associated risks, including the risk that
a rapid rate of prepayment of the Mortgage Loans could result in the failure of
such investors to fully recoup their initial investments. The allocation of a
portion of collected Prepayment Premiums and Yield Maintenance Charges to the
Class IO Certificates is intended to reduce those risks; however, such
allocation may be insufficient to offset fully the adverse effects on the yields
on such Class of Certificates that the related prepayments may otherwise have.
PRICE/YIELD TABLES
The tables beginning on page B-14 of Annex B hereto (the "Yield Tables")
show the pre-tax corporate bond equivalent ("CBE") yield to maturity, modified
duration (except in the case of the Class IO Certificates), weighted average
life, first Distribution Date on which principal is to be paid ("First Principal
Payment Date") and final Distribution Date on which principal is to be paid
("Last Principal Payment Date") with respect to each Class of Offered
Certificates, prepared using the Table Assumptions (as described below) and,
where applicable, the specified assumed purchase prices (which prices do not
include accrued interest). Assumed purchase prices are expressed in 32nds (i.e.
100.04 means 100 4/32%) as a percentage of the initial Certificate Balance (or,
in the case of the Class IO Certificates, of the aggregate of the initial
notional amounts of the respective Class IO Components) of each Class of Offered
Certificates. For purposes of the Yield Tables relating to the Class IO
Certificates, the information therein relating to weighted average life, First
Principal Payment Date and Last Principal Payment Date is being calculated in
respect of the aggregate notional amount of the respective Class IO Components
of the Class IO Certificates.
The yields set forth in the Yield Tables were calculated by determining the
monthly discount rates which, when applied to the assumed stream of cash flows
to be paid on each Class of Offered Certificates, would cause the discounted
present value of such assumed stream of cash flows to equal the assumed purchase
prices, plus accrued interest from and including the Cut-off Date to but
excluding November 25, 1997, and by converting such monthly rates to semi-annual
corporate bond equivalent rates. Such calculation does not take into account
variations that may occur in the interest rates at which investors may be able
to reinvest funds received by them as distributions on the Offered Certificates
and consequently does not purport to reflect the return on any investment in
such Classes of Offered Certificates when such reinvestment rates are
considered. For purposes of the Yield Tables (except in the case of the Class IO
Certificates), "modified duration" has been calculated using the modified
Macaulay Duration as
S-83
<PAGE>
specified in the "PSA Standard Formulas." The Macaulay Duration is calculated as
the present value weighted average time to receive future payments of principal
and interest, and the PSA Standard Formula modified duration is calculated by
dividing the Macaulay Duration by the appropriate semi-annual compounding
factor. The duration of a security may be calculated according to various
methodologies; accordingly, no representation is made by the Depositor or any
other person that the "modified duration" approach used herein is appropriate.
Duration, like yield, will be affected by the prepayment rate of the Mortgage
Loans and extensions in respect of Balloon Payments that actually occur during
the life of the Class A, Class B, Class C, Class D and Class E Certificates and
by the actual performance of the Mortgage Loans, all of which may differ, and
may differ significantly, from the assumptions used in preparing the Yield
Tables.
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 annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of one or more mortgage loans. As used in the Yield
Tables, the columns headed "0% CPR" assumes that none of the Mortgage Loans is
prepaid in whole or in part before maturity. The columns headed "10% CPR", "20%
CPR", "30% CPR" and "50% CPR," respectively, assume that prepayments are made
each month at those levels of CPR on each Mortgage Loan that is eligible for
prepayment under the Table Assumptions (each such scenario, a "Scenario").
The Yield Tables were derived from calculations based on the following
assumptions (the "Table Assumptions"): (i) no Mortgage Loan prepays during any
applicable Lockout Period or Required Defeasance Period or during any period
when a Prepayment Premium or a Yield Maintenance Charge could be required in
connection with a voluntary prepayment of principal; otherwise, in the case of
each of the Yield Tables, each Mortgage Loan is assumed to prepay at the
indicated level of CPR, with each prepayment being applied on the first day of
the applicable month in which it is assumed to be received, (ii) the
Pass-Through Rates and initial Certificate Balances of the respective Classes of
Sequential Pay Certificates are as described herein, (iii) there are no
delinquencies or defaults with respect to, and no modifications, waivers or
amendments of the terms of, the Mortgage Loans, (iv) there are no Realized
Losses, Additional Trust Fund Expenses or Appraisal Reduction Amounts with
respect to the Mortgage Loans or the Trust Fund, (v) scheduled interest and
principal payments on the Mortgage Loans are timely received, (vi) all Mortgage
Loans have Due Dates on the first day of each month and accrue interest on the
respective basis described herein (i.e., a 30/360 basis or an actual/360 basis),
(vii) all prepayments are accompanied by a full month's interest and there are
no Prepayment Interest Shortfalls, (viii) there are no breaches of either
Seller's representations and warranties regarding its Mortgage Loans, (ix) no
Prepayment Premiums or Yield Maintenance Charges are collected, (x) no party
entitled thereto exercises its right of optional termination of the Trust Fund
described herein, (xi) the Mortgage Loans which have Anticipated Repayment Dates
are repaid in full on their respective Anticipated Repayment Dates, and such
Anticipated Repayment Date for any such Mortgage Loan is deemed to be its
maturity date, (xii) distributions on the Certificates are made on the 18th day
(each assumed to be a business day) of each month, commencing in December 1997,
and (xiii) the Closing Date for the sale of the Offered Certificates is November
25, 1997.
The characteristics of the Mortgage Loans differ in certain respects from
those assumed in preparing the Yield Tables, and the Yield Tables are presented
for illustrative purposes only. In particular, none of the Mortgage Loans permit
voluntary partial prepayments. Thus neither the Mortgage Pool nor any Mortgage
Loan will prepay at any constant rate, and it is unlikely that the Mortgage
Loans will prepay in a manner consistent with the designated Scenario for the
Yield Tables. In addition, there can be no assurance that the Mortgage Loans
will prepay at any particular rate, that the Mortgage Loans will not prepay
(involuntarily or otherwise) during Lockout Periods and/or Required Defeasance
Periods, that the actual pre-tax yields on, or any other payment characteristics
of, any Class of Offered Certificates will correspond to any of the information
shown in the Yield Tables, or that the aggregate purchase prices of the Offered
Certificates will be as assumed. Accordingly, investors must make their own
decisions as to the appropriate assumptions (including prepayment assumptions)
to be used in deciding whether to purchase the Offered Certificates.
S-84
<PAGE>
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class A-3, Class B,
Class C, Class D or Class E Certificate refers to the average amount of time
that will elapse from the assumed Closing Date until each dollar allocable to
principal of such Certificate is distributed to the investor. The weighted
average life of any such Offered Certificate will be influenced by, among other
things, the rate at which principal on the Mortgage Loans is paid or otherwise
collected or advanced and applied to pay principal of such Offered Certificate.
As described herein, the Principal Distribution Amount for each Distribution
Date will generally be distributable first in respect of the Class A-1
Certificates until the Certificate Balance thereof is reduced to zero, and will
thereafter generally be distributable entirely in respect of the Class A-2
Certificates, the Class A-3 Certificates, the Class B Certificates, the Class C
Certificates, the Class D Certificates and the Class E Certificates, in that
order, in each case until the Certificate Balance of such Class of Certificates
is reduced to zero.
The following tables indicate the percentage of the initial Certificate
Balance of each Class of Offered Certificates that would be outstanding after
each of the dates shown and the corresponding weighted average life of each such
Class of Offered Certificates. The tables have been prepared on the basis of the
Table Assumptions. To the extent that the Mortgage Loans or the Certificates
have characteristics that differ from those assumed in preparing the tables, the
Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and/or Class E
Certificates may mature earlier or later than indicated by the tables. In
particular, partial prepayments on the Mortgage Loans in fact are not permitted.
Accordingly, the Mortgage Loans will not prepay at any constant rate, and it is
highly unlikely that the Mortgage Loans will prepay in a manner consistent with
the assumptions described above. 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 Certificate Balances (and
shorten or extend the weighted average lives) shown in the following tables.
Investors are urged to conduct their own analyses of the rates at which the
Mortgage Loans may be expected to prepay.
The tables set forth below were prepared on the basis of the Table
Assumptions and indicate the resulting weighted average lives of each Class of
Offered Certificates (other than the Class IO Certificates) and set forth the
percentages of the initial Certificate Balance of such Class of Offered
Certificates that would be outstanding after each of the dates shown in each
case assuming the indicated level of CPR. For purposes of the following tables,
the weighted average life of an Offered Certificate (other than the Class IO
Certificates) is determined by (i) multiplying the amount of each principal
distribution thereon by the number of years from the assumed Closing Date of
such Certificate to the related Distribution Date, (ii) summing the results and
(iii) dividing the sum by the aggregate amount of the reductions in the
principal balance of such Certificate.
S-85
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-1 CERTIFICATES
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT, YM OR PP-OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100%
November 1998 90 90 89 89 88
November 1999 79 78 78 77 76
November 2000 67 66 65 65 64
November 2001 50 50 50 50 50
November 2002 23 23 23 23 23
November 2003 7 6 6 5 4
November 2004 and thereafter 0 0 0 0 0
Weighted Average Life (in years) 3.7 3.7 3.7 3.6 3.6
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-2 CERTIFICATES
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT, YM OR PP-OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100%
November 1998 100 100 100 100 100
November 1999 100 100 100 100 100
November 2000 100 100 100 100 100
November 2001 100 100 100 100 100
November 2002 100 100 100 100 100
November 2003 100 100 100 100 100
November 2004 51 50 49 48 46
November 2005 41 38 36 34 31
November 2006 29 25 21 18 12
November 2007 and thereafter 0 0 0 0 0
Weighted Average Life (in years) 7.8 7.7 7.6 7.5 7.4
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS A-3 CERTIFICATES
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT, YM OR PP-OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100%
November 1998 100 100 100 100 100
November 1999 100 100 100 100 100
November 2000 100 100 100 100 100
November 2001 100 100 100 100 100
November 2002 100 100 100 100 100
November 2003 100 100 100 100 100
November 2004 100 100 100 100 100
November 2005 100 100 100 100 100
November 2006 100 100 100 100 100
November 2007 0 0 0 0 0
November 2008 and thereafter 0 0 0 0 0
Weighted Average Life (in years) 9.8 9.7 9.7 9.7 9.7
</TABLE>
S-86
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS B CERTIFICATES
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT, YM OR PP-OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100%
November 1998 100 100 100 100 100
November 1999 100 100 100 100 100
November 2000 100 100 100 100 100
November 2001 100 100 100 100 100
November 2002 100 100 100 100 100
November 2003 100 100 100 100 100
November 2004 100 100 100 100 100
November 2005 100 100 100 100 100
November 2006 100 100 100 100 100
November 2007 100 100 100 100 100
November 2008 75 75 74 74 73
November 2009 52 51 50 49 49
November 2010 25 24 23 23 22
November 2011 0 0 0 0 0
November 2012 and thereafter 0 0 0 0 0
Weighted average life (in years) 12.0 12.0 12.0 12.0 11.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS C CERTIFICATES
0% CPR DURING LOCKOUT, YM OR PP-OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100%
November 1998 100 100 100 100 100
November 1999 100 100 100 100 100
November 2000 100 100 100 100 100
November 2001 100 100 100 100 100
November 2002 100 100 100 100 100
November 2003 100 100 100 100 100
November 2004 100 100 100 100 100
November 2005 100 100 100 100 100
November 2006 100 100 100 100 100
November 2007 100 100 100 100 100
November 2008 100 100 100 100 100
November 2009 100 100 100 100 100
November 2010 100 100 100 100 100
November 2011 98 97 96 96 95
November 2012 and thereafter 0 0 0 0 0
Weighted average life (in years) 14.6 14.6 14.5 14.5 14.4
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS D CERTIFICATES
0% CPR DURING LOCKOUT, YM OR PP-OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing Date 100% 100% 100% 100% 100%
November 1998 100 100 100 100 100
November 1999 100 100 100 100 100
November 2000 100 100 100 100 100
November 2001 100 100 100 100 100
November 2002 100 100 100 100 100
November 2003 100 100 100 100 100
November 2004 100 100 100 100 100
November 2005 100 100 100 100 100
November 2006 100 100 100 100 100
November 2007 100 100 100 100 100
November 2008 100 100 100 100 100
November 2009 100 100 100 100 100
November 2010 100 100 100 100 100
November 2011 100 100 100 100 100
November 2012 and thereafter 0 0 0 0 0
Weighted average life (in years) 14.9 14.9 14.9 14.9 14.8
</TABLE>
S-87
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF THE
CLASS E CERTIFICATES
<TABLE>
<CAPTION>
0% CPR DURING LOCKOUT, YM OR PP-OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Closing Date ............................ 100% 100% 100% 100% 100%
November 1998 ........................... 100 100 100 100 100
November 1999 ........................... 100 100 100 100 100
November 2000 ........................... 100 100 100 100 100
November 2001 ........................... 100 100 100 100 100
November 2002 ........................... 100 100 100 100 100
November 2003 ........................... 100 100 100 100 100
November 2004 ........................... 100 100 100 100 100
November 2005 ........................... 100 100 100 100 100
November 2006 ........................... 100 100 100 100 100
November 2007 ........................... 100 100 100 100 100
November 2008 ........................... 100 100 100 100 100
November 2009 ........................... 100 100 100 100 100
November 2010 ........................... 100 100 100 100 100
November 2011 ........................... 100 100 100 100 100
November 2012 and thereafter ............ 0 0 0 0 0
Weighted average life (in years) ........ 15.0 15.0 15.0 15.0 15.0
</TABLE>
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by the Depositor to purchase the Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates, Willkie Farr & Gallagher,
counsel to the Depositor, will deliver its opinion generally to the effect that,
assuming compliance with all provisions of the Pooling and Servicing Agreement,
for federal income tax purposes, portions of the Trust Fund designated in the
Pooling and Servicing Agreement as "REMIC I," "REMIC II" and "REMIC III,"
respectively, will each qualify as a REMIC under the Code. For federal income
tax purposes, (a) the separate noncertificated regular interests in REMIC I will
be the "regular interests" in REMIC I and will constitute the assets of REMIC
II, (b) the Class R-I Certificates will be the sole class of "residual
interests" in REMIC I, (c) the separate noncertificated regular interests in
REMIC II will be the "regular interests" in REMIC II and will constitute the
assets of REMIC III, (d) the Class R-II Certificates will be the sole class of
"residual interest" in REMIC II, (e) the REMIC Regular Certificates (or, in the
case of the Class IO Certificates, the Class IO Components) will be the "regular
interests" in REMIC III and generally will be treated as debt instruments of
REMIC III, and (f) the Class R-III Certificates will be the sole class of
"residual interests" in REMIC III. For federal income tax purposes the Class IO
Certificates will consist of fourteen components, each corresponding to one of
the Classes of Sequential Pay Certificates constituting "regular interests." See
"Certain Federal Income Tax Consequences--REMICs" in the Prospectus.
The Class A-1, Class A-2, Class A-3, Class B, Class C, Class D and Class E
Certificates will not, and the Class IO Certificates will, be treated as having
been issued with original issue discount for federal income tax reporting
purposes. The prepayment assumption that will be used in determining the rate of
accrual of original issue discount, market discount and premium, if any, for
federal income tax purposes will be based on the assumption that subsequent to
the date of any determination the Mortgage Loans will prepay at a rate equal to
a CPR of 0%, except that it is assumed that the ARD Loans pay their respective
outstanding principal balances on their related Anticipated Repayment Dates. No
representation is made that the Mortgage Loans will prepay at that rate or at
any other rate. See "Certain Federal Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Regular Certificates--Original Issue Discount" in the
Prospectus.
S-88
<PAGE>
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a
Certificateholder (in particular, the holder of a Class IO Certificate), the
amount of original issue discount allocable to such period would be zero and
such Certificateholder will be permitted to offset such negative amount only
against future original issue discount (if any) attributable to such
Certificates. Although the matter is not free from doubt, a holder of a Class IO
Certificate may be permitted to deduct a loss to the extent that his or her
respective remaining basis in such Certificate exceeds the maximum amount of
future payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
The Internal Revenue Service (the "IRS") has issued regulations (the "OID
Regulations") under Sections 1271 to 1275 of the Code generally addressing the
treatment of debt instruments issued with original issue discount. The OID
Regulations in some circumstances permit the holder of a debt instrument to
recognize original issue discount under a method that differs from that used by
the issuer. Accordingly, it is possible that the holder of an Offered
Certificate may be able to select a method for recognizing original issue
discount that differs from that used by the Trustee in preparing reports to the
Certificateholders and the IRS. Prospective purchasers of Offered Certificates
are advised to consult their tax advisors concerning the tax treatment of such
Certificates.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(5)(A) of the Code. In addition, interest (including
original issue discount) on the Offered Certificates will be interest described
in Section 856(c)(3)(B) of the Code. However, the Offered Certificates will
generally only be considered assets described in Section 7701(a)(19)(C) of the
Code to the extent that the Mortgage Loans are secured by residential property
and, accordingly, investment in the Offered Certificates may not be suitable for
certain thrift institutions.
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed to the holders of the Offered Certificates as described herein.
It is not entirely clear under the Code when the amount of a Prepayment Premium
or Yield Maintenance Charge should be taxed to the holder of an Offered
Certificate, but it is not expected, for federal income tax reporting purposes,
that Prepayment Premiums and Yield Maintenance Charges will be treated as giving
rise to any income to the holders of the Offered Certificates prior to the
Master Servicer's actual receipt of a Prepayment Premium or Yield Maintenance
Charge. It appears that Prepayment Premiums and Yield Maintenance Charges, if
any, will be treated as ordinary income rather than capital gain. However, that
is not entirely clear and Certificateholders should consult their own tax
advisors concerning the treatment of Prepayment Premiums and Yield Maintenance
Charges.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Certain Federal Income Tax
Consequences--REMICs" in the Prospectus.
ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and 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") should carefully review with its legal
advisors 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.
Lehman Brothers Inc. ("Lehman Brothers") has received from the DOL an
individual prohibited transaction exemption (the "Exemption"), which generally
exempts from the application of the prohibited transaction provisions of
Sections 406(a) and (b) and 407(a) of ERISA, and the excise taxes imposed on
such prohibited transactions pursuant to Sections 4975(a) and (b) of the Code,
the purchase, sale and holding of mortgage pass-through certificates
underwritten by an Underwriter, as hereinafter defined, provided that certain
conditions set forth in the Exemption are satisfied. For purposes of this
discussion, the term "Underwriter" shall include (a) Lehman Brothers, (b) any
person directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with Lehman Brothers, and (c) any member
of the underwriting syndicate or selling group of which Lehman Brothers or a
person described in (b) is a manager or co-manager with respect to the Offered
Certificates.
S-89
<PAGE>
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the purchase, sale and holding of Class A-1, Class A-2,
Class A-3 and Class IO Certificates to be eligible for exemptive relief
thereunder. First, the acquisition of the 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 such Certificates must not be subordinated to the rights
and interests evidenced by the other certificates of the same trust. Third, such
Certificates at the time of acquisition by the Plan must be rated in one of the
three highest generic rating categories by Standard & Poor's, DCR, Moody's or
Fitch Investors Service, L.P. ("Fitch"). Fourth, the Trustee cannot be an
affiliate of any other member of the "Restricted Group," which consists of
either Underwriter, the Depositor, the Master Servicer, a Special Servicer, the
Trustee, the Fiscal Agent, any sub-servicer, and any borrower with respect to
Mortgage Loans constituting more than 5.0% of the aggregate unamortized
principal balance of the Mortgage Loans as of the date of initial issuance of
such Certificates. Fifth, the sum of all payments made to and retained by either
Underwriter must represent not more than reasonable compensation for
underwriting such 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, a 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 of the Securities and Exchange Commission
under the Securities Act.
Because none of the Class A-1, Class A-2, Class A-3 and Class IO
Certificates are subordinated with respect to the allocation of Realized Losses
and Additional Trust Fund Expenses 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 Class A-1, Class A-2,
Class A-3 and Class IO Certificates that they be rated not lower than "AAA" (or
the equivalent) by each of DCR, Moody's and, except for the Class IO
Certificates, Standard & Poor's; thus, the third general condition set forth
above is satisfied with respect to such 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 any such
Certificate in the secondary market must make its own determination that, at the
time of such purchase, such Certificate continue to satisfy the third and fourth
general conditions set forth above. A fiduciary of a Plan contemplating the
purchase of any such Certificate must make its own determination that the first,
fifth and sixth general conditions set forth above will be satisfied with
respect to such 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
Standard & Poor's, Moody's, DCR or Fitch for at least one year prior to the
Plan's acquisition of such 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 such Certificates. The
Depositor has confirmed to its satisfaction that such requirements have been
satisfied as of the date hereof.
If the general conditions of the Exemption are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in connection
with (i) the direct or indirect sale, exchange or transfer of such Certificates
in the initial issuance of Certificates between the Depositor or an Underwriter
and a Plan when the Depositor, an Underwriter, Trustee, Master Servicer, Special
Servicer, sub-servicer or borrower is a "Party in Interest," as defined in the
Prospectus, with respect to the investing Plan, (ii) the direct or indirect
acquisition or disposition in the secondary market of Senior Certificates by a
Plan and (iii) the holding of Senior Certificates by a Plan. However, no
exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2)
and 407 of ERISA for the acquisition or holding of such Certificate on behalf of
an "Excluded Plan" by any person who has discretionary authority or renders
investment advice with respect to the assets of such Excluded Plan. For purposes
hereof, an Excluded Plan is a Plan sponsored by any member of the Restricted
Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of
the Code in connection with (1) the direct or indirect sale, exchange or
transfer of Senior Certificates in the initial issuance of Certificates between
the Depositor or an Underwriter and a Plan when the person who has discretionary
S-90
<PAGE>
authority or renders investment advice with respect to the investment of such
Plan's assets in such Certificates is (a) a borrower with respect to 5.0% or
less of the fair market value of the Mortgage Loans or (b) an affiliate of such
a person, (2) the direct or indirect acquisition or disposition in the secondary
market of Senior Certificates by such Plan and (3) the holding of such
Certificates by such Plan.
Further, 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 Pool.
The Depositor expects that the specific conditions of the Exemption required for
this purpose will be satisfied with respect to the Senior Certificates.
The Exemption also may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of
the Code if such restrictions are deemed to otherwise apply merely because a
person is deemed to be a Party in Interest with respect to an investing Plan by
virtue of providing services to the Plan (or by virtue of having certain
specified relationships to such a person) solely as a result of the Plan's
ownership of Senior Certificates. A purchaser of any such Certificate should be
aware, however, that even if the conditions specified in one or more exemptions
are satisfied, the scope of relief provided by an exemption may not cover all
acts that may be considered prohibited transactions.
Before purchasing any 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. See "ERISA CONSIDERATIONS" in
the Prospectus.
THE CHARACTERISTICS OF THE CLASS B, CLASS C, CLASS D AND CLASS E
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION. ACCORDINGLY,
CERTIFICATES OF THOSE CLASSES MAY NOT BE ACQUIRED BY A PLAN, OTHER THAN AN
INSURANCE COMPANY GENERAL ACCOUNT, WHICH MAY BE ABLE TO RELY ON SECTION III OF
PTE 95-60 (DISCUSSED BELOW).
Section III of Prohibited Transaction Class Exemption 95-60 ("PTE 95-60")
exempts from the application of the prohibited transaction provisions of
Sections 406(a), 406(b) and 407(a) of ERISA and Section 4975 of the Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust Fund) in which an insurance company general account has
an interest as a result of its acquisition of certificates issued by the trust,
provided that certain conditions are satisfied. If these conditions are met,
insurance company general accounts would be allowed to purchase classes of
Certificates (such as the Class B, Class C, Class D and Class E Certificates)
which do not meet the requirements of the Exemption solely because they (i) are
subordinated to other classes of Certificates in the Trust Fund and/or (ii) have
not received a rating at the time of the acquisition in one of the three highest
rating categories from Standard & Poor's, Moody's, DCR or Fitch. All other
conditions of the Exemption would have to be satisfied in order for PTE 95-60 to
be available. Before purchasing Class B, Class C, Class D or Class E
Certificates, an insurance company general account seeking to rely on Section
III of PTE 95-60 should itself confirm that all applicable conditions and other
requirements have been satisfied.
Insurance company general accounts purchasing any Class of Certificates may
also be able to rely on relief from certain fiduciary provisions of ERISA
provided under Section 401(c) of ERISA. Insurance companies seeking to rely on
such relief should independently determine whether, and the extent to which,
such relief is available.
LEGAL INVESTMENT
Any Offered Certificates rated in the category of "AAA" or "AA" (or the
equivalent) by at least one Rating Agency will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"). All other Offered Certificates (the "Non-SMMEA
Certificates") will not constitute "mortgage related securities" for purposes of
SMMEA. As a result, the appropriate characterization of the Non-SMMEA
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase the Non-SMMEA
Certificates of any Class, may be subject to significant interpretative
uncertainties. In addition, institutions whose investment activities are subject
to review by federal or state regulatory
S-91
<PAGE>
authorities may be or may become subject to restrictions on the investment by
such institutions in certain forms of mortgage related securities. Investors
should consult their own legal advisors to determine whether and to what extent
the Offered Certificates constitute legal investments for them. See "Legal
Investment" in the Prospectus.
The Depositor makes no representation as to the ability of particular
investors to purchase the Offered Certificates under applicable legal investment
or other restrictions. All institutions whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for them or are subject to investment, capital or other
restrictions. See "Legal Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Depositor and the Underwriters, the
Depositor has agreed to sell to each Underwriter, and each Underwriter has
agreed to purchase one-half of the respective Certificate Balances of each class
of Offered Certificates.
In the Underwriting Agreement, the Underwriters have severally agreed to
purchase all of the Offered Certificates if any are purchased. In the event of a
default by either Underwriter, the Underwriting Agreement provides that the
purchase commitment of the non-defaulting Underwriter may be increased. Proceeds
to the Depositor from the sale of the Offered Certificates, before deducting
expenses payable by the Depositor, will be approximately $2,167,640,662, which
includes accrued interest.
Distribution of the Offered Certificates will be made by each Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Each Underwriter may effect such transactions
by selling the Offered Certificates to or through dealers, and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from such Underwriter. In connection with the purchase and sale of
the Offered Certificates, the Underwriters may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. Each
Underwriter and any dealers that participate with either Underwriter in the
distribution of the Offered Certificates may be deemed to be underwriters and
any profit on the resale of the Offered Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
The Depositor also has been advised by the Underwriters that each of them,
through one or more of its affiliates, currently intends to make a market in the
Offered Certificates; however, neither Underwriter has any obligation to do so,
any market making may be discontinued at any time and there can be no assurance
that an active public market for the Offered Certificates will develop. See
"Risk Factors--Limited Liquidity" herein and in the Prospectus.
The Depositor has agreed to indemnify each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to each Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Willkie Farr
& Gallagher, New York, New York, and certain legal matters will be passed upon
for the Underwriters by Sidley & Austin, New York, New York.
RATINGS
It is a condition of their issuance that each of the Class A-1, Class A-2
and Class A-3 Certificates be rated not lower than "Aaa" by Moody's, "AAA" by
DCR and "AAA" by Standard & Poor's, that the Class IO Certificates
S-92
<PAGE>
be rated not lower than "Aaa" by Moody's and "AAA" by DCR, that the Class B
Certificates be rated not lower than "Aa2" by Moody's, "AA" by DCR and "AA" by
Standard & Poor's, that the Class C Certificates be rated not lower than "A2" by
Moody's, "A" by DCR and "A" by Standard & Poor's, that the Class D Certificates
be rated not lower than "Baa2" by Moody's, "BBB" by DCR and "BBB" by Standard &
Poor's and that the Class E Certificates be rated not lower than "Baa3" by
Moody's, "BBB-" by DCR and "BBB-" by Standard & Poor's.
The ratings on the Offered Certificates address the likelihood of timely
receipt by holders thereof of all distributions of interest to which they are
entitled and, except in the case of the Class IO Certificates, distributions of
principal by the Rated Final Distribution Date set forth on the cover page of
this Prospectus Supplement. The ratings take into consideration the credit
quality of the Mortgage Pool, structural and legal aspects associated with the
Offered Certificates, and the extent to which the payment stream from the
Mortgage Pool is adequate to make payments required under the Offered
Certificates. A security rating does not represent any assessment of (i) the
likelihood or frequency of principal prepayments or default interest 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 and Yield Maintenance Charges will be received. Also, 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 Class IO Certificates
might not fully recover their investment in the event of rapid prepayments of
the Mortgage Loans (including both voluntary and involuntary prepayments).
Therefore, such security rating addresses credit risk and not the risk of
prepayment. As described herein, the amounts payable with respect to the Class
IO Certificates consist only of interest. If the entire Mortgage Pool were to
prepay in the initial month, with the result that the holders of the Class IO
Certificates receive only a single month's interest and thus suffer a nearly
complete loss of their investment, all amounts "due" to such Certificateholders
will nevertheless have been paid, and such result is consistent with the ratings
received on the Class IO Certificates. The Class IO Certificates' notional
amount upon which interest is calculated is reduced by the allocation of
Realized Losses and prepayments, whether voluntary or involuntary. The rating
does not address the timing or magnitude of reductions of the notional amounts
of the Class IO Components, but only the obligation to pay interest timely on
the notional amount as reduced from time to time. Accordingly, the ratings of
the Class IO Certificates should be evaluated independently from similar ratings
on other types of securities.
A downgrade, qualification or withdrawal of a rating with respect to the
Enhancement Insurer, a provider of a residual value insurance policy, a Tenant
or a Guarantor may adversely affect the ratings of the Offered Certificates.
There can be no assurance that any rating agency not requested to rate the
Offered Certificates will not nonetheless issue a rating to any or all Classes
thereof and, if so, what such rating or ratings 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 rating assigned thereto by any
of the Rating Agencies.
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. See "Risk
Factors--Limited Nature of Ratings" in the Prospectus.
S-93
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
30/360 Basis .................................................. S-34
Accrued Certificate Interest .................................. S-69
actual/360 Basis .............................................. S-34
Additional Rights ............................................. S-38
Additional Servicing Fee ...................................... S-59
Additional Servicing Fee Rate ................................. S-59
Additional Trust Fund Expenses ................................ S-13
Administrative Cost Rate ...................................... S-41
Advance ....................................................... S-73
Anticipated Repayment Date .................................... S-34
Appraisal Reduction Amount .................................... S-74
ARD Loans ..................................................... S-34
Assumed Final Distribution Date ............................... S-78
Assumed Scheduled Payment ..................................... S-19
Available Distribution Amount ................................. S-15, S-66
Balloon Loans ................................................. S-9
Balloon Payment ............................................... S-9
Bond-Type Leases .............................................. S-38
Casualty or Condemnation Rights ............................... S-38
Certificate Balance ........................................... S-2
Certificate Owner ............................................. S-7, S-63
Certificateholders ............................................ S-12, S-65
Certificates .................................................. S-1, S-6, S-63
Class ......................................................... S-1, S-6, S-63
Class A Certificates .......................................... S-6, S-63
Class IO Component ............................................ S-13, S-64
Closing Date .................................................. S-7, S-53
Code .......................................................... S-8, S-33
Collection Period ............................................. S-65
Compensating Interest Payment ................................. S-21, S-58
Controlling Class of Sequential Pay Certificates .............. S-57
Controlling Class Representative .............................. S-6, S-57
Corrected Mortgage Loan ....................................... S-57
Credit Lease .................................................. S-11
Credit Lease Default .......................................... S-38
Credit Lease Loans ............................................ S-11
Credit Lease Table ............................................ S-37
Custodian ..................................................... S-53
Cut-off Date .................................................. S-2
Cut-off Date Balance .......................................... S-8
Cut-off Date DSC Ratio ........................................ S-39
Cut-off Date LTV Ratio ........................................ S-40
DCR ........................................................... S-25
Defeasance Collateral ......................................... S-10
Definitive Offered Certificate ................................ S-7, S-63
Depositor ..................................................... S-1
Determination Date ............................................ S-19
Discount Rate ................................................. S-71
Distributable Certificate Interest ............................ S-18
Distribution Date ............................................. S-2, S-15, S-65
Distribution Date Statement ................................... S-74
S-94
<PAGE>
PAGE
DOL ........................................................... S-24
Double Net Leases ............................................. S-38
DSC Ratio ..................................................... S-39
DTC ........................................................... S-7, S-63
DTC Participants .............................................. S-62
Enhancement Insurer ........................................... S-31
ERISA ......................................................... S-24, S-89
Excluded Class ................................................ S-71
Exemption ..................................................... S-89
Final Recovery Determination .................................. S-75
First Principal Payment Date .................................. S-83
First Union Capital ........................................... S-6
Fitch ......................................................... S-90
Form 8-K ...................................................... S-55
FUNB .......................................................... S-6
FUNB Loans .................................................... S-12, S-33
Guarantor ..................................................... S-30
HUD ........................................................... S-36
Initial Pool Balance .......................................... S-2, S-7
IRS ........................................................... S-89
Last Principal Payment Date ................................... S-83
Lease Enhancement Policies .................................... S-11
Lehman Brothers ............................................... S-89
Lehman Loans .................................................. S-12, S-33
Lehman Seller ................................................. S-7
Lockout Period ................................................ S-10, S-34
Loss of Rents ................................................. S-39
Maintenance Rights ............................................ S-38
Majority Subordinate Certificateholder ........................ S-80
Master Servicer ............................................... S-2, S-56
Master Servicing Fee .......................................... S-58
Master Servicing Fee Rate ..................................... S-58
Monthly Payments .............................................. S-9
Monthly Rental Payments ....................................... S-11
Moody's ....................................................... S-25
Mortgage ...................................................... S-32
Mortgage File ................................................. S-53
Mortgage Loan Purchase Agreements ............................. S-53
Mortgage Loan Seller .......................................... S-2
Mortgage Loans ................................................ S-1
Mortgage Note ................................................. S-32
Mortgage Pool ................................................. S-1
Mortgage Rates ................................................ S-9
Mortgaged Property ............................................ S-2, S-8, S-32
Net Aggregate Prepayment Interest Shortfall ................... S-21, S-69
Net Cash Flow ................................................. S-39
Net Mortgage Rate ............................................. S-14, S-65
Nonrecoverable P&I Advance .................................... S-73
Non-SMMEA Certificates ........................................ S-26, S-91
Offered Certificates .......................................... S-1, S-6, S-63
OID Regulations ............................................... S-89
P&I Advance ................................................... S-20, S-73
Participants .................................................. S-7, S-63
S-95
<PAGE>
PAGE
Pass-Through Rate ............................................. S-2
Plan .......................................................... S-24, S-89
Pooling and Servicing Agreement ............................... S-13, S-63
Prepayment Interest Excess .................................... S-21, S-58
Prepayment Interest Shortfall ................................. S-21,S-58
Prepayment Premiums ........................................... S-70
Primary Term .................................................. S-37
Principal Recovery Fee ........................................ S-59
Principal Distribution Amount ................................. S-18
Private Certificates .......................................... S-6, S-63
PTE 95-60 ..................................................... S-91
Purchase Price ................................................ S-53
Qualified Appraiser ........................................... S-74
Rated Final Distribution Date ................................. S-1, S-79
Rating Agencies ............................................... S-25
Realized Losses ............................................... S-13
Reimbursement Rate ............................................ S-20, S-73
Related Proceeds .............................................. S-73
REMIC ......................................................... S-2, S-23
REMIC Administrator ........................................... S-80
"REMIC I" "REMIC II" and "REMIC III" ..................... S-2
REMIC Regular Certificates .................................... S-6, S-63
REMIC Residual Certificates ................................... S-6, S-63
Rental Property ............................................... S-39
REO Extension ................................................. S-62
REO Mortgage Loan ............................................. S-70
REO Property .................................................. S-22, S-57
REO Tax ....................................................... S-62
Required Appraisal Date ....................................... S-74
Required Appraisal Loan ....................................... S-74
Required Defeasance Period .................................... S-82
Scenario ...................................................... S-84
Scheduled Payment ............................................. S-19, S-70
Section 42 Properties ......................................... S-8, S-33, S-35
Securities Act ................................................ S-6
Senior Certificates ........................................... S-21, S-71
Sequential Pay Certificates ................................... S-6, S-63
Servicing Fees ................................................ S-58
Servicing Transfer Event ...................................... S-57
SMMEA ......................................................... S-26, S-91
Special Servicer .............................................. S-2
Special Servicing Fee ......................................... S-58
Special Servicing Fee Rate .................................... S-58
Specially Serviced Mortgage Loans ............................. S-57
Specially Serviced Trust Fund Assets .......................... S-57
Standard & Poor's ............................................. S-25
Stated Principal Balance ...................................... S-14, S-65
Subordinate Certificates ...................................... S-21, S-71
Table Assumptions ............................................. S-84
Tax Credits ................................................... S-35
Tenant ........................................................ S-11
Tenants ....................................................... S-11
Triple Net Leases ............................................. S-38
S-96
<PAGE>
PAGE
Trust Fund .................................................... S-1, S-13, S-63
Trustee ....................................................... S-2
Underwriters .................................................. S-1, S-89
Underwriting Agreement ........................................ S-92
Voting Rights ................................................. S-79
Weighted Average Net Mortgage Rate ............................ S-14, S-66
Yield Tables .................................................. S-83
S-97
<PAGE>
<TABLE>
<CAPTION>
CONTROL ZIP
NO. PROPERTY NAME ADDRESS CITY STATE CODE
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
1 Rentar 66-26 Metropolitan Avenue Middle Village NY 11379
2 Plainview Shopping Center South Oyster Bay Road & Woodbury Road Plainview NY 11714
3 Centreville Square 5900 Centreville Crest Lane Centreville VA 22020
4 Soho Court 299-307 Elizabeth Street New York NY 10012
5 Blue Cross Blue Shield 2800 East 6500 South Salt Lake City UT 84121
- -----------------------------------------------------------------------------------------------------------------------------------
6 Fountainhead Apartments 293-297 Turnpike Road Westborough MA 01581
7 Drury Portfolio #1
7a Drury Inn - Columbia 1000 Knipp Street Columbia MO 65203
7b Drury Inn - Terre Haute 3040 South U.S. Highway 41 Terre Haute IN 47802
- -----------------------------------------------------------------------------------------------------------------------------------
7c Drury Inn - Indianapolis 9320 N. Michigan Road Indianapolis IN 46268
7d Drury Inn - St. Peters 80 Mid Rivers Mall Drive St. Peters MO 63376
7e Hampton Inn - St. Louis airport 10800 Pear Tree Lane St. Louis MO 63074
8 Sutton Place 23275 Riverside Drive Southfield MI 48034
- -----------------------------------------------------------------------------------------------------------------------------------
9 Town Square Wheaton 199 Town Square Wheaton IL 60187
10 San Pedro Plaza N. Side of Loop 410 E. of San Pedro Blvd. San Antonio TX 78212
11 Office Depot - Delray Beach 2300 So. Congress St. Delray Beach FL 33426
12 Cypress Palms & Sabal Palms
- -----------------------------------------------------------------------------------------------------------------------------------
12a Cypress Palms Assisted Living Center 400 Lake Avenue Largo FL 34641
12b Sabal Palms Health Care Center 499 Alternate Keene Road Largo FL 34641
13 Pinole Vista Crossing IH-80 & Fitzgerald Drive Pinole CA 94564
14 675 Sixth Avenue 675 Sixth Ave. New York NY 10010
- -----------------------------------------------------------------------------------------------------------------------------------
15 Citrus Center Office Building 255 S. Orange Avenue Orlando FL 32801
16 Hartford Fire - Farmington 8 Farm Springs Road Farmington CT 06032
17 Campus Club 4000 Southwest 37th Boulevard Gainesville FL 32608
18 Park Esplanade Apartments 3443 Esplanade Ave. New Orleans LA 70119
- -----------------------------------------------------------------------------------------------------------------------------------
19 Glazer Portfolio
19a Allentown-Glazer 4701-4797 Tilghman St. Allentown PA 18104
19b K-Mart Plaza (Chambersburg-Glazer) 1001-1025 Wayne Ave. Chambersburg PA 17201
19c Rt. 30 Mall (Glazer) 341 Cochituate Rd. Framingham MA 01701
19d Hills Plaza (Glazer) 3930-3942 Murdoch Ave. Parkersburg WV 26101
- -----------------------------------------------------------------------------------------------------------------------------------
19e Perry Plaza Shopping Center (Glazer) 2202-2264 Broad Street Erie PA 16503
19f Ridge Plaza Seneca-Glazer 277-345 Ridge Road East Rochester NY 14621
19g Vineland-Glazer 3820 South Delsea Dr. Vineland NJ 08360
19h Acme Plaza (Reading) Glazer 600-634 Greenwich St. Reading PA 19601
- -----------------------------------------------------------------------------------------------------------------------------------
20 Cross Island Plaza 133-33 Brookville Boulevard Rosedale NY 11422
21 The Hamptons 3070 South Nellis Boulevard Las Vegas NV 89121
22 Noland Fashion Square US 40 Highway and Nolan Road Independence MO 64055
23 Sheraton Orlando North 600 North Lake Destiny Drive Maitland FL 32751
24 Olive Tree 6201 West Olive Avenue Glendale AZ 85032
- -----------------------------------------------------------------------------------------------------------------------------------
25 Saddleback Apts. 4722 East Bell Road Phoenix AZ 85032
26 Drury Portfolio #2
26a Drury Inn & Suites Springfield 3180 South Dirksen Parkway Springfield IL 62703
26b Drury Houston Galleria 1615 West Loop South Houston TX 77027
- -----------------------------------------------------------------------------------------------------------------------------------
26c Drury Inn - Woodlands 28099 I-45 North The Woodlands TX 77380
27 Hylan Commons Hylan Boulevard Staten Island NY 10305
28 Eatoncrest 3300 Eaton Crest Drive Eatontown NJ 07724
29 625 Sixth Avenue 625 Sixth Ave. New York NY 10011
- -----------------------------------------------------------------------------------------------------------------------------------
30 375 and 377 Ghent Road 375 and 377 Ghent Road Akron OH 44333
31 Chapel Hill Apartments 1500 Worcester Road Framingham MA 01701
32 Royal Palms Senior Residence 200 Lake Ave, N.E. Largo FL 34641
33 Abrams Run Apartments 232 Long Road King of Prussia PA 19406
34 Brandon Crossings Shopping Center SW Corner of SR 60 & I75 Brandon FL 33619
- -----------------------------------------------------------------------------------------------------------------------------------
35 Trexlertown Shopping Center 7150 Hamilton Blvd. Upper and Lower Macungie PA 18087
36 Renaissance Parc 5151 Verde Valley Lane Dallas TX 75240
37 Berkley Square 4701 Park Boulevard Plano TX 75093
39 NorthPark Executive Suites Hotel 7685 Northcross Drive Austin TX 78757
40 Serramonte Plaza 329-391 Gellert Boulevard Daly City CA 94015
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUMULATIVE
CROSSED COLLATERALIZED % OF AGGREGATE % OF INITIAL ADMINIS- INTEREST
CONTROL LOANS CONTROL ORIGINAL CUT-OFF DATE CUT-OFF DATE POOL MORTGAGE TRATIVE ACCRUAL
NO. NOS. BALANCE BALANCE BALANCE BALANCE RATE COST RATE METHOD
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $45,500,000 $45,416,841 2.06% 2.06% 8.3400% 0.1025% Act/360
2 38,206,000 38,206,000 1.73 3.79 7.4700 0.1025 30/360
3 35,250,000 35,250,000 1.60 5.39 7.6250 0.1025 30/360
4 33,500,000 33,449,419 1.52 6.91 7.4300 0.1025 30/360
5 30,000,000 30,000,000 1.36 8.27 7.1850 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
6 29,200,000 29,121,268 1.32 9.60 8.5500 0.1275 Act/360
7 29,000,000 29,000,000 1.32 10.91 7.9600 0.1025 Act/360
7a 7b,7c,7d,7e
7b 7a,7c,7d,7e
- ------------------------------------------------------------------------------------------------------------------------------------
7c 7a,7b,7d,7e
7d 7a,7b,7c,7e
7e 7a,7b,7c,7d
8 29,000,000 28,887,122 1.31 12.22 8.2500 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
9 28,850,000 28,773,665 1.31 13.53 8.1200 0.1025 30/360
10 28,687,500 28,670,846 1.30 14.83 7.2400 0.1025 Act/360
11 24,146,602 24,140,144 1.10 15.93 8.4100 0.1025 30/360
12 23,400,000 23,372,304 1.06 16.99 8.6310 0.1775 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
12a 12b,32
12b 12a,32
13 23,000,000 22,988,718 1.04 18.03 7.7500 0.1525 Act/360
14 23,000,000 22,901,796 1.04 19.07 8.4200 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
15 21,375,000 21,315,575 0.97 20.04 7.9100 0.1525 Act/360
16 20,142,693 20,078,226 0.91 20.95 7.0650 0.1025 30/360
17 20,000,000 20,000,000 0.91 21.85 7.4500 0.1025 Act/360
18 20,000,000 19,977,150 0.91 22.76 7.9400 0.1825 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
19 20,000,000 19,958,798 0.91 23.67 8.9300 0.1025 Act/360
19a 19b,19c,19d,19e,19f,19g,19h
19b 19a,19c,19d,19e,19f,19g,19h
19c 19a,19b,19d,19e,19f,19g,19h
19d 19a,19b,19c,19e,19f,19g,19h
- ------------------------------------------------------------------------------------------------------------------------------------
19e 19a,19b,19c,19d,19f,19g,19h
19f 19a,19b,19c,19d,19e,19g,19h
19g 19a,19b,19c,19d,19e,19f,19h
19h 19a,19b,19c,19d,19e,19f,19g
- ------------------------------------------------------------------------------------------------------------------------------------
20 19,125,000 19,093,718 0.87 24.53 7.8800 0.1025 Act/360
21 18,700,000 18,665,259 0.85 25.38 8.2900 0.1275 Act/360
22 18,525,000 18,489,317 0.84 26.22 8.2500 0.1775 30/360
23 18,000,000 17,970,413 0.82 27.04 8.6900 0.1625 Act/360
24 17,360,000 17,360,000 0.79 27.82 8.1400 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
25 17,342,000 17,342,000 0.79 28.61 8.1400 0.1025 30/360
26 16,965,000 16,965,000 0.77 29.38 7.9200 0.1025 Act/360
26a 26b,26c
26b 26a,26c
- ------------------------------------------------------------------------------------------------------------------------------------
26c 26a,26b
27 16,560,000 16,560,000 0.75 30.13 7.4700 0.1025 30/360
28 16,500,000 16,491,481 0.75 30.88 7.6000 0.1025 Act/360
29 16,500,000 16,460,174 0.75 31.63 8.4200 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
30 16,300,000 16,276,911 0.74 32.37 8.2500 0.1025 Act/360
31 14,900,000 14,859,825 0.67 33.04 8.5500 0.1275 Act/360
32 12a,12b 14,800,000 14,780,274 0.67 33.71 8.0500 0.1775 30/360
33 14,000,000 14,000,000 0.64 34.35 7.5100 0.1025 30/360
34 13,500,000 13,482,188 0.61 34.96 8.1000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
35 13,100,000 13,093,282 0.59 35.55 7.6200 0.1025 Act/360
36 12,520,000 12,497,380 0.57 36.12 8.3750 0.1025 Act/360
37 12,500,000 12,488,265 0.57 36.69 8.6500 0.1525 Act/360
39 12,250,000 12,250,000 0.56 37.24 7.6700 0.1025 Act/360
40 12,000,000 11,954,284 0.54 37.78 8.6700 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
FIRST UNION -- LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST 1997-C2
ANNEX A
ORIGINAL REMAINING
TERM TO TERM TO ORIGINAL REMAINING
CONTROL AMORTIZATION MATURITY MATURITY AMORTIZATION AMORTIZATION
NO. TYPE (MOS.) (MOS.) TERM (MOS.) TERM (MOS.)
======================================================================================================================
<S> <C> <C> <C> <C> <C>
1 Amortizing Balloon 120 116 360 356
2 Interest Only then Amortizing Balloon(1) 180 180 312 312
3 Amortizing Balloon 120 120 360 360
4 Amortizing Balloon 180 178 360 358
5 Fully Amortizing 299 299 299 299
- ----------------------------------------------------------------------------------------------------------------------
6 Amortizing Balloon 120 114 360 354
7 Amortizing Balloon 180 180 300 300
7a
7b
- ----------------------------------------------------------------------------------------------------------------------
7c
7d
7e
8 Amortizing Balloon 120 114 360 354
- ----------------------------------------------------------------------------------------------------------------------
9 Amortizing Balloon 180 176 360 356
10 Amortizing Balloon 60 59 360 359
11 Step(3) 236 235 283 282
12 Amortizing Balloon 300 298 360 358
- ----------------------------------------------------------------------------------------------------------------------
12a
12b
13 Amortizing Balloon 180 179 360 359
14 Fully Amortizing 300 295 300 295
- ----------------------------------------------------------------------------------------------------------------------
15 Amortizing Balloon 120 117 300 297
16 Step(3) 179 177 209 207
17 Amortizing Balloon 120 120 360 360
18 Amortizing Balloon 120 118 360 358
- ----------------------------------------------------------------------------------------------------------------------
19 Amortizing Balloon 120 115 360 355
19a
19b
19c
19d
- ----------------------------------------------------------------------------------------------------------------------
19e
19f
19g
19h
- ----------------------------------------------------------------------------------------------------------------------
20 Amortizing Balloon 120 117 360 357
21 Amortizing Balloon 120 116 360 356
22 Amortizing Balloon 180 177 360 357
23 Amortizing Balloon 84 82 300 298
24 Interest Only then Hyper-Amortizing(4) 120 116 360 360
- ----------------------------------------------------------------------------------------------------------------------
25 Interest Only then Hyper-Amortizing(4) 120 116 360 360
26 Amortizing Balloon 180 180 300 300
26a
26b
- ----------------------------------------------------------------------------------------------------------------------
26c
27 Interest Only then Amortizing Balloon(1) 180 180 312 312
28 Fully Amortizing 360 359 360 359
29 Amortizing Balloon 180 175 360 355
- ----------------------------------------------------------------------------------------------------------------------
30 Fully Amortizing 240 239 240 239
31 Amortizing Balloon 120 114 360 354
32 Amortizing Balloon 300 298 360 358
33 Fully Amortizing 360 360 360 360
34 Amortizing Balloon 120 118 360 358
- ----------------------------------------------------------------------------------------------------------------------
35 Amortizing Balloon 120 119 360 359
36 Amortizing Balloon 120 116 360 356
37 Amortizing Balloon 120 118 360 358
39 Amortizing Balloon 120 120 300 300
40 Amortizing Balloon 84 80 300 296
- ----------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ORIGINATION MATURITY BALLOON
NO. DATE DATE BALANCE PROPERTY TYPE PREPAYMENT PROVISIONS
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
1 07/01/97 07/01/07 $41,021,427 Industrial/Retail L(5),5(1),4(1),3(1),2(1.5),O(.5)
2 10/14/97 11/01/12 28,808,275 Retail - Anchored L(5),YM1%(5),3(1),2(1),1(2),O(1)
3 10/15/97 11/01/07 30,678,900 Retail - Anchored L(4),YM1%(5.75),O(.25)
4 08/07/97 09/01/12 25,202,968 Multifamily L(5),7(1),5(1),3(1),1(6.5),O(.5) or DEF
5 10/02/97 10/01/22 - Office - CTL L(10),YM1%(14.916) or DEF
- -----------------------------------------------------------------------------------------------------------------------------
6 05/01/97 05/01/07 26,453,458 Multifamily L(2),YM1%(5),O(3)
7 10/03/97 11/01/12 19,273,479 L(4),YM1%(6),4(2),3(1),2(1),O(1)
7a Hospitality
7b Hospitality
- -----------------------------------------------------------------------------------------------------------------------------
7c Hospitality
7d Hospitality
7e Hospitality
8 05/01/97 05/01/07 25,569,311 Multifamily L(0),YM1%(8.5),O(1.5)
- -----------------------------------------------------------------------------------------------------------------------------
9 06/30/97 07/01/12 22,243,000 Retail - Unanchored L(5),YM1%(9.5),O(.5)
10 09/25/97 10/01/02 27,246,613 Retail - Anchored L(2),YM1%(2.5),O(.5) or DEF
11 09/16/97 06/01/17 9,335,743 Office - CTL L(8),YM1%(11.42),O(.25)
12 08/28/97 09/01/22 8,848,645 L(9),YM1%(10),5(1),4(1),3(1),2(1),1(1.5),O(.5)
- -----------------------------------------------------------------------------------------------------------------------------
12a Congregate Care
12b Skilled Nursing
13 09/09/97 10/01/12 18,190,012 Retail - Anchored L(8),YM1%(6.5),O(.5)
14 05/30/97 06/01/22 1,981,294 Office L(10),YM1%(14.5),O(.5) or DEF
- -----------------------------------------------------------------------------------------------------------------------------
15 08/01/97 08/01/07 17,571,021 Office L(8),YM1%(1.5),O(.5) or DEF
16 08/12/97 08/01/12 5,172,877 Office - CTL L(10),YM1%(4.67),O(.25)
17 10/10/97 11/01/07 17,641,391 Multifamily L(2),DEF(7.5),O(.5)
18 08/11/97 09/01/07 17,855,776 Multifamily L(4),YM1%(5.5),O(.5) or DEF
- -----------------------------------------------------------------------------------------------------------------------------
19 05/14/97 06/01/07 18,267,491 L(3),YM1%(6.5),O(.5) or DEF(Borr)
19a Retail - Anchored
19b Retail - Anchored
19c Retail - Anchored
19d Retail - Anchored
- -----------------------------------------------------------------------------------------------------------------------------
19e Retail - Anchored
19f Retail - Unanchored
19g Retail - Anchored
19h Retail - Anchored
- -----------------------------------------------------------------------------------------------------------------------------
20 07/18/97 08/01/07 17,053,143 Office L(4),YM1%(5.5),O(.5) or DEF
21 06/20/97 07/01/07 16,839,887 Multifamily L(2),YM1%(3),<YM3%(1),<YM2%(1),1(2.5),O(.5)
22 07/24/97 08/01/12 14,345,571 Retail - Anchored L(7),YM1%(7.5),O(.5) or DEF
23 08/15/97 09/01/04 16,263,945 Hospitality L(3),YM1%(3.5),O(.5) or DEF
24 06/16/97 07/01/07 15,813,515 Multifamily L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.5),O(.5)
- -----------------------------------------------------------------------------------------------------------------------------
25 06/16/97 07/01/07 15,797,118 Multifamily L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.5),O(.5)
26 10/03/97 11/01/12 11,252,040 L(4),YM1%(6),4(2),3(1),2(1),O(1)
26a Hospitality
26b Hospitality
- -----------------------------------------------------------------------------------------------------------------------------
26c Hospitality
27 10/14/97 11/01/12 12,486,652 Retail - Anchored L(5),YM1%(5),3(1),2(1),1(2),O(1)
28 09/04/97 10/01/27 1,764,952 Multifamily L(4),YM1%(11),1(14.75),O(.25)
29 05/30/97 06/01/12 13,424,550 Office L(10),YM1%(4.5),O(.5) or DEF
- -----------------------------------------------------------------------------------------------------------------------------
30 09/17/97 10/01/17 757,962 Office L(5),YM1%(7),3(1),2(1),1(5.75),O(.25)
31 05/01/97 05/01/07 13,498,512 Multifamily L(2),YM1%(5),O(3)
32 08/28/97 09/01/22 5,374,960 Multifamily L(9),YM1%(10),5(1),4(1),3(1),2(1),1(1.5),O(.5)
33 10/09/97 11/01/27 - Multifamily L(12),DEF(2),O(16)
34 08/21/97 09/01/07 11,867,092 Retail - Unanchored L(9.5),O(.5)
- -----------------------------------------------------------------------------------------------------------------------------
35 09/26/97 10/01/07 11,606,284 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
36 06/11/97 07/01/07 11,296,748 Multifamily L(4),YM1%(5.75),O(.25)
37 08/12/97 09/01/07 11,344,106 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
39 10/10/97 11/01/07 9,996,968 Hospitality L(5),5(1),4(1),3(1),2(1),1(.5),O(.5)
40 06/27/97 07/01/04 10,700,045 Office L(4),YM1%(2.5),O(.5) or DEF
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ANNUAL NET APPRAISED
NO. DEBT SERVICE CASH FLOW DSCR VALUE
=======================================================================
<S> <C> <C> <C> <C>
1 $4,136,513 $5,412,592 1.31x $70,000,000
2 3,335,088(2) 4,014,616 1.20 50,000,000
3 2,993,968 3,739,361 1.25 47,000,000
4 2,791,599 3,700,114 1.33 42,000,000
5 2,590,153 2,667,858 NAP 33,000,000
- -----------------------------------------------------------------------
6 2,706,699 3,518,443 1.30 37,000,000
7 2,676,706 3,893,681 1.45 42,700,000
========== ===========
7a 911,486 8,300,000
7b 654,273 9,100,000
- -----------------------------------------------------------------------
7c 584,608 5,800,000
7d 687,052 9,100,000
7e 1,056,262 10,400,000
8 2,614,408 3,316,078 1.27 36,400,000
- -----------------------------------------------------------------------
9 2,569,314 3,212,329 1.25 38,500,000
10 2,346,057 3,389,310 1.44 39,800,000
11 2,108,229 2,213,640 NAP 25,000,000
12 2,185,232 2,817,422 1.29 34,800,000
========== ===========
- -----------------------------------------------------------------------
12a 1,292,228 16,000,000
12b 1,525,194 18,800,000
13 1,977,298 2,576,395 1.30 29,100,000
14 2,207,567 4,405,553 2.00 35,400,000
- -----------------------------------------------------------------------
15 1,964,440 2,389,446 1.22 30,800,000
16 1,808,748 1,814,174 NAP 21,600,000
17 1,669,905 2,267,085 1.36 25,000,000
18 1,751,007 2,223,187 1.27 25,000,000
- -----------------------------------------------------------------------
19 1,919,018 2,582,686 1.35 33,600,000
========== ===========
19a 548,472 8,000,000
19b 447,810 5,100,000
19c 669,883 6,500,000
19d 302,937 4,400,000
- -----------------------------------------------------------------------
19e 130,717 3,100,000
19f 143,892 1,700,000
19g 160,952 2,000,000
19h 178,023 2,800,000
- -----------------------------------------------------------------------
20 1,664,831 2,753,960 1.65 25,500,000
21 1,692,157 2,177,780 1.29 24,000,000
22 1,670,066 2,272,559 1.36 24,600,000
23 1,767,034 2,572,355 1.46 25,500,000
24 1,548,958(2) 1,988,941 1.28 21,700,000
- -----------------------------------------------------------------------
25 1,547,352(2) 1,959,998 1.27 21,900,000
26 1,560,490 2,668,303 1.71 27,300,000
========== ===========
26a 531,147 6,200,000
26b 941,824 9,600,000
- -----------------------------------------------------------------------
26c 1,195,332 11,500,000
27 1,445,560(2) 1,734,782 1.20 20,700,000
28 1,398,028 1,653,392 1.18 21,000,000
29 1,511,237 2,696,242 1.78 25,400,000
- -----------------------------------------------------------------------
30 1,666,640 2,271,499 1.36 22,625,000
31 1,381,158 1,790,317 1.30 18,700,000
32 1,309,362 1,577,464 1.20 19,000,000
33 1,175,831 1,423,216 1.21 17,500,000
34 1,200,011 1,516,651 1.26 18,500,000
- -----------------------------------------------------------------------
35 1,112,111 1,422,479 1.28 17,300,000
36 1,141,932 1,468,238 1.29 16,200,000
37 1,169,354 1,603,133 1.37 16,850,000
39 1,102,624 1,549,196 1.41 19,350,000
40 1,176,070 1,593,219 1.35 18,500,000
- -----------------------------------------------------------------------
<PAGE>
<CAPTION>
CUT-OFF SCHEDULED
CONTROL APPRAISAL DATE MATURITY YEAR
NO. YEAR LTV DATE LTV BUILT
=================================================================
<S> <C> <C> <C> <C>
1 1997 64.9% 58.6% 1972-73
2 1997 76.4 57.6 1954
3 1997 75.0 65.3 1990
4 1997 79.6 60.0 1995-96
5 1997 NAP - 1997
- -----------------------------------------------------------------
6 1997 78.7 71.5 1970
7 67.9 45.1
7a 1997 1989
7b 1997 1995
- -----------------------------------------------------------------
7c 1997 1986
7d 1997 1995-96
7e 1997 1980
8 1997 79.4 70.3 1970
- -----------------------------------------------------------------
9 1997 74.7 57.8 1991
10 1997 72.0 68.5 1996-97
11 1997 NAP 37.3 1997
12 67.2 25.4
- -----------------------------------------------------------------
12a 1997 1996
12b 1997 1990-93
13 1997 79.0 62.5 1995
14 1997 64.7 5.6 1900
- -----------------------------------------------------------------
15 1997 69.2 57.0 1971
16 1997 NAP 24.0 1982
17 1997 80.0 70.6 1996
18 1997 79.9 71.4 1972
- -----------------------------------------------------------------
19 59.4 54.4
19a 1997 1969
19b 1997 1974
19c 1997 1969
19d 1997 1972
- -----------------------------------------------------------------
19e 1997 1952
19f 1997 1969
19g 1997 1986
19h 1997 1974
- -----------------------------------------------------------------
20 1997 74.9 66.9 1987
21 1997 77.8 70.2 1988
22 1997 75.2 58.3 1986-88
23 1997 70.5 63.8 1985
24 1997 80.0 72.9 1984
- -----------------------------------------------------------------
25 1997 79.2 72.1 1985
26 62.1 41.2
26a 1997 1993
26b 1997 1995
- -----------------------------------------------------------------
26c 1997 1996
27 1997 80.0 60.3 1995
28 1997 78.5 8.4 1965
29 1997 64.8 52.9 1876
- -----------------------------------------------------------------
30 1997 71.9 3.4 1988
31 1997 79.5 72.2 1972
32 1997 77.8 28.3 1990
33 1997 80.0 - 1996
34 1997 72.9 64.1 1985
- -----------------------------------------------------------------
35 1997 75.7 67.1 1990
36 1997 77.1 69.7 1971
37 1997 74.1 67.3 1986
39 1997 63.3 51.7 1986
40 1996 64.6 57.8 1970-78
- -----------------------------------------------------------------
<PAGE>
<CAPTION>
LOAN PER
SQ FT, UNIT, SQ FT, UNIT,
CONTROL YEAR BED, PAD BED, PAD OCCUPANCY RENT ROLL UNDERWRITING
NO. RENOVATED OR ROOM OR ROOM PERCENTAGE DATE RESERVES
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
1 1987 1,567,218 Sq Feet 29.03 100.0% 04/30/97 $0.10 Sq Foot
2 1990 201,452 Sq Feet 189.65 95.4 09/01/97 $0.22 Sq Foot
3 311,054 Sq Feet 113.32 86.4 10/15/97 $0.13 Sq Foot
4 195 Units 171,794.87 99.5 07/01/97 $150.00 Unit
5 222,000 Sq Feet 135.14 100.0 09/30/97 $0.00 Sq Foot
- -----------------------------------------------------------------------------------------------------------------------
6 561 Units 52,049.91 94.7 10/01/97 $210.00 Unit
7 676 Rooms 42,899.41 4% of gross revenue Room
==================
7a 123 Rooms NAP NAP 4% of gross revenue Room
7b 153 Rooms NAP NAP 4% of gross revenue Room
- -----------------------------------------------------------------------------------------------------------------------
7c 110 Rooms NAP NAP 4% of gross revenue Room
7d 135 Rooms NAP NAP 4% of gross revenue Room
7e 1997 155 Rooms NAP NAP 4% of gross revenue Room
8 516 Units 56,201.55 99.0 09/03/97 $202.67 Unit
- -----------------------------------------------------------------------------------------------------------------------
9 175,536 Sq Feet 164.35 96.0 06/17/97 $0.11 Sq Foot
10 286,388 Sq Feet 100.17 100.0 07/31/97 $0.15 Sq Foot
11 215,000 Sq Feet 112.31 100.0 10/31/97 $0.00 Sq Foot
12 353 Beds 66,288.95 $349.00 Bed
- -----------------------------------------------------------------------------------------------------------------------
12a 131 Beds 95.0 08/21/97 $347.33 Bed
12b 222 Beds 95.0 08/21/97 $350.00 Bed
13 206,253 Sq Feet 111.51 100.0 06/01/97 $0.12 Sq Foot
14 1985 312,500 Sq Feet 73.60 87.2 04/01/97 $0.15 Sq Foot
- -----------------------------------------------------------------------------------------------------------------------
15 1995 258,321 Sq Feet 82.75 97.0 07/29/97 $0.13 Sq Foot
16 1997 107,654 Sq Feet 187.11 100.0 10/31/97 $0.10 Sq Foot
17 252 Units 79,365.08 99.4 09/30/97 $500.00 Unit
18 442 Units 45,248.87 94.6 06/30/97 $200.00 Unit
- -----------------------------------------------------------------------------------------------------------------------
19 750,694 Sq Feet 26.64 $0.23 Sq Foot
================== ==========================
19a 160,819 Sq Feet 95.7 05/13/97 $0.32 Sq Foot
19b 138,741 Sq Feet 92.1 05/13/97 $0.15 Sq Foot
19c 63,557 Sq Feet 95.0 05/13/97 $0.15 Sq Foot
19d 112,244 Sq Feet 100.0 05/13/97 $0.15 Sq Foot
- -----------------------------------------------------------------------------------------------------------------------
19e 108,669 Sq Feet 86.6 05/13/97 $0.23 Sq Foot
19f 1977 43,404 Sq Feet 86.8 05/13/97 $0.17 Sq Foot
19g 86,820 Sq Feet 100.0 05/13/97 $0.29 Sq Foot
19h 36,440 Sq Feet 100.0 05/13/97 $0.49 Sq Foot
- -----------------------------------------------------------------------------------------------------------------------
20 236,682 Sq Feet 80.80 98.7 06/01/97 $0.16 Sq Foot
21 492 Units 38,008.13 92.7 06/18/97 $200.00 Unit
22 306,423 Sq Feet 60.46 94.6 06/30/97 $0.09 Sq Foot
23 394 Rooms 45,685.28 NAP NAP 4% of gross revenue Room
24 762 Units 22,782.15 98.5 08/31/97 $175.00 Unit
- -----------------------------------------------------------------------------------------------------------------------
25 582 Units 29,797.25 90.6 08/31/97 $175.00 Unit
26 404 Rooms 41,992.57 4% of gross revenue Room
==================
26a 118 Rooms NAP NAP 4% of gross revenue Room
26b 134 Rooms NAP NAP 4% of gross revenue Room
- -----------------------------------------------------------------------------------------------------------------------
26c 152 Rooms NAP NAP 4% of gross revenue Room
27 85,277 Sq Feet 194.19 100.0 09/01/97 $0.10 Sq Foot
28 1997 412 Units 40,048.54 97.8 08/01/97 $200.00 Unit
29 1980s 144,861 Sq Feet 113.90 85.0 10/30/97 $0.11 Sq Foot
- -----------------------------------------------------------------------------------------------------------------------
30 1990 244,894 Sq Feet 66.56 100.0 08/05/97 $0.05 Sq Foot
31 180 Units 82,777.78 98.3 10/01/97 $225.00 Unit
32 179 Units 82,681.56 95.0 08/20/97 $384.64 Unit
33 194 Units 72,164.95 98.0 09/11/97 $324.62 Unit
34 1987 283,609 Sq Feet 47.60 96.7 07/10/97 $0.20 Sq Foot
- -----------------------------------------------------------------------------------------------------------------------
35 212,027 Sq Feet 61.78 94.1 09/01/97 $0.17 Sq Foot
36 1995 294 Units 42,585.03 96.6 07/21/97 $200.00 Unit
37 124,490 Sq Feet 100.41 98.3 08/01/97 $0.22 Sq Foot
39 180 Rooms 68,055.56 NAP NAP 4% of gross revenue Room
40 1995 236,329 Sq Feet 50.78 88.7 03/31/97 $0.09 Sq Foot
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------
TENANT
CONTROL AREA LEASED LEASE CONTROL
NO. TENANT NAME (SQ. FT.) EXP DATE NO.
