<PAGE>
Pursuant to Rule 424(b)(5)
File No. 333-32019
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 17, 1998)
$748,600,000
(Approximate)
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates,
Series 1998-CF1
DLJ Commercial Mortgage Corp. (the "Depositor") is forming a trust
(the "Trust") for the purpose of issuing its Series 1998-CF1 Commercial
Mortgage Pass-Through Certificates (the "Certificates"). The Certificates will
consist of 17 classes (each, a "Class") to be designated as: (i) the Class CP
and Class S Certificates (collectively, the "Interest Only Certificates");
(ii) the Class A-1A, Class A-1B, Class A-2 and Class A-3 Certificates
(collectively, the "Class A Certificates"); (iii) the Class B-1, Class B-2,
Class B-3, Class B-4, Class B-5, Class B-6 and Class B-7 Certificates
(collectively, the "Class B Certificates"); (iv) the Class C Certificates
(collectively with the Class CP, Class S, Class A and Class B Certificates,
the "REMIC Regular Certificates"); and (v) the Class R-I, Class R-II and Class
R-III Certificates (collectively, the "REMIC Residual Certificates"). Only the
Class CP, Class S, Class A, Class B-1 and Class B-2 Certificates
(collectively, the "Offered Certificates") are offered hereby. The respective
Classes of Offered Certificates will be issued in the aggregate principal
amounts (each, a "Class Principal Balance") or, in the case of the Interest
Only Certificates, with the aggregate notional amounts (each, a "Class
Notional Amount"), and will accrue interest at the per annum rates (each, a
"Pass-Through Rate"), set forth or otherwise described in the table below or
in the footnotes thereto.
<TABLE>
<CAPTION>
==================================================================================================================================
Initial Rating
Initial Class Pass-Through Assumed Final (S&P, Fitch and
Class Principal Balance(1) Rate(1)(2) Distribution Date(3) Moody's)(4)(5)
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class CP ..................... N/A(6) 0.9064% April 15, 2005 AAA/AAA/Aaa
Class S ...................... N/A(6) 0.7181% January 15, 2018 AAA/AAA/Aaa
Class A-1A ................... $125,000,000 6.1400% October 15, 2006 AAA/AAA/Aaa
Class A-1B................... $466,300,000 6.4100% February 15, 2008 AAA/AAA/Aaa
Class A-2..................... $50,400,000 6.5900% February 15, 2008 AA/AA/Aa2
Class A-3..................... $50,300,000 6.7000% February 15, 2008 A/A/A2
Class B-1..................... $41,900,000 7.0600% November 15, 2009 BBB/BBB/Baa2
Class B-2..................... $14,700,000 7.3300% January 15, 2010 BBB-/NR/Baa3
==================================================================================================================================
</TABLE>
(Continued on page 2)
---------------------
FOR A DISCUSSION OF CERTAIN RISK FACTORS TO BE CONSIDERED IN PURCHASING THE
OFFERED CERTIFICATES, SEE "RISK FACTORS" BEGINNING ON PAGE S-41
HEREIN AND ON PAGE 16 IN THE PROSPECTUS.
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 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.
---------------------
The Offered Certificates will be purchased from the Depositor by
Donaldson, Lufkin & Jenrette Securities Corporation (the "Underwriter") and
will be offered by the Underwriter
<PAGE>
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 108.1% of the initial aggregate Certificate Principal Balance (as
defined herein) of the Offered Certificates, plus accrued interest on the
Offered Certificates from March 1, 1998. The Offered Certificates are offered by
the Underwriter subject to prior sale, when, as and if delivered to and accepted
by the Underwriter and subject to certain other conditions. It is expected that
the Offered Certificates will be delivered to the Underwriter in book-entry form
through the Same-Day Funds Settlement System of DTC (as defined herein) on or
about March 2, 1998, against payment therefor in immediately available funds.
Donaldson, Lufkin & Jenrette
Securities Corporation
The date of this Prospectus Supplement is February 20, 1998.
S-2
<PAGE>
The footnotes to the table on the previous page are as follows:
- - ------------------------
(1) Approximate.