====================================================================================
<S> <C> <C> <C> <C>
1 1
2 Shop-Rite (Food Town) 42,000 01/01/10 2
3 Shopper's Food Warehouse 47,002 08/01/08 3
4 4
5 5
- ------------------------------------------------------------------------------------
6 6
7 7
7a 7a
7b 7b
- ------------------------------------------------------------------------------------
7c 7c
7d 7d
7e 7e
8 8
- ------------------------------------------------------------------------------------
9 Barnes & Noble 14,678 01/31/07 9
10 Oshman's Sporting 65,000 09/20/16 10
11 11
12 12
- ------------------------------------------------------------------------------------
12a 12a
12b 12b
13 Toys R Us 44,983 01/31/07 13
14 14
- ------------------------------------------------------------------------------------
15 15
16 16
17 17
18 18
- ------------------------------------------------------------------------------------
19 Various Various Various 19
19a K-Mart 116,805 06/30/98 19a
19b K-Mart 84,180 10/31/99 19b
19c Tandy Computer City 41,955 01/01/03 19c
19d Hills Department Store 73,000 09/30/01 19d
- ------------------------------------------------------------------------------------
19e Erie County Farms Grocery Store 24,920 10/31/09 19e
19f Gannett Rochester 7,500 09/30/08 19f
19g K-Mart 84,180 08/31/01 19g
19h Greenwich Market 20,440 05/31/11 19h
- ------------------------------------------------------------------------------------
20 20
21 21
22 1/2 Price Store 76,520 09/30/03 22
23 23
24 24
- ------------------------------------------------------------------------------------
25 25
26 26
26a 26a
26b 26b
- ------------------------------------------------------------------------------------
26c 26c
27 TJ Maxx 21,000 11/30/05 27
28 28
29 29
- ------------------------------------------------------------------------------------
30 30
31 31
32 32
33 33
34 Waccamaw 86,475 10/01/03 34
- ------------------------------------------------------------------------------------
35 Ames 61,420 02/28/16 35
36 36
37 UA Theatre 29,200 12/31/01 37
39 39
40 40
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL ZIP
NO. PROPERTY NAME ADDRESS CITY STATE CODE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
41 Palm Court Apartments 3995 Overland Avenue Culver City CA 90232
42 K Mart - San Antonio 12300 San Pedro Ave. San Antonio TX 78216
43 Yaohan Plaza Torrance 21515 Western Avenue Torrence CA 90503
44 Irondequoit Shopping Plaza Hudson & Titus Aves. Irondequiot NY 14617
45 The Deauville 8665 Burton Way Los Angeles CA 90048
- ------------------------------------------------------------------------------------------------------------------------------------
46 The NorthCorp Center 3910 RCA Blvd. Palm Beach Gardens FL 33410
47 Garden Ridge - Kennesaw 2875 George Busbee Parkway Marietta City Limits
(Kennesaw) GA 30144
48 Holiday Inn Select (Appleton) 150 Nicolet Road Appleton WI 54914
49 Perwinkle Place Shopping Center 2075 Periwinkle Place Sanibel Island FL 33957
50 Garden Ridge - Norcross 1887 Willow Trail Parkway Norcross GA 30093
- ------------------------------------------------------------------------------------------------------------------------------------
51 Willow Bend Town Centre 22928-23048 S. R. 54 Lutz FL 33549
52 Coachman Manor 401 Gibbsboro Road Lindenwold NJ 08021
53 Avalon Manor Note A
54 Avalon Manor Note B
- ------------------------------------------------------------------------------------------------------------------------------------
53 & 54 Avalon Manor Note A & B - Property Level 14014 Marsh Pike Hagerstown MD 21741
55 Mountain View Apartments(5) 22700 Lake Forest Drive El Toro CA 92630
56 FEL Facility Lakewood Farmingdale Road Farmingdale NJ 07727
57 Castle Way 5955 Weiss Road Saginaw MI 48603
- ------------------------------------------------------------------------------------------------------------------------------------
59 2011 North Soto Street 2011 North Soto St. Los Angeles CA 90032
60 Herndon Centre III 358 - 434 Elden Street Herdon VA 22070
61 Yaohan Plaza Costa Mesa 665 Paularino Avenue Costa Mesa CA 92628
62 Brainerd Village Brainerd Road Chattanooga TN 37421
63 Chatsworth Gardens 20801 Devonshire Street Chatsworth CA 91311
- ------------------------------------------------------------------------------------------------------------------------------------
64 Sierra Creek 501 Central Texas Expressway Killeen TX 76541
65 Shirley Shopping Center Montauk Highway & William Floyd Parkway Shirley NY 11967
66 One Price Distribution Center 1875 East Main Street Duncan SC 29334
67 Quail Lakes Center 4700-4755 Quail Lakes Drive Stockton CA 95219
68 Cedar Run 816 South Oneida Denver CO 80224
- ------------------------------------------------------------------------------------------------------------------------------------
69 Woodmeade South Apartments 200 Lowwood Drive Knoxville TN 37920
70 Park Tower 200 W. Santa Ana Boulevard Santa Ana CA 92701
71 Brampton Moors 101 Brampton Lane Cary NC 27513
72 Country Place I 3900 Blackburn Lane Burtonsville MD 20866
73 Wal-Mart - Boone 1812 Blowing Rock Boone NC 28607
- ------------------------------------------------------------------------------------------------------------------------------------
74 Premier Place Shopping Center NWC of Cobb's Ford & McQueen Smith Roads Prattville AL 36066
75 Concordia Shopping Center 1600 Perrineville Road Monroe NJ 08512
76 Ten Quivira Plaza Shopping Center NWQ Shawnee Mission Pkwy & Quivira Rd. Shawnee KS 66216
77 Grandin Ridge Apartments 2400 Windsor Woods Lane Norcross GA 30071
78 Willowick 5120 North 16th Street Phoenix AZ 85016
- ------------------------------------------------------------------------------------------------------------------------------------
79 Buccaneer Trace Apartments 55 E. Deerwood Rd. Savannah GA 31410
80 Euclid Shopping Center 1315 Euclid Ave. Bristol VA 24202
81 Overlook Rim Apartments 3202 South Mason Avenue Tacoma WA 98409
82 Drury Inn - St. Louis Airport 10490 Natural Bridge Road Edmundson MO 63134
83 Farmington 2013 Fry Road Katy TX 77449
- ------------------------------------------------------------------------------------------------------------------------------------
84 Key Biscayne Galeria 328 Crandon Blvd. Key Biscayne FL 33149
85 The Crossings Shopping Center 2260-2336 Lebanon Pike Nashville TN 37214
86 Scottsdale Park Terrace 1075 North Miller Road Scottsdale AZ 85257
87 Falls Village 6200 A Green Meadow Parkway Baltimore MD 21209
88 Holiday Inn - Catalina Centre 1601 North Congress Avenue Boynton Beach FL 33426
- ------------------------------------------------------------------------------------------------------------------------------------
89 Dam Neck Crossings 1630 and 1650 General Booth Boulevard Virginia Beach VA 23454
90 Roger Smith Hotel 501 Lexington Avenue @ 47th Street New York NY 10017
91 Main Street Village Apartments 6400 Main St. Columbus GA 31904
92 DFW Air Cargo Complex 2963,2967, & 3015 N. Airfield Dr. Irving TX 75261
93 Bayview Apartments 4315 W. 182nd Street Torrance CA 90504
- ------------------------------------------------------------------------------------------------------------------------------------
94 Whiting Shopping Center 108 Lacey Road Whiting NJ 08759
95 Circuit City - Poughkeepsie 837 South Rd. Poughkeepsie NY 12602
96 Reisterstown Business Center 100-322 Business Center Way Reisterstown MD 21136
97 Nob Hill Apartments - Madison 1108 Moorland Road Madison WI 53713
98 Atrium Executive Plaza 499 Northwest 70th Avenue Plantation FL 33317
- ------------------------------------------------------------------------------------------------------------------------------------
99 Gardens Park Plaza 8940 North Military Trail Palm Beach Gardens FL 33403
100 Plaza Healthcare 1475 North Granite Reef Road Scottsdale AZ 85257
101 Leisure Living Properties
101a CumberLand Retirement Village 11535 East Fulton Street Lowell MI 49331
- ------------------------------------------------------------------------------------------------------------------------------------
101b Fountain View - Portage 7818 Kenmure Drive Portage MI 49081
101c Fountain View - Fremont 102 Hillcrest Avenue Fremont MI 49412
102 Victoria Village shopping center 1401 - 1463 Victoria Avenue Ventura CA 93003
103 Terraces @ Windy Hill 3000 Windy Hill Road Marietta GA 30339
- ------------------------------------------------------------------------------------------------------------------------------------
104 Ralphs 67th Street Montezuma & 67th Street San Diego CA 92115
105 Brywood Shopping Center 8600-8760 E. 63rd Street Kansas City MO 64133
106 Clarington 3767 Clarington Avenue Los Angeles CA 90034
107 Tallahasse Residence Inn 1880 Raymond Diehl Road Tallahasee FL 32308
108 Bradford Place Apartments 325 Percival Road Columbia SC 29206
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUMULATIVE
CROSSED COLLATERALIZED % OF AGGREGATE % OF INITIAL INTEREST
CONTROL LOANS CONTROL ORIGINAL CUT-OFF DATE CUT-OFF DATE POOL MORTGAGE ADMINISTRATIVE ACCRUAL
NO. NOS. BALANCE BALANCE BALANCE BALANCE RATE COST RATE METHOD
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
41 $11,790,000 $11,773,564 0.53% 38.32% 8.4100% 0.1025% Act/360
42 11,704,599 11,673,663 0.53 38.85 8.8400 0.1025 30/360
43 10,500,000 10,495,288 0.48 39.33 8.0000 0.1775 Act/360
44 10,300,000 10,269,569 0.47 39.79 8.6910 0.1025 30/360
45 10,000,000 9,986,732 0.45 40.24 7.3600 0.1025 Act/360
-----------------------------------------------------------------------------------------------------------------------------------
46 10,000,000 9,985,351 0.45 41.70 8.2500 0.1025 Act/360
47 9,763,565 9,763,390 0.44 41.14 10.1250 0.1025 30/360
48 9,800,000 9,749,977 0.44 41.58 9.4000 0.1025 30/360
49 9,675,000 9,667,450 0.44 42.02 8.2500 0.1025 Act/360
50 9,460,142 9,459,973 0.43 42.45 10.1250 0.1025 30/360
-----------------------------------------------------------------------------------------------------------------------------------
51 9,400,000 9,387,597 0.43 42.88 8.1000 0.1025 30/360
52 9,400,000 9,382,540 0.43 43.30 8.4500 0.1275 Act/360
53 4,700,000 4,683,455 0.21 43.52 10.5000 0.1025 30/360
54 4,580,000 4,553,995 0.21 43.72 7.6025 0.1025 30/360
-----------------------------------------------------------------------------------------------------------------------------------
53 & 54 9,280,000 9,237,450
55 10,000,000 9,061,380 0.41 44.13 7.5000 0.1025 30/360
56 9,000,000 9,000,000 0.41 44.54 8.3800 0.1025 30/360
57 8,900,000 8,900,000 0.40 44.95 7.6500 0.1025 30/360
-----------------------------------------------------------------------------------------------------------------------------------
59 8,800,000 8,783,677 0.40 45.34 8.0900 0.1775 Act/360
60 8,500,000 8,500,000 0.39 45.73 7.5000 0.1025 30/360
61 8,500,000 8,496,186 0.39 46.12 8.0000 0.1775 Act/360
62 8,500,000 8,494,274 0.39 46.50 7.9800 0.1775 30/360
63 8,500,000 8,491,163 0.39 46.89 8.0700 0.1025 30/360
-----------------------------------------------------------------------------------------------------------------------------------
64 8,400,000 8,400,000 0.38 47.27 8.1400 0.1025 30/360
65 8,250,000 8,234,773 0.37 47.64 8.3100 0.1025 Act/360
66 8,125,000 8,082,804 0.37 48.01 9.1250 0.1025 Act/360
67 8,000,000 7,991,880 0.36 48.37 8.3750 0.1025 Act/360
68 8,000,000 7,986,834 0.36 48.73 8.6500 0.1025 Act/360
-----------------------------------------------------------------------------------------------------------------------------------
69 7,500,000 7,495,930 0.34 49.07 7.4500 0.1025 Act/360
70 7,500,000 7,487,785 0.34 49.41 8.6800 0.1775 Act/360
71 7,500,000 7,476,817 0.34 49.75 8.4700 0.1025 30/360
72 7,425,000 7,408,285 0.34 50.09 7.6800 0.1025 Act/360
73 7,458,022 7,341,749 0.33 50.42 7.3125 0.1025 30/360
-----------------------------------------------------------------------------------------------------------------------------------
74 7,230,000 7,230,000 0.33 50.75 7.9500 0.1025 30/360
75 7,200,000 7,170,968 0.33 51.08 8.6900 0.1025 Act/360
76 105,280,408 7,160,000 7,155,350 0.32 51.40 8.1600 0.1775 30/360
77 7,140,000 7,127,772 0.32 51.72 7.7200 0.1025 Act/360
78 7,100,000 7,088,580 0.32 52.05 7.9375 0.1025 Act/360
-----------------------------------------------------------------------------------------------------------------------------------
79 7,040,000 7,016,198 0.32 52.36 8.9400 0.1025 30/360
80 7,031,000 7,014,233 0.32 52.68 8.6300 0.1025 30/360
81 7,040,000 7,014,139 0.32 53.00 8.5350 0.1025 30/360
82 7,000,000 7,000,000 0.32 53.32 7.9600 0.1025 Act/360
83 7,000,000 7,000,000 0.32 53.64 7.5000 0.1025 30/360
-----------------------------------------------------------------------------------------------------------------------------------
84 7,000,000 6,996,673 0.32 53.95 7.8400 0.1025 Act/360
85 7,000,000 6,989,789 0.32 54.27 8.0000 0.1025 Act/360
86 7,000,000 7,000,000 0.32 54.59 7.5000 0.1025 30/360
87 6,900,000 6,900,000 0.31 54.90 7.5000 0.1025 30/360
88 6,746,000 6,729,457 0.31 55.21 8.5000 0.1025 Act/360
-----------------------------------------------------------------------------------------------------------------------------------
89 6,725,000 6,725,000 0.31 55.51 7.7500 0.1025 Act/360
90 6,700,000 6,700,000 0.30 55.82 9.0000 0.1025 Act/360
91 6,600,000 6,592,053 0.30 56.12 7.7400 0.1025 Act/360
92 6,551,000 6,528,304 0.30 56.41 9.3750 0.1025 Act/360
93 6,500,000 6,488,356 0.29 56.71 7.5600 0.1025 Act/360
- -----------------------------------------------------------------------------------------------------------------------------------
94 6,500,000 6,473,791 0.29 57.00 8.6900 0.1025 Act/360
95 6,589,015 6,428,181 0.29 57.29 8.1875 0.1025 30/360
96 6,400,000 6,389,097 0.29 57.58 8.5500 0.1625 Act/360
97 6,350,000 6,342,551 0.29 57.87 7.8400 0.1525 Act/360
98 6,300,000 6,284,126 0.29 58.15 8.3750 0.1025 Act/360
- -----------------------------------------------------------------------------------------------------------------------------------
99 6,300,000 6,274,923 0.28 58.44 8.7500 0.1025 Act/360
100 6,250,000 6,234,626 0.28 58.72 8.7500 0.1025 Act/360
101 6,250,000 6,217,295 0.28 59.00 9.2500 0.1775 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
101a 101b,101c
101b 101a,101c
101c 101a,101b
102 6,200,000 6,179,213 0.28 59.28 8.8750 0.1025 Act/360
103 6,185,000 6,176,283 0.28 59.57 8.3750 0.1025 Act/360
- -----------------------------------------------------------------------------------------------------------------------------------
104 6,150,000 6,122,436 0.28 59.84 8.7200 0.1775 30/360
105 76,280,408 6,110,000 6,106,032 0.28 60.12 8.1600 0.1775 30/360
106 6,075,000 6,065,121 0.28 60.40 7.9000 0.1025 Act/360
107 5,917,000 5,912,058 0.27 60.66 7.9700 0.1025 Act/360
108 5,885,771 5,853,430 0.27 60.93 8.0000 0.1025 30/360
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
ORIGINAL REMAINING
TERM TO TERM TO ORIGINAL REMAINING
CONTROL AMORTIZATION MATURITY MATURITY AMORTIZATION AMORTIZATION
NO. TYPE (MOS.) (MOS.) TERM (MOS.) TERM (MOS.)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
41 Amortizing Balloon 120 117 360 357
42 Fully Amortizing 257 255 257 255
43 Amortizing Balloon 180 179 360 359
44 Amortizing Balloon 120 115 360 355
45 Amortizing Balloon 120 118 360 358
- ------------------------------------------------------------------------------------------------------------------------------------
46 Amortizing Balloon 120 117 360 357
47 Step(3) 264 260 288 284
48 Amortizing Balloon 120 114 300 294
49 Amortizing Balloon 120 119 300 299
50 Step(3) 264 260 288 284
- ------------------------------------------------------------------------------------------------------------------------------------
51 Amortizing Balloon 120 118 360 358
52 Amortizing Balloon 180 177 330 327
53 Amortizing Balloon 120 115 300 295
54 Amortizing Balloon 120 115 300 295
- ------------------------------------------------------------------------------------------------------------------------------------
53 & 54
55 Amortizing Balloon 180 45 360 225
56 Fully Amortizing 180 180 180 180
57 Interest Only then Amortizing Balloon(6) 84 82 360 360
- ------------------------------------------------------------------------------------------------------------------------------------
59 Amortizing Balloon 84 82 300 298
60 Amortizing Balloon 120 120 360 360
61 Amortizing Balloon 180 179 360 359
62 Amortizing Balloon 120 119 360 359
63 Amortizing Balloon 120 119 300 299
- ------------------------------------------------------------------------------------------------------------------------------------
64 Interest Only then Hyper-Amortizing(4) 120 116 360 360
65 Amortizing Balloon 120 116 360 356
66 Fully Amortizing 240 236 240 236
67 Amortizing Balloon 120 118 360 358
68 Amortizing Balloon 120 116 360 356
- ------------------------------------------------------------------------------------------------------------------------------------
69 Amortizing Balloon 120 119 360 359
70 Amortizing Balloon 84 80 360 356
71 Amortizing Balloon 84 79 360 355
72 Amortizing Balloon 120 117 330 327
73 Fully Amortizing 236 228 236 228
- ------------------------------------------------------------------------------------------------------------------------------------
74 Amortizing Balloon 120 120 360 360
75 Amortizing Balloon 120 115 300 295
76 Amortizing Balloon 120 119 360 359
77 Amortizing Balloon 120 117 360 357
78 Amortizing Balloon 120 117 360 357
- ------------------------------------------------------------------------------------------------------------------------------------
79 Amortizing Balloon 84 78 360 354
80 Amortizing Balloon 120 116 360 356
81 Amortizing Balloon 84 78 360 354
82 Amortizing Balloon 180 180 300 300
83 Interest Only then Amortizing Balloon(7) 123 120 360 360
- ------------------------------------------------------------------------------------------------------------------------------------
84 Amortizing Balloon 120 119 360 359
85 Amortizing Balloon 120 118 330 328
86 Interest Only then Amortizing Balloon(8) 120 118 360 360
87 Amortizing Balloon 120 120 360 360
88 Amortizing Balloon 120 117 300 297
- ------------------------------------------------------------------------------------------------------------------------------------
89 Amortizing Balloon 120 120 360 360
90 Amortizing Balloon 180 180 300 300
91 Amortizing Balloon 180 178 360 358
92 Fully Amortizing 300 295 300 295
93 Amortizing Balloon 120 117 360 357
- ------------------------------------------------------------------------------------------------------------------------------------
94 Amortizing Balloon 120 115 300 295
95 Fully Amortizing 264 247 264 247
96 Amortizing Balloon 120 116 360 356
97 Amortizing Balloon 180 178 360 358
98 Amortizing Balloon 120 117 300 297
- ------------------------------------------------------------------------------------------------------------------------------------
99 Amortizing Balloon 180 175 300 295
100 Fully Amortizing 180 179 180 179
101 Amortizing Balloon 120 114 300 294
- ------------------------------------------------------------------------------------------------------------------------------------
101a
101b
101c
102 Amortizing Balloon 120 114 330 324
103 Amortizing Balloon 120 117 360 357
- ------------------------------------------------------------------------------------------------------------------------------------
104 Amortizing Balloon 240 234 330 324
105 Amortizing Balloon 120 119 360 359
106 Amortizing Balloon 120 117 360 357
107 Amortizing Balloon 120 119 300 299
108 Amortizing Balloon 84 76 360 352
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ORIGINATION MATURITY BALLOON
NO. DATE DATE BALANCE PROPERTY TYPE PREPAYMENT PROVISIONS
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
41 06/30/97 08/01/07 $10,644,388 Congregate Care L(3),YM1%(6.5),O(.5) or DEF
42 08/11/97 02/01/19 - Retail - CTL L(10),YM1%(11.17),O(.25)
43 08/29/97 10/01/12 8,393,146 Retail - Anchored L(8),YM1%(6.5),O(.5) or DEF
44 05/06/97 06/01/07 9,159,217 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
45 08/22/97 09/01/07 8,800,952 Multifamily L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
46 07/02/97 08/01/07 8,995,123 Office L(4),YM1%(5.5),O(.5)
47 06/30/97 07/01/19 2,588,138 Retail - CTL L(8),YM1%(13.75),O(.25)
48 04/18/97 05/01/07 8,181,671 Hospitality L(0),YM1%(9.5),O(.5) or DEF
49 09/19/97 10/01/07 8,030,493 Retail - Unanchored 3(3),2(3),1(3),O(1)
50 06/30/97 07/01/19 2,507,706 Retail - CTL L(8),YM1%(13.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
51 08/21/97 09/01/07 8,263,012 Retail - Anchored L(9.5),O(.5)
52 07/10/97 08/01/12 7,111,902 Multifamily L(5),YM1%(6),1(3.75)O(.25)
53 03/28/97 06/01/07 4,014,527 L(4),YM1%(5.5),O(.5)
54 05/08/97 06/01/07 3,661,024 L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
53 & 54 Skilled Nursing
55 08/08/86 08/01/01 8,111,501 Multifamily None
56 10/07/97 11/01/12 - Industrial/Retail L(7.5),YM1%(7),O(.5) or DEF
57 08/27/97 09/01/04 8,316,694 Multifamily L(1),YM1%(3),2(1),1(1),O(1)
- ------------------------------------------------------------------------------------------------------------------------------------
59 08/13/97 09/01/04 7,866,791 Industrial L(4),YM1%(2.5),O(.5) or DEF
60 10/10/97 11/01/07 7,377,574 Retail - Anchored L(4),YM1%(5.75),O(.25)
61 08/29/97 10/01/12 6,794,451 Retail - Anchored L(8),YM1%(6.5),O(.5) or DEF
62 09/23/97 10/01/07 7,453,524 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF(Borrower's Option)
63 10/01/97 10/01/07 6,877,064 Congregate Care L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
64 06/16/97 07/01/07 7,651,701 Multifamily L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.5),O(.5)
65 06/13/97 07/01/07 7,432,801 Retail - Anchored L(5),YM1%(4.5),O(.5) or DEF
66 06/17/97 07/01/17 489,757 Industrial L(7),YM1%(10),O(3)
67 08/12/97 09/01/07 7,215,371 Retail - Anchored L(4),YM1%(5.5),O(.5)
68 06/30/97 07/01/07 7,263,453 Multifamily YM1%(9.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
69 09/30/97 10/01/07 6,616,613 Multifamily L(4),YM1%(5.5),O(.5) or DEF
70 06/30/97 07/01/04 7,086,702 Office L(4),YM1%(2.5),O(.5)
71 05/07/97 06/01/04 6,978,308 Multifamily L(4),YM1%(2.5),O(.5) or DEF
72 08/01/97 08/01/07 6,357,579 Multifamily L(4),YM1%(5.5),O(.5)
73 02/21/97 11/01/16 - Retail - CTL L(8),YM1%(6),YM5%(1),YM4%(1),YM3%(1),YM2%(1),YM1%(1.42),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
74 10/02/97 11/01/07 6,335,945 Retail - Anchored L(4),YM1%(5.5),O(.5)
75 05/23/97 06/01/07 6,050,244 Retail - Anchored L(4),YM1%(5.75),O(.25)
76 09/26/97 10/01/07 6,301,602 Retail - Anchored L(4),YM1%(5.5),O(.5)
77 07/23/97 08/01/07 6,341,759 Multifamily L(4),YM1%(5.5),O(.5) or DEF
78 07/29/97 08/01/07 6,339,606 Multifamily L(2),3(1),2(1),1(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
79 04/22/97 05/01/04 6,587,689 Multifamily L(3),YM1%(3.5),O(.5) or DEF
80 06/20/97 07/01/07 6,245,105 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
81 04/29/97 05/01/04 6,555,622 Multifamily L(4),YM1%(2.5),O(.5)
82 10/03/97 11/01/12 4,652,220 Hospitality L(4),YM1%(6),4(2),3(1),2(1),O(1)
83 07/23/97 11/01/07 6,290,956 Multifamily L(0),YM1%(8.75),O(1.5)
- ------------------------------------------------------------------------------------------------------------------------------------
84 09/13/97 10/01/07 6,235,366 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
85 08/29/97 09/01/07 6,043,715 Retail - Anchored L(3),YM1%(6.75),O(.25)
86 08/27/97 09/01/07 6,319,478 Multifamily L(2),3(1),2(1),1(1),O(5)
87 10/21/97 11/01/07 5,988,854 Multifamily L(4),YM1%(3),O(3)
88 08/01/97 08/01/07 5,638,917 Hospitality L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
89 10/02/97 11/01/07 5,976,229 Retail - Anchored L(4),YM1%(5.75),O(.25)
90 10/09/97 11/01/12 4,688,635 Hospitality L(3),YM5%(1),YM3%(1),YM1%(9.5),O(.5)
91 08/19/97 09/01/12 5,215,988 Multifamily L(9),YM1%(5.5),O(.5) or DEF
92 05/02/97 06/01/22 760,973 Industrial L(5),YM1%(5),5(1),4(1),3(1),2(1),1(10.75),O(.5)
93 07/25/97 08/01/07 5,750,487 Multifamily L(3),YM1%(6.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
94 05/23/97 06/01/07 5,462,027 Retail - Anchored L(4),YM1%(5.75),O(.25)
95 05/03/96 06/01/18 - Retail - CTL L(8),YM1%(13.5),O(.5)
96 06/13/97 07/01/07 5,797,740 Industrial L(4),YM1%(5.5),O(.5)
97 08/27/97 09/01/12 5,039,954 Multifamily L(10),YM1%(4.5),O(.5)
98 07/03/97 08/01/07 5,247,835 Office L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
99 05/22/97 06/01/12 4,359,196 Retail - Anchored L(5),5(2),4(2),3(2),2(2),1(1.75),O(.25)
100 09/05/97 10/01/12 175,731 Skilled Nursing L(4),YM1%(5.75),O(5.25)
101 04/10/97 05/01/07 5,200,570 L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
101a Assisted Living
101b Assisted Living
101c Assisted Living
102 04/11/97 05/01/07 5,475,052 Retail - Anchored L(4),5(1),4(1),3(1),2(1),1(1.75),O(.25)
103 07/16/97 08/01/07 5,579,546 Retail - Unanchored L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
104 04/09/97 05/01/17 3,241,920 Retail - Anchored L(7),YM1%(12.5),O(.5)
105 09/26/97 10/01/07 5,377,485 Retail - Anchored L(4),YM1%(5.5),O(.5)
106 07/30/97 08/01/07 5,419,493 Multifamily L(3),YM1%(1),1(5.5),O(.5)
107 09/22/97 10/01/07 4,872,186 Hospitality L(4),YM1%(5.75),O(.25)
108 02/24/97 03/01/04 5,443,011 Multifamily L(2),YM1%(4.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ANNUAL NET APPRAISED
NO. DEBT SERVICE CASH FLOW DSCR VALUE
=======================================================================================
<S> <C> <C> <C> <C>
41 $1,078,848 $1,424,760 1.32x $15,725,000
42 1,219,621 1,329,387 NAP 13,080,000
43 924,543 1,244,704 1.35 14,300,000
44 967,158 1,261,931 1.30 13,800,000
45 827,584 989,866 1.20 13,650,000
- ---------------------------------------------------------------------------------------
46 901,520 1,536,992 1.70 18,200,000
47 989,079 1,078,096 NAP 10,900,000
48 1,019,304 1,489,822 1.46 13,900,000
49 915,391 1,190,159 1.30 12,500,000
50 958,341 1,044,592 NAP 10,500,000
- ---------------------------------------------------------------------------------------
51 835,563 1,114,399 1.33 12,550,000
52 881,289 1,147,795 1.30 13,100,000
53 532,518
54 409,821
- ---------------------------------------------------------------------------------------
53 & 54 1,359,490 1.44 12,500,000
55 899,737 1,097,337 1.22 12,500,000
56 1,055,936 1,525,930 1.45 13,500,000
57 757,761(2) 916,044 1.21 11,500,000
- ---------------------------------------------------------------------------------------
59 821,344 1,090,558 1.33 12,000,000
60 713,199 932,400 1.31 12,500,000
61 748,440 997,670 1.33 11,600,000
62 747,018 1,078,222 1.44 11,300,000
63 791,988 1,301,313 1.64 11,525,000
- ---------------------------------------------------------------------------------------
64 749,496(2) 1,046,927 1.40 10,500,000
65 747,934 980,324 1.31 11,000,000
66 885,086 1,167,134 1.32 11,475,000
67 729,669 980,786 1.34 11,300,000
68 748,386 962,946 1.29 11,100,000
- ---------------------------------------------------------------------------------------
69 626,215 754,840 1.21 9,400,000
70 703,536 965,121 1.37 10,000,000
71 690,110 963,577 1.40 11,100,000
72 649,338 902,856 1.39 9,900,000
73 716,092 859,310 NAP 9,515,000
- ---------------------------------------------------------------------------------------
74 633,593 760,883 1.20 9,650,000
75 706,813 929,353 1.31 12,500,000
76 640,060 869,239 1.36 9,300,000
77 612,047 795,030 1.30 8,930,000
78 621,459 884,181 1.42 9,200,000
- ---------------------------------------------------------------------------------------
79 676,101 809,791 1.20 8,800,000
80 656,537 816,844 1.24 9,400,000
81 651,675 838,876 1.29 8,725,000
82 646,101 1,346,309 2.08 12,100,000
83 587,240(2) 744,845 1.27 8,600,000
- ---------------------------------------------------------------------------------------
84 607,019 831,040 1.37 10,200,000
85 630,357 788,172 1.25 9,450,000
86 587,340(2) 1,030,962 1.76 12,800,000
87 578,950 725,230 1.25 8,800,000
88 651,847 932,400 1.43 11,400,000
- ---------------------------------------------------------------------------------------
89 578,145 762,021 1.32 8,800,000
90 674,714 1,093,169 1.62 16,100,000
91 566,851 681,781 1.20 8,334,000
92 680,012 885,170 1.30 12,000,000
93 548,595 681,391 1.24 8,065,000
- ---------------------------------------------------------------------------------------
94 638,095 879,829 1.38 10,800,000
95 646,935 646,935 NAP 7,000,000
96 593,249 899,974 1.52 9,100,000
97 550,653 679,358 1.23 8,600,000
98 602,397 792,966 1.32 8,700,000
- ---------------------------------------------------------------------------------------
99 621,541 795,163 1.28 10,200,000
100 749,586 1,172,735 1.56 11,100,000
101 642,286 832,360 1.30 8,990,000
--------- ----------
101a 333,835 4,500,000
- ---------------------------------------------------------------------------------------
101b 332,250 2,930,000
101c 166,275 1,560,000
102 603,273 763,597 1.27 8,675,000
103 564,126 753,782 1.34 8,200,000
- ---------------------------------------------------------------------------------------
104 590,416 774,452 1.31 8,270,000
105 546,197 677,295 1.24 8,800,000
106 529,841 704,242 1.33 8,300,000
107 546,610 782,338 1.43 8,150,000
108 518,253 621,312 1.20 7,400,000
- ---------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUT-OFF SCHEDULED
CONTROL APPRAISAL DATE MATURITY YEAR
NO. YEAR LTV DATE LTV BUILT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
41 1997 74.9% 67.7% 1991
42 1997 NAP - 1994
43 1997 73.4 58.7 1991
44 1997 74.4 66.4 1956
45 1997 73.2 64.5 1989
- --------------------------------------------------------------------------------
46 1997 54.9 49.4 1961-70
47 1997 NAP 23.7 1997
48 1996 70.1 58.9 1986
49 1997 77.3 64.2 1973-85
50 1997 NAP 23.9 1997
- --------------------------------------------------------------------------------
51 1997 74.8 65.8 1991
52 1997 71.6 54.3 1967
53 74.0 63.4
54 73.8 59.3
- --------------------------------------------------------------------------------
53 & 54 1997 1953
55 1996 72.5 64.9 1975
56 1997 66.7 1978
57 1997 77.4 72.3 1985
- --------------------------------------------------------------------------------
59 1997 73.2 65.6 1956
60 1997 68.0 59.0 1985
61 1997 73.2 58.6 1991
62 1997 75.2 66.0 1960
63 1997 73.7 59.7 1981,89
- --------------------------------------------------------------------------------
64 1997 80.0 72.9 1982
65 1997 74.9 67.6 1981
66 1997 70.4 4.3 1986
67 1997 70.7 63.9 1979
68 1997 72.0 65.4 1971
- --------------------------------------------------------------------------------
69 1997 79.7 70.4 1983
70 1997 74.9 70.9 1986
71 1996 67.4 62.9 1986
72 1997 74.8 64.2 1979
73 1996 NAP 1997
- --------------------------------------------------------------------------------
74 1997 74.9 65.7 1997
75 1997 57.4 48.4 1985
76 1997 76.9 67.8 1981
77 1997 79.8 71.0 1973
78 1997 77.0 68.9 1973
- --------------------------------------------------------------------------------
79 1997 79.7 74.9 1987
80 1997 74.6 66.4 1983
81 1997 80.4 75.1 1986
82 1997 57.9 38.5 1993
83 1997 81.4 73.2 1984
- --------------------------------------------------------------------------------
84 1997 68.6 61.1 1990
85 1997 74.0 64.0 1990
86 1997 54.7 49.4 1988
87 1997 78.4 68.1 1962
88 1997 59.0 49.5 1988
- --------------------------------------------------------------------------------
89 1997 76.4 67.9 1991
90 1997 41.6 29.1 1929
91 1997 79.1 62.6 1996
92 1996 54.4 6.3 1978,90
93 1997 80.5 71.3 1965
- --------------------------------------------------------------------------------
94 1997 59.9 50.6 1980,82
95 1996 NAP - 1996
96 1997 70.2 63.7 1992-95
97 1997 73.8 58.6 1972
98 1997 72.2 60.3 1985
- --------------------------------------------------------------------------------
99 1996 61.5 42.7 1979
100 1997 56.2 1.6 1961
101 69.2 57.9
101a 1997 1978
- --------------------------------------------------------------------------------
101b 1997 1989
101c 1997 1988
102 1997 71.2 63.1 1982
103 1997 75.3 68.0 1985
- --------------------------------------------------------------------------------
104 1997 74.0 39.2 1997
105 1997 69.4 61.1 1972
106 1997 73.1 65.3 1982
107 1997 72.5 59.8 1995
108 1997 79.1 73.6 1968
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LOAN PER
SQ FT, UNIT, SQ FT, UNIT,
CONTROL YEAR BED, PAD BED, PAD OCCUPANCY RENT ROLL UNDERWRITING
NO. RENOVATED OR ROOM OR ROOM PERCENTAGE DATE RESERVES
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
41 100 Units $117,900.00 100.0% 04/30/97 $202.98 Unit
42 169,563 Sq Feet 69.03 100.0 10/31/97 $0.00 Sq Foot
43 56,682 Sq Feet 185.24 100.0 08/11/97 $0.15 Sq Foot
44 1991 212,578 Sq Feet 48.45 95.7 03/31/97 $0.09 Sq Foot
45 78 Units 128,205.13 100.0 08/12/97 $192.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
46 348,612 Sq Feet 28.69 99.9 06/25/97 $0.20 Sq Foot
47 141,000 Sq Feet 69.25 100.0 10/31/97 $0.00 Sq Foot
48 1996 228 Rooms 42,982.46 NAP NAP 4% of gross revenue Room
49 41,092 Sq Feet 235.45 100.0 08/29/97 $0.24 Sq Foot
50 141,000 Sq Feet 67.09 100.0 10/31/97 $0.00 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
51 184,435 Sq Feet 50.97 96.0 08/05/97 $0.10 Sq Foot
52 558 Units 16,845.88 87.5 07/01/97 $200.00 Unit
53
54
- ------------------------------------------------------------------------------------------------------------------------------------
53 & 54 1994 221 Beds 41,990.95 97.0 04/25/97 $300.00 Bed
55 225 Units 44,444.44 100.0 07/10/97 $250.00 Unit
56 459,000 Sq Feet 19.61 100.0 09/13/97 $0.15 Sq Foot
57 1996 224 Units 39,732.14 96.9 07/16/97 $200.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
59 1995 289,854 Sq Feet 30.36 100.0 07/01/97 $0.15 Sq Foot
60 1997 85,485 Sq Feet 99.43 89.2 09/25/97 $0.12 Sq Foot
61 44,419 Sq Feet 191.36 100.0 08/14/97 $0.15 Sq Foot
62 1989 221,825 Sq Feet 38.32 93.2 08/02/97 $0.15 Sq Foot
63 224 Units 37,946.43 82.6 06/30/97 $225.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
64 344 Units 24,418.60 96.1 08/29/97 $175.00 Unit
65 1996 110,287 Sq Feet 74.80 100.0 05/05/97 $0.19 Sq Foot
66 1995 405,091 Sq Feet 20.06 100.0 06/01/97 $0.13 Sq Foot
67 1991 147,591 Sq Feet 54.20 95.0 08/31/97 $0.10 Sq Foot
68 383 Units 20,887.73 96.3 06/30/97 $284.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
69 242 Units 30,991.74 97.5 07/25/97 $236.00 Unit
70 146,029 Sq Feet 51.36 90.3 06/30/97 $0.15 Sq Foot
71 224 Units 33,482.14 95.0 07/05/97 $317.56 Unit
72 192 Units 38,671.88 96.9 07/24/97 $263.00 Unit
73 122,367 Sq Feet 60.95 100.0 10/31/97 $0.00 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
74 76,494 Sq Feet 94.52 91.0 06/25/97 $0.10 Sq Foot
75 114,735 Sq Feet 62.75 92.3 10/01/97 $0.17 Sq Foot
76 164,361 Sq Feet 43.56 100.0 10/03/97 $0.14 Sq Foot
77 1996 215 Units 33,209.30 95.8 07/07/97 $277.00 Unit
78 395 Units 17,974.68 94.4 09/15/97 $247.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
79 208 Units 33,846.15 91.4 07/05/97 $321.00 Unit
80 1995-96 129,572 Sq Feet 54.26 95.8 03/27/97 $0.10 Sq Foot
81 297 Units 23,703.70 92.5 02/19/97 $200.00 Unit
82 172 Rooms 40,697.67 NAP NAP Room
83 168 Units 41,666.67 100.0 09/03/97 $200.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
84 50,889 Sq Feet 137.55 96.0 08/01/97 $0.15 Sq Foot
85 110,059 Sq Feet 63.60 88.6 07/31/97 $0.14 Sq Foot
86 188 Units 37,234.04 95.2 07/01/97 $200.00 Unit
87 1996 320 Units 21,562.50 98.1 08/15/97 $220.00 Unit
88 1997 170 Rooms 39,682.35 NAP NAP 4% of gross revenue Room
- ------------------------------------------------------------------------------------------------------------------------------------
89 1994 138,571 Sq Feet 48.53 100.0 08/01/97 $0.10 Sq Foot
90 1988 135 Rooms 49,629.63 NAP NAP 4% of gross revenue Room
91 154 Units 42,857.14 98.7 08/18/97 $151.00 Unit
92 1990 172,603 Sq Feet 37.95 76.8 09/09/97 $0.14 Sq Foot
93 130 Units 50,000.00 93.9 06/01/97 $250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
94 114,381 Sq Feet 56.83 88.0 09/10/97 $0.16 Sq Foot
95 42,031 Sq Feet 156.77 100.0 10/31/97 $0.00 Sq Foot
96 132,600 Sq Feet 48.27 100.0 05/28/97 $0.10 Sq Foot
97 1996 272 Units 23,345.59 89.9 03/31/97 $250.00 Unit
98 86,977 Sq Feet 72.43 100.0 09/09/97 $0.18 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
99 1996 120,241 Sq Feet 52.39 79.5 09/10/97 $0.19 Sq Foot
100 1982,85 221 Beds 28,280.54 87.0 06/30/97 $293.00 Bed
101 209 Beds 29,904.31 $225.00 Bed
================== ===============
101a 1987 149 Beds 89.0 07/31/97 $225.00 Bed
- ------------------------------------------------------------------------------------------------------------------------------------
101b 1992 40 Beds 97.5 07/31/97 $225.00 Bed
101c 20 Beds 95.0 07/31/97 $225.00 Bed
102 89,637 Sq Feet 69.17 98.6 08/21/97 $0.18 Sq Foot
103 75,028 Sq Feet 82.44 97.3 06/30/97 $0.18 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
104 46,218 Sq Feet 133.07 100.0 05/15/96 $0.10 Sq Foot
105 171,256 Sq Feet 35.68 100.0 10/03/97 $0.18 Sq Foot
106 157 Units 38,694.27 98.7 09/24/97 $306.00 Unit
107 78 Rooms 75,858.97 NAP NAP 4% of gross revenue Room
108 312 Units 18,864.65 72.8 07/07/97 $212.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
---------------------------------------------------------------------
TENANT
CONTROL AREA LEASED LEASE CONTROL
NO. TENANT NAME (SQ. FT.) EXP DATE NO.
=========================================================================================
<S> <C> <C> <C> <C>
41 41
42 K-Mart 169,563 02/28/19 42
43 Yaohan USA 56,682 09/03/17 43
44 Wegman's 90,000 02/28/21 44
45 45
- -----------------------------------------------------------------------------------------
46 46
47 Garden Ridge 141,000 07/31/19 47
48 48
49 Cricket Shop 3,393 06/30/98 49
50 Garden Ridge 141,000 07/31/19 50
- -----------------------------------------------------------------------------------------
51 K-Mart 86,479 03/01/16 51
52 52
53 53
54 54
- -----------------------------------------------------------------------------------------
53 & 54 53 & 54
55 55
56 56
57 57
- -----------------------------------------------------------------------------------------
59 59
60 Fashion Bug 9,115 01/01/03 60
61 Yaohan USA 44,419 08/22/17 61
62 Sports Authority 44,080 06/30/10 62
63 63
- -----------------------------------------------------------------------------------------
64 64
65 Pathmark 59,778 08/31/16 65
66 66
67 S-Mart Foods 27,968 01/02/05 67
68 68
- -----------------------------------------------------------------------------------------
69 69
70 70
71 71
72 72
73 Wal-Mart 122,367 12/18/16 73
- -----------------------------------------------------------------------------------------
74 Goody's 25,000 07/31/07 74
75 Edwards 34,746 04/01/05 75
76 Sun Fresh Grocery 40,223 12/07/00 76
77 77
78 78
- -----------------------------------------------------------------------------------------
79 79
80 Food City 44,334 08/31/12 80
81 81
82 82
83 83
- -----------------------------------------------------------------------------------------
84 Eckerd Drugs 6,225 08/18/00 84
85 Food Lion 29,000 10/05/10 85
86 86
87 87
88 88
- -----------------------------------------------------------------------------------------
89 K-Mart 104,231 09/30/16 89
90 90
91 91
92 92
93 93
- -----------------------------------------------------------------------------------------
94 Edwards 31,590 02/23/00 94
95 Circuit City 42,031 05/31/18 95
96 96
97 97
98 98
- -----------------------------------------------------------------------------------------
99 Winn-Dixie Stores 46,491 05/31/99 99
100 100
101 101
101a 101a
- -----------------------------------------------------------------------------------------
101b 101b
101c 101c
102 Ralphs Grocery 35,862 07/31/02 102
103 Dental One Associates 10,985 12/31/05 103
- -----------------------------------------------------------------------------------------
104 Ralphs Grocery Store 46,218 05/15/17 104
105 Price Chopper 61,132 01/31/04 105
106 106
107 107
108 108
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL ZIP
NO. PROPERTY NAME ADDRESS CITY STATE CODE
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
109 Bellevue Valley Plaza 7401 - 7091 Highway 70 South Nashville TN 37221
110 Tri State Plaza NE Route 23 and Route 84 Montague NJ 07827
111 Chimney Sweep Apartments 775 Camino Del Sur Isla Vista CA 93117
112 Forest Brook Apartments 2921 Forestbrook Drive Charlotte NC 28208
113 Holiday Inn-Oceanfront 2605 North A1A Melbourne FL 32903
- ------------------------------------------------------------------------------------------------------------------------------------
114 Nob Hill Apartments - Birmingham 800 Valley Ave. Birmingham AL 35209
115 Carriage Way Shopping Center 201-235 South Waukegan Road Lake Bluff IL 60044
116 The Benchmark 170 Old Country Road Mineola NY 11501
117 Bally Total Fitness - Bloomington 4901 West 80th Street Bloomington MN 55437
118 Hampton Inn - Daytona 1715 W. International Speedway Daytona FL 32114
- ------------------------------------------------------------------------------------------------------------------------------------
119 The Bradley Building 1220 West 6th Street Cleveland OH 44113
120 Lincoln Plaza 4545 North Lincoln Rd. Oklahoma OK 73105
122 215 Coles Street 215 Coles Street Jersey City NJ 07310
123 Westpark Walk 100 - 481 Commerce Drive Peachtree City GA 30269
124 Albertson's, Inc. - Pharr-McAllen 401 North Jackson Road Pharr-McAllen TX 78577
- ------------------------------------------------------------------------------------------------------------------------------------
125 The 535 Plaza 12444 Highway 535 Orlando FL 32821
126 Vanguard Distribution Building 13900 South Broadway Los Angeles CA 90061
127 Saratoga Holiday Inn 232 Broadway at Circular Street Saratoga Springs NY 12866
128 Courtyard Sarasota 850 University Parkway Sarasota FL 34234
129 Barnes & Noble, Inc. - Rockleigh 1 Pond Road Rockleigh NJ 07647
- ------------------------------------------------------------------------------------------------------------------------------------
130 Best Western Pensacola 16 Via De Luna Drive Pensacola FL 32561
131 Royal Garden Apartments 9352-9372 Holder Street Cypress CA 90620
132 CVS Plaza 213, 214 &218 Northern Blvd. Bayside NY 11361
133 Gainesville Courtyard by Marriott 3510 SW 40th Blvd. Gainesville FL 32608
134 The Shores Apartments 1100 Lamar Blvd. East Arlington TX 76011
- ------------------------------------------------------------------------------------------------------------------------------------
135 Williamsburg Villas 3211 S.W. Govenor John Sevier Highway Knoxville TN 37920
136 Dayton's Bluff Community Care Center 324 Johnson Parkway St. Paul MN 55106
137 Kings Plaza Shopping Center 1000 & 1080 Kings Highway New Bedford MA 02745
138 Circuit City - Cincinnati 5455 Glenway Ave Cincinnati OH 45238
139 Circuit City - Wilkes Barre 500 Kidder St. Wilkes Barre PA 18702
- ------------------------------------------------------------------------------------------------------------------------------------
140 College Village Shopping Center SEC College Blvd. & Quivira Road Overland Park KS 66204
141 Berwyn House 4800 Berwyn House Road College Park MD 20740
142 Shawnee Village 12821 126th Way NE Kirkland WA 98034
143 Sierra Vista Apartments 710 South Hardy Drive Tempe AZ 85281
145 Cedars Executive Center 2939 North Monroe St. Tallahassee FL 32303
- ------------------------------------------------------------------------------------------------------------------------------------
146 Midwest Warehouse 6634 W. 68th Street Bedford Park IL 60638
147 Southington Queen Plaza 825-875 Queen Street Southington CT 06489
148 Best Western - Mystic 9 Whitehall Avenue Mystic CT 06355
149 Plaza 50 Shopping Center 1936-2270 E. Williams Street Carson City NV 89701
150 Wendover Plaza Shopping Center 931 Wendover Rd. Charlotte NC 28211
- ------------------------------------------------------------------------------------------------------------------------------------
151 University Roost Apartments 700 S. Blackbird Road Flagstaff AZ 86001
152 Olympic Ridge Apartments 4302 Center Street Tacoma WA 98409
153 Mountain Creek Park 4235 Highway 78 Lilburn GA 30247
154 2600 Post Road 2600 Southport Post Road Southport CT 06490
155 Westgate Plaza SEC US 64/Roller Mill Road Franklin NC 28734
- ------------------------------------------------------------------------------------------------------------------------------------
156 Country Place II 3918-3930 Blackburn Lane Burtonsville MD 20866
157 Circuit City - Florence 2400 David McLeod Blvd. Florence SC 29501
158 Eagle Crest Apartments 1601 Regency Court Arlington TX 76010
159 Edgewater Trace 10714 Abercorn Extension Savannah GA 31419
160 Lafayette Green Apartments 8327 West Tidwell Houston TX 77040
- ------------------------------------------------------------------------------------------------------------------------------------
161 Zinfandel Ranch Apartments 10833 Folsom Boulevard Rancho Cordova CA 95670
162 Cove Village Townhouses 2 Driftwood Court Baltimore MD 21221
163 Mobile Residence Inn 950 S Beltline Highway Mobile AL 36609
164 Village Shopping Center 3020 N. Main Street Hope Mills NC 28348
165 Thompson Creek Shopping Center Thompson Creek Road Stevensville MD 21666
- ------------------------------------------------------------------------------------------------------------------------------------
166 Bally Total Fitness - Cincinnati 3694 Werk Rd. Cincinnati OH 45248
167 Watchung Commons Route 22 East & Terrill Road Watchung NJ 07060
168 Giant Eagle Plaza 4400 Buffalo Road (US 20) Erie PA 16510
169 Courtyard by Marriott - Mobile 1000 South Beltline Hwy. Mobile AL 36609
170 National Hills Shopping Center 2701 Washington Rd. Augusta GA 30909
- ------------------------------------------------------------------------------------------------------------------------------------
171 International Outlet Center 5532 International Drive Orlando FL 32819
172 Wymberly Pointe Apartments 702 West Warrior Grand Prairie TX 75052
173 Indian Run Casarow Drive Bridgeton NJ 08302
174 Oak Creek Apartments 8460 Hospital Drive Atlanta GA 30134
175 South Coast Center 16261 Highway 101 Harbor OR 97415
- ------------------------------------------------------------------------------------------------------------------------------------
176 The Hampton Inn 2311 North Shadeland Avenue Indianapolis IN 46219
177 Best Western Airport East 301 North Central Avenue Hapeville GA 30354
178 Evergreen Office Center 200 East Del Mar Blvd. Pasadena CA 91101
180 Auburn Chase Apartments 401 Turlington Drive Newport News VA 23602
181 Foxwood I & II Apartments 19920 Foxwood Forest Humble TX 77338
- ------------------------------------------------------------------------------------------------------------------------------------
182 Radisson Suite Hotel 1808 Australian Avenue West Palm Beach FL 33409
183 Hunters Glen 1201 Bacon Ranch Road Killeen TX 76542
184 Sunset International 7000 SW 97th Ave. Miami FL 33173
185 Bally Total Fitness - Greenwood 517 US Highway 31 Greenwood IN 46142
186 Fort Myers Residence Inn by Marriott 2960 Colonial Boulevard Ft. Myers FL 33912
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUMULATIVE
CROSSED COLLATERALIZED % OF AGGREGATE % OF INITIAL INTEREST
CONTROL LOANS CONTROL ORIGINAL CUT-OFF DATE CUT-OFF DATE POOL MORTGAGE ADMINISTRATIVE ACCRUAL
NO. NOS. BALANCE BALANCE BALANCE BALANCE RATE COST RATE METHOD
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
109 $5,813,000 $5,801,266 0.26% 61.19% 8.1250% 0.1025% Act/360
110 5,800,000 5,788,599 0.26 61.46 8.1500 0.1025 30/360
111 5,750,000 5,739,700 0.26 61.72 7.5600 0.1025 Act/360
112 5,750,000 5,735,276 0.26 61.98 8.3000 0.1275 Act/360
113 5,600,000 5,579,458 0.25 62.23 8.9000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
114 5,500,000 5,497,367 0.25 62.48 7.8200 0.1625 Act/360
115 5,500,000 5,489,244 0.25 62.73 8.2500 0.1025 Act/360
116 5,500,000 5,488,961 0.25 62.98 9.0100 0.1025 Act/360
117 5,471,920 5,415,475 0.25 63.22 10.1250 0.1025 30/360
118 5,400,000 5,400,000 0.25 63.47 8.0400 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
119 5,400,000 5,391,697 0.24 63.71 8.0900 0.1825 Act/360
120 5,300,000 5,280,462 0.24 63.95 8.8700 0.1525 30/360
122 5,250,000 5,250,000 0.24 64.19 8.2500 0.1275 Act/360
123 5,200,000 5,189,301 0.24 64.43 9.0000 0.1025 Act/360
124 5,158,009 5,158,009 0.23 64.66 7.4375 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
125 5,125,000 5,108,096 0.23 64.89 9.0600 0.1775 30/360
126 5,100,000 5,096,859 0.23 65.12 7.7930 0.1025 Act/360
127 5,000,000 5,000,000 0.23 65.35 8.0000 0.1025 Act/360
128 5,003,000 4,998,821 0.23 65.58 7.9700 0.1025 Act/360
129 5,000,000 4,989,871 0.23 65.80 8.2500 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
130 5,000,000 4,978,679 0.23 66.03 9.2400 0.1525 30/360
131 4,863,000 4,842,232 0.22 66.25 8.5700 0.1025 30/360
132 4,841,680 4,833,642 0.22 66.47 8.6250 0.1025 Act/360
133 4,802,000 4,797,989 0.22 66.69 7.9700 0.1025 Act/360
134 4,815,000 4,797,258 0.22 66.90 8.5200 0.1775 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
135 4,800,000 4,797,046 0.22 67.12 8.0000 0.1025 Act/360
136 4,800,000 4,789,403 0.22 67.34 8.9700 0.1525 Act/360
137 4,800,000 4,784,004 0.22 67.56 9.0100 0.1025 30/360
138 4,903,453 4,783,763 0.22 67.77 8.1875 0.1025 30/360
139 4,903,453 4,776,282 0.22 67.99 8.1875 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
140 4,750,000 4,748,045 0.22 68.21 8.2300 0.1775 Act/360
141 4,750,000 4,743,859 0.22 68.42 8.2000 0.1825 30/360
142 4,750,000 4,742,388 0.22 68.64 7.9500 0.1025 Act/360
143 4,750,000 4,741,261 0.22 68.85 8.3200 0.1775 Act/360
145 4,750,000 4,729,022 0.21 69.07 9.1500 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
146 4,749,750 4,699,778 0.21 69.28 9.1500 0.1025 30/360
147 4,700,000 4,692,155 0.21 69.49 7.8100 0.1025 Act/360
148 238,255 4,683,000 4,683,000 0.21 69.70 8.2500 0.1025 Act/360
149 4,600,000 4,600,000 0.21 69.91 7.8750 0.1025 30/360
150 215 4,600,000 4,597,936 0.21 70.12 8.0000 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
151 4,600,000 4,597,585 0.21 70.33 7.5500 0.1775 Act/360
152 4,560,000 4,543,249 0.21 70.54 8.5350 0.1025 30/360
153 4,550,000 4,538,834 0.21 70.74 8.4900 0.1025 30/360
154 4,510,000 4,501,095 0.20 70.95 8.1000 0.1025 Act/360
155 4,500,000 4,495,259 0.20 71.15 8.2400 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
156 4,500,000 4,489,869 0.20 71.35 7.6800 0.1025 Act/360
157 4,596,987 4,484,777 0.20 71.56 8.1875 0.1025 30/360
158 4,475,000 4,465,732 0.20 71.76 7.5200 0.1025 Act/360
159 4,463,500 4,461,018 0.20 71.96 7.3750 0.1025 Act/360
160 4,450,000 4,440,878 0.20 72.16 7.9800 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
161 4,450,000 4,438,772 0.20 72.37 8.2700 0.1025 Act/360
162 4,425,000 4,423,108 0.20 72.57 8.1300 0.1025 Act/360
163 4,410,000 4,410,000 0.20 72.77 8.1500 0.1025 Act/360
164 4,400,000 4,394,466 0.20 72.97 7.6250 0.1025 Act/360
165 4,350,000 4,345,341 0.20 73.16 8.1800 0.1525 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
166 4,368,323 4,344,815 0.20 73.36 9.8750 0.1025 30/360
167 4,323,000 4,323,000 0.20 73.56 7.4700 0.1025 30/360
168 4,300,000 4,297,799 0.20 73.75 7.6250 0.1025 Act/360
169 4,293,000 4,274,173 0.19 73.95 9.0500 0.1025 Act/360
170 4,100,000 4,095,982 0.19 74.13 8.5000 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
171 4,100,000 4,089,140 0.19 74.32 9.2200 0.1775 30/360
172 219 4,100,000 4,086,023 0.19 74.50 8.9000 0.1775 30/360
173 4,075,000 4,067,080 0.18 74.69 8.1500 0.1025 Act/360
174 4,000,000 4,000,000 0.18 74.87 8.3200 0.1025 Act/360
175 4,000,000 3,997,673 0.18 75.05 8.1880 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
176 4,000,000 3,993,109 0.18 75.23 8.4600 0.1525 Act/360
177 4,000,000 3,984,774 0.18 75.41 9.3500 0.1025 Act/360
178 3,990,000 3,977,324 0.18 75.59 9.2410 0.1775 30/360
180 3,920,000 3,898,460 0.18 75.77 8.0000 0.1025 30/360
181 3,920,000 3,898,460 0.18 75.95 8.0000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
182 3,900,000 3,897,050 0.18 76.12 8.3750 0.1025 Act/360
183 3,880,000 3,880,000 0.18 76.30 8.1400 0.1025 30/360
184 3,850,000 3,838,693 0.17 76.47 8.7200 0.1025 30/360
185 3,857,440 3,816,269 0.17 76.65 10.1250 0.1025 30/360
186 3,803,000 3,799,824 0.17 76.82 7.9700 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
ORIGINAL REMAINING
TERM TO TERM TO ORIGINAL REMAINING
CONTROL AMORTIZATION MATURITY MATURITY AMORTIZATION AMORTIZATION
NO. TYPE (MOS.) (MOS.) TERM (MOS.) TERM (MOS.)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
109 Amortizing Balloon 120 117 330 327
110 Amortizing Balloon 120 117 360 357
111 Amortizing Balloon 120 117 360 357
112 Amortizing Balloon 120 117 300 297
113 Amortizing Balloon 84 80 300 296
- ------------------------------------------------------------------------------------------------------------------------------------
114 Amortizing Balloon 120 119 360 359
115 Amortizing Balloon 120 117 330 327
116 Amortizing Balloon 120 115 360 355
117 Step(3) 141 137 141 137
118 Amortizing Balloon 120 120 300 300
- ------------------------------------------------------------------------------------------------------------------------------------
119 Amortizing Balloon 84 81 360 357
120 Amortizing Balloon 120 116 300 296
122 Amortizing Balloon 120 120 300 300
123 Amortizing Balloon 120 116 330 326
124 Amortizing Balloon 238 238 298 298
- ------------------------------------------------------------------------------------------------------------------------------------
125 Amortizing Balloon 84 78 360 354
126 Amortizing Balloon 120 119 336 335
127 Amortizing Balloon 120 120 300 300
128 Amortizing Balloon 120 119 300 299
129 Fully Amortizing 300 298 300 298
- ------------------------------------------------------------------------------------------------------------------------------------
130 Fully Amortizing 276 272 276 272
131 Amortizing Balloon 120 113 360 353
132 Amortizing Balloon 120 116 360 356
133 Amortizing Balloon 120 119 300 299
134 Amortizing Balloon 120 114 360 354
- ------------------------------------------------------------------------------------------------------------------------------------
135 Amortizing Balloon 120 119 330 329
136 Amortizing Balloon 120 117 300 297
137 Amortizing Balloon 120 114 360 354
138 Fully Amortizing 264 247 264 247
139 Fully Amortizing 264 246 264 246
- ------------------------------------------------------------------------------------------------------------------------------------
140 Amortizing Balloon 120 119 360 359
141 Amortizing Balloon 84 82 360 358
142 Amortizing Balloon 120 117 360 357
143 Amortizing Balloon 120 116 360 356
145 Amortizing Balloon 120 115 300 295
- ------------------------------------------------------------------------------------------------------------------------------------
146 Amortizing Balloon 85 78 240 233
147 Amortizing Balloon 120 117 360 357
148 Fully Amortizing 264 264 264 264
149 Amortizing Balloon 120 120 300 300
150 Amortizing Balloon 120 119 360 359
- ------------------------------------------------------------------------------------------------------------------------------------
151 Amortizing Balloon 120 119 360 359
152 Amortizing Balloon 84 78 360 354
153 Amortizing Balloon 240 236 360 356
154 Amortizing Balloon 120 116 360 356
155 Amortizing Balloon 120 118 360 358
- ------------------------------------------------------------------------------------------------------------------------------------
156 Amortizing Balloon 120 117 330 327
157 Fully Amortizing 264 247 264 247
158 Amortizing Balloon 84 82 300 298
159 Amortizing Balloon 120 119 360 359
160 Amortizing Balloon 120 116 360 356
- ------------------------------------------------------------------------------------------------------------------------------------
161 Amortizing Balloon 120 115 360 355
162 Amortizing Balloon 120 119 360 359
163 Amortizing Balloon 120 120 300 300
164 Amortizing Balloon 120 119 264 263
165 Amortizing Balloon 120 118 360 358
- ------------------------------------------------------------------------------------------------------------------------------------
166 Step(3) 139 137 139 137
167 Interest Only then Amortizing Balloon(1) 180 180 312 312
168 Amortizing Balloon 120 119 360 359
169 Amortizing Balloon 119 113 300 294
170 Amortizing Balloon 120 118 360 358
- ------------------------------------------------------------------------------------------------------------------------------------
171 Amortizing Balloon 120 115 360 355
172 Amortizing Balloon 120 114 360 354
173 Amortizing Balloon 120 116 360 356
174 Interest Only then Hyper-Amortizing(4) 120 116 360 360
175 Amortizing Balloon 120 119 330 329
- ------------------------------------------------------------------------------------------------------------------------------------
176 Amortizing Balloon 120 118 300 298
177 Amortizing Balloon 120 117 240 237
178 Amortizing Balloon 120 114 360 354
180 Amortizing Balloon 84 76 360 352
181 Amortizing Balloon 84 76 360 352
- ------------------------------------------------------------------------------------------------------------------------------------
182 Amortizing Balloon 180 179 300 299
183 Interest Only then Hyper-Amortizing(4) 120 116 360 360
184 Amortizing Balloon 120 115 360 355
185 Step(3) 138 134 138 134
186 Amortizing Balloon 120 119 300 299
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ORIGINATION MATURITY BALLOON
NO. DATE DATE BALANCE PROPERTY TYPE PREPAYMENT PROVISIONS
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
109 07/24/97 08/01/07 $5,036,265 Retail - Anchored L(4),YM1%(5.75),O(.25)
110 07/02/97 08/01/07 5,103,620 Retail - Anchored L(3),YM1%(6.333),O(.667)
111 07/25/97 08/01/07 5,086,968 Multifamily L(3),YM1%(6.5),O(.5)
112 07/02/97 08/01/07 4,779,632 Multifamily YM1%(9.75),O(.25)
113 06/30/97 07/01/04 5,010,932 Hospitality L(0),YM1%(7) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
114 09/26/97 10/01/07 4,896,841 Multifamily L(4),YM1%(5.5),O(.5) or DEF
115 07/07/97 08/01/07 4,780,463 Retail - Anchored L(4),YM1%(5.75),O(.25)
116 05/30/97 06/01/07 5,032,230 Office L(6),YM1%(3.5),O(.5) or DEF
117 06/20/97 04/01/09 - Health & Fitness - CTL L(4),YM1%(7.5),O(.25)
118 10/15/97 11/01/07 4,454,462 Hospitality L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
119 07/31/97 08/01/04 5,058,191 Retail - Unanchored L(4),YM1%(2.5),O(.5) or DEF
120 06/18/97 07/01/07 4,372,027 Office L(4),YM1%(5.5),O(.5)
122 10/07/97 11/01/07 4,356,629 Industrial YM1%(9.75),O(.25)
123 06/04/97 07/01/07 4,605,591 Retail - Unanchored L(4),4(3),2(1),1(1.5),O(.5)
124 10/10/97 09/01/17 1,898,993 Retail - CTL L(8),YM1%(11.833)
- ------------------------------------------------------------------------------------------------------------------------------------
125 05/01/97 05/01/04 4,802,392 Retail - Unanchored L(1),YM1%(5.5),O(.5)
126 10/01/97 10/01/07 4,414,591 Industrial/Retail L(5),YM1%(4.5),O(.5) or DEF
127 10/09/97 11/01/07 4,119,774 Hospitality L(7),YM1%(2.75),O(.25)
128 09/22/97 10/01/07 4,119,579 Hospitality L(4),YM1%(5.75),O(.25)
129 08/28/97 09/01/22 - Mixed Use - CTL L(8),YM1%(16.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
130 06/09/97 07/01/20 - Hospitality L(0),YM1%(15),O(8)
131 03/19/97 04/01/07 4,314,520 Multifamily L(4),YM1%(3),3(1),2(1),1(.5),O(.5)
132 06/05/97 07/01/07 4,393,459 Retail - Anchored L(4),YM1%(5.75),O(.25)
133 09/22/97 10/01/07 3,954,072 Hospitality L(4),YM1%(5.75),O(.25)
134 05/01/97 05/01/07 4,267,852 Multifamily L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
135 09/26/97 10/01/07 4,144,896 Assisted Living L(3),5(2),3(2),1(2),O(1)
136 07/07/97 08/01/07 4,063,836 Skilled Nursing L(4),YM1%(5.5),O(.5)
137 04/14/97 05/01/07 4,293,398 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
138 05/06/96 06/01/18 - Retail - CTL L(8),YM1%(13.5),O(.5)
139 04/30/96 05/01/18 - Retail - CTL L(8),YM1%(13.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
140 09/15/97 10/01/07 4,270,493 Retail - Unanchored L(4),YM1%(5.5),O(.5)
141 08/27/97 09/01/04 4,404,343 Multifamily L(4),YM1%(2.5),O(.5)
142 07/31/97 08/01/07 4,242,558 Multifamily L(3),YM1%(1),1(5.5),O(.5)
143 06/30/97 07/01/07 4,280,482 Multifamily L(4),YM1%(4),YM2%(1),O(1)
145 05/30/97 06/01/07 3,943,560 Office L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
146 03/27/97 05/01/04 3,919,573 Industrial L(5),YM1%(1.583),O(.5) or DEF
147 07/28/97 08/01/07 4,183,736 Retail - Anchored L(3),YM1%(6.5),O(.5)
148 10/03/97 11/01/19 269,911 Hospitality L(3),YM1%(18.75),O(.25)
149 10/03/97 11/01/07 3,703,251 Retail - Anchored L(4),YM1%(5.75),O(.25)
150 09/12/97 10/01/07 4,113,308 Retail - Anchored L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
151 09/29/97 10/01/07 4,068,394 Multifamily L(4),YM1%(5.5),O(.5)
152 04/29/97 05/01/04 4,246,256 Multifamily L(4),YM1%(2.5),O(.5)
153 06/24/97 07/01/17 2,820,358 Retail - Anchored L(4),YM1%(15.5),O(.5)
154 06/24/97 07/01/07 4,043,367 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
155 08/06/97 09/01/07 4,046,049 Retail - Anchored L(5),YM1%(4.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
156 08/01/97 08/01/07 3,853,079 Multifamily L(4),YM1%(5.5),O(.5)
157 05/02/96 06/01/18 - Retail - CTL L(8),YM1%(13.5),O(.5)
158 08/08/97 09/01/04 3,957,752 Multifamily L(4),YM1%(2.5),O(.5) or DEF
159 09/16/97 10/01/07 3,930,287 Multifamily L(4),YM1%(5.75),O(.25)
160 06/26/97 07/01/07 3,978,206 Multifamily L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
161 05/23/97 06/01/07 4,004,868 Multifamily L(3),YM1%(6.5),O(.5)
162 09/02/97 10/01/07 3,969,013 Multifamily L(5),YM1%(4.5),O(.5)
163 10/03/97 11/01/07 3,649,237 Hospitality L(4),YM1%(5.75),O(.25)
164 09/29/97 10/01/07 3,307,234 Retail - Anchored L(4),YM1%(5.75),O(.25)
165 08/28/97 09/01/07 3,905,725 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
166 08/27/97 04/01/09 - Health & Fitness - CTL L(4),YM1%(7.083),O(.5)
167 10/14/97 11/01/12 3,259,649 Retail - Unanchored L(5),YM1%(5),3(1),2(1),1(2),O(1)
168 10/01/97 10/01/07 3,810,169 Retail - Anchored L(4),YM1%(5),O(1)
169 04/22/97 04/01/07 3,652,181 Hospitality L(4),YM1%(5.75),O(.167)
170 08/11/97 09/01/07 3,708,392 Retail - Anchored L(3),YM1%(6.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
171 05/05/97 06/01/07 3,680,899 Retail - Unanchored L(3),YM1%(6.5),O(.5)
172 04/18/97 05/01/07 3,660,000 Multifamily L(4),YM1%(5.5),O(.5) or DEF
173 06/27/97 07/01/07 3,657,684 Multifamily L(4),YM1%(4),O(2)
174 06/16/97 07/01/07 3,708,126 Multifamily L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.5),O(.5)
175 09/16/97 10/01/07 3,470,991 Retail - Anchored L(1),YM1%(8.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
176 08/04/97 09/01/07 3,339,051 Hospitality L(4),YM1%(5.5),O(.5)
177 07/02/97 08/01/07 2,950,588 Hospitality L(5),5(1),4(1),3(1),2(1),1(.5),O(.5)
178 04/30/97 05/01/07 3,583,450 Office L(4),YM1%(5.5),O(.5)
180 02/24/97 03/01/04 3,625,116 Multifamily L(2),YM1%(4.5),O(.5) or DEF
181 02/24/97 03/01/04 3,625,116 Multifamily L(2),YM1%(4.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
182 09/09/97 10/01/12 2,648,163 Hospitality L(4),YM1%(10.75),O(.25)
183 06/16/97 07/01/07 3,534,357 Multifamily L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.5),O(.5)
184 05/16/97 06/01/07 3,425,448 Office L(4),YM1%(5.5),O(.5) or DEF
185 06/20/97 01/01/09 - Health & Fitness - CTL L(4),YM1%(7.25),O(.25)
186 09/22/97 10/01/07 3,131,473 Hospitality L(4),YM1%(5.75),O(.25)
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ANNUAL NET APPRAISED
NO. DEBT SERVICE CASH FLOW DSCR VALUE
==============================================================================
<S> <C> <C> <C> <C>
109 $529,413 $692,131 1.31x $ 7,750,000
110 517,997 700,693 1.35 8,500,000
111 485,296 621,939 1.28 7,600,000
112 546,338 704,096 1.29 7,525,000
113 559,345 400,941 2.50 16,000,000
- ------------------------------------------------------------------------------
114 476,029 599,707 1.26 7,000,000
115 506,557 636,235 1.26 8,000,000
116 531,526 749,090 1.41 8,800,000
117 721,238 865,485 NAP 7,250,000
118 501,855 741,144 1.48 7,440,000
- ------------------------------------------------------------------------------
119 479,551 626,147 1.31 7,220,000
120 528,078 739,179 1.40 7,770,000
122 496,724 672,055 1.35 7,790,000
123 511,444 679,806 1.33 7,600,000
124 455,947 457,315 NAP 5,400,000
- ------------------------------------------------------------------------------
125 497,500 711,597 1.43 7,500,000
126 448,384 630,511 1.41 6,800,000
127 463,090 648,346 1.40 8,880,000
128 462,175 671,488 1.45 6,900,000
129 473,070 699,930 NAP 6,150,000
- ------------------------------------------------------------------------------
130 525,230 835,160 1.59 8,750,000
131 451,605 563,572 1.25 6,250,000
132 451,897 565,917 1.25 6,300,000
133 443,607 645,742 1.46 6,860,000
134 445,097 623,781 1.40 6,275,000
- ------------------------------------------------------------------------------
135 432,245 573,539 1.33 6,775,000
136 482,194 702,712 1.46 6,600,000
137 463,877 584,346 1.26 6,400,000
138 481,440 481,440 NAP 5,190,000
139 481,440 481,440 NAP 5,250,000
- ------------------------------------------------------------------------------
140 427,421 590,787 1.38 6,400,000
141 426,220 582,470 1.37 6,550,000
142 416,261 576,543 1.39 6,450,000
143 431,030 529,954 1.23 6,200,000
145 484,210 656,269 1.36 7,300,000
- ------------------------------------------------------------------------------
146 518,328 706,092 1.36 6,800,000
147 406,398 521,943 1.28 6,700,000
148 462,057 677,401 1.47 6,690,000
149 421,482 540,910 1.28 6,400,000
150 405,038 510,086 1.26 6,000,000
- ------------------------------------------------------------------------------
151 387,858 513,285 1.32 5,800,000
152 422,108 509,911 1.21 5,945,000
153 419,440 532,390 1.27 6,100,000
154 400,893 534,677 1.33 6,100,000
155 405,304 500,394 1.23 6,050,000
- ------------------------------------------------------------------------------
156 393,538 578,537 1.47 6,000,000
157 451,350 451,350 NAP 4,870,000
158 397,537 646,099 1.63 5,900,000
159 369,939 512,484 1.39 5,650,000
160 391,086 476,919 1.22 5,610,000
- ------------------------------------------------------------------------------
161 401,927 564,258 1.40 5,650,000
162 394,452 607,362 1.54 5,900,000
163 413,718 587,378 1.42 6,300,000
164 413,093 519,335 1.26 5,550,000
165 389,595 529,836 1.36 5,800,000
- ------------------------------------------------------------------------------
166 571,842 686,211 NAP 5,750,000
167 377,364(2) 466,537 1.24 6,175,000
168 365,222 507,747 1.39 6,400,000
169 434,086 613,129 1.41 5,850,000
170 378,305 502,452 1.33 5,490,000
- ------------------------------------------------------------------------------
171 403,687 546,089 1.35 5,650,000
172 392,339 477,336 1.22 5,150,000
173 363,937 473,626 1.30 5,200,000
174 362,973(2) 514,473 1.42 5,500,000
175 366,365 471,233 1.29 5,500,000
- ------------------------------------------------------------------------------
176 385,216 632,200 1.64 6,400,000
177 442,732 659,707 1.49 8,800,000
178 393,585 498,176 1.27 6,000,000
180 345,163 415,454 1.20 4,900,000
181 345,163 413,195 1.20 4,900,000
- ------------------------------------------------------------------------------
182 372,912 523,749 1.40 5,600,000
183 346,196(2) 447,762 1.29 4,850,000
184 362,466 560,897 1.55 5,400,000
185 512,527 615,032 NAP 5,200,000
186 351,320 491,898 1.40 6,050,000
- ------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUT-OFF SCHEDULED
CONTROL APPRAISAL DATE MATURITY YEAR
NO. YEAR LTV DATE LTV BUILT
====================================================================================================================================
<S> <C> <C> <C> <C>
109 1997 74.9% 65.0% 1985,86
110 1997 68.1 60.0 1997
111 1997 75.5 66.9 1960
112 1997 76.2 63.5 1971
113 1997 34.9 31.3 1978,85
- ------------------------------------------------------------------------------------------------------------------------------------
114 1997 78.5 70.0 1972
115 1997 68.6 59.8 1990
116 1997 62.4 57.2 1966
117 1997 NAP - 1989
118 1997 72.6 59.9 1985
- ------------------------------------------------------------------------------------------------------------------------------------
119 1997 74.7 70.1 1884
120 1997 68.0 56.3 1969
122 1997 67.4 55.9 1927
123 1997 68.3 60.6 1986
124 1997 NAP 35.2 1997
- ------------------------------------------------------------------------------------------------------------------------------------
125 1997 68.1 64.0 1990
126 1997 75.0 64.9 1966
127 1997 56.3 46.4 1964
128 1997 72.4 59.7 1995
129 1997 NAP - 1973
- ------------------------------------------------------------------------------------------------------------------------------------
130 1997 56.9 - 1991,93
131 1996 77.5 69.0 1970
132 1997 76.7 69.7 1996
133 1997 69.9 57.6 1995
134 1996 76.5 68.0 1976
- ------------------------------------------------------------------------------------------------------------------------------------
135 1997 70.8 61.2 1990,95
136 1997 72.6 61.6 1960-70
137 1997 74.8 67.1 1970
138 1996 NAP - 1995
139 1996 NAP - 1996
- ------------------------------------------------------------------------------------------------------------------------------------
140 1997 74.2 66.7 1986
141 1997 72.4 67.2 1965
142 1997 73.5 65.8 1978
143 1997 76.5 69.0 1980
145 1997 64.8 54.0 1974
- ------------------------------------------------------------------------------------------------------------------------------------
146 1997 69.1 57.6 1973
147 1997 70.0 62.4 1969
148 1997 70.0 4.0 1973
149 1997 71.9 57.9 1973
150 1997 76.6 68.6 1979
- ------------------------------------------------------------------------------------------------------------------------------------
151 1997 79.3 70.1 1982
152 1997 76.4 71.4 1980
153 1997 74.4 46.2 1996
154 1997 73.8 66.3 1971
155 1997 74.3 66.9 1987
- ------------------------------------------------------------------------------------------------------------------------------------
156 1997 74.8 64.2 1979
157 1996 NAP - 1996
158 1997 75.7 67.1 1970
159 1997 79.0 69.6 1969
160 1997 79.2 70.9 1979
- ------------------------------------------------------------------------------------------------------------------------------------
161 1997 78.6 70.9 1987
162 1997 75.0 67.3 1964
163 1997 70.0 57.9 1996
164 1997 79.2 59.6 1987
165 1997 74.9 67.3 1988
- ------------------------------------------------------------------------------------------------------------------------------------
166 1997 NAP - 1989
167 1997 70.0 52.8 1991
168 1997 67.2 59.5 1987
169 1997 73.1 62.4 1994
170 1997 74.6 67.5 1961,73
- ------------------------------------------------------------------------------------------------------------------------------------
171 1996 72.4 65.1 1985
172 1996 79.3 71.1 1983
173 1997 78.2 70.3 1973
174 1997 72.7 67.4 1972
175 1997 72.7 63.1 1984,85,89
- ------------------------------------------------------------------------------------------------------------------------------------
176 1997 62.4 52.2 1989
177 1997 45.3 33.5 1974
178 1997 66.3 59.7 1981
180 1997 79.6 74.0 1974
181 1997 79.6 74.0 1983
- ------------------------------------------------------------------------------------------------------------------------------------
182 1997 69.6 47.3 1986
183 1997 80.0 72.9 1985
184 1997 71.1 63.4 1982
185 1997 NAP - 1989
186 1997 62.8 51.8 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LOAN PER
SQ FT, UNIT, SQ FT, UNIT,
CONTROL YEAR BED, PAD BED, PAD OCCUPANCY RENT ROLL UNDERWRITING
NO. RENOVATED OR ROOM OR ROOM PERCENTAGE DATE RESERVES
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
109 82,304 Sq Feet $ 70.63 96.2% 07/17/97 $0.12 Sq Foot
110 1968 114,500 Sq Feet 50.66 63.0 09/01/97 $0.15 Sq Foot
111 90 Units 63,888.89 83.2 06/20/97 $250.00 Unit
112 262 Units 21,946.56 93.5 08/12/97 $300.00 Unit
113 296 Rooms 18,918.92 NAP NAP 4% of gross revenue Room
- ------------------------------------------------------------------------------------------------------------------------------------
114 232 Units 23,706.90 99.0 08/07/97 $203.00 Unit
115 64,574 Sq Feet 85.17 100.0 07/01/97 $0.16 Sq Foot
116 1997 109,684 Sq Feet 50.14 89.6 05/01/97 $0.15 Sq Foot
117 43,000 Sq Feet 127.25 100.0 10/31/97 $0.15 Sq Foot
118 1993 121 Rooms 44,628.10 NAP NAP 4% of gross revenue Room
- ------------------------------------------------------------------------------------------------------------------------------------
119 1985 120,371 Sq Feet 44.86 100.0 06/30/97 $0.28 Sq Foot
120 253,403 Sq Feet 20.92 99.0 08/01/97 $0.15 Sq Foot
122 1992 787,369 Sq Feet 6.67 100.0 10/01/97 $0.10 Sq Foot
123 86,655 Sq Feet 60.01 93.8 07/01/97 $0.25 Sq Foot
124 55,513 Sq Feet 92.92 100.0 10/31/97 $0.30 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
125 30,730 Sq Feet 166.78 100.0 02/28/97 $0.16 Sq Foot
126 1988 175,600 Sq Feet 29.04 100.0 09/26/97 $0.19 Sq Foot
127 1996 150 Rooms 33,333.33 NAP NAP 4% of gross revenue Room
128 81 Rooms 61,765.43 NAP NAP 4% of gross revenue Room
129 1987 75,750 Sq Feet 66.01 100.0 10/31/97 $0.00 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
130 1995 123 Rooms 40,650.41 NAP NAP 4% of gross revenue Room
131 127 Units 38,291.34 98.4 08/29/97 $292.14 Unit
132 22,632 Sq Feet 213.93 100.0 05/01/97 $0.05 Sq Foot
133 81 Rooms 59,283.95 NAP NAP 4% of gross revenue Room
134 1990 236 Units 20,402.54 95.8 04/24/97 $308.13 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
135 96 Beds 50,000.00 97.0 09/04/97 $200.00 Bed
136 204 Beds 23,529.41 85.8 04/04/97 $246.69 Bed
137 1994 169,234 Sq Feet 28.36 99.2 03/05/97 $0.17 Sq Foot
138 33,343 Sq Feet 147.06 100.0 10/31/97 $0.00 Sq Foot
139 29,660 Sq Feet 165.32 100.0 10/31/97 $0.00 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
140 53,588 Sq Feet 88.64 99.9 08/01/97 $0.13 Sq Foot
141 1996 132 Units 35,984.85 94.0 06/15/97 $268.43 Unit
142 160 Units 29,687.50 96.9 09/24/97 $232.00 Unit
143 239 Units 19,874.48 82.4 07/25/97 $249.55 Unit
145 117,782 Sq Feet 40.33 98.1 04/01/97 $0.34 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
146 160,318 Sq Feet 29.63 91.0 N/A $0.24 Sq Foot
147 160,711 Sq Feet 29.25 89.8 07/23/97 $0.15 Sq Foot
148 1994 150 Rooms 31,220.00 NAP NAP 4% of gross revenue Room
149 1986 120,534 Sq Feet 38.16 94.6 10/03/97 $0.17 Sq Foot
150 1985 77,589 Sq Feet 59.29 97.0 06/01/97 $0.24 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
151 264 Units 17,424.24 97.0 07/01/97 $225.00 Unit
152 168 Units 27,142.86 90.0 02/20/97 $223.00 Unit
153 66,925 Sq Feet 67.99 100.0 04/03/97 $0.05 Sq Foot
154 1994-97 39,029 Sq Feet 115.56 92.9 06/11/97 $0.12 Sq Foot
155 157,151 Sq Feet 28.63 94.9 07/01/97 $0.16 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
156 120 Units 37,500.00 97.5 07/24/97 $288.00 Unit
157 33,090 Sq Feet 138.92 100.0 10/31/97 $0.00 Sq Foot
158 280 Units 15,982.14 92.9 07/01/97 $237.00 Unit
159 1995 160 Units 27,896.88 97.5 08/31/97 $242.00 Unit
160 240 Units 18,541.67 96.3 05/14/97 $250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
161 174 Units 25,574.71 94.8 05/16/97 $200.00 Unit
162 299 Units 14,799.33 92.4 07/31/97 $225.00 Unit
163 66 Rooms 66,818.18 NAP NAP 4% of gross revenue Room
164 118,822 Sq Feet 37.03 100.0 08/01/97 $0.12 Sq Foot
165 78,485 Sq Feet 55.42 83.0 07/24/97 $0.28 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
166 36,300 Sq Feet 120.34 100.0 10/31/97 $0.15 Sq Foot
167 27,698 Sq Feet 156.08 100.0 09/01/97 $0.07 Sq Foot
168 1996 85,861 Sq Feet 50.08 100.0 10/01/97 $0.10 Sq Foot
169 78 Rooms 55,192.31 NAP NAP 4% of gross revenue Room
170 1995-96 181,289 Sq Feet 22.62 92.0 04/14/97 $0.30 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
171 33,025 Sq Feet 124.15 100.0 02/28/97 $0.21 Sq Foot
172 1994 208 Units 19,711.54 95.7 06/30/97 $238.74 Unit
173 160 Units 25,468.75 93.8 06/01/97 $250.00 Unit
174 216 Units 18,518.52 92.0 05/16/97 $236.00 Unit
175 81,326 Sq Feet 49.18 95.1 08/06/97 $0.14 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
176 125 Rooms 32,000.00 NAP NAP 4% of gross revenue Room
177 1994,95 184 Rooms 21,739.13 NAP NAP 4% of gross revenue Room
178 54,152 Sq Feet 73.68 94.3 06/01/97 $0.15 Sq Foot
180 272 Units 14,411.76 83.8 07/07/97 $209.10 Unit
181 184 Units 21,304.35 95.7 07/01/97 $285.93 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
182 1995 174 Rooms 22,413.79 NAP NAP 4% of gross revenue Room
183 152 Units 25,526.32 94.7 06/05/97 $175.00 Unit
184 1997 58,174 Sq Feet 66.18 100.0 05/05/97 $0.32 Sq Foot
185 36,000 Sq Feet 107.15 100.0 10/31/97 $0.15 Sq Foot
186 78 Rooms 48,756.41 NAP NAP 4% of gross revenue Room
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
---------------------------------------------------------------------
TENANT
CONTROL AREA LEASED LEASE CONTROL
NO. TENANT NAME (SQ. FT.) EXP DATE NO.
====================================================================================================================================
109 Freidmans 15,120 12/31/00 109
110 Big V 59,000 08/30/22 110
111 111
112 112
113 113
- ------------------------------------------------------------------------------------------------------------------------------------
114 114
115 Treasure Island 40,000 11/30/10 115
116 116
117 117
118 118
- ------------------------------------------------------------------------------------------------------------------------------------
119 Liquid Cafe 4,075 07/31/00 119
120 120
122 122
123 Carmike Theatres 14,236 08/31/08 123
124 Albertson's, Inc. 55,513 10/31/17 124
- ------------------------------------------------------------------------------------------------------------------------------------
125 East Coast Impex, Inc. 8,583 03/31/17 125
126 126
127 127
128 128
129 Barnes & Noble, Inc. 75,750 07/31/23 129
- ------------------------------------------------------------------------------------------------------------------------------------
130 130
131 131
132 CVS Drugs 10,000 01/31/12 132
133 133
134 134
- ------------------------------------------------------------------------------------------------------------------------------------
135 135
136 136
137 Ames 71,501 02/28/11 137
138 Circuit City 33,343 05/31/18 138
139 Circuit City 29,660 04/30/18 139
- ------------------------------------------------------------------------------------------------------------------------------------
140 Flack Decorating 5,730 03/01/98 140
141 141
142 142
143 143
145 145
- ------------------------------------------------------------------------------------------------------------------------------------
146 146
147 Ames 81,550 01/31/00 147
148 148
149 Scolari's Market 40,420 12/01/09 149
150 Food Lion 29,000 11/30/14 150
- ------------------------------------------------------------------------------------------------------------------------------------
151 151
152 152
153 Sports Authority 43,393 05/31/16 153
154 Bridgeport Hospital 11,785 06/30/06 154
155 K-Mart 86,479 08/13/13 155
- ------------------------------------------------------------------------------------------------------------------------------------
156 156
157 Circuit City 33,090 05/31/18 157
158 158
159 159
160 160
- ------------------------------------------------------------------------------------------------------------------------------------
161 161
162 162
163 163
164 Roses 45,495 08/01/07 164
165 Ritz Cameras/Boaters World 6,600 03/31/98 165
- ------------------------------------------------------------------------------------------------------------------------------------
166 166
167 Annie Sez 14,500 01/31/02 167
168 Giant Eagle Supermarket 70,453 10/31/12 168
169 169
170 J.B. White 85,000 01/31/01 170
- ------------------------------------------------------------------------------------------------------------------------------------
171 Famous Shoes 8,040 02/15/00 171
172 172
173 173
174 174
175 Pay Less Drugs 20,846 06/30/11 175
- ------------------------------------------------------------------------------------------------------------------------------------
176 176
177 177
178 178
180 180
181 181
- ------------------------------------------------------------------------------------------------------------------------------------
182 182
183 183
184 184
185 185
186 186
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL ZIP
NO. PROPERTY NAME ADDRESS CITY STATE CODE
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
187 Moberly Manor Phyllis Drive Bentonville AR 72712
188 Lakeway Plaza I
189 Lakeway Plaza II
188 & 189 Lakeway Plaza I & II - Property Level 1310 Ranch Road 620 Lakeway TX 78734
- ------------------------------------------------------------------------------------------------------------------------------------
190 Custer Park Shopping Center 2929 Custer Road Plano TX 75075
191 Sovereign 4829 Sheboygan Avene Madison WI 53705
192 Corporate Park at Kendall 12415 SW 136th Avenue Miami FL 33186
193 Canwood Business Park 5126-5137-5142 Clareton Drive Aurora Hills CA 91301
- ------------------------------------------------------------------------------------------------------------------------------------
194 Preston Luther Center 6131 Luther Lane Dallas TX 75225
195 Huntington Circle 409 W. Highway 304 Lewisville TX 75067
196 Bally Total Fitness - Indianapolis 5435 Pike Plaza Dr. Indianapolis IN 46254
197 Planters Walk Shopping Center 6570 Tara Blvd. Jonesboro GA 30236
198 Market Square Shopping Center WS Gray Highway, N of Shurling Drive Macon GA 31298
- ------------------------------------------------------------------------------------------------------------------------------------
199 812 San Antonio Street 812 San Antonio Street Austin TX 78701
200 Colombus West Park Nursing &
Rehabilitation Center 1700 Heinzerling Drive Columbus OH 43223
201 Nassau Eden Club Apartments 2100 Sinton, 925-964 Auburnview,
2116-2142 Gilbert Ave. Cincinnati OH 45214
202 Texas Melody 5929-5921 Melody Place Dallas TX 75231
203 Willow Garden Apartments 635 Willow Street Highspire PA 17034
- ------------------------------------------------------------------------------------------------------------------------------------
204 Best Western Crabtree 6619 Glenwood Avenue Raleigh NC 27612
205 3720-3740 Main Street 3720-3740 Main Street Philadelphia PA 19127
206 Two Edison Lakes 4101 Edison Lakes Parkway Mishawaka IN 46545
207 Ocean State Plaza 361 Reservoir Avenue Cranston RI 02910
208 Meadows at Central 2816 Central Drive Bedford TX 76201
- ------------------------------------------------------------------------------------------------------------------------------------
209 Belmont Plaza Retirement Center 1710 Magnolia Boulevard Nashville TN 37219
210 1227 Commonwealth Avenue 1227-1245 Commonwealth Avenue Boston MA 02165
211 Loehmann's Plaza 2701 North Federal Hwy. Fort Lauderdale FL 33306
212 Hopkins Tech Center 1600 South Second Street Hopkins MN 55343
213 Mariner's Point 15922 Pacific Coast Highway Huntington Beach CA 92649
- ------------------------------------------------------------------------------------------------------------------------------------
214 4401 Barclay Downs 4401 Barclay Downs Drive Charlotte NC 28209
215 Lake Hickory Plaza Shopping Center 1366 Highway 321 North Hickory NC 28601
216 15625 Kendall Drive 15625 Kendall Drive Kendall FL 33193
217 Holiday Inn - Dalton 515 Holiday Drive Dalton GA 30720
218 Chase Ridge 8050 103rd Street Jacksonville FL 32299
- ------------------------------------------------------------------------------------------------------------------------------------
219 Wymberly Crossing Apartments 3001 South Carrier Parkway Grand Prairie TX 75052
220 Harwood Village North 601-735 Harwood Rd. & 2908-2928 Brown Trail Bedford TX 76021
221 Town & Country Villas 3662-3798 Mill Lake Circle Greenacres City FL 33463
222 The Shops at Washington Point SWC of 120th Avenue & Washington St Northglenn CO 80233
223 Danville Plaza 2855 Riverside Drive Danville VA 24540
- ------------------------------------------------------------------------------------------------------------------------------------
224 Tarmac-Sentara Building 1151 Azalea Garden Road Norfolk VA 23502
225 Four Seasons Apartments 4443 Ocean Drive Corpus Christi TX 78412
226 Countrywood East 5700 Mack Road Sacramento CA 95823
227 Sierra Vista Business Park 100-140 Chaparral Court Anaheim CA 92808
228 Walgreen Company - San Francisco 42nd Avenue and Point Lobos Avenue San Francisco CA 94121
- ------------------------------------------------------------------------------------------------------------------------------------
229 Misty Ridge Apartments 301 West Hawkins Parkway Longview TX 75605
230 Woodward Bluffs Mobile Home Park 9360 North Blackstone Fresno CA 93720
231 Mallards Landing Apartments 3260 Justina Road Jacksonville FL 32277
232 Huntington Oaks Plaza Fred George Road at US Highway 27 Tallahassee FL 32303
233 Colony Apartments 300 Champions Drive Lufkin TX 75901
- ------------------------------------------------------------------------------------------------------------------------------------
234 Essex Shopping Center 435 Hialeah Drive Hialeah FL 33010
235 3400 West 86th Street 3400 West 86th Street Indianapolis IN 46268
237 CH2M Hill 2567 Fairlane Drive Montgomery AL 36116
238 Best Western - Keene 401 Winchester Street Keene NH 03431
239 Marriott Fairfield Inn 2437 South Wildcat Way Wood Cross UT 84011
- ------------------------------------------------------------------------------------------------------------------------------------
240 Tysons Plaza Retail Center 8032 Leesburg Pike Tysons Corner VA 22182
241 Holiday Inn College Station 1503 Texas Avenue College Station TX 77840
242 Circuit City - Muncy Lycoming Mall Ring Rd. Muncy PA 17756
243 Porterwood Apartments 24270 FM 1314 Porter TX 77365
244 Designer Shoe Warehouse Northwest Corner Yosemite and Chester Street Littleton CO 80124
- ------------------------------------------------------------------------------------------------------------------------------------
245 Eastgate Shopping Center 578-680 East Boise Avenue Boise ID 83701
246 8180 NW 36th Street 8180 NW 36th Street Miami FL 33166
247 3300 Holcomb Bridge Road 3300 Holcomb Bridge Road Norcross GA 30092
248 84 Business Park 84 Business Park Drive Armonk NY 10504
249 Apple Creek 9905 Locust Street Kansas City MO 64131
- ------------------------------------------------------------------------------------------------------------------------------------
250 Day Hill Village Shoppes 555 Day Hill Road Windsor CT 06095
251 Cedar Pointe Apartments 7610 Fallbrook Drive Houston TX 77086
252 Lockworks Square Shopping Center 1208-1236 Main St. Branford CT 06405
253 Coliseum Self Storage 5200 Coliseum Way Oakland CA 94601
254 Mission Center 4460 Lincoln Avenue Cypress CA 90630
- ------------------------------------------------------------------------------------------------------------------------------------
255 Ramada Inn - Bedford 340 Great Road Bedford MA 01730
256 Clearlake Shopping Center 1068 Clearlake Boulevard Cocoa FL 32922
257 Westgate Hills 3175 Robinson Road Jackson MS 39209
258 Wheaton Square Apartments 10866 Bucknell Drive Wheaton MD 20902
259 Ridgeview 710 North Washington Boulevard Ogden UT 84404
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUMULATIVE
CROSSED COLLATERALIZED % OF AGGREGATE % OF INITIAL INTERES
CONTROL LOANS CONTROL ORIGINAL CUT-OFF DATE CUT-OFF DATE POOL MORTGAGE ADMINISTRATIVE ACCRUAL
NO. NOS. BALANCE BALANCE BALANCE BALANCE RATE COST RATE METHOD
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
187 $3,800,000 $3,795,978 0.17% 76.99% 7.9600% 0.1625% 30/360
188 3,350,000 3,342,286 0.15 77.14 8.8000 0.1025 30/360
189 450,000 449,722 0.02 77.16 8.5200 0.1025 30/360
========================
188 & 189 3,800,000 3,792,008
- ------------------------------------------------------------------------------------------------------------------------------------
190 3,775,000 3,771,311 0.17 77.34 8.5100 0.1025 Act/360
191 3,768,000 3,763,729 0.17 77.51 7.9700 0.1025 Act/360
192 3,720,000 3,718,625 0.17 77.67 8.5000 0.1025 Act/360
193 3,720,000 3,711,291 0.17 77.84 8.7200 0.1525 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
194 3,700,000 3,688,712 0.17 78.01 8.7100 0.1025 Act/360
195 3,670,000 3,668,187 0.17 78.18 7.7300 0.1025 Act/360
196 3,687,350 3,648,000 0.17 78.34 10.1250 0.1025 30/360
197 3,620,000 3,614,084 0.16 78.51 8.6700 0.1025 Act/360
198 3,600,000 3,588,345 0.16 78.67 9.1500 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
199 3,600,000 3,588,272 0.16 78.83 9.1200 0.1025 30/360
200 3,600,000 3,584,657 0.16 79.00 8.6250 0.1025 Act/360
201 3,550,000 3,548,384 0.16 79.16 7.9600 0.1825 Act/360
202 3,520,000 3,511,325 0.16 79.32 8.3500 0.1025 Act/360
203 3,500,000 3,495,840 0.16 79.47 7.7900 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
204 3,500,000 3,495,344 0.16 79.63 8.6250 0.1025 Act/360
205 3,500,000 3,486,313 0.16 79.79 9.0000 0.1025 30/360
206 3,450,000 3,445,183 0.16 79.95 7.8200 0.1625 30/360
207 3,400,000 3,398,622 0.15 80.10 8.2700 0.1025 Act/360
208 3,400,000 3,396,659 0.15 80.26 8.4900 0.1525 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
209 3,400,000 3,391,662 0.15 80.41 8.5000 0.1025 Act/360
210 3,400,000 3,390,047 0.15 80.56 8.5000 0.1025 30/360
211 3,400,000 3,384,300 0.15 80.72 8.8800 0.1025 30/360
212 3,375,000 3,373,768 0.15 80.87 8.5300 0.1775 Act/360
213 3,400,000 3,373,703 0.15 81.02 8.6800 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
214 3,362,000 3,356,836 0.15 81.18 7.7500 0.1025 Act/360
215 150 3,354,000 3,351,936 0.15 81.33 8.0000 0.1025 Act/360
216 3,300,000 3,297,420 0.15 81.48 8.3750 0.1025 30/360
217 3,300,000 3,290,597 0.15 81.63 9.0000 0.1025 Act/360
218 3,300,000 3,289,627 0.15 81.78 8.5800 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
219 172 3,300,000 3,288,751 0.15 81.93 8.9000 0.1775 30/360
220 3,300,000 3,281,916 0.15 82.07 8.9700 0.1025 30/360
221 3,250,000 3,234,030 0.15 82.22 8.5000 0.1025 30/360
222 3,250,000 3,230,658 0.15 82.37 7.7050 0.1525 30/360
223 3,100,000 3,100,000 0.14 82.51 7.8750 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
224 3,100,000 3,096,954 0.14 82.65 8.4900 0.1525 Act/360
225 3,100,000 3,096,346 0.14 82.79 7.8220 0.1025 Act/360
226 3,075,000 3,070,666 0.14 82.93 8.3750 0.1025 Act/360
227 3,050,000 3,041,128 0.14 83.07 9.3750 0.1025 Act/360
228 3,026,068 3,019,414 0.14 83.20 7.6600 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
229 3,000,000 3,000,000 0.14 83.34 8.1400 0.1025 30/360
230 3,000,000 2,998,549 0.14 83.48 7.7900 0.1025 Act/360
231 3,000,000 2,998,544 0.14 83.61 7.7800 0.1625 Act/360
232 3,000,000 2,996,822 0.14 83.75 8.2200 0.1625 Act/360
233 2,960,000 2,943,735 0.13 83.88 8.0000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
234 2,935,500 2,929,205 0.13 84.01 7.9000 0.1775 30/360
235 2,925,000 2,919,341 0.13 84.15 7.8750 0.1025 Act/360
237 2,850,000 2,850,000 0.13 84.28 8.1250 0.1025 Act/360
238 148,255 2,848,000 2,848,000 0.13 84.41 8.2500 0.1025 Act/360
239 2,810,000 2,805,319 0.13 84.53 8.6250 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
240 2,800,000 2,796,539 0.13 84.66 8.4200 0.1525 30/360
241 2,800,000 2,792,139 0.13 84.79 8.8750 0.1025 Act/360
242 2,860,347 2,790,528 0.13 84.91 8.1875 0.1025 30/360
243 2,800,000 2,784,614 0.13 85.04 8.0000 0.1025 30/360
244 2,790,000 2,775,546 0.13 85.17 9.1400 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
245 2,763,000 2,760,569 0.13 85.29 7.7500 0.1025 Act/360
246 2,750,000 2,736,203 0.12 85.42 9.5040 0.1025 30/360
247 2,700,000 2,699,026 0.12 85.54 8.5600 0.1025 Act/360
248 2,700,000 2,697,652 0.12 85.66 7.8000 0.1625 Act/360
249 2,700,000 2,696,480 0.12 85.78 8.6200 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
250 2,700,000 2,695,400 0.12 85.90 8.5500 0.1025 Act/360
251 2,700,000 2,695,146 0.12 86.03 8.3900 0.1025 Act/360
252 2,700,000 2,694,669 0.12 86.15 8.1000 0.1025 Act/360
253 2,700,000 2,692,537 0.12 86.27 8.5000 0.1025 30/360
254 2,700,000 2,691,259 0.12 86.39 9.1500 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
255 148,238 2,669,000 2,669,000 0.12 86.51 8.2500 0.1025 Act/360
256 2,600,000 2,600,000 0.12 86.63 7.9900 0.1025 Act/360
257 2,600,000 2,598,995 0.12 86.75 8.3900 0.1025 Act/360
258 2,600,000 2,596,570 0.12 86.87 8.1000 0.1825 30/360
259 2,595,000 2,593,835 0.12 86.99 8.0000 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
ORIGINAL REMAINING
TERM TO TERM TO ORIGINAL REMAINING
CONTROL AMORTIZATION MATURITY MATURITY AMORTIZATION AMORTIZATION
NO. TYPE (MOS.) (MOS.) TERM (MOS.) TERM (MOS.)
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
187 Fully Amortizing 300 299 300 299
188 Amortizing Balloon 84 80 360 356
189 Amortizing Balloon 81 80 357 356
188 & 189
- -------------------------------------------------------------------------------------------------------------------------
190 Amortizing Balloon 120 118 360 358
191 Amortizing Balloon 120 118 360 358
192 Amortizing Balloon 120 119 360 359
193 Amortizing Balloon 120 116 360 356
- -------------------------------------------------------------------------------------------------------------------------
194 Fully Amortizing 300 296 300 296
195 Amortizing Balloon 120 119 360 359
196 Step(3) 138 134 138 134
197 Amortizing Balloon 120 116 360 356
198 Amortizing Balloon 120 114 360 354
- -------------------------------------------------------------------------------------------------------------------------
199 Amortizing Balloon 84 78 360 354
200 Fully Amortizing 240 237 240 237
201 Amortizing Balloon 180 179 360 359
202 Amortizing Balloon 300 295 360 355
203 Amortizing Balloon 120 118 360 358
- -------------------------------------------------------------------------------------------------------------------------
204 Fully Amortizing 240 239 240 239
205 Amortizing Balloon 120 113 360 353
206 Amortizing Balloon 120 118 360 358
207 Amortizing Balloon 84 83 360 359
208 Amortizing Balloon 120 118 360 358
- -------------------------------------------------------------------------------------------------------------------------
209 Amortizing Balloon 120 117 300 297
210 Amortizing Balloon 84 81 300 297
211 Amortizing Balloon 120 115 300 295
212 Amortizing Balloon 120 119 360 359
213 Fully Amortizing 180 177 180 177
- -------------------------------------------------------------------------------------------------------------------------
214 Amortizing Balloon 120 119 240 239
215 Amortizing Balloon 120 119 330 329
216 Amortizing Balloon 126 125 330 329
217 Amortizing Balloon 120 116 300 296
218 Amortizing Balloon 120 116 300 296
- -------------------------------------------------------------------------------------------------------------------------
219 Amortizing Balloon 120 114 360 354
220 Amortizing Balloon 84 78 300 294
221 Amortizing Balloon 120 115 300 295
222 Fully Amortizing 180 178 180 178
223 Amortizing Balloon 180 180 300 300
- -------------------------------------------------------------------------------------------------------------------------
224 Amortizing Balloon 120 118 360 358
225 Amortizing Balloon 120 118 360 358
226 Amortizing Balloon 84 81 360 357
227 Amortizing Balloon 120 114 330 324
228 Fully Amortizing 214 213 214 213
- -------------------------------------------------------------------------------------------------------------------------
229 Interest Only then Hyper-Amortizing(4) 120 116 360 360
230 Amortizing Balloon 120 119 360 359
231 Amortizing Balloon 120 119 360 359
232 Amortizing Balloon 120 118 360 358
233 Amortizing Balloon 84 76 360 352
- -------------------------------------------------------------------------------------------------------------------------
234 Amortizing Balloon 120 118 300 298
235 Amortizing Balloon 156 154 300 298
237 Fully Amortizing 240 240 240 240
238 Fully Amortizing 264 264 264 264
239 Amortizing Balloon 120 118 300 298
- -------------------------------------------------------------------------------------------------------------------------
240 Amortizing Balloon 120 118 360 358
241 Amortizing Balloon 120 118 240 238
242 Fully Amortizing 264 247 264 247
243 Amortizing Balloon 84 76 360 352
244 Fully Amortizing 240 236 240 236
- -------------------------------------------------------------------------------------------------------------------------
245 Amortizing Balloon 120 119 300 299
246 Amortizing Balloon 120 114 300 294
247 Amortizing Balloon 120 119 360 359
248 Amortizing Balloon 120 119 300 299
249 Amortizing Balloon 120 117 360 357
- -------------------------------------------------------------------------------------------------------------------------
250 Amortizing Balloon 120 116 360 356
251 Amortizing Balloon 84 80 360 356
252 Amortizing Balloon 120 116 360 356
253 Fully Amortizing 180 179 180 179
254 Amortizing Balloon 120 114 360 354
- -------------------------------------------------------------------------------------------------------------------------
255 Fully Amortizing 264 264 264 264
256 Amortizing Balloon 120 120 360 360
257 Fully Amortizing 360 359 360 359
258 Amortizing Balloon 84 82 360 358
259 Fully Amortizing 360 359 360 359
- -------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ORIGINATION MATURITY BALLOON
NO. DATE DATE BALANCE PROPERTY TYPE PREPAYMENT PROVISIONS
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
187 09/16/97 10/01/22 - Multifamily L(10),YM1%(10),1(4.5),O(.5) or DEF
188 06/24/97 07/01/04 3,129,591 L(3),YM1%(3.5),O(.5) or DEF
189 09/23/97 07/01/04 419,725 L(3),YM1%(3.25),O(.5) or DEF
188 & 189 Retail - Unanchored
- ------------------------------------------------------------------------------------------------------------------------------------
190 08/18/97 09/01/07 3,415,204 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
191 08/29/97 09/01/07 3,366,441 Multifamily L(4),YM1%(5.5),O(.5)
192 09/08/97 10/01/07 3,365,238 Office L(4),YM1%(5.5),O(.5) or DEF
193 06/05/97 07/01/07 3,309,784 Office L(3),YM1%(6.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
194 06/10/97 07/01/22 352,961 Retail - Unanchored L(10),YM1%(14.5),O(.5) or DEF
195 09/11/97 10/01/07 3,260,361 Multifamily L(3),YM1%(6.5),O(.5) or DEF
196 06/20/97 01/01/09 - Health & Fitness - CTL L(4),YM1%(7),O(.5)
197 06/25/97 07/01/07 3,288,179 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
198 04/09/97 05/01/07 3,228,056 Retail - Anchored L(3),YM1%(6.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
199 04/03/97 05/01/04 3,375,698 Office L(4),YM1%(2.5),O(.5) or DEF
200 07/30/97 08/01/17 186,506 Skilled Nursing L(5),YM1%(5),O(10)
201 09/05/97 10/01/12 2,832,883 Multifamily L(5),YM1%(9.5),O(.5) or DEF
202 05/19/97 06/01/22 1,628,377 Multifamily - Section 42 L(15),O(10)
203 08/07/97 09/01/07 3,113,472 Multifamily L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
204 09/26/97 10/01/17 180,710 Hospitality L(4),YM1%(15.75),O(.25)
205 03/13/97 04/01/07 3,130,041 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
206 08/28/97 09/01/07 3,015,164 Office L(4),YM1%(5.5),O(.5) or DEF
207 09/09/97 10/01/04 3,193,282 Retail - Unanchored L(3),YM1%(3.5),O(.5) or DEF
208 08/26/97 09/01/07 3,074,557 Retail - Unanchored L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
209 07/14/97 08/01/07 2,842,028 Congregate Care L(3),5(2),3(2),1(2),O(1)
210 07/07/97 08/01/04 3,023,634 Retail - Unanchored L(4),YM1%(2),O(1)
211 05/15/97 06/01/07 2,805,350 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
212 09/11/97 10/01/07 3,055,207 Industrial L(4),YM1%(5.5),O(.5)
213 07/11/97 08/01/12 94,423 Office L(4),YM1%(10.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
214 09/24/97 10/01/07 2,350,174 Office YM1%(9.75),O(.25)
215 09/12/97 10/01/07 2,896,246 Retail - Anchored L(4),YM1%(5.75),O(.25)
216 09/08/97 04/01/08 2,781,637 Retail - Anchored L(4),YM1%(6.25),O(.25)
217 06/19/97 07/01/07 2,796,878 Hospitality L(4),YM1%(5.5),O(.5)
218 06/02/97 07/01/07 2,765,213 Multifamily L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
219 04/18/97 05/01/07 2,945,854 Multifamily L(4),YM1%(5.5),O(.5) or DEF
220 04/16/97 05/01/04 2,955,976 Retail - Anchored L(4),YM1%(2.5),O(.5) or DEF
221 05/30/97 06/01/07 2,657,543 Multifamily L(4),YM1%(5.5),O(.5)
222 08/25/97 09/01/12 - Retail - Anchored L(4),YM1%(10.5),O(.5)-May prepay 10%of UPB
every year w/o penalty
223 10/08/97 11/01/12 2,051,360 Retail - Anchored L(4),YM5%(2),YM1%(7),2.5(1.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
224 08/25/97 09/01/07 2,803,273 Office L(5),YM1%(4.5),O(.5) or DEF
225 08/25/97 09/01/07 2,759,789 Multifamily L(4),YM1%(5.5),O(.5) or DEF
226 07/03/97 08/01/04 2,892,559 Multifamily L(2),YM1%(4.75),O(.25)
227 04/10/97 05/01/07 2,725,519 Office L(4),YM1%(5.75),O(.25)
228 09/11/97 08/01/15 - Retail - CTL L(8),YM1%(9.58),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
229 06/16/97 07/01/07 2,732,751 Multifamily L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.5),O(.5)
230 09/17/97 10/01/07 2,669,056 Mobile Home Park L(4),YM1%(5.5),O(.5) or DEF
231 09/19/97 10/01/07 2,668,406 Multifamily L(4),YM1%(5.5),O(.5)
232 08/12/97 09/01/07 2,696,114 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
233 02/24/97 03/01/04 2,737,333 Multifamily L(2),YM1%(4.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
234 08/05/97 09/01/07 2,364,758 Retail - Unanchored L(3),YM1%(6.5),O(.5) or DEF
235 08/08/97 09/01/10 2,144,501 Retail - Anchored L(4),YM1%(8.75),O(.25)
237 10/14/97 11/01/17 126,067 Office L(5),YM1%(10),1(4),O(1)
238 10/03/97 11/01/19 164,144 Hospitality L(3),YM1%(18.75),O(.25)
239 08/22/97 09/01/07 2,356,361 Hospitality L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
240 08/08/97 09/01/07 2,477,035 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
241 08/21/97 09/01/07 2,033,043 Hospitality L(4),YM1%(5.75),O(.25)
242 05/07/96 06/01/18 - Retail - CTL L(8),YM1%(13.5),O(.5)
243 02/24/97 03/01/04 2,589,368 Multifamily L(2),YM1%(4.5),O(.5) or DEF
244 06/11/97 07/01/17 168,859 Retail - Anchored L(5),YM1%(14.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
245 09/26/97 10/01/07 2,260,598 Retail - Anchored L(4),YM1%(5.75),O(.25)
246 04/09/97 05/01/07 2,301,110 Office L(4),YM1%(5.5),O(.5) or DEF
247 09/04/97 10/01/07 2,445,817 Office L(4),YM1%(5.5),O(.5) or DEF
248 09/24/97 10/01/07 2,212,290 Office L(4),5(1),4(1),3(1),2(1),1(1.5),O(.5)
249 07/14/97 08/01/07 2,449,234 Multifamily L(1),YM1%(8.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
250 06/13/97 07/01/07 2,445,921 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
251 06/05/97 07/01/04 2,540,665 Multifamily L(3),YM1%(3.5),O(.5) or DEF
252 06/24/97 07/01/07 2,420,643 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
253 09/11/97 10/01/12 - Self Storage L(7),YM1%(7.5),O(.5) or DEF
254 04/08/97 05/01/07 2,421,042 Retail - Unanchored L(9.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
255 10/03/97 11/01/19 153,828 Hospitality L(3),YM1%(18.75),O(.25)
256 10/09/97 11/01/07 2,323,917 Retail - Anchored L(5),YM1%(4.5),O(.5) or DEF
257 09/04/97 10/01/27 371,328 Multifamily - Section 42 YM1%(15),O(15)
258 08/29/97 09/01/04 2,407,627 Multifamily L(4),YM1%(2.5),O(.5)
259 09/30/97 10/01/27 321,720 Multifamily - Section 42 L(5),YM1%(10),O(15)
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ANNUAL NET APPRAISED APPRAISAL
NO. DEBT SERVICE CASH FLOW DSCR VALUE
================================================================================
<S> <C> <C> <C> <C>
187 $350,741 $429,886 1.23x $5,300,000
188 317,690
189 41,674
188 & 189 469,450 1.31 5,100,000
- --------------------------------------------------------------------------------
190 348,639 457,265 1.31 6,500,000
191 330,834 416,627 1.26 4,800,000
192 343,243 434,155 1.26 5,200,000
193 350,227 522,328 1.49 5,850,000
- --------------------------------------------------------------------------------
194 363,826 480,384 1.32 5,200,000
195 314,900 390,710 1.24 4,740,000
196 489,909 587,891 NAP 4,950,000
197 339,264 449,836 1.33 4,840,000
198 352,270 461,805 1.31 4,800,000
- --------------------------------------------------------------------------------
199 351,333 457,615 1.30 5,000,000
200 378,324 531,901 1.41 4,800,000
201 311,397 377,889 1.21 4,450,000
202 320,309 404,276 1.26 4,400,000
203 302,055 365,457 1.21 4,600,000
- --------------------------------------------------------------------------------
204 367,815 614,532 1.67 4,770,000
205 337,941 432,392 1.28 5,100,000
206 298,600 386,989 1.30 4,610,000
207 307,091 421,193 1.37 4,750,000
208 313,428 400,398 1.28 4,550,000
- --------------------------------------------------------------------------------
209 328,533 508,479 1.55 5,400,000
210 328,533 515,812 1.57 5,300,000
211 339,046 447,882 1.32 5,000,000
212 312,271 416,674 1.33 4,500,000
213 406,090 527,883 1.30 5,550,000
- --------------------------------------------------------------------------------
214 331,203 430,626 1.30 4,650,000
215 302,031 381,201 1.26 4,200,000
216 307,339 390,185 1.27 4,400,000
217 332,322 470,096 1.41 5,700,000
218 321,008 411,295 1.28 4,500,000
- --------------------------------------------------------------------------------
219 315,785 380,975 1.21 4,450,000
220 331,509 535,805 1.62 5,310,000
221 314,039 436,902 1.39 4,350,000
222 366,093 484,143 1.32 4,900,000
223 284,042 373,321 1.31 4,610,000
- --------------------------------------------------------------------------------
224 285,772 361,795 1.27 4,400,000
225 268,359 335,102 1.25 3,975,000
226 280,467 355,287 1.27 4,100,000
227 309,684 415,477 1.34 5,400,000
228 311,650 321,000 NAP 3,900,000
- --------------------------------------------------------------------------------
229 267,677(2) 387,564 1.45 3,750,000
230 258,904 335,767 1.30 4,000,000
231 258,655 332,384 1.29 3,910,000
232 269,697 338,329 1.25 4,100,000
233 260,633 346,399 1.33 3,700,000
- --------------------------------------------------------------------------------
234 269,551 447,798 1.66 4,660,000
235 268,007 350,097 1.31 3,900,000
237 288,729 388,140 1.34 4,250,000
238 281,003 399,089 1.42 4,120,000
239 274,369 400,432 1.46 3,950,000
- --------------------------------------------------------------------------------
240 256,452 366,858 1.43 4,350,000
241 299,612 439,074 1.47 4,500,000
242 280,840 280,840 NAP 3,040,000
243 246,545 307,825 1.25 3,500,000
244 304,249 380,812 1.25 3,950,000
- --------------------------------------------------------------------------------
245 250,437 318,569 1.27 3,700,000
246 288,412 388,560 1.35 4,200,000
247 250,507 331,759 1.32 3,600,000
248 245,791 388,850 1.58 5,300,000
249 251,889 313,607 1.25 3,750,000
- --------------------------------------------------------------------------------
250 250,277 350,568 1.40 3,600,000
251 246,607 312,626 1.27 3,400,000
252 240,002 321,652 1.34 3,600,000
253 319,056 515,683 1.62 4,910,000
254 264,202 338,294 1.28 3,700,000
- --------------------------------------------------------------------------------
255 263,342 368,740 1.40 4,130,000
256 228,717 317,031 1.39 3,500,000
257 237,473 296,819 1.25 3,600,000
258 231,113 281,305 1.22 3,700,000
259 228,494 268,323 1.17 3,200,000
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUT-OFF SCHEDULED
CONTROL APPRAISAL DATE MATURITY YEAR
NO. YEAR LTV DATE LTV BUILT
===============================================================================
<S> <C> <C> <C> <C>
187 1997 71.6 - 1996
188 74.3 69.6
189 74.5 69.5
188 & 189 1997 1985
- --------------------------------------------------------------------------------
190 1997 58.0 52.5 1975-85
191 1997 78.4 70.1 1970
192 1997 71.5 64.7 1997
193 1997 63.4 56.6 1984
- --------------------------------------------------------------------------------
194 1997 70.9 6.8 1951
195 1997 77.4 68.8 1982
196 1997 NAP - 1989
197 1997 74.7 67.9 1985
198 1996 74.8 67.3 1982
- --------------------------------------------------------------------------------
199 1997 71.8 67.5 1974
200 1997 74.7 3.9 1984
201 1997 79.7 63.7 1880,1987
202 1997 79.8 37.0 1996
203 1997 76.0 67.7 1973-75
- --------------------------------------------------------------------------------
204 1997 73.3 3.8 1984,88
205 1997 68.4 61.4 1997
206 1997 74.7 65.4 1989
207 1997 71.5 67.2 1988
208 1997 74.7 67.6 1986
- --------------------------------------------------------------------------------
209 1997 62.8 52.6 1980
210 1997 64.0 57.1 1899
211 1997 67.7 56.1 1997
212 1997 75.0 67.9 1951
213 1996 60.8 1.7 1984
- --------------------------------------------------------------------------------
214 1997 72.2 50.5 1987
215 1997 79.8 69.0 1987
216 1997 74.9 63.2 1996
217 1997 57.7 49.1 1968
218 1997 73.1 61.5 1969
- --------------------------------------------------------------------------------
219 1996 73.9 66.2 1975
220 1997 61.8 55.7 1981
221 1997 74.3 61.1 1984
222 1997 65.9 - 1996
223 1997 67.2 44.5 1971
- --------------------------------------------------------------------------------
224 1997 70.4 63.7 1987
225 1997 77.9 69.4 1960's
226 1997 74.9 70.6 1980
227 1997 56.3 50.5 1986
228 1997 NAP - 1953
- --------------------------------------------------------------------------------
229 1997 80.0 72.9 1981
230 1997 75.0 66.7 1974
231 1997 76.7 68.2 1963
232 1997 73.1 65.8 1990
233 1997 79.6 74.0 1984
- --------------------------------------------------------------------------------
234 1997 62.9 50.7 1948
235 1997 74.9 55.0 1997
237 1997 67.1 3.0 1988
238 1997 69.1 4.0 1975
239 1997 71.0 59.7 1995
- --------------------------------------------------------------------------------
240 1997 64.3 56.9 1984
241 1997 62.0 45.2 1974
242 1996 NAP - 1995
243 1997 79.6 74.0 1984
244 1997 70.3 4.3 1997
- --------------------------------------------------------------------------------
245 1997 74.6 61.1 1978
246 1996 65.1 54.8 1985
247 1997 75.0 67.9 1974
248 1997 50.9 41.7 1986
249 1997 71.9 65.3 1984
- --------------------------------------------------------------------------------
250 1997 74.9 67.9 1989
251 1997 79.3 74.7 1983
252 1997 74.9 67.2 1870
253 1997 54.8 - 1979
254 1997 72.7 65.4 1979
- --------------------------------------------------------------------------------
255 1997 64.6 3.7 1968
256 1997 74.3 66.4 1983
257 1997 72.2 10.3 1974
258 1997 70.2 65.1 1970
259 1996 81.1 10.1 1995
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LOAN PER
SQ FT, UNIT, SQ FT, UNIT,
CONTROL YEAR BED, PAD BED, PAD OCCUPANCY RENT ROLL UNDERWRITING
NO. RENOVATED OR ROOM OR ROOM PERCENTAGE DATE RESERVES
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
187 144 Units $26,388.89 100.0% 05/01/97 $205.00 Unit
188
189
188 & 189 85,225 Sq Feet 44.59 87.4 03/11/97 $0.15 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
190 131,214 Sq Feet 28.77 88.2 06/01/97 $0.16 Sq Foot
191 114 Units 33,052.63 98.2 07/31/97 $263.00 Unit
192 72,470 Sq Feet 51.33 100.0 08/01/97 $0.10 Sq Foot
193 98,206 Sq Feet 37.88 100.0 04/04/97 $0.15 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
194 1986 39,165 Sq Feet 94.47 100.0 06/09/97 $0.20 Sq Foot
195 126 Units 29,126.98 98.0 09/01/97 $227.54 Unit
196 36,000 Sq Feet 102.43 100.0 10/31/97 $0.15 Sq Foot
197 69,756 Sq Feet 51.90 88.7 04/03/97 $0.32 Sq Foot
198 116,290 Sq Feet 30.96 100.0 06/30/97 $0.15 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
199 1987 58,074 Sq Feet 61.99 92.0 03/18/97 $0.28 Sq Foot
200 100 Beds 36,000.00 94.0 07/03/97 $250.00 Bed
201 1989 81 Units 43,827.16 97.5 07/01/97 $249.00 Unit
202 262 Units 13,435.11 96.6 05/01/97 $196.18 Unit
203 176 Units 19,886.36 98.3 07/17/97 $250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
204 1994 88 Rooms 39,772.73 NAP NAP 4% of gross revenue Room
205 32,000 Sq Feet 109.38 100.0 09/22/97 $0.12 Sq Foot
206 40,286 Sq Feet 85.64 92.0 09/26/97 $0.25 Sq Foot
207 60,580 Sq Feet 56.12 100.0 03/25/97 $0.17 Sq Foot
208 58,796 Sq Feet 57.83 90.9 06/18/97 $0.17 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
209 124 Units 27,419.35 95.0 06/30/97 $223.19 Unit
210 1989 30,831 Sq Feet 110.28 100.0 09/12/97 $0.18 Sq Foot
211 25,000 Sq Feet 136.00 100.0 N/A $0.15 Sq Foot
212 344,976 Sq Feet 9.78 99.4 06/09/97 $0.15 Sq Foot
213 22,808 Sq Feet 149.07 100.0 06/30/97 $0.40 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
214 39,152 Sq Feet 85.87 100.0 N/A $0.24 Sq Foot
215 55,375 Sq Feet 60.57 100.0 06/01/97 $0.15 Sq Foot
216 42,341 Sq Feet 77.94 100.0 07/01/97 $0.13 Sq Foot
217 1993 199 Rooms 16,582.91 NAP NAP 4% of gross revenue Room
218 1996 172 Units 19,186.05 95.9 05/23/97 $295.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
219 1991 212 Units 15,566.04 94.8 06/30/97 $262.64 Unit
220 85,956 Sq Feet 38.39 98.0 02/03/97 $0.15 Sq Foot
221 113 Units 28,761.06 97.4 09/30/97 $248.85 Unit
222 45,200 Sq Feet 71.90 100.0 06/26/97 $0.10 Sq Foot
223 1995-96 146,288 Sq Feet 21.19 90.5 09/08/97 $0.10 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
224 52,178 Sq Feet 59.41 100.0 07/22/97 $0.15 Sq Foot
225 1996 99 Units 31,313.13 95.0 08/12/97 $225.00 Unit
226 168 Units 18,303.57 94.0 06/18/97 $264.00 Unit
227 97,906 Sq Feet 31.15 87.7 06/30/97 $0.22 Sq Foot
228 1994 10,420 Sq Feet 290.41 100.0 10/31/97 $0.15 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
229 176 Units 17,045.45 96.0 06/05/97 $175.00 Unit
230 169 Pads 17,751.48 96.4 08/18/97 $50.00 Pad
231 200 Units 15,000.00 98.7 09/01/97 $252.00 Unit
232 69,262 Sq Feet 43.31 97.7 06/26/97 $0.23 Sq Foot
233 128 Units 23,125.00 94.5 07/03/97 $363.82 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
234 1995 65,642 Sq Feet 44.72 91.0 06/15/97 $0.21 Sq Foot
235 30,000 Sq Feet 97.50 100.0 08/01/97 $0.10 Sq Foot
237 46,775 Sq Feet 60.93 100.0 10/10/97 $0.10 Sq Foot
238 1989 131 Rooms 21,740.46 NAP NAP 4% of gross revenue Room
239 80 Rooms 35,125.00 NAP NAP 4% of gross revenue Room
- ------------------------------------------------------------------------------------------------------------------------------------
240 23,460 Sq Feet 119.35 100.0 03/12/97 $0.22 Sq Foot
241 1995 126 Rooms 22,222.22 NAP NAP 4% of gross revenue Room
242 18,980 Sq Feet 150.70 100.0 10/31/97 $0.00 Sq Foot
243 136 Units 20,588.24 94.9 07/08/97 $320.53 Unit
244 25,000 Sq Feet 111.60 100.0 05/21/97 $0.10 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
245 95,072 Sq Feet 29.06 100.0 09/10/97 $0.16 Sq Foot
246 57,489 Sq Feet 47.84 95.7 02/01/97 $0.16 Sq Foot
247 59,509 Sq Feet 45.37 100.0 08/22/97 $0.17 Sq Foot
248 61,757 Sq Feet 43.72 100.0 09/10/97 $0.15 Sq Foot
249 103 Units 26,213.59 87.4 05/14/97 $277.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
250 34,384 Sq Feet 78.52 97.6 08/02/97 $0.15 Sq Foot
251 144 Units 18,750.00 97.9 05/31/97 $200.00 Unit
252 1995 34,852 Sq Feet 77.47 100.0 06/11/97 $0.15 Sq Foot
253 1994 67,180 Sq Feet 40.19 90.9 04/01/97 $0.19 Sq Foot
254 40,550 Sq Feet 66.58 95.8 03/14/97 $0.15 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
255 1990 99 Rooms 26,959.60 NAP NAP 4% of gross revenue Room
256 1995 82,522 Sq Feet 31.51 93.0 09/19/97 $0.17 Sq Foot
257 1989 296 Units 8,783.78 89.5 08/01/97 $236.00 Unit
258 1990 64 Units 40,625.00 96.9 06/11/97 $283.00 Unit
259 79 Units 32,848.10 98.7 06/01/97 $150.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
---------------------------------------------------------------------
TENANT
CONTROL AREA LEASED LEASE CONTROL
NO. TENANT NAME (SQ. FT.) EXP DATE NO.
=============================================================================================
<S> <C> <C> <C> <C>
187 187
188 188
189 189
188 & 189 Independent Golf Research 9,920 03/31/00 188 & 189
- ----------------------------------------------------------------------------------------------
190 Western Auto 14,510 11/30/99 190
191 191
192 192
193 193
- ----------------------------------------------------------------------------------------------
194 Fagadau and Hawk 5,156 09/01/99 194
195 195
196 196
197 Eckerd Drugs 8,504 01/31/05 197
198 Wal-Mart 60,000 06/30/02 198
- ----------------------------------------------------------------------------------------------
199 199
200 200
201 201
202 202
203 203
- ----------------------------------------------------------------------------------------------
204 204
205 United Artists 22,000 02/28/17 205
206 206
207 Ocean State Job Lot 28,480 03/31/98 207
208 Fitness Forever III 15,526 10/31/03 208
- ----------------------------------------------------------------------------------------------
209 209
210 Marty's Liquor 20,672 03/31/99 210
211 Loehmann's, Inc 25,000 02/28/17 211
212 212
213 213
- ----------------------------------------------------------------------------------------------
214 214
215 Lowe's Food Store 35,775 03/31/08 215
216 Babies R Us 42,341 02/01/08 216
217 217
218 218
- ----------------------------------------------------------------------------------------------
219 219
220 Minyard Food Stores 26,166 04/30/11 220
221 221
222 Petco 14,000 07/31/06 222
223 Value City 75,600 11/30/06 223
- ----------------------------------------------------------------------------------------------
224 224
225 225
226 226
227 227
228 Walgreen Company 10,420 08/31/15 228
- ----------------------------------------------------------------------------------------------
229 229
230 230
231 231
232 Food Lion 29,000 08/31/10 232
233 233
- ----------------------------------------------------------------------------------------------
234 Igiesio Cristo Rompe 10,485 06/30/00 234
235 Staples, Inc. 30,000 07/01/11 235
237 237
238 238
239 239
- ----------------------------------------------------------------------------------------------
240 Yi's Interiors 5,500 02/01/00 240
241 241
242 Circuit City 18,980 05/31/18 242
243 243
244 Designer Shoe Warehouse 25,000 08/30/18 244
- ----------------------------------------------------------------------------------------------
245 Albertsons Grocery 36,996 05/31/07 245
246 246
247 247
248 248
249 249
- ----------------------------------------------------------------------------------------------
250 Tutor Time Child Care 8,690 07/31/12 250
251 251
252 Bailey, Schaefer & Errato 5,511 04/30/99 252
253 253
254 Genghiskhan 6,101 10/31/00 254
- ----------------------------------------------------------------------------------------------
255 255
256 Winn Dixie 46,616 04/11/04 256
257 257
258 258
259 259
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL ZIP
NO. PROPERTY NAME ADDRESS CITY STATE CODE
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
260 North Park Plaza NW Corner Arizona Ave. & Ray Rd. Chandler AZ 85224
261 South Oak SC 809 Arrowood Road Charlotte NC 28217
262 Homelife Center 8780 Central Avenue Montclair CA 91763
263 Highpoint Village Shopping Center 12101 North Greenville Ave. Dallas SC 75243
264 Wexford Square Apartments 208 W. 62nd St. Minneapolis MN 55419
- ------------------------------------------------------------------------------------------------------------------------------------
265 Shoppes of Cooper City 12125-12397 Sheridan St. Cooper City FL 33026
266 Pep Boys - Miami 10660 SW 40TH Street Miami FL 33165
267 Willow Glenn Apartments 7474 La Mancha Way Sacramento CA 95823
268 Hempstead Road Apartments 5615-5645 Hempstead Road Pittsburgh PA 15217
269 Confederate Ridge Apartments 780 Highway 61 North Bypass Vicksburg MS 39180
- ------------------------------------------------------------------------------------------------------------------------------------
270 Auto/Retail (2450 S. Military Trail) 2450 S. Military Trail West Palm Beach FL 33046
271 Wood Creek Apartments 202 North Garnett Road Tulsa OK 74166
272 Latimer Brook Commons S.C. 339 Flanders Rd. East Lyme CT 06333
273 Nob Hill Apartments 3502 South Mason Avenue Tacoma WA 98409
275 Capital Plaza 545,551 & 555 Washington Street Weymouth MA 02188
- ------------------------------------------------------------------------------------------------------------------------------------
276 Mountain Park Square 4206 East Chandler Blvd. Phoenix AZ 85044
277 St. Mary's 551 4th St. North Winsted MN 55395
278 Tuscany Apartments 1221 North Orange Ave. Los Angeles CA 90038
279 Lakeview Apartments 2610 West Erie Avenue Lorain OH 44052
280 Devonshire Shopping Center SEC 127th St. & Mur-Len Rd. Olathe KS 66061
- ------------------------------------------------------------------------------------------------------------------------------------
281 Georgetown Apartments 751 E. Northside Drive Greenwood SC 29649
282 Shamrock Park Apartments 1440 College Way Olathe KS 66062
283 Thrifty-Payless - Corona del Mar 3141 East Pacific Coast Highway Corona del Mar CA 92625
284 Walgreen - Weston 1751 Bonaventure Blvd Weston FL 33326
285 Summit at Woodhaven Apartments 6100 Oakland Hills Drive Fort Worth TX 76112
- ------------------------------------------------------------------------------------------------------------------------------------
286 MCL Center 1331-1337 West Fullerton Ave. Chicago IL 60614
287 Hibiscus Center 2950 Tamiami Trail Naples FL 33940
288 Towers Garden Apartments 4015 Covington Highway Decatur GA 30032
289 Greenbriar Plaza Shopping Center 7041-7181 North Pecos Street Denver CO 80221
290 Point Place II 443 Donelson Pike Nashville TN 37214
- ------------------------------------------------------------------------------------------------------------------------------------
291 Babcock 222-230 Babcock Street Brookline MA 02134
292 Stoneridge Apartments 1000 South Danville Road Kilgore TX 75662
293 Rivers Edge Business Park 19017, 19039, 19201 62nd Avenue South Kent WA 98032
294 Summit 1700 Enterprise Drive Wichita Falls TX 76306
295 2105-2109 First Avenue 2102-2109 First Avenue New York NY 10029
- ------------------------------------------------------------------------------------------------------------------------------------
296 North Pointe Plaza Shopping Center 5420-5430 North Tryon Street Charlotte NC 28213
297 French Quarter Apartments 6643 Abrego Road Isla Vista CA 93117
298 Rite-Aid - Bay City 3880 E. Wilder Road Bay City MI 48706
299 Coral Gardens 3230 East Roosevelt Street Phoenix AZ 85008
300 Sherwood Arms Apartments 3909 Baker Plaza Columbus GA 31903
- ------------------------------------------------------------------------------------------------------------------------------------
301 Irongate Village Shopping Center 6401-25 Iron Bridge Road Richmond VA 23234
302 Conway Club Apartments 1900 South Conway Rd. Orlando FL 32812
303 Rite-Aid - Essexville 1490 W. Center Avenue Essexville MI 48732
304 Golden Age Four and Taylor
- ------------------------------------------------------------------------------------------------------------------------------------
304a Taylor County Health Care Center South Broad Street Butler GA 31006
304b Four County Health Care Center 99 Overby Drive Richland GA 31825
305 Mission Station 4400 Bluemel Rd. San Antonio TX 78240
306 El Mercado Apartments 10480 El Mercado Drive Rancho Cordova CA 95670
- ------------------------------------------------------------------------------------------------------------------------------------
307 Greentree 6103 Manor Road Austin TX 78723
308 Santa Rosa Plaza Shopping Center 2800 Gulf Breeze Parkway Gulf Breeze FL 32561
309 The Hermitage 219 Monastery Court Valrico FL 33594
310 A Rite-Aid Pharmacy - Manhattan Blvd. 810 Manhattan Blvd. Toldeo OH 43608
311 Fowler Plaza 2540 East Fowler Plaza Tampa FL 33612
- ------------------------------------------------------------------------------------------------------------------------------------
312 Countrywood Village 5500 Mack Road Sacramento CA 95023
313 Sun Club Apartments 1701 North Central Avenue Kissimmee FL 32741
314 A Rite-Aid Pharmacy - Sylvania Ave. 1012 Sylvania Ave. Toledo OH 43612
315 Queensbury 220 S. Home Ave. Avalon PA 15202
316 Colonial Village 9500 103rd Street Jacksonville FL 32210
- ------------------------------------------------------------------------------------------------------------------------------------
317 54 South Commerce Way 54 South Commerce Way Hanover Township PA 18017
318 Mac Frugal's Plaza 303 E Southern Avenue Mesa AZ 85210
319 1250 South Vermont Avenue 1250 South Vermont Avenue Los Angeles CA 90006
320 Hilltop Manor 5200 Annapolis Road Bladensburg MD 20710
321 Commerce Center 1975 E. Sunrise Blvd. Ft. Lauderdale FL 33304
- ------------------------------------------------------------------------------------------------------------------------------------
322 Lakecrest Shopping Center 28855 Military Road South Federal Way WA 98003
323 Bridgestone Apartments 1272 Bridgestone Avenue Springdale AR 72764
324 Rite-Aid - Jenison 2739 Port Sheldon Road Jenison MI 49428
325 A Rite-Aid Pharmacy - Main Street 212 Main Street Toledo OH 43605
326 First Union National Bank Building 205 Front Street Wilmington NC 28403
- ------------------------------------------------------------------------------------------------------------------------------------
327 Auto/Retail (2501 Sample Road) 2501-2525 W. Sample Road Pompano Beach FL 33073
328 Rite-Aid - Wilkes-Barre Wilkes-Barre Blvd & Wilkes-Barre PA 18702
East Northampton Street
329 Villa Gardens Apartments 3734 West El Segundo Blvd. Hawthorne CA 90250
330 Rite-Aid - Cleveland 15105 St Clair Ave & 152nd St. Cleveland OH 44110
331 Holiday Inn & Suites 300 East Washington Blvd. Fort Wayne IN 46802
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUMULATIVE
CROSSED COLLATERALIZED % OF AGGREGATE % OF INITIAL INITIAL
CONTROL LOANS CONTROL ORIGINAL CUT-OFF DATE CUT-OFF DATE POOL MORTGAGE ADMINISTRATIVE ACCRUAL
NO. NOS. BALANCE BALANCE BALANCE BALANCE RATE COST RATE METHOD
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
260 $2,600,000 $2,592,807 0.12% 87.10% 9.0100% 0.1775% 30/360
261 2,500,000 2,500,000 0.11 87.22 7.7500 0.1025 30/360
262 2,494,000 2,494,000 0.11 87.33 7.6200 0.1025 Act/360
263 2,500,000 2,492,741 0.11 87.44 8.5500 0.1025 30/360
264 2,500,000 2,491,906 0.11 87.56 8.4500 0.1525 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
265 2,500,000 2,491,161 0.11 87.67 8.7220 0.1025 30/360
266 2,447,077 2,447,077 0.11 87.78 7.9600 0.1025 30/360
267 2,445,000 2,441,908 0.11 87.89 7.5500 0.1025 Act/360
268 2,445,000 2,437,864 0.11 88.00 8.7500 0.1025 30/360
269 2,425,750 2,412,421 0.11 88.11 8.0000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
270 2,400,000 2,400,000 0.11 88.22 8.0800 0.1025 Act/360
271 2,400,000 2,396,142 0.11 88.33 7.9400 0.1025 Act/360
272 2,400,000 2,395,261 0.11 88.44 8.1000 0.1025 Act/360
273 2,400,000 2,391,184 0.11 88.55 8.5350 0.1025 30/360
275 2,350,000 2,329,478 0.11 88.65 9.3750 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
276 2,325,000 2,319,928 0.11 88.76 8.7500 0.1025 Act/360
277 2,325,000 2,319,749 0.11 88.86 8.8700 0.1525 Act/360
278 2,320,000 2,313,214 0.10 88.97 8.7400 0.1775 30/360
279 2,300,000 2,300,000 0.10 89.07 7.5100 0.1025 Act/360
280 76,105,408 2,295,000 2,293,509 0.10 89.18 8.1600 0.1775 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
281 2,275,000 2,272,933 0.10 89.28 7.6100 0.1625 Act/360
282 2,275,000 2,272,469 0.10 89.38 8.0400 0.1775 Act/360
283 2,270,098 2,262,166 0.10 89.49 7.9300 0.1025 30/360
284 2,257,604 2,257,604 0.10 89.59 7.3750 0.1025 30/360
285 2,260,000 2,254,104 0.10 89.69 8.1900 0.1825 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
286 2,250,000 2,250,000 0.10 89.79 7.6300 0.1025 Act/360
287 2,250,000 2,248,944 0.10 89.89 7.8760 0.1625 Act/360
288 2,250,000 2,245,357 0.10 90.00 7.9100 0.1825 30/360
289 2,250,000 2,244,275 0.10 90.10 8.3300 0.1775 Act/360
290 2,240,000 2,234,690 0.10 90.20 8.7300 0.1775 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
291 2,225,000 2,215,083 0.10 90.30 8.7500 0.1025 30/360
292 2,200,000 2,200,000 0.10 90.40 8.1400 0.1025 30/360
293 2,200,000 2,199,079 0.10 90.50 8.1875 0.1025 Act/360
294 2,200,000 2,197,608 0.10 90.60 8.1250 0.1025 Act/360
295 2,200,000 2,197,179 0.10 90.70 8.8400 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
296 2,175,000 2,171,313 0.10 90.80 8.5400 0.1525 Act/360
297 2,169,000 2,165,115 0.10 90.90 7.5600 0.1025 Act/360
298 2,159,314 2,159,314 0.10 90.99 7.5000 0.1025 30/360
299 2,160,000 2,156,589 0.10 91.09 8.0000 0.1025 Act/360
300 2,160,000 2,155,702 0.10 91.19 8.0900 0.1825 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
301 2,128,000 2,121,737 0.10 91.29 8.7100 0.1825 30/360
302 2,125,000 2,118,577 0.10 91.38 8.5800 0.1825 30/360
303 2,114,985 2,114,985 0.10 91.48 7.5000 0.1025 30/360
304 2,100,000 2,100,000 0.10 91.57 8.1500 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
304a 304a
304b 304b
305 2,100,000 2,097,344 0.10 91.67 7.5500 0.1025 Act/360
306 2,100,000 2,097,344 0.10 91.76 7.5500 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
307 2,100,000 2,094,179 0.10 91.86 9.0000 0.1025 30/360
308 2,100,000 2,091,703 0.09 91.95 8.9500 0.1025 30/360
309 2,050,000 2,047,557 0.09 92.05 7.7800 0.1625 Act/360
310 2,044,000 2,039,470 0.09 92.14 7.7900 0.1025 30/360
311 2,025,000 2,022,355 0.09 92.23 8.1500 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
312 2,025,000 2,022,146 0.09 92.32 8.3750 0.1025 Act/360
313 2,025,000 2,017,331 0.09 92.41 8.6250 0.1025 30/360
314 2,008,000 2,003,550 0.09 92.51 7.7900 0.1025 30/360
315 2,006,000 2,000,084 0.09 92.60 8.7000 0.1025 30/360
316 2,000,000 2,000,000 0.09 92.69 7.8750 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
317 2,000,000 1,998,995 0.09 92.78 7.6800 0.1625 Act/360
318 2,000,000 1,998,732 0.09 92.87 8.2800 0.1775 30/360
319 2,000,000 1,997,260 0.09 92.96 9.1500 0.1775 Act/360
320 2,000,000 1,995,287 0.09 93.05 8.5000 0.1025 Act/360
321 2,000,000 1,994,444 0.09 93.14 8.9900 0.1825 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
322 2,000,000 1,989,549 0.09 93.23 9.1250 0.1025 Act/360
323 1,990,000 1,987,894 0.09 93.32 7.9600 0.1625 30/360
324 1,974,110 1,974,110 0.09 93.41 7.5000 0.1025 30/360
325 1,956,000 1,953,856 0.09 93.50 7.7900 0.1025 30/360
326 1,960,000 1,951,883 0.09 93.59 8.8125 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
327 1,950,000 1,950,000 0.09 93.68 8.0800 0.1025 Act/360
328 1,948,066 1,940,888 0.09 93.76 7.7650 0.1025 30/360
329 1,950,000 1,938,977 0.09 93.85 8.5900 0.1025 Act/360
330 1,961,817 1,925,202 0.09 93.94 8.1700 0.1025 30/360
331 1,900,000 1,893,030 0.09 94.02 8.9000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
ORIGINAL REMAINING
TERM TO TERM TO ORIGINAL REMAINING
CONTROL AMORTIZATION MATURITY MATURITY AMORTIZATION AMORTIZATION
NO. TYPE (MOS.) (MOS.) TERM (MOS.) TERM (MOS.)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
260 Amortizing Balloon 120 115 360 355
261 Amortizing Balloon 180 180 360 360
262 Amortizing Balloon 120 120 330 330
263 Amortizing Balloon 120 117 300 297
264 Fully Amortizing 300 296 300 296
- ------------------------------------------------------------------------------------------------------------------------------------
265 Amortizing Balloon 84 78 360 354
266 Step(3) 234 234 234 234
267 Amortizing Balloon 120 118 360 358
268 Amortizing Balloon 120 115 360 355
269 Amortizing Balloon 84 76 360 352
- ------------------------------------------------------------------------------------------------------------------------------------
270 Amortizing Balloon 180 180 300 300
271 Amortizing Balloon 120 117 360 357
272 Amortizing Balloon 120 116 360 356
273 Amortizing Balloon 84 78 360 354
275 Amortizing Balloon 120 114 240 234
- ------------------------------------------------------------------------------------------------------------------------------------
276 Amortizing Balloon 240 235 360 355
277 Amortizing Balloon 120 117 300 297
278 Amortizing Balloon 120 115 360 355
279 Amortizing Balloon 120 120 360 360
280 Amortizing Balloon 120 119 360 359
- ------------------------------------------------------------------------------------------------------------------------------------
281 Amortizing Balloon 120 119 300 299
282 Amortizing Balloon 120 118 360 358
283 Fully Amortizing 238 236 238 236
284 Fully Amortizing 235 235 235 235
285 Amortizing Balloon 120 116 360 356
- ------------------------------------------------------------------------------------------------------------------------------------
286 Amortizing Balloon 120 120 360 360
287 Amortizing Balloon 84 83 360 359
288 Amortizing Balloon 120 117 360 357
289 Amortizing Balloon 120 117 300 297
290 Amortizing Balloon 120 116 324 320
- ------------------------------------------------------------------------------------------------------------------------------------
291 Amortizing Balloon 120 114 330 324
292 Interest Only then Hyper-Amortizing(4) 120 116 360 360
293 Amortizing Balloon 120 119 360 359
294 Amortizing Balloon 120 118 360 358
295 Amortizing Balloon 120 119 240 239
- ------------------------------------------------------------------------------------------------------------------------------------
296 Amortizing Balloon 120 118 300 298
297 Amortizing Balloon 120 117 360 357
298 Amortizing Balloon 240 240 296 296
299 Amortizing Balloon 336 333 360 357
300 Amortizing Balloon 120 117 360 357
- ------------------------------------------------------------------------------------------------------------------------------------
301 Amortizing Balloon 120 115 360 355
302 Amortizing Balloon 120 115 360 355
303 Amortizing Balloon 240 240 296 296
304 Fully Amortizing 120 120 120 120
- ------------------------------------------------------------------------------------------------------------------------------------
304a
304b
305 Amortizing Balloon 120 118 360 358
306 Amortizing Balloon 120 118 360 358
- ------------------------------------------------------------------------------------------------------------------------------------
307 Fully Amortizing 360 355 360 355
308 Amortizing Balloon 84 77 360 353
309 Amortizing Balloon 120 118 360 358
310 Amortizing Balloon 238 236 298 296
311 Amortizing Balloon 120 118 360 358
- ------------------------------------------------------------------------------------------------------------------------------------
312 Amortizing Balloon 84 81 360 357
313 Amortizing Balloon 120 115 330 325
314 Amortizing Balloon 238 236 298 296
315 Amortizing Balloon 120 115 360 355
316 Amortizing Balloon 120 120 360 360
- ------------------------------------------------------------------------------------------------------------------------------------
317 Amortizing Balloon 120 119 360 359
318 Amortizing Balloon 120 119 360 359
319 Amortizing Balloon 120 116 360 356
320 Amortizing Balloon 120 115 360 355
321 Amortizing Balloon 84 79 360 355
- ------------------------------------------------------------------------------------------------------------------------------------
322 Amortizing Balloon 120 113 300 293
323 Fully Amortizing 300 299 300 299
324 Amortizing Balloon 240 240 296 296
325 Amortizing Balloon 239 238 299 298
326 Amortizing Balloon 180 177 240 237
- ------------------------------------------------------------------------------------------------------------------------------------
327 Amortizing Balloon 180 180 192 192
328 Fully Amortizing 234 232 234 232
329 Fully Amortizing 240 236 240 236
330 Fully Amortizing 230 220 230 220
331 Amortizing Balloon 84 80 300 296
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ORIGINATION MATURITY BALLOON
NO. DATE DATE BALANCE PROPERTY TYPE PREPAYMENT PROVISIONS
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
260 05/14/97 06/01/07 $2,325,590 Retail - Anchored L(5),YM1%(1),4(1),3(1),2(1),1(.5),O(.5)
261 10/10/97 11/01/12 1,902,770 Retail - Anchored L(4),YM1%(6),5(1),4(1),3(1),2(1),1(.75),O(.25)
262 10/10/97 11/01/07 2,131,512 Retail - Unanchored L(4),YM1%(5.75),O(.25)
263 07/18/97 08/01/07 2,046,729 Retail - Unanchored L(2),YM1%(7.5),O(.5) or DEF
264 06/30/97 07/01/22 219,583 Multifamily L(11),YM1%(13.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
265 04/25/97 05/01/04 2,333,330 Retail - Unanchored L(4),YM1%(2.5),O(.5) or DEF
266 10/15/97 05/01/17 - Ground Lease - CTL L(8),YM1%(11.5)
267 08/25/97 09/01/07 2,162,162 Multifamily L(3),YM1%(6.5),O(.5)
268 05/19/97 06/01/07 2,176,598 Multifamily L(4),YM1%(5.75),O(.25)
269 02/24/97 03/01/04 2,243,272 Multifamily L(2),YM1%(4.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
270 10/06/97 11/01/12 1,604,785 Retail - Unanchored L(5),YM2%(9.5),O(.5)
271 07/18/97 08/01/07 2,143,094 Multifamily L(4),YM1%(5.5),O(.5) or DEF
272 06/24/97 07/01/07 2,151,682 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
273 04/29/97 05/01/04 2,234,872 Multifamily L(4),YM1%(2.5),O(.5)
275 04/14/97 05/01/07 1,686,964 Retail - Unanchored L(4),YM1%(5),O(1)
- ------------------------------------------------------------------------------------------------------------------------------------
276 05/28/97 06/01/17 1,608,231 Retail - Unanchored L(4),YM1%(15.75),O(.25)
277 07/07/97 08/01/07 1,963,157 Skilled Nursing L(4),YM1%(5.5),O(.5)
278 05/05/97 06/01/07 2,064,935 Multifamily L(4),YM1%(5.5),O(.5) or DEF
279 10/07/97 11/01/07 2,031,820 Multifamily L(4),5(1),4(1),3(1),2(1),1(1),O(1)
280 09/26/97 10/01/07 2,019,857 Retail - Anchored L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
281 09/19/97 10/01/07 1,853,656 Multifamily L(4),YM1%(5.5),O(.5) or DEF
282 08/27/97 09/01/07 2,035,936 Multifamily L(4),YM1%(5.5),O(.5)
283 08/29/97 07/01/17 - Retail - CTL L(8),YM1%(11.58),O(.25)
284 10/10/97 06/01/17 - Retail - CTL L(8),YM1%(11.33),O(.25)
285 06/23/97 07/01/07 1,990,255 Multifamily L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
286 10/09/97 11/01/07 1,993,595 Retail - Unanchored L(4),YM1%(5.75),O(.25)
287 09/25/97 10/01/04 2,100,676 Retail - Unanchored L(4),YM1%(2.5),O(.5) or DEF
288 07/28/97 08/01/07 1,970,128 Multifamily L(4),YM1%(5.5),O(.5)
289 07/25/97 08/01/07 1,871,866 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
290 06/19/97 07/01/07 1,955,517 Office L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
291 04/18/97 05/01/07 1,915,315 Multifamily L(4),YM1%(5),O(1)
292 06/16/97 07/01/07 2,004,017 Multifamily L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.5),O(.5)
293 09/05/97 10/01/07 1,975,955 Industrial L(2),YM1%(3),5(1),4(1),3(1),2(1),1(.75),O(.25)
294 08/27/97 09/01/07 1,972,768 Multifamily L(4),YM1%(5.5),O(.5)
295 09/10/97 10/01/07 1,595,951 Multifamily L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
296 08/21/97 09/01/07 1,819,624 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
297 07/25/97 08/01/07 1,918,903 Multifamily L(3),YM1%(6.5),O(.5)
298 10/10/97 11/01/17 755,487 Retail - CTL L(10),YM1%(10)
299 07/31/97 08/01/25 578,446 Multifamily - Section 42 L(15),O(13)
300 07/15/97 08/01/07 1,898,348 Multifamily L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
301 05/22/97 06/01/07 1,892,985 Retail - Anchored L(4),YM1%(5.5),O(.5)
302 05/21/97 06/01/07 1,885,689 Multifamily L(4),YM1%(5.5),O(.5)
303 10/10/97 11/01/17 739,976 Retail - CTL L(10),YM1%(10)
304 10/14/97 11/01/07 23,825 L(3),4(3),3(1),2(1),1(1),O(1)
- ------------------------------------------------------------------------------------------------------------------------------------
304a Skilled Nursing
304b Skilled Nursing
305 08/22/97 09/01/07 1,857,071 Multifamily L(3),YM1%(6.5),O(.5)
306 08/25/97 09/01/07 1,857,071 Multifamily L(3),YM1%(6.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
307 05/06/97 06/01/27 - Multifamily - Section 42 L(10),YM1%(5),O(15)
308 03/26/97 04/01/04 1,965,308 Retail - Anchored L(2),YM1%(4.5),O(.5) or DEF
309 08/27/97 09/01/07 1,823,162 Multifamily L(4),YM1%(5.5),O(.5)
310 08/27/97 07/01/17 769,553 Retail - CTL L(10),YM1%(9.833) or DEF
311 08/21/97 09/01/07 1,781,867 Retail - Unanchored L(9.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
312 07/03/97 08/01/04 1,904,856 Multifamily L(2),YM1%(4.75),O(.25)
313 05/12/97 06/01/07 1,738,554 Multifamily L(5),YM1%(4.75),O(.25)
314 08/22/97 07/01/17 755,999 Retail - CTL L(10),YM1%(9.833) or DEF
315 05/24/97 06/01/07 1,784,125 Multifamily L(4),YM1%(5.75),O(.25)
316 10/06/97 11/01/07 1,782,713 Multifamily L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
317 09/23/97 10/01/07 1,774,582 Office L(4),YM1%(5.5),O(.5) or DEF
318 09/05/97 10/01/07 1,764,453 Retail - Anchored L(4),YM1%(5.5),O(.5)
319 05/28/97 07/01/07 1,835,725 Retail - Unanchored L(3),YM1%(6.5),O(.5) or DEF
320 05/27/97 06/01/07 1,809,447 Multifamily L(4),YM1%(5.75),O(.25)
321 05/23/97 06/01/04 1,872,593 Office L(4),YM1%(2.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
322 03/19/97 04/01/07 1,700,448 Retail - Unanchored L(4),YM1%(5.75),O(.25)
323 09/16/97 10/01/22 - Multifamily L(10),YM1%(10),1(4.5),O(.5) or DEF
324 10/10/97 11/01/17 690,691 Retail - CTL L(10),YM1%(10)
325 09/26/97 09/01/17 735,615 Retail - CTL L(10),YM1%(9.917) or DEF
326 07/03/97 08/01/12 907,861 Office L(4),YM1%(10.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
327 10/06/97 11/01/12 256,399 Retail - Unanchored L(5),YM2%(9.5),O(.5)
328 08/21/97 03/01/17 - Retail - CTL L(8),YM1%(11.25),O(.25)
329 06/03/97 07/01/17 101,514 Multifamily L(4),YM1%(15.5),O(.5)
330 12/31/96 03/01/16 - Retail - CTL L(8),YM1%(10.67),O(.5)
331 06/30/97 07/01/04 1,700,137 Hospitality L(0),YM1%(6.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ANNUAL NET APPRAISED
NO. DEBT SERVICE CASH FLOW DSCR VALUE
================================================================================
<S> <C> <C> <C> <C>
260 $251,267 $310,852 1.24x $3,520,000
261 214,924 267,724 1.25 3,400,000
262 216,901 283,440 1.31 3,325,000
263 242,580 362,744 1.50 3,570,000
264 240,558 300,218 1.25 3,500,000
- --------------------------------------------------------------------------------
265 235,410 360,147 1.53 3,400,000
266 227,019 227,700 NAP 2,530,000
267 206,155 256,657 1.24 3,100,000
268 230,818 289,421 1.25 3,180,000
269 213,592 288,325 1.35 3,100,000
- --------------------------------------------------------------------------------
270 223,812 298,671 1.33 3,200,000
271 210,121 273,263 1.30 3,300,000
272 213,335 286,662 1.34 3,200,000
273 222,162 272,594 1.23 3,000,000
275 260,563 355,839 1.37 4,200,000
- --------------------------------------------------------------------------------
276 219,489 285,362 1.30 3,100,000
277 231,657 322,744 1.39 3,100,000
278 218,819 275,127 1.26 3,350,000
279 193,172 253,783 1.31 2,930,000
280 205,159 295,535 1.44 2,900,000
- --------------------------------------------------------------------------------
281 203,702 273,519 1.34 2,970,000
282 201,080 260,468 1.30 2,900,000
283 227,453 232,002 NAP 2,600,000
284 218,205 240,025 NAP 2,800,000
285 202,601 266,900 1.32 2,850,000
- --------------------------------------------------------------------------------
286 191,197 249,888 1.31 3,000,000
287 195,787 250,405 1.28 3,125,000
288 196,425 267,928 1.36 3,100,000
289 214,327 302,970 1.41 3,500,000
290 216,200 317,729 1.47 3,200,000
- --------------------------------------------------------------------------------
291 214,164 328,477 1.53 4,350,000
292 196,297(2) 265,638 1.35 2,750,000
293 197,176 265,069 1.34 3,100,000
294 196,019 254,024 1.30 3,150,000
295 234,818 473,540 2.02 3,600,000
- --------------------------------------------------------------------------------
296 210,868 324,799 1.54 2,900,000
297 183,061 253,999 1.39 3,000,000
298 192,371 194,102 NAP 2,160,000
299 190,192 234,810 1.23 2,850,000
300 191,820 261,784 1.36 2,900,000
- --------------------------------------------------------------------------------
301 200,163 267,368 1.34 2,900,000
302 197,521 252,156 1.28 2,660,000
303 188,422 190,118 NAP 2,120,000
304 307,747 635,820 2.07 7,241,000
- --------------------------------------------------------------------------------
304a 341,877 3,512,000
304b 293,943 3,729,000
305 177,066 236,158 1.33 2,700,000
306 177,066 222,778 1.26 2,850,000
- --------------------------------------------------------------------------------
307 202,765 274,179 1.35 2,600,000
308 201,859 297,427 1.47 2,825,000
309 176,748 233,618 1.32 2,600,000
310 186,318 191,513 NAP 2,060,000
311 180,852 240,947 1.33 2,700,000
- --------------------------------------------------------------------------------
312 184,698 232,008 1.26 3,000,000
313 192,799 244,344 1.27 2,700,000
314 183,037 188,159 NAP 2,025,000
315 188,516 235,701 1.25 2,550,000
316 174,017 231,523 1.33 2,600,000
- --------------------------------------------------------------------------------
317 170,779 227,848 1.33 2,695,000
318 180,810 298,418 1.65 3,400,000
319 195,705 267,387 1.37 2,800,000
320 184,539 230,473 1.25 2,800,000
321 192,937 262,416 1.36 2,885,000
- --------------------------------------------------------------------------------
322 203,465 255,160 1.25 3,100,000
323 183,677 239,857 1.31 3,000,000
324 175,871 177,278 NAP 1,975,000
325 178,101 183,330 NAP 1,975,000
326 208,788 315,736 1.51 2,740,000
- --------------------------------------------------------------------------------
327 217,532 285,923 1.31 3,030,000
328 194,198 194,780 NAP 2,125,000
329 204,405 318,669 1.56 2,600,000
330 202,889 213,033 NAP 2,125,000
331 189,778 323,377 1.70 5,100,000
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUT-OFF SCHEDULED
CONTROL APPRAISAL DATE MATURITY YEAR
NO. YEAR LTV DATE LTV BUILT
================================================================================
<S> <C> <C> <C> <C>
260 1997 73.7% 66.1% 1966
261 1997 73.5 56.0 1990
262 1997 75.0 64.1 1992
263 1997 69.8 57.3 1984
264 1997 71.2 6.3 1967
- --------------------------------------------------------------------------------
265 1997 73.3 68.6 1987
266 1997 NAP - 1997
267 1997 78.8 69.7 1989
268 1997 76.7 68.5 1925
269 1997 77.8 72.4 1974
- --------------------------------------------------------------------------------
270 1997 75.0 50.1 1985
271 1997 72.6 64.9 1975
272 1997 74.9 67.2 1989
273 1997 79.7 74.5 1986
275 1996 55.5 40.2 1950,80
- --------------------------------------------------------------------------------
276 1997 74.8 51.9 1997
277 1997 74.8 63.3 1960
278 1996 69.1 61.6 1990
279 1997 78.5 69.3 1972
280 1997 79.1 69.7 1987
- --------------------------------------------------------------------------------
281 1997 76.5 62.4 1972
282 1997 78.4 70.2 1980-82
283 1997 NAP - 1959
284 1996 NAP - 1997
285 1997 79.1 69.8 1984
- --------------------------------------------------------------------------------
286 1997 75.0 66.5 1986
287 1997 72.0 67.2 1986
288 1997 72.4 63.6 1965-72
289 1997 64.1 53.5 1956-62
290 1997 69.8 61.1 1985
- --------------------------------------------------------------------------------
291 1997 50.9 44.0 1962
292 1997 80.0 72.9 1982
293 1997 70.9 63.7 1987
294 1997 69.8 62.6 1972
295 1997 61.0 44.3 1900
- --------------------------------------------------------------------------------
296 1997 74.9 62.7 1979-80
297 1997 72.2 64.0 1966
298 1997 NAP 35.0 1997
299 1997 75.7 20.3 1961
300 1997 74.3 65.5 1972
- --------------------------------------------------------------------------------
301 1997 73.2 65.3 1985
302 1997 79.6 70.9 1968
303 1997 NAP 34.9 1997
304 29.0 0.3
- --------------------------------------------------------------------------------
304a 1997 1990
304b 1997 1989
305 1997 77.7 68.8 1983
306 1997 73.6 65.2 1978
- --------------------------------------------------------------------------------
307 1996 80.5 - 1973
308 1997 74.0 69.6 1984
309 1997 78.8 70.1 1985
310 1997 NAP 37.4 1997
311 1997 74.9 66.0 1980
- --------------------------------------------------------------------------------
312 1997 67.4 63.5 1980
313 1996 74.7 64.4 1973
314 1997 NAP 37.3 1997
315 1997 78.4 70.0 1970
316 1997 76.9 68.6 1981
- --------------------------------------------------------------------------------
317 1997 74.2 65.8 1989
318 1997 58.8 51.9 1986
319 1997 71.3 65.6 1996
320 1997 71.3 64.6 1942
321 1997 69.1 64.9 1968
- --------------------------------------------------------------------------------
322 1997 64.2 54.9 1960,90
323 1997 66.3 - 1996
324 1997 NAP 35.0 1996
325 1997 NAP 37.2 1997
326 1997 71.2 33.1 1914
- --------------------------------------------------------------------------------
327 1997 64.4 8.5 1989
328 1997 NAP - 1997
329 1997 74.6 3.9 1961
330 1996 NAP - 1995
331 1997 37.1 33.3 1968
- --------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LOAN PER
SQ FT, UNIT, SQ FT, UNIT,
CONTROL YEAR BED, PAD BED, PAD OCCUPANCY RENT ROLL UNDERWRITING
NO. RENOVATED OR ROOM OR ROOM PERCENTAGE DATE RESERVES
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
260 59,990 Sq Feet $ 43.34 98.5% 07/17/97 $0.15 Sq Foot
261 36,746 Sq Feet 68.03 88.1 10/01/97 $0.19 Sq Foot
262 37,773 Sq Feet 66.03 100.0 09/30/97 $0.15 Sq Foot
263 38,413 Sq Feet 65.08 94.7 06/26/97 $0.15 Sq Foot
264 1995-96 119 Units 21,008.40 98.3 04/28/97 $265.75 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
265 28,847 Sq Feet 86.66 96.5 03/20/97 $0.15 Sq Foot
266 - Sq Feet - 100.0 10/31/97 $0.00 Sq Foot
267 94 Units 26,010.64 97.9 06/30/97 $349.00 Unit
268 90 Units 27,166.67 99.0 03/31/97 $269.00 Unit
269 1994 162 Units 14,973.77 87.0 07/05/97 $361.20 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
270 30,510 Sq Feet 78.66 100.0 09/23/97 $0.15 Sq Foot
271 1996 160 Units 15,000.00 99.4 05/01/97 $261.00 Unit
272 33,781 Sq Feet 71.05 100.0 06/11/97 $0.18 Sq Foot
273 88 Units 27,272.73 93.2 02/20/97 $225.00 Unit
275 43,140 Sq Feet 54.47 100.0 09/01/97 $0.24 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
276 23,885 Sq Feet 97.34 100.0 08/29/97 $0.28 Sq Foot
277 1994 95 Beds 24,473.68 90.0 04/15/97 $275.00 Bed
278 54 Units 42,962.96 100.0 04/22/97 $307.83 Unit
279 96 Units 23,958.33 85.4 08/31/97 $225.00 Unit
280 45,907 Sq Feet 49.99 91.3 10/03/97 $0.15 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
281 100 Units 22,750.00 98.0 07/01/97 $372.00 Unit
282 1997 113 Units 20,132.74 100.0 06/30/97 $215.00 Unit
283 1997 9,563 Sq Feet 237.38 100.0 10/31/97 $0.15 Sq Foot
284 15,930 Sq Feet 141.72 100.0 10/31/97 $0.20 Sq Foot
285 140 Units 16,142.86 91.4 05/12/97 $263.30 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
286 16,685 Sq Feet 134.85 100.0 06/01/97 $0.15 Sq Foot
287 29,932 Sq Feet 75.17 100.0 09/03/97 $0.23 Sq Foot
288 118 Units 19,067.80 95.8 04/25/97 $306.00 Unit
289 1986 114,506 Sq Feet 19.65 98.7 07/21/97 $0.26 Sq Foot
290 48,957 Sq Feet 45.75 100.0 05/31/97 $0.34 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
291 62 Units 35,887.10 99.0 03/07/97 $266.00 Unit
292 136 Units 16,176.47 94.9 05/27/97 $175.00 Unit
293 49,200 Sq Feet 44.72 100.0 07/21/97 $0.14 Sq Foot
294 148 Units 14,864.86 100.0 08/01/97 $278.00 Unit
295 1991 66 Units 33,333.33 100.0 09/03/97 $315.80 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
296 79,300 Sq Feet 27.43 100.0 09/01/97 $0.16 Sq Foot
297 36 Units 60,250.00 86.1 07/01/97 $250.00 Unit
298 11,180 Sq Feet 193.14 100.0 10/31/97 $0.30 Sq Foot
299 1996 118 Units 18,305.08 94.1 07/02/97 $150.00 Unit
300 165 Units 13,090.91 94.0 05/30/97 $241.92 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
301 51,050 Sq Feet 41.68 89.9 08/06/97 $0.22 Sq Foot
302 98 Units 21,683.67 97.0 06/30/97 $283.68 Unit
303 11,180 Sq Feet 189.18 100.0 10/31/97 $0.30 Sq Foot
304 163 Beds 12,883.44 $250.00 Bed
- ------------------------------------------------------------------------------------------------------------------------------------
304a 78 Beds 99.0 07/31/97 $250.00 Bed
304b 85 Beds 100.0 07/31/97 $250.00 Bed
305 76 Units 27,631.58 94.7 04/30/97 $271.00 Unit
306 1995-96 104 Units 20,192.31 91.3 06/30/97 $286.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
307 1995 124 Units 16,935.48 96.8 04/01/97 $200.00 Unit
308 53,227 Sq Feet 39.45 97.4 02/07/97 $0.18 Sq Foot
309 82 Units 25,000.00 98.0 07/01/97 $200.00 Unit
310 11,180 Sq Feet 182.83 100.0 02/12/96 $0.25 Sq Foot
311 1989 25,619 Sq Feet 79.04 100.0 08/21/97 $0.16 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
312 124 Units 16,330.65 92.0 06/18/97 $296.00 Unit
313 128 Units 15,820.31 97.8 04/18/97 $250.00 Unit
314 11,180 Sq Feet 179.61 100.0 09/26/96 $0.25 Sq Foot
315 51 Units 39,333.33 98.0 03/31/97 $288.00 Unit
316 101 Units 19,801.98 100.0 09/26/97 $223.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
317 36,897 Sq Feet 54.20 100.0 09/09/97 $0.12 Sq Foot
318 51,849 Sq Feet 38.57 98.1 03/03/97 $0.15 Sq Foot
319 12,815 Sq Feet 156.07 100.0 06/30/97 $0.15 Sq Foot
320 149 Units 13,422.82 93.3 04/01/97 $250.00 Unit
321 1991 46,913 Sq Feet 42.63 95.0 07/15/97 $0.29 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
322 47,755 Sq Feet 41.88 92.5 06/01/97 $0.22 Sq Foot
323 84 Units 23,690.48 100.0 05/01/97 $179.00 Unit
324 11,180 Sq Feet 176.58 100.0 10/31/97 $0.30 Sq Foot
325 11,180 Sq Feet 174.96 100.0 02/12/96 $0.25 Sq Foot
326 1985 61,854 Sq Feet 31.69 89.4 09/30/97 $0.26 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
327 21,002 Sq Feet 92.85 100.0 09/23/97 $0.23 Sq Foot
328 11,288 Sq Feet 172.58 100.0 10/31/97 $0.28 Sq Foot
329 1997 130 Units 15,000.00 97.0 05/31/97 $188.68 Unit
330 11,325 Sq Feet 173.23 100.0 10/31/97 $0.10 Sq Foot
331 1996 208 Rooms 9,134.62 NAP NAP 4% of gross revenue Room
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------
TENANT
CONTROL AREA LEASED LEASE CONTROL
NO. TENANT NAME (SQ. FT.) EXP DATE NO.
================================================================================
<S> <C> <C> <C> <C>
260 Southwest Supermarkets 15,900 05/31/98 260
261 Plej's 6,000 04/30/00 261
262 Sears Homelife 29,980 08/27/02 262
263 The Point 3,979 03/31/07 263
264 264
- --------------------------------------------------------------------------------
265 Robert B. Schultz, M.D., P.A. 3,637 11/14/97 265
266 266
267 267
268 268
269 269
- --------------------------------------------------------------------------------
270 Maaco Auto Pain & Body 7,500 10/31/05 270
271 271
272 Lawrence & Memorial Hospital 8,407 02/28/04 272
273 273
275 Highroad Adventure Sports 21,280 11/13/01 275
- --------------------------------------------------------------------------------
276 Strength Training, Inc. 7,000 03/01/02 276
277 277
278 278
279 279
280 Le Petite Acadamy 5,400 07/31/03 280
- --------------------------------------------------------------------------------
281 281
282 282
283 Thrifty-Payless, Inc. 9,563 08/27/17 283
284 Walgreen Company 15,930 07/04/17 284
285 285
- --------------------------------------------------------------------------------
286 MCL Construction 5,976 NAV 286
287 Za Zou 8,554 07/31/02 287
288 288
289 Aqua Pools 15,748 01/31/00 289
290 290
- --------------------------------------------------------------------------------
291 291
292 292
293 293
294 294
295 295
- --------------------------------------------------------------------------------
296 Big Lots 28,465 01/31/06 296
297 297
298 Rite Aid of Michigan, Inc. 11,180 08/09/17 298
299 299
300 300
- --------------------------------------------------------------------------------
301 Food Lion 25,000 06/08/10 301
302 302
303 Rite Aid of Michigan, Inc. 11,180 06/24/17 303
304 304
- --------------------------------------------------------------------------------
304a 304a
304b 304b
305 305
306 306
- --------------------------------------------------------------------------------
307 307
308 DelChamps 33,387 06/30/01 308
309 309
310 Rite Aid 11,180 NAV 310
311 Sound Warehouse, Inc. 13,379 12/01/99 311
- --------------------------------------------------------------------------------
312 312
313 313
314 Rite Aid 11,180 NAV 314
315 315
316 316
- --------------------------------------------------------------------------------
317 317
318 Riccardo's Pizza & Spirits 8,026 12/31/99 318
319 Chief Auto Parts 5,400 09/30/06 319
320 320
321 321
- --------------------------------------------------------------------------------
322 Valley Harvest Produce 17,992 05/31/04 322
323 323
324 Rite Aid of Michigan, Inc. 11,180 08/08/17 324
325 Rite Aid 11,180 NAV 325
326 326
- --------------------------------------------------------------------------------
327 Tire Kingdom, Inc. 7,104 08/31/14 327
328 Rite Aid of Pennsylvania 11,288 03/31/17 328
329 329
330 Rite-Aid of Ohio 11,325 04/28/16 330
331 331
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL ZIP
NO. PROPERTY NAME ADDRESS CITY STATE CODE
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
332 Rancho San Manuel Mobile Home Park 402 San Carlos Street San Manuel AZ 85631
333 Moonlight Townhomes 211 North Evergreen Gardner KS 66030
334 Rite-Aid - Saginaw 812 Williams Street Saginaw MI 49602
335 Willow Park Apartments 1466 Rock Cut Road Forest Park GA 30050
336 Rite-Aid - Cartersville 954 Joe Frank Harris Pkwy Cartersville GA 30120
- ------------------------------------------------------------------------------------------------------------------------------------
337 Crestwood Apartments 2100 North 57th Street Kansas City KS 66104
338 French Embassy Apartments 9920 Quail Boulevard Austin TX 78758
339 Beehive Retirement Center 401 Maple Street McCleary WA 98557
340 Rite-Aid - West Branch 501 E. Houghton West Branch MI 48661
341 Dairy Ashford Village 1570 Dairy Ashford Road Houston TX 77477
- ------------------------------------------------------------------------------------------------------------------------------------
342 Rite-Aid - Liberty Township 2704 Belmont Ave Liberty Township OH 44505
343 Eckerd - Stockton 441 Country Club Drive Stockton GA 30281
344 Englewood Apartments 5432 N.W. Waukomis Drive Kansas City MO 64151
345 The Meadows 4300 Meyers Lane Waco TX 76705
346 Rite-Aid - Ashtabula (2) 1127 West Prospect Ave Ashtabula OH 44004
- ------------------------------------------------------------------------------------------------------------------------------------
347 Revco - Norfolk (2) 3214-3216 Tidewater Drive Norfolk VA 23505
348 Rite-Aid - Jefferson 224 N Chesnut St Jefferson OH 44047
349 Rite-Aid - Ashtabula (1) 2120 Lake Ave Ashtabula OH 44004
350 Gardens of Victoria Apartments 413 Williamsburg Avenue Victoria TX 77904
351 Woodland Terrace Apartments Armstrong Street Auburn AL 36830
- ------------------------------------------------------------------------------------------------------------------------------------
352 Eckerd - Oneco 1505 Oneco Boulevard Oneco FL 34203
353 Franklin Row 32-40 North Dean Street Englewood NJ 07631
430 Park Terrace / Abbington Apartments (Roll-up)
430a Park Terrace 105 N. Kendall Kalamazoo MI 49006
- ------------------------------------------------------------------------------------------------------------------------------------
430b Abbington Apartments 1619-1625 Fraternity Village Kalamazoo MI 49006
354 Southwood Village Shopping Center Northwest Side of Timberlake Road Lynchburg VA 24502
355 Super Crown Bookstore 1633 Chicago Avenue Evanston IL 60201
356 Su Casa 109 & 203 W. 39th Street Austin TX 78751
- ------------------------------------------------------------------------------------------------------------------------------------
357 Buckner Square Office Park 3650 North Buckner Blvd. Dallas TX 75228
358 Allen's Creek Center 17900-17964 U.S. Highway 19 North Tampa FL 34624
359 Revco - Norfolk (1) 2330 Azalea Garden Road Norfolk VA 23513
360 River Village Shopping Center 5004 - 5068 N. Oracle Road Tucson AZ 85704
361 Eckerd - Monroe 703 West Spring Street Monroe GA 30655
- ------------------------------------------------------------------------------------------------------------------------------------
362 Revco - Dundalk 7845 Wise Avenue Dundalk MD 21222
363 Northridge & Quail Hollow Apartments 640 Taylor Road & 901-907 Liberty Manor Hinesville GA 31313
364 Eckerd - Sharpsburg 3055 Highway 34 East Sharpsburg GA 30265
365 Rite-Aid - Barnegat Twp., Ocean County, Barnegat Blvd and West Bay Ave. Barnegat Twp. NJ 08005
366 Comfort Inn - Elkton 2625 State Road 207 St. Augustine FL 32033
- ------------------------------------------------------------------------------------------------------------------------------------
367 McKellips Shopping Center NEC of McKellips Rd & Center Street Mesa AZ 85201
368 Trinity Oaks Shopping Center 821-829 NE Green Oaks Boulevard Arlington TX 76006
369 Holbrook Plaza Shopping Center 1501 - 1613 Navajo Boulevard Holbrook AZ 86025
370 Carob Tree Apartments 9202 North 19th Ave. Phoenix AZ 85021
371 Sentinel Square 70-76 Main Street Lake Placid NY 12946
- ------------------------------------------------------------------------------------------------------------------------------------
372 Eckerd - Lady Lake 860 Avenida Central Lady Lake FL 32159
373 Oakwood Homes 3802 Damon Street Eau Claire WI 54701
374 Southwest Oaks Apartments 4651 Oakwood Dr. Odessa TX 79761
375 Crystal Glen 2800 Crystal Street Anderson IN 46012
376 Ocean Mews 31 Cedar Avenue Long Branch NJ 07740
- ------------------------------------------------------------------------------------------------------------------------------------
377 Rite-Aid - Newton Falls 325 West Broad St Newton Falls OH 44444
378 Camden Corners Shopping Center GA Highway 40 & Haddock Road Kingsland GA 31548
379 Silverfield Condominiums 6001 Reims Road Houston TX 77036
380 901 Alton Road 901 Alton Road Miami Beach FL 33139
381 Alfa-Laval Separators, Inc. 3944 Holland Boulevard Chesapeake VA 23323
- ------------------------------------------------------------------------------------------------------------------------------------
382 Revco - Portsmouth (2) 2004 Victory Boulevard Portsmouth VA 23702
383 151-169 Nagle Avenue 151-169 Nagle Avenue New York NY 10040
384 Rite-Aid - Perry 102 North Main Street Perry MI 48872
385 Revco - Virginia Beach 5015 Virginia Beach Blvd. Virginia Beach VA 23462
386 Revco - Akron 1140 Portage Trail Rd Akron OH 44321
- ------------------------------------------------------------------------------------------------------------------------------------
387 Revco - Portsmouth (1) 3531 Airline Boulevard Portsmouth VA 23701
388 Revco - Newport News 10453 Jefferson Avenue Newport News VA 23606
389 12701 Executive Drive 12071 Executive Drive Stafford TX 77477
390 Nicholas Venture 1102-1121 North 48th Street Omaha NE 68114
391 Sunset Court 4415 S. 28th St. Phoenix AZ 85040
- ------------------------------------------------------------------------------------------------------------------------------------
392 Royal Manor 3900 Memorial Drive Decatur GA 30032
393 Parkway Square 4111 Fairmont Parkway Pasadena TX 77504
394 Rite-Aid - Portage 614 Main Street Portage PA 15946
395 Twenty Mile Mini-Storage 18601 Longs Way Parker CO 80134
396 4840-4860 Northfield Road 4840-4860 Northfield Rd. Northfield OH 44067
- ------------------------------------------------------------------------------------------------------------------------------------
397 Rite-Aid - New Bethlehem 610 Broad St New Bethlehem PA 16242
398 Rite-Aid - Folkston 200 N 2nd St. Folkston GA 31537
400 Fairmont Central Shopping Center 4118-4130 Fairmont Parkway Pasadena TX 77504
401 Flagler Inn 3700 Poinsettia Avenue West Palm Beach FL 33407
402 Rite-Aid - Craigville Route 55 & Route 20 Craigville WV 25535
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUMULATIVE
CROSSED COLLATERALIZED % OF AGGREGATE % OF INITIAL INTEREST
CONTROL LOANS CONTROL ORIGINAL CUT-OFF DATE CUT-OFF DATE POOL MORTGAGE ADMINISTRATIVE ACCRUAL
NO. NOS. BALANCE BALANCE BALANCE BALANCE RATE COST RATE METHOD
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
332 $1,900,000 $1,892,273 0.09% 94.11% 8.2500% 0.1775% Act/360
333 1,850,000 1,847,592 0.08 94.19 8.6250 0.1025 Act/360
334 1,839,795 1,839,795 0.08 94.28 7.5000 0.1025 30/360
335 1,830,000 1,826,425 0.08 94.36 8.1800 0.1825 30/360
336 1,835,631 1,807,387 0.08 94.44 8.3750 0.1025 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
337 1,800,000 1,798,719 0.08 94.52 7.0000 0.1775 30/360
338 1,800,000 1,796,233 0.08 94.61 7.8400 0.1775 30/360
339 1,800,000 1,784,056 0.08 94.52 9.2500 0.1025 30/360
340 1,754,680 1,754,680 0.08 94.77 7.5000 0.1025 30/360
341 1,730,000 1,724,585 0.08 94.85 9.3130 0.1025 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
342 1,748,804 1,713,889 0.08 94.92 7.9300 0.1025 30/360
343 1,723,331 1,710,960 0.08 95.00 8.5000 0.1025 30/360
344 1,700,000 1,696,548 0.08 95.08 7.9900 0.1775 30/360
345 1,700,000 1,693,198 0.08 95.15 8.3700 0.1525 30/360
346 1,707,479 1,673,378 0.08 95.23 8.0700 0.1025 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
347 1,695,212 1,673,105 0.08 95.31 8.8125 0.1025 30/360
348 1,702,049 1,668,057 0.08 95.38 8.0700 0.1025 30/360
349 1,676,936 1,641,993 0.07 95.46 8.0700 0.1025 30/360
350 1,640,000 1,637,406 0.07 95.53 7.9950 0.1025 Act/360
351 1,625,000 1,620,382 0.07 95.60 8.8800 0.1025 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
352 1,622,868 1,617,476 0.07 95.68 7.5900 0.1025 30/360
353 1,610,000 1,610,000 0.07 95.75 7.4700 0.1025 30/360
430 1,600,000 1,600,000 0.07 95.82 8.1600 0.1025 Act/360
430a 430b
- ----------------------------------------------------------------------------------------------------------------------------------
430b 430a
354 1,600,000 1,599,330 0.07 95.90 8.0300 0.1625 Act/360
355 1,600,000 1,597,872 0.07 95.97 8.0600 0.1025 30/360
356 1,600,000 1,587,810 0.07 96.04 8.9800 0.1825 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
357 1,575,000 1,574,401 0.07 96.11 8.4300 0.1825 Act/360
358 1,575,000 1,571,263 0.07 96.18 8.5000 0.1025 Act/360
359 1,597,003 1,564,682 0.07 96.25 9.1250 0.1025 30/360
360 1,540,000 1,538,798 0.07 96.32 8.2500 0.1025 Act/360
361 1,533,030 1,522,289 0.07 96.39 8.5000 0.1025 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
362 1,531,796 1,521,433 0.07 96.46 8.2500 0.1025 30/360
363 1,520,000 1,517,357 0.07 96.53 8.4900 0.1025 Act/360
364 1,513,702 1,513,702 0.07 96.60 7.5000 0.1025 30/360
365 1,543,168 1,512,548 0.07 96.67 8.8750 0.1025 30/360
366 1,505,000 1,502,493 0.07 96.74 8.6250 0.1025 Act/360
- ----------------------------------------------------------------------------------------------------------------------------------
367 1,500,000 1,498,832 0.07 96.80 8.2600 0.1775 Act/360
368 1,500,000 1,497,796 0.07 96.87 8.2400 0.1825 Act/360
369 1,500,000 1,496,101 0.07 96.94 9.3750 0.1025 Act/360
370 1,500,000 1,492,533 0.07 97.01 8.4200 0.1525 30/360
371 1,500,000 1,485,209 0.07 97.08 9.0700 0.1775 Act/360
- ----------------------------------------------------------------------------------------------------------------------------------
372 1,486,408 1,481,593 0.07 97.14 7.6250 0.1025 30/360
373 1,472,000 1,471,674 0.07 97.21 9.5500 0.1025 Act/360
374 1,450,000 1,448,165 0.07 97.28 8.7100 0.1025 Act/360
375 1,450,000 1,447,916 0.07 97.34 8.3125 0.1025 Act/360
376 1,450,000 1,445,334 0.07 97.41 9.1800 0.1475 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
377 1,454,665 1,425,623 0.06 97.47 7.9300 0.1025 30/360
378 1,425,000 1,424,361 0.06 97.54 8.0000 0.1025 Act/360
379 1,400,000 1,400,000 0.06 97.60 7.9000 0.1025 Act/360
380 1,400,000 1,398,924 0.06 97.66 8.3100 0.1025 Act/360
381 1,400,000 1,398,463 0.06 97.73 8.0900 0.1525 Act/360
- ----------------------------------------------------------------------------------------------------------------------------------
382 1,418,084 1,389,123 0.06 97.79 9.1250 0.1025 30/360
383 1,370,000 1,364,049 0.06 97.85 9.2500 0.1025 30/360
384 1,364,026 1,361,668 0.06 97.91 7.9200 0.1025 30/360
385 1,373,132 1,358,280 0.06 97.97 9.0000 0.1025 30/360
386 1,352,498 1,350,090 0.06 98.04 7.7500 0.1025 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
387 1,352,057 1,341,130 0.06 98.10 8.7910 0.1025 30/360
388 1,348,886 1,334,164 0.06 98.16 9.0000 0.1025 30/360
389 1,325,000 1,321,379 0.06 98.22 7.9830 0.1025 Act/360
390 1,300,000 1,299,431 0.06 98.28 8.0700 0.1025 Act/360
391 1,300,000 1,299,194 0.06 98.34 9.1250 0.1025 Act/360
- ----------------------------------------------------------------------------------------------------------------------------------
392 1,300,000 1,297,521 0.06 98.39 7.9500 0.1025 Act/360
393 400 1,300,000 1,292,923 0.06 98.45 9.0100 0.1025 30/360
394 1,291,741 1,264,848 0.06 98.51 8.3400 0.1025 30/360
395 1,250,000 1,248,118 0.06 98.57 8.1600 0.1325 Act/360
396 1,235,000 1,234,127 0.06 98.62 8.6400 0.1775 Act/360
- ----------------------------------------------------------------------------------------------------------------------------------
397 1,240,338 1,214,515 0.06 98.68 8.3400 0.1025 30/360
398 1,233,982 1,214,497 0.06 98.73 8.3750 0.1025 30/360
400 393 1,200,000 1,193,467 0.05 98.79 9.0100 0.1025 30/360
401 1,173,000 1,168,597 0.05 98.84 8.7600 0.1775 30/360
402 1,181,635 1,156,200 0.05 98.89 8.5000 0.1025 30/360
- ----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
ORIGINAL REMAINING
TERM TO TERM TO ORIGINAL REMAINING
CONTROL AMORTIZATION MATURITY MATURITY AMORTIZATION AMORTIZATION
NO. TYPE (MOS.) (MOS.) TERM (MOS.) TERM (MOS.)
===============================================================================================================
<S> <C> <C> <C> <C> <C>
332 Fully Amortizing 216 214 216 214
333 Fully Amortizing 360 357 360 357
334 Amortizing Balloon 240 240 296 296
335 Amortizing Balloon 120 117 360 357
336 Fully Amortizing 237 228 237 228
- ---------------------------------------------------------------------------------------------------------------
337 Amortizing Balloon 108 107 360 359
338 Amortizing Balloon 84 81 360 357
339 Amortizing Balloon 120 110 300 290
340 Amortizing Balloon 240 240 296 296
341 Amortizing Balloon 120 114 360 354
- ---------------------------------------------------------------------------------------------------------------
342 Fully Amortizing 237 226 237 226
343 Step(3) 234 229 234 229
344 Amortizing Balloon 84 81 360 357
345 Amortizing Balloon 84 80 300 296
346 Fully Amortizing 235 224 235 224
- ---------------------------------------------------------------------------------------------------------------
347 Fully Amortizing 236 228 236 228
348 Fully Amortizing 235 224 235 224
349 Fully Amortizing 230 219 230 219
350 Amortizing Balloon 84 81 360 357
351 Amortizing Balloon 120 115 360 355
- ---------------------------------------------------------------------------------------------------------------
352 Step(3) 233 231 233 231
353 Interest Only then Amortizing Balloon(4) 180 180 312 312
430 Amortizing Balloon 120 120 300 300
430a
- ---------------------------------------------------------------------------------------------------------------
430b
354 Amortizing Balloon 120 119 360 359
355 Amortizing Balloon 120 118 360 358
356 Fully Amortizing 240 235 240 235
- ---------------------------------------------------------------------------------------------------------------
357 Amortizing Balloon 120 119 360 359
358 Amortizing Balloon 120 116 330 326
359 Fully Amortizing 239 226 239 226
360 Amortizing Balloon 120 119 300 299
361 Step(3) 234 229 234 229
- ---------------------------------------------------------------------------------------------------------------
362 Fully Amortizing 238 234 238 234
363 Amortizing Balloon 120 116 360 356
364 Step(3) 227 227 227 227
365 Step(3) 240 225 240 225
366 Amortizing Balloon 120 118 300 298
- ---------------------------------------------------------------------------------------------------------------
367 Amortizing Balloon 84 83 300 299
368 Amortizing Balloon 120 117 360 357
369 Amortizing Balloon 120 116 300 296
370 Amortizing Balloon 120 115 300 295
371 Amortizing Balloon 120 116 180 176
- ---------------------------------------------------------------------------------------------------------------
372 Step(3) 232 230 232 230
373 Amortizing Balloon 300 299 360 359
374 Amortizing Balloon 120 117 360 357
375 Amortizing Balloon 120 117 360 357
376 Amortizing Balloon 120 114 360 354
- ---------------------------------------------------------------------------------------------------------------
377 Fully Amortizing 237 226 237 226
378 Amortizing Balloon 120 119 360 359
379 Amortizing Balloon 120 120 300 300
380 Amortizing Balloon 120 119 300 299
381 Amortizing Balloon 120 118 360 358
- ---------------------------------------------------------------------------------------------------------------
382 Fully Amortizing 238 225 238 225
383 Amortizing Balloon 120 115 300 295
384 Fully Amortizing 239 238 239 238
385 Fully Amortizing 239 232 239 232
386 Fully Amortizing 238 237 238 237
- ---------------------------------------------------------------------------------------------------------------
387 Fully Amortizing 236 231 236 231
388 Fully Amortizing 238 231 238 231
389 Amortizing Balloon 120 117 300 297
390 Amortizing Balloon 120 119 360 359
391 Amortizing Balloon 120 119 300 299
- ---------------------------------------------------------------------------------------------------------------
392 Fully Amortizing 300 298 300 298
393 Amortizing Balloon 120 114 300 294
394 Fully Amortizing 237 225 237 225
395 Amortizing Balloon 120 117 360 357
396 Amortizing Balloon 120 119 300 299
- ---------------------------------------------------------------------------------------------------------------
397 Fully Amortizing 237 225 237 225
398 Fully Amortizing 234 225 234 225
400 Amortizing Balloon 120 114 300 294
401 Amortizing Balloon 120 116 300 296
402 Fully Amortizing 231 219 231 219
- ---------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ORIGINATION MATURITY BALLOON
NO. DATE DATE BALANCE PROPERTY TYPE PREPAYMENT PROVISIONS
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
332 08/19/97 09/01/15 - Mobile Home Park L(7),YM1%(10.5),O(.5)
333 07/10/97 08/01/27 288,194 Multifamily - Section 42 L(15),O(15)
334 10/10/97 11/01/17 643,696 Retail - CTL L(10),YM1%(10)
335 07/08/97 08/01/07 1,611,254 Multifamily L(4),YM1%(5.5),O(.5)
336 01/03/97 11/01/16 - Retail - CTL L(8),YM1%(11.5),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------
337 09/29/97 10/01/06 1,601,253 Multifamily L(4),YM1%(4),O(1)
338 07/30/97 08/01/04 1,660,971 Multifamily L(4),YM1%(2),O(1)
339 12/12/96 01/01/07 1,497,764 Assisted Living L(4),YM1%(5.5),O(.5)
340 10/10/97 11/01/17 613,916 Retail - CTL L(10),YM1%(10)
341 04/14/97 05/01/07 1,555,658 Retail - Unanchored L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------
342 11/25/96 09/01/16 - Retail - CTL L(8),YM(11.25),O(.5)
343 05/19/97 12/01/16 - Retail - CTL L(8),YM1%(11.25),O(.25)
344 07/24/97 08/01/04 1,571,905 Multifamily L(4),YM1%(2),O(1)
345 06/25/97 07/01/04 1,508,695 Multifamily L(4),5(1),4(1),3(.5),O(.5)
346 11/08/96 07/01/16 - Retail - CTL L(8),YM(11.08),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------
347 02/19/97 11/01/16 - Retail - CTL L(8),YM1%(11.42),O(.25)
348 11/08/96 07/01/16 - Retail - CTL L(8),YM1%(11.08),O(.5)
349 11/08/96 02/01/16 - Retail - CTL L(8),YM(10.67),O(.5)
350 07/25/97 08/01/04 1,533,996 Multifamily L(3),YM1%(3.5),O(.5) or DEF
351 05/06/97 06/01/07 1,450,081 Multifamily L(4),YM1%(5.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------
352 08/29/97 02/01/17 - Retail - CTL L(8),YM1%(11.17),O(.25)
353 10/14/97 11/01/12 1,213,980 Mixed Use L(5),YM1%(5),3(1),2(1),1(2),O(1)
430 10/06/97 11/01/07 1,324,363 L(4),YM1%(5.5),O(.5)
430a Multifamily
- ------------------------------------------------------------------------------------------------------------------------------
430b Multifamily
354 09/18/97 10/01/07 1,431,737 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
355 08/14/97 09/01/07 1,405,325 Retail - Anchored L(5),YM1%(4.5),O(.5)
356 05/01/97 06/01/17 - Multifamily L(7),YM1%(8),1(4.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------
357 09/09/97 10/01/07 1,422,537 Office L(4),YM1%(5.5),O(.5) or DEF
358 06/30/97 07/01/07 1,377,958 Retail - Unanchored L(4),YM1%(5.75),O(.25)
359 09/30/96 09/01/16 - Retail - CTL L(8),YM1%(6.5),O(5.42)
360 09/30/97 10/01/07 1,278,239 Retail - Unanchored L(4),YM1%(5.75),O(.25)
361 05/19/97 12/01/16 - Retail - CTL L(8),YM1%(11.25),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------
362 06/27/97 05/01/17 - Retail - CTL L(8),YM1%(11.58),O(.25)
363 06/26/97 07/01/07 1,375,094 Multifamily L(4),YM1%(5.5),O(.5) or DEF
364 10/09/97 10/01/16 - Retail - CTL L(6),YM5%(1),YM3%(1),YM1%(10),3(.75),O(.25)
365 07/09/96 08/01/16 - Retail - CTL L(8),YM1%(11.5),O(.5)
366 08/26/97 09/01/07 1,262,036 Hospitality L(4),YM1%(5.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------
367 09/22/97 10/01/04 1,345,213 Retail - Unanchored L(4),YM1%(2.5),O(.5) or DEF
368 07/31/97 08/01/07 1,348,954 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
369 06/04/97 07/01/07 1,283,901 Retail - Anchored L(4),YM1%(5.75),O(.25)
370 05/29/97 06/01/07 1,224,180 Multifamily L(4),YM1%(5.5),O(.5)
371 06/19/97 07/01/07 761,632 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------
372 08/06/97 01/01/17 - Retail - CTL L(6),YM5%(1),YM3%(1),YM1%(11),3(.08),O(.25)
373 09/29/97 10/01/22 784,592 Multifamily - Section 42 L(15),O(10)
374 07/01/97 08/01/07 1,317,963 Multifamily L(4),YM1%(5.5),O(.5) or DEF
375 07/02/97 08/01/07 1,306,181 Multifamily L(1),YM1%(6),O(3)
376 04/14/97 05/01/07 1,300,873 Multifamily L(5),YM1%(4.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------
377 11/25/96 09/01/16 - Retail - CTL L(8),YM1%(11.25),O(.5)
378 09/30/97 10/01/07 1,274,230 Retail - Anchored L(4),YM1%(5.5),O(.5) or DEF
379 10/10/97 11/01/07 1,150,215 Multifamily L(4),YM1%(5.75),O(.25)
380 09/04/97 10/01/07 1,163,999 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
381 08/25/97 09/01/07 1,254,364 Industrial L(5),YM1%(4.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------
382 09/30/96 08/01/16 - Retail - CTL L(8),YM1%(6.5),O(5.33)
383 05/16/97 06/01/07 1,139,965 Multifamily L(5),YM1%(4.75),O(.25)
384 09/16/97 09/01/17 - Retail - CTL L(10),YM1%(9.67),O(.25)
385 03/31/97 03/01/17 - Retail - CTL L(8),YM1%(11.67),O(.25)
386 09/25/97 08/01/17 - Retail - CTL L(8),YM1%(11.83)
- ------------------------------------------------------------------------------------------------------------------------------
387 05/16/97 02/01/17 - Retail - CTL L(8),YM1%(11.42),O(.25)
388 03/31/97 02/01/17 - Retail - CTL L(8),YM1%(11.58),O(.25)
389 07/30/97 08/01/07 1,091,498 Industrial L(4),YM1%(5.5),O(.5) or DEF
390 09/22/97 10/01/07 1,164,390 Multifamily L(4),YM1%(5.5),O(.5)
391 09/30/97 10/01/07 1,105,079 Multifamily L(5),YM1%(4.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------
392 08/06/97 09/01/22 94,764 Multifamily L(15),O(10)
393 04/17/97 05/01/07 1,075,857 Retail - Unanchored L(4),5(2),4(1),3(1),2(1),1(.5),O(.5) or DEF
394 10/16/96 08/01/16 - Retail - CTL L(8),YM(11.25),O(.5)
395 07/31/97 08/01/07 1,122,033 Self Storage L(4),YM1%(5.5),O(.5)
396 10/01/97 10/01/07 1,036,248 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------
397 10/16/96 08/01/16 - Retail - CTL L(8),YM(11.25),O(.5)
398 01/03/97 08/01/16 - Retail - CTL L(8),YM(11.25),O(.25)
400 04/17/97 05/01/07 993,099 Retail - Anchored L(4),5(2),4(1),3(1),2(1),1(.5),O(.5) or DEF
401 06/27/97 07/01/07 965,134 Assisted Living L(4),YM1%(5.5),O(.5)
402 10/08/96 02/01/16 - Retail - CTL L(8),YM1%(10.75),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ANNUAL NET APPRAISED
NO. DEBT SERVICE CASH FLOW DSCR VALUE
=========================================================================
<S> <C> <C> <C> <C>
332 $202,954 $335,083 1.65x $2,900,000
333 172,669 199,306 1.15 2,225,000
334 163,905 165,053 NAP 1,840,000
335 163,899 256,909 1.57 2,350,000
336 190,353 199,871 NAP 2,200,000
- -------------------------------------------------------------------------
337 154,148 206,573 1.34 2,400,000
338 156,091 206,627 1.32 2,450,000
339 184,978 250,651 1.36 3,040,000
340 156,323 157,339 NAP 1,755,000
341 171,736 240,154 1.40 2,400,000
- -------------------------------------------------------------------------
342 175,527 184,303 NAP 1,850,000
343 175,755 181,027 NAP 1,980,000
344 149,546 204,986 1.37 3,425,000
345 162,483 238,708 1.47 3,800,000
346 173,760 182,448 NAP 1,800,000
- -------------------------------------------------------------------------
347 181,708 182,254 NAP 1,960,000
348 173,208 181,868 NAP 1,800,000
349 172,184 180,793 NAP 1,800,000
350 144,336 180,616 1.25 2,062,000
351 155,221 205,487 1.32 2,100,000
- -------------------------------------------------------------------------
352 155,424 202,051 NAP 2,350,000
353 140,541(2) 202,397 1.44 2,300,000
430 150,229 207,202 1.38 2,095,000
======== ==========
430a 153,211 1,550,000
- -------------------------------------------------------------------------
430b 53,991 545,000
354 141,285 184,325 1.30 2,175,000
355 141,687 194,255 1.37 2,235,000
356 172,501 231,323 1.34 2,500,000
- -------------------------------------------------------------------------
357 144,388 196,210 1.36 2,200,000
358 148,316 193,230 1.30 2,200,000
359 174,224 174,747 NAP 1,870,000
360 145,706 202,728 1.39 2,175,000
361 155,723 160,395 NAP 1,750,000
- -------------------------------------------------------------------------
362 157,142 157,613 NAP 1,830,000
363 140,121 184,331 1.32 2,004,000
364 144,258 158,684 NAP 1,820,000
365 160,209 160,690 NAP 1,700,000
366 146,949 214,600 1.46 2,200,000
- -------------------------------------------------------------------------
367 142,041 227,056 1.60 2,800,000
368 135,102 217,493 1.61 2,200,000
369 155,704 206,392 1.33 3,100,000
370 143,972 200,076 1.39 2,990,000
371 183,318 273,156 1.49 2,800,000
- -------------------------------------------------------------------------
372 142,138 170,566 NAP 2,000,000
373 149,173 171,587 1.15 1,850,000
374 136,389 179,285 1.31 2,025,000
375 131,486 164,063 1.25 2,000,000
376 142,264 173,831 1.22 2,150,000
- -------------------------------------------------------------------------
377 146,004 153,305 NAP 1,550,000
378 125,474 188,063 1.50 1,900,000
379 128,554 189,858 1.48 1,900,000
380 133,134 180,787 1.36 1,910,000
381 124,328 178,101 1.43 1,900,000
- -------------------------------------------------------------------------
382 154,935 155,400 NAP 1,660,000
383 140,789 180,949 1.29 2,100,000
384 136,331 140,421 NAP 1,520,000
385 148,475 155,899 NAP 1,690,000
386 133,710 136,384 NAP 1,360,000
- -------------------------------------------------------------------------
387 144,704 151,939 NAP 1,650,000
388 146,074 153,378 NAP 1,670,000
389 122,540 159,547 1.30 1,770,000
390 115,229 144,469 1.25 1,625,000
391 132,253 171,074 1.29 2,000,000
- -------------------------------------------------------------------------
392 119,887 155,905 1.30 1,800,000
393 131,022 170,643 1.30 2,180,000
394 133,612 140,292 NAP 1,400,000
395 111,742 166,038 1.49 1,700,000
396 120,736 164,233 1.36 1,650,000
- -------------------------------------------------------------------------
397 128,295 134,709 NAP 1,350,000
398 128,609 135,039 NAP 1,475,000
400 120,943 153,587 1.27 1,660,000
401 115,821 163,983 1.42 2,000,000
402 124,899 131,143 NAP 1,400,000
- -------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUT-OFF SCHEDULED
CONTROL APPRAISAL DATE MATURITY YEAR
NO. YEAR LTV DATE LTV BUILT
======================================================================
<S> <C> <C> <C> <C>
332 1997 65.3% - 1974
333 1997 83.0 13.0% 1996
334 1997 NAP 35.0 1997
335 1997 77.7 68.6 1970
336 1996 NAP - 1996
- ----------------------------------------------------------------------
337 1997 74.9 66.7 1972
338 1997 73.3 67.8 1973
339 1996 58.7 49.3 1968,94
340 1997 NAP 35.0 1997
341 1997 71.9 64.8 1986
- ----------------------------------------------------------------------
342 1996 NAP - 1996
343 1997 NAP - 1997
344 1997 49.5 45.9 1969
345 1997 44.6 39.7 1984
346 1996 NAP - 1996
- ----------------------------------------------------------------------
347 1996 NAP - 1996
348 1996 NAP - 1996
349 1996 NAP - 1996
350 1997 79.4 74.4 1983
351 1997 77.2 69.1 1960
- ----------------------------------------------------------------------
352 1997 NAP - 1997
353 1997 70.0 52.8 1900
430 76.4 63.2
430a 1997 1969
- ----------------------------------------------------------------------
430b 1997 1984
354 1997 73.5 65.8 1982
355 1997 71.5 62.9 1940,50
356 1997 63.5 - 1970
- ----------------------------------------------------------------------
357 1997 71.6 64.7 1986
358 1997 71.4 62.6 1984
359 1996 NAP - 1996
360 1997 70.7 58.8 1979
361 1997 87.0 - 1996
- ----------------------------------------------------------------------
362 1997 83.1 - 1997
363 1997 75.7 68.6 1980
364 1997 NAP - 1996
365 1995 NAP - 1996
366 1997 68.3 57.4 1987
- ----------------------------------------------------------------------
367 1997 53.5 48.0 1986
368 1997 68.1 61.3 1985
369 1996 48.3 41.4 1979
370 1997 49.9 40.9 1979
371 1997 53.0 27.2 1994
- ----------------------------------------------------------------------
372 1997 NAP - 1996
373 1997 79.5 42.4 1995
374 1997 71.5 65.1 1975,76
375 1997 72.4 65.3 1965
376 1996 67.2 60.5 1942
- ----------------------------------------------------------------------
377 1996 NAP - 1996
378 1997 75.0 67.1 1989
379 1997 73.7 60.5 1979
380 1997 73.2 60.9 1930s
381 1997 73.6 66.0 1990
- ----------------------------------------------------------------------
382 1997 NAP - 1995
383 1997 65.0 54.3 1910
384 1997 NAP - 1997
385 1997 NAP - 1997
386 1997 NAP - 1997
- ----------------------------------------------------------------------
387 1997 NAP - 1997
388 1997 NAP - 1997
389 1997 74.7 61.7 1980
390 1997 80.0 71.7 1960
391 1997 65.0 55.3 1985
- ----------------------------------------------------------------------
392 1997 72.1 5.3 1971
393 1997 59.3 49.4 1981
394 1996 NAP - 1995
395 1997 73.4 66.0 1996
396 1997 74.8 62.8 1980
- ----------------------------------------------------------------------
397 1996 NAP - 1995
398 1996 NAP - 1996
400 1997 71.9 59.8 1981
401 1997 58.4 48.3 1939,70
402 1996 NAP - 1996
- ----------------------------------------------------------------------
<PAGE>
<CAPTION>
LOAN PER
SQ FT, UNIT, SQ FT, UNIT,
CONTROL YEAR BED, PAD BED, PAD OCCUPANCY RENT ROLL UNDERWRITING
NO. RENOVATED OR ROOM OR ROOM PERCENTAGE DATE RESERVES
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
332 383 Pads $ 4,960.84 82.0% 04/01/97 $22.91 Pad
333 57 Units 32,456.14 93.0 07/08/97 $175.00 Unit
334 11,180 Sq Feet 164.56 100.0 10/31/97 $0.30 Sq Foot
335 108 Units 16,944.44 94.4 06/13/97 $215.55 Unit
336 11,325 Sq Feet 162.09 100.0 10/31/97 $0.15 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
337 135 Units 13,333.33 99.0 08/29/97 $275.02 Unit
338 142 Units 12,676.06 93.0 07/31/97 $210.00 Unit
339 114 Beds 15,789.47 95.0 08/01/97 $225.00 Bed
340 11,180 Sq Feet 156.95 100.0 10/31/97 $0.30 Sq Foot
341 43,798 Sq Feet 39.50 72.5 01/01/97 $0.10 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
342 11,325 Sq Feet 154.42 100.0 10/31/97 $0.10 Sq Foot
343 11,310 Sq Feet 152.37 100.0 10/31/97 $0.00 Sq Foot
344 151 Units 11,258.28 95.4 07/31/97 $287.75 Unit
345 210 Units 8,095.24 93.3 03/31/97 $210.00 Unit
346 11,325 Sq Feet 150.77 100.0 10/31/97 $0.10 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
347 12,608 Sq Feet 134.46 100.0 10/31/97 $0.15 Sq Foot
348 11,325 Sq Feet 150.29 100.0 10/31/97 $0.10 Sq Foot
349 11,325 Sq Feet 148.07 100.0 10/31/97 $0.10 Sq Foot
350 66 Units 24,848.48 97.0 06/30/97 $266.53 Unit
351 93 Units 17,473.12 97.9 04/23/97 $200.00 Unit
- -------------------------------------------------------------------------------------------------------------------
352 10,880 Sq Feet 149.16 100.0 10/31/97 $0.00 Sq Foot
353 1994 9,544 Sq Feet 168.69 87.1 09/01/97 $0.14 Sq Foot
430 75 Units 21,333.33 $241.36 Unit
=============== ===============
430a 51 Units 98.0 09/01/97 $250.00 Unit
- -------------------------------------------------------------------------------------------------------------------
430b 24 Units 100.0 09/01/97 $223.00 Unit
354 41,000 Sq Feet 39.02 100.0 09/15/97 $0.28 Sq Foot
355 1996 16,680 Sq Feet 95.92 100.0 07/01/97 $0.11 Sq Foot
356 71 Units 22,535.21 97.0 03/17/97 $264.00 Unit
- -------------------------------------------------------------------------------------------------------------------
357 54,525 Sq Feet 28.89 96.0 06/30/97 $0.25 Sq Foot
358 28,788 Sq Feet 54.71 100.0 06/01/97 $0.23 Sq Foot
359 12,608 Sq Feet 126.67 100.0 10/31/97 $0.15 Sq Foot
360 1996 21,900 Sq Feet 70.32 100.0 07/21/97 $0.15 Sq Foot
361 11,294 Sq Feet 135.74 100.0 10/31/97 $0.00 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
362 12,608 Sq Feet 121.49 100.0 10/31/97 $0.15 Sq Foot
363 68 Units 22,352.94 94.2 05/27/97 $241.41 Unit
364 10,908 Sq Feet 138.77 100.0 10/31/97 $0.20 Sq Foot
365 10,209 Sq Feet 151.16 100.0 10/31/97 $0.10 Sq Foot
366 62 Rooms 24,274.19 NAP NAP $500.49 Room
- -------------------------------------------------------------------------------------------------------------------
367 60,140 Sq Feet 24.94 84.7 05/01/97 $0.18 Sq Foot
368 25,999 Sq Feet 57.69 90.0 06/01/97 $0.19 Sq Foot
369 80,631 Sq Feet 18.60 99.5 09/01/97 $0.19 Sq Foot
370 137 Units 10,948.91 91.9 08/12/97 $250.00 Unit
371 18,205 Sq Feet 82.39 100.0 08/10/97 $0.15 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
372 11,200 Sq Feet 132.72 100.0 10/31/97 $0.00 Sq Foot
373 63 Units 23,365.08 96.8 09/03/97 $175.00 Unit
374 1993 103 Units 14,077.67 94.2 05/31/97 $368.78 Unit
375 1990 72 Units 20,138.89 98.6 04/25/97 $208.00 Unit
376 1990 42 Units 34,523.81 97.3 03/19/97 $256.00 Unit
- -------------------------------------------------------------------------------------------------------------------
377 11,325 Sq Feet 128.45 100.0 10/31/97 $0.10 Sq Foot
378 68,424 Sq Feet 20.83 97.4 07/03/97 $0.07 Sq Foot
379 92 Units 15,217.39 95.6 07/07/97 $230.00 Unit
380 1994 9,373 Sq Feet 149.37 92.5 07/04/97 $0.15 Sq Foot
381 40,000 Sq Feet 35.00 100.0 07/22/97 $0.10 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
382 12,608 Sq Feet 112.47 100.0 10/31/97 $0.15 Sq Foot
383 55 Units 24,909.09 100.0 07/01/97 $271.00 Unit
384 9,600 Sq Feet 142.09 100.0 10/31/97 $0.15 Sq Foot
385 10,722 Sq Feet 128.07 100.0 10/31/97 $0.15 Sq Foot
386 10,722 Sq Feet 126.14 100.0 10/31/97 $0.15 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
387 12,608 Sq Feet 107.24 100.0 10/31/97 $0.15 Sq Foot
388 10,722 Sq Feet 125.81 100.0 10/31/97 $0.15 Sq Foot
389 37,950 Sq Feet 34.91 100.0 07/31/97 $0.10 Sq Foot
390 69 Units 18,840.58 94.2 07/31/97 $200.00 Unit
391 128 Units 10,156.25 96.9 07/31/97 $257.00 Unit
- -------------------------------------------------------------------------------------------------------------------
392 1996 76 Units 17,105.26 96.1 07/16/97 $282.00 Unit
393 35,170 Sq Feet 36.96 100.0 06/01/97 $0.26 Sq Foot
394 10,258 Sq Feet 125.93 100.0 10/31/97 $0.10 Sq Foot
395 49,550 Sq Feet 25.23 92.5 06/30/97 $0.10 Sq Foot
396 15,950 Sq Feet 77.43 100.0 08/21/97 $0.27 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
397 10,167 Sq Feet 122.00 100.0 10/31/97 $0.10 Sq Foot
398 11,325 Sq Feet 108.96 100.0 10/31/97 $0.15 Sq Foot
400 1990 27,580 Sq Feet 43.51 88.6 06/01/97 $0.15 Sq Foot
401 1996 48 Units 24,437.50 93.0 04/01/97 $443.75 Unit
402 10,141 Sq Feet 116.52 100.0 10/31/97 $0.20 Sq Foot
- -------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
----------------------------------------------------------------
TENANT
CONTROL AREA LEASED LEASE CONTROL
NO. TENANT NAME (SQ. FT.) EXP DATE NO.
===================================================================================
<S> <C> <C> <C> <C>
332 332
333 333
334 Rite Aid of Michigan, Inc. 11,180 09/25/17 334
335 335
336 Rite-Aid of Georgia 11,325 12/13/16 336
- -----------------------------------------------------------------------------------
337 337
338 338
339 339
340 Rite Aid of Michigan, Inc. 11,180 09/04/17 340
341 Westside 6,196 07/31/97 341
- -----------------------------------------------------------------------------------
342 Rite-Aid of Ohio 11,325 10/25/16 342
343 Eckerd Corporation 11,310 01/20/17 343
344 344
345 345
346 Rite-Aid of Ohio 11,325 08/23/16 346
- -----------------------------------------------------------------------------------
347 Revco Discount Drug Centers, Inc. 12,608 10/31/16 347
348 Rite-Aid of Ohio 11,325 08/13/16 348
349 Rite-Aid of Ohio 11,325 03/01/16 349
350 350
351 351
- -----------------------------------------------------------------------------------
352 Eckerd Corporation 10,880 03/31/17 352
353 Marcia's Attic 5,039 05/31/02 353
430 430
430a 430a
- -----------------------------------------------------------------------------------
430b 430b
354 Food Lion 29,000 10/12/07 354
355 Super Crown Bookstore 16,680 12/31/07 355
356 356
- -----------------------------------------------------------------------------------
357 357
358 GTE Mobil 8,362 12/01/99 358
359 Revco Discount Drug Centers, Inc. 12,608 08/31/16 359
360 The Wherehouse 6,000 01/01/05 360
361 Eckerd Corporation 11,294 12/31/17 361
- -----------------------------------------------------------------------------------
362 Revco Discount Drug Centers, Inc. 12,608 04/30/17 362
363 363
364 Eckerd Corporation 10,908 12/06/16 364
365 Rite Aid of New Jersey 10,209 08/31/16 365
366 366
- -----------------------------------------------------------------------------------
367 Treasures from the Past 22,000 10/14/04 367
368 Swif-T-Foods 2,695 07/31/01 368
369 ALCO 27,071 10/31/05 369
370 370
371 G.H. Bass 6,593 06/09/99 371
- -----------------------------------------------------------------------------------
372 Eckerd Corporation 11,200 01/31/17 372
373 373
374 374
375 375
376 376
- -----------------------------------------------------------------------------------
377 Rite-Aid of Ohio 11,325 04/28/16 377
378 Revco 8,450 12/31/03 378
379 379
380 Kamay International 2,300 06/30/07 380
381 381
- -----------------------------------------------------------------------------------
382 Revco Discount Drug Centers, Inc. 12,608 07/31/16 382
383 383
384 Rite Aid of Michigan 9,600 10/03/17 384
385 Revco Discount Drug Centers, Inc. 10,722 02/28/17 385
386 Revco Discount Drug Center, Inc 10,722 09/30/17 386
- -----------------------------------------------------------------------------------
387 Revco Discount Drug Centers, Inc. 12,608 01/31/17 387
388 Revco Discount Drug Centers, Inc. 10,722 01/31/17 388
389 389
390 390
391 391
- -----------------------------------------------------------------------------------
392 392
393 TRC 4,500 02/28/00 393
394 Rite-Aid of Ohio 10,258 08/31/16 394
395 395
396 PS Plus Sizes 5,530 08/31/00 396
- -----------------------------------------------------------------------------------
397 Rite-Aid of Pennsylvania 10,167 08/31/16 397
398 Rite-Aid of Georgia 11,325 08/13/16 398
400 Eckerd's 8,640 11/14/99 400
401 401
402 Rite Aid of West Virginia 10,141 03/24/16 402
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTROL ZIP
NO. PROPERTY NAME ADDRESS CITY STATE CODE
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
403 Orleans CVS, Inc. - Orleans 108-122 Cranberry Highway Orleans MA 02653
404 Rite-Aid - Latrobe NEC Depot St & Ligonier St Latrobe PA 15650
405 Rite-Aid - Homerville 400 N Church Street Homerville GA 31634
406 Berkshire Terrace Apartments 900-909, 911-913 Berkshire Terrace Hinesville GA 31313
407 Shops at Merchants Walk 4235 Merchants Walk Drive Marietta GA 30068
- ------------------------------------------------------------------------------------------------------------------------------------
408 Ten Quivira Outparcel Building NWQ Shawnee Mission Pkwy & Quivira Rd. Shawnee KS 66216
409 Rite-Aid - Glenville 902 North Lewis St. Glenville WV 26351
410 Casa Grande 1150-1156 East Florence Boulevard Casa Grande AZ 85230
411 Braesforest 8100 Creekbend Houston TX 77071
412 Sunbelt Rentals - Savannah Bourne Aveand State Road 21 Savannah GA 31408
- ------------------------------------------------------------------------------------------------------------------------------------
413 Fountain Court Plaza 1001 Tower Way Bakersfield CA 93309
414 Tower Gardens 4707 West Alabama Houston TX 77027
415 Revco - Chase City 610 North Main Street Chase City VA 23924
416 Sunbelt Rentals - Kennesaw 2750 McCollum Parkway Kennesaw GA 30144
417 Revco - Holly Hill 8517 Old State Road Holly Hill SC 29059
- ------------------------------------------------------------------------------------------------------------------------------------
418 Country Hearth Inn Columbus 2436 Highway 71 South Columbus TX 78934
419 Davie Village Assisted Living Facility 191 Crestview Drive Mocksville NC 27028
420 Auto/Retail (2530 W. Commercial) 2530 West Commercial Boulevard Tamarac FL 33309
421 1500 Alton Road 1500 Alton Road Miami Beach FL 33139
422 2800 University Avenue 2800 University Avenue Bronx NY 10462
- ------------------------------------------------------------------------------------------------------------------------------------
423 Country Hearth West Columbia 714 Columbia Drive West Columbia TX 77846
424 530 West 136th Street 530 West 136th Street New York NY 10031
425 Country Hearth Inn Alvin 1588 Highway 35 Alvin TX 77511
426 Towering Pines 1200-1222 Towering Pines Lane & 2119-2123
Beachview Drive Albany GA 31705
427 Auto/Retail (1000-1050 Commercial) 1000-1050 Commercial Boulevard Fort Lauderdale FL 33309
- ------------------------------------------------------------------------------------------------------------------------------------
428 Benson Terrace 5127 Maple Street Omaha NE 68114
429 1225 Morris Avenue 1225 Morris Avenue Bronx NY 10462
- ------------------------------------------------------------------------------------------------------------------------------------
1 Loan contains original interest-only period of 35 months and remaining interest-only period of 35 months.
2 The Annual Debt Service, hence the DSCR, reflects the annualized monthly principal and interest during the period in which
the loan is amortizing.
3 The Mortgage Loan provides for increases in the monthly payments at specified times in the future which coincide with rent
increases on the underlying Credit Lease.
The timing and the terms of the increases are provided in the sheet named "STEP" within the file "FULB97C2.XLS" included in
the diskette on the back cover of this Prospectus Supplement.
4 Loan contains original interest-only period of 23 months and remaining interest-only period of 19 months.
5 The loan is a COFI index adjustable mortgage loan. The Mortgage Rate for this Mortgage Loan is its interest floor.
A retained yield interest (not part of the trust) is entitled to any interest in excess of the Mortgage Rate, if any.
6 Loan contains original interest-only period of 12 months and remaining interest-only period of 10 months.
7 Loan contains original interest-only period of 24 months and remaining interest-only period of 21 months.
8 Loan contains original interest-only period of 24 months and remaining interest-only period of 22 months.
<PAGE>
<CAPTION>
CUMULATIVE
CROSSED COLLATERALIZED % OF AGGREGATE % OF INITIAL INTERES
CONTROL LOANS CONTROL ORIGINAL CUT-OFF DATE CUT-OFF DATE POOL MORTGAGE ADMINISTRATIVE ACCRUAL
NO. NOS. BALANCE BALANCE BALANCE BALANCE RATE COST RATE METHOD
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
403 $1,160,219 $1,153,040 0.05% 98.95% 8.7500% 0.1025% 30/360
404 1,160,344 1,136,187 0.05 99.00 8.3400 0.1025 30/360
405 1,147,105 1,128,992 0.05 99.05 8.3750 0.1025 30/360
406 1,100,000 1,098,088 0.05 99.10 8.4900 0.1025 Act/360
407 1,035,000 1,035,000 0.05 99.14 8.0100 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
408 76,105,280 1,030,000 1,029,331 0.05 99.19 8.1600 0.1775 30/360
409 1,043,258 1,019,996 0.05 99.24 8.5000 0.1025 30/360
410 1,010,000 1,008,078 0.05 99.28 8.3100 0.1775 30/360
411 1,000,000 997,986 0.05 99.33 9.0000 0.1025 Act/360
412 975,307 974,025 0.04 99.37 8.1250 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
413 950,000 945,897 0.04 99.42 9.1900 0.1525 30/360
414 930,000 929,642 0.04 99.46 8.4000 0.1025 Act/360
415 933,486 920,048 0.04 99.50 9.0000 0.1025 30/360
416 918,245 917,220 0.04 99.54 8.1250 0.1025 30/360
417 923,436 916,074 0.04 99.58 8.8300 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
418 423,425 917,000 915,881 0.04 99.62 9.1250 0.1025 Act/360
419 900,000 897,379 0.04 99.67 8.6250 0.1025 Act/360
420 850,000 850,000 0.04 99.70 8.0800 0.1025 Act/360
421 850,000 849,347 0.04 99.74 8.3100 0.1025 Act/360
422 760,000 757,893 0.03 99.78 9.0000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
423 418,425 758,000 757,075 0.03 99.81 9.1250 0.1025 Act/360
424 750,000 745,994 0.03 99.85 9.1250 0.1025 30/360
425 418,423 725,000 724,115 0.03 99.88 9.1250 0.1025 Act/360
426
706,000 705,142 0.03 99.91 8.5000 0.1025 30/360
427 700,000 700,000 0.03 99.94 8.0800 0.1025 Act/360
- ------------------------------------------------------------------------------------------------------------------------------------
428 684,000 683,649 0.03 99.97 7.6200 0.1025 Act/360
429 600,000 597,500 0.03 100.00 9.5000 0.1025 30/360
- ------------------------------------------------------------------------------------------------------------------------------------
$2,209,469,846 $2,203,502,325
<PAGE>
<CAPTION>
ORIGINAL REMAINING
TERM TO TERM TO ORIGINAL REMAINING
CONTROL AMORTIZATION MATURITY MATURITY AMORTIZATION AMORTIZATION
NO. TYPE (MOS.) (MOS.) TERM (MOS.) TERM (MOS.)
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
403 Step(3) 248 242 248 242
404 Fully Amortizing 237 225 237 225
405 Fully Amortizing 234 225 234 225
406 Amortizing Balloon 120 116 360 356
407 Amortizing Balloon 120 120 240 240
- -----------------------------------------------------------------------------------------------------------------------
408 Amortizing Balloon 120 119 360 359
409 Fully Amortizing 227 215 227 215
410 Amortizing Balloon 84 81 360 357
411 Amortizing Balloon 120 115 360 355
412 Step(3) 238 237 238 237
- -----------------------------------------------------------------------------------------------------------------------
413 Amortizing Balloon 120 114 324 318
414 Fully Amortizing 360 359 360 359
415 Fully Amortizing 236 227 236 227
416 Step3 233 232 233 232
417 Fully Amortizing 237 232 237 232
- -----------------------------------------------------------------------------------------------------------------------
418 Amortizing Balloon 120 119 240 239
419 Amortizing Balloon 120 118 240 238
420 Amortizing Balloon 180 180 192 192
421 Amortizing Balloon 120 119 300 299
422 Amortizing Balloon 120 115 360 355
- -----------------------------------------------------------------------------------------------------------------------
423 Amortizing Balloon 120 119 240 239
424 Amortizing Balloon 120 114 300 294
425 Amortizing Balloon 120 119 240 239
426 Fully Amortizing 360 358 360 358
427 Amortizing Balloon 180 180 192 192
- -----------------------------------------------------------------------------------------------------------------------
428 Amortizing Balloon 120 119 360 359
429 Amortizing Balloon 120 115 300 295
- -----------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ORIGINATION MATURITY BALLOON
NO. DATE DATE BALANCE PROPERTY TYPE PREPAYMENT PROVISIONS
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
403 04/10/97 01/01/18 - Retail - CTL L(8),YM(12.42),O(.25)
404 10/16/96 08/01/16 - Retail - CTL L(8),YM1%(11.25),O(.5)
405 01/03/97 08/01/16 - Retail - CTL L(8),YM(11.25),O(.25)
406 06/26/97 07/01/07 $995,136 Multifamily L(4),YM1%(5.5),O(.5) or DEF
407 10/02/97 11/01/07 729,874 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
- ------------------------------------------------------------------------------------------------------------------------------------
408 09/26/97 10/01/07 906,515 Retail - Unanchored L(4),YM1%(5.5),O(.5)
409 10/08/96 10/01/15 - Retail - CTL L(8),YM1%(10.42),O(.5)
410 07/10/97 08/01/04 937,838 Retail - Unanchored L(4),YM1%(2.5),O(.5)
411 05/02/97 06/01/07 914,754 Multifamily L(5),YM1%(4.75),O(.25)
412 09/30/97 08/01/17 - Retail - CTL L(6),YM5%(1),YM3%(1),YM1%(11),YM3%(.583),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
413 04/29/97 05/01/07 818,768 Office L(4),YM1%(5.5),O(.5)
414 09/10/97 10/01/27 133,298 Multifamily L(4),YM1%(10),O(16)
415 01/30/97 10/01/16 - Retail - CTL L(8),YM1%(11.42),O(.25)
416 09/30/97 03/01/17 - Retail - CTL L(6),YM5%(1),YM3%(1),YM1%(11),YM3%(.167),O(.25)
417 05/19/97 03/01/17 - Retail - CTL L(8),YM1%(11.5),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
418 09/10/97 10/01/07 671,462 Hospitality L(4),YM1%(5.75),O(.25)
419 08/29/97 09/01/07 648,089 Assisted Living L(5),YM1%(4.5),O(.5)
420 10/06/97 11/01/12 111,762 Retail - Unanchored L(5),YM2%(9.5),O(.5)
421 09/04/97 10/01/07 706,714 Retail - Unanchored L(4),YM1%(5.5),O(.5) or DEF
422 05/16/97 06/01/07 679,666 Multifamily L(5),YM1%(4.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
423 09/10/97 10/01/07 555,036 Hospitality L(4),YM1%(5.75),O(.25)
424 04/30/97 05/01/07 622,316 Multifamily L(4),YM1%(5.75),O(.25)
425 09/10/97 10/01/07 530,873 Hospitality L(4),YM1%(5.75),O(.25)
426 08/14/97 09/01/27 - Multifamily - Section 42 L(15),O(15)
427 10/06/97 11/01/12 92,040 Retail - Unanchored L(5),YM2%(9.5),O(.5)
- ------------------------------------------------------------------------------------------------------------------------------------
428 09/22/97 10/01/07 606,007 Multifamily L(4),YM1%(5.5),O(.5)
429 05/16/97 06/01/07 502,016 Multifamily L(5),YM1%(4.75),O(.25)
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONTROL ANNUAL NET APPRAISED
NO. DEBT SERVICE CASH FLOW DSCR VALUE
====================================================================================
<S> <C> <C> <C> <C>
403 $115,618 $121,399 NAP $1,300,000
404 120,020 126,021 NAP 1,275,000
405 119,554 125,532 NAP 1,375,000
406 101,403 143,306 1.41x 1,540,000
407 103,963 135,673 1.31 1,485,000
- ------------------------------------------------------------------------------------
408 92,076 113,249 1.23 1,430,000
409 111,046 116,599 NAP 1,250,000
410 91,565 119,727 1.31 1,350,000
411 96,555 125,063 1.30 1,500,000
412 94,622 103,138 NAP 1,100,000
- ------------------------------------------------------------------------------------
413 95,356 122,324 1.28 2,050,000
414 85,021 105,968 1.25 1,200,000
415 101,400 106,470 NAP 1,160,000
416 86,913 95,604 NAP 1,140,000
417 98,950 103,898 NAP 1,130,000
- ------------------------------------------------------------------------------------
418 99,892 147,342 1.48 1,310,000
419 94,581 131,050 1.39 1,300,000
420 94,822 122,994 1.30 1,400,000
421 80,831 114,337 1.41 1,175,000
422 73,382 97,901 1.33 1,400,000
- ------------------------------------------------------------------------------------
423 82,572 123,730 1.50 1,270,000
424 76,300 102,166 1.34 1,200,000
425 78,977 114,156 1.45 1,300,000
426 65,142 76,587 1.18 882,600
427 78,088 116,307 1.49 1,200,000
- ------------------------------------------------------------------------------------
428 58,068 72,818 1.25 910,000
429 62,906 80,541 1.28 940,000
- ------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CUT-OFF SCHEDULED
CONTROL APPRAISAL DATE MATURITY YEAR
NO. YEAR LTV DATE LTV BUILT
=======================================================================
<S> <C> <C> <C> <C>
403 1997 NAP - 1930
404 1996 NAP - 1995
405 1996 NAP - 1996
406 1997 71.3% 64.6% 1982
407 1997 69.7 49.1 1996
- -----------------------------------------------------------------------
408 1997 2.0 63.4 1993
409 1996 NAP 0.0 1995
410 1997 74.7 69.5 1970
411 1997 66.5 61.0 1979
412 1997 NAP - 1997
- -----------------------------------------------------------------------
413 1997 46.1 39.9 1983
414 1997 77.5 11.1 1965
415 1996 NAP - 1996
416 1997 NAP - 1985
417 1997 NAP - 1997
- -----------------------------------------------------------------------
418 1996 69.9 51.3 1986
419 1997 69.0 49.9 1986,92
420 1997 60.7 8.0 1988
421 1997 72.3 60.1 1939
422 1997 54.1 48.6 1926
- -----------------------------------------------------------------------
423 1996 59.6 43.7 1986
424 1997 62.2 51.9 1926
425 1996 55.7 40.8 1986
426 1996 79.9 - 1994
427 1997 58.3 7.7 1988
- -----------------------------------------------------------------------
428 1997 75.1 66.6 1950
429 1997 63.6 53.4 1937
- -----------------------------------------------------------------------
<PAGE>
<CAPTION>
LOAN PER
SQ FT, UNIT, SQ FT, UNIT,
CONTROL YEAR BED, PAD BED, PAD OCCUPANCY RENT ROLL UNDERWRITING
NO. RENOVATED OR ROOM OR ROOM PERCENTAGE DATE RESERVES
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
403 1989 10,900 Sq Feet $ 106.44 100.0% 10/31/97 $0.00 Sq Foot
404 10,209 Sq Feet 113.66 100.0 10/31/97 $0.10 Sq Foot
405 11,325 Sq Feet 101.29 100.0 10/31/97 $0.15 Sq Foot
406 52 Units 21,153.85 96.5 05/28/97 $276.00 Unit
407 10,545 Sq Feet 98.15 100.0 10/15/97 $0.16 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
408 12,000 Sq Feet 85.83 100.0 10/03/97 $0.15 Sq Foot
409 10,004 Sq Feet 104.28 100.0 10/31/97 $0.20 Sq Foot
410 1995-96 27,000 Sq Feet 37.41 100.0 08/01/97 $0.15 Sq Foot
411 94 Units 10,638.30 95.0 02/28/97 $250.00 Unit
412 10,000 Sq Feet 97.53 100.0 10/31/97 $0.20 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
413 31,507 Sq Feet 30.15 90.0 03/19/97 $0.66 Sq Foot
414 23 Units 40,434.78 99.0 08/01/97 $225.00 Unit
415 10,500 Sq Feet 88.90 100.0 10/31/97 $0.15 Sq Foot
416 1997 21,000 Sq Feet 43.73 100.0 10/31/97 $0.20 Sq Foot
417 10,500 Sq Feet 87.95 100.0 10/31/97 $0.15 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
418 40 Rooms 22,925.00 NAP NAP $521.39 Room
419 32 Beds 28,125.00 93.8 05/01/97 $271.88 Bed
420 11,004 Sq Feet 77.24 100.0 09/25/97 $0.19 Sq Foot
421 1994 5,050 Sq Feet 168.32 100.0 07/04/97 $0.15 Sq Foot
422 59 Units 12,881.36 93.2 04/15/97 $250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
423 40 Rooms 18,950.00 NAP NAP 4% of gross revenue Room
424 37 Units 20,270.27 95.2 04/21/97 $348.00 Unit
425 40 Rooms 18,125.00 NAP NAP 4% of gross revenue Room
426 30 Units 23,533.33 100.0 05/01/97 $200.00 Unit
427 7,772 Sq Feet 90.07 100.0 09/23/97 $0.20 Sq Foot
- ------------------------------------------------------------------------------------------------------------------------------------
428 40 Units 17,100.00 100.0 07/31/97 $229.00 Unit
429 43 Units 13,953.49 97.7 04/15/97 $250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
LARGEST RETAIL TENANT
---------------------------------------------------------------------
TENANT
CONTROL AREA LEASED LEASE CONTROL
NO. TENANT NAME (SQ. FT.) EXP DATE NO.
=========================================================================================
<S> <C> <C> <C> <C>
403 Orleans CVS, Inc. 10,900 01/31/18 403
404 Rite-Aid of Pennsylvania 10,209 08/31/16 404
405 Rite-Aid of Georgia 11,325 08/13/16 405
406 406
407 Mattress Firm 4,975 07/05/01 407
- -----------------------------------------------------------------------------------------
408 The Italian Oven 5,300 11/30/13 408
409 Rite Aid of West Virginia 10,004 11/10/15 409
410 Fashion Furniture 21,000 11/30/05 410
411 411
412 Sunbelt Rentals 10,000 09/02/17 412
- -----------------------------------------------------------------------------------------
413 413
414 414
415 Revco Discount Drug Centers, Inc. 10,500 09/30/16 415
416 Sunbelt Rentals 21,000 05/31/17 416
417 Revco Discount Drug Centers, Inc. 10,500 02/28/17 417
- -----------------------------------------------------------------------------------------
418 418
419 419
420 Benjosh Transmission 3,472 05/31/05 420
421 Offerdalhl's Bagel Gourmet 2,400 06/30/00 421
422 422
- -----------------------------------------------------------------------------------------
423 423
424 424
425 425
426 426
427 Southern Exporess 3,192 08/31/02 427
- -----------------------------------------------------------------------------------------
428 428
429 429
- -----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX B
FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1997-C2
$1,961,117,000
(APPROXIMATE)
OFFERED CERTIFICATES
[MAP OF UNITED STATES REFLECTING
PERCENTAGES OF MORTGAGE POOL BY STATE]
% OF MORTGAGE POOL BY CUT-OFF DATE BALANCE
LEHMAN BROTHERS FIRST UNION CAPITAL MARKETS CORP.
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS AND PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES ARE ADVISED TO CAREFULLY READ, AND SHOULD RELY
SOLELY UPON THE DETAILED INFORMATION APPEARING IN, THE PROSPECTUS AND PROSPECTUS
SUPPLEMENT. THIS ANNEX B DOES NOT INCLUDE ALL RELEVANT INFORMATION RELATING TO
THE SECURITIES AND THE UNDERLYING ASSETS DESCRIBED HEREIN, PARTICULARLY WITH
RESPECT TO THE RISKS AND SPECIAL CONSIDERATIONS INVOLVED WITH AN INVESTMENT IN
SUCH SECURITIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION SET FORTH IN THE PROSPECTUS AND PROSPECTUS SUPPLEMENT. CERTAIN
CAPITALIZED TERMS USED HEREIN MAY BE DEFINED IN THE PROSPECTUS OR PROSPECTUS
SUPPLEMENT.
<PAGE>
FIRST UNION-LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C2
(FU-LB 1997-C2)
- --------------------------------------------------------------------------------
% Credit
% of Deal Enhancement
---------------
Class A-1
AAA/Aaa/AAA 9.98% 28.00%
---------------
Class A-2
AAA/Aaa/AAA 17.43% 28.00%
---------------
Class A-3 Class IO
AAA/Aaa/AAA --/Aaa/AAA 44.59% 28.00%
---------------
Class B
AA/Aa2/AA 5.00% 23.00%
---------------
Class C
A/A2/A 5.00% 18.00%
---------------
Class D
BBB/Baa2/BBB 5.50% 12.50%
---------------
Class E
BBB-/Baa3/BBB- 1.50% 11.00%
---------------
Class F 3.00% 8.00%
---------------
Class G 2.25% 5.75%
---------------
Class H 0.75% 5.00%
---------------
Class J 2.00% 3.00%
---------------
Class K 1.00% 2.00%
---------------
Class L 1.25% 0.75%
---------------
Class M 0.75%
---------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
================================================================================================================
ORIGINAL RATING COUPON AVG PRINCIPAL LEGAL
CLASS FACE ($) (S/M/D) DESCRIPTION (%) LIFE(1) WINDOW(1) STATUS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 220,000,000 AAA/Aaa/AAA Fixed 6.479 3.72 12/97-3/04 Public
- ----------------------------------------------------------------------------------------------------------------
A-2 384,000,000 AAA/Aaa/AAA Fixed 6.600 7.76 3/04-5/07 Public
- ----------------------------------------------------------------------------------------------------------------
A-3 982,521,000 AAA/Aaa/AAA Fixed 6.650 9.76 5/07-12/07 Public
- ----------------------------------------------------------------------------------------------------------------
IO 2,203,502,325(2) NR/Aaa/AAA WAC IO 1.3892(5) 10.69(3) 12/97-11/27(3) Public
- ----------------------------------------------------------------------------------------------------------------
B 110,175,000 AA/Aa2/AA Fixed 6.790 12.04 12/07-10/11 Public
- ----------------------------------------------------------------------------------------------------------------
C 110,175,000 A/A2/A Fixed 7.020 14.61 10/11-9/12 Public
- ----------------------------------------------------------------------------------------------------------------
D 121,194,000 BBB/Baa2/BBB Fixed 7.120 14.92 9/12-11/12 Public
- ----------------------------------------------------------------------------------------------------------------
E 33,052,000 BBB-/Baa3/BBB- Fixed 7.120 14.98 11/12-11/12 Public
- ----------------------------------------------------------------------------------------------------------------
F 66,105,000 Not Offered WAC 7.500(4) 16.43 11/12-9/15 Private, 144A
- ----------------------------------------------------------------------------------------------------------------
G 49,578,000 Not Offered WAC 7.500(4) 18.82 9-15-6/17 Private, 144A
- ----------------------------------------------------------------------------------------------------------------
H 16,527,208 Not Offered WAC 7.500(4) 19.63 6/17-9/17 Private, 144A
- ----------------------------------------------------------------------------------------------------------------
J 44,070,046 Not Offered WAC 6.000(4) 20.84 9/17-1/20 Private, 144A
- ----------------------------------------------------------------------------------------------------------------
K 22,035,023 Not Offered WAC 6.000(4) 23.24 1/20-2/22 Private, 144A
- ----------------------------------------------------------------------------------------------------------------
L 27,543,779 Not Offered WAC 6.000(4) 24.73 2/22-4/23 Private, 144A
- ----------------------------------------------------------------------------------------------------------------
M 16,526,268 Not Offered WAC 6.000(4) 28.13 4/23-11/27 Private, 144A
================================================================================================================
TOTAL 2,203,502,325
================================================================================================================
</TABLE>
(1) Assuming, among other things, 0% CPR and no losses. Expressed in years.
(2) Represents notional amount on Class IO.
(3) Represents average life of related principal notional amounts on Class IO.
(4) Pass-through Rate will equal the lesser of the applicable rate set forth
above and the Weighted Average Net Mortgage Rate.
(5) Variable rate. Coupon shown is for the first Distribution Date.
RATING AGENCIES: Standard & Poor's, Moody's and Duff & Phelps
TRUSTEE: LaSalle National Bank
FISCAL AGENT: ABN AMRO Bank N.V.
MASTER SERVICER: First Union National Bank ("First Union")
SPECIAL SERVICER: CRIIMI MAE Services Limited Partnership
B-2
<PAGE>
FU-LB 97-C2 STRUCTURAL TERM SHEET (CONTINUED):
CUT-OFF DATE: November 1, 1997
ERISA: Classes A-1, A-2, A-3 and IO are expected to be eligible for
Lehman Brothers Inc.'s individual prohibited transaction
exemptions with respect to ERISA.
SMMEA: Classes A-1, A-2, A-3, B and IO are "mortgage related
securities" for purposes of SMMEA.
PAYMENT: Pays on 18th of each month or, if such date is not a
business day, then the following business day.
THE CLASS IO: The Class IO is comprised of fourteen components, one
relating to each class of Sequential Pay Certificates.
OPTIONAL CALL: 1% Clean-up Call.
COLLATERAL: The Certificates are backed by 422 mortgage loans secured by
first liens on 439 commercial and multifamily properties,
such mortgage loans having been originated by an affiliate
of Lehman Brothers, or its approved conduit originators, or
by First Union, or its approved conduit originators.
o NEWLY ORIGINATED COLLATERAL. The collateral consists of 422 Mortgage Loans
with a principal balance (as of November 1, 1997) of approximately $2.20
Billion (the "Initial Pool Balance"). 49.8%* of the Mortgage Loans were
contributed by an affiliate of Lehman Brothers and 50.2% of the Mortgage
Loans were contributed by First Union.
o CALL PROTECTION.
99.6% of the loans have call protection: 95.4% of Mortgage Loans have
lockout initially then yield maintenance and/or declining penalties (or
have option to require Defeasance collateral in lieu of Prepayment
Premiums) and/or open periods.
<TABLE>
<CAPTION>
======================================================================================
TYPE OF CALL PROTECTION # OF LOANS % OF BALANCE
- --------------------------------------------------------------------------------------
<S> <C> <C>
Lockout (weighted average 59 months), then yield 234 43.3
maintenance ("YM")*
- --------------------------------------------------------------------------------------
Defeasance or Lockout then Defeasance (Lender Option) 121 31.6
- --------------------------------------------------------------------------------------
Lockout (weighted average 52 months), then YM*, then 33 14.4
declining penalties
- --------------------------------------------------------------------------------------
Lockout (weighted average 51 months), then declining 14 5.0
penalties
- --------------------------------------------------------------------------------------
YM * only 8 3.0
- --------------------------------------------------------------------------------------
Lockout (weighted average 133 months), then open 10 1.8
- --------------------------------------------------------------------------------------
Declining penalties only 1 0.4
- --------------------------------------------------------------------------------------
None 1 0.4
======================================================================================
</TABLE>
* 93.5% of Mortgage Loans provide for yield maintenance prepayment premiums
that are calculated at a discount rate of Treasuries flat.
o NO LOAN DELINQUENT 30 DAYS OR MORE AS OF THE CUT-OFF DATE.
o $5.2MM AVERAGE LOAN BALANCE AS OF THE CUT-OFF DATE.
o 1.36X WEIGHTED AVERAGE DEBT SERVICE COVERAGE RATIO ("DSCR") AS OF THE
CUT-OFF DATE (EXCLUDING CREDIT TENANT LEASE ("CTL") LOANS).
o 72.1% WEIGHTED AVERAGE LOAN TO VALUE ("LTV") AS OF THE CUT-OFF DATE
(EXCLUDING CTL LOANS).
o PROPERTY TYPES. 31.1% Multifamily concentration, 30.6% Retail
concentration. Less than 10% concentrations in Office (9.3%) and
Hospitality (8.9%) (excluding CTLs).
o GEOGRAPHIC DIVERSIFICATION. FL (14.4%), NY (11.3%), TX (10.4%), CA (9.6%),
GA (5.1%); all other states less than 4% each.
o 10.8% CTLS. 6.3% Retail, 3.4% Office, 1.1% Other.
o CASH FLOWS WILL BE MODELED ON BLOOMBERG.
* Except as otherwise indicated, percentages (%) represent the principal
amount of loan or loans as of the Cut-off Date of the Initial Pool Balance.
B-3
<PAGE>
FU-LB 97-C2 STRUCTURAL TERM SHEET (CONTINUED):
PRIORITY AND TIMING OF CASH FLOWS *
[CHART INDICATING PRIORITY AND TIMING OF CASH FLOWS]
* Assuming 0% CPR, no losses. Otherwise based on Table Assumptions.
MORTGAGE LOANS: The collateral consists of an approximately $2.20 billion
pool of 422 fixed rate mortgage loans secured by first liens
(or by first and second liens on the same Mortgaged
Property) on commercial and multifamily properties in 38
different states. As of the Cut-off Date, the Mortgage Loans
have a weighted average coupon ("WAC") of 8.207% and a
weighted average maturity ("WAM") of 151 months. See the
Collateral Overview tables at the end of this memo for more
Mortgage Loan details.
CREDIT ENHANCEMENT: Credit enhancement for each class of Certificates will be
provided by the classes of Certificates which are
subordinate in priority with respect to payments of interest
and principal.
DISTRIBUTIONS: Principal and interest payments will generally be made to
Certificateholders in the following order:
1) Interest to the Senior Classes: Class A-1, Class A-2,
Class A-3 and Class IO, pro rata,
2) Principal to Class A-1 until such Class is retired,*
3) Principal to Class A-2 until such Class is retired,*
4) Principal to Class A-3 until such Class is retired,*
5) Interest to Class B, then Principal to Class B until such
Class is retired,
6) Interest to Class C, then Principal to Class C until such
Class is retired,
7) Interest to Class D, then Principal to Class D until such
Class is retired,
8) Interest to Class E, then Principal to Class E until such
Class is retired,
9) Interest and Principal to the Private Classes,
sequentially.
* Pro rata if Classes B through M are retired.
REALIZED LOSSES: Realized Losses from any Mortgage Loan will be allocated in
reverse sequential order (i.e. Classes M, L, K, J, H, G, F,
E, D, C, B and then pro-rata to Classes A-1, A-2, and A-3).
B-4
<PAGE>
FU-LB 97-C2 STRUCTURAL TERM SHEET (CONTINUED):
APPRAISAL REDUCTIONS:
With respect to certain Mortgage Loans as to which an
appraisal is required (including any Mortgage Loan that
becomes 60 days delinquent), an Appraisal Reduction Amount
may be created, in the amount, if any, by which the Stated
Principal Balance of such Mortgage Loan, together with
unadvanced interest, unreimbursed P&I and servicing advances
and certain other items, exceeds 90% of the appraised value
of the related Mortgaged Property (net of certain senior
liens). The Appraisal Reduction Amount will reduce
proportionately the amount of any P&I Advance for such loan,
which reduction may result in a shortfall of interest to the
most subordinate class of Principal Balance Certificates
outstanding. The Appraisal Reduction Amount will be reduced
to zero as of the date the related Mortgage Loan has been
brought current for three months, paid in full, repurchased
or otherwise liquidated, and any shortfalls borne by the
subordinate classes may be made whole.
PREPAYMENT PREMIUMS (% represents % of Cut-off Date Balance):
<TABLE>
<CAPTION>
======================================================================================================================
PREPAYMENT 11/97 11/98 11/99 11/00 11/01 11/02 11/03 11/04 11/05 11/06 11/07
PREMIUM
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LOCK-OUT 95.4% 94.4% 85.5% 76.7% 35.9% 22.7% 22.2% 18.7% 10.7% 8.6% 1.2%
- ----------------------------------------------------------------------------------------------------------------------
DEFEASANCE 0.8 0.8 3.3 7.1 20.4 22.1 20.3 17.7 19.9 18.6 8.2
- ----------------------------------------------------------------------------------------------------------------------
YM 3.0 4.0 9.7 14.2 40.0 44.5 43.4 41.5 45.7 45.9 19.5
- ----------------------------------------------------------------------------------------------------------------------
5% 0.4 1.0 5.7 0.3 0.4
- ----------------------------------------------------------------------------------------------------------------------
4% 0.1 0.3 0.9 5.8 0.3 0.3 2.4
- ----------------------------------------------------------------------------------------------------------------------
3% 0.4 0.4 1.1 0.4 1.1 5.8 0.3 3.0
- ----------------------------------------------------------------------------------------------------------------------
2% 1.1 0.8 0.4 0.8 5.8 2.1
- ----------------------------------------------------------------------------------------------------------------------
1% 1.1 1.2 1.3 2.5 3.3 5.8
- ----------------------------------------------------------------------------------------------------------------------
OPEN 0.4 0.4 0.4 0.4 0.3 3.9 2.7 4.3 8.6 0.4
- ----------------------------------------------------------------------------------------------------------------------
MATURED 0.4 1.7 1.7 10.0 10.0 10.1 64.7
- ----------------------------------------------------------------------------------------------------------------------
TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
======================================================================================================================
</TABLE>
* Note that Prepayment Premium periods generally end prior to the last six
months before the Mortgage Loan's maturity date.
ALLOCATION OF PREPAYMENT PREMIUMS:
All Prepayment Premiums are distributed to
Certificateholders on the Distribution Date following the
one-month collection period in which the prepayment
occurred. All Prepayment Premiums will be allocated to
Classes A through G, in each case, up to the product of (i)
the Prepayment Premium, (ii) the "Discount Rate Fraction"
and (iii) the percentage of the total principal distribution
to Certificateholders to which such Class is entitled. Thus,
only such Class(es) that are entitled to principal payments
on a given Distribution Date will be eligible to receive a
portion of the Prepayment Premiums. Any excess amounts will
be distributed to Class IO.
The Discount Rate Fraction for Classes A through G is
defined as:
(Coupon on Class - Discount Rate)/(Coupon on Mortgage
Loan - Discount Rate)
B-5
<PAGE>
FU-LB 97-C2 STRUCTURAL TERM SHEET (CONTINUED):
PREPAYMENT PREMIUM ALLOCATION EXAMPLE:
The Yield Maintenance formulas for the Mortgage Loans are
calculated based upon various methods. Under one method, the
Yield Maintenance prepayment premium will be equal to the
present value of the reduction in interest payments as a
result of the prepayment through the maturity of the
Mortgage Loan, discounted at the yield of a Treasury
security of similar maturity in most cases (converted from
semi-annual to monthly pay). The following example reflects
that method.
GENERAL YIELD MAINTENANCE EXAMPLE:
Assuming the structure presented on pages 2 and 3 of this
memo (except as otherwise described below) and the following
assumptions:
Mortgage Loan Characteristics of loan being prepaid*:
Balance $10,000,000
Coupon 9.0%
Maturity 10 yrs (November 1, 2007)
Amortization Term 30 yrs
Prepayment Date 12/1/97
Prepayment Premium Type Yield Maintenance (Treasuries
flat)
Certificate Characteristics
Class A-1 Coupon 7.00%
* The Yield Maintenance formula for certain Mortgage Loans may result in a lower
Yield Maintenance prepayment premium than set forth in this example.
<TABLE>
<CAPTION>
=================================================================================================
MORTGAGE CLASS A-1 CLASS IO
LOAN CERTIFICATES CERTIFICATES
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AMOUNT OF PRINCIPAL PREPAYMENT $10,000,000 $10,000,000 N/A
- -------------------------------------------------------------------------------------------------
MATURITY DATE OF THE MORTGAGE LOAN 11/1/07
NUMBER OF PAYMENTS (1) 120
- -------------------------------------------------------------------------------------------------
TREASURY NOTE USED FOR DISCOUNT RATE (2) 6.125% 8/07
TREASURY YIELD (CBE) 6.075%
DISCOUNT RATE (MTG) (3) 6.000%
- -------------------------------------------------------------------------------------------------
MORTGAGE RATE 9.00%
PAYMENT DIFFERENTIAL ($ PER MONTH) (4) $25,000
- -------------------------------------------------------------------------------------------------
CERTIFICATE PASS-THROUGH RATE 7.00%
- -------------------------------------------------------------------------------------------------
TOTAL PREPAYMENT PREMIUM $2,251,836
- -------------------------------------------------------------------------------------------------
DISCOUNT RATE FRACTION CALCULATION (7.00%-6.000%)/ excess
(CLASS A-1 COUPON - DISCOUNT RATE) / (9.00%-6.000%)= prepayment
(GROSS MORTGAGE RATE - DISCOUNT RATE) = 1.000/3.000= premiums
% OF PREMIUM ALLOCATED TO CLASSES (DISCOUNT
RATE FRACTION) 33.333%
- -------------------------------------------------------------------------------------------------
$ PREMIUM ALLOCATED TO EACH CLASS $750,612 $1,501,224
=================================================================================================
</TABLE>
(1) The number of payments to discount for yield maintenance prepayment premium
computation.
(2) The yield on the treasury note with a maturity date closest to the maturity
date of the loan.
(3) The Discount Rate used is the mortgage equivalent of the CBE treasury
yield.
(4) (Mortgage Rate - Discount Rate) x (amount of Principal Prepayment) / 12
used for 120 payments.
B-6
<PAGE>
FU-LB 97-C2 STRUCTURAL TERM SHEET (CONTINUED):
CREDIT LEASE LOANS:
Credit Lease Loans are secured by Mortgages on Mortgaged
Properties that are, in each case, subject to a lease (each
a "Credit Lease") to a tenant which possesses (or whose
parent or other affiliate which guarantees the Credit Lease
obligation possesses) the rating indicated in the table
below. Scheduled monthly rent payments under the Credit
Leases are generally sufficient to pay in full and on a
timely basis all interest and principal scheduled to be paid
with respect to the related Credit Lease Loans, other than
the Balloon Payments with respect to Credit Lease Loans
which are Balloon Loans.
The Credit Lease Loans generally provide that the Tenant is
responsible for all costs and expenses incurred in
connection with the maintenance and operation of the related
Mortgaged Property and that, in the event of a casualty or
condemnation of a material portion of the related Mortgaged
Property, (i) the Tenant is obligated to continue making
payments; (ii) the Tenant must make an offer to purchase the
related Mortgaged Property for an amount not less than the
unpaid principal balance plus accrued interest on the
related Credit Lease Loan; or (iii) the Trustee on behalf of
the Certificateholders will have the benefit of certain
non-cancelable credit lease enhancement policies obtained to
cover certain casualty and/or condemnation risks.
Approximately 10.8% of the Mortgage Loans are Credit Lease
Loans.
================================================================================
# INITIAL PROPERTY LEASE CREDIT
TENANT / GUARANTOR LOANS BALANCE TYPE TYPE (1) RATING (2)
- --------------------------------------------------------------------------------
Rite Aid Pharmacy / 25 40,645,628 Retail NN BBB+/Baa1
Rite Aid Corp.
- --------------------------------------------------------------------------------
Blue Cross Blue Shield 1 30,000,000 Office B A/NR (3)
of Utah
- --------------------------------------------------------------------------------
Office Depot 1 24,140,144 Office NNN BB+/Baa2
- --------------------------------------------------------------------------------
Circuit City 5 23,263,531 Retail B NAIC 2
- --------------------------------------------------------------------------------
Hartford Fire 1 20,078,226 Office NN AA/Aa3 (3)
- --------------------------------------------------------------------------------
Garden Ridge 2 19,223,363 Retail NNN (4)
- --------------------------------------------------------------------------------
Bally Total 4 17,224,559 Other NNN B+/B3
Fitness/Bally Total
Fitness Holding Corp.
- --------------------------------------------------------------------------------
Revco / Revco D.S. Inc. 10 13,368,129 Retail NN N.A./Baa1
- --------------------------------------------------------------------------------
Kmart 1 11,673,663 Retail NNN B+/Ba3
- --------------------------------------------------------------------------------
Walmart 1 7,341,749 Retail NNN AA/Aa2
- --------------------------------------------------------------------------------
Eckerd 4 6,332,318 Retail NNN A-/Baa1
- --------------------------------------------------------------------------------
Eckerd 1 1,513,702 Retail NN A-/Baa1
- --------------------------------------------------------------------------------
Walgreen 2 5,277,018 Retail NN A+/Aa3
- --------------------------------------------------------------------------------
Albertson's, Inc. 1 5,158,010 Retail NN A+/Aa3
- --------------------------------------------------------------------------------
Barnes & Noble, Inc. 1 4,989,871 Mixed Use NNN BB/Ba2
- --------------------------------------------------------------------------------
Pep Boys 1 2,447,077 Ground NNN BBB+/Baa2
Lease
- --------------------------------------------------------------------------------
Thrifty-Payless 1 2,262,166 Retail NN N.A./Baa2
- --------------------------------------------------------------------------------
Sunbelt Rentals / 2 1,891,245 Retail NN (4)
Ashtead Group, PLC
- --------------------------------------------------------------------------------
Orleans CVS, Inc. / 1 1,153,040 Retail NNN A-/A3
CVS Corp.
- --------------------------------------------------------------------------------
TOTAL CTLs 65 237,983,438
================================================================================
(1) "NNN" means triple net lease; "NN" means double net lease; "B" means
bond-type lease.
(2) See Note 2 to the table set forth under "Description of the Mortgage
Pool--Credit Lease Loans" in the Prospectus Supplement.
(3) S&P/Moody's claims paying ability rating.
(4) Private rating; not publicly available.
B-7
<PAGE>
FU-LB 97-C2 STRUCTURAL TERM SHEET (CONTINUED):
ADVANCING: The Master Servicer will be obligated to make advances of
scheduled principal and interest payments (excluding balloon
payments and subject to adjustment in connection with
Appraisal Reduction Amounts) and certain servicing expenses
("Advances"), to the extent that such Advances are deemed to
be recoverable. If the Master Servicer fails to make a
required Advance, the Trustee or Fiscal Agent will be
obligated to make such advances.
CONTROLLING CLASS REPRESENTATIVE:
A Controlling Class Representative will be appointed by a
majority of Certificateholders of the Controlling Class,
which will generally be the most subordinate class with a
Certificate Balance outstanding that is at least 25% of the
initial Certificate Balance of such Class. The Controlling
Class Representative will, subject to certain limitations,
be entitled to direct the Special Servicer on how to resolve
delinquent or defaulted loans.
SPECIAL SERVICER FLEXIBILITY:
The Pooling and Servicing Agreement will generally permit
the Special Servicer to modify, waive or amend any term of
any Mortgage Loan if (a) it determines, in accordance with
the servicing standard, that it is appropriate to do so and
(b) such modification, waiver or amendment will not:
(i) affect the amount or timing of any scheduled
payments of principal, interest or other amount
(including Prepayment Premiums and Yield Maintenance
Charges) payable under the Mortgage Loan;
(ii) affect the obligation of the related borrower to pay
a Prepayment Premium or Yield Maintenance Charge or
permit a principal prepayment during the applicable
Lockout Period;
(iii) except as expressly provided by the related Mortgage
or in connection with a material adverse
environmental condition at the related Mortgaged
Property, result in a release of the lien of the
related Mortgage on any material portion of such
Mortgaged Property without a corresponding principal
prepayment; or
(iv) in the judgment of the Special Servicer, materially
impair the security for the Mortgage Loan or reduce
the likelihood of timely payment of amounts due
thereon.
SPECIAL SERVICER: CRIIMI MAE Services Limited Partnership ("CRIIMI"), a
Maryland limited partnership, the general partner of which
is CRIIMI MAE Management, Inc.
As of July 31, 1997, CRIIMI had a total commercial and
multifamily mortgage loan servicing portfolio (including
loans serviced for its own account and for others) of
approximately $9 billion.
MASTER SERVICER: First Union. As of March 31, 1997, First Union had a total
commercial and multifamily mortgage loan servicing portfolio
(including loans serviced for its own account and for
others) of approximately $4 billion.
B-8
<PAGE>
FU-LB 97-C2 STRUCTURAL TERM SHEET (CONTINUED):
MINIMUM DENOMINATIONS:
<TABLE>
<CAPTION>
MINIMUM INCREMENTS
CLASSES DENOMINATION THEREAFTER DELIVERY
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A-1, A-2, A-3, B, C, D, AND E $10,000 $1 DTC
- ------------------------------------------------------------------------------------------
IO $100,000 $1 DTC
</TABLE>
DETAILED MONTHLY INVESTOR REPORTING:
Updated collateral summary information will be a part of the
monthly remittance report in addition to detailed P&I
payment and delinquency information. Quarterly NOI and
Occupancy data, to the extent delivered by the borrowers,
will be available to Certificateholders through the Trustee.
The following is a list of all the reports that will be
available to Certificateholders:
<TABLE>
<CAPTION>
NAME OF REPORT DESCRIPTION (INFORMATION PROVIDED)
- -----------------------------------------------------------------------------------------------------------
<C> <S> <C>
1 Remittance Report principal and interest distributions, principal balances
- -----------------------------------------------------------------------------------------------------------
2 Mortgage Loan Status Report portfolio stratifications
- -----------------------------------------------------------------------------------------------------------
3 Comparative Financial Status Report revenue, NOI, DSCR to the extent available
- -----------------------------------------------------------------------------------------------------------
4 Delinquent Loan Status Report listing of delinquent mortgage loans
- -----------------------------------------------------------------------------------------------------------
5 Historical Loan Modification Report information on modified mortgage loans
- -----------------------------------------------------------------------------------------------------------
6 Historical Loss Estimate Report liquidation proceeds, expenses, and realized losses
- -----------------------------------------------------------------------------------------------------------
7 REO Status Report NOI and value of REO
- -----------------------------------------------------------------------------------------------------------
8 Watch List listing of loans in jeopardy of becoming Specially Serviced
- -----------------------------------------------------------------------------------------------------------
9 Loan Payoff Notification Report listing of loans that have given notice of intent to payoff
</TABLE>
B-9
<PAGE>
FU-LB 97-C2 COLLATERAL OVERVIEW (AS OF THE CUT-OFF DATE - NOVEMBER 1, 1997):
GENERAL CHARACTERISTICS PROPERTY TYPES
<TABLE>
<CAPTION>
============================================= ======================================
PROPERTY % OF INITIAL POOL
CHARACTERISTICS TYPES BALANCE
- --------------------------------------------- --------------------------------------
<S> <C> <C> <C>
AMOUNT $2,203,502,325 Multifamily 31.1
- --------------------------------------------- --------------------------------------
# OF LOANS 422 Retail 30.6
- --------------------------------------------- --------------------------------------
GROSS WAC 8.207% Office 9.3
- --------------------------------------------- --------------------------------------
ORIGINAL WAM 154(mos) Hospitality 8.9
- --------------------------------------------- --------------------------------------
REMAINING WAM 151(mos) Health Care 4.1
- --------------------------------------------- --------------------------------------
AVG. LOAN BALANCE $5,221,569 Industrial/Retail 2.7
- --------------------------------------------- --------------------------------------
WA DSCR (1) 1.36x Industrial/Warehouse 2.2
- --------------------------------------------- --------------------------------------
WA CUT-OFF DATE LTV RATIO(1) 72.1% Self Storage 0.2
- --------------------------------------------- --------------------------------------
BALLOON LOANS 82.8% Mobile Home Park 0.2
- --------------------------------------------- --------------------------------------
ARD LOANS 2.5% Mixed Use 0.1
============================================= --------------------------------------
(1) Excluding CTL Loans. Credit Lease Loans 10.8
======================================
</TABLE>
<TABLE>
<CAPTION>
DEAL SUMMARY BY PROPERTY TYPE:
- ----------------------------------------------------------------------------------------------------------------------
AGGREGATE % OF AVERAGE REM WA WA
# OF CUT-OFF DATE INITIAL CUT-OFF DATE GROSS WAM LTV WA OCCUP. % %
PROPERTY TYPE LOANS BALANCE BALANCE BALANCE WAC (MOS) RATIO DSCR RATE CA BALLOON
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 136 684,255,137 31.1 5,031,288 8.05 140 76.7 1.30 95.6 2.8 26.0
- ----------------------------------------------------------------------------------------------------------------------
Conventional 128 667,275,806 30.3 5,213,092 8.04 135 76.6 1.30 95.6 2.8 25.7
- ----------------------------------------------------------------------------------------------------------------------
Sec. 42 8 16,979,331 0.8 2,122,416 8.48 337 78.7 1.23 95.3 - 0.3
- ----------------------------------------------------------------------------------------------------------------------
RETAIL 122 673,267,134 30.6 5,518,583 8.15 132 72.5 1.32 95.6 3.2 30.1
- ----------------------------------------------------------------------------------------------------------------------
Anchored 71 494,871,243 22.5 6,970,018 8.07 133 72.7 1.31 95.3 2.8 22.2
- ----------------------------------------------------------------------------------------------------------------------
Unanchored 51 178,395,892 8.1 3,497,959 8.35 130 71.7 1.33 96.6 0.3 7.9
- ----------------------------------------------------------------------------------------------------------------------
OFFICE 32 204,089,365 9.3 6,377,793 8.41 150 67.6 1.50 94.7 1.6 7.2
- ----------------------------------------------------------------------------------------------------------------------
HOSPITALITY 33 195,766,774 8.9 5,932,326 8.37 147 63.9 1.54 N/A - 8.0
- ----------------------------------------------------------------------------------------------------------------------
Full Service 11 64,280,525 2.9 5,843,684 8.73 136 61.2 1.56 N/A - 2.5
- ----------------------------------------------------------------------------------------------------------------------
Limited Service 22 131,486,249 6.0 5,976,648 8.19 152 65.2 1.53 N/A - 5.6
- ----------------------------------------------------------------------------------------------------------------------
HEALTH CARE 16 90,158,951 4.1 5,634,934 8.63 173 68.5 1.41 93.4 0.9 3.6
- ----------------------------------------------------------------------------------------------------------------------
Assisted Living 5 14,864,373 0.7 2,972,875 8.77 116 67.6 1.33 93.8 - 0.7
- ----------------------------------------------------------------------------------------------------------------------
Skilled Nursing 7 28,265,885 1.3 4,037,984 8.84 145 66.6 1.51 92.1 - 0.7
- ----------------------------------------------------------------------------------------------------------------------
Congregate Care 3 23,656,389 1.1 7,885,463 8.30 118 72.7 1.47 93.0 0.9 1.1
- ----------------------------------------------------------------------------------------------------------------------
Skilled
Nursing/Cong Care 1 23,372,304 1.1 23,372,304 8.63 298 67.2 1.29 95.0 - 1.1
- ----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL/RETAIL 3 59,513,700 2.7 19,837,900 8.30 126 66.0 1.34 100.0 0.2 2.3
- ----------------------------------------------------------------------------------------------------------------------
INDUSTRIAL/WAREHOUSE 10 48,026,349 2.2 4,802,635 8.65 151 68.8 1.36 95.9 0.4 1.5
- ----------------------------------------------------------------------------------------------------------------------
MOBILE HOME PARK 2 4,890,822 0.2 2,445,411 7.97 156 71.2 1.43 90.8 0.1 0.1
- ----------------------------------------------------------------------------------------------------------------------
SELF STORAGE 2 3,940,655 0.2 1,970,328 8.39 159 60.7 1.57 91.4 0.1 0.1
- ----------------------------------------------------------------------------------------------------------------------
MIXED USE 1 1,610,000 0.1 1,610,000 7.47 180 70.0 1.44 87.1 - 0.1
======================================================================================================================
CTLS 65 237,983,438 10.8 3,661,284 8.24 235 N/A N/A 100.0 0.2 3.8
- ----------------------------------------------------------------------------------------------------------------------
Retail 56 139,103,561 6.3 2,483,992 8.39 239 N/A N/A 100.0 0.2 1.8
- ----------------------------------------------------------------------------------------------------------------------
Office 3 74,218,370 3.4 24,739,457 7.55 245 N/A N/A 100.0 - 2.0
- ----------------------------------------------------------------------------------------------------------------------
Other 6 24,661,507 1.1 4,110,251 9.49 178 N/A N/A 100.0 - -
- ----------------------------------------------------------------------------------------------------------------------
TOTAL/AVG/MIN/MAX/ 422 2,203,502,325 100.0 5,221,569 8.21 151 72.1 1.36 96.1 9.6 82.8
WTD.AVG.: (1) (1) (2)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Excluding CTLs.
(2) Excluding Hospitality properties.
B-10
<PAGE>
<TABLE>
FU-LB 97-C2 COLLATERAL OVERVIEW (AS OF THE CUT-OFF DATE - NOVEMBER 1, 1997):
DEAL SUMMARY BY PROPERTY TYPE (CONTINUED):
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE
AGGREGATE % OF CUT-OFF MINIMUM MAXIMUM
PROPERTY # OF CUT-OF DATE INITIAL DATE CUT-OF DATE CUT-OF DATE GROSS MIN MAX MIN
TYPE LOANS BALANCE BAL. BALANCE BALANCE BALANCE WAC WAC WAC WAM
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 136 684,255,137 31.1 5,031,288 597,500 33,449,419 8.05 7.36 9.55 45
- ---------------------------------------------------------------------------------------------------------------------
Conventional 128 667,275,806 30.3 5,213,092 597,500 33,449,419 8.04 7.36 9.50 45
- ---------------------------------------------------------------------------------------------------------------------
Sec. 42 8 16,979,331 0.8 2,122,416 705,142 3,511,325 8.48 8.00 9.55 295
- ---------------------------------------------------------------------------------------------------------------------
RETAIL 122 673,267,134 30.6 5,518,583 449,722 38,206,000 8.15 7.24 9.38 59
- ---------------------------------------------------------------------------------------------------------------------
Anchored 71 494,871,243 22.5 6,970,018 1,193,467 38,206,000 8.07 7.24 9.38 59
- ---------------------------------------------------------------------------------------------------------------------
Unanchored 51 178,395,892 8.1 3,497,959 449,722 28,773,665 8.35 7.47 9.38 78
- ---------------------------------------------------------------------------------------------------------------------
OFFICE 32 204,089,365 9.3 6,377,793 945,897 22,901,796 8.41 7.68 9.50 78
- ---------------------------------------------------------------------------------------------------------------------
HOSPITALITY 33 195,766,774 8.9 5,932,326 724,115 29,000,000 8.37 7.67 9.40 80
- ---------------------------------------------------------------------------------------------------------------------
Full Service 11 64,280,525 2.9 5,843,684 1,893,030 17,970,413 8.73 8.00 9.40 80
- ---------------------------------------------------------------------------------------------------------------------
Limited Service 22 131,486,249 6.0 5,976,648 724,115 29,000,000 8.19 7.67 9.35 113
- ---------------------------------------------------------------------------------------------------------------------
HEALTH CARE 16 90,158,951 4.1 5,634,934 897,379 23,372,304 8.63 7.60 10.50 110
- ---------------------------------------------------------------------------------------------------------------------
Skilled Nursing 7 28,265,885 1.3 4,037,984 2,100,000 6,234,626 8.84 7.60 10.50 115
- ---------------------------------------------------------------------------------------------------------------------
Skilled 1 23,372,304 1.1 23,372,304 23,372,304 23,372,304 8.63 8.63 8.63 298
Nursing/Cong Care
- ---------------------------------------------------------------------------------------------------------------------
Congregate Care 3 23,656,389 1.1 7,885,463 3,391,662 11,773,564 8.30 8.07 8.50 117
- ---------------------------------------------------------------------------------------------------------------------
Assisted Living 5 14,864,373 0.7 2,972,875 897,379 6,217,295 8.77 8.00 9.25 110
- ---------------------------------------------------------------------------------------------------------------------
INDUSTRIAL/RETAIL 3 59,513,700 2.7 19,837,900 5,096,859 45,416,841 8.30 7.79 8.38 116
- ---------------------------------------------------------------------------------------------------------------------
INDUSTRIAL/WAREHOUSE 10 48,026,349 2.2 4,802,635 1,321,379 8,783,677 8.65 7.98 9.38 78
- ---------------------------------------------------------------------------------------------------------------------
MOBILE HOME PARK 2 4,890,822 0.2 2,445,411 1,892,273 2,998,549 7.97 7.79 8.25 119
- ---------------------------------------------------------------------------------------------------------------------
SELF STORAGE 2 3,940,655 0.2 1,970,328 1,248,118 2,692,537 8.39 8.16 8.50 117
- ---------------------------------------------------------------------------------------------------------------------
MIXED USE 1 1,610,000 0.1 1,610,000 1,610,000 1,610,000 7.47 7.47 7.47 180
- ---------------------------------------------------------------------------------------------------------------------
CTLS 65 237,983,438 10.8 3,661,284 916,074 30,000,000 8.24 7.07 10.13 134
- ---------------------------------------------------------------------------------------------------------------------
Retail 56 139,103,561 6.3 2,483,992 916,074 11,673,663 8.39 7.31 10.13 213
- ---------------------------------------------------------------------------------------------------------------------
Office 3 74,218,370 3.4 24,739,457 20,078,226 30,000,000 7.55 7.07 8.41 177
- ---------------------------------------------------------------------------------------------------------------------
Other 6 24,661,507 1.1 4,110,251 2,447,077 5,415,475 9.49 7.96 10.13 134
- ---------------------------------------------------------------------------------------------------------------------
TOTAL/AVG/MIN/MAX/ 422 2,203,502,325 100.0 5,221,569 449,722 45,416,841 8.21 7.07 10.50 45
WTD.AVE.:
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------
WA MIN MAX
PROPERTY MAX WA MIN MAX LTV LTV LTV
TYPE WAM DSCR DSCR DSCR RATIO RATIO RATIO
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MULTIFAMILY 360 1.30 1.15 2.02 76.7 44.6 83.0
- -----------------------------------------------------------------------------------
Conventional 360 1.30 1.18 2.02 76.6 44.6 81.4
- -----------------------------------------------------------------------------------
Sec. 42 359 1.23 1.15 1.35 78.7 72.2 83.0
- -----------------------------------------------------------------------------------
RETAIL 296 1.32 1.20 1.66 72.5 48.3 80.0
- -----------------------------------------------------------------------------------
Anchored 236 1.31 1.20 1.65 72.7 48.3 80.0
- -----------------------------------------------------------------------------------
Unanchored 296 1.33 1.23 1.66 71.7 53.5 77.3
- -----------------------------------------------------------------------------------
OFFICE 295 1.50 1.22 2.00 67.6 46.1 75.0
- -----------------------------------------------------------------------------------
HOSPITALITY 272 1.54 1.40 2.50 63.9 34.9 73.3
- -----------------------------------------------------------------------------------
Full Service 264 1.56 1.40 2.50 61.2 34.9 70.5
- -----------------------------------------------------------------------------------
Limited Service 272 1.53 1.40 2.08 65.2 45.3 73.3
- -----------------------------------------------------------------------------------
HEALTH CARE 298 1.41 1.29 2.07 68.5 29.0 74.9
- -----------------------------------------------------------------------------------
Skilled Nursing 237 1.51 1.39 2.07 66.6 29.0 74.8
- -----------------------------------------------------------------------------------
Skilled 298 1.29 1.29 1.29 67.2 67.2 67.2
Nursing/Cong Care
- -----------------------------------------------------------------------------------
Congregate Care 119 1.47 1.32 1.64 72.7 62.8 74.9
- -----------------------------------------------------------------------------------
Assisted Living 119 1.33 1.30 1.42 67.6 58.4 70.8
- -----------------------------------------------------------------------------------
INDUSTRIAL/RETAIL 180 1.34 1.31 1.45 66.0 64.9 75.0
- -----------------------------------------------------------------------------------
INDUSTRIAL/WAREHOUSE 295 1.36 1.30 1.52 68.8 54.4 75.0
- -----------------------------------------------------------------------------------
MOBILE HOME PARK 214 1.43 1.30 1.65 71.2 65.3 75.0
- -----------------------------------------------------------------------------------
SELF STORAGE 179 1.57 1.49 1.62 60.7 54.8 73.4
- -----------------------------------------------------------------------------------
MIXED USE 180 1.44 1.44 1.44 70.0 70.0 70.0
- -----------------------------------------------------------------------------------
CTLS 299 N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------
Retail 260 N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------
Office 299 N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------
Other 298 N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------
TOTAL/AVG/MIN/MAX/ 360 1.36 1.15 2.50 72.1 29.0 83.0
WTD.AVE.: (1) (1) (1) (1) (1) (1)
- -----------------------------------------------------------------------------------
</TABLE>
(1) Excluding CTLs.
B-11
<PAGE>
<TABLE>
FU-LB 97-C2 COLLATERAL OVERVIEW (AS OF THE CUT-OFF DATE - NOVEMBER 1, 1997):
<CAPTION>
LOAN SIZE DISTRIBUTION GROSS RATE DISTRIBUTION
==================================================== ================================
CUT-OFF DATE % OF INITIAL GROSS RATE % OF INITIAL
BALANCE RANGE ($) # OF LOANS POOL BALANCE (%) POOL BALANCE
- ---------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 - 2,000,000 115 7.42 7.000 - 7.249% 3.57
- ---------------------------------------------------- --------------------------------
2,000,001 - 4,000,000 138 17.89 7.250 - 7.499% 6.85
- ---------------------------------------------------- --------------------------------
4,000,001 - 6,000,000 67 14.71 7.500 - 7.749% 11.14
- ---------------------------------------------------- --------------------------------
6,000,001 - 8,000,000 40 12.39 7.750 - 7.999% 14.72
- ---------------------------------------------------- --------------------------------
8,000,001 - 10,000,000 19 7.80 8.000 - 8.249% 16.61
- ---------------------------------------------------- --------------------------------
10,000,001 - 12,000,000 5 2.55 8.250 - 8.499% 18.64
- ---------------------------------------------------- --------------------------------
12,000,001 - 14,000,000 6 3.53 8.500 - 8.749% 14.07
- ---------------------------------------------------- --------------------------------
14,000,001 - 16,000,000 2 1.35 8.750 - 8.999% 5.61
- ---------------------------------------------------- --------------------------------
16,000,001 - 18,000,000 8 6.15 9.000 - 9.249% 4.96
- ---------------------------------------------------- --------------------------------
18,000,001 - 20,000,000 6 5.27 9.250 - 9.499% 1.73
- ---------------------------------------------------- --------------------------------
20,000,001 - 22,000,000 2 1.88 9.500 - 9.749% 0.22
- ---------------------------------------------------- --------------------------------
22,000,001 - 24,000,000 3 3.14 9.750 - 9.999% 0.20
- ---------------------------------------------------- --------------------------------
24,000,001 - 26,000,000 1 1.10 10.000 - 10.249% 1.46
- ---------------------------------------------------- --------------------------------
28,000,001 - 30,000,000 6 7.92 10.500 - 10.749% 0.21
- ---------------------------------------------------- ================================
32,000,001 - 34,000,000 1 1.52
- ----------------------------------------------------
34,000,001 - 36,000,000 1 1.60
- ----------------------------------------------------
38,000,001 - 40,000,000 1 1.73
- ----------------------------------------------------
44,000,001 - 46,000,000 1 2.06
====================================================
</TABLE>
REMAINING TERMS TO MATURITY REMAINING AMORTIZATION TERM
============================== =============================
% OF INITIAL % OF INITIAL
MONTHS POOL BALANCE MONTHS POOL BALANCE
------------------------------ -----------------------------
25 - 48 0.41 97 - 120 0.10
------------------------------ -----------------------------
49 - 72 1.30 121 - 144 0.78
------------------------------ -----------------------------
73 - 96 8.31 169 - 192 1.34
------------------------------ -----------------------------
97 - 120 54.68 193 - 216 1.18
------------------------------ -----------------------------
121 - 144 0.93 217 - 240 6.19
------------------------------ -----------------------------
145 - 168 0.13 241 - 264 2.30
------------------------------ -----------------------------
169 - 192 16.05 265 - 288 2.19
------------------------------ -----------------------------
193 - 216 0.27 289 - 312 24.60
------------------------------ -----------------------------
217 - 240 7.26 313 - 336 4.18
------------------------------ -----------------------------
241 - 264 2.97 337 - 360 57.14
------------------------------ =============================
265 - 288 0.23
------------------------------
289 - 312 5.48
------------------------------
313 - 336 0.10
------------------------------
337 - 360 1.87
==============================
THE SECURITIES DESCRIBED HEREIN ARE OFFERED ONLY PURSUANT TO A DEFINITIVE
PROSPECTUS AND PROSPECTUS SUPPLEMENT AND PROSPECTIVE INVESTORS WHO CONSIDER
PURCHASING ANY SUCH SECURITIES ARE ADVISED TO CAREFULLY READ, AND SHOULD RELY
SOLELY UPON THE DETAILED INFORMATION APPEARING IN THE PROSPECTUS AND PROSPECTUS
SUPPLEMENT. THIS ANNEX B DOES NOT INCLUDE ALL RELEVANT INFORMATION RELATING TO
THE SECURITIES AND THE UNDERLYING ASSETS DESCRIBED HEREIN, PARTICULARLY WITH
RESPECT TO THE RISKS AND SPECIAL CONSIDERATIONS INVOLVED WITH AN INVESTMENT IN
SUCH SECURITIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE DETAILED
INFORMATION SET FORTH IN THE PROSPECTUS AND PROSPECTUS SUPPLEMENT. CERTAIN
CAPITALIZED TERMS USED HEREIN MAY BE DEFINED IN THE PROSPECTUS OR PROSPECTUS
SUPPLEMENT.
B-12
<PAGE>
FU-LB 97-C2 COLLATERAL OVERVIEW (AS OF THE CUT-OFF DATE - NOVEMBER 1, 1997):
DEBT SERVICE COVERAGE RATIOS LOAN TO VALUE % (LTV)
================================== =================================
% OF INITIAL % OF INITIAL
DSCR RANGE(X)(1) POOL BALANCE LTV RANGES(1) POOL BALANCE
---------------------------------- ---------------------------------
1.15 - 1.19(2) 1.05 25.01 - 30.00 0.10
---------------------------------- ---------------------------------
1.20 - 1.24 10.62 30.01 - 35.00 0.25
---------------------------------- ---------------------------------
1.25 - 1.29 21.28 35.01 - 40.00 0.09
---------------------------------- ---------------------------------
1.30 - 1.34 20.64 40.01 - 45.00 0.38
---------------------------------- ---------------------------------
1.35 - 1.39 11.52 45.01 - 50.00 0.44
---------------------------------- ---------------------------------
1.40 - 1.44 6.74 50.01 - 55.00 1.58
---------------------------------- ---------------------------------
1.45 - 1.49 7.55 55.01 - 60.00 3.83
---------------------------------- ---------------------------------
1.50 - 1.54 1.42 60.01 - 65.00 8.78
---------------------------------- ---------------------------------
1.55 - 1.59 1.16 65.01 - 70.00 10.42
---------------------------------- ---------------------------------
1.60 - 1.64 1.14 70.01 - 75.00 32.50
---------------------------------- ---------------------------------
1.65 - 1.69 1.90 75.01 - 80.00 29.62
---------------------------------- ---------------------------------
1.70 - 1.74 1.31 80.01 - 83.04 1.23
---------------------------------- =================================
1.75 - 1.79 1.06 (1) Excluding CTL Loans
----------------------------------
2.00 - 2.04 1.14
----------------------------------
2.05 - 2.50 0.66
==================================
(1) Excluding CTL Loans.
(2) With exception to one loan, or 0.7%, the Mortgage Loans with DSC Ratios
below 1.20x are loans secured by Section 42 properties.
STATE DISTRIBUTION
=============================
% OF INITIAL
STATE POOL BALANCE
- -----------------------------
FL 14.43
- -----------------------------
NY 11.30
- -----------------------------
TX 10.43
- -----------------------------
CA 9.61
- -----------------------------
GA 5.07
- -----------------------------
VA 3.86
- -----------------------------
AZ 3.80
- -----------------------------
PA 3.53
- -----------------------------
NJ 3.52
- -----------------------------
MO 2.95
- -----------------------------
Other 31.50
=============================
B-13
<PAGE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
Pre-Tax Yield to Maturity and Modified Duration of Class A1 Certificates
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- ------------------- ------------------ ------------------ ------------------ ------------------
CBE Modified CBE Modified CBE Modified CBE Modified CBE Modified
Yield Duration Yield Duration Yield Duration Yield Duration Yield Duration
(%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100.10 6.371% 3.14 6.369% 3.12 6.368% 3.09 6.366% 3.07 6.364% 3.04
100.11 6.361% 3.14 6.359% 3.12 6.358% 3.09 6.356% 3.07 6.354% 3.04
100.12 6.351% 3.14 6.349% 3.12 6.348% 3.09 6.346% 3.08 6.344% 3.04
100.13 6.341% 3.14 6.339% 3.12 6.338% 3.10 6.336% 3.08 6.334% 3.04
100.14 6.331% 3.14 6.329% 3.12 6.328% 3.10 6.326% 3.08 6.324% 3.04
100.15 6.321% 3.14 6.319% 3.12 6.318% 3.10 6.316% 3.08 6.313% 3.04
100.16 6.312% 3.14 6.309% 3.12 6.308% 3.10 6.306% 3.08 6.303% 3.04
100.17 6.302% 3.14 6.300% 3.12 6.298% 3.10 6.296% 3.08 6.293% 3.05
100.18 6.292% 3.15 6.290% 3.12 6.288% 3.10 6.286% 3.08 6.283% 3.05
100.19 6.282% 3.15 6.280% 3.12 6.278% 3.10 6.276% 3.08 6.273% 3.05
100.20 6.272% 3.15 6.270% 3.12 6.268% 3.10 6.266% 3.08 6.263% 3.05
100.21 6.262% 3.15 6.260% 3.12 6.258% 3.10 6.256% 3.08 6.252% 3.05
100.22 6.253% 3.15 6.250% 3.12 6.248% 3.10 6.246% 3.08 6.242% 3.05
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (yrs.) 3.72 3.69 3.66 3.64 3.60
First Principal
Payment Date 18-Dec-97 18-Dec-97 18-Dec-97 18-Dec-97 18-Dec-97
Last Principal
Payment Date 18-Mar-2004 18-Mar-2004 18-Feb-2004 18-Feb-2004 18-Jan-2004
</TABLE>
B-14
<PAGE>
<TABLE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
Pre-Tax Yield to Maturity and Modified Duration of Class A2 Certificates
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- ------------------- ------------------ ------------------ ------------------ ------------------
CBE Modified CBE Modified CBE Modified CBE Modified CBE Modified
Yield Duration Yield Duration Yield Duration Yield Duration Yield Duration
(%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100.04 6.617% 5.87 6.617% 5.82 6.616% 5.77 6.615% 5.73 6.615% 5.67
100.06 6.607% 5.87 6.606% 5.82 6.605% 5.77 6.605% 5.73 6.604% 5.67
100.08 6.596% 5.87 6.595% 5.82 6.594% 5.77 6.594% 5.74 6.593% 5.67
100.10 6.585% 5.87 6.585% 5.82 6.584% 5.78 6.583% 5.74 6.582% 5.67
100.12 6.575% 5.87 6.574% 5.82 6.573% 5.78 6.572% 5.74 6.571% 5.67
100.14 6.564% 5.87 6.563% 5.82 6.562% 5.78 6.561% 5.74 6.560% 5.67
100.16 6.554% 5.87 6.553% 5.82 6.552% 5.78 6.551% 5.74 6.549% 5.67
100.18 6.543% 5.87 6.542% 5.82 6.541% 5.78 6.540% 5.74 6.538% 5.67
100.20 6.533% 5.87 6.531% 5.83 6.530% 5.78 6.529% 5.74 6.527% 5.67
100.22 6.522% 5.87 6.521% 5.83 6.519% 5.78 6.518% 5.74 6.516% 5.67
100.24 6.512% 5.88 6.510% 5.83 6.509% 5.78 6.507% 5.74 6.505% 5.68
100.26 6.501% 5.88 6.500% 5.83 6.498% 5.78 6.497% 5.74 6.494% 5.68
100.28 6.491% 5.88 6.489% 5.83 6.487% 5.78 6.486% 5.74 6.484% 5.68
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (yrs.) 7.76 7.67 7.59 7.52 7.41
First Principal
Payment Date 18-Mar-2004 18-Mar-2004 18-Feb-2004 18-Feb-2004 18-Jan-2004
Last Principal
Payment Date 18-May-2007 18-May-2007 18-May-2007 18-Apr-2007 18-Mar-2007
</TABLE>
B-15
<PAGE>
<TABLE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
Pre-Tax Yield to Maturity and Modified Duration of Class A3 Certificates
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- ------------------- ------------------ ------------------ ------------------ ------------------
CBE Modified CBE Modified CBE Modified CBE Modified CBE Modified
Yield Duration Yield Duration Yield Duration Yield Duration Yield Duration
(%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100.04 6.680% 6.97 6.680% 6.96 6.680% 6.96 6.680% 6.95 6.680% 6.94
100.06 6.671% 6.97 6.671% 6.97 6.671% 6.96 6.671% 6.96 6.671% 6.94
100.08 6.662% 6.97 6.662% 6.97 6.662% 6.96 6.662% 6.96 6.662% 6.94
100.10 6.653% 6.97 6.653% 6.97 6.653% 6.96 6.653% 6.96 6.653% 6.94
100.12 6.644% 6.97 6.644% 6.97 6.644% 6.96 6.644% 6.96 6.644% 6.94
100.14 6.635% 6.97 6.635% 6.97 6.635% 6.97 6.635% 6.96 6.635% 6.95
100.16 6.627% 6.98 6.627% 6.97 6.626% 6.97 6.626% 6.96 6.626% 6.95
100.18 6.618% 6.98 6.618% 6.97 6.618% 6.97 6.617% 6.96 6.617% 6.95
100.20 6.609% 6.98 6.609% 6.97 6.609% 6.97 6.609% 6.96 6.608% 6.95
100.22 6.600% 6.98 6.600% 6.98 6.600% 6.97 6.600% 6.97 6.599% 6.95
100.24 6.591% 6.98 6.591% 6.98 6.591% 6.97 6.591% 6.97 6.591% 6.95
100.26 6.582% 6.98 6.582% 6.98 6.582% 6.97 6.582% 6.97 6.582% 6.95
100.28 6.573% 6.98 6.573% 6.98 6.573% 6.97 6.573% 6.97 6.573% 6.95
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (yrs.) 9.76 9.75 9.74 9.73 9.70
First Principal
Payment Date 18-May-2007 18-May-2007 18-May-2007 18-Apr-2007 18-Mar-2007
Last Principal
Payment Date 18-Dec-2007 18-Dec-2007 18-Dec-2007 18-Dec-2007 18-Dec-2007
</TABLE>
B-16
<PAGE>
<TABLE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
Pre-Tax Yield to Maturity and Modified Duration of Class B Certificates
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- ------------------- ------------------ ------------------ ------------------ ------------------
CBE Modified CBE Modified CBE Modified CBE Modified CBE Modified
Yield Duration Yield Duration Yield Duration Yield Duration Yield Duration
(%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99.24 6.878% 7.96 6.878% 7.94 6.878% 7.93 6.878% 7.92 6.878% 7.91
99.28 6.862% 7.96 6.862% 7.95 6.862% 7.94 6.862% 7.93 6.862% 7.91
100.00 6.847% 7.96 6.847% 7.95 6.846% 7.94 6.846% 7.93 6.846% 7.92
100.04 6.831% 7.96 6.831% 7.95 6.831% 7.94 6.831% 7.93 6.831% 7.92
100.08 6.815% 7.97 6.815% 7.96 6.815% 7.95 6.815% 7.94 6.815% 7.92
100.12 6.800% 7.97 6.800% 7.96 6.800% 7.95 6.799% 7.94 6.799% 7.93
100.16 6.784% 7.97 6.784% 7.96 6.784% 7.95 6.784% 7.94 6.784% 7.93
100.20 6.769% 7.98 6.769% 7.97 6.768% 7.96 6.768% 7.95 6.768% 7.93
100.24 6.753% 7.98 6.753% 7.97 6.753% 7.96 6.753% 7.95 6.753% 7.94
100.28 6.738% 7.98 6.738% 7.97 6.737% 7.96 6.737% 7.95 6.737% 7.94
101.00 6.722% 7.99 6.722% 7.98 6.722% 7.97 6.722% 7.96 6.721% 7.94
101.04 6.707% 7.99 6.707% 7.98 6.706% 7.97 6.706% 7.96 6.706% 7.95
101.08 6.692% 7.99 6.691% 7.98 6.691% 7.97 6.691% 7.96 6.690% 7.95
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (yrs.) 12.04 12.01 11.99 11.97 11.94
First Principal
Payment Date 18-Dec-2007 18-Dec-2007 18-Dec-2007 18-Dec-2007 18-Dec-2007
Last Principal
Payment Date 18-Oct-2011 18-Oct-2011 18-Oct-2011 18-Oct-2011 18-Sep-2011
</TABLE>
B-17
<PAGE>
<TABLE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
Pre-Tax Yield to Maturity and Modified Duration of Class C Certificates
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- ------------------- ------------------ ------------------ ------------------ ------------------
CBE Modified CBE Modified CBE Modified CBE Modified CBE Modified
Yield Duration Yield Duration Yield Duration Yield Duration Yield Duration
(%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
99.16 7.142% 8.84 7.143% 8.82 7.143% 8.81 7.143% 8.80 7.143% 8.77
99.20 7.128% 8.85 7.128% 8.83 7.128% 8.81 7.128% 8.80 7.128% 8.77
99.24 7.114% 8.85 7.114% 8.83 7.114% 8.82 7.114% 8.80 7.114% 8.78
99.28 7.100% 8.85 7.100% 8.84 7.100% 8.82 7.100% 8.81 7.100% 8.78
100.00 7.086% 8.86 7.086% 8.84 7.086% 8.83 7.086% 8.81 7.086% 8.78
100.04 7.072% 8.86 7.072% 8.85 7.072% 8.83 7.072% 8.82 7.072% 8.79
100.08 7.058% 8.87 7.058% 8.85 7.058% 8.83 7.058% 8.82 7.058% 8.79
100.12 7.044% 8.87 7.044% 8.85 7.044% 8.84 7.044% 8.82 7.043% 8.80
100.16 7.030% 8.87 7.030% 8.86 7.030% 8.84 7.030% 8.83 7.029% 8.80
100.20 7.016% 8.88 7.016% 8.86 7.016% 8.85 7.016% 8.83 7.015% 8.80
100.24 7.002% 8.88 7.002% 8.87 7.002% 8.85 7.002% 8.84 7.001% 8.81
100.28 6.988% 8.89 6.988% 8.87 6.988% 8.86 6.988% 8.84 6.987% 8.81
101.00 6.975% 8.89 6.974% 8.87 6.974% 8.86 6.974% 8.85 6.973% 8.82
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (yrs.) 14.61 14.56 14.52 14.48 14.40
First Principal
Payment Date 18-Oct-2011 18-Oct-2011 18-Oct-2011 18-Oct-2011 18-Sep-2011
Last Principal
Payment Date 18-Sep-2012 18-Sep-2012 18-Aug-2012 18-Aug-2012 18-Jul-2012
</TABLE>
B-18
<PAGE>
<TABLE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
Pre-Tax Yield to Maturity and Modified Duration of Class D Certificates
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- ------------------- ------------------ ------------------ ------------------ ------------------
CBE Modified CBE Modified CBE Modified CBE Modified CBE Modified
Yield Duration Yield Duration Yield Duration Yield Duration Yield Duration
(%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
97.16 7.473% 8.82 7.473% 8.81 7.473% 8.81 7.474% 8.80 7.474% 8.78
97.24 7.444% 8.83 7.444% 8.82 7.444% 8.82 7.445% 8.81 7.445% 8.79
98.00 7.415% 8.84 7.415% 8.83 7.416% 8.83 7.416% 8.82 7.416% 8.80
98.08 7.387% 8.85 7.387% 8.84 7.387% 8.84 7.387% 8.83 7.387% 8.81
98.16 7.358% 8.86 7.358% 8.85 7.358% 8.84 7.358% 8.84 7.359% 8.82
98.24 7.330% 8.86 7.330% 8.86 7.330% 8.85 7.330% 8.85 7.330% 8.83
99.00 7.301% 8.87 7.301% 8.87 7.301% 8.86 7.301% 8.85 7.302% 8.84
99.08 7.273% 8.88 7.273% 8.88 7.273% 8.87 7.273% 8.86 7.273% 8.84
99.16 7.245% 8.89 7.245% 8.89 7.245% 8.88 7.245% 8.87 7.245% 8.85
99.24 7.217% 8.90 7.217% 8.89 7.217% 8.89 7.217% 8.88 7.217% 8.86
100.00 7.189% 8.91 7.189% 8.90 7.189% 8.90 7.189% 8.89 7.189% 8.87
100.08 7.161% 8.92 7.161% 8.91 7.161% 8.91 7.161% 8.90 7.161% 8.88
100.16 7.133% 8.92 7.133% 8.92 7.133% 8.91 7.133% 8.91 7.133% 8.89
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (yrs.) 14.92 14.91 14.89 14.87 14.81
First Principal
Payment Date 18-Sep-2012 18-Sep-2012 18-Aug-2012 18-Aug-2012 18-Jul-2012
Last Principal
Payment Date 18-Nov-2012 18-Nov-2012 18-Nov-2012 18-Nov-2012 18-Nov-2012
</TABLE>
B-19
<PAGE>
<TABLE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
Pre-Tax Yield to Maturity and Modified Duration of Class E Certificates
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- ------------------- ------------------ ------------------ ------------------ ------------------
CBE Modified CBE Modified CBE Modified CBE Modified CBE Modified
Yield Duration Yield Duration Yield Duration Yield Duration Yield Duration
(%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.) (%) (yrs.)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
96.16 7.589% 8.80 7.589% 8.80 7.589% 8.80 7.589% 8.80 7.589% 8.80
96.24 7.560% 8.81 7.560% 8.81 7.560% 8.81 7.560% 8.81 7.560% 8.81
97.00 7.530% 8.82 7.530% 8.82 7.530% 8.82 7.530% 8.82 7.530% 8.82
97.08 7.501% 8.83 7.501% 8.83 7.501% 8.83 7.501% 8.83 7.501% 8.83
97.16 7.472% 8.84 7.472% 8.84 7.472% 8.84 7.472% 8.84 7.472% 8.84
97.24 7.444% 8.85 7.444% 8.85 7.444% 8.85 7.444% 8.85 7.444% 8.85
98.00 7.415% 8.86 7.415% 8.86 7.415% 8.86 7.415% 8.86 7.415% 8.86
98.08 7.386% 8.87 7.386% 8.87 7.386% 8.87 7.386% 8.87 7.386% 8.87
98.16 7.358% 8.87 7.358% 8.87 7.358% 8.87 7.358% 8.87 7.358% 8.87
98.24 7.329% 8.88 7.329% 8.88 7.329% 8.88 7.329% 8.88 7.329% 8.88
99.00 7.301% 8.89 7.301% 8.89 7.301% 8.89 7.301% 8.89 7.301% 8.89
99.08 7.273% 8.90 7.273% 8.90 7.273% 8.90 7.273% 8.90 7.273% 8.90
99.16 7.245% 8.91 7.245% 8.91 7.245% 8.91 7.245% 8.91 7.245% 8.91
<CAPTION>
<S> <C> <C> <C> <C> <C>
Weighted Average
Life (yrs.) 14.98 14.98 14.98 14.98 14.98
First Principal
Payment Date 18-Nov-2012 18-Nov-2012 18-Nov-2012 18-Nov-2012 18-Nov-2012
Last Principal
Payment Date 18-Nov-2012 18-Nov-2012 18-Nov-2012 18-Nov-2012 18-Nov-2012
</TABLE>
B-20
<PAGE>
Weighted Average Life, First Principal Payment Date,
Last Principal Payment Date,
and Pre-Tax Yield to Maturity of Class IO Certificates
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ------------- --------- --------- --------- --------- ---------
CBE CBE CBE CBE CBE
Yield Yield Yield Yield Yield
(%) (%) (%) (%) (%)
9.11 8.787% 8.719% 8.666% 8.620% 8.540%
9.12 8.714% 8.646% 8.592% 8.547% 8.467%
9.13 8.642% 8.573% 8.519% 8.474% 8.394%
9.14 8.570% 8.501% 8.447% 8.401% 8.321%
9.15 8.498% 8.429% 8.375% 8.329% 8.249%
9.16 8.426% 8.357% 8.303% 8.257% 8.177%
9.17 8.356% 8.286% 8.232% 8.186% 8.106%
9.18 8.285% 8.215% 8.161% 8.115% 8.035%
9.19 8.215% 8.145% 8.090% 8.044% 7.964%
9.20 8.145% 8.075% 8.020% 7.974% 7.894%
9.21 8.076% 8.005% 7.950% 7.904% 7.824%
9.22 8.007% 7.936% 7.881% 7.835% 7.754%
9.23 7.938% 7.867% 7.812% 7.766% 7.685%
Weighted Average
Life (yrs.) 10.69 10.61 10.56 10.52 10.46
First Principal
Payment Date 18-Dec-97 18-Dec-97 18-Dec-97 18-Dec-97 18-Dec-97
Last Principal
Payment Date 18-Nov-2027 18-Nov-2027 18-Nov-2027 18-Nov-2027 18-Nov-2027
B-21
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX C
<TABLE>
<CAPTION>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/28/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
Number Of Pages
---------------
<S> <C>
Table Of Contents 1
REMIC Certificate Report 1
Other Related Information 1
Asset Backed Facts Sheets 1
Delinquency Loan Detail 1
Mortgage Loan Characteristics 2
TOTAL PAGES INCLUDED IN THIS PACKAGE 2
Specially Serviced Loan Detail Appendix A
Modified Loan Detail Appendix B
Realized Loss Detail Appendix C
<CAPTION>
================================================================================
INFORMATION IS AVAILABLE FOR THIS ISSUE FROM THE FOLLOWING SOURCES
- --------------------------------------------------------------------------------
<S> <C>
LaSalle Web Site www.1nbabs.com
First Union Web Site www.firstunion.com
LaSalle Bulletin Board (714) 282-3990
LaSalle ASAP Fax System (312) 904-2200
Bloomberg User Terminal
ASAP #: 295
Monthly Data File Name: 0777MMYY.EXE
================================================================================
</TABLE>
PAGE 1 OF 7
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/28/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9 WAC:
Chicago, IL 60603 WAMM:
====================================================================================================================================
ORIGINAL OPENING PRINCIPAL PRINCIPAL NEGATIVE CLOSING INTEREST INTEREST PASS-THROUGH
CLASS FACE VALUE(1) BALANCE PAYMENT ADJ. OR 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> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
Total P&I Payment 0.00
===========================
</TABLE>
PAGE 2 OF 7
Notes: (1) N denotes notional balance not included in total
(2) Interest Paid minus Interest Adjustment minus Deferred Interest
equals Accrual
(3) Estimated
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/28/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 OTHER RELATED INFORMATION
====================================================================================================================================
================================================================================================================
ACCRUED EXCESS INTEREST PRIOR ENDING ACTUAL
CERTIFICATE DEFERRED PREPAYMENT REDUCTION UNPAID UNPAID DISTRIBUTION
CLASS INTEREST INTEREST INT. SHORTFALLS AMOUNTS INTEREST INTEREST OF INTEREST
================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
================================================================================================================
COLLATERAL INFORMATION
- ----------------------------------------------------------------------------------------------------------------
Component Sub-Pool I Sub-Pool II Sub-Pool III Pool Total
================================================================================================================
<S> <C> <C> <C> <C>
Beginning Loan Count:
Ending Loan Count:
Beginning Scheduled Balance of the Mortgage Loans:
Ending Scheduled Balance of the Mortgage Loans:
Weighted Average Remaining Term to Maturity
====================================================================================================================================
</TABLE>
PAGE 3 OF 7
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/26/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
============================================================================================
Distribution Delinq 1 Months Delinq 2 Months Delinq 3+ Months Foreclosure/Bankruptcy
-------------------------------------------------------------------------------
Date # Balance # Balance # Balance # Balance
============================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/18/97 0 0 0 0 0 0 0 0
0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
============================================================================================
</TABLE>
================================================================================
Distribution REO Modifications Prepayments Curr Weighted Avg
-------------------------------------------------------------------
Date # Balance # Balance # Balance Coupon Remit
================================================================================
12/18/97 0 0 0 0 0 0
0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
PAGE 4 OF 7
Note: Foreclosure and REO Totals are Included in the Appropriate Delinquency
Aging Category
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/28/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
DELINQUENT LOAN DETAIL
P
====================================================================================================================================
Paid Outstanding Out. Property Special
Disclosure Doc Thru Current P&I P&I Protection Advance Servicer Foreclosure Benkruptcy REO
Control # Date Advance Advances** Advances Description(1) Transfer Date Date Date Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
A. P&I Advance - Loan in Grace Period
B. P&I Advance - Late Payment but < one month delinq
1. P&I Advance - Loan delinquent 1 month
2. P&I Advance - Loan delinquent 2 months
3. P&I Advance - Loan delinquent 3 months or More
4. Matured Balloon/Assumed Scheduled Payment
================================================================================
PAGE 5 OF 7
** Outstanding P&I Advances include the current period P&I Advance
<PAGE>
<TABLE>
<S> <C> <C>
AMN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: ########
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: ########
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: ########
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 POOL TOTAL
</TABLE>
DISTRIBUTION OF PRINCIPAL BALANCES
- --------------------------------------------------------------------------------
(2) Current Scheduled Number (2) Scheduled Based on
Balances of Loans Balance Balance
================================================================================
$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
DISTIRBUTION OF PROPERTY TYPES
- --------------------------------------------------------------------------------
Number (2) Scheduled Based on
Property Types of Loans Balance Balance
================================================================================
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
DISTRIBUTION OF MORTGAGE INTEREST RATES
- --------------------------------------------------------------------------------
Current Mortgage Number (2) Scheduled Based on
Interest Rate of Loans Balance Balance
###### to less
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to ######
###### to 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%
Geographic Distribution
- --------------------------------------------------------------------------------
Number (2) Scheduled Based on
Geographic Location of Loans Balance Balance
================================================================================
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
PAGE 6 OF 7
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: ########
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: ########
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: ########
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603 POOL TOTAL
</TABLE>
LOAN SEASONING
- --------------------------------------------------------------------------------
Number (2) Scheduled Based on
Number of Years of Loans Balance Balance
================================================================================
================================================================================
- --------------------------------------------------------------------------------
Weighted Average Seasoning is 0.0
DISTRIBUTION OF AMORTIZATION TYPE
- --------------------------------------------------------------------------------
Number (2) Scheduled Based on
Amortization Type of Loans Balance Balance
================================================================================
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
DISTRIBUTION OF REMAINING TERM
FULLY AMORTIZING
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fully Amortizing Number (2) Scheduled Based on
Mortgage Loans of Loans Balance Balance
================================================================================
60 months or less
6l to l20 months
121 to 180 months
181 to 240 months
241 to 36O months
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
Weighted Average Months to Maturity is 0
DISTRIBUTION OF REMAINING TERM
BALLOON LOANS
- --------------------------------------------------------------------------------
Balloon Number (2) Scheduled Based on
Mortgage Loans of Loans Balance Balance
================================================================================
12 months or less
13 to 24 months
25 to 36 months
37 to 48 months
49 to 60 months
61 to 120 months
121 to 130 months
181 to 240 months
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
Weighted Average Months to Maturity is 0
DISTRIBUTION OF DSCR
- --------------------------------------------------------------------------------
Debt Service Number (2) Scheduled Based on
Coverage Ratio(1) of Loans Balance Balance
================================================================================
0.500 or less
0.500 to 0.625
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 Ratio is 0.000
NOI AGING
- --------------------------------------------------------------------------------
Number (2) Scheduled Based on
NOI Date of Loans Balance Balance
================================================================================
1 year or less
l to 2 years
1 to 2 Years
2 Years or More
Unknown
================================================================================
Total 0 0 0.00%
- --------------------------------------------------------------------------------
(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 my
representation as to the accuracy of the data provided by the borrower for
this calculation.
PAGE 7 OF 7
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/28/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
SPECIALLY SERVICED LOAN DETAIL
==========================================================================================================================
Beginning Specialty
Disclosure Scheduled Interest Maturity Property Serviced
Control # Balance Rate Date Type Status Code(1) Comments
==========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
==========================================================================================================================
</TABLE>
(1) Legend:
1) Request for waiver of Prepayment Penalty
2) Payment default
3) Request for Loan Modification or Workout
4) Loan with Borrower Bankruptcy
5) Loan in Process of Foreclosure
6) Loan now REO Property
7) Loans Paid Off
8) Loans Returned to Master Servicer
================================================================================
APPENDIX A
<PAGE>
<TABLE>
<S> <C> <C>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/28/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
</TABLE>
MODIFIED LOAN DETAIL
================================================================================
Disclosure Modification Modification
Control# Date Description
- --------------------------------------------------------------------------------
================================================================================
APPENDIX B
<PAGE>
<TABLE>
<CAPTION>
ABN AMRO FIRST UNION - LEHMAN BROTHERS COMMERCIAL MORTGAGE TRUST II Statement Date: 12/18/97
LaSalle National Bank FIRST UNION NATIONAL BANK AS MASTER SERVICER Payment Date: 12/18/97
MORTGAGE PASS-THROUGH CERTIFICATES Prior Payment: NA
Administrator: SERIES 1997-C2 Record Date: 11/28/97
Brian Ames (800) 246-5761
135 S. LaSalle Street Suite 1740 ABN AMRO ACCT: 99-9999-99-9
Chicago, IL 60603
REALIZED LOSS DETAIL
======================================================================================
Beginning Gross Proceeds
Dist. Disclosure Appraisal Appraisal Scheduled Gross as a % of
Date Control # Date Value Balance Proceeds Sched Principal
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
Current Total 0.00 0.00
Cumulative 0.00 0.00
======================================================================================
</TABLE>
==============================================================
Aggregate Net Net Proceeds
Dist. Liquidation Liquidation as a % of Realized
Date Expenses * Proceeds Sched. Balance Loss
- --------------------------------------------------------------
- --------------------------------------------------------------
Current 0.00 0.00 0.00
Cumulative 0.00 0.00 0.00
==============================================================
APPENDIX C
* Aggregate liquidation expenses also include outstanding P&I advances and
unpaid servicing fees, unpaid trustee fees, etc.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX D
DELINQUENT LOAN STATUS REPORT
AS OF ____________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 S62 OR S63 P8 P7 P37 P39
- ------------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT NAME PAID SCHEDULED TOTAL P&I TOTAL
PROSPECTUS (WHEN PROPERTY SQ FT OR THRU LOAN ADVANCES EXPENSES
ID APPROPRIATE) TYPE CITY STATE UNITS DATE BALANCE TO DATE TO DATE
- ------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
- ------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
- ------------------------------------------------------------------------------------------------------------------------------------
* Workout Strategy should match the CSSA Loan file using abreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification,
DPO - Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan,
TBD - To Be Determined etc...)
- ------------------------------------------------------------------------------------------------------------------------------------
It is possible to combine the status codes if the loan is going in more
than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
- ------------------------------------------------------------------------------------------------------------------------------------
** App - Appraisal, BPO - Broker opinion, Int. - Internal Value
- ------------------------------------------------------------------------------------------------------------------------------------
*** How to deterime the cap rate is agreed upon by Underwriter and special
services - to be provided by a third party
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 P38 P25 P10 P11 P58 P54 P55 P81 P74
- ------------------------------------------------------------------------------------------------------------------------------------
(d) (e)=a+b+c+d (f)=P38/P81
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other Value
Advances Current Current using NOI
Prospectus (Taxes & Total Monthly Interest Maturity LTM NOI Cap Rate & Cap Valuation
ID Escrow) Exposure P&I Rate Date Date LTM NOI LTM DSCR Assigned Rate Date
- ------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
S4 P75 P35 P77 P79 P42 P82 P76
- -----------------------------------------------------------------------------------------------------------------------------
(g)=(.92*f)-e (h)=(g/e)
- -----------------------------------------------------------------------------------------------------------------------------
APPRAISAL TOTAL
BPO OR LOSS USING ESTIMATED APPRAISAL FCL EXPECTED
PROSPECTUS INTERNAL 92% APPR. RECOVERY REDUCTION TRANSFER RESOLUTION START FCL SALE WORKOUT
ID VALUE** OR BPO (F) % REALIZED DATE DATE DATE DATE STRATEGY COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
- ----------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 m
- ----------------------------------------------------------------------------------------------------------------------------
* Workout Strategy should match the CSSA Loan file using abr etc...
- ----------------------------------------------------------------------------------------------------------------------------
It is possible to combine the status codes if the loan is goi
- ----------------------------------------------------------------------------------------------------------------------------
** App - Appraisal, BPO - Broker opinion, Int. - Internal Va
- ----------------------------------------------------------------------------------------------------------------------------
*** How to deterime the cap rate is agreed upon by Underwriter and special
services - to be provided by a third party
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX E
HISTORICAL LOAN MODIFICATION REPORT
AS OF _________________
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
S4 S57 S58 P49 P48 P7* P7* P50* P50* P25*
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE BALANCE AT
WHEN THE
MOD / SENT TO EFFECTIVE # MTHS
PROSPECTUS EXTENTION EFFECT SPECIAL DATE OF OLD FOR RATE NEW OLD
ID CITY STATE FLAG DATE SERVICER REHABILITATION RATE CHANGE RATE P&I
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
THIS REPORT IS HISTORICAL
- ---------------------------------------------------------------------------------------------------------------------------
Information is as of modification. Each line it should not change in the future. Only new modifications should be added.
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
===========================================================================================================================
TOTAL FOR ALL LOANS:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FOR LOANS IN CURRENT MONTH:
- ---------------------------------------------------------------------------------------------------------------------------
# OF LOANS $ BALANCE
- ---------------------------------------------------------------------------------------------------------------------------
MODIFICATIONS:
- ---------------------------------------------------------------------------------------------------------------------------
MATURITY DATE EXTENTIONS:
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
* The information in these columns is from a particular point in time and should not change on this report once assigned.
- ---------------------------------------------------------------------------------------------------------------------------
(1) Actual principal loss taken by bonds
- ---------------------------------------------------------------------------------------------------------------------------
(2) Expected future loss due to a rate reduction. This is just an estimate calculated at the time of the modification.
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
S4 P25* P11* P11* P47
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
(2) EST.
FUTURE
TOTAL # INTEREST
MTHS (1) LOSS TO
FOR REALIZED TRUST $
PROSPECTUS NEW OLD NEW CHANGE LOSS TO (RATE
ID P&I MATURITY MATURITY OF MOD TRUST $ REDUCTION) COMMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
TOTAL FOR ALL LOANS:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL FOR LOANS IN CURRENT MONTH:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
MODIFICATIONS:
- ----------------------------------------------------------------------------------------------------------
MATURITY DATE EXTENTIONS:
- ----------------------------------------------------------------------------------------------------------
TOTAL:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX F
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD or DISCOUNTED PAYOFF)
as of ______________________
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P45/P7 P75 P45 P7 P37 P39+P38
- -----------------------------------------------------------------------------------------------------------------------------------
(c)=b/a (a) (b) (d) (e) (f) (g)
- -----------------------------------------------------------------------------------------------------------------------------------
LATEST
APPRAISAL
SHORT NAME % OR EFFECT NET AMT
PROSPECTUS (WHEN PROPERTY RECEIVED BROKERS DATE OF SALES RECEIVED SCHEDULED TOTAL P&I TOTAL
ID APPROPRIATE) TYPE CITY STATE FROM SALE OPINION SALE PRICE FROM SALE BALANCE ADVANCED EXPENSE
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
THIS REPORT IS HISTORICAL
- -----------------------------------------------------------------------------------------------------------------------------------
All information is from the liquidation date and does not need to be updated.
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
TOTAL ALL LOANS:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENT MONTH ONLY:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
S4
- ---------------------------------------------------------------------------------------------------------
(h) (i)=d-(f+g+h) (k)=i-e (m) (n)=k+m (o)=n/e
- ---------------------------------------------------------------------------------------------------------
DATE MINOR
LOSS ADJ TOTAL LOSS LOSS % OF
PROSPECTUS SERVICING ACTUAL LOSSES PASSED MINOR ADJ PASSED WITH SCHEDULED
ID FEES EXPENSE NET PROCEEDS PASSED THRU THRU TO TRUST THRU ADJUSTMENT BALANCE
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
THIS REPORT IS HISTORICAL
- ---------------------------------------------------------------------------------------------------------
All information is from the liquidation date and does not need to be updated.
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
Total all Loans:
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Current Month Only:
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX G
REO STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 S62 or P8 P7 P37 P39 P38
- -------------------------------------------------------------------------------------------------------------------------
S63 (a) (b) (c) (d)
- -------------------------------------------------------------------------------------------------------------------------
PROSPECTUS SHORT NAME PROPE CITY STATE SQ FT PAID SCHEDULED TOTAL TOTAL OTHER
ID (WHEN RTY OR THRU LOAN P&I EXPENSES ADVANCES
APPROPRIATE) TYPE UNITS DATE BALANCE ADVANCES TO DATE (TAXES &
TO DATE ESCROW)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
S4 P25 P11 P58 P54 P81 P74 P75
- ---------------------------------------------------------------------------------------------------------------------
(e)=a+b+c+d (k) (j) (f)=(k/j) (g)
- ---------------------------------------------------------------------------------------------------------------------
PROSPECTUS TOTAL CURRENT MATURITY LTM LTM CAP VALUATION VALUE APPRAISAL
ID EXPOSURE MONTHLY DATE NOI NOI / RATE DATE USING BPO OR
P&I DATE DSC ASSIGN NOI & INTERNAL
CAP RATE VALUE**
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
S4 P35 P77 P82 P79
- -----------------------------------------------------------------------------------------------------
(h)=(.92*g) (i)=(g/e)
- -----------------------------------------------------------------------------------------------------
PROSPECTUS LOSS ESTIMATED TOTAL TRANSFER REO PENDING
ID USING RECOVERY APPRAISAL DATE AQUISITION RESOLUTION COMMENTS
92% % REDUCTION DATE DATE
APPR. OR REALIZED
BPO (f)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Use the following codes; App. - Appraisal, BPO - Brokers Opinion, Int -
Internal Value
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX H
SERVICER WATCH LIST
as of ____________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
S4 S55 S61 S57 S58 P7 P8 P11 P54
- ------------------------------------------------------------------------------------------------------------------------------------
PROSPECTUS SHORT NAME PROPERTY CITY STATE SCHEDULED PAID MATURITY LTM COMMENT / REASON ON WATCH LIST
ID (WHEN TYPE LOAN THRU DATE DSCR
APPROPRIATE) BALANCE DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
List all loans on watch list and reason sorted in decending balance order.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total: $
- ------------------------------------------------------------------------------------------------------------------------------------
*LTM - Last 12 months either trailing or last annual
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX I
Form of OPERATING STATEMENT ANALYSIS REPORT
as of ____________________
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
--------------
LB Control Number
--------------
-------------------------
Current Balance/Paid to Date
-----------------------------------------------------------------------------------------------
Property Name
-----------------------------------------------------------------------------------------------
Property Type
-----------------------------------------------------------------------------------------------
Property Address, City, State
-----------------------------------------------------------------------------------------------
Net Rentable Square Feet
-------------------------
Year Built/Year Renovated
-----------------------------------------------------------------
Year of Operations UNDERWRITING 1994 1995 1996 TRAILING
-----------------------------------------------------------------
Occupancy Rate *
-----------------------------------------------------------------
Average Rental Rate
-----------------------------------------------------------------
* OCCUPANCY RATES ARE YEAR END OR THE ENDING DATE OF THE FINANCIAL STATEMENT FOR THE PERIOD.
INCOME: NO. OF MOS.
--------------
Number of Mos. PRIOR YEAR CURRENT YR.
------------------------------------------------------------------------------------------
Period Ended UNDERWRITING 1994 1995 1996 97 TRAILING** 1996-BASE 1996-1995
--------------
Statement Classification BASE LINE NORMALIZED NORMALIZED NORMALIZED AS OF / /97 VARIANCE VARIANCE
------------------------------------------------------------------------------------------
Rental Income (Category 1)
------------------------------------------------------------------------------------------
Rental Income (Category 2)
------------------------------------------------------------------------------------------
Rental Income (Category 3)
------------------------------------------------------------------------------------------
Pass Through/Escalations
------------------------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $0.00 $0.00 $0.00 $0.00 $0.00 % %
------------------------------------------------------------------------------------------
Normalized - Full year Financial statements that have been reviewed by the underwriter or
Servicer
** Servicer will not be expected to "Normalize" these YTD numbers.
OPERATING EXPENSES:
------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------
Property Insurance
------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------
General & Administration
------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------
Payroll & Benefits Expense
------------------------------------------------------------------------------------------
Advertising & Marketing
------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $0.00 $0.00 $0.00 $0.00 $0.00 % %
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
OPERATING EXPENSE RATIO
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
NET OPERATING INCOME $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------
Replacement Reserve
------------------------------------------------------------------------------------------
TOTAL CAPITAL ITEMS $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
N.O.I. AFTER CAPITAL ITEMS $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
CASH FLOW AFTER DEBT SERVICE $0.00 $0.00 $0.00 $0.00 $0.00
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
(1) DSCR: (NOI/DEBT SERVICE)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
DSCR: (AFTER RESERVES\CAP EXP.)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
SOURCE OF FINANCIAL DATA:
------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS:
===========================================================================================================================
</TABLE>
The years shown above will roll always showing a three year history. 1996 is the
current year financials; 1995 is the prior year financials.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
Rental Income need to be broken down, differently whenever possible for each
property type as follows: Retail: 1) Base Rent 2) Percentage rents on cashflow
Hotel: 1) Room Revenue 2) Food/Beverage Nursing Home: 1) Private 2) Medicaid
3) Medicare
INCOME: COMMENT
EXPENSE: COMMENT
CAPITAL ITEMS: COMMENT
(1) Used in the Comparative Financial Status Report
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Annex J
Form of NOI ADJUSTMENT WORKSHEET for "year"
as of ____________________
<TABLE>
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
-------------
LB Control Number
-------------------------
Current Balance/Paid to Date
--------------------------------------------------------------------------------------------
Property Name
--------------------------------------------------------------------------------------------
Property Type
--------------------------------------------------------------------------------------------
Property Address, City, State
--------------------------------------------------------------------------------------------
Net Rentable Square Feet
-------------------------
Year Built/Year Renovated
--------------------------------------------
Year of Operations BORROWER ADJUSTMENT NORMALIZED
--------------------------------------------
Occupancy Rate *
--------------------------------------------
Average Rental Rate
--------------------------------------------
* OCCUPANCY RATES ARE YEAR END OR THE ENDING
DATE OF THE FINANCIAL STATEMENT FOR THE
PERIOD.
INCOME:
Number of Mos.Annualized "Year"
-------------------------------------------------------------------
Period Ended Borrower Adjustment Normalized
Statement Classification Actual
-------------------------------------------------------------------
Rental Income (Category 1)
-------------------------------------------------------------------
Rental Income (Category 2)
-------------------------------------------------------------------
Rental Income (Category 3)
-------------------------------------------------------------------
Pass Throughs/Escalations
-------------------------------------------------------------------
Other Income
-------------------------------------------------------------------
-------------------------------------------------------------------
EFFECTIVE GROSS INCOME $0.00 $0.00 $0.00
-------------------------------------------------------------------
Normalized - Full year financial statements that have been reviewed
by the underwriter or Servicer
OPERATING EXPENSES:
-------------------------------------------------------------------
Real Estate Taxes
-------------------------------------------------------------------
Property Insurance
-------------------------------------------------------------------
Utilities
-------------------------------------------------------------------
General & Administration
-------------------------------------------------------------------
Repairs and Maintenance
-------------------------------------------------------------------
Management Fees
-------------------------------------------------------------------
Payroll & Benefits Expense
-------------------------------------------------------------------
Advertising & Marketing
-------------------------------------------------------------------
Professional Fees
-------------------------------------------------------------------
Other Expenses
-------------------------------------------------------------------
Ground Rent
-------------------------------------------------------------------
TOTAL OPERATING EXPENSES $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
OPERATING EXPENSE RATIO
-------------------------------------------------------------------
-------------------------------------------------------------------
NET OPERATING INCOME $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
Leasing Commissions
-------------------------------------------------------------------
Tenant Improvements
-------------------------------------------------------------------
Replacement Reserve
-------------------------------------------------------------------
TOTAL CAPITAL ITEMS $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
N.O.I. AFTER CAPITAL ITEMS $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) $0.00 $0.00 $0.00
-------------------------------------------------------------------
CASH FLOW AFTER DEBT SERVICE $0.00 $0.00 $0.00
-------------------------------------------------------------------
-------------------------------------------------------------------
(1)DSCR: (NOI/DEBT SERVICE)
-------------------------------------------------------------------
-------------------------------------------------------------------
DSCR: (AFTER RESERVES\CAP EXP.)
-------------------------------------------------------------------
-------------------------------------------------------------------
SOURCE OF FINANCIAL DATA:
-------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
</TABLE>
NOTES AND ASSUMPTIONS:
================================================================================
This report should be completed by the Servicer for any "Normalization" of the
Borrowers numbers.
The "Normalized" column is used in the Operating Statement Analysis Report.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
(1) Used in the Comparative Financial Status Report
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX K
COMPARATIVE FINANCIAL STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
S4 S57 S58 P7 P8 S72 S69 S70 S65 S66
- ---------------------------------------------------------------------------------------------------------------
ORIGINAL UNDERWRITING
- ---------------------------------------------------------------------------------------------------------------
INFORMATION
- ---------------------------------------------------------------------------------------------------------------
BASIS YEAR
- ---------------------------------------------------------------------------------------------------------------
Last
Property Scheduled Paid Annual Financial
Prospectus Inspect Loan Thru Debt Info as of % Total $ (1)
ID City State Date Balance Date Service Date Occ Revenue NOI DSCR
yy/mm yy/mm
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
List all loans currently in deal with or without information largest to smallest loan
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Total $ $ WA $ $ WA
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
===============================================================================================================
RECEIVED
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION: LOANS BALANCE
- ---------------------------------------------------------------------------------------------------------------
# % $ %
- ---------------------------------------------------------------------------------------------------------------
CURRENT FULL YEAR:
- ---------------------------------------------------------------------------------------------------------------
CURRENT FULL YR. RECEIVED WITH DSC <1:
- ---------------------------------------------------------------------------------------------------------------
PRIOR FULL YEAR:
- ---------------------------------------------------------------------------------------------------------------
PRIOR FULL YR. RECEIVED WITH DSC <1:
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
S4 P65 P64 P59 P61 P63 P58 P57 P52 P54 P56
- ---------------------------------------------------------------------------------------------------------------
2ND PRECEDING ANNUAL OPERATING PRECEDING ANNUAL OPERATING
- ---------------------------------------------------------------------------------------------------------------
INFORMATION INFORMATION
- ---------------------------------------------------------------------------------------------------------------
AS OF ___________ NORMALIZED AS OF ___________ NORMALIZED
- ---------------------------------------------------------------------------------------------------------------
Financial Financial
Prospectus Info as of % Total $ (1) Info as of % Total $ (1)
ID Date Occ Revenue NOI DSCR Date Occ Revenue NOI DSCR
yy/mm yy/mm
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Total WA $ $ WA WA $ $ WA
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
=========================================================================================================================
REQUIRED
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION: LOANS BALANCE
- -------------------------------------------------------------------------------------------------------------------------
# % $ %
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FULL YEAR:
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FULL YR. RECEIVED WITH DSC <1:
- -------------------------------------------------------------------------------------------------------------------------
PRIOR FULL YEAR:
- -------------------------------------------------------------------------------------------------------------------------
PRIOR FULL YR. RECEIVED WITH DSC <1:
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
S4 P72 P73 P66 P68 P70 (2)
- -------------------------------------------------------------------------------
TRAILING FINANCIAL NET CHANGE
- -------------------------------------------------------------------------------
INFORMATION
- -------------------------------------------------------------------------------
MONTH REPORTED ACTUAL PRECEDING & BASIS
- -------------------------------------------------------------------------------
%
Prospectus FS Start FS End Total $ (%) % Total (1)
ID Date Date Revenue NOI DSC Occ Revenue DSC
yy/mm yy/mm
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total WA $ $ WA WA $ WA
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
DEPOSITOR
----------
This Prospectus describes the commercial mortgage pass-through
certificates (the "Offered Certificates") offered hereby and by the supplements
hereto (each, a "Prospectus Supplement"), which will be offered from time to
time in series. The Offered Certificates of each series, together with any other
commercial mortgage pass-through certificates of such series not offered hereby,
are collectively referred to herein as the "Certificates".
In the aggregate, the Certificates of each series of Certificates will
represent the entire beneficial ownership interest in a trust fund (with respect
to any series, the "Trust Fund") consisting primarily of a segregated pool of
one or more of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage-backed securities ("CMBS") that evidence interests
in, or that are secured by pledges of, one or more of various types of
multifamily or commercial mortgage loans or a combination of Mortgage Loans and
CMBS (collectively, "Mortgage Assets"). Mortgage Loans (or mortgage loans
underlying a CMBS) may be secured by first or junior, recourse or non-recourse
liens and may be delinquent or non-performing as of the date Certificates of a
series are issued, if so specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, the Trust Fund for a series of
Certificates may include letters of credit, insurance policies, guarantees,
reserve funds or other types of credit support, or any combination thereof (with
respect to any series, collectively, "Credit Support"), and currency or interest
rate exchange agreements and other financial assets, or any combination thereof
(with respect to any series, collectively, "Cash Flow Agreements"). See
"Description of the Trust Funds", "Description of the Certificates" and
"Description of Credit Support".
(cover continued on next page)
----------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING ON PAGE 18
UNDER THE CAPTION "RISK FACTORS" HEREIN AND UNDER SUCH CAPTION
IN THE RELATED PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY
OFFERED CERTIFICATE.
----------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE RELATED TRUST FUND ONLY AND
WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC. OR ANY AFFILIATE THEREOF, INCLUDING WITHOUT
LIMITATION, FIRST UNION NATIONAL BANK. A CERTIFICATE
IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES
NOR THE UNDERLYING MORTGAGE ASSETS ARE
INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY.
----------
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.
----------
Prior to issuance there will have been no market for the Certificates of
any series and there can be no assurance that a secondary market for any Offered
Certificates will develop or that, if it does develop, it will continue. See
"Risk Factors". This Prospectus may not be used to consummate sales of the
Offered Certificates of any series unless accompanied by the Prospectus
Supplement for such series.
The Offered Certificates of any series may be offered through one or more
different methods such as offerings through underwriters, including First Union
Capital Markets Corp., an affiliate of the Depositor, acting as principals for
their own account or as agents, as more fully described under "Method of
Distribution" herein and in the related Prospectus Supplement.
Each series of Certificates will consist of one or more classes of
Certificates, and such class or classes (including classes of Offered
Certificates) may (i) provide for the accrual of interest thereon based on a
fixed, variable or adjustable rate; (ii) be senior or subordinate to one or more
other classes of Certificates in entitlement to certain distributions on the
Certificates; (iii) be entitled to distributions of principal, with
disproportionately small, nominal or no distributions of interest; (iv) be
entitled to distributions of interest, with disproportionately small, nominal or
no distributions of principal; (v) provide for distributions of principal and/or
interest that commence only following the occurrence of certain events, such as
the retirement of one or more other classes of Certificates of such series; (vi)
provide for distributions of principal to be made, from time to time or for
designated periods, at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on the Mortgage
Assets in the related Trust Fund; or (vii) provide for distributions of
principal to be made, subject to available funds, based on a specified principal
payment schedule or other methodology. See "Description of the Certificates".
OCTOBER 29, 1997
<PAGE>
(cover continued)
Distributions in respect of the Certificates will be made on a monthly,
quarterly or other periodic basis as specified in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
such distributions will be made only from the assets of the related Trust Fund.
This Prospectus and related Prospectus Supplements may be used by the
Depositor, First Union Capital Markets Corp., an affiliate of the Depositor, and
any other affiliate of the Depositor when required under the federal securities
laws in connection with offers and sales of Offered Certificates in furtherance
of market-making activities in Offered Certificates. First Union Capital Markets
Corp. or any such other affiliate may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale or otherwise.
No Certificates of any series will represent an obligation of or interest
in the Depositor or any of its affiliates, except to the limited extent
described herein and in the related Prospectus Supplement. Neither the
Certificates of any series nor the assets in the related Trust Fund will be
guaranteed or insured by any governmental agency or instrumentality or by any
other person, unless otherwise provided in the related Prospectus Supplement.
The assets in each Trust Fund will be held in trust for the benefit of the
holders of the related series of Certificates (the "Certificateholders")
pursuant to a Pooling Agreement, as more fully described herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchases and defaults) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such paymentsas described herein and in the related
Prospectus Supplement. See "Yield and Maturity Considerations". A Trust Fund may
be subjectto early termination under the circumstances described herein and in
the related Prospectus Supplement. See "Description ofthe Certificates".
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
"real estate mortgage investment conduit" (a "REMIC") for federal income tax
purposes. See "Certain Federal Income Tax Consequences" herein.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
2
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, each Prospectus Supplement will,
among other things, set forth, as and to the extent appropriate: (i) a
description of the class or classes of Offered Certificates of the related
series, including the aggregate principal amount of each such class (the
"Certificate Balance"), the rate at which interest will accrue from time to
time, if at all, with respect to each such class (the "Pass-Through Rate") or
the method of determining such rate; (ii) information with respect to any other
classes of Certificates of the same series not offered thereby; (iii) the
respective dates on which distributions are to be made to Certificateholders;
(iv) information as to the assets constituting the related Trust Fund, including
the general characteristics of the assets included therein, including the
Mortgage Assets and any Credit Support and Cash Flow Agreements (with respect to
the Certificates of any series, the "Trust Assets"); (v) the circumstances, if
any, under which the related Trust Fund may be subject to early termination;
(vi) additional information with respect to the method of distribution of such
Offered Certificates;(vii) whether one or more REMIC elections will be made, and
the designation of the "regular interests" and "residual interests" in each
REMIC to be created; (viii) the initial percentage ownership interest in the
related Trust Fund to be evidenced by each class of Certificates of such series;
(ix) information concerning the trustee (as to any series, the "Trustee") of the
related Trust Fund; (x) information concerning the master servicer (as to any
series, the "Master Servicer") and any special servicer (as to any series, the
"Special Servicer") engaged to administer the related Mortgage Assets; (xi)
information as to the nature and extent of any subordination in entitlement to
distributions of any class of Certificates of such series; and (xii) whether
such Offered Certificates will be initially issued in definitive or book-entry
form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Offered Certificates. This Prospectus and the Prospectus
Supplement relating to the Offered Certificates of each series contain summaries
of the material terms of the documents referred to herein and therein, but do
not contain all of the information set forth in the Registration Statement
pursuant to the rules and regulations of the Commission. For further
information, reference is made to such Registration Statement and the exhibits
thereto. Such Registration Statement and exhibits can be inspected and copied at
prescribed rates at the public reference facilities maintained by the Commission
at its Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its Regional Offices located as follows: Chicago Regional Office,
Northwest Atrium Center, 500 West Madison Street, 14th Floor, Chicago, Illinois
60661; and New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048. The Commission also maintains a Web site that contains
reports, proxy and information statements, and other information regarding
registrants that file electronically with the Commission. The site may be
accessed at http:/www.sec.gov.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and any related Prospectus
Supplement and, if given or made, such information or representation must not be
relied upon. This Prospectus and any related Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Offered Certificates, or an offer of the Offered Certificates to
any person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date; however, if
any material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
The related Master Servicer or Trustee will be required to mail to holders
of the Offered Certificates of each series periodic unaudited reports concerning
the related Trust Fund. If beneficial interests in a class of Offered
Certificates are being held and transferred in book-entry format through the
facilities of The Depository Trust Company ("DTC") as described herein, then,
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to a nominee of DTC as the
registered holder of the Offered Certificates. The means by which notices and
other communications are conveyed by DTC to its participating organizations, and
directly or indirectly through such participating organizations to the
beneficial owners of the applicable Offered Certificates, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. See "Description of the
Certificates--Reports to
3
<PAGE>
Certificateholders" and "--Book-Entry Registration and Definitive Certificates"
and "Description of the Pooling Agreements--Evidence as to Compliance". The
Depositor will file or cause to be filed with the Commission such periodic
reports with respect to each Trust Fund as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
To the extent described in the related Prospectus Supplement, some or all
of the Mortgage Loans may be secured by an assignment of the lessors' (i.e., the
related Mortgagors') rights in one or more bond-type or credit-type net leases
(each, a "Lease") of the related Mortgaged Property. Unless otherwise specified
in the related Prospectus Supplement, no series of Certificates will represent
interests in or obligations of any lessee (each, a "Lessee") under a Lease. If
indicated, however, in the Prospectus Supplement for a given series, a
significant or the sole source of payments on the Mortgage Loans in such series,
and, therefore, of distributions on such Certificates, will be rental payments
due from the Lessees under the Leases. Under such circumstances, prospective
investors in the related series of Certificates may wish to consider publicly
available information, if any, concerning the Lessees. Reference should be made
to the related Prospectus Supplement for information concerning the Lessees and
whether any such Lessees are subject to the periodic reporting requirements of
the Exchange Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor, upon request, 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 Offered Certificates, a copy of any or all documents
or reports incorporated herein by reference, in each case to the extent such
documents or reports relate to one or more of such Offered Certificates, other
than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Depositor should
be directed in writing to its principal executive office at One First Union
Center, Charlotte, North Carolina 28228-0013, Attention: Secretary, or by
telephone at 704-374-6161. The Depositor has determined that its financial
statements will not be material to the offering of any Offered Certificates.
4
<PAGE>
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT .................................................... 3
AVAILABLE INFORMATION .................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ........................ 4
SUMMARY OF PROSPECTUS .................................................... 9
RISK FACTORS ............................................................. 18
Limited Liquidity ....................................................... 18
Limited Assets .......................................................... 18
Prepayments; Average Life of Certificates; Yields ....................... 18
Limited Nature of Ratings ............................................... 19
Risks Associated with Mortgage Loans and Mortgaged Properties ........... 20
Risks Associated with Certain Mortgage Loans and Related Leases ......... 21
Balloon Payments; Borrower Default ...................................... 21
Junior Mortgage Loans ................................................... 22
Credit Support Limitations .............................................. 22
Enforceability .......................................................... 22
Leases and Rents ........................................................ 23
Environmental Risks ..................................................... 23
ERISA Considerations .................................................... 23
Certain Federal Tax Considerations Regarding REMIC Residual
Certificates ........................................................... 23
Book-Entry Registration ................................................. 24
Delinquent and Non-Performing Mortgage Loans ............................ 24
DESCRIPTION OF THE TRUST FUNDS ........................................... 24
General ................................................................. 24
Mortgage Loans-Leases ................................................... 25
General ................................................................ 25
Leases ................................................................. 25
Default and Loss Considerations with Respect to the Mortgage Loans ..... 26
Payment Provisions of the Mortgage Loans ............................... 27
Mortgage Loan Information in Prospectus Supplements .................... 28
CMBS .................................................................... 28
Certificate Accounts .................................................... 29
Credit Support .......................................................... 29
Cash Flow Agreements .................................................... 29
YIELD AND MATURITY CONSIDERATIONS ........................................ 30
General ................................................................. 30
Pass-Through Rate ....................................................... 30
Payment Delays .......................................................... 30
Certain Shortfalls in Collections of Interest ........................... 30
Yield and Prepayment Considerations ..................................... 30
Weighted Average Life and Maturity ...................................... 32
Controlled Amortization Classes and Companion Classes ................... 32
Other Factors Affecting Yield, Weighted Average Life and Maturity ....... 33
Balloon Payments; Extensions of Maturity ............................... 33
Negative Amortization .................................................. 33
Foreclosures and Payment Plans ......................................... 34
Losses and Shortfalls on the Mortgage Assets ........................... 34
Additional Certificate Amortization .................................... 34
5
<PAGE>
PAGE
----
THE DEPOSITOR ............................................................ 34
USE OF PROCEEDS .......................................................... 34
DESCRIPTION OF THE CERTIFICATES .......................................... 35
General ................................................................. 35
Distributions ........................................................... 35
Distributions of Interest on the Certificates ........................... 36
Distributions of Certificate Principal .................................. 37
Distributions on the Certificates in Respect of Prepayment
Premiums or in Respect of Equity Participations ........................ 37
Allocation of Losses and Shortfalls ..................................... 37
Advances in Respect of Delinquencies .................................... 37
Reports to Certificateholders ........................................... 38
Voting Rights ........................................................... 40
Termination ............................................................. 40
Book-Entry Registration and Definitive Certificates ..................... 41
DESCRIPTION OF THE POOLING AGREEMENTS .................................... 42
General ................................................................. 42
Assignment of Mortgage Assets; Repurchases .............................. 42
Representations and Warranties; Repurchases ............................. 43
Certificate Account ..................................................... 44
General ................................................................ 44
Deposits ............................................................... 44
Withdrawals ............................................................ 45
Collection and Other Servicing Procedures ............................... 46
Modifications, Waivers and Amendments of Mortgage Loans ................. 47
Sub-Servicers ........................................................... 47
Special Servicers ....................................................... 47
Realization Upon Defaulted Mortgage Loans ............................... 47
Hazard Insurance Policies ............................................... 49
Due-on-Sale and Due-on-Encumbrance Provisions ........................... 50
Servicing Compensation and Payment of Expenses .......................... 50
Evidence as to Compliance ............................................... 50
Certain Matters Regarding the Master Servicer and the Depositor ......... 51
Events of Default ....................................................... 52
Rights Upon Event of Default ............................................ 52
Amendment ............................................................... 52
List of Certificateholders .............................................. 53
The Trustee ............................................................. 53
Duties of the Trustee ................................................... 53
Certain Matters Regarding the Trustee ................................... 53
Resignation and Removal of the Trustee .................................. 54
DESCRIPTION OF CREDIT SUPPORT ............................................ 54
General ................................................................. 54
Subordinate Certificates ................................................ 55
Cross-Support Provisions ................................................ 55
Insurance or Guarantees with Respect to Mortgage Loans .................. 55
Letter of Credit ........................................................ 55
Certificate Insurance and Surety Bonds .................................. 55
Reserve Funds ........................................................... 55
Credit Support with Respect to CMBS ..................................... 56
6
<PAGE>
PAGE
----
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES ....................... 56
General ................................................................. 56
Types of Mortgage Instruments ........................................... 57
Leases and Rents ........................................................ 57
Personalty .............................................................. 57
Cooperative Loans ....................................................... 57
Junior Mortgages; Rights of Senior Lenders .............................. 58
Foreclosure ............................................................. 59
General ................................................................ 59
Judicial Foreclosure ................................................... 60
Non-Judicial Foreclosure/Power of Sale ................................. 60
Equitable Limitations on Enforceability of Certain Provisions .......... 60
Public Sale ............................................................ 60
Rights of Redemption ................................................... 61
Anti-Deficiency Legislation ............................................ 61
Leasehold Risks ........................................................ 62
Regulated Healthcare Facilities ........................................ 62
Cross-Collateralization ................................................ 62
Cooperative Loans ...................................................... 62
Bankruptcy Laws ......................................................... 63
Environmental Considerations ............................................ 64
General ................................................................ 64
Superlien Laws ......................................................... 64
CERCLA ................................................................. 64
Certain Other State Laws ............................................... 65
Additional Considerations .............................................. 65
Due-on-Sale and Due-on-Encumbrance ...................................... 65
Subordinate Financing ................................................... 65
Default Interest and Limitations on Prepayments ......................... 66
Applicability of Usury Laws ............................................. 66
Soldiers' and Sailors' Civil Relief Act of 1940 ......................... 66
Americans with Disabilities Act ......................................... 67
Forfeitures in Drug and RICO Proceedings ................................ 67
CERTAIN FEDERAL INCOME TAX CONSEQUENCES .................................. 67
General ................................................................. 67
REMICs .................................................................. 68
Classification of REMICs ............................................... 68
Characterization of Investments in REMIC Certificates .................. 68
Tiered REMIC Structures ................................................ 69
Taxation of Owners of REMIC Regular Certificates ........................ 69
General ................................................................ 69
Original Issue Discount ................................................ 69
Market Discount ........................................................ 71
Premium ................................................................ 72
Realized Losses ........................................................ 72
Taxation of Owners of REMIC Residual Certificates ....................... 72
General ................................................................ 72
Taxable Income of the REMIC ............................................ 73
Basis Rules, Net Losses and Distributions .............................. 74
Excess Inclusions ...................................................... 75
Noneconomic REMIC Residual Certificates ................................ 76
Mark-to-Market Rules ................................................... 77
7
<PAGE>
PAGE
----
Possible Pass-Through of Miscellaneous Itemized Deductions ............. 77
Sales of REMIC Certificates ............................................ 77
Prohibited Transactions Tax and Other Taxes ............................ 78
Tax and Restrictions on Transfers of REMIC Residual
Certificates to Certain Organizations ................................ 79
Termination ............................................................ 79
Reporting and Other Administrative Matters ............................. 80
Backup Withholding with Respect to REMIC Certificates .................. 80
Foreign Investors in REMIC Certificates ................................ 81
Grantor Trust Funds ..................................................... 81
Classification of Grantor Trust Funds .................................. 81
Characterization of Investments in Grantor Trust Certificates ........... 81
Grantor Trust Fractional Interest Certificates ......................... 81
Grantor Trust Strip Certificates ....................................... 82
Taxation of Owners of Grantor Trust Fractional Interest Certificates .... 82
General ................................................................ 82
If Stripped Bond Rules Apply ........................................... 82
If Stripped Bond Rules Do Not Apply .................................... 84
Market Discount ........................................................ 85
Premium ................................................................ 86
Taxation of Owners of Grantor Trust Strip Certificates ................. 87
Possible Application of Contingent Payment Rules ....................... 88
Sales of Grantor Trust Certificates .................................... 88
Grantor Trust Reporting ................................................ 88
Backup Withholding ..................................................... 89
Foreign Investor ....................................................... 89
STATE AND OTHER TAX CONSEQUENCES ......................................... 89
ERISA CONSIDERATIONS ..................................................... 89
General ................................................................. 89
Plan Asset Regulations ................................................. 90
Prohibited Transaction Exemptions ....................................... 90
LEGAL INVESTMENT ......................................................... 92
METHOD OF DISTRIBUTION ................................................... 94
LEGAL MATTERS ............................................................ 94
FINANCIAL INFORMATION .................................................... 95
RATING ................................................................... 95
INDEX OF PRINCIPAL DEFINITIONS ........................................... 96
8
<PAGE>
- --------------------------------------------------------------------------------
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 withthe offering of Offered Certificates of such series.
An Index of Principal Definitions is included at the end ofthis Prospectus.
Title of Certificates ...... Commercial Mortgage Pass-Through Certificates,
issuable in series (the "Certificates").
Depositor .................. First Union Commercial Mortgage Securities, Inc.,
a wholly-owned subsidiary of First Union
National Bank. See "The Depositor".
Master Servicer ............ The master servicer (the "Master Servicer"), if
any, for a series of Certificates will be named
in the related Prospectus Supplement and maybe
an affiliate of the Depositor. See "Description
of the PoolingAgreements--Collection and Other
Servicing Procedures".
Special Servicer ........... The special servicer (the "Special Servicer"), if
any, for a series of Certificates will be named,
or the circumstances under which a Special
Servicer will be appointed will be described, in
the related Prospectus Supplement. See
"Description of the Pooling
Agreements--SpecialServicers".
Trustee .................... The trustee (the "Trustee") for each series of
Certificates will be named in the related
Prospectus Supplement. See "Description of the
Pooling Agreements--The Trustee".
The Trust Assets ........... Each series of Certificates will represent in the
aggregate the entire beneficial ownership
interest in a Trust Fund consisting primarily
of:
A. Mortgage Assets ...... The Mortgage Assets with respect to each series of
Certificates will, in general, consist of a pool
of mortgage loans (collectively, the "Mortgage
Loans") secured by first or junior liens on, or
security interests in, or installment contracts
for the sale of, fee simple or leasehold
interests in, (i) residential properties
consisting of five or more rental or
cooperatively owned dwelling units ("Multifamily
Properties") or (ii) office buildings, shopping
centers, retail stores, hotels or motels,
nursing homes, hospitals or other health-care
related facilities, mobile home parks, warehouse
facilities, mini-warehouse facilities or
self-storage facilities, industrial plants,
mixed use or other types of income-producing
properties or unimproved land ("Commercial
Properties"), (iii) CMBS or (iv) participations
in, or any combination of, the foregoing. If so
specified in the related Prospectus Supplement
and if permitted by applicable law, a Trust Fund
may include (i) Multifamily Properties or
Commercial Properties acquired by foreclosure or
by deed-in-lieu of foreclosure ("REO Property")
and (ii) Mortgage Loans secured by liens on real
estate projects under construction. If so
specified in the related Prospectus Supplement,
some Mortgage Loans may be delinquent or
non-performing as of the date of their deposit
into the related Trust Fund. The Mortgage Loans
will not be guaranteed or insured by the
Depositor, any of its affiliates or, unless
otherwise specified in the Prospectus
Supplement, by any governmental agency or
instrumentality or any other person.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
To the extent described in the related Prospectus
Supplement, some or all of the Mortgage Loans
may also be secured by an assignment of one or
more leases (a "Lease Assignment"), including
bond-type or credit-type net leases (each, a
"Lease") of one or more lessees (each, a
"Lessee") of all or a portion of the related
Mortgaged Properties (as defined herein). Unless
otherwise specified in the related Prospectus
Supplement, a significant or the sole source of
payments on certain Mortgage Loans will be the
rental payments due under the related Leases. In
certain circumstances, with respect to
Commercial Properties, the material terms and
conditions of the related Leases may be set
forth in the related Prospectus Supplement. See
"Description of the Trust Funds--Mortgage
Loans--Leases" and "Risk Factors--Limited
Assets" herein.
Unless otherwise provided in the related
Prospectus Supplement, the Mortgaged Properties
may be located in any one of the 50 states, the
District of Columbia or the Commonwealth of
Puerto Rico. Unless otherwise provided in the
related Prospectus Supplement, all Mortgage
Loans will have individual principal balances at
origination of not less than $100,000 and
original terms to maturity of not more than 40
years.
As and to the extent described in the related
Prospectus Supplement, a Mortgage Loan (i) may
provide for no accrual of interest or for
accrual of interest thereon at an interest rate
(a "Mortgage Rate") that is fixed over its term
or that adjusts from time to time, or that may
be converted at the borrower's election from an
adjustable to a fixed Mortgage Rate, or from a
fixed to an adjustable Mortgage Rate, (ii) may
provide for the formula, index or other method
by which the Mortgage Rate will be calculated,
(iii) may provide for level payments to maturity
or for payments that adjust from time to time to
accommodate changes in the Mortgage Rate or to
reflect the occurrence of certain events, and
may permit negative amortization or accelerated
amortization, (iv) may be fully amortizing over
its term to maturity, or may provide for little
or no amortization over its term and thus
require a balloon payment on its stated maturity
date, (v) may contain a prohibition on
prepayment or require payment of a premium or a
yield maintenance penalty in connection with a
prepayment and (vi) may provide for payments of
principal, interest or both, on due dates that
occur monthly or quarterly or at such other
interval as is specified in the related
Prospectus Supplement. See "Description of the
Trust Funds--Mortgage Loans--Leases".
If and to the extent specified in the related
Prospectus Supplement, the Mortgage Assets that
constitute a particular Trust Fund may also
include or consist solely of (i) private
mortgage participations, mortgage pass-through
certificates or other mortgage-backed securities
or (ii) certificates insured or guaranteed by
the Federal Home Loan Mortgage Corporation
("FHLMC"), the Federal National Mortgage
Association ("FNMA"), the Governmental National
Mortgage Association ("GNMA") or the Federal
Agricultural Mortgage Corporation ("FAMC")
(collectively, the mortgage-backed securities
referred to in clauses (i) and (ii), "CMBS"),
provided that each CMBS will evidence an
interest in, or will be secured by a pledge of,
one or more mortgage loans that conform to the
descriptions of the Mortgage Loans contained
herein. See "Description of the Trust
Funds--CMBS".
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
Each Mortgage Asset will be selected by the
Depositor for inclu-sion in a Trust Fund from
among those purchased, either directly or
indirectly, from a prior holder thereof (a
"Mortgage Asset Seller"), which prior holder may
or may not be the originator of such Mortgage
Loan or the issuer of such CMBS and may be an
affiliate of theDepositor, all as more
particularly described in the related Prospectus
Supplement.
B. Certificate Account .. Each Trust Fund will include one or more accounts
(collectively, the"Certificate Account")
established and maintained on behalf of the
Certificateholders into which the person or
persons designated in the related Prospectus
Supplement will, to the extent described herein
and in such Prospectus Supplement, deposit all
payments and collections received or advanced
with respect to the Mortgage Assets and other
assets in the Trust Fund. A Certificate Account
may be maintained as an interest bearing or a
non-interest bearing account, and funds held
therein may be held as cash or invested in
certain short-term, investment grade
obligations, in each case as described in the
related Prospectus Supplement. See "Description
of the Trust Funds--Certificate Accounts" and
"Description of the Pooling
Agreements--Certificate Account".
C. Credit Support ....... If so provided in the related Prospectus
Supplement, partial or full protection against
certain defaults and losses on the Mortgage
Assets in the related Trust Fund may be provided
to one or more classes of Certificates of the
related series in the form of subordination of
one or more other classes of Certificates of
such series, which other classes may include one
or more classes of Offered Certificates, or by
one or more other types of credit support, such
as overcollateralization, a letter of credit,
insurance policy, guarantee, reserve fund or
another type of credit support, or a combination
thereof (any such coverage with respect to the
Certificates of any series, "Credit Support").
The amount and types of any Credit Support, the
identification of the entity providing it (if
applicable) and related information will be set
forth in the related Prospectus Supplement. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a Trust
Fund that includes CMBS will describe in the
same fashion any similar forms of credit support
that are provided by or with respect to, or are
included as part of the trust fund evidenced by
or providing security for, such CMBS to the
extent information is available and deemed
material. The type, characteristic and amount of
Credit Support will be determined based on the
characteristics of the Mortgage Assets and other
factors and will be established, in part, on the
basis of requirements of each Rating Agency
rating the Certificates of such series. If so
specified in the related Prospectus Supplement,
any such Credit Support may apply only in the
event of certain types of losses or
delinquencies and the protection against losses
or delinquencies provided by such Credit Support
will be limited. See "Risk Factors--Credit
Support Limitations", "Description of the Trust
Funds--Credit Support" and "Description of
Credit Support".
D. Cash Flow Agreements . If so provided in the related Prospectus
Supplement, a Trust Fund may include guaranteed
investment contracts pursuant to which moneys
held in the funds and accounts established for
the related series will be invested at a
specified rate. The Trust Fund may also include
certain
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
other agreements, such as interest rate exchange
agreements, interest rate cap or floor
agreements, currency exchange agreements or
similar agreements designed to reduce the
effects of interest rate or currency exchange
rate fluctuations on the Mortgage Assets or on
one or more classes of Certificates. The
principal terms of any such guaranteed
investment contract or other agreement (any such
agreement, a "Cash Flow Agreement"), including,
without limitation, provisions relating to the
timing, manner and amount of payments thereunder
and provisions relating to the termination
thereof, will be described in the Prospectus
Supplement for the related series. In addition,
the related Prospectus Supplement will contain
certain information that pertains to the obligor
under any such Cash Flow Agreement. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a Trust
Fund that includes CMBS will describe in the
same fashion any Cash Flow Agreements that are
included as part of the trust fund evidenced by
or providing security for such CMBS to the
extent information is available and deemed
material. See "Description of the Trust
Funds--Cash Flow Agreements".
Description of Certificates Each series of Certificates will be issued
pursuant to a pooling and servicing agreement or
other agreement specified in the related
Prospectus Supplement (in either case, a
"Pooling Agreement") and will represent in the
aggregate the entire beneficial ownership
interest in the related Trust Fund.
Each series of Certificates may consist of one or
more classes of Certificates, and such class or
classes (including classes of Offered
Certificates) may (i) be senior (collectively,
"Senior Certificates") or subordinate
(collectively, "Subordinate Certificates") to
one or more other classes of Certificates in
entitlement to certain distributions on the
Certificates; (ii) be entitled to distributions
of principal, with disproportionately small,
nominal or no distributions of interest
(collectively, "Stripped Principal
Certificates"); (iii) be entitled to
distributions of interest, with
disproportionately small, nominal or no
distributions of principal (collectively,
"Stripped Interest Certificates"); (iv) provide
for distributions of principal and/or interest
that commence only after the occurrence of
certain events, such as the retirement of one or
more other classes of Certificates of such
series; (v) provide for distributions of
principal to be made, from time to time, or for
designated periods, at a rate that is faster
(and, in some cases, substantially faster) or
slower (and, in some cases, substantially
slower) than the rate at which payments or other
collections of principal are received on the
Mortgage Assets in the related Trust Fund; (vi)
provide for distributions of principal to be
made, subject to available funds, based on a
specified principal payment schedule or other
methodology; and/or (vii) provide for
distributions based on a combination of two or
more components thereof with one or more of the
characteristics described in this paragraph,
including a Stripped Principal Certificate
component and a Stripped Interest Certificate
component, to the extent of available funds, in
each case as described in the related Prospectus
Supplement. Any such classes may include classes
of Offered Certificates. With respect to
Certificates with two or more
components,references herein to Certificate
Balance, notional amount and
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
Pass-Through Rate refer to the principal
balance, if any, notional amount, if any, and
the Pass-Through Rate, if any, for any
suchcomponent.
Each class of Certificates, other than certain
classes of Stripped Interest Certificates and
certain REMIC Residual Certificates (as defined
below), will have a stated principal amount (a
"Certificate Balance"), and each class of
Certificates, other than certain classes of
Stripped Principal Certificates and certain
REMIC Residual Certificates, will accrue
interest on its Certificate Balance or, in the
case of certain classes of Stripped Interest
Certificates, on a notional amount ("Notional
Amount"), based on a fixed, variable or
adjustable interest rate (a "Pass-Through
Rate"). The related Prospectus Supplement will
specify the Certificate Balance, Notional Amount
and Pass-Through Rate for each class of Offered
Certificates, as applicable, or, in the case of
a variable or adjustable Pass-Through Rate, the
method fordetermining the Pass-Through Rate.
The Certificates will not be guaranteed or insured
by the Depositor or any of its affiliates, by
any governmental agency or instrumentality or by
any other person, unless otherwise provided in
the related Prospectus Supplement. See "Risk
Factors--Limited Assets" and "Description of the
Certificates".
Distributions of Interest
on the Certificates ...... Interest on each class of Offered Certificates
Certificates (other than certain classes of
Stripped Principal Certificates and Stripped
Interest Certificates and certain REMIC Residual
Certificates) of each series will accrue at the
applicable Pass-Through Rate on the Certificate
Balance or, in the case of certain classes of
Stripped Interest Certificates, the Notional
Amount thereof outstanding from time to time and
will be distributed to Certificateholders as
provided in the related Prospectus Supplement
(each of the specified dates on which
distributions are to be made, a "Distribution
Date"). Distributions of interest with respect
to one or more classes of Certificates
(collectively, "Accrual Certificates") may not
commence until the occurrence of certain events,
such as the retirement of one or more other
classes of Certificates, and interest accrued
with respect to a class of Accrual Certificates
prior to the occurrence of such an event will
either be added to the Certificate Balance
thereof or otherwise deferred. Distributions of
interest with respect to one or more classes of
Certificates may be reduced to the extent of
certain delinquencies, losses and other
contingencies described herein and in the
related Prospectus Supplement. See "Risk
Factors--Prepayments; Average Life of
Certificates; Yields", "Yield and Maturity
Considerations", and "Description of the
Certificates--Distributions of Interest on the
Certificates".
Distributions of Certificate
Principal ................ Each class of the Certificates of each series
(other than certain classes of Stripped Interest
Certificates and/or REMIC Residual Certificates)
will have a Certificate Balance which, as of any
date, will represent the maximum amount that the
holders thereof are then entitled to receive in
respect of principal from future cash flow on
the Mortgage Assets in the related Trust Fund.
Unless otherwise specified in the related
Prospectus Supplement, the initial aggregate
Certificate Balance of all
- --------------------------------------------------------------------------------
13
<PAGE>
- --------------------------------------------------------------------------------
classes of a series of Certificates will not
exceed the outstanding principal balance of the
related Mortgage Assets as of a specified date
(the "Cut-off Date"), after application of
scheduled payments due on or before such date,
whether or not received. As and to the extent
described in the related Prospectus Supplement,
distributions of principal with respect to each
series of Certificates will be made on each
Distribution Date to the holders of the class or
classes of Certificates of such series entitled
thereto until the Certificate Balances of such
Certificates have been reduced to zero.
Distributions of principal with respect to one
or more classes of Certificates (i) may be made
at a rate that is faster (and, in some cases,
substantially faster) than the rate at which
payments or other collections of principal are
received on the Mortgage Assets in the related
Trust Fund; (ii) may not commence until the
occurrence of certain events, such as the
retirement of one or more other classes of
Certificates of the same series, or may be made
at a rate that is slower (and, in some cases,
substantially slower) than the rate at which
payments or other collections of principal are
received on the Mortgage Assets in the related
Trust Fund; (iii) may be made, subject to
available funds, based on a specified principal
payment schedule for any such class, a
"Controlled Amortization Class"); and (iv) may
be contingent on the specified principal payment
schedule for a Controlled Amortization Class of
the same series and the rate at which payments
and other collections of principal on the
Mortgage Assets in the related Trust Fund are
received (any such class, a "Companion Class").
Unless otherwise specified in the related
Prospectus Supplement, distributions of
principal of any class of Certificates will be
made on a pro rata basis among all of the
Certificates of such class. See "Description of
the Certificates--Distributions of
Certificate Principal".
Advances ................... If and to the extent provided in the related
Prospectus Supplement, the Master Servicer
and/or another specified person will be
obligated to make, or have the option of making,
certain advances with respect to delinquent
scheduled payments of principal and/or interest
on the Mortgage Loans in the related Trust Fund.
Any such advances made with respect to a
particular Mortgage Loan will be reimbursable
from subsequent recoveries in respect of such
Mortgage Loan and otherwise to the extent
described herein and in the related Prospectus
Supplement. If and to the extent provided in the
Prospectus Supplement for a series of
Certificates, the Master Servicer or other
specified person will be entitled to receive
interest on its advances for the period that
they are outstanding, payable from amounts in
the related Trust Fund. See "Description of the
Certificates--Advances in Respect of
Delinquencies". If a Trust Fund includes CMBS,
any comparable advancing obligation of a party
to the related Pooling Agreement, or of a
party to the related CMBS Agreement, will be
described in the related Prospectus Supplement.
Termination ................ If so specified in the related Prospectus
Supplement, a series of Certificates will be
subject to optional early termination by means
of the repurchase of the Mortgage Assets in the
related Trust Fund by the party or parties
specified therein, under the circumstances and
in the manner set forth therein. If so provided
in the related Prospectus Sup-
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
plement, upon the reduction of the Certificate
Balance of a specified class or classes of
Certificates by a specified percentage or
amount, a party specified therein may be
authorized or required to solicit bids for the
purchase of all of the Mortgage Assets of the
Trust Fund, or of a sufficient portion of such
Mortgage Assets to retire such class or classes,
under the circumstances and in the manner set
forth therein. Further, if so provided in the
related Prospectus Supplement, certain classes
of Certificates may be purchased by a party or
parties specified therein under similar or other
conditions as described therein. See
"Description of the Certificates--Termination".
Registration of Book-Entry
Certificates ............. If so provided in the related Prospectus
Supplement, one or more classes of the Offered
Certificates of any series will be offered in
book-entry format (collectively, "Book-Entry
Certificates") through the facilities of DTC.
Each class of Book-Entry Certificates will be
initially represented by one or more
Certificates registered in the name of a nominee
of DTC. No person acquiring an interest in a
class of Book-Entry Certificates (a "Certificate
Owner") will be entitled to receive a
Certificate of such class in fully registered,
definitive form (a "Definitive Certificate"),
except under the limited circumstances described
herein. See "Risk Factors--Book-Entry
Registration" and "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates".
Tax Status of the
Certificates ............. The Certificates of each series will constitute
either (i) "regular interests" ("REMIC Regular
Certificates") and "residual interests" ("REMIC
Residual Certificates") in a Trust Fund, or a
designated portion thereof, treated as a REMIC
under Sections 860A through 860G of the Internal
Revenue Code of 1986 (the "Code"), or (ii)
interests ("Grantor Trust Certificates") in a
Trust Fund treated as a grantor trust under
applicable provisions of the Code.
A. REMIC ................ REMIC Regular Certificates generally will be
treated as debt obligations of the applicable
REMIC for federal income tax purposes. In
general, to the extent the assets and income of
the REMIC are treated as qualifying assets and
income under the following sections of the Code,
REMIC Regular Certificates owned by a real
estate investment trust will be treated as "real
estate assets" for purposes of Section
856(c)(5)(A) of the Code and interest income
therefrom will be treated as "interest on
obligations secured by mortgages on real
property" for purposes of Section 856(c)(3)(B)
of the Code. In addition, REMIC Regular
Certificates will be "qualified mortgages"
within the meaning of Section 860G(a)(3) of the
Code. Moreover, if 95% or more of the assets and
the income of the REMIC qualify for any of the
foregoing treatments, the REMIC Regular
Certificates will qualify for the foregoing
treatments in their entirety. However, REMIC
Regular Certificates owned by a thrift
institution will constitute assets described in
Section 7701(a)(19)(C) of the Code only if so
specified in the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, certain of the REMIC Regular
Certificates may be issuedwith original issue
discount. See "Certain Federal Income
TaxConsequences--REMICs--Taxation of Owners of
REMIC Regular Certificates".
- --------------------------------------------------------------------------------
15
<PAGE>
- --------------------------------------------------------------------------------
REMIC Residual Certificates generally will be
treated as representing an interest in
qualifying assets and income to the same extent
described above for institutions subject to
Sections 856(c)(5)(A) and 856(c)(3)(B) of the
Code, but not for purposes of Section
7701(a)(19)(C) of the Code unless otherwise
stated in the related Prospectus Supplement. A
portion (or, in certain cases, all) of the
income from REMIC Residual Certificates (i) may
not be offset by any losses from other
activities of the holder of such REMIC Residual
Certificates, (ii) may be treated as unrelated
business taxable income for holders of REMIC
Residual Certificates that are subject to tax on
unrelated business taxable income (as defined in
Section 511 of the Code), and (iii) may be
subject to foreign withholding rules. See
"Certain Federal Income Tax
Consequences--REMICs--Taxation of Owners of
REMIC Residual Certificates".
B. Grantor Trust ........ Unless otherwise provided in the related
Prospectus Supplement, Grantor Trust
Certificates may be either Certificates that
have a Certificate Balance and a Pass-Through
Rate or that are Stripped Principal Certificates
(collectively, "Grantor Trust Fractional
Interest Certificates"), or may be Stripped
Interest Certificates. Holders of Grantor Trust
Fractional Interest Certificates generally will
be treated as owning an interest in qualifying
assets and income under Sections 856(c)(5)(A),
856(c)(3)(B) and 860G(a)(3) of the Code, but
will not be so treated for purposes of Section
7701(a)(19)(C) of the Code unless otherwise
stated in the related Prospectus Supplement.
It is unclear whether Stripped Interest
Certificates will be treated as representing an
ownership interest in qualifying assets and
income under Sections 856(c)(5)(A) and
856(c)(3)(B) of the Code, although the policy
considerations underlying those Sections suggest
that such treatment should be available.
However, such Certificates will not be treated
as representing an ownership interest in assets
described in Section 7701(a)(19)(C) of the Code
unless otherwise stated in the related
Prospectus Supplement. The taxation of holders
of Stripped Interest Certificates is uncertain
in various respects, including in particular the
method such holders should use to recover their
purchase price and to report their income with
respect to such Stripped Interest Certificates.
See "Certain Federal Income Tax
Consequences--Grantor Trust Funds".
Investors are advised to consult their tax
advisors with respect to the taxation of holders
of Stripped Interest Certificates and to review
"Certain Federal Income Tax Consequences" herein
and in the relatedProspectus Supplement.
ERISA Considerations ....... Fiduciaries of employee benefit plans and certain
other retirement plans and arrangements,
including individual retirement accounts,
annuities, Keogh plans, and collective
investment funds and separate accounts in which
such plans, accounts, annuities or arrangements
are invested, that are subject to the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), or Section 4975 of the Code,
should carefully review with their legal
advisors whether the purchase or holding of
Offered Certificates could give rise to a
transaction that is prohibited or is not
otherwise permissible either under ERISA or
Section
- --------------------------------------------------------------------------------
16
<PAGE>
- --------------------------------------------------------------------------------
4975 of the Code. See "ERISA Considerations"
herein and in the related Prospectus Supplement.
Legal Investment ........... The Offered Certificates of any series will
constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market
Enhancement Act of 1984 only if so specified in
the related Prospectus Supplement. 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 related Prospectus Supplement.
Rating ..................... At their respective dates of issuance, each class
of Offered Certificates will be rated not lower
than investment grade by one or more nationally
recognized statistical rating agencies requested
by the Depositor to rate the Offered
Certificates (each, a "Rating Agency"). See
"Rating" herein and in the related Prospectus
Supplement.
- --------------------------------------------------------------------------------
17
<PAGE>
RISK FACTORS
In considering an investment in the Offered Certificates of any series,
investors should consider, among other things, the following factors and any
other factors set forth under the heading "Risk Factors" in the related
Prospectus Supplement. In general, to the extent that the factors discussed
below pertain to or are influenced by the characteristics or behavior of
Mortgage Loans included in a particular Trust Fund, they would similarly pertain
to and be influenced by the characteristics or behavior of the mortgage loans
underlying any CMBS included in such Trust Fund.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Offered
Certificates of any series will develop or, if it does develop, that it will
provide holders with liquidity of investment or will continue for as long as
such Certificates remain outstanding. Furthermore, because, among other things,
the timing of receipt of payments with respect to a pool of multifamily or
commercial mortgage loans may be substantially more difficult to predict than
that of a pool of single family mortgage loans, any such secondary market that
does develop may provide less liquidity to investors than any comparable market
for securities that evidence interests in single-family mortgage loans.
The primary source of continuing information regarding the Offered
Certificates of any series, including information regarding the status of the
related Mortgage Assets and any Credit Support for such Certificates, will be
the periodic reports to Certificateholders delivered pursuant to the related
Pooling Agreement as described herein under the heading "Description of the
Certificates--Reports to Certificateholders". There can be no assurance that any
additional continuing information regarding the Offered Certificates of any
series will be available through any other source, and the limited nature of
such information may adversely affect the liquidity thereof, even if a secondary
market for such Certificates does develop.
Except to the extent described herein and in the related Prospectus
Supplement, Certificateholders will have no redemption rights, and the Offered
Certificates of each series are subject to early retirement only under certain
specified circumstances described herein and in the related Prospectus
Supplement. See "Description of the Certificates--Termination".
LIMITED ASSETS
Unless otherwise specified in the related Prospectus Supplement, neither
the Offered Certificates of any series nor the Mortgage Assets in the related
Trust Fund will be guaranteed or insured by the Depositor or any of its
affiliates, by any governmental agency or instrumentality or by any other
person; and no Offered Certificate of any series will represent a claim against
or security interest in the Trust Funds for any other series. Accordingly, if
the related Trust Fund has insufficient assets to make payments on such
Certificates, no other assets will be available for payment of the deficiency.
Additionally, certain amounts on deposit from time to time remaining in certain
funds or accounts constituting part of a Trust Fund, including the Certificate
Account and any accounts maintained as Credit Support, may be withdrawn under
certain conditions that will be described in the related Prospectus Supplement,
for purposes other than the payment of principal of or interest on the related
series of 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 Mortgage Assets have been incurred, 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.
PREPAYMENTS; AVERAGE LIFE OF CERTIFICATES; YIELDS
For a number of reasons, including the difficulty of predicting the rate
of prepayments on the Mortgage Loans in a particular Trust Fund, the amount and
timing of distributions of principal and/or interest on the Offered Certificates
of the related series may be highly unpredictable. Prepayments on the Mortgage
Loans in any Trust Fund will result in a faster rate of principal payments on
one or more classes of the related Certificates than if payments on such
Mortgage Loans were made as scheduled. Thus, the prepayment experience on the
Mortgage Loans may affect the average life of each class of such Certificates,
including a class of Offered Certificates. The rate of principal payments on
pools of mortgage loans varies among pools and from time to time is influenced
by a variety of economic,
18
<PAGE>
demographic, geographic, social, tax, legal and other factors. For example, if
prevailing interest rates fall significantly below the Mortgage 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. Conversely, if prevailing interest rates rise significantly
above the Mortgage Rates borne by the Mortgage Loans included in a Trust Fund,
principal prepayments thereon are likely to be lower than if prevailing interest
rates remain at or below the rates borne by those Mortgage Loans. There can be
no assurance as to the rate of prepayments on the Mortgage Loans in any Trust
Fund or that such rate will conform to any model described herein or in any
Prospectus Supplement. As a result, depending on the anticipated rate of
prepayment for the Mortgage Loans in any Trust Fund, the retirement of any class
of Certificates of the related series could occur significantly earlier or later
than expected.
The extent to which prepayments on the Mortgage Loans in any Trust Fund
ultimately affect the average life of any class of Certificates of the related
series will depend on the terms of such Certificates. A class of Certificates,
including a class of Offered Certificates, may provide that on any Distribution
Date the holders of such Certificates are entitled to a pro rata share of the
prepayments (including prepayments occasioned by defaults) on the Mortgage Loans
in the related Trust Fund that are distributable on such date, to a
disproportionately large share (which, in some cases, may be all) of such
prepayments, or to a disproportionately small share (which, in some cases, may
be none) of such prepayments. A class of Certificates that entitles the holders
thereof to a disproportionately large share of prepayments enhances the risk of
early retirement of such class ("call risk") if the rate of prepayment is faster
than anticipated; while a class of Certificates that entitles the holders
thereof to a disproportionately small share of prepayments enhances the risk of
an extended average life of such class ("extension risk") if the rate of
prepayment is slower than anticipated. As and to the extent described in the
related Prospectus Supplement, the respective entitlements of the various
classes of Certificateholders of any series to receive payments (and, in
particular, prepayments) of principal of the Mortgage Loans in the related Trust
Fund may vary based on the occurrence of certain events (e.g., the retirement of
one or more classes of Certificates of such series) or subject to certain
contingencies (e.g., prepayment and default rates with respect to such Mortgage
Loans).
A series of Certificates may include one or more Controlled Amortization
Classes that will be entitled to receive principal distributions according to a
specified principal payment schedule. Although prepayment risk cannot be
eliminated entirely for any class of Certificates, it can be reduced
substantially in the case of a Controlled Amortization Class so long as the
actual rate of prepayments on the Mortgage Loans in the related Trust Fund
remains relatively constant at the rate, or within the range of rates, of
prepayment used to establish the specific principal payment schedule for such
Certificates. However, the reduction of prepayment risk afforded to a Controlled
Amortization Class comes at the expense of one or more Companion Classes of the
same series, any of which Companion Classes may also be a class of Offered
Certificates. In general, and as more specifically described in the related
Prospectus Supplement, a Companion Class will entitle the holders thereof to a
disproportionately large share of prepayments on the Mortgage Loans in the
related Trust Fund when the rate of prepayment is relatively fast, and to a
disproportionately small share of those prepayments when the rate of prepayment
is relatively slow, and thus absorbs some (but not all) of the "call risk"
and/or "extension risk" that would otherwise affect the related Controlled
Amortization Class if all payments of principal of the Mortgage Loans were
allocated on a pro rata basis.
A series of Certificates may also include one or more classes of Offered
Certificates offered at a premium or discount. Yields on such classes of
Certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the Mortgage Loans in the related Trust Fund and, where the
amount of interest payable with respect to a class is disproportionately large,
as compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might fail to recoup its original investment
under some prepayment scenarios. An investor should consider, in the case of any
Offered 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 Offered Certificate purchased at a premium, 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. See "Yield and
Maturity Considerations" herein and, if applicable, in the related Prospectus
Supplement.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Offered Certificates
will reflect only its assessment of the likelihood that holders of Certificates
of such class will receive payments to which such Certificateholders are
entitled
19
<PAGE>
under the related Pooling Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments (including those caused
by defaults) 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. Such rating
will not address the possibility that prepayments on 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 an Offered Certificate at a significant premium might fail to recoup
its initial investment under certain prepayment scenarios.
The amount, type and nature of Credit Support, 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 or 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. See "Description
of Credit Support" and "Rating".
RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made on the security of multifamily or commercial property
may entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with loans made on the
security of single-family property. See "Description of the Trust
Funds--Mortgage Loans-Leases". 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; thus, the value of an income
producing property is directly related to the net operating income derived from
such property. If the net operating income of the property is reduced (for
example, if rental or occupancy rates decline or real estate tax rates or other
operating expenses increase), the borrower's ability to repay the loan may be
impaired. 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, acts of
God; and other factors beyond the control of a Master Servicer.
In addition, additional risk may be presented by the type and use of a
particular Mortgaged Property. For instance, Mortgaged Properties that operate
as hospitals and nursing homes may present special risks to lenders due to the
significant governmental regulation of the ownership, operation, maintenance and
financing of health care institutions. In particular, required licenses for
hospitals and nursing homes are generally nontransferable; thus it may be
impossible for a person acquiring such a property through foreclosure to operate
the property as a hospital or a nursing home. Hotel and motel properties are
often operated pursuant to franchise or operating agreements which may be
terminable by the franchiser or operator. Termination of such agreements may be
available to the franchiser or operator under a variety of circumstances,
including foreclosure. 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.
It is anticipated that some or all 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 those Mortgage Loans, recourse in the event
of borrower default will be limited to the specific real property and other
assets, if any, that were pledged to secure the Mortgage Loan. However, even
with respect to those Mortgage Loans that provide for recourse against the
borrower and its assets generally, there can be no assurance that enforcement of
such recourse provisions will be practicable, or that the assets of the borrower
will be sufficient to permit a recovery in respect of a defaulted Mortgage Loan
in excess of the liquidation value of the related Mortgaged Property.
20
<PAGE>
Further, the concentration of default, foreclosure and loss risks in
individual Mortgage Loans in a particular Trust Fund will generally be greater
than for pools of single-family loans because Mortgage Loans in a Trust Fund
will generally consist of a smaller number of higher balance loans than would a
pool of single-family loans of comparable aggregate unpaid principal balance.
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND RELATED LEASES
If so described in the related Prospectus Supplement, the borrower under a
Mortgage Loan may be an entity created by the owner or purchaser of the related
Mortgaged Property solely to own or purchase such property, in part to isolate
the property from the debts and liabilities of such owner or purchaser. Unless
otherwise specified, each such Mortgage Loan will represent a nonrecourse
obligation of the related borrower secured by the lien of the related Mortgage
and the related Lease Assignments. In the case of Commercial Properties, the
value of a property that is not itself an operating business generally will be
derived from rental payments under Leases of all or portions of the property.
Whether or not such loans are recourse or nonrecourse obligations, it is not
expected that the borrowers of Mortgage Loans secured by Commercial Properties
will have any significant assets other than the Commercial Properties and any
related Leases, which will be pledged to the Trustee under the related Pooling
Agreement. Therefore, the payment of amounts due on any such Mortgage Loans,
and, consequently, the payment of principal of and interest on the related
Certificates, will depend primarily or solely on rental payments by the Lessees.
Such rental payments will, in turn, depend on continued occupancy by, and/or the
creditworthiness of, such Lessees, which in either case may be adversely
affected by a general economic downturn or an adverse change in their financial
condition. Moreover, to the extent a Commercial Property was designed for the
needs of a specific type of tenant (e.g., a nursing home, hotel or motel), the
value of such property in the event of a default by the Lessee or the early
termination of such Lease may be adversely affected because of difficulty in
re-leasing the property to a suitable substitute lessee or, if re-leasing to
such a substitute is not possible, because of the cost of altering the property
for another more marketable use. As a result, without the benefit of the
Lessee's continued support of the Commercial Property, and absent significant
amortization of the Mortgage Loan, if such loan is foreclosed on and the
Commercial Property liquidated following a Lease default, the net proceeds might
be insufficient to cover the outstanding principal and interest owing on such
Mortgage Loan, thereby increasing the risk that holders of the Certificates will
suffer some loss.
The performance of a Mortgage Loan secured by an income-producing property
leased (pursuant to general commercial-type leases rather than credit- or
bond-type leases) by the Mortgagor to Lessees as well as the liquidation value
of such property may be dependent upon the business operated by such Lessees in
connection with such property, the creditworthiness of such Lessees or both; the
risks associated with such loans may be offset by the number of Lessees or, if
applicable, a diversity of types of business operated by such Lessees.
BALLOON PAYMENTS; BORROWER DEFAULT
Certain of the Mortgage Loans included in a Trust Fund may not be fully
amortizing (or may not amortize at all) over their terms to maturity and, thus,
will require substantial principal payments (that is, balloon payments) at their
stated maturity. Mortgage Loans of this type involve a greater degree of risk
than self-amortizing loans because the ability of a borrower to make a balloon
payment typically will depend upon its ability either to fully refinance the
loan or to sell the related 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,
including the value of the related Mortgaged Property, the level of available
mortgage rates at the time of sale or refinancing, the borrower's equity in the
related Mortgaged Property, the financial condition and operating history of the
borrower and the related Mortgaged Property, tax laws, rent control laws (with
respect to certain residential properties), Medicaid and Medicare reimbursement
rates (with respect to hospitals and nursing homes), prevailing general economic
conditions and the availability of credit for loans secured by commercial or
multifamily, as the case may be, real properties generally. In addition, a
Master Servicer or a Special Servicer may receive a workout fee based on
receipts from or proceeds of such Mortgage Loans.
If and to the extent specified in the related Prospectus Supplement, in
order to maximize recoveries on defaulted Mortgage Loans, the Master Servicer or
a Special Servicer will be permitted (within prescribed limits) to extend and
modify Mortgage Loans that are in default or as to which a payment default is
imminent. While a Master Servicer generally will be required to determine that
any such extension or modification is reasonably likely to produce a
21
<PAGE>
greater recovery on a present value basis than liquidation, there can be no
assurance that any such extension or modification will in fact increase the
present value of receipts from or proceeds of the affected Mortgage Loans.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case of
liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, the junior Mortgage Loans would suffer a loss
and, accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties".
CREDIT SUPPORT LIMITATIONS
The Prospectus Supplement for the Offered Certificates of each series will
describe any Credit Support provided with respect thereto. Use of Credit Support
will be subject to the conditions and limitations described herein and in the
related Prospectus Supplement. Moreover, such Credit Support may not cover all
potential losses or risks; for example, Credit Support may or may not cover
fraud or negligence by a mortgage loan originator or other parties.
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 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 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
Support may be exhausted before the principal of the lower priority classes of
Certificates of such series has been fully repaid. As a result, the impact of
losses and shortfalls experienced with respect to the Mortgage Assets may fall
primarily upon those classes of Certificates having a lower priority of payment.
Moreover, if a form of Credit Support covers more than one series of
Certificates, holders of Certificates of one series will be subject to the risk
that such Credit Support will be exhausted by the claims of the holders of
Certificates of one or more other series.
The amount of any applicable Credit Support supporting one or more classes
of Offered Certificates, including the subordination of one or more classes of
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level of
defaults, delinquencies and losses on the underlying Mortgage Assets and other
factors. There can, however, be no assurance that the loss experience on the
related Mortgage Assets will not exceed such assumed levels. See "--Limited
Nature of Ratings", "Description of the Certificates" and "Description of Credit
Support".
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the credit enhancement for any series of Certificates if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of the
downgrading of the obligations of any applicable credit support provider, or as
a result of losses on the related Mortgage Assets substantially in excess of the
levels contemplated by such Rating Agency at the time of its initial rating
analysis. None of the Depositor, the Master Servicer or any of their affiliates
will have any obligation to replace or supplement any credit enhancement, or to
take any other action to maintain any rating of any series of Certificates.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the borrower 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 lender to accelerate
22
<PAGE>
the debt upon a monetary or non-monetary default of the borrower. Such clauses
are not always enforceable. 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.
LEASES AND RENTS
The Mortgage Loans included in any Trust Fund typically will be secured by
an assignment of leases and rents pursuant to which the borrower assigns to the
lender its right, title and interest as landlord under the leases of the related
Mortgaged Property, and the income derived therefrom, as further security for
the related Mortgage Loan, while retaining a license to collect rents for so
long as there is no default. If the borrower defaults, the license terminates
and the lender is entitled to collect rents. 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 Mortgage Loans and Leases--Leases and
Rents".
ENVIRONMENTAL RISKS
Under the laws of certain states, contamination of real 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 an existing mortgage lien on 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 lender may be liable, as an "owner" or "operator", for costs of
addressing releases or threatened releases of hazardous substances at a
property, if agents or employees of the lender have become sufficiently involved
in the operations of the borrower, regardless of whether or not the
environmental damage or threat was caused by the borrower or a prior owner. A
lender also risks such liability on foreclosure of the mortgage. In addition,
liabilities imposed upon a borrower by CERCLA or other environmental laws may
adversely affect a borrower's ability to repay a loan. See "Certain Legal
Aspects of Mortgage Loans and Leases--Environmental Considerations". If a Trust
Fund includes Mortgage Loans and the related Prospectus Supplement does not
otherwise specify, the related Pooling Agreement will contain provisions
generally to the effect that the Master Servicer, acting on behalf of the Trust
Fund, may not acquire title to a Mortgaged Property or assume control of its
operation unless the Master Servicer, based upon a report prepared by a person
who regularly conducts environmental audits, has made the determination that it
is appropriate to do so, as described under "Description of the Pooling
Agreements--Realization Upon Defaulted Mortgage Loans". These provisions are
designed to reduce substantially the risk of liability for costs associated with
remediation of a hazardous environmental condition, but there can be no
assurance in a given case that those risks can be eliminated entirely. Moreover,
it is likely that any recourse against the person preparing the environmental
report, and such person's ability to satisfy a judgment, will be limited.
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".
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC 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 under "Certain Federal Income Tax
Consequences--REMICs". Accordingly, under certain circumstances, holders of
Offered Certificates that constitute REMIC 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 REMIC 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 REMIC Residual Certificates have received full
23
<PAGE>
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, which (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 REMIC Residual Certificates may be limited in their
ability to deduct servicing fees and other expenses of the REMIC. In addition,
REMIC Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of REMIC Residual Certificates, the taxable
income arising in a given year on a REMIC Residual Certificate 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 a REMIC Residual Certificate may be
significantly less than that of a corporate bond or stripped instrument having
similar cash flow characteristics.
BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any series will be issued as Book-Entry
Certificates. Each class of Book-Entry Certificates will be initially
represented by one or more Certificates registered in the name of a nominee for
DTC. As a result, unless and until corresponding Definitive Certificates are
issued, the Certificate Owners with respect to any class of Book-Entry
Certificates will be able to exercise the rights of Certificateholders only
indirectly through DTC and its participating organizations ("Participants"). In
addition, the access of Certificate Owners to information regarding the
Book-Entry Certificates in which they hold interests may be limited. The means
by which notices and other communications are conveyed by DTC to its
Participants, and directly and indirectly through such Participants to
Certificate Owners, will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Furthermore, as described herein, Certificate Owners may experience delays in
the receipt of payments on the Book-Entry Certificates, and the ability of any
Certificate Owner to pledge or otherwise take actions with respect to its
interest in the Book-Entry Certificates may be limited due to the lack of a
physical certificate evidencing such interest. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates".
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
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 as of the date they are deposited in the Trust Fund. If so
specified in the related Prospectus Supplement, the servicing of such Mortgage
Loans will be performed by a Special Servicer. Credit Support provided with
respect to a particular series of Certificates may not cover all losses related
to such delinquent or nonperforming 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 the Mortgage Loans
in the Trust Fund and the yield on the Offered Certificates of such series. See
"Description of the Trust Funds--Mortgage Loans-Leases--General".
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each Trust Fund will consist of (i) multifamily and
or commercial mortgage loans (the "Mortgage Loans"), (ii) mortgage
participations, pass-through certificates or other mortgage-backed securities
("CMBS") that evidence interests in, or that are secured by pledges of, one or
more of various types of multifamily or commercial mortgage loans, or (iii) a
combination of Mortgage Loans and CMBS (collectively, "Mortgage Assets"). Each
Trust Fund will be established by First Union Commercial Mortgage Securities,
Inc. (the "Depositor"). Each Mortgage Asset will be selected by the Depositor
for inclusion in a Trust Fund from among those purchased, either directly or
indirectly, from a prior holder thereof (a "Mortgage Asset Seller"), which prior
holder may or may not be the originator of such Mortgage Loan or the issuer of
such CMBS and may be an affiliate of the Depositor. The Mortgage Assets will not
be guaranteed or insured by the Depositor or any of its affiliates or, unless
otherwise provided in the related Prospectus Supplement, by any governmental
agency or instrumentality or by any other person. The discussion below under the
heading "--Mortgage Loans", unless otherwise noted, applies equally to mortgage
loans underlying any CMBS included in a particular Trust Fund.
24
<PAGE>
MORTGAGE LOANS-LEASES
General. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments ("mortgages") that create first or junior liens on, or installment
contracts for the sale of, fee simple or leasehold interests in properties (the
"Mortgaged Properties") consisting of (i) residential properties consisting of
five or more rental or cooperatively owned dwelling units in high-rise, mid-rise
or garden apartment buildings or other residential structures ("Multifamily
Properties") or (ii) office buildings, retail stores, hotels or motels, nursing
homes, hospitals or other health care-related facilities, mobile home parks,
warehouse facilities, mini-warehouse facilities, self-storage facilities,
industrial plants, mixed use or other types of income-producing properties or
unimproved land ("Commercial Properties"). The Multifamily Properties may
include mixed commercial and residential structures and may include apartment
buildings owned by private cooperative housing corporations ("Cooperatives").
Unless otherwise specified in the related Prospectus Supplement, each Mortgage
will create a first priority mortgage lien on a Mortgaged Property. A Mortgage
may create a lien on a borrower's leasehold estate in a property; however,
unless otherwise specified in the related Prospectus Supplement, the term of any
such leasehold will exceed the term of the Mortgage Note by at least two years.
Each Mortgage Loan will have been originated by a person (the "Originator")
other than the Depositor.
If so specified in the related Prospectus Supplement, Mortgage Assets for
a series of Certificates may include Mortgage Loans made on the security of real
estate projects under construction. In that case, the related Prospectus
Supplement will describe the procedures and timing for making disbursements from
construction reserve funds as portions of the related real estate project are
completed. In addition, the Mortgage Assets for a particular series of
Certificates may include Mortgage Loans that are delinquent or non-performing as
of the date such Certificates are issued. In that case, the related Prospectus
Supplement will set forth, as to each such Mortgage Loan, available information
as to the period of such delinquency or non-performance, any forbearance
arrangement then in effect, the condition of the related Mortgaged Property and
the ability of the Mortgaged Property to generate income to service the mortgage
debt.
Leases. To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or a
portion of such properties. Pursuant to a Lease Assignment, the related borrower
may assign its right, title and interest as lessor 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 borrower defaults,
the license terminates and the mortgagee or its agent is entitled to collect the
rents from the related Lessee or Lessees for application to the monetary
obligations of the borrower. State law may limit or restrict the enforcement of
the Lease Assignments by a mortgagee until it takes possession of the related
Mortgaged Property and/or a receiver is appointed. See "Certain Legal Aspects of
the Mortgage Loans and Leases--Leases and Rents." Alternatively, to the extent
specified in the related Prospectus Supplement, the borrower and the mortgagee
may agree that payments under Leases are to be made directly to the Master
Servicer or the Special Servicer.
To the extent described in the related Prospectus Supplement, the Leases,
which may include "bond-type" or "credit-type" leases, may require the Lessees
to pay rent that is sufficient in the aggregate to cover all scheduled payments
of principal and interest on the related Mortgage Loans and, in certain cases,
their pro rata share of the operating expenses, insurance premiums and real
estate taxes associated with the Mortgaged Properties. A "bond-type" lease is a
lease between a lessor and a lessee for a specified period of time with
specified rent payments that are at least sufficient to repay the related
note(s). A bond-type lease requires the lessee to perform all obligations
related to the leased premises; also, no matter what occurs with regard to the
leased premises, the lessee is obligated to continue to pay its rent. A
"credit-type" lease is a lease between a lessor and a lessee for a specified
period of time with specified rent payments at least sufficient to repay the
related note(s). A credit-type lease requires the lessee to perform most of the
obligations related to the leased premises, excluding only a few landlord duties
which remain the responsibility of the borrower/lessor. Certain of the Leases
(including credit-type leases) may require the borrower to bear costs associated
with structural repairs and/or the maintenance of the exterior or other portions
of the Mortgaged Property or provide for certain limits on the aggregate amount
of operating expenses, insurance premiums, taxes and other expenses that the
Lessees are required to pay. If so specified in the related Prospectus
Supplement, under certain circumstances the Lessees may be permitted to set off
their rental obligations against the obligations of the borrower under the
Leases. In those cases where payments under the Leases (net of any operating
expenses payable by the borrowers) are insufficient to pay all of the scheduled
principal and interest on the related Mortgage Loans, the borrowers must rely on
other income or sources generated by the related Mortgaged Property to make
payments on
25
<PAGE>
the related Mortgage Loan. To the extent specified in the related Prospectus
Supplement, some Commercial Properties may be leased entirely to one Lessee.
This would generally be the case in bond-type leases and credit-type leases. In
such cases, absent the availability of other funds, the borrower must rely
entirely on rent paid by such Lessee in order for the borrower to pay all of the
scheduled principal and interest on the related Mortgage Loan. To the extent
specified in the related Prospectus Supplement, certain of the Leases (not
including bond-type leases) may expire prior to the stated maturity of the
related Mortgage Loan. In such cases, upon expiration of the Leases the Borrower
will have to look to alternative sources of income, including rent payment by
any new Lessees or proceeds from the sale or refinancing of the Mortgaged
Property, to cover the payments of principal and interest due on such Mortgage
Loans unless the Lease is renewed. As specified in the related Prospectus
Supplement, certain of the Leases may provide that upon the occurrence of a
casualty affecting a Mortgaged Property, the Lessee will have the right to
terminate its Lease, unless the borrower, as lessor, is able to cause the
Mortgaged Property to be restored within a specified period of time. Certain
Leases may provide that it is the lessor's responsibility, while other Leases
provide that it is the Lessee's responsibility, to restore the Mortgaged
Property after a casualty to its original condition. Certain Leases may provide
a right of termination to the related Lessee if a taking of a material or
specified percentage of the leased space in the Mortgage Property occurs, or if
the ingress or egress to the leased space has been materially impaired.
Default and Loss Considerations with Respect to the Mortgage Loans.
Mortgage loans secured by liens on income-producing properties are substantially
different from loans made on the security of owner-occupied single-family homes.
The repayment of a loan secured by a lien on an income producing property is
typically dependent upon the successful operation of such property (that is, its
ability to generate income). Moreover, some or all of the Mortgage Loans
included in a particular Trust Fund may be non-recourse loans, which means that,
absent special facts, recourse in the case of default will be limited to the
Mortgaged Property and such other assets, if any, that were pledged to secure
repayment of the Mortgage Loan.
Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important measure of the risk of
default on such a loan. Unless otherwise defined in the related Prospectus
Supplement, the "Debt Service Coverage Ratio" of a Mortgage Loan at any given
time is the ratio of (i) the Net Operating Income of the related Mortgaged
Property for a twelve-month period to (ii) the annualized scheduled payments on
the Mortgage Loan and on any other loan that is secured by a lien on the
Mortgaged Property prior to the lien of the related Mortgage. Unless otherwise
defined in the related Prospectus Supplement, "Net Operating Income" means, for
any given period, the total operating revenues derived from a Mortgaged Property
during such period, minus the total operating expenses incurred in respect of
such Mortgaged Property during such period other than (i) non-cash items such as
depreciation and amortization, (ii) capital expenditures and (iii) debt service
on loans (including the related Mortgage Loan) secured by liens on the Mortgaged
Property. The Net Operating Income of a Mortgaged Property will fluctuate over
time and may or may not be sufficient to cover debt service on the related
Mortgage Loan at any given time. An insufficiency of Net Operating Income can be
compounded or solely caused by an ARM Loan, a Mortgage Loan that carries an
adjustable Mortgage Rate. As the primary source of the operating revenues of a
non-owner occupied income-producing property, rental income (and maintenance
payments from tenant-stockholders of a Cooperative) may be affected by the
condition of the applicable real estate market and/or area economy. In addition,
properties typically leased, occupied or used on a short-term basis, such as
certain health care-related facilities, hotels and motels, and miniwarehouse and
self-storage facilities, tend to be affected more rapidly by changes in market
or business conditions than do properties typically leased for longer periods,
such as warehouses, retail stores, office buildings and industrial plants.
Commercial Properties may be owner-occupied or leased to a single tenant. Thus,
the Net Operating Income of such a Mortgaged Property may depend substantially
on the financial condition of the borrower or the single tenant, and Mortgage
Loans secured by liens on such properties may pose greater risks than loans
secured by liens on Multifamily Properties or on multitenant Commercial
Properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or changes in governmental rules, regulations and fiscal
policies may also affect the risk of default on a Mortgage Loan. As may be
further described in the related Prospectus Supplement, in some cases leases of
Mortgaged Properties may provide that the Lessee, rather than the
borrower/landlord, is responsible for payment of operating expenses. However,
the existence of such "net of expense" provisions will result in stable Net
Operating
26
<PAGE>
Income to the borrower/landlord only to the extent that the Lessee is able to
absorb operating expense increases while continuing to make rent payments. See
"--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities, the income
from which and the operating expenses of which are subject to state and/or
federal regulations, such as Medicare and Medicaid, and multifamily properties
and mobile home parks, which may be subject to state or local rent control
regulation and, in certain cases, restrictions on changes in use of the
property. Low- and moderate-income housing in particular may be subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
measure of risk of loss if a property must be liquidated following a default.
Unless otherwise defined in the related Prospectus Supplement, the
"Loan-to-Value Ratio" of a Mortgage Loan at any given time is the ratio
(expressed as a percentage) of (i) the then outstanding principal balance of the
Mortgage Loan and the outstanding principal balance of any loan secured by a
lien on the related Mortgaged Property prior to the lien of the related
Mortgage, to (ii) the Value of such Mortgaged Property. The "Value" of a
Mortgaged Property, is generally its fair market value determined in an
appraisal obtained by the originator at the origination of such loan. The lower
the Loan-to-Value Ratio, the greater the percentage of the borrower's equity in
a Mortgaged Property, and thus the greater the cushion provided to the lender
against loss on liquidation following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure
of the risk of liquidation loss in a pool of Mortgage Loans. For example, the
value of a Mortgaged Property as of the date of initial issuance of the related
series of Certificates may be less than the Value determined at loan
origination, and will likely continue to fluctuate from time to time based upon
changes in economic conditions and the real estate market. Moreover, even when
current, an appraisal is not necessarily a reliable estimate of value. Appraised
values of income-producing properties are generally based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the property's projected net cash flow), or upon a selection from or
interpolation of the values derived from such methods. Each of these appraisal
methods can present analytical difficulties. It is often difficult to find truly
comparable properties that have recently been sold; the replacement cost of a
property may have little to do with its current market value; and income
capitalization is inherently based on inexact projections of income and expense
and the selection of an appropriate capitalization rate. Where more than one of
these appraisal methods are used and provide significantly different results, an
accurate determination of value and, correspondingly, a reliable analysis of
default and loss risks, is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish loans secured by liens on
income-producing real estate from single-family mortgage loans, there is no
assurance that all of such factors will in fact have been prudently considered
by the Originators of the Mortgage Loans, or that, for a particular Mortgage
Loan, they are complete or relevant. See "Risk Factors--Risks Associated with
Mortgage Loans and Mortgaged Properties" and "--Balloon Payments; Borrower
Default".
Payment Provisions of the Mortgage Loans. Unless otherwise specified in
the related Prospectus Supplement, all of the Mortgage Loans will have had
original terms to maturity of not more than 40 years and will provide for
scheduled payments of principal, interest or both, to be made on specified dates
that occur monthly or quarterly or at such other interval as is specified in the
Prospectus Supplement. A Mortgage Loan (i) may provide for no accrual of
interest or for accrual of interest thereon at an interest rate (a "Mortgage
Rate") that is fixed over its term or that adjusts from time to time, or that
may be converted at the borrower's election from an adjustable to a fixed
Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, (ii) may provide
for the formula, index or other method by which the Mortgage Rate will be
calculated, (iii) may provide for level payments to maturity or for payments
that adjust from time to time to accommodate changes in the Mortgage Rate or to
reflect the occurrence of certain events, and may permit negative amortization
or accelerated amortization, (iv) may be fully amortizing over its term to
maturity, or may provide for little or no amortization over its term and thus
require a balloon payment on its stated maturity date, and (v) may contain a
prohibition on prepayment (the period of such prohibition, a "Lockout Period")
or require
27
<PAGE>
payment of a premium or a yield maintenance penalty (a "Prepayment Premium") in
connection with a prepayment, in each case as described in the related
Prospectus Supplement. A Mortgage Loan may also contain a provision that
entitles the lender to a share of profits realized from the operation or
disposition of the Mortgaged Property (an "Equity Participation"), as described
in the related Prospectus Supplement. If holders of any class or classes of
Offered Certificates of a series will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will describe the Equity
Participation and the method or methods by which distributions in respect
thereof will be made to such holders.
Mortgage Loan Information in Prospectus Supplements. Each Prospectus
Supplement will contain certain information pertaining to the Mortgage Loans
which will generally be current as of a date specified in the related Prospectus
Supplement and which, to the extent then applicable and specifically known to
the Depositor, will include the following: (i) the aggregate outstanding
principal balance and the largest, smallest and average outstanding principal
balance of the Mortgage Loans as of the applicable Cut-off Date, (ii) the type
or types of property that provide security for repayment of the Mortgage Loans,
(iii) the original and remaining terms to maturity of the Mortgage Loans, and
the seasoning of the Mortgage Loans, (iv) the earliest and latest origination
date and maturity date and weighted average original and remaining terms to
maturity of the Mortgage Loans, (v) the original Loan-to-Value Ratios of the
Mortgage Loans, (vi) the Mortgage Rates or range of Mortgage Rates and the
weighted average Mortgage Rate carried by the Mortgage Loans, (vii) the
geographic distribution of the Mortgaged Properties on a state-by-state basis,
(viii) information with respect to the prepayment provisions, if any, of the
Mortgage Loans, (ix) with respect to Mortgage Loans with adjustable Mortgage
Rates ("ARM Loans"), the index or indices upon which such adjustments are based,
the adjustment dates, the range of gross margins and the weighted average gross
margin, and any limits on Mortgage Rate adjustments at the time of any
adjustment and over the life of the ARM Loan, (x) Debt Service Coverage Ratios
either at origination or as of a more recent date (or both) and (xi) information
regarding the payment characteristics of the Mortgage Loans, including without
limitation balloon payment and other amortization provisions. In appropriate
cases, the related Prospectus Supplement will also contain certain information
available to the Depositor that pertains to the provisions of leases and the
nature of tenants of the Mortgaged Properties. If the Depositor is unable to
tabulate the specific information described above at the time Offered
Certificates of a series are initially offered, more general information of the
nature described above will be provided in the related Prospectus Supplement,
and specific information will be set forth in a report which will be available
to purchasers of those Certificates at or before the initial issuance thereof
and will be filed as part of a Current Report on Form 8-K with the Commission
within 15 days following such issuance.
CMBS
CMBS may include (i) private (that is, not guaranteed or insured by the
United States or any agency or instrumentality thereof) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities or (ii)
certificates insured or guaranteed by FHLMC, FNMA, GNMA or FAMC, provided that
each CMBS will evidence an interest in, or will be secured by a pledge of,
mortgage loans that conform to the descriptions of the Mortgage Loans contained
herein.
Any CMBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(a "CMBS Agreement"). The issuer (the "CMBS Issuer") of the CMBS and/or the
servicer (the "CMBS Servicer") of the underlying mortgage loans will have
entered into the CMBS Agreement, generally with a trustee (the "CMBS Trustee")
or, in the alternative, with the original purchaser or purchasers of the CMBS.
The CMBS may have been issued in one or more classes with characteristics
similar to the classes of Certificates described herein. Distributions in
respect of the CMBS will be made by the CMBS Servicer or the CMBS Trustee on the
dates specified in the related Prospectus Supplement. The CMBS Issuer or the
CMBS Servicer or another person specified in the related Prospectus Supplement
may have the right or obligation to repurchase or substitute assets underlying
the CMBS after a certain date or under other circumstances specified in the
related Prospectus Supplement.
Reserve funds, subordination or other credit support similar to that
described for the Certificates under "Description of Credit Support" may have
been provided with respect to the CMBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and
28
<PAGE>
other factors and generally will have been established on the basis of the
requirements of any Rating Agency that may have assigned a rating to the CMBS,
or by the initial purchasers of the CMBS.
The Prospectus Supplement for a series of Certificates that evidence
interests in CMBS will specify, to the extent available and deemed material, (i)
the aggregate approximate initial and outstanding principal amount and type of
the CMBS to be included in the Trust Fund, (ii) the original and remaining term
to stated maturity of the CMBS, if applicable, (iii) the pass-through or bond
rate of the CMBS or the formula for determining such rates, (iv) the payment
characteristics of the CMBS, (v) the CMBS Issuer, CMBS Servicer and CMBS
Trustee, as applicable, (vi) a description of the credit support, if any, (vii)
the circumstances under which the related underlying mortgage loans, or the CMBS
themselves, may be purchased prior to their maturity, (viii) the terms on which
mortgage loans may be substituted for those originally underlying the CMBS, (ix)
the servicing fees payable under the CMBS Agreement, (x) the type of information
in respect of the underlying mortgage loans described under "--Mortgage
Loans--Leases--Mortgage Loan Information in Prospectus Supplements" and (xi) the
characteristics of any cash flow agreements that relate to the CMBS.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
"Certificate Account") established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will, to the extent described herein and in such
Prospectus Supplement, deposit all payments and collections received or advanced
with respect to the Mortgage Assets and other assets in the Trust Fund. A
Certificate Account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement.
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in the
related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as overcollateralization, a letter of credit, insurance policy, guarantee
or reserve fund, among others, or by a combination thereof (any such coverage
with respect to the Certificates of any series, "Credit Support"). The amount
and types of Credit Support, the identity of the entity providing it (if
applicable) and related information with respect to each type of Credit Support,
if any, will be set forth in the Prospectus Supplement for the Offered
Certificates of each series. The Prospectus Supplement for any series of
Certificates evidencing an interest in a Trust Fund that includes CMBS will
describe in the same fashion any similar forms of credit support that are
provided by or with respect to, or are included as part of the trust fund
evidenced by or providing security for, such CMBS to the extent information is
available and deemed material. The type, characteristic and amount of Credit
Support will be determined based on the characteristics of the Mortgage Assets
and other factors and will be established, in part, on the basis of requirements
of each Rating Agency rating the Certificates of such series. If so specified in
the related Prospectus Supplement, any such Credit Support may apply only in the
event of certain types of losses or delinquencies and the protection against
losses or delinquencies provided by such Credit Support will be limited. See
"Risk Factors--Credit Support Limitations" and "Description of Credit Support".
CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements designed to reduce the
effects of interest rate or currency exchange rate fluctuations on the Mortgage
Assets on one or more classes of Certificates. The principal terms of any such
guaranteed investment contract or other agreement (any such agreement, a "Cash
Flow Agreement"), and the identity of the Cash Flow Agreement obligor, will be
described in the related Prospectus Supplement. The Prospectus Supplement for
any series of Certificates evidencing an interest in a Trust Fund that includes
CMBS will describe in the same fashion any cash flow agreements that are
included as part of the trust fund evidenced by or providing security for such
CMBS to the extent information is available and deemed material.
29
<PAGE>
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate and the amount and
timing of distributions on the Certificate. See "Risk Factors--Prepayments;
Average Life of Certificates; Yields". The following discussion contemplates a
Trust Fund that consists solely of Mortgage Loans. While the characteristics and
behavior of mortgage loans underlying CMBS can generally be expected to have the
same effect on the yield to maturity and/or weighted average life of a Class of
Certificates as will the characteristics and behavior of comparable Mortgage
Loans, the effect may differ due to the payment characteristics of the CMBS. If
a Trust Fund includes CMBS, the related Prospectus Supplement will discuss the
effect that the CMBS payment characteristics may have on the yield to maturity
and weighted average lives of the Offered Certificates offered thereby.
PASS-THROUGH RATE
The Certificates of any class within a series may have a fixed, variable
or adjustable Pass-Through Rate, which may or may not be based upon the interest
rates borne by the Mortgage Loans in the related Trust Fund. The Prospectus
Supplement with respect to the Offered Certificates of any series will specify
the Pass-Through Rate for each class of such Certificates or, in the case of a
class of Offered Certificates with a variable or adjustable Pass-Through Rate,
the method of determining the Pass-Through Rate; the effect, if any, of the
prepayment of any Mortgage Loan on the Pass-Through Rate of one or more classes
of Offered Certificates; and whether the distributions of interest on the
Offered Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
PAYMENT DELAYS
With respect to any series of Certificates, a period of time will elapse
between the date upon which payments on the Mortgage Loans in the related Trust
Fund are due and the Distribution Date on which such payments are passed through
to Certificateholders. That delay will effectively reduce the yield that would
otherwise be produced if payments on such Mortgage Loans were distributed to
Certificateholders on or near the date they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a Mortgage Loan,
the borrower is generally charged interest only for the period from the Due Date
of the preceding scheduled payment up to the date of such prepayment, instead of
for the full accrual period, that is, the period from the Due Date of the
preceding scheduled payment up to the Due Date for the next scheduled payment.
However, interest accrued on any series of Certificates and distributable
thereon on any Distribution Date will generally correspond to interest accrued
on the principal balance of Mortgage Loans for their respective full accrual
periods. Consequently, if a prepayment on any Mortgage Loan is distributable to
Certificateholders on a particular Distribution Date, but such prepayment is not
accompanied by interest thereon for the full accrual period, the interest
charged to the borrower (net of servicing and administrative fees) may be less
(such shortfall, a "Prepayment Interest Shortfall") than the corresponding
amount of interest accrued and otherwise payable on the Certificates of the
related series. If and to the extent that any such shortfall is allocated to a
class of Offered Certificates, the yield thereon will be adversely affected. The
Prospectus Supplement for a series of Certificates will describe the manner in
which any such shortfalls will be allocated among the classes of such
Certificates. If so specified in the related Prospectus Supplement, the Master
Servicer will be required to apply some or all of its servicing compensation for
the corresponding period to offset the amount of any such shortfalls. The
related Prospectus Supplement will also describe any other amounts available to
offset such shortfalls. See "Description of the Pooling Agreements--Servicing
Compensation and Payment of Expenses".
YIELD AND PREPAYMENT CONSIDERATIONS
A Certificate's yield to maturity will be affected by the rate of
principal payments on the Mortgage Loans in the related Trust Fund and the
allocation thereof to reduce the principal balance (or Notional Amount, if
applicable) of such Certificate. The rate of principal payments on the Mortgage
Loans will in turn be affected by the amortization
30
<PAGE>
schedules thereof (which, in the case of ARM Loans, will change periodically to
accommodate adjustments to their Mortgage Rates), the dates on which any balloon
payments are due, and the rate of principal prepayments thereon (including for
this purpose, prepayments resulting from liquidations of Mortgage Loans due to
defaults, casualties or condemnations affecting the Mortgaged Properties, or
purchases of Mortgage Loans out of the Trust Fund). Because the rate of
principal prepayments on the Mortgage Loans in any Trust Fund will depend on
future events and a variety of factors (as discussed more fully below), it is
impossible to predict with assurance.
The extent to which the yield to maturity of a class of Offered
Certificates of any series 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 in the related Trust
Fund are in turn distributed on such Certificates (or, in the case of a class of
Stripped Interest Certificates, result in the reduction of the Notional Amount
thereof). Further, an investor should consider, in the case of any Offered
Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans in the related Trust Fund could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of any Offered Certificate purchased at a premium, 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 prepayment of principal on the Mortgage Loans is
distributed on an Offered Certificate purchased at a discount or premium (or, if
applicable, is allocated in reduction of the Notional Amount thereof), the
greater will be the effect on the investor's yield to maturity. As a result, the
effect on such investor's yield of principal payments (to the extent
distributable in reduction of the principal balance or Notional Amount of such
investor's Offered Certificates) 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 principal
payments.
A class of Certificates, including a class of Offered Certificates, may
provide that on any Distribution Date the holders of such Certificates are
entitled to a pro rata share of the prepayments (including prepayments
occasioned by defaults) on the Mortgage Loans in the related Trust Fund that are
distributable on such date, to a disproportionately large share (which, in some
cases, may be all) of such prepayments, or to a disproportionately small share
(which, in some cases, may be none) of such prepayments. As and to the extent
described in the related Prospectus Supplement, the respective entitlements of
the various classes of Certificateholders of any series to receive payments
(and, in particular, prepayments) of principal of the Mortgage Loans in the
related Trust Fund may vary based on the occurrence of certain events (e.g., the
retirement of one or more classes of Certificates of such series) or subject to
certain contingencies (e.g., prepayment and default rates with respect to such
Mortgage Loans).
In general, the Notional Amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (ii) equal the Certificate
Balances of one or more of the other classes of Certificates of the same series.
Accordingly, the yield on such Stripped Interest Certificates will be directly
related to the amortization of such Mortgage Assets or such classes of
Certificates, as the case may be. Thus, if a class of Certificates of any series
consists of Stripped Interest Certificates or Stripped Principal Certificates, a
lower than anticipated rate of principal prepayments on the Mortgage Loans in
the related Trust Fund will negatively affect the yield to investors in Stripped
Principal Certificates, and a higher than anticipated rate of principal
prepayments on such Mortgage Loans will negatively affect the yield to investors
in Stripped Interest Certificates.
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 multifamily or commercial mortgage loans. However, the extent
of prepayments of principal of the Mortgage Loans in any Trust Fund may be
affected by a number of factors, including, without limitation, the availability
of mortgage credit, the relative economic vitality of the area in which the
Mortgaged Properties are located, the quality of management of the Mortgaged
Properties, the servicing of the Mortgage Loans, possible changes in tax laws
and other opportunities for investment. In addition, the rate of principal
payments on the Mortgage Loans in any Trust Fund may be affected by the
existence of Lockout Periods and requirements that principal prepayments be
accompanied by Prepayment Premiums, and by the extent to which such provisions
may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with ARM Loans that have experienced a corresponding
31
<PAGE>
interest rate decline may have an increased incentive to refinance for purposes
of either (i) converting to a fixed rate loan and thereby "locking in" such rate
or (ii) taking advantage of the initial "teaser rate" (a mortgage interest rate
below what it would otherwise be if the applicable index and gross margin were
applied) on another adjustable rate mortgage loan.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash flow
needs or to make other investments. In addition, some borrowers may 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. The Depositor
will make no representation as to the particular factors that will affect the
prepayment of the Mortgage Loans in any Trust Fund, as to the relative
importance of such factors, as to the percentage of the principal balance of
such Mortgage Loans that will be paid as of any date or as to the overall rate
of prepayment on such Mortgage Loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Weighted average life
refers to the average amount of time that will elapse from the date of issuance
of an instrument until each dollar of the principal amount of such instrument is
repaid to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related Mortgage
Loans, whether in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes voluntary prepayments, liquidations due
to default and purchases of Mortgage Loans out of the related Trust Fund), is
paid to such class. Prepayment rates on loans are commonly measured relative to
a prepayment standard or model, such as the Constant Prepayment Rate ("CPR")
prepayment model or the Standard Prepayment Assumption ("SPA") prepayment model.
CPR represents an assumed constant rate of prepayment each month (expressed as
an annual percentage) relative to the then outstanding principal balance of a
pool of loans for the life of such loans. SPA represents an assumed variable
rate of prepayment each month (expressed as an annual percentage) relative to
the then outstanding principal balance of a pool of loans, with different
prepayment assumptions often expressed as percentages of SPA. For example, a
prepayment assumption of 100% of SPA assumes prepayment rates of 0.2% per annum
of the then outstanding principal balance of such loans in the first month of
the life of the loans and an additional 0.2% per annum in each month thereafter
until the 30th month. Beginning in the 30th month, and in each month thereafter
during the life of the loans, 100% of SPA assumes a constant prepayment rate of
6% per annum each month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any particular pool of loans. Moreover, the
CPR and SPA models were developed based upon historical prepayment experience
for single-family loans. Thus, it is unlikely that the prepayment experience of
the Mortgage Loans included in any Trust Fund will conform to any particular
level of CPR or SPA.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series and the percentage of the
initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the related Mortgage Loans
are made at rates corresponding to various percentages of CPR or SPA, or at such
other rates specified in such Prospectus Supplement. Such tables and assumptions
will illustrate the sensitivity of the weighted average lives of the
Certificates to various assumed prepayment rates and will not be intended to
predict, or to provide information that will enable investors to predict, the
actual weighted average lives of the Certificates.
CONTROLLED AMORTIZATION CLASSES AND COMPANION CLASSES
A series of Certificates may include one or more Controlled Amortization
Classes that are designed to provide increased protection against prepayment
risk by transferring that risk to one or more Companion Classes. Unless
otherwise specified in the related Prospectus Supplement, each Controlled
Amortization Class will either be a Planned Amortization Class (a "PAC") or a
Targeted Amortization Class (a "TAC"). In general, distributions of principal on
a PAC are made in accordance with a specified amortization schedule so long as
prepayments on the underlying Mortgage Loans occur within a specified range of
constant prepayment rates and, as described below, so
32
<PAGE>
long as one or more Companion Classes remain to absorb excess cash flows and
make up for shortfalls. For example, if the rate of prepayments is significantly
higher than expected, the excess prepayments may retire the Companion Classes
much earlier than expected, thus leaving the PAC without further prepayment
protection. A TAC is similar to a PAC, but a TAC structure generally does not
draw on Companion Classes to make up cash flow shortfalls, and will generally
not provide protection to the TAC against the risk that prepayments occur more
slowly than expected.
In general, the reduction of prepayment risk afforded to a Controlled
Amortization Class comes at the expense of one or more Companion Classes of the
same series (any of which may also be a class of Offered Certificates) which
absorb a disproportionate share of the overall prepayment risk of a given
structure. As more particularly described in the related Prospectus Supplement,
the holders of a Companion Class will receive a disproportionately large share
of prepayments when the rate of prepayment exceeds the rate assumed in
structuring the Controlled Amortization Class, and (in the case of a Companion
Class that supports a PAC) a disproportionately small share of prepayments (or
no prepayments) when the rate of prepayment falls below that assumed rate. Thus,
as and to the extent described in the related Prospectus Supplement, a Companion
Class will absorb a disproportionate share of the risk that a relatively fast
rate of prepayments will result in the early retirement of the investment, that
is, "call risk", and, if applicable, the risk that a relatively slow rate of
prepayments will extend the average life of the investment, that is, "extension
risk" that would otherwise be allocated to the related Controlled Amortization
Class. Accordingly, Companion Classes can exhibit significant average life
variability.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the Mortgage
Loans included in a particular Trust Fund may require that balloon payments be
made at maturity. Because the ability of a borrower to make a balloon payment
typically will depend upon its ability either to refinance the loan or to sell
the related Mortgaged Property, there is a risk that Mortgage Loans that require
balloon payments may default at maturity, or that the maturity of such a
Mortgage Loan may be extended in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the borrower or adverse conditions in the market where the property is
located. In order to minimize losses on defaulted Mortgage Loans, the Master
Servicer or a Special Servicer, to the extent and under the circumstances set
forth herein and in the related Prospectus Supplement, may be authorized to
modify Mortgage Loans that are in default or as to which a payment default is
imminent. Any defaulted balloon payment or modification that extends the
maturity of a Mortgage Loan may delay distributions of principal on a class of
Offered Certificates and thereby extend the weighted average life of such
Certificates and, if such Certificates were purchased at a discount, reduce the
yield thereon.
Negative Amortization. The weighted average life of a class of
Certificates can be affected by Mortgage Loans that permit negative
amortization. In general, such Mortgage Loans by their terms limit the amount by
which scheduled payments may adjust in response to changes in Mortgage Rates
and/or provide that scheduled payment amounts will adjust less frequently than
the Mortgage Rates. Accordingly, during a period of rising interest rates, the
scheduled payment on a Mortgage Loan that permits negative amortization may be
less than the amount necessary to amortize the loan fully over its remaining
amortization schedule and pay interest at the then applicable Mortgage Rate. In
that case, the Mortgage Loan balance would amortize more slowly than necessary
to repay it over such schedule and, if the amount of scheduled payment were less
than the amount necessary to pay current interest at the applicable Mortgage
Rate, the loan balance would negatively amortize to the extent of the amount of
the interest shortfall. Conversely, during a period of declining interest rates,
the scheduled payment on such a Mortgage Loan may exceed the amount necessary to
amortize the loan fully over its remaining amortization schedule and pay
interest at the then applicable Mortgage Rate. In that case, the excess would be
applied to principal, thereby resulting in amortization at a rate faster than
necessary to repay the Mortgage Loan balance over such schedule.
A slower or negative rate of Mortgage Loan amortization would
correspondingly be reflected in a slower or negative rate of amortization for
one or more classes of Certificates of the related series. Accordingly, the
weighted average lives of Mortgage Loans that permit negative amortization (and
that of the classes of Certificates to which any such negative amortization
would be allocated or which would bear the effects of a slower rate of
amortization on such Mortgage Loans) may increase as a result of such feature. A
faster rate of Mortgage Loan amortization will shorten the weighted average life
of such Mortgage Loans and, correspondingly, the weighted average lives of those
classes of Certificates then entitled to a portion of the principal payments on
such Mortgage Loans. The related Prospectus Supplement will describe, if
applicable, the manner in which negative amortization in respect of the Mortgage
Loans in any Trust Fund is allocated among the respective classes of
Certificates of the related series.
33
<PAGE>
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the Mortgage Loans that are foreclosed in relation to the
number and principal amount of Mortgage Loans that are repaid in accordance with
their terms will affect the weighted average lives of those Mortgage Loans and,
accordingly, the weighted average lives of and yields on the Certificates of the
related series. Servicing decisions made with respect to the Mortgage Loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of Mortgage Loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular Mortgage Loans and thus the
weighted average lives of and yields on the Certificates of the related series.
Losses and Shortfalls on the Mortgage Assets. The yield to holders of the
Offered Certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the Mortgage Assets in the related Trust
Fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of Certificates that is required to bear the effects
thereof.
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or Certificate
Balances of one or more such classes of Certificates, or may be effected simply
by a prioritization of payments among such classes of Certificates. The yield to
maturity on a class of Subordinate Certificates may be extremely sensitive to
losses and shortfalls in collections on the Mortgage Assets in the related Trust
Fund.
Additional Certificate Amortization. In addition to entitling the holders
thereof to a specified portion (which may range from none to all) of the
principal payments received on the Mortgage Assets in the related Trust Fund,
one or more classes of Certificates of any series, including one or more classes
of Offered Certificates of such series, may provide for distributions of
principal thereof from (i) amounts attributable to interest accrued but not
currently distributable on one or more classes of Accrual Certificates, (ii)
Excess Funds or (iii) any other amounts described in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement,
"Excess Funds" will, in general, represent that portion of the amounts
distributable in respect of the Certificates of any series on any Distribution
Date that represent (i) interest received or advanced on the Mortgage Assets in
the related Trust Fund that is in excess of the interest currently distributable
on the Certificates of such series, as well as any interest accrued but not
currently distributable on any Accrual Certificates of such series or (ii)
Prepayment Premiums, payments from Equity Participations or any other amounts
received on the Mortgage Assets in the related Trust Fund that do not constitute
interest thereon or principal thereof.
The amortization of any class of Certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of such
Certificates and, if such Certificates were purchased at a premium, reduce the
yield thereon. The related Prospectus Supplement will discuss the relevant
factors to be considered in determining whether distributions of principal of
any class of Certificates out of such sources would have any material effect on
the rate at which such Certificates are amortized.
THE DEPOSITOR
First Union Commercial Mortgage Securities, Inc., the Depositor, is a
North Carolina corporation organized on August 17, 1988 as a wholly-owned
subsidiary of First Union National Bank, a national banking association with its
main office located in Charlotte, North Carolina. First Union National Bank is a
subsidiary of First Union Corporation, a North Carolina corporation registered
as a bank holding company under the Bank Holding Company Act of 1956, as
amended. The Depositor maintains its principal office at 301 South College St.,
Charlotte, N.C. 28228-0600. Its telephone number is 704-374-6161. There can be
no assurance that the Depositor will have any significant assets.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates of any
series will be applied by the Depositor to the purchase of Trust Assets or will
be used by the Depositor for general corporate purposes. The Depositor expects
to sell the Certificates from time to time, but the timing and amount of
offerings of Certificates will depend on a number of factors, including the
volume of Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
34
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
In the aggregate, the Certificates of each series of Certificates will
represent the entire beneficial ownership interest in the Trust Fund created
pursuant to the related Pooling Agreement. Each series of Certificates may
consist of one or more classes of Certificates (including classes of Offered
Certificates), and such class or classes may (i) provide for the accrual of
interest thereon at a fixed, variable or adjustable rate; (ii) be senior
(collectively, "Senior Certificates") or subordinate (collectively, "Subordinate
Certificates") to one or more other classes of Certificates in entitlement to
certain distributions on the Certificates; (iii) be entitled to distributions of
principal, with disproportionately small, nominal or no distributions of
interest (collectively, "Stripped Principal Certificates"); (iv) be entitled to
distributions of interest, with disproportionately small, nominal or no
distributions of principal (collectively "Stripped Interest Certificates"); (v)
provide for distributions of principal and/or interest thereon that commence
only after the occurrence of certain events such as the retirement of one or
more other classes of Certificates of such series; (vi) provide for
distributions of principal to be made, from time to time or for designated
periods, at a rate that is faster (and, in some cases, substantially faster) or
slower (and, in some cases, substantially slower) than the rate at which
payments or other collections of principal are received on the Mortgage Assets
in the related Trust Fund; (vii) provide for distributions of principal to be
made, subject to available funds, based on a specified principal payment
schedule or other methodology; and/or (viii) provide for distributions based on
a combination of two or more components thereof with one or more of the
characteristics described in this paragraph, including a Stripped Principal
Certificate component and a Stripped Interest Certificate component, to the
extent of available funds, in each case as described in the related Prospectus
Supplement. Any such classes may include classes of Offered Certificates. With
respect to Certificates with two or more components, references herein to
Certificate Balance, Notional Amount and Pass-Through Rate refer to the
principal balance, if any, Notional Amount, if any, and the Pass-Through Rate,
if any, for any such component.
Each class of Offered Certificates of a series will be issued in minimum
denominations corresponding to the Certificate Balances or, in case of Stripped
Interest Certificates or REMIC Residual Certificates, Notional Amounts or
percentage interests specified in the related Prospectus Supplement. As provided
in the related Prospectus Supplement, one or more classes of Offered
Certificates of any series may be issued in fully registered, definitive form
(such Certificates, "Definitive Certificates") or may be offered in book-entry
format (such Certificates, "Book-Entry Certificates") through the facilities of
DTC. The Offered Certificates of each series (if issued as Definitive
Certificates) may be transferred or exchanged, subject to any restrictions on
transfer described in the related Prospectus Supplement, at the location
specified in the related Prospectus Supplement, without the payment of any
service charge, other than any tax or other governmental charge payable in
connection therewith. Interests in a class of Book-Entry Certificates will be
transferred on the book-entry records of DTC and its participating
organizations. See "Risk Factors--Limited Liquidity", "--Limited Assets" and
"--Book-Entry Registration".
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the related Trustee or Master Servicer on each Distribution Date as
specified in the related Prospectus Supplement from the Available Distribution
Amount for such series and such Distribution Date. Unless otherwise provided in
the related Prospectus Supplement, the "Available Distribution Amount" for any
series of Certificates and any Distribution Date will refer to the total of all
payments or other collections (or advances in lieu thereof) on, under or in
respect of the Mortgage Assets and any other assets included in the related
Trust Fund that are available for distribution to the Certificateholders of such
series on such date. The particular components of the Available Distribution
Amount for any series on each Distribution Date will be more specifically
described in the related Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Certificates of each series (other than the final
distribution in retirement of any such Certificate) will be made to the persons
in whose names such Certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date (the
"Determination Date") specified in the related Prospectus Supplement. All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro
35
<PAGE>
rata among the outstanding Certificates in such class. Payments will be made
either by wire transfer in immediately available funds to the account of a
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has provided the Trustee or other person
required to make such payments with wiring instructions (which may be provided
in the form of a standing order applicable to all subsequent distributions) no
later than the date specified in the related Prospectus Supplement (and, if so
provided in the related Prospectus Supplement, such Certificateholder holds
Certificates in the requisite amount or denomination specified therein), or by
check mailed to the address of such Certificateholder as it appears on the
Certificate Register; provided, however, that the final distribution in
retirement of any class of Certificates (whether Definitive Certificates or
Book-Entry Certificates) will be made only upon presentation and surrender of
such Certificates at the location specified in the notice to Certificateholders
of such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain REMIC Residual Certificates that
have no Pass-Through Rate) may have a different Pass-Through Rate, which may be
fixed, variable or adjustable. The related Prospectus Supplement will specify
the Pass-Through Rate or, in the case of a variable or adjustable Pass-Through
Rate, the method for determining the Pass-Through Rate, for each class. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates of each series will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Distributions of interest in respect of the Certificates of any class
(other than any class of Certificates that will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement ("Accrual
Certificates"), and other than any class of Stripped Principal Certificates or
REMIC Residual Certificates that is not entitled to any distributions of
interest) will be made on each Distribution Date based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates (other than certain classes of Stripped Interest
Certificates and REMIC Residual Certificates), "Accrued Certificate Interest"
for each Distribution Date will be equal to interest at the applicable
Pass-Through Rate accrued for a specified period (generally the period between
Distribution Dates) on the outstanding Certificate Balance thereof immediately
prior to such Distribution Date. Unless otherwise provided in the related
Prospectus Supplement, Accrued Certificate Interest for each Distribution Date
on Stripped Interest Certificates will be similarly calculated except that it
will accrue on a notional amount (a "Notional Amount") that is either (i) based
on the principal balances of some or all of the Mortgage Assets in the related
Trust Fund or (ii) equal to the Certificate Balances of one or more other
classes of Certificates of the same series. Reference to a Notional Amount with
respect to a class of Stripped Interest Certificates is solely for convenience
in making certain calculations and does not represent the right to receive any
distributions of principal. If so specified in the related Prospectus
Supplement, the amount of Accrued Certificate Interest that is otherwise
distributable on (or, in the case of Accrual Certificates, that may otherwise be
added to the Certificate Balance of) one or more classes of the Certificates of
a series will be reduced to the extent that any Prepayment Interest Shortfalls,
as described under "Yield and Maturity Considerations--Certain Shortfalls in
Collections of Interest", exceed the amount of any sums (including, if and to
the extent specified in the related Prospectus Supplement, the Master Servicer's
servicing compensation) that are applied to offset such shortfalls. The
particular manner in which such shortfalls will be allocated among some or all
of the classes of Certificates of that series will be specified in the related
Prospectus Supplement. The related Prospectus Supplement will also describe the
extent to which the amount of Accrued Certificate Interest that is otherwise
distributable on (or, in the case of Accrual Certificates, that may otherwise be
added to the Certificate Balance of) a class of Offered Certificates may be
reduced as a result of any other contingencies, including delinquencies, losses
and deferred interest on or in respect of the Mortgage Assets in the related
Trust Fund. Unless otherwise provided in the related Prospectus Supplement, any
reduction in the amount of Accrued Certificate Interest otherwise distributable
on a class of Certificates by reason of the allocation to such class of a
portion of any deferred interest on or in respect of the Mortgage Assets in the
related Trust Fund will result in a corresponding increase in the Certificate
Balance of such class. See "Risk Factors--Prepayments; Average Life of
Certificates; Yields" and "Yield and Maturity Considerations".
36
<PAGE>
DISTRIBUTIONS OF CERTIFICATE PRINCIPAL
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates of REMIC Residual Certificates) will have a
Certificate Balance which, at any time, will equal the then maximum amount that
the holders of Certificates of such class will be entitled to receive in respect
of principal out of the future cash flow on the Mortgage Assets and other assets
included in the related Trust Fund. The outstanding Certificate Balance of a
class of Certificates will be reduced by distributions of principal made thereon
from time to time and, if so provided in the related Prospectus Supplement,
further by any losses incurred in respect of the related Mortgage Assets
allocated thereto from time to time. In turn, the outstanding Certificate
Balance of a class of Certificates may be increased as a result of any deferred
interest on or in respect of the related Mortgage Assets that is allocated
thereto from time to time, and will be increased, in the case of a class of
Accrual Certificates prior to the Distribution Date on which distributions of
interest thereon are required to commence, by the amount of any Accrued
Certificate Interest in respect thereof (reduced as described above). Unless
otherwise provided in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of a series of Certificates will not be
greater than the aggregate outstanding principal balance of the related Mortgage
Assets as of the applicable Cut-off Date, after application of scheduled
payments due on or before such date, whether or not received. As and to the
extent described in the related Prospectus Supplement, distributions of
principal with respect to a series of Certificates will be made on each
Distribution Date to the holders of the class or classes of Certificates of such
series entitled thereto until the Certificate Balances of such Certificates have
been reduced to zero. Distributions of principal with respect to one or more
classes of Certificates may be made at a rate that is faster (and, in some
cases, substantially faster) than the rate at which payments or other
collections of principal are received on the Mortgage Assets in the related
Trust Fund, may not commence until the occurrence of certain events, such as the
retirement of one or more other classes of Certificates of the same series, or
may be made at a rate that is slower (and, in some cases, substantially slower)
than the rate at which payments or other collections of principal are received
on such Mortgage Assets. In addition, distributions of principal with respect to
one or more classes of Certificates (each such class, a "Controlled Amortization
Class") may be made, subject to available funds, based on a specified principal
payment schedule and, with respect to one or more classes of Certificates (each
such class, a "Companion Class"), may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the Mortgage Assets
in the related Trust Fund are received. Unless otherwise specified in the
related Prospectus Supplement, distributions of principal of any class of
Certificates will be made on a pro rata basis among all of the Certificates of
such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT OF PREPAYMENT PREMIUMS OR IN
RESPECT OF EQUITY PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums
or payments in respect of Equity Participations received on or in connection
with the Mortgage Assets in any Trust Fund will be distributed on each
Distribution Date to the holders of the class of Certificates of the related
series entitled thereto in accordance with the provisions described in such
Prospectus Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or in the
Certificate Balances of one or more such classes of Certificates, or may be
effected simply by a prioritization of payments among such classes of
Certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, the
related Master Servicer and/or another specified person (including a provider of
Credit Support) may be obligated to advance, or have the option of advancing, on
or before each Distribution Date, from its or their own funds or from excess
funds held in the related Certificate Account that are not part of the Available
Distribution Amount for the related series of Certificates for such Distribution
Date, an amount up to the aggregate of any payments of principal (other than any
balloon payments) and
37
<PAGE>
interest that were due on or in respect of such Mortgage Loans during the
related Due Period and were delinquent on the related Determination Date. Unless
otherwise provided in the related Prospectus Supplement, a "Due Period" is the
period between Distribution Dates, and scheduled payments on the Mortgage Loans
in any Trust Fund that became due during a given Due Period will, to the extent
received by the related Determination Date or advanced by the related Master
Servicer or other specified person, be distributed on the Distribution Date next
succeeding such Determination Date.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Accordingly, all
advances made from the advancing person's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts received under any
instrument of Credit Support) respecting which such advances were made (as to
any Mortgage Loan, "Related Proceeds") and such other specific sources as may be
identified in the related Prospectus Supplement, including in the case of a
series that includes one or more classes of Subordinate Certificates,
collections on other Mortgage Loans in the related Trust Fund that would
otherwise be distributable to the holders of one or more classes of such
Subordinate Certificates. No advance will be required to be made by the Master
Servicer or by any other person if, in the good faith judgment of the Master
Servicer or such other person, such advance would not be recoverable from
Related Proceeds or another specifically identified source (any such advance, a
"Nonrecoverable Advance"); and, if previously made by a Master Servicer or
another person, a Nonrecoverable Advance will be reimbursable from any amounts
in the related Certificate Account prior to any distributions being made to the
related series of Certificateholders.
If advances have been made from excess funds in a Certificate Account, the
Master Servicer or other person that advanced such funds will be required to
replace such funds in the Certificate Account on any future Distribution Date to
the extent that funds then in the Certificate Account are insufficient to permit
full distributions to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligation of a Master Servicer or other
specified person to make advances may be secured by a cash advance reserve fund
or a surety bond. If applicable, information regarding the characteristics of,
and the identity of any obligor on, any such surety bond will be set forth in
the related Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, any
entity making advances will be entitled to receive interest thereon for the
period that such advances are outstanding at the rate specified in such
Prospectus Supplement, and such entity will be entitled to payment of such
interest periodically from general collections on the Mortgage Loans in the
related Trust Fund prior to any payment to Certificateholders or as otherwise
provided in the related Pooling Agreement and described in such Prospectus
Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes CMBS will describe any comparable
advancing obligation of a party to the related Pooling Agreement or of a party
to the related CMBS Agreement.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders
of each class of the Offered Certificates of a series, a Master Servicer or
Trustee, as provided in the related Prospectus Supplement, will forward to each
such holder, a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of Certificates of
such class that was applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of
such class that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of
Certificates of such class that is allocable to (A) Prepayment Premiums
and (B) payments on account of Equity Participations;
(iv) the amount of servicing compensation received by the related
Master Servicer (and, if payable directly out of the related Trust Fund,
by any Special Servicer and any Sub-Servicer (as defined herein)) and such
other customary information as such Master Servicer or the related
Trustee, as the case may be, deems necessary,
38
<PAGE>
or desirable, or that a Certificateholder reasonably requests, to enable
Certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the close of business
on such Distribution Date;
(vi) the aggregate principal balance of the related Mortgage Loans
on, or as of a specified date shortly prior to, such Distribution Date;
(vii) the number and aggregate principal balance of any Mortgage
Loans in respect of which (A) one scheduled payment is delinquent, (B) two
scheduled payments are delinquent, (C) three or more scheduled payments
are delinquent and (D) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent in
respect of three or more scheduled payments, (A) the loan number thereof,
(B) the unpaid balance thereof, (C) whether the delinquency is in respect
of any balloon payment, (D) the aggregate amount of unreimbursed servicing
expenses and unreimbursed advances in respect thereof, (E) if applicable,
the aggregate amount of any interest accrued and payable to the related
Master Servicer, a Special Servicer and/or any other entity on related
servicing expenses and related advances, (F) whether a notice of
acceleration has been sent to the borrower and, if so, the date of such
notice and (G) a brief description of the status of any foreclosure
proceedings or negotiations with the borrower;
(ix) with respect to any Mortgage Loan liquidated during the related
Prepayment Period (that is, the specified period, generally equal in
length to the time period between Distribution Dates, during which
prepayments and other unscheduled collections on the Mortgage Loans in the
related Trust Fund must be received in order to be distributed on a
particular Distribution Date (the "Prepayment Period")) in connection with
a default thereon or by reason of being purchased out of the related Trust
Fund, (A) the loan number thereof, (B) the manner in which it was
liquidated, (C) the aggregate amount of Liquidation Proceeds received, (D)
the portion of such Liquidation Proceeds payable or reimbursable to the
related Master Servicer or a Special Servicer in respect of such Mortgage
Loan and (E) the amount of any loss to Certificateholders;
(x) with respect to each Mortgaged Property acquired through
foreclosure, deed-in-lieu of foreclosure or otherwise ("REO Property") and
included in the related Trust Fund as of the end of the related Due Period
or Prepayment Period, as applicable, (A) the loan number of the related
Mortgage Loan, (B) the date of acquisition, (C) the principal balance of
the related Mortgage Loan (calculated as if such Mortgage Loan were still
outstanding taking into account certain limited modifications to the terms
thereof specified in the related Pooling Agreement), (D) the aggregate
amount of unreimbursed servicing expenses and unreimbursed advances in
respect thereof and (E) if applicable, the aggregate amount of interest
accrued and payable to the related Master Servicer, a Special Servicer
and/or any other entity on related servicing expenses and related
advances;
(xi) with respect to any REO Property sold during the related
Prepayment Period, (A) the loan number of the related Mortgage Loan, (B)
the aggregate amount of sales proceeds, (C) the portion of such sales
proceeds payable or reimbursable to the related Master Servicer or a
Special Servicer in respect of such REO Property or the related Mortgage
Loan and (D) the amount of any loss to Certificateholders in respect of
the related Mortgage Loan;
(xii) the Certificate Balance or Notional Amount, as the case may
be, of each class of Certificates (including any class of Certificates not
offered hereby) at the close of business on such Distribution Date,
separately identifying any reduction in such Certificate Balance due to
the allocation of any losses in respect of the related Mortgage Loans and
any increase in the Certificate Balance of a class of Accrual Certificates
in the event that Accrued Certificate Interest has been added to such
balance;
(xiii) the aggregate amount of principal prepayments made on the
Mortgage Loans during the related Prepayment Period;
(xiv) the amount deposited in or withdrawn from any reserve fund on
such Distribution Date, and the amount remaining on deposit in such
reserve fund as of the close of business on such Distribution Date;
(xv) the amount of any Accrued Certificate Interest due but not paid
on such class of Offered Certificates at the close of business on such
Distribution Date;
39
<PAGE>
(xvi) if such class of Offered Certificates has a variable
Pass-Through Rate or an adjustable Pass-Through Rate, the Pass-Through
Rate applicable thereto for such Distribution Date and, if determinable,
for the next succeeding Distribution Date; and
(xvii) if the related Trust Fund includes one or more instruments of
Credit Support, such as a letter of credit, an insurance policy and/or a
surety bond, the amount of coverage under each such instrument as of the
close of business on such Distribution Date.
In the case of information furnished pursuant to subclauses (i)-(iv)
above, the amounts will be expressed as a dollar amount per minimum denomination
of the relevant class of Offered Certificates or per a specified portion of such
minimum denomination. The Prospectus Supplement for each series of Offered
Certificates will describe any additional information to be included in reports
to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar year,
the related Master Servicer or Trustee, as the case may be, will be required to
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)-(iv) above, aggregated for such calendar year or the applicable
portion thereof during which such person was a Certificateholder. Such
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements of
the Code as are from time to time in force. See, however, "Description of the
Certificates--Book-Entry Registration and Definitive Certificates".
If the Trust Fund for a series of Certificates includes CMBS, the ability
of the related Master Servicer or Trustee, as the case may be, to include in any
Distribution Date Statement information regarding the mortgage loans underlying
such CMBS will depend on the reports received with respect to such CMBS. In such
cases, the related Prospectus Supplement will describe the loan-specific
information to be included in the Distribution Date Statements that will be
forwarded to the holders of the Offered Certificates of that series in
connection with distributions made to them.
VOTING RIGHTS
The Voting Rights evidenced by each series of Certificates will be
allocated among the respective classes of such series in the manner described in
the related Prospectus Supplement.
Certificateholders will generally have a right to vote only with respect
to required consents to certain amendments to the related Pooling Agreement and
as otherwise specified in the related Prospectus Supplement. See "Description of
the Pooling Agreements--Amendment". The holders of specified amounts of
Certificates of a particular series will have the collective right to remove the
related Trustee and also to cause the removal of the related Master Servicer in
the case of an Event of Default on the part of the Master Servicer. See
"Description of thePooling Agreements--Events of Default", "--Rights Upon Event
of Default" and "--Resignation and Removal of the Trustee".
TERMINATION
The obligations created by the Pooling Agreement for each series of
Certificates will terminate upon the payment (or provision for payment) to
Certificateholders of that series of all amounts held in the related Certificate
Account, or otherwise by the related Master Servicer or Trustee or by a Special
Servicer, and required to be paid to such Certificateholders pursuant to such
Pooling Agreement following the earlier of (i) the final payment or other
liquidation of the last Mortgage Asset subject thereto or the disposition of all
property acquired upon foreclosure of any Mortgage Loan subject thereto and (ii)
the purchase of all of the assets of the related Trust Fund by the party
entitled to effect such termination, under the circumstances and in the manner
that will be described in the related Prospectus Supplement. Written notice of
termination of a Pooling Agreement will be given to each Certificateholder of
the related series, and the final distribution will be made only upon
presentation and surrender of the Certificates of such series at the location to
be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates will be subject to optional early termination through the
repurchase of the assets in the related Trust Fund by a party that will be
specified therein, under the circumstances and in the manner set forth therein.
If so provided in the related Prospectus Supplement, upon
40
<PAGE>
the reduction of the Certificate Balance of a specified class or classes of
Certificates by a specified percentage or amount, a party identified therein
will be authorized or required to solicit bids for the purchase of all the
assets of the related Trust Fund, or of a sufficient portion of such assets to
retire such class or classes, under the circumstances and in the manner set
forth therein. Further, if so provided in the related Prospectus Supplement,
certain classes of Certificates may be purchased by a party or parties specified
therein under similar or other conditions as described therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes
of the Offered Certificates of any series will be offered in book-entry format
through the facilities of The Depository Trust Company, and each such class will
be represented by one or more global Certificates registered in the name of DTC
or its nominee.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking corporation" within the meaning of the New York Banking
Law, 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 the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book entry
changes in their accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants", which maintain accounts with
DTC, include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. 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. Access to the DTC system also is available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a "Certificate Owner") will in turn be recorded on
the records of Direct and Indirect Participants. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate Owners
are expected to receive written confirmations providing details of such
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner entered into the
transaction. Transfers of ownership interest in the Book-Entry Certificates will
be accomplished by entries made on the books of Participants acting on behalf of
Certificate Owners. Certificate Owners will not receive certificates
representing their ownership interests in the Book-Entry Certificates, except in
the event that use of the book-entry system for the Book-Entry Certificates of
any series is discontinued as described below.
DTC will not know the identity of actual Certificate Owners of the
Book-Entry Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Certificates are credited. The Participants
will remain responsible for keeping account of their holdings on behalf of their
customers. Notices and other communications conveyed by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by Participants to Certificate Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of each such Participant (and not
of DTC, the Depositor or any Trustee or Master Servicer), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Under a book-entry system, Certificate Owners may receive payments after the
related Distribution Date.
Unless otherwise provided in the related Prospectus Supplement, the only
"Certificateholder"(as such term is used in the related Pooling Agreement) of a
Book-Entry Certificate will be the nominee of DTC, and the Certificate Owners
will not be recognized as Certificateholders under the Pooling Agreement.
Certificate Owners will be
41
<PAGE>
permitted to exercise the rights of Certificateholders under the related Pooling
Agreement only indirectly through the Participants who in turn will exercise
their rights through DTC. The Depositor is informed that DTC will take action
permitted to be taken by a Certificateholder under a Pooling Agreement only at
the direction of one or more Participants to whose account with DTC interests in
the Book-Entry Certificates are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability of a
Certificate Owner to pledge its interest in Book-Entry Certificates to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in Book-Entry Certificates, may be limited due to the
lack of a physical certificate evidencing such interest.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued as Definitive
Certificates to Certificate Owners or their nominees, rather than to DTC or its
nominee, only if (i) the Depositor advises the Trustee in writing that DTC is no
longer willing or able to properly discharge its responsibilities as depository
with respect to such Certificates and the Depositor is unable to locate a
qualified successor or (ii) the Depositor, at its option, elects to terminate
the book-entry system through DTC with respect to such Certificates. Upon the
occurrence of either of the events described in the preceding sentence, DTC will
be required to notify all Participants of the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the certificate or
certificates representing a class of Book-Entry Certificates, together with
instructions for reregistration, the Trustee or other designated party will be
required to issue to the Certificate Owners identified in such instructions the
Definitive Certificates to which they are entitled, and thereafter the holders
of such Definitive Certificates will be recognized as Certificateholders under
the related Pooling Agreement.
DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The Certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related Prospectus
Supplement (in either case, a "Pooling Agreement"). In general, the parties to a
Pooling Agreement will include the Depositor, the Trustee, the Master Servicer
and, in some cases, a Special Servicer appointed as of the date of the Pooling
Agreement. However, a Pooling Agreement that relates to a Trust Fund that
consists solely of CMBS may not include a Master Servicer or other servicer as a
party. All parties to each Pooling Agreement under which Certificates of a
series are issued will be identified in the related Prospectus Supplement.
A form of a pooling and servicing agreement has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part. However, the
provisions of each Pooling Agreement will vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the related Trust Fund.
The following summaries describe certain provisions that may appear in a Pooling
Agreement under which Certificates that evidence interests in Mortgage Loans
will be issued. The Prospectus Supplement for a series of Certificates will
describe any provision of the related Pooling Agreement that materially differs
from the description thereof contained in this Prospectus and, if the related
Trust Fund includes CMBS, will summarize all of the material provisions of the
related Pooling Agreement. The summaries herein do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Pooling Agreement for each series of Certificates and the
description of such provisions in the related Prospectus Supplement. As used
herein with respect to any series, the term "Certificate" refers to all of the
Certificates of that series, whether or not offered hereby and by the related
Prospectus Supplement, unless the context otherwise requires. The Depositor will
provide a copy of the Pooling Agreement (without exhibits) that relates to any
series of Certificates without charge upon written request of a holder of a
Certificate of such series addressed to First Union Commercial Mortgage
Securities, Inc., One First Union Center, Charlotte, N.C. 28288-0166, Attention:
Securitization Services.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Mortgage Loans to
be included in the related Trust Fund, together with, unless otherwise specified
in the related Prospectus Supplement, all principal and interest to be received
on or with respect to such Mortgage Loans after the Cut-off Date, other than
principal and interest due on or before the Cut-off Date. The Trustee will,
concurrently with such assignment, deliver the Certificates to or at the
direction of the Depositor in exchange for
42
<PAGE>
the Mortgage Loans and the other assets to be included in the Trust Fund for
such series. Each Mortgage Loan will be identified in a schedule appearing as an
exhibit to the related Pooling Agreement. Such schedule generally will include
detailed information that pertains to each Mortgage Loan included in the related
Trust Fund, which information will typically include the address of the related
Mortgaged Property and type of such property; the Mortgage Rate and, if
applicable, the applicable index, gross margin, adjustment date and any rate cap
information; the original and remaining term to maturity; the original
amortization term; the original and outstanding principal balance; and the
Loan-to-Value Ratio and Debt Service Coverage Ratio as of the date indicated.
With respect to each Mortgage Loan to be included in a Trust Fund, the
Depositor will deliver (or cause to be delivered) to the related Trustee (or to
a custodian appointed by the Trustee) certain loan documents which, unless
otherwise specified in the related Prospectus Supplement, will include the
original Mortgage Note endorsed, without recourse, to the order of the Trustee,
the original Mortgage (or a certified copy thereof) with evidence of recording
indicated thereon and an assignment of the Mortgage to the Trustee in recordable
form. Unless otherwise provided in the related Prospectus Supplement, the
related Pooling Agreement will require that the Depositor or other party thereto
promptly cause each such assignment of Mortgage to be recorded in the
appropriate public office for real property records.
The related Trustee (or the custodian appointed by the Trustee) will be
required to review the Mortgage Loan documents within a specified period of days
after receipt thereof, and the Trustee (or the custodian) will hold such
documents in trust for the benefit of the Certificateholders of the related
series. Unless otherwise specified in the related Prospectus Supplement, if any
such document is found to be missing or defective, in either case such that
interests of the Certificateholders are materially and adversely affected, the
Trustee (or such custodian) will be required to notify the Master Servicer and
the Depositor, and the Master Servicer will be required to notify the relevant
Mortgage Asset Seller. In that case, and if the Mortgage Asset Seller cannot
deliver the document or cure the defect within a specified number of days after
receipt of such notice, then unless otherwise specified in the related
Prospectus Supplement, the Mortgage Asset Seller will be obligated to replace
the related Mortgage Loan or repurchase it from the Trustee at a price that will
be specified in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Depositor will,
as to some or all of the Mortgage Loans, assign or cause to be assigned to the
Trustee the related Lease Assignments. In certain cases, the Trustee, or Master
Servicer, as applicable, may collect all moneys under the related Leases and
distribute amounts, if any, required under the Leases for the payment of
maintenance, insurance and taxes, to the extent specified in the related Leases.
The Trustee, or if so specified in the Prospectus Supplement, the Master
Servicer, as agent for the Trustee, may hold the Leases in trust for the benefit
of the Certificateholders.
With respect to each CMBS in certificate form, the Depositor will deliver
or cause to be delivered to the Trustee (or the custodian) the original
certificate or other definitive evidence of such CMBS together with bond power
or other instruments, certifications or documents required to transfer fully
such CMBS to the Trustee for the benefit of the Certificateholders. With respect
to each CMBS in uncertificated or book-entry form or held through a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, the
Depositor and the Trustee will cause such CMBS to be registered directly or on
the books of such clearing corporation or of a financial intermediary in the
name of the Trustee for the benefit of the Certificateholders. Unless otherwise
provided in the related Prospectus Supplement, the related Pooling Agreement
will require that either the Depositor or the Trustee promptly cause any CMBS in
certificated form not registered in the name of the Trustee to be reregistered,
with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement, the
Depositor will, with respect to each Mortgage Loan in the related Trust Fund,
make or assign certain representations and warranties, (the person making such
representations and warranties, the "Warranting Party") covering, by way of
example: (i) the accuracy of the information set forth for such Mortgage Loan on
the schedule of Mortgage Loans appearing as an exhibit to the related Pooling
Agreement; (ii) the enforceability of the related Mortgage Note and Mortgage and
the existence of title insurance insuring the lien priority of the related
Mortgage; (iii) the Warranting Party's title to the Mortgage Loan and the
authority of the Warranting Party to sell the Mortgage Loan; and (iv) the
payment status of the Mortgage Loan. Each Warranting Party will be identified in
the related Prospectus Supplement.
43
<PAGE>
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will provide that the Master Servicer and/or Trustee will be
required to notify promptly any Warranting Party of any breach of any
representation or warranty made by it in respect of a Mortgage Loan that
materially and adversely affects the interests of the related
Certificateholders. If such Warranting Party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related Prospectus Supplement, it will be
obligated to repurchase such Mortgage Loan from the Trustee within a specified
period at a price that will be specified in the related Prospectus Supplement.
If so provided in the Prospectus Supplement for a series of Certificates, a
Warranting Party, in lieu of repurchasing a Mortgage Loan as to which a breach
has occurred, will have the option, exercisable upon certain conditions and/or
within a specified period after initial issuance of such series of Certificates,
to replace such Mortgage Loan with one or more other mortgage loans, in
accordance with standards that will be described in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, this repurchase
or substitution obligation will constitute the sole remedy available to holders
of Certificates of any series for a breach of representation and warranty by a
Warranting Party. Moreover, neither the Depositor (unless it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or replace a
Mortgage Loan if a Warranting Party defaults on its obligation to do so.
Unless otherwise provided in the related Prospectus Supplement, the
Warranting Party will, with respect to a Trust Fund that includes CMBS, make or
assign certain representations or warranties, as of a specified date, with
respect to such CMBS, covering (i) the accuracy of the information set forth
therefor on the schedule of Mortgage Assets appearing as an exhibit to the
related Pooling Agreement and (ii) the authority of the Warranting Party to sell
such Mortgage Assets.
The dates as of which representations and warranties have been made by a
Warranting Party will be specified in the related Prospectus Supplement. In some
cases, such representations and warranties will have been made as of a date
prior to the date upon which the related series of Certificates is issued, and
thus may not address events that may occur following the date as of which they
were made. 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 made in respect of such Mortgage Loan will not be accurate in all
material respects as of such date of issuance.
CERTIFICATE ACCOUNT
General. The Master Servicer and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained
Certificate Accounts for the collection of payments on the related Mortgage
Loans, which will be established so as to comply with the standards of each
Rating Agency that has rated any one or more classes of Certificates of the
related series. As described in the related Prospectus Supplement, a Certificate
Account may be maintained either as an interest-bearing or a
non-interest-bearing account, and the funds held therein may be held as cash or
invested in United States government securities and other investment grade
obligations specified in the related Pooling Agreement ("Permitted
Investments"). Unless otherwise provided in the related Prospectus Supplement,
any interest or other income earned on funds in the Certificate Account will be
paid to the related Master Servicer or Trustee as additional compensation. If
permitted by such Rating Agency or Agencies and so specified in the related
Prospectus Supplement, a Certificate Account may contain funds relating to more
than one series of mortgage pass-through certificates and may contain other
funds representing payments on mortgage loans owned by the related Master
Servicer or serviced by it on behalf of others.
Deposits. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, the related Master Servicer,
Trustee or Special Servicer will be required to deposit or cause to be deposited
in the Certificate Account for each Trust Fund within a certain period following
receipt (in the case of collections and payments), the following payments and
collections received, or advances made, by the Master Servicer, the Trustee or
any Special Servicer subsequent to the Cut-off Date (other than payments due on
or before the Cut-off Date):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans,
including any default interest collected, in each case net of any portion
thereof retained by the Master Servicer, any Special Servicer or
Sub-Servicer as its servicing compensation or as compensation to the
Trustee;
44
<PAGE>
(iii) all proceeds received under any hazard, title or other
insurance policy that provides coverage with respect to a Mortgaged
Property or the related Mortgage Loan (other than proceeds applied to the
restoration of the property or released to the related borrower in
accordance with the customary servicing practices of the Master Servicer
(or, if applicable, a Special Servicer) and/or the terms and conditions of
the related Mortgage (collectively, "Insurance Proceeds") and all other
amounts received and retained in connection with the liquidation of
defaulted Mortgage Loans or property acquired in respect thereof, by
foreclosure or otherwise ("Liquidation Proceeds"), together with the net
operating income (less reasonable reserves for future expenses) derived
from the operation of any Mortgaged Properties acquired by the Trust Fund
through foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund
that constitutes Credit Support for the related series of Certificates as
described under "Description of Credit Support";
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies";
(vi) any amounts paid under any Cash Flow Agreement, as described
under "Description of the Trust Funds--Cash Flow Agreements";
(vii) all proceeds of the purchase of any Mortgage Loan, or property
acquired in respect thereof, by the Depositor, any Mortgage Asset Seller
or any other specified person as described under "--Assignment of Mortgage
Assets; Repurchases" and "--Representations and Warranties; Repurchases",
all proceeds of the purchase of any defaulted Mortgage Loan as described
under "--Realization Upon Defaulted Mortgage Loans", and all proceeds of
any Mortgage Asset purchased as described under "Description of the
Certificates--Termination" (all of the foregoing, also, "Liquidation
Proceeds");
(viii) any amounts paid by the Master Servicer to cover Prepayment
Interest Shortfalls arising out of the prepayment of Mortgage Loans as
described under "--Servicing Compensation and Payment of Expenses";
(ix) to the extent that any such item does not constitute additional
servicing compensation to the Master Servicer or a Special Servicer, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations on the Mortgage
Loans;
(x) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy
described under "--Hazard Insurance Policies";
(xi) any amount required to be deposited by the Master Servicer or
the Trustee in connection with losses realized on investments for the
benefit of the Master Servicer or the Trustee, as the case may be, of
funds held in the Certificate Account; and
(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Pooling Agreement and described in the
related Prospectus Supplement.
Withdrawals. Unless otherwise provided in the related Pooling Agreement
and described in the related Prospectus Supplement, a Master Servicer, Trustee
or Special Servicer may make withdrawals from the Certificate Account for each
Trust Fund for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to reimburse the Master Servicer or any other specified person
for unreimbursed amounts advanced by it as described under "Description of
the Certificates--Advances in Respect of Delinquencies", such
reimbursement to be made out of amounts received which were identified and
applied by the Master Servicer as late collections of interest (net of
related servicing fees) on and principal of the particular Mortgage Loans
with respect to which the advances were made or out of amounts drawn under
any form of Credit Support with respect to such Mortgage Loans;
(iii) to reimburse the Master Servicer or a Special Servicer for
unpaid servicing fees earned by it and certain unreimbursed servicing
expenses incurred by it with respect to Mortgage Loans in the Trust Fund
and properties acquired in respect thereof, such reimbursement to be made
out of amounts that represent Liquidation Proceeds and Insurance Proceeds
collected on the particular Mortgage Loans and properties, and net income
collected on the particular properties, with respect to which such fees
were earned or such expenses were
45
<PAGE>
incurred or out of amounts drawn under any form of Credit Support with
respect to such Mortgage Loans and properties;
(iv) to reimburse the Master Servicer or any other specified person
for any advances described in clause (ii) above made by it, any servicing
expenses referred to in clause (iii) above incurred by it and any
Servicing Fees earned by it which, in the good faith judgment of the
Master Servicer or such other person, will not be recoverable from the
amounts described in clauses (ii) and (iii), respectively, such
reimbursement to be made from amounts collected on other Mortgage Loans in
the related Trust Fund or, if and to the extent so provided by the related
Pooling Agreement and described in the related Prospectus Supplement, only
from that portion of amounts collected on such other Mortgage Loans that
is otherwise distributable on one or more classes of Subordinate
Certificates of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay the Master Servicer, a Special Servicer or another
specified entity (including a provider of Credit Support) interest accrued
on the advances described in clause (ii) above made by it and the
servicing expenses described in clause (iii) above incurred by it while
such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted Mortgage Loans, and for
any containment, clean-up or remediation of hazardous wastes and materials
present on such Mortgaged Properties, as described under "--Realization
Upon Defaulted Mortgage Loans";
(vii) to reimburse the Master Servicer, the Depositor, or any of
their respective directors, officers, employees and agents, as the case
may be, for certain expenses, costs and liabilities incurred thereby, as
and to the extent described under "--Certain Matters Regarding the Master
Servicer and the Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay the fees of the Trustee;
(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
"--Certain Matters Regarding the Trustee";
(x) to pay the Master Servicer or the Trustee, as additional
compensation, interest and investment income earned in respect of amounts
held in the Certificate Account;
(xi) to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any Mortgaged
Property acquired by the Trust Fund by foreclosure or otherwise;
(xii) if one or more elections have been made to treat the Trust
Fund or designated portions thereof as a REMIC, to pay any federal, state
or local taxes imposed on the Trust Fund or its assets or transactions, as
and to the extent described under "Certain Federal Income Tax
Consequences--REMICS--Taxation of Owners of REMIC Residual
Certificates--Prohibited Transactions Tax and Other Taxes";
(xiii) to pay for the cost of an independent appraiser or other
expert in real estate matters retained to determine a fair sale price for
a defaulted Mortgage Loan or a property acquired in respect thereof in
connection with the liquidation of such Mortgage Loan or property;
(xiv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling Agreement for the benefit of
Certificateholders;
(xv) to make any other withdrawals permitted by the related Pooling
Agreement and described in the related Prospectus Supplement; and
(xvi) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer for any mortgage pool, directly or through
Sub-Servicers, will be required to make reasonable efforts to collect all
scheduled Mortgage Loan payments and will be required to follow such collection
procedures as it would follow with respect to mortgage loans that are comparable
to such Mortgage Loans and held for
46
<PAGE>
its own account, provided such procedures are consistent with (i) the terms of
the related Pooling Agreement and any related instrument of Credit Support
included in the related Trust Fund, (ii) applicable law and (iii) the servicing
standard specified in the Pooling Agreement and in the related Prospectus
Supplement (the "Servicing Standard").
The Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums and similar items, or
otherwise monitoring the timely payment of those items; attempting to collect
delinquent payments; supervising foreclosures; conducting property inspections
on a periodic or other basis; managing REO Properties; and maintaining servicing
records relating to the Mortgage Loans. Unless otherwise specified in the
related Prospectus Supplement, the Master Servicer will be responsible for
filing and settling claims in respect of particular Mortgage Loans under any
applicable instrument of Credit Support. See "Description of Credit Support".
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
A Master Servicer may agree to modify, waive or amend any term of any
Mortgage Loan serviced by it in a manner consistent with the Servicing Standard;
provided that, unless otherwise set forth in the related Prospectus Supplement,
the modification, waiver or amendment will not (i) affect the amount or timing
of any scheduled payments of principal or interest on the Mortgage Loan or (ii)
in the judgment of the Master Servicer, materially impair the security for the
Mortgage Loan or reduce the likelihood of timely payment of amounts due thereon.
Unless otherwise provided in the related Prospectus Supplement, a Master
Servicer also may agree to any other modification, waiver or amendment if, in
its judgment (x) a material default on the Mortgage Loan has occurred or a
payment default is imminent and (y) such modification, waiver or amendment is
reasonably likely to produce a greater recovery with respect to the Mortgage
Loan on a present value basis than would liquidation.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of the
Mortgage Loans serviced by it to one or more third-party servicers (each, a
"Sub-Servicer"), but the Master Servicer will remain liable for such obligations
under the related Pooling Agreement unless otherwise provided in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, each sub-servicing agreement between a Master Servicer and a
Sub-Servicer (a "Sub-Servicing Agreement") must provide that, if for any reason
the Master Servicer is no longer acting in such capacity, the Trustee or any
successor Master Servicer may assume the Master Servicer's rights and
obligations under such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to the
related Pooling Agreement is sufficient to pay such fees. Each Sub-Servicer will
be reimbursed by the Master Servicer for certain expenditures which it makes,
generally to the same extent the Master Servicer would be reimbursed under a
Pooling Agreement. See "--Certificate Account" and "--Servicing Compensation and
Payment of Expenses".
SPECIAL SERVICERS
If and to the extent specified in the related Prospectus Supplement, a
special servicer (the "Special Servicer") may be a party to the related Pooling
Agreement or may be appointed by the Master Servicer or another specified party
to perform certain specified duties (for example, the servicing of defaulted
Mortgage Loans) in respect of the servicing of the related Mortgage Loans. The
Master Servicer will be liable for the performance of a Special Servicer only
if, and to the extent, set forth in such Prospectus Supplement.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
A borrower's failure to make required Mortgage Loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a borrower that is unable to make Mortgage Loan payments may also be
unable to make timely payment of taxes and to otherwise maintain and insure the
related Mortgaged Property. In general, the related Master Servicer
47
<PAGE>
will be required to monitor any Mortgage Loan that is in default, evaluate
whether the causes of the default can be corrected over a reasonable period
without significant impairment of the value of the related Mortgaged Property,
initiate corrective action in cooperation with the borrower if cure is likely,
inspect the related Mortgaged Property and take such other actions as are
consistent with the Servicing Standard. A significant period of time may elapse
before the Master Servicer is able to assess the success of any such corrective
action or the need for additional initiatives.
The time within which the Master Servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders may vary considerably depending on the
particular Mortgage Loan, the Mortgaged Property, the borrower, the presence of
an acceptable party to assume the Mortgage Loan and the laws of the jurisdiction
in which the Mortgaged Property is located. If a borrower files a bankruptcy
petition, the Master Servicer may not be permitted to accelerate the maturity of
the related Mortgage Loan or to foreclose on the Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of Mortgage Loans and
Leases".
A Pooling Agreement may grant to the Master Servicer, a Special Servicer,
a provider of Credit Support and/or the holder or holders of certain classes of
Certificates of the related series a right of first refusal to purchase from the
Trust Fund, at a predetermined purchase price (which, if insufficient to fully
fund the entitlements of Certificateholders to principal and interest thereon,
will be specified in the related Prospectus Supplement), any Mortgage Loan as to
which a specified number of scheduled payments are delinquent. In addition,
unless otherwise specified in the related Prospectus Supplement, the Master
Servicer may offer to sell any defaulted Mortgage Loan if and when the Master
Servicer determines, consistent with the Servicing Standard, that such a sale
would produce a greater recovery on a present value basis than would liquidation
of the related Mortgaged Property. Unless otherwise provided in the related
Prospectus Supplement, the related Pooling Agreement will require that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Mortgage Loan. In the absence of any
bid determined in accordance with the related Pooling Agreement to be fair, the
Master Servicer will generally be required to proceed with respect to such
defaulted Mortgage Loan as described below.
If a default on a Mortgage Loan has occurred or, in the Master Servicer's
judgment, is imminent, the Master Servicer, on behalf of the Trustee, may at any
time institute foreclosure proceedings, exercise any power of sale contained in
the related Mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire
title to the related Mortgaged Property, by operation of law or otherwise, if
such action is consistent with the Servicing Standard. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer may not,
however, acquire title to any Mortgaged Property or take any other action that
would cause the Trustee, for the benefit of Certificateholders of the related
series, or any other specified person to be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or an "operator" of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Master Servicer has previously determined, based on a report prepared
by a person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund), that:
(i) either the Mortgaged Property is in compliance with applicable
environmental laws and regulations or, if not, that taking such actions as
are necessary to bring the Mortgaged Property into compliance therewith is
reasonably likely to produce a greater recovery on a present value basis
than not taking such actions; and
(ii) either there are no circumstances or conditions present at the
Mortgaged Property relating to the use, management or disposal of
hazardous materials for which investigation, testing, monitoring,
containment, cleanup or remediation could be required under any applicable
environmental laws and regulations or, if such circumstances or conditions
are present for which any such action could reasonably be expected to be
required, taking such actions with respect to the Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis
than not taking such actions. See "Certain Legal Aspects of Mortgage Loans
and Leases--Environmental Considerations".
Unless otherwise provided in the related Prospectus Supplement, if title to
any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election
has been made, the Master Servicer, on behalf of the Trust Fund, will be
required to sell the Mortgaged Property by the end of the third calendar year
following the year of acquisition or unless (i) the Internal Revenue Service
grants an extension of time to sell such property or (ii) the Trustee receives
an opinion of independent counsel to the effect that the holding of the property
by the Trust Fund for more than three years after
48
<PAGE>
the end of the calendar year in which it was acquired will not result in the
imposition of a tax on the Trust Fund or cause the Trust Fund to fail to qualify
as a REMIC under the Code at any time that any Certificate is outstanding.
Subject to the foregoing, the Master Servicer will generally be required to
solicit bids for any Mortgaged Property so acquired in such a manner as will be
reasonably likely to realize a fair price for such property. If the Trust Fund
acquires title to any Mortgaged Property, the Master Servicer, on behalf of the
Trust Fund, may retain an independent contractor to manage and operate such
property. The retention of an independent contractor, however, will not relieve
the Master Servicer of its obligation to manage such Mortgaged Property in a
manner consistent with the Servicing Standard.
If Liquidation Proceeds collected with respect to a defaulted Mortgage
Loan are less than the outstanding principal balance of the defaulted Mortgage
Loan plus interest accrued thereon plus the aggregate amount of reimbursable
expenses incurred by the Master Servicer with respect to such Mortgage Loan, the
Trust Fund will realize a loss in the amount of such difference. The Master
Servicer will be entitled to reimburse itself from the Liquidation Proceeds
recovered on any defaulted Mortgage Loan (prior to the distribution of such
Liquidation Proceeds to Certificateholders), amounts that represent unpaid
servicing compensation in respect of the Mortgage Loan, unreimbursed servicing
expenses incurred with respect to the Mortgage Loan and any unreimbursed
advances of delinquent payments made with respect to the Mortgage Loan.
If any Mortgaged Property suffers damage that the proceeds, if any, of the
related hazard insurance policy are insufficient to fully restore, the Master
Servicer will not be required to expend its own funds to restore the damaged
property unless (and to the extent not otherwise provided in the related
Prospectus Supplement) it determines (i) that such restoration will increase the
proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will require the related Master Servicer to cause each
Mortgage Loan borrower to maintain a hazard insurance policy that provides for
such coverage as is required under the related Mortgage or, if the Mortgage
permits the holder thereof to dictate to the borrower the insurance coverage to
be maintained on the related Mortgaged Property, such coverage as is consistent
with the requirements of the Servicing Standard. Unless otherwise specified in
the related Prospectus Supplement, such coverage generally will be in an amount
equal to the lesser of the principal balance owing on such Mortgage Loan and the
replacement cost of the Mortgaged Property, but in either case not less than the
amount necessary to avoid the application of any co-insurance clause contained
in the hazard insurance policy. The ability of the Master Servicer to assure
that hazard insurance proceeds are appropriately applied may be dependent upon
its being named as an additional insured under any hazard insurance policy and
under any other insurance policy referred to below, or upon the extent to which
information concerning covered losses is furnished by borrowers. All amounts
collected by the Master Servicer under any such policy (except for amounts to be
applied to the restoration or repair of the Mortgaged Property or released to
the borrower in accordance with the Master Servicer's normal servicing
procedures and/or to the terms and conditions of the related Mortgage and
Mortgage Note) will be deposited in the related Certificate Account. The Pooling
Agreement may provide that the Master Servicer may satisfy its obligation to
cause each borrower to maintain such a hazard insurance policy by maintaining a
blanket policy insuring against hazard losses on all of the Mortgage Loans in
the related Trust Fund. If such blanket policy contains a deductible clause, the
Master Servicer will be required, in the event of a casualty covered by such
blanket policy, to deposit in the related Certificate Account all sums that
would have been deposited therein but for such deductible clause.
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 certain other kinds of
risks.
The hazard insurance policies covering the Mortgaged Properties will
typically contain co-insurance clauses that in effect require an insured at all
times to carry insurance of a specified percentage (generally 80% to 90%) of the
49
<PAGE>
full replacement value of the improvements on the property in order to recover
the full amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clauses generally provide that the insurer's
liability in the event of partial loss does not exceed the lesser of (i) the
replacement cost of the improvements less physical depreciation and (ii) such
proportion of the loss as the amount of insurance carried bears to the specified
percentage of the full replacement cost of such improvements.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the Mortgage Loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the Mortgage Loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the Mortgage Loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will determine whether to exercise any right the Trustee may have under
any such provision in a manner consistent with the Servicing Standard. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
will be entitled to retain as additional servicing compensation any fee
collected in connection with the permitted transfer of a Mortgaged Property. See
"Certain Legal Aspects of Mortgage Loans and Leases--Due-on-Sale and Due-on
Encumbrance".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a portion of the
interest payments on each Mortgage Loan in the related Trust Fund. Since that
compensation is generally based on a percentage of the principal balance of each
such Mortgage Loan outstanding from time to time, it will decrease in accordance
with the amortization of the Mortgage Loans. The Prospectus Supplement with
respect to a series of Certificates may provide that, as additional
compensation, the Master Servicer may retain all or a portion of late payment
charges, Prepayment Premiums, modification fees and other fees collected from
borrowers and any interest or other income that may be earned on funds held in
the Certificate Account. Any Sub-Servicer will receive a portion of the Master
Servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any Sub-Servicer, a Master Servicer may
be required, to the extent provided in the related Prospectus Supplement, to pay
from amounts that represent its servicing compensation certain expenses incurred
in connection with the administration of the related Trust Fund, including,
without limitation, payment of the fees and disbursements of independent
accountants and payment of expenses incurred in connection with distributions
and reports to Certificateholders. Certain other expenses, including certain
expenses related to Mortgage Loan defaults and liquidations and, to the extent
so provided in the related Prospectus Supplement, interest on such expenses at
the rate specified therein, and the fees of the Trustee and any Special
Servicer, may be required to be borne by the Trust Fund.
If and to the extent provided in the related Prospectus Supplement, the
Master Servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any period to Prepayment Interest
Shortfalls. See "Yield and Maturity Considerations--Certain Shortfalls in
Collections of Interest".
EVIDENCE AS TO COMPLIANCE
Unless otherwise provided in the related Prospectus Supplement, each
Pooling Agreement will require that, on or before a specified date in each year,
the Master Servicer cause a firm of independent public accountants to furnish a
statement to the Trustee to the effect that, based on an examination by such
firm conducted substantially in compliance with either the Uniform Single Audit
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, the servicing by or on behalf of the Master Servicer of mortgage loans
under pooling and servicing agreements substantially similar to each other
(which may include the related Pooling Agreement) was conducted through the
preceding calendar year or other specified twelve-month period in compliance
with the terms of such agreements except for any significant exceptions or
errors in records that, in the opinion of such firm, either the Audit Program
for Mortgages serviced for FHLMC or paragraph 4 of the Uniform Single Audit
Program for
50
<PAGE>
Mortgage Bankers, as the case may be, requires it to report. Each Pooling
Agreement will also provide for delivery to the Trustee, on or before a
specified date in each year, of a statement signed by one or more officers of
the Master Servicer to the effect that the Master Servicer has fulfilled its
material obligations under the Pooling Agreement throughout the preceding
calendar year or other specified twelve-month period.
Unless otherwise provided in the related Prospectus Supplement, copies of
the annual accountants' statement and the statement of officers of a Master
Servicer will be made available to Certificateholders without charge upon
written request to the Master Servicer.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The Master Servicer under a Pooling Agreement may be an affiliate of the
Depositor and may have other normal business relationships with the Depositor or
the Depositor's affiliates. Unless otherwise specified in the Prospectus
Supplement for a series of Certificates, the related Pooling Agreement will
permit the Master Servicer to resign from its obligations thereunder only upon a
determination that such obligations are no longer permissible under applicable
law or are in material conflict by reason of applicable law with any other
activities carried on by it at the date of the Pooling Agreement. No such
resignation will become effective until the Trustee or a successor servicer has
assumed the Master Servicer's obligations and duties under the Pooling
Agreement. Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will also be required to maintain a fidelity bond and errors and
omissions policy that provides coverage against losses that may be sustained as
a result of an officer's or employee's misappropriation of funds, errors and
omissions or negligence, subject to certain limitations as to amount of
coverage, deductible amounts, conditions, exclusions and exceptions.
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will further provide that none of the Master Servicer, the
Depositor and any director, officer, employee or agent of either of them will be
under any liability to the related Trust Fund or Certificateholders for any
action taken, or not taken, in good faith pursuant to the Pooling Agreement or
for errors in judgment; provided, however, that none of the Master Servicer, the
Depositor and any such person will be protected against any breach of a
representation, warranty or covenant made in such Pooling Agreement, or against
any expense or liability that such person is specifically required to bear
pursuant to the terms of such Pooling Agreement, or against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of obligations or duties thereunder or by reason
of reckless disregard of such obligations and duties. Unless otherwise specified
in the related Prospectus Supplement, each Pooling Agreement will further
provide that the Master Servicer, the Depositor and any director, officer,
employee or agent of either of them will be entitled to indemnification by the
related Trust Fund against any loss, liability or expense incurred in connection
with the Pooling Agreement or the related series of Certificates; provided,
however, that such indemnification will not extend to any loss, liability or
expense (i) that such person is specifically required to bear pursuant to the
terms of such agreement, or is incidental to the performance of obligations and
duties thereunder and is not reimbursable pursuant to the Pooling Agreement;
(ii) incurred in connection with any breach of a representation, warranty or
covenant made in the Pooling Agreement; (iii) incurred by reason of misfeasance,
bad faith or gross negligence in the performance of obligations or duties under
the Pooling Agreement, or by reason of reckless disregard of such obligations or
duties; or (iv) incurred in connection with any violation of any state or
federal securities law. In addition, each Pooling Agreement will provide that
neither the Master Servicer nor the Depositor will be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
respective responsibilities under the Pooling Agreement and that in its opinion
may involve it in any expense or liability. However, each of the Master Servicer
and the Depositor will be permitted, in the exercise of its discretion, to
undertake any such action that it may deem necessary or desirable with respect
to the enforcement and/or protection of the rights and duties of the parties to
the Pooling Agreement and the interests of the Certificateholders thereunder. In
such event, the legal expenses and costs of such action, and any liability
resulting therefrom, will be expenses, costs and liabilities of the
Certificateholders, and the Master Servicer or the Depositor, as the case may
be, will be entitled to charge the related Certificate Account therefor.
Subject, in certain circumstances, to the satisfaction of certain
conditions that may be required in the related Pooling Agreement, any person
into which the Master Servicer or the Depositor may be merged or consolidated,
or any person resulting from any merger or consolidation to which the Master
Servicer or the Depositor is a party, or any person succeeding to the business
of the Master Servicer or the Depositor, will be the successor of the Master
Servicer or the Depositor, as the case may be, under the related Pooling
Agreement.
51
<PAGE>
EVENTS OF DEFAULT
Unless otherwise provided in the Prospectus Supplement for a series of
Certificates, "Events of Default" under the related Pooling Agreement will
include (i) any failure by the Master Servicer to distribute or cause to be
distributed to Certificateholders, or to remit to the Trustee for distribution
to Certificateholders in a timely manner, any amount required to be so
distributed or remitted, which failure continues unremedied for five days after
written notice of such failure has been given to the Master Servicer by the
Trustee or the Depositor, or to the Master Servicer, the Depositor and the
Trustee by Certificateholders entitled to not less than 25% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series, (ii) any failure by the Master Servicer duly to observe or
perform in any material respect any of its other covenants or obligations under
the Pooling Agreement which continues unremedied for 60 days after written
notice of such failure has been given to the Master Servicer by the Trustee or
the Depositor, or to the Master Servicer, the Depositor and the Trustee by
Certificateholders entitled to not less than 25% (or such other percentage
specified in the related Prospectus Supplement) of the Voting Rights for such
series; and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings in respect of or
relating to the Master Servicer and certain actions by or on behalf of the
Master Servicer indicating its insolvency or inability to pay its obligations.
Material variations to the foregoing Events of Default (other than to add
thereto or shorten cure periods or eliminate notice requirements) will be
specified in the related Prospectus Supplement.
RIGHTS UPON EVENT OF DEFAULT
Unless otherwise provided in the Prospectus Supplement, so long as an
Event of Default under a Pooling Agreement remains unremedied, the Depositor or
the Trustee will be authorized, and at the direction of Certificateholders
entitled to not less than 51% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for such series, the Trustee will be
required, to terminate all of the rights and obligations of the Master Servicer
as master servicer under the Pooling Agreement, whereupon the Trustee will
succeed to all of the responsibilities, duties and liabilities of the Master
Servicer under the Pooling Agreement (except that if the Master Servicer is
required to make advances in respect of Mortgage Loan delinquencies, but the
Trustee is prohibited by law from obligating itself to do so, or if the related
Prospectus Supplement so specifies, the Trustee will not be obligated to make
such advances) and will be entitled to similar compensation arrangements. Unless
otherwise specified in the related Prospectus Supplement, if the Trustee is
unwilling or unable so to act, it may (or, at the written request of
Certificateholders entitled to at least 51% (or such other percentage specified
in the related Prospectus Supplement) of the Voting Rights for such series, it
will be required to) appoint, or petition a court of competent jurisdiction to
appoint, a loan servicing institution that (unless otherwise provided in the
related Prospectus Supplement) is acceptable to each Rating Agency that assigned
ratings to the Offered Certificates of such series to act as successor to the
Master Servicer under the Pooling Agreement. Pending such appointment, the
Trustee will be obligated to act in such capacity.
No Certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of default and unless Certificateholders
entitled to at least 25% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for the related series shall have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and shall have offered to the Trustee reasonable
indemnity, and the Trustee for 60 days (or such other period specified in the
related Prospectus Supplement) shall have neglected or refused to institute any
such proceeding. The Trustee, however, will be under no obligation to exercise
any of the trusts or powers vested in it by any Pooling Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the holders of Certificates of the related series, unless
such Certificateholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
AMENDMENT
Unless otherwise provided in the Prospectus Supplement, each Pooling
Agreement may be amended by the parties thereto, without the consent of any of
the holders of the related Certificates, (i) to cure any ambiguity, (ii) to
correct a defective provision therein or to correct, modify or supplement any
provision therein that may be
52
<PAGE>
inconsistent with any other provision therein, (iii) to add any other provisions
with respect to matters or questions arising under the Pooling Agreement that
are not inconsistent with the provisions thereof, (iv) to comply with any
requirements imposed by the Code or (v) for any other purpose; provided that
such amendment (other than an amendment for the purpose specified in clause (iv)
above) may not (as evidenced by an opinion of counsel to such effect
satisfactory to the Trustee) adversely affect in any material respect the
interests of any such holder. Unless otherwise specified in the related
Prospectus Supplement, each Pooling Agreement may also be amended for any
purpose by the parties, with the consent of Certificateholders entitled to at
least 51% (or such other percentage specified in the related Prospectus
Supplement) of the Voting Rights for the related series allocated to the
affected classes; provided, however, that unless otherwise specified in the
related Prospectus Supplement, no such amendment may (x) reduce in any manner
the amount of, or delay the timing of, payments received or advanced on Mortgage
Loans that are required to be distributed in respect of any Certificate without
the consent of the holder of such Certificate, (y) adversely affect in any
material respect the interests of the holders of any class of Certificates, in a
manner other than as described in clause (x), without the consent of the holders
of all Certificates of such class or (z) modify the provisions of the Pooling
Agreement described in this paragraph without the consent of the holders of all
Certificates of the related series. However, unless otherwise specified in the
related Prospectus Supplement, the Trustee will be prohibited from consenting to
any amendment of a Pooling Agreement pursuant to which a REMIC election is to be
or has been made unless the Trustee shall first have received an opinion of
counsel to the effect that such amendment will not result in the imposition of a
tax on the related Trust Fund or cause the related Trust Fund to fail to qualify
as a REMIC at any time that the related Certificates are outstanding.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Certificateholder of record made for purposes
of communicating with other holders of Certificates of the same series with
respect to their rights under the related Pooling Agreement, the Trustee or
other specified person will afford such Certificateholder access, during normal
business hours, to the most recent list of Certificateholders of that series
then maintained by such person.
THE TRUSTEE
The Trustee under each Pooling Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as Trustee may have typical
banking relationships with the Depositor and its affiliates and with any Master
Servicer and its affiliates.
DUTIES OF THE TRUSTEE
The Trustee for a series of Certificates will make no representation as to
the validity or sufficiency of the related Pooling Agreement, the Certificates
or any Mortgage Loan or related document and will not be accountable for the use
or application by or on behalf of any Master Servicer of any funds paid to the
Master Servicer or any Special Servicer in respect of the Certificates or the
Mortgage Loans, or any funds deposited into or withdrawn from the Certificate
Account or any other account by or on behalf of the Master Servicer or any
Special Servicer. If no Event of Default has occurred and is continuing, the
Trustee will be required to perform only those duties specifically required
under the related Pooling Agreement. However, upon receipt of any of the various
certificates, reports or other instruments required to be furnished to it
pursuant to the Pooling Agreement, the Trustee will be required to examine such
documents and to determine whether they conform to the requirements of the
Pooling Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for a series of Certificates will be entitled to indemnification, from
amounts held in the related Certificate Account, for any loss, liability or
expense incurred by the Trustee in connection with the Trustee's acceptance or
administration of its trusts under the related Pooling Agreement; provided,
however, that such indemnification will not extend to any loss, liability or
expense that constitutes a specific liability imposed on the Trustee pursuant to
the Pooling Agreement, or to any loss, liability or expense incurred by reason
of willful misfeasance, bad faith or negligence on the part of the Trustee in
the performance of its obligations and duties thereunder, or by reason of its
reckless disregard of such obligations or
53
<PAGE>
duties, or as may arise from a breach of any representation, warranty or
covenant of the Trustee made therein. As and to the extent described in the
related Prospectus Supplement, the fees and normal disbursements of any Trustee
may be the expense of the related Master Servicer or other specified person or
may be required to be borne by the related Trust Fund.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee for a series of Certificates will be permitted at any time to
resign from its obligations and duties under the related Pooling Agreement by
giving written notice thereof to the Depositor. Upon receiving such notice of
resignation, the Master Servicer (or such other person as may be specified in
the related Prospectus Supplement) will be required to use reasonable efforts to
promptly appoint a successor trustee. If no successor trustee shall have
accepted an appointment within a specified period after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction to appoint a successor trustee.
Unless otherwise provided in the related Prospectus Supplement, if at any
time the Trustee ceases to be eligible to continue as such under the related
Pooling Agreement, or if at any time the Trustee becomes incapable of acting, or
if certain events of (or proceedings in respect of) bankruptcy or insolvency
occur with respect to the Trustee, the Depositor will be authorized to remove
the Trustee and appoint a successor trustee. In addition, unless otherwise
provided in the related Prospectus Supplement, holders of the Certificates of
any series entitled to at least 51% (or such other percentage specified in the
related Prospectus Supplement) of the Voting Rights for such series may at any
time (with or without cause) remove the Trustee and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit Support may be provided with respect to one or more classes of the
Certificates of any series, or with respect to the related Mortgage Assets.
Credit Support may be in the form of overcollateralization, a letter of credit,
the subordination of one or more classes of Certificates, the use of a pool
insurance policy or guarantee insurance, the establishment of one or more
reserve funds or another method of Credit Support described in the related
Prospectus Supplement, or any combination of the foregoing. If so provided in
the related Prospectus Supplement, any form of Credit Support may provide credit
enhancement for more than one series of Certificates to the extent described
therein.
Unless otherwise provided in the related Prospectus Supplement for a
series of Certificates, the Credit Support will not provide protection against
all risks of loss and will not guarantee payment to Certificateholders of all
amounts to which they are entitled under the related Pooling Agreement. If
losses or shortfalls occur that exceed the amount covered by the Credit Support
or that are not covered by the Credit Support, Certificateholders will bear
their allocable share of deficiencies. Moreover, if a form of Credit Support
covers more than one series of Certificates, holders of Certificates of one
series will be subject to the risk that such Credit Support will be exhausted by
the claims of the holders of Certificates of one or more other series before the
former receive their intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or with respect to the related Mortgage Assets, the
related Prospectus Supplement will include a description of (i) the nature and
amount of coverage under such Credit Support, (ii) any conditions to payment
thereunder not otherwise described herein, (iii) the conditions (if any) under
which the amount of coverage under such Credit Support may be reduced and under
which such Credit Support may be terminated or replaced and (iv) the material
provisions relating to such Credit Support. Additionally, the related Prospectus
Supplement will set forth certain information with respect to the obligor under
any instrument of Credit Support, generally including (w) a brief description of
its principal business activities, (x) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (y) if applicable, the identity of the regulatory agencies that
exercise primary jurisdiction over the conduct of its business and (z) its total
assets, and its stockholders' equity or policyholders' surplus, if applicable,
as of a date that will be specified in the Prospectus Supplement. See "Risk
Factors--Credit Support Limitations".
54
<PAGE>
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions from the Certificate Account
on any Distribution Date will be subordinated to the corresponding rights of the
holders of Senior Certificates. If so provided 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 or shortfalls. The related Prospectus
Supplement will set forth information concerning the amount of subordination
provided by a class or classes of Subordinate Certificates in a series, the
circumstances under which such subordination will be available and the manner in
which the amount of subordination will be made available.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets in any Trust Fund are divided into separate groups,
each supporting a separate class or classes of Certificates of a series, Credit
Support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the Prospectus Supplement for a series of Certificates,
Mortgage Loans included in the related Trust Fund will be covered for certain
default risks by insurance policies or guarantees. To the extent material, a
copy of each such instrument will accompany the Current Report on Form 8-K to be
filed with the Commission within 15 days of issuance of the Certificates of the
related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the "L/C
Bank"). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or of the initial aggregate Certificate Balance of one or
more classes of Certificates. If so specified in the related Prospectus
Supplement, the letter of credit may permit draws only in the event of certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. The obligations of the L/C Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit will accompany the Current Report on Form 8-K to be
filed with the Commission within 15 days of issuance of the Certificates of the
related series.
CERTIFICATE INSURANCE AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or 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. A copy of any such
instrument will accompany the Current Report on Form 8-K to be filed with the
Commission within 15 days of issuance of the Certificates of the related series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered (to the extent of available funds) by one or
more
55
<PAGE>
reserve funds in which cash, a letter of credit, Permitted Investments, a demand
note or a combination thereof will be deposited, in the amounts specified in
such Prospectus Supplement. If so specified in the related Prospectus
Supplement, the reserve fund for a series may also be funded over time by a
specified amount of the collections received on the related Mortgage Assets.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, reserve funds may be established
to provide protection only against certain types of losses and shortfalls.
Following each Distribution Date, amounts in a 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.
If so specified in the related Prospectus Supplement, amounts deposited in
any reserve fund will be invested in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, 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. However, such income may be payable to any related Master Servicer
or another service provider as additional compensation for its services. The
reserve fund, if any, for a series will not be a part of the Trust Fund unless
otherwise specified in the related Prospectus Supplement.
CREDIT SUPPORT WITH RESPECT TO CMBS
If so provided in the Prospectus Supplement for a series of Certificates,
any CMBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement for any series of
Certificates evidencing an interest in a Trust Fund that includes CMBS will
describe to the extent information is available and deemed material, any similar
forms of Credit Support that are provided by or with respect to, or are included
as part of the trust fund evidenced by or providing security for, such CMBS. The
type, characteristic and amount of Credit Support will be determined based on
the characteristics of the Mortgage Assets and other factors and will be
established, in part, on the basis of requirements of each Rating Agency rating
the Certificates of such series. If so specified in the related Prospectus
Supplement, any such Credit Support may apply only in the event of certain types
of losses or delinquencies and the protection against losses or delinquencies
provided by such Credit Support will be limited.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
Because such legal aspects are governed by applicable state law (which laws may
differ substantially), the summaries do not purport to be complete, to reflect
the laws of any particular state, or to encompass the laws of all states in
which the security for the Mortgage Loans (or mortgage loans underlying any
CMBS) is situated. Accordingly, the summaries are qualified in their entirety by
reference to the applicable laws of those states. See "Description of the Trust
Funds--Mortgage Loans--Leases". For purposes of the following discussion,
"Mortgage Loan" includes a mortgage loan underlying a CMBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as "mortgages". A mortgage creates a lien upon, or
grants a title interest in, the real property covered thereby, and represents
the security for the repayment of the indebtedness customarily evidenced by a
promissory note. The priority of the lien created or interest granted will
depend on the terms of the mortgage and, in some cases, on the terms of separate
subordination agreements or intercreditor agreements with others that hold
interests in the real property, the knowledge of the parties to the mortgage
and, generally, the order of recordation of the mortgage in the appropriate
public recording office. However, the lien of a recorded mortgage will generally
be subordinate to later-arising liens for real estate taxes and assessments and
other charges imposed under governmental police powers. Additionally, in some
states, mechanic's and materialman's liens have priority over mortgage liens.
56
<PAGE>
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 related instrument, the law of the
state in which the real property is located, certain federal laws (including,
without limitation, the Soldiers' and Sailors' Civil Relief Act of 1940) and, in
some deed of trust transactions, the directions of the beneficiary.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In a mortgage,
the mortgagor grants a lien on the subject property in favor of the mortgagee. A
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property to the trustee, in trust, irrevocably until the
debt is paid, and generally with a power of sale. A deed to secure debt
typically has two parties. The borrower, or grantor, conveys title to the real
property to the grantee, or lender, generally with a power of sale, until such
time as the debt is repaid. In a case where the borrower is a land trust, there
would be an additional party to a mortgage instrument 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 generally executes a separate undertaking to make payments on the
mortgage note. 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 related instrument,
the law of the state in which the real property is located, certain federal laws
and, in some deed of trust transactions, the directions of the beneficiary.
References herein and in any Prospectus Supplement to "mortgage" shall include a
mortgage, a deed of trust or a deed to secure debt, as the case may be.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease and
the income derived therefrom, while (unless rents are to be paid directly to the
lender) retaining a revocable license to collect the rents for so long as there
is no default. If the borrower defaults, the license terminates and the lender
is entitled to collect the rents. Local law may require that the lender take
possession of the property and/or obtain a court-appointed receiver before
becoming entitled to collect the rents.
In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code ("UCC"); in cases where hotels or
motels constitute loan security, the rates are generally pledged by the borrower
as additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the rates and must file
continuation statements, generally every five years, to maintain perfection of
such security interest. Even if the lender's security interest in room rates is
perfected under the UCC, it will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to collect the room
rates following a default. See "--Bankruptcy Laws".
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the borrower
and not previously pledged) may constitute a significant portion of the
property's value as security. The creation and enforcement of liens on personal
property are governed by the UCC. Accordingly, if a borrower pledges personal
property as security for a mortgage loan, the lender generally must file UCC
financing statements in order to perfect its security interest therein, and must
file continuation statements, generally every five years, to maintain that
perfection.
COOPERATIVE LOANS
If specified in the related Prospectus Supplement, the Mortgage Loans may
consist of loans secured by "blanket mortgages" on the property owned by
cooperative housing corporations (each a "Cooperative"). If specified in the
related Prospectus Supplement, the Mortgage Loans may consist of cooperative
apartment loans ("Cooperative Loans") secured by security interests in shares
issued by Cooperatives and in the related proprietary leases or
57
<PAGE>
occupancy agreements granting exclusive rights to occupy specific dwelling units
in the Cooperatives' buildings. The security agreement will create a lien upon,
or grant a title interest in, the property which it covers, the priority of
which will depend on the terms of the particular security agreement as well as
the order of recordation of the agreement in the appropriate recording office.
Such a lien or title interest is not prior to the lien for real estate taxes and
assessments and other charges imposed under governmental police powers.
A Cooperative generally owns in fee or has a leasehold interest in land
and owns in fee or leases the building or buildings thereon and all separate
dwelling units in the buildings. The Cooperative is owned by tenant-stockholders
who, through ownership of stock or shares in the corporation, receive
proprietary lease or occupancy agreements which confer exclusive rights to
occupy specific units. Generally, a tenant-stockholder of a Cooperative must
make a monthly payment to the Cooperative representing such tenant-stockholder's
pro rata share of the Cooperative's payments for its blanket mortgage, real
property taxes, maintenance expenses and other capital or ordinary expenses. The
Cooperative is directly responsible for property management and, in most cases,
payment of real estate taxes, other governmental impositions and hazard and
liability insurance. If there is a blanket mortgage or mortgages on the
Cooperative apartment building or underlying land, as is generally the case, or
an underlying lease of the land, as is the case in some instances, the
Cooperative, as property mortgagor, or lessee, as the case may be, is also
responsible for meeting these mortgage or rental obligations. A blanket mortgage
is ordinarily incurred by the Cooperative in connection with either the
construction or purchase of the Cooperative's apartment building or obtaining of
capital by the Cooperative. The interest of the occupant under proprietary
leases or occupancy agreements as to which that Cooperative is the landlord are
generally subordinate to the interest of the holder of a blanket mortgage and to
the interest of the holder of a land lease. If the Cooperative is unable to meet
the payment obligations (i) arising under a blanket mortgage, the mortgagee
holding a blanket mortgage could foreclose on that mortgage and terminate all
subordinate proprietary leases and occupancy agreements, or (ii) arising under
its land lease, the holder of the landlord's interest under the land lease could
terminate it and all subordinate proprietary leases and occupancy agreements.
Also, a blanket mortgage on a Cooperative may provide financing in the form of a
mortgage that does not fully amortize, with a significant portion of principal
being due in one final payment at maturity. The inability of the Cooperative to
refinance a mortgage and its consequent inability to make such final payment
could lead to foreclosure by the mortgagee. Similarly, a land lease has an
expiration date and the inability of the Cooperative to extend its term, or, in
the alternative, to purchase the land, could lead to termination of the
Cooperatives' interest in the property and termination of all proprietary leases
and occupancy agreements. Upon foreclosure of a blanket mortgage on a
Cooperative, the lender would normally be required to take the Mortgaged
Property subject to state and local regulations that afford tenants who are not
shareholders various rent control and other protections. A foreclosure by the
holder of a blanket mortgage or the termination of the underlying lease could
eliminate or significantly diminish the value of any collateral held by a party
who financed the purchase of cooperative shares by an individual tenant
stockholder.
An ownership interest in a Cooperative and accompanying occupancy rights
are financed through a cooperative share loan evidenced by a promissory note and
secured by an assignment of and a security interest in the occupancy agreement
or proprietary lease and a security interest in the related cooperative shares.
The lender generally takes possession of the share certificate and a counterpart
of the proprietary lease or occupancy agreement and a financing statement
covering the proprietary lease or occupancy agreement and the cooperative shares
are filed in the appropriate state and local offices to perfect the lender's
interest in its collateral. Subject to the limitations discussed below, upon
default of the tenant-stockholder, the lender may sue for judgment on the
promissory note, dispose of the collateral at a public or private sale or
otherwise proceed against the collateral or tenant-stockholder as an individual
as provided in the security agreement covering the assignment of the proprietary
lease or occupancy agreement and the pledge of cooperative shares. See
"--Foreclosure--Cooperative Loans" below.
JUNIOR MORTGAGES; RIGHTS OF SENIOR LENDERS
Some of the Mortgage Loans included in a Trust Fund may be secured by
mortgage instruments that are subordinate to mortgage instruments held by other
lenders. The rights of the Trust Fund (and therefore the Certificateholders), as
holder of a junior mortgage instrument, are subordinate to those of the senior
lender, including the prior rights of the senior lender to receive rents, hazard
insurance and condemnation proceeds and to cause the Mortgaged Property to be
sold upon borrower's default and thereby extinguish the Trust Fund's junior lien
unless the Master Servicer or Special Servicer asserts its subordinate interest
in a property in a foreclosure litigation or satisfies
58
<PAGE>
the defaulted senior loan. As discussed more fully below, in many states a
junior lender may satisfy a defaulted senior loan in full, adding the amounts
expended to the balance due on the junior loan. Absent a provision in the senior
mortgage instrument, no notice of default is required to be given to the junior
lender.
The form of the mortgage instrument used by many institutional lenders
confers on the lender the right both to receive all proceeds collected under any
hazard insurance policy and all awards made in connection with any condemnation
proceedings, and (subject to any limits imposed by applicable state law) to
apply such proceeds and awards to any indebtedness secured by the mortgage
instrument in such order as the lender may determine. Thus, if improvements on a
property are damaged or destroyed by fire or other casualty, or if the property
is taken by condemnation, the holder of the senior mortgage instrument will have
the prior right to collect any insurance proceeds payable under a hazard
insurance policy and any award of damages in connection with the condemnation
and to apply the same to the senior indebtedness. Accordingly, only the proceeds
in excess of the amount of senior indebtedness will be available to be applied
to the indebtedness secured by a junior mortgage instrument.
The form of mortgage instrument used by many institutional lenders
typically contains a "future advance" clause, which provides, in general, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage instrument. While
such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or an "optional" advance. If the lender is obligated to
advance the additional amounts, the advance may be entitled to receive the same
priority as the amounts advanced at origination, notwithstanding that
intervening junior liens may have been recorded between the date of recording of
the senior mortgage instrument and the date of the future advance, and
notwithstanding that the senior lender had actual knowledge of such intervening
junior liens at the time of the advance. Where the senior lender is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior liens, the advance may be subordinate to such intervening
junior liens. Priority of advances under a "future advance" clause rests, in
many other states, on state law giving priority to all advances made under the
loan agreement up to a "credit limit" amount stated in the recorded mortgage.
Another provision typically found in the form of mortgage instrument used
by many institutional lenders permits the lender to itself perform certain
obligations of the borrower (for example, the obligations to pay when due all
taxes and assessments on the property and, when due, all encumbrances, charges
and liens on the property that are senior to the lien of the mortgage
instrument, to maintain hazard insurance on the property, and to maintain and
repair the property) upon a failure of the borrower to do so, with all sums so
expended by the lender becoming part of the indebtedness secured by the mortgage
instrument.
The form of mortgage instrument used by many institutional lenders
typically requires the borrower to obtain the consent of the lender in respect
of actions affecting the mortgaged property, including the execution of new
leases and the termination or modification of existing leases, the performance
of alterations to buildings forming a part of the mortgaged property and the
execution of management and leasing agreements for the mortgaged property.
Tenants will often refuse to execute leases unless the lender executes a written
agreement with the tenant not to disturb the tenant's possession of its premises
in the event of a foreclosure. A senior lender may refuse to consent to matters
approved by a junior lender, with the result that the value of the security for
the junior mortgage instrument is diminished.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to seek
to recover its mortgage debt by enforcing its rights and available legal
remedies under the mortgage in respect of the mortgaged property. If the
borrower defaults in payment or performance of its obligations under the note or
mortgage, the lender has the right to institute foreclosure proceedings to sell
the real property at public auction to satisfy the indebtedness.
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and non-judicial foreclosure pursuant to a power of sale usually granted in the
mortgage instrument. Other foreclosure procedures are available in some states,
but they are either infrequently used or available only in limited
circumstances.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses are raised or counterclaims are interposed, and
sometimes requires years to complete. Moreover, the filing by or against the
59
<PAGE>
borrower-mortgagor of a bankruptcy petition would impose an automatic stay on
such proceedings and could further delay a foreclosure sale.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon all parties having a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating proper defendants. As stated
above, if the lender's right to foreclose is contested by any defendant, the
legal proceedings may be time-consuming. In addition, judicial foreclosure is a
proceeding in equity and, therefore, equitable defenses may be raised against
the foreclosure. Upon successful completion of a judicial foreclosure
proceeding, the court generally issues a judgment of foreclosure and appoints a
referee or other officer to conduct a public sale of the mortgaged property, the
proceeds of which are used to satisfy the judgment. Such sales are made in
accordance with procedures that vary from state to state.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power of
sale typically granted in the deed of trust. A power of sale may also be
contained in any other type of mortgage instrument if applicable law so permits.
A power of sale under a deed of trust or mortgage allows a non-judicial public
sale to be conducted generally following a request from the beneficiary/lender
to the trustee to sell the property upon default by the borrower and after
notice of sale is given in accordance with the terms of the mortgage and
applicable state law. In some states, prior to such sale, the trustee under the
deed of trust must record a notice of default and notice of sale and send a copy
to the borrower and to any other party who has recorded a request for a copy of
a notice of default and notice of sale. In addition, in some states the trustee
must provide notice to any other party having an interest of record in the real
property, including junior lienholders. 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 borrower or a 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 expenses incurred in
enforcing the obligation. In other states, the borrower 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. In addition to such cure
rights, in most jurisdictions, the borrower-mortgagor or a subordinate
lienholder can seek to enjoin the non-judicial foreclosure by commencing a court
proceeding. Generally, state law governs the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods.
Both judicial and non-judicial foreclosures may result in the termination
of leases at the mortgaged property, which in turn could result in the reduction
in the income for such property. Some of the factors that will determine whether
or not a lease will be terminated by a foreclosure are: the provisions of
applicable state law, the priority of the mortgage vis-a-vis the lease in
question, the terms of the lease and the terms of any subordination,
non-disturbance and attornment agreement between the tenant under the lease and
the mortgagee.
Equitable Limitations on Enforceability of Certain Provisions. United
States courts have traditionally imposed general equitable principles to limit
the remedies available to lenders in foreclosure actions. These principles are
generally designed to relieve borrowers from the effects of mortgage defaults
perceived as harsh or unfair. Relying on such principles, a court may alter the
specific terms of a loan to the extent it considers necessary to prevent or
remedy an injustice, undue oppression or overreaching, or may require the lender
to undertake affirmative actions to determine the cause of the borrower's
default and the likelihood that the borrower will be able to reinstate the loan.
In some cases, courts have substituted their judgment for the lender's and have
required that lenders reinstate loans or recast payment schedules in order to
accommodate borrowers who are suffering from a temporary financial disability.
In other cases, courts have limited the right of the lender to foreclose in the
case of a non-monetary default, such as a failure to adequately maintain the
mortgaged property or placing a subordinate mortgage or other encumbrance upon
the mortgaged property. Finally, some courts have addressed the issue of whether
federal or state constitutional provisions reflecting due process concerns for
adequate notice require that a borrower receive notice in addition to
statutorily prescribed minimum notice. For the most part, these cases have
upheld the reasonableness of the notice provisions or have found that a public
sale under a mortgage providing for a power of sale does not involve sufficient
state action to trigger constitutional protections.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale for a number of reasons, including the difficulty in
determining the exact status of title to the property (due to, among other
things,
60
<PAGE>
redemption rights that may exist) and because of the possibility that physical
deterioration of the property may have occurred during the foreclosure
proceedings. Potential buyers may also 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. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under Section 67d of the
former Bankruptcy Act (Section 548 of the current Bankruptcy Code, Bankruptcy
Reform Act of 1978, as amended, 11 U.S.C. ss.ss. 101-1330 (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 were 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 with provisions similar to those construed in
Durrett. For these reasons, it is common for the lender to purchase the
mortgaged property for an amount equal to the secured indebtedness and accrued
and unpaid interest plus the expenses of foreclosure, in which event the
borrower's debt will be extinguished. Thereafter, subject to the borrower's
right in some states to remain in possession during a redemption period, the
lender will become the owner of the property and have both the benefits and
burdens of ownership, including the obligation to pay debt service on any senior
mortgages, to pay taxes, to obtain casualty insurance and to make such repairs
as are necessary to render the property suitable for sale. The costs involved in
a foreclosure process can often be quite expensive; such costs may include,
depending on the jurisdiction involved, legal fees, court administration fees,
referee fees and transfer taxes or fees. The costs of operating and maintaining
a commercial or multifamily residential property may be significant and may be
greater than the income derived from that property. The lender also will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale or lease of the property. Depending upon
market conditions, the ultimate proceeds of the sale of the property may not
equal the lender's investment in the property. Moreover, because of the expenses
associated with acquiring, owning and selling a mortgaged property, a lender
could realize an overall loss on a mortgage loan even if the 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 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, including penalty fees and court costs, or
face foreclosure.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all persons
who have interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their "equity of redemption". The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. 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 terminated.
The equity of redemption is a common-law (non-statutory) right which
should be distinguished from post-sale statutory rights of redemption. In some
states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted if the former borrower pays only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the ability of the lender to
sell the foreclosed property because the exercise of a right of redemption would
defeat the title of any purchaser through a foreclosure. Consequently, the
practical effect of the redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.
Anti-Deficiency Legislation. Some or all of the Mortgage Loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and such other assets, if any, that were pledged to
secure the Mortgage Loan. However, even if a mortgage loan by its terms provides
for recourse to the
61
<PAGE>
borrower's other assets, a lender's ability to realize upon those assets may be
limited by state law. For example, in some states a lender cannot obtain a
deficiency judgment against the borrower following a non-judicial foreclosure. A
deficiency judgment is a personal judgment against the former borrower equal to
the difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other statutes may require the lender
to exhaust the security afforded under a mortgage before bringing a personal
action against the borrower. In certain other states, the lender has the option
of bringing a personal action against the borrower on the debt without first
exhausting such security; however, in some of those states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and thus may be precluded from foreclosing upon the security.
Consequently, lenders in those states where such an election of remedy provision
exists will usually proceed first against the security. Finally, other statutory
provisions, designed to protect borrowers from exposure to large deficiency
judgments that might result from bidding at below-market values at the
foreclosure sale, limit any deficiency judgment to the excess of the outstanding
debt over the judicially determined fair market value of the property at the
time of the sale.
Leasehold Risks. Mortgage Loans may be secured by a mortgage on the
borrower's leasehold interest in a ground lease. Leasehold mortgage loans are
subject to certain risks not associated with mortgage loans secured by a lien on
the fee estate of the borrower. The most significant of these risks is that if
the borrower's leasehold were to be terminated upon a lease default or the
bankruptcy of the lessee or the lessor, the leasehold mortgagee would lose its
security. This risk may be substantially lessened if the ground lease contains
provisions protective of the leasehold mortgagee, such as a provision that
requires the ground lessor to give the leasehold mortgagee notices of lessee
defaults and an opportunity to cure them, a provision that permits the leasehold
estate to be assigned to and by the leasehold mortgagee or the purchaser at a
foreclosure sale, a provision that gives the leasehold mortgagee the right to
enter into a new ground lease with the ground lessor on the same terms and
conditions as the old ground lease or a provision that prohibits the ground
lessee/borrower 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. Certain mortgage loans, however, may be secured by
liens on ground leases that do not contain these provisions.
Regulated Healthcare Facilities. A Mortgage Loan may be secured by a
mortgage on a nursing home or other regulated healthcare facility. In most
jurisdictions, a license (which is nontransferable and may not be assigned or
pledged) granted by the appropriate state regulatory authority is required to
operate a regulated healthcare facility. Accordingly, the ability of a person
acquiring this type of property upon a foreclosure sale to take possession of
and operate the same as a regulated healthcare facility may be prohibited by
applicable law. Notwithstanding the foregoing, however, in certain jurisdictions
the person acquiring this type of property at a foreclosure sale may have the
right to terminate the use of the same as a regulated health care facility and
convert it to another lawful purpose.
Cross-Collateralization. Certain of the Mortgage Loans may be secured by
more than one mortgage covering Mortgaged 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 a cross-collateralized
Mortgage Loan to foreclose on the related Mortgaged Properties in a particular
order rather than simultaneously in order to ensure that the lien of the
mortgages is not impaired or released.
Cooperative Loans. The cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the Cooperative's Certificate of Incorporation and
By-laws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the Cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by such tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permit the Cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder. A default under the
proprietary lease or occupancy agreement will usually constitute a default under
the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or the occupancy
agreement is terminated, the Cooperative will recognize the lender's lien
against proceeds from the sale of the Cooperative apartment, subject, however,
to the Cooperative's right to sums due under such proprietary lease or occupancy
agreement. The total amount owed to the Cooperative by the
62
<PAGE>
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure on
a Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the UCC and the security
agreement relating to those shares. Article 9 of the UCC requires that a sale be
conducted in a "commercially reasonable" manner. Whether a foreclosure sale has
been conducted in a "commercially reasonable" manner will depend on the facts in
each case. In determining commercial reasonableness, a court will look to the
notice given the debtor and the method, manner, time, place and terms of the
foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the Cooperatives to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency.
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a lender 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) to
collect a debt 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 case. The delay and the consequences thereof caused by
the automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor would stay
the senior lender from proceeding with any foreclosure action.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender's second claim are met, the amount and terms
of a mortgage loan secured by a lien on property of the debtor may be modified
under certain circumstances. For example, if the loan is undersecured, the
outstanding amount of the loan which would remain secured may be reduced to the
then-current value of the property (with a corresponding partial reduction of
the amount of lender's security interest) pursuant to a confirmed plan, thus
leaving the lender 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 by means of a reduction in
the rate of interest and/or an alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or by an
extension (or shortening) of the term to maturity. Some bankruptcy courts have
approved plans, based on the particular facts of the reorganization case, that
effected the cure of a mortgage loan default by paying arrearages over a number
of years. Also, a bankruptcy court may permit a debtor, through its
rehabilitative plan, to reinstate a loan mortgage payment schedule even if the
lender has obtained a final judgment of foreclosure prior to the filing of the
debtor's petition.
Federal bankruptcy law may also have the effect of interfering with or
affecting the ability of the secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property. Under Section 362 of the
Bankruptcy Code, the lender will be stayed from enforcing the assignment, and
the legal proceedings necessary to resolve the issue could be time-consuming,
with resulting delays in the lender's receipt of the rents. However, the
Bankruptcy Code has recently been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues in
the post-petition leases, rents and hotel revenues, unless a bankruptcy court
orders to the contrary "based on the equities of the case." Thus, unless a court
orders otherwise, revenues from a mortgaged property generated after the date
the bankruptcy petition is filed will constitute "cash collateral" under the
Bankruptcy Code. Debtors may only use cash collateral upon obtaining the
lender's consent or a prior court order finding that the lender's interest in
the mortgaged properties and the cash collateral is "adequately protected" as
such term is defined and interpreted under the Bankruptcy Code.
63
<PAGE>
If a borrower's ability to make payment on a mortgage loan is dependent on
its receipt of rent payments under a lease of the related property, that ability
may be impaired by the commencement of a bankruptcy proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
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
trustee or debtor-in-possession may, subject to approval of the court, (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 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, and any assurances provided to
the lessor may, in fact, be inadequate. 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. The Bankruptcy Code also limits a lessor's damages
for lease rejection to the rent reserved by the lease (without regard to
acceleration) for the greater of one year, or 15%, not to exceed three years, of
the remaining term of the lease.
ENVIRONMENTAL CONSIDERATIONS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties that
are or have been used for industrial, manufacturing, military, disposal or
certain commercial activity. Such environmental risks include the possible
diminution of the value of a contaminated property or, as discussed below,
potential liability for clean-up costs or other remedial actions that could
exceed the value of the property or the amount of the lender's loan. In certain
circumstances, a lender may decide to abandon a contaminated mortgaged property
as collateral for its loan rather than foreclose and risk liability for clean-up
costs.
Superlien Laws. Under the laws of many states, contamination on a property
may give rise to a lien on the property for clean-up costs. In several states,
such a lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to such
a "superlien".
CERCLA. The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), imposes strict liability 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 lender that, "without participating in the management" of the
facility, holds indicia of ownership primarily to protect his security interest
in the facility. This so-called secured creditor exemption is intended to
provide a lender protection from liability under CERCLA as an owner or operator
of contaminated property. The secured creditor exemption, however, does not
necessarily protect a lender from liability for cleanup of hazardous substances
in every situation. A secured lender may be liable as an "owner" or "operator"
of a contaminated mortgaged property if agents or employees of the lender are
deemed to have participated in the management of such mortgaged property or the
operations of the borrower. Such liability may exist even if the lender did not
cause or contribute to the contamination and regardless of whether the lender
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.
In addition, lenders may face potential liability for remediation of
releases of petroleum or hazardous substances from underground storage tanks
under Subtitle I of the Federal Resource Conservation and Recovery Act ("RCRA"),
if they are deemed to be the "owners" or "operators" of facilities in which they
have a security interest or upon which they have foreclosed.
The Federal Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Lender Liability Act") seeks to clarify the actions
a lender may take without incurring liability as an "owner" or "operator" of
contaminated property or underground petroleum storage tanks. The Lender
Liability Act amends CERCLA and RCRA to provide guidance on actions that do or
do not constitute "participation in management."
Importantly, the Lender Liability Act does not, among other things: (1)
completely eliminate potential liability to lenders under CERCLA or RCRA, (2)
reduce credit risks associated with lending to borrowers having significant
environmental liabilities or potential liabilities, (3) eliminate environmental
risks associated with taking possession of contaminated property or underground
storage tanks or assuming control of the operations thereof, or (4) affect
liabilities or potential liabilities under state environmental laws.
64
<PAGE>
Certain Other State Laws. Many states have statutes similar to CERCLA and
RCRA, and not all of those statutes provide for a secured creditor exemption.
In a few states, transfers of some types of properties are conditioned
upon cleanup of contamination prior to transfer. In these cases, a lender 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.
Beyond statute-based environmental liability, there exist common law
causes of action (for example, actions based on nuisance or on toxic tort
resulting in death, personal injury, or damage to property) related to hazardous
environmental conditions on a property. While it may be more difficult to hold a
lender liable in such cases, unanticipated or uninsured liabilities of the
borrower may jeopardize the borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against other potentially liable parties,
but such parties may be without substantial assets. Accordingly, it is possible
that such costs could become a liability of the Trust Fund and occasion a loss
to the Certificateholders.
To reduce the likelihood of such a loss, unless otherwise specified in the
related Prospectus Supplement, the Pooling and Servicing Agreement will provide
that the Master Servicer, acting on behalf of the Trustee, may not take
possession of a Mortgaged Property or take over its operation unless the Master
Servicer, based solely on a report (as to environmental matters) prepared by a
person who regularly conducts environmental site assessments, has made the
determination that it is appropriate to do so, as described under "Description
of the Pooling Agreements--Realization Upon Defaulted Mortgage Loans."
If a lender forecloses on a mortgage secured by a property, the operations
of which are subject to environmental laws and regulations, the lender may be
required to operate the property in accordance with those laws and regulations.
Such compliance may entail substantial expense, especially in the case of
industrial or manufacturing properties.
In addition, a lender 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 lender to recoup its investment in a loan upon foreclosure.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
Certain of the Mortgage Loans may contain "due-on-sale" and
"due-on-encumbrance" clauses that purport to permit the lender to accelerate the
maturity of the loan if the borrower transfers or encumbers the related
Mortgaged Property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such clauses
in many states. By virtue, however, of the Garn-St. Germain Depository
Institutions Act of 1982 (the "Garn Act"), effective October 15, 1982 (which
purports to preempt state laws that prohibit the enforcement of due-on-sale
clauses by providing, among other matters, that "due-on-sale" clauses in certain
loans made after the effective date of the Garn Act are enforceable, within
certain limitations as set forth in the Garn Act and the regulations promulgated
thereunder), a Master Servicer may nevertheless have the right to accelerate the
maturity of a Mortgage Loan that contains a "due-on-sale" provision upon
transfer of an interest in the property, regardless of the Master Servicer's
ability to demonstrate that a sale threatens its legitimate security interest.
SUBORDINATE FINANCING
Certain of the Mortgage Loans may not restrict the ability of the borrower
to use the Mortgaged Property as security for one or more additional loans.
Where a borrower encumbers a mortgaged property with one or more junior liens,
the senior lender is subjected to additional risk. First, the borrower may have
difficulty servicing and repaying multiple loans. Moreover, if the subordinate
financing permits recourse to the borrower (as is frequently the case) and the
senior loan does not, a borrower may have more incentive to repay sums due on
the subordinate loan. Second, acts of the senior lender that prejudice the
junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal
65
<PAGE>
amount of or the interest rate payable on the senior loan, the senior lender may
lose its priority to the extent any existing junior lender is harmed or the
borrower is additionally burdened. Third, if the borrower defaults on the senior
loan and/or any junior loan or loans, the existence of junior loans and actions
taken by junior lenders can impair the security available to the senior lender
and can interfere with or delay the taking of action by the senior lender.
Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or
similar proceedings by the senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and in
some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ("Title V") provides that state usury limitations shall not apply to
certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V 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
the 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.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan provides
for such interest rate, discount points and charges as are permitted in such
state or (ii) such Mortgage Loan provides that the terms thereof are to be
construed in accordance with the laws of another state under which such interest
rate, discount points and charges would not be usurious and the borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of any servicer to
collect full amounts of interest on certain of the Mortgage Loans. Any
shortfalls in interest collections resulting from the application of the Relief
Act would result in a reduction of the amounts distributable to the holders of
the related series of Certificates, and would not be covered by advances or,
unless otherwise specified in the related Prospectus Supplement, any form of
Credit Support provided in connection with such Certificates. In addition, the
Relief Act imposes limitations that would impair the ability of the servicer to
foreclose on an affected Mortgage Loan during the borrower's period of active
duty status and, under certain circumstances, during an additional three-month
period thereafter.
66
<PAGE>
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 architectural and communication barriers that are
structural in nature 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. The requirements of the ADA may also
be imposed on a foreclosing lender who succeeds to the interest of the borrower
as owner or landlord. Since the "readily achievable" standard may vary depending
on the financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the borrower of complying with the requirements of
the ADA may be subject to more stringent requirements than those to which the
borrower is subject.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ("RICO") statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the Comprehensive Crime Control Act of 1984, the
government may seize the property even before conviction. The government must
publish notice of the forfeiture proceeding and may give notice to all parties
"known to have an alleged interest in the property", including the holders of
mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based or (ii) the lender was, at the
time of execution of the mortgage, "reasonably without cause to believe" that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
CERTAIN 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 Offered
Certificates. This discussion is directed solely to Certificateholders that hold
the Certificates as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986 (the "Code") and it does not purport to discuss
all federal income tax consequences that may be applicable to particular
categories of investors, some of which (such as banks, insurance companies and
foreign investors) may be subject to special rules. Further, the authorities on
which this discussion, and the opinion referred to below, are based are subject
to change or differing interpretations, which could apply retroactively.
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 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. 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 Offered Certificates. See "State and
Other Tax Consequences". 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 Offered Certificates.
The following discussion addresses securities of two general types: (i)
certificates ("REMIC Certificates") representing interests in a Trust Fund, or a
portion thereof, that the Master Servicer or the Trustee will elect to have
treated as a real estate mortgage investment conduit ("REMIC") under Sections
860A through 860G (the "REMIC Provisions") of the Code and (ii) certificates
("Grantor Trust Certificates") representing interests in a Trust Fund ("Grantor
Trust Fund") as to which no such election will be made. The Prospectus
Supplement for each series of Certificates will indicate whether a REMIC
election (or elections) will be made for the related Trust Fund and, if such an
election is to be made, will identify all "regular interests" and "residual
interests" in the REMIC. For purposes of this tax discussion, references to a
"Certificateholder" or a "holder" are to the beneficial owner of a Certificate.
67
<PAGE>
The following discussion is limited in applicability to Offered
Certificates. Moreover, this discussion applies only to the extent that Mortgage
Assets held by a Trust Fund consist solely of Mortgage Loans. To the extent that
other Mortgage Assets, including REMIC certificates and mortgage pass-through
certificates, are to be held by a Trust Fund, the tax consequences associated
with the inclusion of such assets will be disclosed in the related Prospectus
Supplement. In addition, if Cash Flow Agreements, other than guaranteed
investment contracts, are included in a Trust Fund, the tax consequences
associated with such Cash Flow Agreements also will be disclosed in the related
Prospectus Supplement. See "Description of the Trust Funds--Cash Flow
Agreements".
Furthermore, 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 do
not adequately address certain issues relevant to, and in some instances provide
that they are not applicable to, securities such as the Certificates.
REMICS
Classification of REMICs. It is the opinion of Willkie Farr & Gallagher,
counsel to the Depositor, that upon the issuance of each series of REMIC
Certificates, assuming compliance with all provisions of the related Pooling
Agreement and based upon the law on the date hereof, for federal income tax
purposes the related Trust Fund (or each applicable portion thereof) will
qualify as a REMIC and the REMIC Certificates offered with respect thereto will
be considered to evidence ownership of "regular interests" ("REMIC Regular
Certificates") or "residual interests" ("REMIC Residual Certificates") in that
REMIC within the meaning of the REMIC Provisions.
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 REMIC Certificates may not be
accorded the status or given the tax treatment described below. 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 during which the requirements for such status are
not satisfied. The Pooling Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, unless
otherwise provided in the related Prospectus Supplement, the REMIC Certificates
will be "real estate assets" within the meaning of Section 856(c)(5)(A) of the
Code and assets described in Section 7701(a)(19)(C) of the Code in the same
proportion that the assets of the REMIC underlying such Certificates would be so
treated. However, to the extent that the REMIC assets constitute mortgages on
property not used for residential or certain other prescribed purposes, the
REMIC Certificates will not be treated as assets qualifying under Section
7701(a)(19)(C)(v) of the Code. Moreover, if 95% or more of the assets of the
REMIC qualify for any of the foregoing treatments at all times during a calendar
year, the REMIC Certificates will qualify for the corresponding status in their
entirety for that calendar year. Interest (including original issue discount) on
the REMIC Regular Certificates and income allocated to the class of REMIC
Residual Certificates will be interest described in Section 856(c)(3)(B) of the
Code to the extent that such Certificates are treated as "real estate assets"
within the meaning of Section 856(c)(5)(A) of the Code. In addition, the REMIC
Regular Certificates will be "qualified mortgages" within the meaning of Section
860G(a)(3) of the Code. 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 Master Servicer or the Trustee will report those determinations to
Certificateholders in the manner and at the times required by the applicable
Treasury regulations.
The assets of the REMIC will include, in addition to Mortgage Loans,
payments on Mortgage Loans held pending distribution on the REMIC Certificates
and property acquired by foreclosure held pending sale, and may include amounts
in reserve accounts. It is unclear whether property acquired by foreclosure held
pending sale and amounts in reserve accounts would be considered to be part of
the Mortgage Loans, or whether such assets (to the extent not invested in assets
described in the foregoing sections) otherwise would receive the same treatment
as the Mortgage Loans for purposes of all of the foregoing sections. In
addition, in some instances Mortgage Loans may not be treated entirely as assets
described in the foregoing sections. If so, the related Prospectus Supplement
will describe
68
<PAGE>
those Mortgage Loans that may not be so treated. The REMIC Regulations do
provide, however, that payments on Mortgage Loans held pending distribution are
considered part of the Mortgage Loans for purposes of Section 856(c)(5)(A) of
the Code.
Tiered REMIC Structures. For certain series of REMIC 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 REMIC Certificates, counsel to the Depositor will
deliver its opinion generally to the effect that, assuming compliance with all
provisions of the related Pooling Agreement, the Tiered REMICs will each qualify
as a REMIC and the REMIC Certificates issued by the Tiered REMICs, respectively,
will be considered to evidence ownership of REMIC Regular Certificates or REMIC
Residual Certificates in the related REMIC within the meaning of the REMIC
Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
"real estate assets" within the meaning of Section 856(c)(5)(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, the Tiered REMICs will be treated as one
REMIC.
TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
Original Issue Discount. Certain REMIC Regular Certificates may be issued
with "original issue discount" within the meaning of Section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in income
as it accrues, in accordance with the method described below, in advance of the
receipt of the cash attributable to such income. In addition, Section 1272(a)(6)
of the Code provides special rules applicable to REMIC Regular Certificates and
certain other debt instruments issued with original issue discount. Regulations
have not been issued under that section.
The Code requires that a prepayment assumption be used with respect to
Mortgage Loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The Conference Committee Report accompanying the Tax Reform Act of 1986 (the
"Committee Report") indicates that the regulations will provide that the
prepayment assumption used with respect to a REMIC Regular Certificate must be
the same as that used in pricing the initial offering of such REMIC Regular
Certificate. The prepayment assumption (the "Prepayment Assumption") used in
reporting original issue discount for each series of REMIC Regular Certificates
will be consistent with this standard and will be disclosed in the related
Prospectus Supplement. However, neither the Depositor nor any other person will
make any representation that the Mortgage Loans will in fact prepay at a rate
conforming to the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will
be the excess of its stated redemption price at maturity over its issue price.
The issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial issuance
(the "Closing Date"), the issue price for such class will be the fair market
value of such class on the Closing Date. Under the OID Regulations, the stated
redemption price of a REMIC Regular Certificate is equal to the total of all
payments to be made on such Certificate other than "qualified stated interest".
"Qualified stated interest" includes interest that is unconditionally payable at
least annually at a single fixed rate, at a "qualified floating rate", or at an
"objective rate", a combination of a single fixed rate and one or more
"qualified floating rates" or one "qualified inverse floating rate", or a
combination of "qualified floating rates" that does not operate in a manner that
accelerates or defers interest payments on such REMIC Regular Certificate.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
69
<PAGE>
such REMIC Regular Certificates. If the original issue discount rules apply to
such Certificates, the related Prospectus Supplement will describe the manner in
which such rules will be applied with respect to those Certificates in preparing
information returns to the Certificateholders and the Internal Revenue Service
(the "IRS").
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated as part of the overall cost of such
REMIC Regular Certificate (and not as a separate asset the cost of which is
recovered entirely out of interest received on the next Distribution Date) and
that portion of the interest paid on the first Distribution Date in excess of
interest accrued for a number of days corresponding to the number of days from
the Closing Date to the first Distribution Date should be included in the stated
redemption price of such REMIC Regular Certificate. However, the OID Regulations
state that all or some portion of such accrued interest may be treated as a
separate asset the cost of which is recovered entirely out of interest paid on
the first Distribution Date. It is unclear how an election to do so would be
made under the OID Regulations and whether such an election could be made
unilaterally by a Certificateholder.
Notwithstanding the general definition of original issue discount,
original issue discount on a REMIC Regular Certificate will be considered to be
de minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the amounts determined, as to each payment included in the stated
redemption price of such REMIC Regular Certificate, by multiplying (i) the
number of complete years (rounding down for partial years) from the issue date
until such payment is expected to be made (presumably taking into account the
Prepayment Assumption) by (ii) a fraction, the numerator of which is the amount
of the payment, and the denominator of which is the stated redemption price at
maturity of such REMIC Regular Certificate. Under the OID Regulations, original
issue discount of only a de minimis amount (other than de minimis original
discount attributable to a so-called "teaser" interest rate or an initial
interest holiday) will be included in income as each payment of stated principal
is made, based on the product of the total amount of such de minimis original
issue discount and a fraction, the numerator of which is the amount of such
principal payment and the denominator of which is the outstanding stated
principal amount of the REMIC Regular Certificate. The OID Regulations also
would permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See "--Taxation
of Owners of REMIC Regular Certificates--Market Discount" for a description of
such election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of
a de minimis amount, the holder of such Certificate must include in ordinary
gross income the sum of the "daily portions" of original issue discount for each
day during its taxable year on which it held such REMIC Regular Certificate,
including the purchase date but excluding the disposition date. In the case of
an original holder of a REMIC Regular Certificate, the daily portions of
original issue discount will be determined as follows.
As to each "accrual period", that is, unless otherwise stated in the
related Prospectus Supplement, each period that ends on a date that corresponds
to a Distribution Date and begins on the first day following the immediately
preceding accrual period (or in the case of the first such period, begins on the
Closing Date), a calculation will be made of the portion of the original issue
discount that accrued during such accrual period. The portion of original issue
discount that accrues in any accrual period will equal the excess, if any, of
(i) the sum of (a) the present value, as of the end of the accrual period, of
all of the distributions remaining to be made on the REMIC Regular Certificate,
if any, in future periods and (b) the distributions made on such REMIC Regular
Certificate during the accrual period of amounts included in the stated
redemption price, over (ii) the adjusted issue price of such REMIC Regular
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence will be calculated
(x) assuming that distributions on the REMIC Regular Certificate will be
received in future periods based on the Mortgage Loans being prepaid at a rate
equal to the Prepayment Assumption and (y) using a discount rate equal to the
original yield to maturity of the Certificate. For these purposes, the original
yield to maturity of the Certificate will be calculated based on its issue price
and assuming that distributions on the Certificate will be made in all accrual
periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate
at the beginning of any accrual period will equal the issue price of such
Certificate, increased by the aggregate amount of original issue discount that
accrued with respect to such Certificate in prior accrual periods, and reduced
by the amount of any distributions made on such
70
<PAGE>
REMIC Regular Certificate in prior accrual periods of amounts included in the
stated redemption price. The original issue discount accruing during any accrual
period, computed as described above, will be allocated ratably to each day
during the accrual period to determine the daily portion of original issue
discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its "adjusted issue
price", in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the case of a REMIC Regular
Certificate issued with original issue discount, at a purchase price less than
its adjusted issue price, will recognize gain upon receipt of each distribution
representing stated redemption price. In particular, under Section 1276 of the
Code such a Certificateholder generally will be required to allocate the portion
of each such distribution representing stated redemption price first to accrued
market discount not previously included in income, and to recognize ordinary
income to that extent. A Certificateholder may elect to include market discount
in income currently as it accrues rather than including it on a deferred basis
in accordance with the foregoing. If made, such election will apply to all
market discount bonds acquired by such Certificateholder on or after the first
day of the first taxable year to which such election applies. In addition, the
OID Regulations permit a Certificateholder to elect to accrue all interest,
discount (including de minimis market or original issue discount) and premium in
income as interest, based on a constant yield method. If such an election were
made with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to currently include
market discount in income with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election or thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate that is
acquired at a premium would be 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. See "--Taxation of Owners of REMIC
Regular Certificates --Premium". Each of these elections to accrue interest,
discount and premium with respect to a Certificate on a constant yield method or
as interest would be irrevocable.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the Prepayment Assumption. If
market discount is treated as de minimis under this rule, it appears that the
actual discount would be treated in a manner similar to original issue discount
of a de minimis amount. See "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount". Such treatment would result in discount
being included in income at a slower rate than discount would be required to be
included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method; (ii) in the case of a REMIC Regular Certificate issued without original
issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the
total amount of stated interest remaining to be paid on the REMIC Regular
Certificate as of the beginning of the accrual period or (iii) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the original
issue discount accrued in the accrual period bears to the total original issue
discount remaining on the REMIC Regular Certificate at the beginning of the
accrual period. Moreover, the Prepayment
71
<PAGE>
Assumption used in calculating the accrual of original issue discount is also
used in calculating the accrual of market discount. Because the regulations
referred to in this paragraph have not been issued, it is not possible to
predict what effect such regulations might have on the tax treatment of a REMIC
Regular Certificate purchased at a discount in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the
sale or exchange of such Certificate as ordinary income to the extent of the
market discount accrued to the date of disposition under one of the foregoing
methods, less any accrued market discount previously reported as ordinary
income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased at
a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield method
over the life of the Certificate. If made, such an election will apply to all
debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID Regulations also permit Certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the Certificateholder as having made the election
to amortize premium generally. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount". The Committee Report states that the same rules
that apply to accrual of market discount (which rules will require use of a
Prepayment Assumption in accruing market discount with respect to REMIC Regular
Certificates without regard to whether such Certificates have original issue
discount) will also apply in amortizing bond premium under Section 171 of the
Code.
Realized Losses. Under Section 166 of the Code, both corporate holders of
the REMIC Regular Certificates and noncorporate holders of the REMIC Regular
Certificates that acquire such Certificates in connection with a trade or
business should be allowed to deduct, as ordinary losses, any losses sustained
during a taxable year in which their Certificates become wholly or partially
worthless as the result of one or more realized losses on the Residential Loans.
However, it appears that a noncorporate holder that does not acquire a REMIC
Regular Certificate in connection with a trade or business will not be entitled
to deduct a loss under Section 166 of the Code until such holder's Certificate
becomes wholly worthless (i.e., until its outstanding principal balance has been
reduced to zero) and that the loss will be characterized as a short-term capital
loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue discount with respect to such Certificate, without
giving effect to any reductions in distributions attributable to defaults or
delinquencies on the Residential Loans or the underlying Certificates until it
can be established that any such reduction ultimately will not be recoverable.
As a result, the amount of taxable income reported in any period by the holder
of a REMIC Regular Certificate could exceed the amount of economic income
actually realized by the holder in such period. Although the holder of a REMIC
Regular Certificate eventually will recognize a loss or reduction in income
attributable to previously accrued and included income that as the result of a
realized loss ultimately will not be realized, the law is unclear with respect
to the timing and character of such loss or reduction in income.
TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
General. As residual interests, the REMIC Residual Certificates will be
subject to tax rules that differ significantly from those that would apply if
the REMIC Residual Certificates were treated for federal income tax purposes as
direct ownership interests in the Mortgage Loans or as debt instruments issued
by the REMIC.
72
<PAGE>
An original holder of a REMIC Residual Certificate generally will be
required to report its daily portion of the taxable income or, subject to the
limitations noted in this discussion, the net loss of the REMIC for each day
during a calendar quarter that such holder owned such REMIC Residual
Certificate. For this purpose, the taxable income or net loss of the REMIC will
be allocated to each day in the calendar quarter ratably using a "30 days per
month/90 days per quarter/360 days per year" convention unless otherwise
disclosed in the related Prospectus Supplement. The daily amounts so allocated
will then be allocated among the REMIC Residual Certificateholders in proportion
to their respective ownership interests on such day. Any amount included in the
gross income or allowed as a loss of any REMIC Residual Certificateholder by
virtue of this paragraph will be treated as ordinary income or loss. The taxable
income of the REMIC will be determined under the rules described below in
"--Taxable Income of the REMIC" and will be taxable to the REMIC Residual
Certificateholders without regard to the timing or amount of cash distributions
by the REMIC. Ordinary income derived from REMIC Residual Certificates will be
"portfolio income" for purposes of the taxation of taxpayers subject to
limitations under Section 469 of the Code on the deductibility of "passive
losses".
A holder of a REMIC Residual Certificate that purchased such Certificate
from a prior holder of such Certificate also will be required to report on its
federal income tax return amounts representing its daily share of the taxable
income (or net loss) of the REMIC for each day that it holds such REMIC Residual
Certificate. Those daily amounts generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report indicates
that certain modifications of the general rules may be made, by regulations,
legislation or otherwise, to reduce (or increase) the income of a REMIC Residual
Certificateholder that purchased such REMIC Residual Certificate from a prior
holder of such Certificate at a price greater than (or less than) the adjusted
basis (as defined below) such REMIC Residual Certificate would have had in the
hands of an original holder of such Certificate. The REMIC Regulations, however,
do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such REMIC Residual Certificate will be taken
into account in determining the income of such holder for federal income tax
purposes. Although it appears likely that any such payment would be includible
in income immediately upon its receipt, the IRS might assert that such payment
should be included in income over time according to an amortization schedule or
according to some other method. Because of the uncertainty concerning the
treatment of such payments, holders of REMIC Residual Certificates should
consult their tax advisors concerning the treatment of such payments for income
tax purposes.
The amount of income REMIC Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes due as a result of their
ownership of REMIC Residual Certificates or unrelated deductions against which
income may be offset, subject to the rules relating to "excess inclusions",
residual interests without "significant value" and "noneconomic" residual
interests discussed below. The fact that the tax liability associated with the
income allocated to REMIC Residual Certificateholders may exceed the cash
distribution received by such REMIC Residual Certificateholders for the
corresponding period may significantly adversely affect such REMIC Residual
Certificateholders' after-tax rate of return.
Taxable Income of the REMIC. The taxable income of the REMIC will equal
the income from the Mortgage Loans and other assets of the REMIC plus any
cancellation of indebtedness income due to the allocation of realized losses to
REMIC Regular Certificates, less the deductions allowed to the REMIC for
interest (including original issue discount and reduced by any premium on
issuance) on the REMIC Regular Certificates (and any other class of REMIC
Certificates constituting "regular interests" in the REMIC not offered hereby),
amortization of any premium on the Mortgage Loans, bad debt losses with respect
to the Mortgage Loans and, except as described below, for servicing,
administrative and other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC Certificates (or, if a class of REMIC Certificates is not sold
initially, their fair market values). Such aggregate basis will be allocated
among the Mortgage Loans and the other assets of the REMIC in proportion to
their respective fair market values. The issue price of any REMIC Certificates
offered hereby will be determined in the manner described above under
"--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount".
The issue price of a REMIC Certificate received in exchange for an interest in
the Mortgage Loans or other property will equal the fair market value of such
interests in the Mortgage Loans or other property. Accordingly, if one or more
classes of REMIC Certificates are retained initially rather than sold, the
73
<PAGE>
Master Servicer or the Trustee may be required to estimate the fair market value
of such interests in order to determine the basis of the REMIC in the Mortgage
Loans and other property held by the REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to Mortgage Loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates (that is, under the constant yield method taking into account the
Prepayment Assumption). However, a REMIC that acquires loans at a market
discount must include such market discount in income currently, as it accrues,
on a constant interest basis. See "--Taxation of Owners of REMIC Regular
Certificates" above, which describes a method for accruing such discount income
that is analogous to that required to be used by a REMIC as to Mortgage Loans
with market discount that it holds.
A Mortgage Loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis therein, determined as described
in the preceding paragraph, is less than (or greater than) its stated redemption
price. Any such discount will be includible in the income of the REMIC as it
accrues, in advance of receipt of the cash attributable to such income, under a
method similar to the method described above for accruing original issue
discount on the REMIC Regular Certificates. It is anticipated that each REMIC
will elect under Section 171 of the Code to amortize any premium on the Mortgage
Loans. Premium on any Mortgage Loan to which such election applies may be
amortized under a constant yield method, presumably taking into account a
Prepayment Assumption. Further, such an election would not apply to any Mortgage
Loan originated on or before September 27, 1985. Instead, premium on such a
Mortgage Loan should be allocated among the principal payments thereon and be
deductible by the REMIC as those payments become due or upon the prepayment of
such Mortgage Loan.
A REMIC will be allowed deductions for interest (including original issue
discount) on the REMIC Regular Certificates (including any other class of REMIC
Certificates constituting "regular interests" in the REMIC not offered hereby)
equal to the deductions that would be allowed if the REMIC Regular Certificates
(including any other class of REMIC Certificates constituting "regular
interests" in the REMIC not offered hereby) were indebtedness of the REMIC.
Original issue discount will be considered to accrue for this purpose as
described above under "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount", except that the de minimis rule and the
adjustments for subsequent holders of REMIC Regular Certificates (including any
other class of REMIC Certificates constituting "regular interests" in the REMIC
not offered hereby) described therein will not apply.
If a class of REMIC Regular Certificates is issued at a price in excess of
the stated redemption price of such class (such excess, "Issue Premium"), the
net amount of interest deductions that are allowed the REMIC in each taxable
year with respect to the REMIC Regular Certificates of such class will be
reduced by an amount equal to the portion of the Issue Premium that is
considered to be amortized or repaid in that year. Although the matter is not
entirely certain, it is likely that Issue Premium would be amortized under a
constant yield method in a manner analogous to the method of accruing original
issue discount described above under "--Taxation of Owners of REMIC Regular
Certificates--Original Issue Discount".
As a general rule, the taxable income of a REMIC will be determined in the
same manner as if the REMIC were an individual having the calendar year as its
taxable year and using the accrual method of accounting. However, no item of
income, gain, loss or deduction allocable to a prohibited transaction will be
taken into account. See "--Prohibited Transactions Tax and Other Taxes" below.
Further, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code (which allows such deductions only to the
extent they exceed in the aggregate two percent of the taxpayer's adjusted gross
income) will not be applied at the REMIC level so that the REMIC will be allowed
deductions for servicing, administrative and other non-interest expenses in
determining its taxable income. All such expenses will be allocated as a
separate item to the holders of REMIC Certificates, subject to the limitation of
Section 67 of the Code. See "--Possible Pass-Through of Miscellaneous Itemized
Deductions". If the deductions allowed to the REMIC exceed its gross income for
a calendar quarter, such excess will be the net loss for the REMIC for that
calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the REMIC Residual
Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such REMIC Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such REMIC
Residual Certificateholder's adjusted basis in its REMIC Residual
74
<PAGE>
Certificate as of the close of such calendar quarter (determined without regard
to such net loss). Any loss that is not currently deductible by reason of this
limitation may be carried forward indefinitely to future calendar quarters and,
subject to the same limitation, may be used only to offset income from the REMIC
Residual Certificate. The ability of REMIC Residual Certificateholders to deduct
net losses may be subject to additional limitations under the Code, as to which
REMIC Residual Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
nontaxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the Trust Fund. However, such bases increases may not occur until the
end of the calendar quarter, or perhaps the end of the calendar year, with
respect to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such REMIC Residual
Certificateholders, and increases in such initial bases either occur after such
distributions or (together with their initial bases) are less than the amount of
such distributions, gain will be recognized to such REMIC Residual
Certificateholders on such distributions and will be treated as gain from the
sale of their REMIC Residual Certificates.
The effect of these rules is that a REMIC Residual Certificateholder may
not amortize its basis in a REMIC Residual Certificate, but may only recover its
basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See "--Sales of REMIC
Certificates". For a discussion of possible modifications of these rules that
may require adjustments to income of a holder of a REMIC Residual Certificate
other than an original holder in order to reflect any difference between the
cost of such REMIC Residual Certificate to such REMIC Residual Certificateholder
and the adjusted basis such REMIC Residual Certificate would have in the hands
of an original holder, see "--Taxation of Owners of REMIC Residual
Certificates--General".
Excess Inclusions. Any "excess inclusions" with respect to a REMIC
Residual Certificate will, with an exception discussed below for certain REMIC
Residual Certificates held by thrift institutions, be subject to federal income
tax in all events.
In general, the "excess inclusions" with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of (i) the sum
of the daily portions of REMIC taxable income allocable to such REMIC Residual
Certificate over (ii) the sum of the "daily accruals" (as defined below) for
each day during such quarter that such REMIC Residual Certificate was held by
such REMIC Residual Certificateholder. The daily accruals of a REMIC Residual
Certificateholder will be determined by allocating to each day during a calendar
quarter its ratable portion of the product of the "adjusted issue price" of the
REMIC Residual Certificate at the beginning of the calendar quarter and 120% of
the "long-term Federal rate" in effect on the Closing Date. For this purpose,
the adjusted issue price of a REMIC Residual Certificate as of the beginning of
any calendar quarter will be equal to the issue price of the REMIC Residual
Certificate, increased by the sum of the daily accruals for all prior quarters
and decreased (but not below zero) by any distributions made with respect to
such REMIC Residual Certificate before the beginning of such quarter. The issue
price of a REMIC Residual Certificate is the initial offering price to the
public (excluding bond houses and brokers) at which a substantial amount of the
REMIC Residual Certificates were sold. The "long-term Federal rate" is an
average of current yields on Treasury securities with a remaining term of
greater than nine years, computed and published monthly by the IRS.
For REMIC Residual Certificateholders, an excess inclusion (i) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (ii) will be treated as "unrelated business taxable income" to an
otherwise tax-exempt organization and (iii) will not be eligible for any rate
reduction or exemption under any applicable tax treaty with respect to the 30%
United States withholding tax imposed on distributions to REMIC Residual
Certificateholders that are foreign investors. See, however, "--Foreign
Investors in REMIC Certificates" below.
As an exception to the general rules described above, thrift institutions
are allowed to offset their excess inclusions with unrelated deductions, losses
or loss carryovers, but only if the REMIC Residual Certificates are
75
<PAGE>
considered to have "significant value". The REMIC Regulations provide that in
order to be treated as having significant value, the REMIC Residual Certificates
must have an aggregate issue price, at least equal to two percent of the
aggregate issue prices of all of the related REMIC's Regular and Residual
Certificates. In addition, based on the Prepayment Assumption, the anticipated
weighted average life of the REMIC Residual Certificates must equal or exceed
20% of the anticipated weighted average life of the REMIC, based on the
Prepayment Assumption and on any required or permitted cleanup calls or required
liquidation provided for in the REMIC's organizational documents. Although it
has not done so, the Treasury also has authority to issue regulations that would
treat the entire amount of income accruing on a REMIC Residual Certificate as an
excess inclusion if the REMIC Residual Certificates are considered not to have
"significant value". The related Prospectus Supplement will disclose whether
offered REMIC Residual Certificates may be considered to have "significant
value" under the REMIC Regulations; provided, however, that any disclosure that
a REMIC Residual Certificate will have "significant value" will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will have "significant value" for purposes of the
above-described rules. The above-described exception for thrift institutions
applies only to those residual interests held directly by, and deductions,
losses and loss carryovers incurred by, such institutions (and not by other
members of an affiliated group of corporations filing a consolidated income tax
return) or by certain wholly owned direct subsidiaries of such institutions
formed or operated exclusively in connection with the organization and operation
of one or more REMICs.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Treasury regulations yet to be issued could apply a similar rule to
regulated investment companies, common trust funds and certain cooperatives; the
REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations,
transfers of "noneconomic" REMIC Residual Certificates will be disregarded for
all federal income tax purposes if "a significant purpose of the transfer was to
enable the transferor to impede the assessment or collection of tax". If such
transfer is disregarded, the purported transferor will continue to remain liable
for any taxes due with respect to the income on such "noneconomic" REMIC
Residual Certificate. The REMIC Regulations provide that a REMIC Residual
Certificate is noneconomic unless, based on the Prepayment Assumption and on any
required or permitted cleanup calls, or required liquidation provided for in the
REMIC's organizational documents, (i) the present value of the expected future
distributions (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 REMIC Residual Certificate, which rate is
computed and published monthly by the IRS) on the REMIC Residual Certificate
equals at least the present value of the expected tax on the anticipated excess
inclusions and (ii) the transferor reasonably expects that the transferee will
receive distributions with respect to the REMIC Residual Certificate at or after
the time the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. Accordingly, all transfers of REMIC
Residual Certificates that may constitute noneconomic residual interests will be
subject to certain restrictions under the terms of the related Pooling Agreement
that are intended to reduce the possibility of any such transfer being
disregarded. Such restrictions will require each party to a transfer to provide
an affidavit that no purpose of such transfer is to impede the assessment or
collection of tax, including certain representations as to the financial
condition of the prospective transferee, as to which the transferor is also
required to make a reasonable investigation to determine such transferee's
historic payment of its debts and ability to continue to pay its debts as they
come due in the future. Prior to purchasing a REMIC Residual Certificate,
prospective purchasers should consider the possibility that a purported transfer
of such REMIC Residual Certificate by such a purchaser to another purchaser at
some future date may be disregarded in accordance with the above-described rules
which would result in the retention of tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered "noneconomic" residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered "noneconomic" will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will not be considered "noneconomic" for purposes of the
above-described rules. See "--Taxation of Owners of REMIC Residual
76
<PAGE>
Certificates--Foreign Investors in REMIC Certificates" below for additional
restrictions applicable to transfers of certain REMIC Residual Certificates to
foreign persons.
Mark-to-Market Rules. On December 24, 1996, the IRS released final
regulationa (the "Mark-to-Market Regulations") relating to the requirement that
a securities dealer mark to market securities held for sale to customers. This
mark-to-market requirement applies to all securities owned by a dealer except to
the extent that the dealer has specifically identified a security as held for
investment. The Mark-to-Market Regulations provide that for purposes of this
mark-to-market requirement, a REMIC Residual Certificate issued after January 4,
1995 is not treated as a security and thus may not be marked to market.
Prospective purchasers of a REMIC Residual Certificate should consult their tax
advisors regarding the possible application of the mark-to-market
requirement to REMIC Residual Certificates.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to the holders of the related
REMIC Residual Certificates. The applicable Treasury regulations indicate,
however, that in the case of a REMIC that is similar to a single class grantor
trust, all or a portion of such fees and expenses should be allocated to the
holders of the related REMIC Regular Certificates. Unless otherwise stated in
the related Prospectus Supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to
the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate or
trust, or a "pass-through entity" beneficially owned by one or more individuals,
estates or trusts, (i) an amount equal to such individual's, estate's or trust's
share of such fees and expenses will be added to the gross income of such holder
and (ii) such individual's, estate's or trust's share of such fees and expenses
will be treated as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to the
extent they exceed in the aggregate two percent of a taxpayer's adjusted gross
income. In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (x) three percent of
the excess of the individual's adjusted gross income over such amount or (y) 80%
of the amount of itemized deductions otherwise allowable for the taxable year.
The amount of additional taxable income reportable by REMIC Certificateholders
that are subject to the limitations of either Section 67 or Section 68 of the
Code may be substantial. Furthermore, in determining the alternative minimum
taxable income of such a holder of a REMIC Certificate 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. Accordingly, such
REMIC Certificates may not be appropriate investments for individuals, estates
or trusts, or pass-through entities beneficially owned by one or more
individuals, estates or trusts. Such prospective investors should carefully
consult with their own tax advisors prior to making an investment in such
Certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Certificate.
The adjusted basis of a REMIC Regular Certificate generally will equal the cost
of such REMIC Regular Certificate to such Certificateholder, increased by income
reported by such Certificateholder with respect to such REMIC Regular
Certificate (including original issue discount and market discount income) and
reduced (but not below zero) by distributions on such REMIC Regular Certificate
received by such Certificateholder and by any amortized premium. The adjusted
basis of a REMIC Residual Certificate will be determined as described under
"--Basis Rules, Net Losses and Distributions". Except as provided in the
following two paragraphs, any such gain or loss will be capital gain or loss,
provided such REMIC Certificate is held as a capital asset (generally, property
held for investment) within the meaning of Section 1221 of the Code. The Code as
of the date of this Prospectus provides for a top marginal tax rate of 39.6% for
individuals and a maximum marginal rate for long-term capital gains for
individuals of 20%. No such rate differential exists for corporations. In
addition, the distinction between a capital gain or loss and ordinary income or
loss remains relevant for other purposes.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent such gain does not
exceed the excess, if any, of (i) the amount that would have been includible in
the seller's income with respect to such REMIC Regular Certificate assuming that
income had accrued
77
<PAGE>
thereon at a rate equal to 110% of the "applicable Federal rate" (generally, a
rate based on an average of current yields on Treasury securities having a
maturity comparable to that of the Certificate based on the application of the
Prepayment Assumption to such Certificate, which rate is computed and published
monthly by the IRS), determined as of the date of purchase of such REMIC Regular
Certificate, over (ii) the amount of ordinary income actually includible in the
seller's income prior to such sale. In addition, gain recognized on the sale of
a REMIC Regular Certificate by a seller who purchased such REMIC Regular
Certificate at a market discount will be taxable as ordinary income in an amount
not exceeding the portion of such discount that accrued during the period such
REMIC Certificate was held by such holder, reduced by any market discount
included in income under the rules described above under "--Taxation of Owners
of REMIC Regular Certificates--Market Discount" and "--Premium".
REMIC Certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a "conversion transaction" within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, 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.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires a REMIC Residual Certificate,
or acquires any other residual interest in a REMIC or any similar interest in a
"taxable mortgage pool" (as defined in Section 7701(i) of the Code) during the
period beginning six months before, and ending six months after, the date of
such sale, such sale will be subject to the "wash sale" rules of Section 1091 of
the Code. In that event, any loss realized by the REMIC Residual
Certificateholder on the sale will not be deductible, but instead will be added
to such REMIC Residual Certificateholder's adjusted basis in the newly acquired
asset.
Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from "prohibited transactions" (a
"Prohibited Transactions Tax"). In general, subject to certain specified
exceptions, a prohibited transaction means the disposition of a Mortgage Loan,
the receipt of income from a source other than a Mortgage Loan or certain other
permitted investments, the receipt of compensation for services, or gain from
the disposition of an asset purchased with the payments on the Mortgage Loans
for temporary investment pending distribution on the REMIC Certificates. It is
not anticipated that the REMIC will engage in any prohibited transactions in
which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
"Contributions Tax"). Each Pooling Agreement will include provisions designed to
prevent the acceptance of any contributions that would be subject to such tax.
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. "Net income from foreclosure
property" generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any REMIC will recognize "net income from foreclosure property"
subject to federal income tax.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
78
<PAGE>
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 Pooling 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.
Tax and Restrictions on Transfers of REMIC Residual Certificates to
Certain Organizations. If a REMIC Residual Certificate is transferred to a
"disqualified organization" (as defined below), a tax would be imposed in an
amount (determined under the REMIC Regulations) 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 REMIC Residual Certificate, which rate is
computed and published monthly by the IRS) of the total anticipated excess
inclusions with respect to such REMIC Residual Certificate for periods after the
transfer and (ii) the highest marginal federal income tax rate applicable to
corporations. The anticipated excess inclusions must be determined as of the
date that the REMIC Residual Certificate is transferred and must be based on
events that have occurred up to the time of such transfer, the Prepayment
Assumption and any required or permitted cleanup calls or required liquidation
provided for in the REMIC's organizational documents. Such a tax generally would
be imposed on the transferor of the REMIC Residual Certificate, except that
where such transfer is through an agent for a disqualified organization, the tax
would instead be imposed on such agent. However, a transferor of a REMIC
Residual Certificate would in no event 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. Moreover, an entity will not qualify as a REMIC unless there are
reasonable arrangements designed to ensure that (x) residual interests in such
entity are not held by disqualified organizations and (y) information necessary
for the application of the tax described herein will be made available.
Restrictions on the transfer of REMIC Residual Certificates and certain other
provisions that are intended to meet this requirement will be included in the
Pooling Agreement, and will be discussed more fully in any Prospectus Supplement
relating to the offering of any REMIC Residual Certificate.
In addition, if a "pass-through entity" (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii) the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period, however, if
each record holder of an interest in such pass-through entity furnishes to such
pass-through entity (x) such holder's social security number and a statement
under penalty of perjury that such social security number is that of the record
holder or (y) a statement under penalty of perjury that such record holder is
not a disqualified organization.
For these purposes, a "disqualified organization" means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the FHLMC), (ii) any organization (other than a cooperative
described in Section 521 of the Code) that is exempt from federal income tax,
unless it is subject to the tax imposed by Section 511 of the Code or (iii) any
organization described in Section 1381(a)(2)(C) of the Code. For these purposes,
a "pass-through entity" means any regulated investment company, real estate
investment trust, trust, partnership or certain other entities described in
Section 860E(e)(6) of the Code. In addition, a person holding an interest in a
pass-through entity as a nominee for another person will, with respect to such
interest, be treated as a pass-through entity.
Termination. A REMIC will terminate immediately after the Distribution
Date following receipt by the REMIC of the final payment in respect of the
Mortgage Loans or upon a sale of the REMIC's assets following the adoption by
the REMIC of a plan of complete liquidation. The last distribution on a REMIC
Regular Certificate will be treated as a payment in retirement of a debt
instrument. In the case of a REMIC Residual Certificate, if the last
distribution on such REMIC Residual Certificate is less than the REMIC Residual
Certificateholder's adjusted basis in such REMIC Residual Certificate, such
REMIC Residual Certificateholder should (but may not) be treated as
79
<PAGE>
realizing a loss equal to the amount of such difference. Such loss may be
treated as a capital loss and may be subject to the "wash sale" rules of Section
1091 of the Code.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and REMIC Residual Certificateholders will be treated as partners.
Unless otherwise stated in the related Prospectus Supplement, either the Trustee
or the Master Servicer generally will hold at least a nominal amount of REMIC
Residual Certificates, will file REMIC federal income tax returns on behalf of
the related REMIC, and will be designated as and will act as the "tax matters
person" with respect to the REMIC in all respects.
As the tax matters person, the Trustee or the Master Servicer, as the case
may be, will, subject to certain notice requirements and various restrictions
and limitations, generally have the authority to act on behalf of the REMIC and
the REMIC Residual Certificateholders in connection with the administrative and
judicial review of items of income, deduction, gain or loss of the REMIC, as
well as the REMIC's classification. REMIC Residual Certificateholders will
generally 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 or the Master Servicer, as
the case may be, as tax matters person, and the IRS concerning any such REMIC
item. Adjustments made to the REMIC tax return may require a REMIC Residual
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 REMIC Residual 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 REMIC
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.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30 days
after the end of the quarter for which the information was requested, or two
weeks after the receipt of the request. The REMIC must also comply with rules
requiring a REMIC Regular Certificate issued with original issue discount to
disclose on its face the amount of original issue discount and the issue date,
and requiring such information to be reported to the IRS. Reporting with respect
to the REMIC Residual Certificates, including income, excess, inclusions,
investment expenses and relevant information regarding qualification of the
REMIC's assets will be made as required under the Treasury regulations,
generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount".
The responsibility for complying with the foregoing reporting rules will
be borne by either the Trustee or the Master Servicer, unless otherwise stated
in the related Prospectus Supplement.
Backup Withholding with Respect to REMIC Certificates. Payments of
interest and principal, as well as payments of proceeds from the sale of REMIC
Certificates, may be subject to the "backup withholding tax" under Section 3406
of the Code at a rate of 31% if recipients of such payments fail to furnish to
the payor certain information, including their taxpayer identification numbers,
or otherwise fail to establish an exemption from such tax. Any amounts deducted
and withheld from a distribution to a recipient would be allowed as a credit
against such recipient's federal income tax. Furthermore, certain penalties may
be imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner.
80
<PAGE>
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a "United States person" (as defined below) and is not subject to
federal income tax as a result of any direct or indirect connection to the
United States in addition to its ownership of a REMIC Regular Certificate will
not, unless otherwise disclosed in the related Prospectus Supplement, be subject
to United States federal income or withholding tax in respect of a distribution
on a REMIC Regular Certificate, provided that the holder complies to the extent
necessary with certain identification requirements (including delivery of a
statement, signed by the Certificateholder under penalties of perjury,
certifying that such Certificateholder is not a United States person and
providing the name and address of such Certificateholder). For these purposes,
"United States 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, an estate whose
income from sources without the United States is includible in gross income for
United States federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States or a trust if (a) a
court within the United States is able to exercise primary supervision over the
administration of the trust, and (b) one or more United States persons have the
authority to control all substantial decisions of the trust. It is possible that
the IRS may assert that the foregoing tax exemption should not apply with
respect to a REMIC Regular Certificate held by a REMIC Residual
Certificateholder that owns directly or indirectly a 10% or greater interest in
the REMIC Residual Certificates. If the holder does not qualify for exemption,
distributions of interest, including distributions in respect of accrued
original issue discount, to such holder may be subject to a tax rate of 30%,
subject to reduction under any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a nonresident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are non-resident
alien individuals should consult their tax advisors concerning this question.
Unless otherwise stated in the related Prospectus Supplement, transfers of
REMIC Residual Certificates to investors that are not United States persons will
be prohibited under the related Pooling Agreement.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
Grantor Trust Certificates, counsel to the Depositor will deliver its opinion to
the effect that, assuming compliance with all provisions of the related Pooling
Agreement, the related Grantor Trust Fund will be classified as a grantor trust
under subpart E, part I of subchapter J of the Code and not as a partnership or
an association taxable as a corporation. Accordingly, each holder of a Grantor
Trust Certificate generally will be treated as the owner of an interest in the
Mortgage Loans included in the Grantor Trust Fund.
For purposes of the following discussion, a Grantor Trust Certificate
representing an undivided equitable ownership interest in the principal of the
Mortgage Loans constituting the related Grantor Trust Fund, together with
interest thereon at a pass-through rate, will be referred to as a "Grantor Trust
Fractional Interest Certificate". A Grantor Trust Certificate representing
ownership of all or a portion of the difference between interest paid on the
Mortgage Loans constituting the related Grantor Trust Fund (net of normal
administration fees and any spread) and interest paid to the holders of Grantor
Trust Fractional Interest Certificates issued with respect to such Grantor Trust
Fund will be referred to as a "Grantor Trust Strip Certificate". A Grantor Trust
Strip Certificate may also evidence a nominal ownership interest in the
principal of the Mortgage Loans constituting the related Grantor Trust Fund.
CHARACTERIZATION OF INVESTMENTS IN GRANTOR TRUST CERTIFICATES
Grantor Trust Fractional Interest Certificates. In the case of Grantor
Trust Fractional Interest Certificates, unless otherwise disclosed in the
related Prospectus Supplement, counsel to the Depositor will deliver an opinion
that, in general, Grantor Trust Fractional Interest Certificates will represent
interests in (i) assets described in Section 7701(a)(19)(C) of the Code; (ii)
"obligation[s] (including any participation or certificate of beneficial
ownership therein) which . . . [are] principally secured by an interest in real
property" within the meaning of Section 860G(a)(3)(A) of the Code; and (iii)
"real estate assets" within the meaning of Section 856(c)(5)(A) of the Code. In
addition, counsel to the Depositor will deliver an opinion that interest on
Grantor Trust Fractional Interest Certificates will to the same extent be
considered "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.
81
<PAGE>
Grantor Trust Strip Certificates. Even if Grantor Trust Strip Certificates
evidence an interest in a Grantor Trust Fund consisting of Mortgage Loans that
are assets described in Section 7701(a)(19)(C) of the Code and "real estate
assets" within the meaning of Section 856(c)(5)(A) of the Code, and the interest
on which is "interest on obligations secured by mortgages on real property"
within the meaning of Section 856(c)(3)(B) of the Code, it is unclear whether
the Grantor Trust Strip Certificates, and the income therefrom, will be so
characterized. However, the policies underlying such sections (namely, to
encourage or require investments in mortgage loans by thrift institutions and
real estate investment trusts) may suggest that such characterization is
appropriate. Counsel to the Depositor will not deliver any opinion on these
questions. Prospective purchasers to which such characterization of an
investment in Grantor Trust Strip Certificates is material should consult their
tax advisors regarding whether the Grantor Trust Strip Certificates, and the
income therefrom, will be so characterized.
The Grantor Trust Strip Certificates will be "obligation[s] (including any
participation or certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property" within the meaning of
Section 860G(a)(3)(A) of the Code.
TAXATION OF OWNERS OF GRANTOR TRUST FRACTIONAL INTEREST CERTIFICATES
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the Mortgage Loans
(including amounts used to pay reasonable servicing fees and other expenses) and
will be entitled to deduct their shares of any such reasonable servicing fees
and other expenses. Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on account of a Grantor
Trust Fractional Interest Certificate may differ significantly from the amount
distributable thereon representing interest on the Mortgage Loans. Under Section
67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate, directly or through certain pass-through
entities, will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) three percent of
the excess of the individual's adjusted gross income over such amount or (ii)
80% of the amount of itemized deductions otherwise allowable for the taxable
year. The amount of additional taxable income reportable by holders of Grantor
Trust Fractional Interest Certificates who are subject to the limitations of
either Section 67 or Section 68 of the Code may be substantial. Further,
Certificateholders (other than corporations) subject to the alternative minimum
tax may not deduct miscellaneous itemized deductions in determining their
alternative minimum taxable income. Although it is not entirely clear, it
appears that in transactions in which multiple classes of Grantor Trust
Certificates (including Grantor Trust Strip Certificates) are issued, such fees
and expenses should be allocated among the classes of Grantor Trust Certificates
using a method that recognizes that each such class benefits from the related
services. In the absence of statutory or administrative clarification as to the
method to be used, it currently is intended to base information returns or
reports to the IRS and Certificateholders on a method that allocates such
expenses among classes of Grantor Trust Certificates with respect to each period
based on the distributions made to each such class during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
"stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (i) a class of Grantor
Trust Strip Certificates is issued as part of the same series of Certificates or
(ii) the Depositor or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on a Mortgage Asset. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. For
purposes of determining what constitutes reasonable servicing fees for various
types of mortgages the IRS has established certain "safe harbors". The servicing
fees paid with respect to the Mortgage Loans for certain series of Grantor Trust
Certificates may be higher than the "safe harbors" and, accordingly, may not
constitute reasonable servicing compensation. The related Prospectus Supplement
will include information regarding servicing fees paid to a Master Servicer, a
Special Servicer, any Sub-Servicer or their respective affiliates necessary to
determine whether the preceding "safe harbor" rules apply.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each
Grantor Trust Fractional Interest Certificate will be treated as having been
issued with "original issue discount" within the meaning of Section 1273(a)
82
<PAGE>
of the Code, subject, however, to the discussion below regarding the treatment
of certain stripped bonds as market discount bonds and the discussion regarding
de minimis market discount. See "--Taxation of Owners of Grantor Trust
Fractional Interest Certificates--Market Discount". Under the stripped bond
rules, the holder of a Grantor Trust Fractional Interest Certificate (whether a
cash or accrual method taxpayer) will be required to report interest income from
its Grantor Trust Fractional Interest Certificate for each month in an amount
equal to the income that accrues on such Certificate in that month calculated
under a constant yield method, in accordance with the rules of the Code relating
to original issue discount.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser for the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, other than "qualified stated
interest", if any, as well as such Certificate's share of reasonable servicing
fees and other expenses. See "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--If Stripped Bond Rules Do Not Apply" for a definition of
"qualified stated interest". In general, the amount of such income that accrues
in any month would equal the product of such holder's adjusted basis in such
Grantor Trust Fractional Interest Certificate at the beginning of such month
(see "--Sales of Grantor Trust Certificates") and the yield of such Grantor
Trust Fractional Interest Certificate to such holder. Such yield would be
computed at the rate (compounded based on the regular interval between payment
dates) that, if used to discount the holder's share of future payments on the
Mortgage Loans, would cause the present value of those future payments to equal
the price at which the holder purchased such Certificate. In computing yield
under the stripped bond rules, a Certificateholder's share of future payments on
the Mortgage Loans will not include any payments made in respect of any spread
or any other ownership interest in the Mortgage Loans retained by the Depositor,
a Master Servicer, a Special Servicer, any Sub-Servicer or their respective
affiliates, but will include such Certificateholder's share of any reasonable
servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (i) the use of a reasonable
prepayment assumption in accruing original issue discount and (ii) adjustments
in the accrual of original issue discount when prepayments do not conform to the
prepayment assumption, with respect to certain categories of debt instruments,
and regulations could be adopted applying those provisions to the Grantor Trust
Fractional Interest Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Fractional Interest Certificates or whether
use of a reasonable prepayment assumption may be required or permitted without
reliance on these rules. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Fractional
Interest Certificate or, with respect to any holder, at the time of purchase of
the Grantor Trust Fractional Interest Certificate by that holder.
Certificateholders are advised to consult their own tax advisors concerning
reporting original issue discount in general and, in particular, whether a
prepayment assumption should be used in reporting original issue discount with
respect to Grantor Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the Mortgage Loans allocable to such
Certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease such yield, and thus accelerate or
decelerate, respectively, the reporting of income.
If a prepayment assumption is not used, then when a Mortgage Loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the Mortgage Loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such Certificateholder's
interest in the Mortgage Loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See "--Taxation of Owners
of REMIC Regular Certificates--Original Issue Discount". It is unclear whether
any other adjustments would be required to reflect differences between an
assumed prepayment rate and the actual rate of prepayments.
83
<PAGE>
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders in transactions subject to the stripped bond rules on a
prepayment assumption (the "Stripped Bond Prepayment Assumption") that will be
disclosed in the related Prospectus Supplement and on a constant yield computed
using a representative initial offering price for each class of Certificates.
However, neither the Depositor nor any other person will make any representation
that the Mortgage Loans will in fact prepay at a rate conforming to such
Stripped Bond Prepayment Assumption or any other rate and Certificateholders
should bear in mind that the use of a representative initial offering price will
mean that such information returns or reports, even if otherwise accepted as
accurate by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price.
Under Treasury regulation Section 1.1286-1T, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (i) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (ii) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the Mortgage Loans, the related Prospectus Supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than 0.25%
of the stated redemption price multiplied by the weighted average maturity of
the Mortgage Loans, then such original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only
a de minimis amount will be included in income in the same manner as de minimis
original issue discount and market discount described in "--If Stripped Bond
Rules Do Not Apply" and "--Market Discount".
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the Certificateholder will be required to
report its share of the interest income on the Mortgage Loans in accordance with
such Certificateholder's normal method of accounting. The original issue
discount rules will apply to a Grantor Trust Fractional Interest Certificate to
the extent it evidences an interest in Mortgage Loans issued with original issue
discount.
The original issue discount, if any, on the Mortgage Loans will equal the
difference between the stated redemption price of such Mortgage Loans and their
issue price. Under the OID Regulations, the stated redemption price is equal to
the total of all payments to be made on such Mortgage Loan other than "qualified
stated interest". "Qualified stated interest" includes interest that is
unconditionally payable at least annually at a single fixed rate, at a
"qualified floating rate", or at an "objective rate", a combination of a single
fixed rate and one or more "qualified floating rates" or one "qualified inverse
floating rate", or a combination of "qualified floating rates" that does not
operate in a manner that accelerates or defers interest payments on such
Mortgage Loan. In general, the issue price of a Mortgage Loan will be the amount
received by the borrower from the lender under the terms of the Mortgage Loan,
less any "points" paid by the borrower, and the stated redemption price of a
Mortgage Loan will equal its principal amount, unless the Mortgage Loan provides
for an initial below-market rate of interest or the acceleration or the deferral
of interest payments.
In the case of Mortgage Loans bearing adjustable or variable interest
rates, the related Prospectus Supplement will describe the manner in which such
rules will be applied with respect to those Mortgage Loans in preparing
information returns to the Certificateholders and the IRS.
Notwithstanding the general definition of original issue discount,
original issue discount will be considered to be de minimis if such original
issue discount is less than 0.25% of the stated redemption price multiplied by
the weighted average maturity of the Mortgage Loan. For this purpose, the
weighted average maturity of the Mortgage Loan will be computed as the sum of
the amounts determined, as to each payment included in the stated redemption
price of such Mortgage Loan, by multiplying (i) the number of complete years
(rounding down for partial years) from the issue date until such payment is
expected to be made by (ii) a fraction, the numerator of which is the amount of
the payment and the denominator of which is the stated redemption price of the
Mortgage Loan. Under the OID Regulations, original issue discount of only a de
minimis amount (other than de minimis original issue discount attributable to a
so-called "teaser" rate or initial interest holiday) will be included in income
as each payment of stated principal price is made, based on the product of the
total amount of such de minimis original issue discount and a fraction, the
numerator of
84
<PAGE>
which is the amount of each such payment and the denominator of which is the
outstanding stated principal amount of the Mortgage Loan. The OID Regulations
also permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See "--Market
Discount" below.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a Mortgage Loan will be required to be
accrued and reported in income each month, based on a constant yield. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
Interest Certificates. Certificateholders should refer to the related Prospectus
Supplement with respect to each series to determine whether and in what manner
the original issue discount rules will apply to Mortgage Loans in such series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less than
such Certificate's allocable portion of the aggregate remaining stated
redemption price of the Mortgage Loans held in the related Trust Fund will also
be required to include in gross income such Certificate's daily portions of any
original issue discount with respect to such Mortgage Loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate "adjusted issue prices" of the Mortgage Loans
held in the related Trust Fund, approximately in proportion to the ratio such
excess bears to such Certificate's allocable portion of the aggregate original
issue discount remaining to be accrued on such Mortgage Loans. The adjusted
issue price of a Mortgage Loan on any given day equals the sum of (i) the
adjusted issue price (or, in the case of the first accrual period, the issue
price) of such Mortgage Loan at the beginning of the accrual period that
includes such day and (ii) the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issue price of a
Mortgage Loan at the beginning of any accrual period will equal the issue price
of such Mortgage Loan, increased by the aggregate amount of original issue
discount with respect to such Mortgage Loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such Mortgage Loan in
prior accrual periods of amounts included in its stated redemption price.
Unless otherwise provided in the related Prospectus Supplement, the
Trustee or Master Servicer, as applicable, will provide to any holder of a
Grantor Trust Fractional Interest Certificate such information as such holder
may reasonably request from time to time with respect to original issue discount
accruing on Grantor Trust Fractional Interest Certificates. See "--Grantor Trust
Reporting" below.
Market Discount. If the stripped bond rules do not apply to the Grantor
Trust Fractional Interest Certificate, a Certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of the Code to the extent an
interest in a Mortgage Loan is considered to have been purchased at a "market
discount", that is, in the case of a Mortgage Loan issued without original issue
discount, at a purchase price less than its remaining stated redemption price
(as defined above), or in the case of a Mortgage Loan issued with original issue
discount, at a purchase price less than its adjusted issue price (as defined
above). If market discount is in excess of a de minimis amount (as described
below), the holder generally will be required to include in income in each month
the amount of such discount that has accrued (under the rules described in the
next paragraph) through such month that has not previously been included in
income, but limited, in the case of the portion of such discount that is
allocable to any Mortgage Loan, to the payment of stated redemption price on
such Mortgage Loan that is received by (or, in the case of accrual basis
Certificateholders, due to) the Trust Fund in that month. A Certificateholder
may elect to include market discount in income currently as it accrues (under a
constant yield method based on the yield of the Certificate to such holder)
rather than including it on a deferred basis in accordance with the foregoing.
If made, such election will apply to all market discount bonds acquired by such
Certificateholder during or after the first taxable year to which such election
applies. In addition, the OID Regulations would permit a Certificateholder to
elect to accrue all interest, discount (including de minimis market or original
issue discount) and premium in income as interest, based on a constant yield
method. If such an election were made with respect to a Mortgage Loan with
market discount, the Certificateholder would be deemed to have made an election
to currently include market discount in income with respect to all other debt
instruments having market discount that such Certificateholder acquires during
the taxable year of the election
85
<PAGE>
and thereafter and, possibly, previously acquired instruments. Similarly, a
Certificateholder that made this election for a Certificate acquired at a
premium would be 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. See "--Taxation of Owners of REMIC Regular
Certificates--Premium". Each of these elections to accrue interest, discount and
premium with respect to a Certificate on a constant yield method or as interest
is irrevocable.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under those rules, in each
accrual period market discount on the Mortgage Loans should accrue, at the
Certificateholder's option: (i) on the basis of a constant yield method, (ii) in
the case of a Mortgage Loan issued without original issue discount, in an amount
that bears the same ratio to the total remaining market discount as the stated
interest paid in the accrual period bears to the total stated interest remaining
to be paid on the Mortgage Loan as of the beginning of the accrual period or
(iii) in the case of a Mortgage Loan issued with original issue discount, in an
amount that bears the same ratio to the total remaining market discount as the
original issue discount accrued in the accrual period bears to the total
original issue discount remaining at the beginning of the accrual period. The
prepayment assumption, if any, used in calculating the accrual of original issue
discount is to be used in calculating the accrual of market discount. The effect
of using a prepayment assumption could be to accelerate the reporting of such
discount income. Because the regulations referred to in this paragraph have not
been issued, it is not possible to predict what effect such regulations might
have on the tax treatment of a Mortgage Loan purchased at a discount in the
secondary market.
Because the Mortgage Loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount would
be included in income if it were original issue discount.
Market discount with respect to Mortgage Loans generally will be
considered to be de minimis if it is less than 0.25% of the stated redemption
price of the Mortgage Loans multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the prepayment assumption used,
if any. The effect of using a prepayment assumption could be to accelerate the
reporting of such discount income. If market discount is treated as de minimis
under the foregoing rule, it appears that actual discount would be treated in a
manner similar to original issue discount of a de minimis amount. See "--If
Stripped Bond Rules Do Not Apply".
Further, under the rules described in "--Taxation of Owners of REMIC
Regular Certificates--Market Discount", any discount that is not original issue
discount and exceeds a de minimis amount may require the deferral of interest
expense deductions attributable to accrued market discount not yet includible in
income, unless an election has been made to report market discount currently as
it accrues. This rule applies without regard to the origination dates of the
Mortgage Loans.
Premium. If a Certificateholder is treated as acquiring the underlying
Mortgage Loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of such premium
allocable to Mortgage Loans originated after September 27, 1985. Amortizable
premium is treated as an offset to interest income on the related debt
instrument, rather than as a separate interest deduction. However, premium
allocable to Mortgage Loans originated before September 28, 1985 or to Mortgage
Loans for which an amortization election is not made, should be allocated among
the payments of stated redemption price on the Mortgage Loan and be allowed as a
deduction as such payments are made (or, for a Certificateholder using the
accrual method of accounting, when such payments of stated redemption price are
due).
It is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Mortgage Loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss, equal to the difference between
the portion of the prepaid principal amount of the Mortgage Loan that is
allocable to the Certificate and the portion of the adjusted basis of the
Certificate that is allocable to the
86
<PAGE>
Mortgage Loan. If a prepayment assumption is used to amortize such premium, it
appears that such a loss would be unavailable. Instead, if a prepayment
assumption is used, a prepayment should be treated as a partial payment of the
stated redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See "--Taxation of Owners
of REMIC Regular Certificates--Original Issue Discount". It is unclear whether
any other adjustments would be required to reflect differences between the
prepayment assumption used, if any, and the actual rate of prepayments.
Taxation of Owners of Grantor Trust Strip Certificates. The "stripped
coupon" rules of Section 1286 of the Code will apply to the Grantor Trust Strip
Certificates. Except as described above in "--If Stripped Bond Rules Apply", no
regulations or published rulings under Section 1286 of the Code have been issued
and some uncertainty exists as to how it will be applied to securities such as
the Grantor Trust Strip Certificates. Accordingly, holders of Grantor Trust
Strip Certificates should consult their own tax advisors concerning the method
to be used in reporting income or loss with respect to such Certificates.
The OID Regulations do not apply to "stripped coupons", although they
provide general guidance as to how the original issue discount sections of the
Code will be applied. In addition, the discussion below is subject to the
discussion under "--Possible Application of Contingent Payment Rules" below and
assumes that the holder of a Grantor Trust Strip Certificate will not own any
Grantor Trust Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of Grantor
Trust Strip Certificates would include as interest income in each month an
amount equal to the product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month and the yield of such
Grantor Trust Strip Certificate to such holder. Such yield would be calculated
based on the price paid for that Grantor Trust Strip Certificate by its holder
and the payments remaining to be made thereon at the time of the purchase, plus
an allocable portion of the servicing fees and expenses to be paid with respect
to the Mortgage Loans. See "--If Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. Regulations could be adopted applying
those provisions to the Grantor Trust Strip Certificates. It is unclear whether
those provisions would be applicable to the Grantor Trust Strip Certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on
conditions at the time of the first sale of the Grantor Trust Strip Certificate
or, with respect to any subsequent holder, at the time of purchase of the
Grantor Trust Strip Certificate by that holder.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Stripped Bond
Prepayment Assumption disclosed in the related Prospectus Supplement and on a
constant yield computed using a representative initial offering price for each
class of Certificates. However, neither the Depositor nor any other person will
make any representation that the Mortgage Loans will in fact prepay at a rate
conforming to the Stripped Bond Prepayment Assumption or at any other rate and
Certificateholders should bear in mind that the use of a representative initial
offering price will mean that such information returns or reports, even if
otherwise accepted as accurate by the IRS, will, in any event be accurate only
as to the initial Certificateholders of each series who bought at that price.
Prospective purchasers of the Grantor Trust Strip Certificates should consult
their own tax advisors regarding the use of the Stripped Bond Prepayment
Assumption.
It is unclear under what circumstances, if any, the prepayment of a
Mortgage Loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into account in computing yield with respect to such
Grantor Trust Strip Certificate, it appears that no loss may be available as a
result of any particular prepayment unless prepayments occur at a rate faster
than the Stripped Bond Prepayment Assumption. However, if a Grantor Trust Strip
Certificate is treated as an interest in discrete Mortgage Loans, or if the
Stripped Bond Prepayment
87
<PAGE>
Assumption is not used, then when a Mortgage Loan is prepaid, the holder of a
Grantor Trust Strip Certificate should be able to recognize a loss equal to the
portion of the adjusted issue price of the Grantor Trust Strip Certificate that
is allocable to such Mortgage Loan.
Possible Application of Contingent Payment Rules. The coupon stripping
rules' general treatment of stripped coupons is to regard them as newly issued
debt instruments in the hands of each purchaser. To the extent that payments on
the Grantor Trust Strip Certificates would cease if the Mortgage Loans were
prepaid in full, the Grantor Trust Strip Certificates could be considered to be
debt instruments providing for contingent payments. Under the OID Regulations,
debt instruments providing for contingent payments are not subject to the same
rules as debt instruments providing for noncontingent payments. Final
regulations have been promulgated with respect to contingent payment debt
instruments. However, like the OID Regulations, such regulations do not
specifically address securities, such as the Grantor Trust Strip Certificates,
that are subject to the stripped bond rules of Section 1286 of the Code.
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange of
a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any income
reported by the seller (including original issue discount and market discount
income) and reduced (but not below zero) by any previously reported losses, any
amortized premium and by any distributions with respect to such Grantor Trust
Certificate. The Code as of the date of this Prospectus provides a top marginal
tax rate of 39.6% for individuals and a maximum marginal rate for long-term
capital gains for individuals of 20%. No such rate differential exists for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes.
Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to Section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the Grantor Trust Certificate is held as part of a "conversion transaction"
within the meaning of Section 1258 of the Code. A conversion transaction
generally is one in which the taxpayer has taken two or more positions in the
same or similar property that reduce or eliminate market risk, if substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate "applicable Federal rate" (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction. Finally, a
taxpayer may elect to have net capital gain taxed at ordinary income rates
rather than capital gains rates in order to include such net capital gain in
total net investment income for that taxable year, 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.
Grantor Trust Reporting. Unless otherwise provided in the related
Prospectus Supplement, the Trustee or Master Servicer, as applicable, will
furnish to each holder of a Grantor Trust Certificate, with each distribution, a
statement setting forth the amount of such distribution allocable to principal
on the underlying Mortgage Loans and to interest thereon at the related
Pass-Through Rate. In addition, within a reasonable time after the end of each
calendar year, the Trustee or Master Servicer, as applicable, will furnish to
each Certificateholder during such year such customary factual information as
the Depositor or the reporting party deems necessary or desirable to enable
holders of Grantor Trust Certificates to prepare their tax returns and will
furnish comparable information to the IRS as and when required by law to do so.
Because the rules for accruing discount and amortizing premium with respect to
the Grantor Trust Certificates are uncertain in various respects, there is no
assurance the IRS will agree with the Trustee's or Master Servicer's, as the
case may be, information reports of such items of income and expense. Moreover,
such information reports, even if otherwise accepted as accurate by the IRS,
will in any event be accurate only as to the
88
<PAGE>
initial Certificateholders that bought their Certificates at the representative
initial offering price used in preparing such reports.
Backup Withholding. In general, the rules described in "--Taxation of
Owners of REMIC Residual Certificates--Backup Withholding with Respect to REMIC
Certificates" will also apply to Grantor Trust Certificates.
Foreign Investor. In general, the discussion with respect to REMIC Regular
Certificates in "--Taxation of Owners of REMIC Residual Certificates--Foreign
Investors in REMIC Certificates" applies to Grantor Trust Certificates except
that Grantor Trust Certificates will, unless otherwise disclosed in the related
Prospectus Supplement, be eligible for exemption from United States withholding
tax, subject to the conditions described in such discussion, only to the extent
the related Mortgage Loans were originated after July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to United States estate taxes in the estate of a
non-resident alien individual.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences", potential investors should consider the state
and local tax consequences of the acquisition, ownership and disposition of the
Offered Certificates. State tax law may differ substantially from the
corresponding federal tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Offered
Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans, and on
certain other retirement plans and arrangements, including individual retirement
accounts and annuities, medical savings accounts, Keogh plans and collective
investment funds and separate accounts in which such plans, accounts or
arrangements are invested that are subject to the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code (all of which are hereinafter
referred to as "Plans"), and on persons who are fiduciaries with respect to
Plans, in connection with the investment of Plan assets. Certain employee
benefit plans, such as governmental plans (as defined in ERISA Section 3(32)),
and, if no election has been made under Section 410(d) of the Code, church plans
(as defined in Section 3(33) of ERISA) are not subject to ERISA requirements.
Accordingly, assets of such plans may be invested in Offered Certificates
without regard to the ERISA considerations described below, subject to the
provisions of other applicable federal and state law. Any such plan which is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code,
however, is subject to the prohibited transaction rules set forth in Section 503
of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, ERISA and the Code prohibit a broad range of
transactions involving assets of a Plan and persons ("Parties-in-Interest") who
have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. Certain Parties-in-Interest that
participate in a prohibited transaction may be subject to an excise tax imposed
pursuant to Section 4975 of the Code, unless a statutory or administrative
exemption is available. These prohibited transactions generally are set forth in
Section 406 of ERISA and Section 4975 of the Code.
89
<PAGE>
Plan Asset Regulations. A Plan's investment in Offered Certificates may
cause the Trust Assets to be deemed Plan assets. Section 2510.3-101 of the
regulations of the United States Department of Labor (the "DOL") provides that
when a Plan acquires an equity interest in an entity, the Plan's assets include
both such equity interest and an undivided interest in each of the underlying
assets of the entity, unless certain exceptions not applicable to this
discussion apply, or unless the equity participation in the entity by "benefit
plan investors" (that is, Plans and certain employee benefit plans not subject
to ERISA) is not "significant". For this purpose, in general, equity
participation in a Trust Fund will be "significant" on any date if, immediately
after the most recent acquisition of any Certificate, 25% or more of any class
of Certificates is held by benefit plan investors.
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary of the investing
Plan. If the Trust Assets constitute Plan assets, then any party exercising
management or discretionary control regarding those assets, such as a Master
Servicer, a Special Servicer or any Sub-Servicer, may be deemed to be a Plan
"fiduciary" with respect to the investing Plan, and thus subject to the
fiduciary responsibility provisions and prohibited transaction provisions of
ERISA and the Code. In addition, if the Trust Assets constitute Plan assets, the
purchase of Certificates by a Plan, as well as the operation of the Trust Fund,
may constitute or involve a prohibited transaction under ERISA and the Code.
PROHIBITED TRANSACTION EXEMPTIONS
First Union Corporation ("First Union") has received from the DOL an
individual prohibited transaction exemption (the "Exemption"), which generally
exempts from the application of the prohibited transaction provisions of
Sections 406(a) and (b) and 407(a) of ERISA, and the excise taxes imposed on
such prohibited transactions pursuant to Section 4975(a) and (b) of the Code,
certain transactions, among others, relating to the servicing and operation of
mortgage pools and the purchase, sale and holding of mortgage pass-through
certificates underwritten by an Underwriter (as hereinafter defined), provided
that certain conditions set forth in the Exemption application are satisfied.
For purposes of this Section, "ERISA Considerations", the term "Underwriter"
includes (i) First Union, (ii) any person directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control with
First Union, and (iii) any member of the underwriting syndicate or selling group
of which First Union or a person described in (ii) is a manager or co-manager
with respect to a class of Certificates. See "Method of Distribution".
The Exemption sets forth six general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of Offered
Certificates to be eligible for exemptive relief under the Exemption:
First, the acquisition of Offered 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 Offered Certificates must evidence rights and interests
which are not subordinated to the rights and interests evidenced by other
Certificates of the same trust.
Third, the Offered Certificates at the time of acquisition by the
Plan must be rated in one of the three highest generic rating categories
by Standard & Poor's Structured Rating Group ("Standard & Poor's"),
Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps Credit Rating
Co. ("Duff & Phelps") or Fitch Investors Service, L.P. ("Fitch").
Fourth, the Trustee cannot be an affiliate of any other member of
the "Restricted Group", which consists of any Underwriter, the Depositor,
the Trustee, the Master Servicer, the Special Servicer, any Sub-Servicer,
the provider of any Credit Support and any obligor with respect to
Mortgage Assets (including mortgage loans underlying a CMBS not issued by
FNMA, FHLMC or GNMA) constituting more than 5% of the aggregate
unamortized principal balance of the Mortgage Assets in the related Trust
Fund as of the date of initial issuance of the Certificates.
Fifth, the sum of all payments made to and retained by the
Underwriter(s) must represent not more than reasonable compensation for
underwriting or placing the Certificates; the sum of all payments made to
and retained by the Depositor pursuant to the assignment of the Mortgage
Assets to the related Trust Fund must represent not more than the fair
market value of such obligations; and the sum of all payments made to and
90
<PAGE>
retained by the Master Servicer and any Sub-Servicer must represent not
more than reasonable compensation for such person's services under the
related Pooling 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 of the Commission under the Securities
Act.
Seventh, in the event the obligations used to fund the Trust Fund
have not all been transferred to the Trust Fund on the closing date,
additional obligations as specified in the Exemption shall be transferred
to the Trust Fund in exchange for the amounts credited to the Pre-Funding
Account during the period commencing on the closing date and ending no
later than the earliest to occur of: (i) the date the amount on deposit
in the Pre-Funding Account (as defined in the Exemption) is less than the
minimum dollar amount specified in the Pooling Agreement; (ii) the date
on which an event of default occurs under the Pooling Agreement; or (iii)
the date which is the later of three months or 90 days after the closing
date, provided certain conditions of the Exemption are met.
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
Standard & Poor's, Moody's, Duff & Phelps or Fitch for at least one year prior
to the Plan's acquisition of 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 Certificates.
It is not clear whether certain Offered Certificates would constitute
"certificates" for purposes of the Exemption, including but not limited to, (i)
Certificates evidencing an interest in Mortgage Loans secured by liens on real
estate projects under construction, (ii) Certificates evidencing an interest in
a Trust Fund including Cash Flow Agreements or (iii) subordinated Classes of
Certificates.
If the general conditions set forth in the Exemption are satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(a) and 407(a) of ERISA (as well as the excise taxes imposed by Sections
4975(a) and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of
the Code) in connection with (i) the direct or indirect sale, exchange or
transfer of Offered Certificates acquired by a Plan upon issuance from the
Depositor or Underwriter when the Depositor, Underwriter, Master Servicer,
Special Servicer, Sub-Servicer, Trustee, provider of Credit Support, or obligor
with respect to Mortgage Assets is a "Party in Interest" under ERISA with
respect to the investing Plan, (ii) the direct or indirect acquisition or
disposition in the secondary market of Offered Certificates by a Plan and (iii)
the holding of Offered Certificates by a Plan. However, no exemption is provided
from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for
the acquisition or holding of a Certificate on behalf of an "Excluded Plan" by
any person who has discretionary authority or renders investment advice with
respect to the assets of such Excluded Plan. For this purpose, an Excluded Plan
is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions set forth in the Exemption are also
satisfied, the Exemption may provide an exemption from the restrictions imposed
by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by Sections
4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code in
connection with (i) the direct or indirect sale, exchange or transfer of Offered
Certificates in the initial issuance of Offered Certificates between the
Depositor or an Underwriter and a Plan (other than an Excluded Plan) when the
person who has discretionary authority or renders investment advice with respect
to the investment of the Plan's assets in such Certificates is (a) an obligor
with respect to 5% or less of the fair market value of the Mortgage Assets
(including mortgage loans underlying a CMBS not issued by FNMA, FHLMC or GNMA)
in the related Trust Fund or (b) an affiliate of such a person, (ii) the direct
or indirect acquisition or disposition in the secondary market of Offered
Certificates by such Plan and (iii) the holding of Offered Certificates by such
Plan.
Further, if certain specific conditions set forth in 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 Trust Assets. The Depositor expects that the specific conditions set forth
91
<PAGE>
in the Exemption that are required for this purpose will be satisfied with
respect to the Certificates so that the Exemption would provide an exemption
from the restrictions imposed by Sections 406(a) and (b) of ERISA (as well as
the excise 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 pools of Mortgage Assets, provided that the
general conditions set forth in the Exemption are satisfied.
The Exemption also provides an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Section 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1) (A) through (D) of the Code
if such restrictions are deemed to otherwise apply merely because a person is
deemed to be a Party in Interest with respect to an investing Plan by virtue of
providing services to the Plan (or by virtue of having certain specified
relationships to such a person) solely as a result of the Plan's ownership of
Offered Certificates.
Before purchasing an Offered Certificate, a fiduciary of a Plan should
itself confirm (i) that the Offered Certificates constitute "certificates" for
purposes of the Exemption and (ii) that the specific and general conditions 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 that may be provided in the Exemption the Plan fiduciary should consider
its general fiduciary obligations under ERISA in determining whether to purchase
any Offered Certificates on behalf of a Plan.
The DOL recently issued a Prohibited Transaction Class Exemption 95-60
(the "Class Exemption"), which exempts from the application of the prohibited
transactions provisions of Sections 406(a), 406(b) and 407(a) of ERISA and
Section 4975 of the Code transactions in connection with the servicing,
management and operation of a trust in which an insurance company general
account has an interest as a result of its acquisition of certificates issued by
the trust, provided that certain conditions are satisfied. Insurance company
general accounts are allowed to purchase, in reliance on the Class Exemption,
classes of Certificates that (i) are subordinated to other classes of
Certificates and/or (ii) have not received a rating at the time of the
acquisition in one of the three highest rating categories from Standard &
Poor's, Moody's, Duff & Phelps or Fitch. In addition to the foregoing Class
Exemption, certain insurance company general accounts, which support policies
issued by any insurer on or before December 31, 1998 to or for the benefit of
employee benefit plans, are allowed to purchase Certificates in reliance upon
regulations to be promulgated by the DOL pursuant to Section 1460 of the Small
Business Job Protection Act of 1996. If such policies satisfy the Section 1460
regulations, then the insurer will be deemed in compliance with ERISA's
fiduciary requirements and prohibited transaction rules with respect to those
assets of the insurer's general account which support such policies.
Any fiduciary of a Plan that proposes to cause the Plan to purchase
Offered Certificates should consult with its counsel with respect to the
potential applicability of ERISA and the Code to such investment and the
availability of (and scope of relief provided by) the Exemption or any other
prohibited transaction exemption in connection therewith. The Prospectus
Supplement with respect to a series of Certificates may contain additional
information regarding the application of the Exemption or any other exemption,
with respect to the Certificates offered thereby. In addition, any Plan
fiduciary that proposes to cause a Plan to purchase Stripped Interest
Certificates should consider the federal income tax consequences of such
investment.
LEGAL INVESTMENT
The Offered Certificates of any series will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA") only if so specified in the related Prospectus Supplement.
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.
Generally, only classes of Offered Certificates that (i) are rated in one
of the two highest rating categories by one or more Rating Agencies and (ii) are
part of a series evidencing interests in a Trust Fund consisting of loans
directly secured by a first lien on a single parcel of real estate upon which is
located a dwelling or mixed residential and commercial structure, such as
certain multifamily loans, and originated by types of Originators specified in
SMMEA, will be "mortgage related securities" for purposes of SMMEA. "Mortgage
related securities" are legal investments to the same extent that, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any agency or instrumentality thereof constitute, legal
investments for persons, trusts, corporations,
92
<PAGE>
partnerships, associations, business trusts and business entities (including
depository institutions, insurance companies and pension funds created pursuant
to or existing under the laws of the United States or of any state, the
authorized investments of which are subject to state regulation). Under SMMEA,
if a state enacted legislation prior to October 3, 1991 that specifically limits
the legal investment authority of any such entities with respect to "mortgage
related securities", Offered Certificates would constitute legal investments for
entities subject to such legislation only to the extent provided in such
legislation.
Pursuant to final implementing regulations under the Riegle Community
Development and Regulatory Improvement Act of 1994 (the "Riegle Act") and the
terms of the Riegle Act, a modification of the definition of "mortgage related
securities" became effective December 31, 1996 to include among the types of
loans to which such securities may relate loans directly secured by a first lien
on "one or more parcels of real estate upon which is located one or more
commercial structures". The regulations also imposed on national banks
purchasing "mortgage related securities" the requirement that the securities be
fully secured by interests in a pool of loans to numerous obligors. In addition,
the related legislative history of the Riegle Act indicates that this expanded
definition includes multifamily loans secured by more than one parcel of real
estate upon which is located more than one structure. Until September 23, 2001
any state may enact legislation limiting the extent to which "commercial
mortgage related securities" would constitute legal investments under that
state's laws.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal with "mortgage
related securities" without limitation as to the percentage of their assets
represented thereby, federal credit unions may invest in such securities, and
national banks may purchase such securities for their own account without regard
to the limitations generally applicable to investment securities set forth in 12
U.S.C. 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, effective
December 31, 1996, the Office of the Comptroller of the Currency (the "OCC")
amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for
their own account, without limitation as to a percentage of the bank's capital
and surplus (but subject to compliance with certain general standards concerning
"safety and soundness" and retention of credit information in 12 C.F.R. Section
1.5), certain "Type IV securities", defined in 12 C.F.R. Section 1.2(1) to
include certain "commercial mortgage-related securities" and "residential
mortgage-related securities". As so defined, "commercial mortgage-related
security" and "residential mortgage-related security" mean, in relevant part,
"mortgage related security" within the meaning of SMMEA, provided that, in the
case of a "commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
secured by a first lien on one or more parcels of real estate upon which one or
more commercial structures are located and that is fully secured by interests in
a pool of loans to numerous obligors." In the absence of any rule or
administrative interpretation by the OCC defining the term "numerous obligors,"
no representation is made as to whether any class of Offered Certificates will
qualify as "commercial mortgage-related securities", and thus as "Type IV
securities", for investment by national banks. Federal credit unions should
review NCUA Letter to Credit Unions No. 96, as modified by Letter to Credit
Unions No. 108, which includes guidelines to assist federal credit unions in
making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Section 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain classes of Offered Certificates), except
under limited circumstances.
All depository institutions considering an investment in the Offered
Certificates of any series should review the Federal Financial Institutions
Examination Council's Supervisory Policy Statement on the Selection of
Securities Dealers and Unsuitable Investment Practices (to the extent adopted by
their respective regulatory authorities), setting forth, in relevant part,
certain investment practices deemed to be unsuitable for an institution's
investment portfolio, as well as guidelines for investing in certain types of
mortgage related securities.
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 and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying".
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Certificates or to
purchase Offered Certificates representing more than a specified percentage of
the investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for such investors.
93
<PAGE>
METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by the Prospectus Supplements
hereto will be offered in series. The distribution of the Offered Certificates
may be effected 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. The
Prospectus Supplement for the Offered Certificates of each series will, as to
each class of such Certificates, set forth the method of the offering, either
the initial public offering price or the method by which the price at which the
Certificates of such class will be sold to the public can be determined, the
amount of any underwriting discounts, concessions and commissions to
underwriters, any discounts or commissions to be allowed to dealers and the
proceeds of the offering to the Depositor.
If so specified in the related Prospectus Supplement, the Offered
Certificates of a series will be distributed in a firm commitment underwriting,
subject to the terms and conditions of the underwriting agreement, by First
Union Capital Markets Corp. acting as underwriter with other underwriters, if
any, named therein. Alternatively, the Prospectus Supplement may specify that
Offered Certificates will be distributed by First Union Capital Markets Corp.
acting as agent. If First Union Capital Markets Corp. acts as agent in the sale
of Offered Certificates, First Union Capital Markets Corp. will receive a
selling commission with respect to such Offered Certificates, depending on
market conditions, expressed as a percentage of the aggregate Certificate
Balance or Notional Amount of such Offered Certificates as of the date of
issuance. The exact percentage for each series of Certificates will be disclosed
in the related Prospectus Supplement. To the extent that First Union Capital
Markets Corp. elects to purchase Offered Certificates as principal, First Union
Capital Markets Corp. may realize losses or profits based upon the difference
between its purchase price and the sales price. The Prospectus Supplement with
respect to any Series offered other than through underwriters will contain
information regarding the nature of such offering and any agreements to be
entered into between the Depositor and purchasers of Offered Certificates of
such series.
This Prospectus and related Prospectus Supplements may be used by the
Depositor, First Union Capital Markets Corp., an affiliate of the Depositor, and
any other affiliate of the Depositor when required under the federal securities
laws in connection with offers and sales of Offered Certificates in furtherance
of market-making activities in Offered Certificates. First Union Capital Markets
Corp. or any such other affiliate may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale or otherwise.
The Depositor will agree to indemnify First Union Capital Markets Corp.
and any underwriters and their respective controlling persons against certain
civil liabilities, including liabilities under the Securities Act, or will
contribute to payments that any such person may be required to make in respect
thereof.
In the ordinary course of business, First Union Capital Markets Corp. and
the Depositor may engage in various securities and financing transactions,
including repurchase agreements to provide interim financing of the Depositor's
mortgage loans pending the sale of such mortgage loans or interests therein,
including the Certificates.
The Depositor anticipates that the Offered Certificates will be sold
primarily to institutional investors. Purchasers of Offered Certificates,
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities
Act in connection with reoffers and sales by them of Offered Certificates.
Certificateholders should consult with their legal advisors in this regard prior
to any such reoffer or sale.
As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any class of Certificates not offered hereby may be initially retained by the
Depositor, and may be sold by the Depositor at any time to one or more
institutional investors.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for the
Depositor, its affiliates, and the Trustee in the ordinary course of business.
LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, certain
legal matters in connection with the Certificates of each series, including
certain federal income tax consequences, will be passed upon for the Depositor
by Willkie Farr & Gallagher, New York, New York and for the underwriters by
Sidley & Austin, New York, New York.
94
<PAGE>
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.
RATING
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 rating categories, by at least one Rating Agency.
Ratings on commercial mortgage pass-through certificates address the
likelihood of receipt by the holders thereof of all collections on the
underlying mortgage assets to which such holders are entitled. These ratings
address the structural, legal and issuer-related aspects associated with such
certificates, the nature of the underlying mortgage assets and the credit
quality of the guarantor, if any. Ratings on commercial mortgage pass-through
certificates do not represent any assessment of the likelihood of principal
prepayments by borrowers or of the degree by which such prepayments might differ
from those originally anticipated. As a result, 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.
There can be no assurance that any rating agency not requested to rate the
Offered Certificates will not nonetheless issue a rating to any or all Classes
thereof and, if so, what such rating or ratings 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 rating assigned thereto by one
or more of the Rating Agencies.
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.
95
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
Accrual Certificates .................................... 13, 36
Accrued Certificate Interest ............................ 36
ADA ..................................................... 67
ARM Loans ............................................... 28
Available Distribution Amount ........................... 35
Bond-type ............................................... 35
Book-Entry Certificates ................................. 15, 35
Cash Flow Agreement ..................................... Front Cover, 12, 29
CERCLA .................................................. 23
Certificate ............................................. Front Cover, 9
Certificate Account ..................................... 11, 29
Certificate Balance ..................................... 3, 13
Certificate Owner ....................................... 15, 41
Certificateholders ...................................... Front Cover
Closing Date ............................................ 69
CMBS .................................................... Front Cover, 10, 24
CMBS Agreement .......................................... 28
CMBS Issuer ............................................. 28
CMBS Servicer ........................................... 28
CMBS Trustee ............................................ 28
Code .................................................... 15, 67
Commercial Properties ................................... 9, 25
Commission .............................................. 3
Committee Report ........................................ 69
Companion Class ......................................... 14, 37
Contributions Tax ....................................... 78
Controlled Amortization Class ........................... 14, 37
Cooperative Loans ....................................... 57
Cooperatives ............................................ 25, 57
CPR ..................................................... 32
Credit Support .......................................... Front Cover, 11, 29
Cut-off Date ............................................ 14
Debt Service Coverage Ratio ............................. 26
Definitive Certificate .................................. 15
Definitive Certificates ................................. 35
Depositor ............................................... 24
Determination Date ...................................... 35
Direct Participants ..................................... 41
Distribution Date ....................................... 13
Distribution Date Statement ............................. 38
DOL ..................................................... 90
DTC ..................................................... 3
Due Period .............................................. 38
Equity Participation .................................... 28
ERISA ................................................... 16, 89
Event of Default ........................................ 52
Excess Funds ............................................ 34
Exchange Act ............................................ 4
Exemption ............................................... 90
FAMC .................................................... 10
FHLMC ................................................... 10
First Union ............................................. 90
FNMA .................................................... 10
Garn Act ................................................ 65
96
<PAGE>
PAGE
----
GNMA .................................................... 10
Grantor Trust Certificates .............................. 67
Grantor Trust Fractional Interest Certificates .......... 82
Grantor Trust Fund ...................................... 67
Grantor Trust Strip Certificate ......................... 16, 81
Indirect Participants ................................... 41
Insurance Proceeds ...................................... 45
IRS ..................................................... 70
Issue Premium ........................................... 74
L/C Bank ................................................ 55
Lease ................................................... 4, 10
Lease Assignment ........................................ 10
Lessee .................................................. 4, 10
Liquidation Proceeds .................................... 45
Loan-to-Value Ratio ..................................... 27
Lock-out Period ......................................... 27
Mark-to-Market Regulations .............................. 77
Master Servicer ......................................... 3, 9
Mortgage Asset Seller ................................... 11, 24
Mortgage Assets ......................................... Front Cover, 24
Mortgage Loans .......................................... Front Cover, 9, 24
Mortgage Notes .......................................... 25
Mortgage Rate ........................................... 10, 27
Mortgaged Properties .................................... 25
Mortgages ............................................... 25
Multifamily Properties .................................. 9, 25
Net Operating Income .................................... 26
Nonrecoverable Advance .................................. 38
Notional Amount ......................................... 13, 36
Offered Certificates .................................... Front Cover
OID Regulations ......................................... 68
Originator .............................................. 25
PAC ..................................................... 32
Participants ............................................ 24
Parties in Interest ..................................... 89
Pass-Through Rate ....................................... 3, 13
Permitted Investments ................................... 44
Plans ................................................... 89
Pooling Agreement ....................................... 12, 42
Prepayment Assumption ................................... 69
Prepayment Interest Shortfall ........................... 30
Prepayment Period ....................................... 39
Prepayment Premium ...................................... 28
Prohibited Transactions Tax ............................. 78
Prospectus Supplement ................................... Front Cover
Rating Agency ........................................... 17
Record Date ............................................. 35
Related Proceeds ........................................ 38
Relief Act .............................................. 66
REMIC ................................................... Front Cover, 67
REMIC Certificates ...................................... 67
REMIC Provisions ........................................ 67
REMIC Regular Certificates .............................. 15, 68
REMIC Regulations ....................................... 68
REMIC Residual Certificates ............................. 15, 68
REO Property ............................................ 9, 39
97
<PAGE>
PAGE
----
RICO .................................................... 67
Securities Act .......................................... 3
Senior Certificates ..................................... 12, 35
Servicing Standard ...................................... 93
SMMEA ................................................... 92
SPA ..................................................... 32
Special Servicer ........................................ 3, 9, 47
Stripped Bond Prepayment Assumption ..................... 84
Stripped Interest Certificates .......................... 12, 35
Stripped Principal Certificates ......................... 12, 35
Subordinate Certificates ................................ 12, 35
Sub-Servicer ............................................ 47
Sub-Servicing Agreement ................................. 47
TAC ..................................................... 32
Tiered REMICs ........................................... 69
Title V ................................................. 66
Trust Assets ............................................ 3
Trust Fund .............................................. Front Cover
Trustee ................................................. 3, 9
UCC ..................................................... 57
Value ................................................... 27
Warranting Party ........................................ 43
98
<PAGE>
[GRAPHIC OMITTED]
(1) "FULB97C2.XLS" is a Microsoft Excel*, Version 5.0 spreadsheet that provides
in electronic format certain loan-level information shown in Annex A, as well as
certain Mortgage Loan and Mortgaged Property information shown in the Prospectus
Supplement. This spreadsheet can be put on a user-specified hard drive or
network drive. Open this file as you would normally open any spreadsheet in
Microsoft Excel. After the file is opened, a securities law legend will be
displayed. READ THE LEGEND CAREFULLY. To view the Annex A data, see the
worksheet labeled "Annex A".
(2) "CSSA.XLS" is a Microsoft Excel, Version 5.0 spreadsheet that provides in
electronic format certain loan- and property-level information. This spreadsheet
can be put on a user-specified hard drive or network drive. The information
contained in this file is in the CSSA format. As described under "Reports to
Certificateholders; Available Information" on page S-74 of the Prospectus
Supplement, each month the Trustee will make available through its bulletin
board system an electronic file in the CSSA format updating and supplementing
the information contained in the "CSSA.XLS" file. Open this file as you would
normally open any spreadsheet in Microsoft Excel. After the file is opened, a
securities law legend will be displayed. READ THE LEGEND CAREFULLY. To view the
CSSA loan-level data, see the worksheet labeled "CSSALOAN"; and to view the CSSA
property-level data, see the worksheet labeled "CSSAPROP".
* Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE DEPOSITOR OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
NEITHERDELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SINCE
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
--------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary of Prospectus Supplement ................................ S-5
Risk Factors .................................................... S-27
Description of the Mortgage Pool ................................ S-32
Servicing of the Mortgage Loans ................................. S-55
Description of the Certificates ................................. S-63
Yield and Maturity Considerations ............................... S-81
Use of Proceeds ................................................. S-88
Certain Federal Income Tax
Consequences ................................................... S-88
ERISA Considerations ............................................ S-89
Legal Investment ................................................ S-91
Method of Distribution .......................................... S-92
Legal Matters ................................................... S-92
Ratings ......................................................... S-92
Index of Principal Definitions .................................. S-94
Annex A ......................................................... A-1
Annex B ......................................................... B-1
Annex C ......................................................... C-1
Annex D ......................................................... D-1
Annex E ......................................................... E-1
Annex F ......................................................... F-1
Annex G ......................................................... G-1
Annex H ......................................................... H-1
Annex I ......................................................... I-1
Annex J ......................................................... J-1
Annex K ......................................................... K-1
PROSPECTUS
Prospectus Supplement ........................................... 3
Available Information ........................................... 3
Incorporation of Certain Information by
Reference ...................................................... 4
Summary of Prospectus ........................................... 9
Risk Factors .................................................... 18
Description of the Trust Funds .................................. 24
Yield and Maturity Considerations ............................... 30
The Depositor ................................................... 34
Use of Proceeds ................................................. 34
Description of the Certificates ................................. 35
Description of the Pooling Agreements ........................... 42
Description of Credit Support ................................... 54
Certain Legal Aspects of Mortgage Loans and
Leases ......................................................... 56
Certain Federal Income Tax Consequences ......................... 67
State and Other Tax Consequences ................................ 89
ERISA Considerations ............................................ 89
Legal Investment ................................................ 92
Method of Distribution .......................................... 94
Legal Matters ................................................... 94
Financial Information ........................................... 95
Rating .......................................................... 95
Index of Principal Definitions .................................. 96
================================================================================
================================================================================
FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC.
(DEPOSITOR)
$1,961,117,000 (APPROXIMATE)
FIRST UNION-LEHMAN BROTHERS
COMMERCIAL MORTGAGE TRUST II
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 1997-C2
---------------------
PROSPECTUS SUPPLEMENT
---------------------
LEHMAN BROTHERS
[FIRST UNION LOGO]
NOVEMBER 19, 1997
================================================================================