(2) The Pass-Through Rate for the Class S Certificates is variable and
will, in general, equal the weighted average of the Class S Strip
Rates (as defined herein) at which interest accrues on the respective
components of the Class Notional Amount of the Class S Certificates
from time to time as described herein. The Pass-Through Rate for the
Class CP Certificates is also variable and will, in general, equal
the weighted average of the Class CP Strip Rates (as defined herein)
at which interest accrues on the respective components of the Class
Notional Amount of the Class CP Certificates from time to time as
described herein. The Pass-Through Rate for each other Class of
Offered Certificates will, in general, equal the lesser of the rate
per annum specified in the foregoing table with respect to such Class
and the weighted average of the Net Mortgage Rates (as defined
herein) in effect for the Mortgage Loans from time to time.
(3) The "Assumed Final Distribution Date" with respect to any Class of
Certificates is the Distribution Date (as defined herein) on which
the final distribution would occur for such Class of Certificates
based upon the assumption that no Mortgage Loan (other than an ARD
Loan (as defined herein)) is prepaid prior to its stated maturity and
that the ARD Loans are not prepaid prior to, but are paid in their
entirety on, their respective Preferred Prepayment Dates (as defined
herein) and otherwise based on the Modeling Assumptions (as defined
herein). The actual performance and experience of the Mortgage Loans
will likely differ from such assumptions. See "Yield and Maturity
Considerations" herein.
(4) It is a condition to their issuance that the respective Classes of
Offered Certificates be assigned ratings by Standard & Poor's Ratings
Services, a Division of the McGraw-Hill Companies, Inc. ("S&P"),
Fitch IBCA, Inc. ("Fitch") and/or Moody's Investors Service, Inc.
("Moody's"; and together with S&P and Fitch, the "Rating Agencies"),
no less than those set forth above. The "Rated Final Distribution
Date" for each such Class is the Distribution Date in February 2031.
"NR" means not rated. See "Ratings" herein.
(5) The ratings on the Offered Certificates do not represent any
assessment of (i) the likelihood or frequency of principal
prepayments, whether voluntary or involuntary, 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, Yield Maintenance Premiums and Default Interest (each as
defined herein) 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 one or both Classes
of Interest Only Certificates might not fully recover their initial
investments in the event of rapid prepayments of the Mortgage Loans
(including both voluntary and involuntary prepayments). See "Ratings"
herein.
(6) Neither Class of Interest Only Certificates will have a Class
Principal Balance. The Class S Certificates will accrue interest on a
Class Notional Amount that is equal to the aggregate of the Class
Principal Balances of the Class A, Class B and Class C Certificates
outstanding from time to time. The Class CP Certificates will accrue
interest on a Class Notional Amount that is equal to the sum of (a)
the aggregate of the Class Principal Balances of the Class A-2, Class
A-3, Class B-1 and Class B-2 Certificates outstanding from time to
time and (b) the lesser of (i) the Class Principal Balance of the
Class A-1B Certificates outstanding from time to time and (ii)
$325,000,000; provided that the Class CP Certificates will in no
event accrue interest after the end of the Interest Accrual period
that occurs during March 2005.
- - -------------------------
See "Index of Principal Definitions" herein for the location of
meanings of capitalized terms used and defined herein. See "Index of Principal
Definitions" in the Prospectus for the location of meanings of capitalized
terms used but not defined herein.
S-3
<PAGE>
The Trust will be formed, and the Certificates will be issued,
pursuant to a Pooling and Servicing Agreement, to be dated as of March 1, 1998
(the "Pooling Agreement"), among the Depositor, Banc One Mortgage Capital
Markets, LLC, as servicer (in such capacity, the "Servicer"), Clarion
Partners, LLC as special servicer (in such capacity, the "Special Servicer")
and Norwest Bank Minnesota, National Association., as trustee (in such
capacity, the "Trustee") and REMIC administrator (in such capacity, the "REMIC
Administrator"). The assets of the Trust (such assets collectively, the "Trust
Fund") will consist primarily of a segregated pool (the "Mortgage Pool") of
approximately 168 multifamily and commercial mortgage loans (the "Mortgage
Loans"), with an Initial Pool Balance (calculated as described herein) of
approximately $838,800,140, and otherwise having the characteristics described
herein.
Distributions to holders of the Certificates ("Certificateholders") will be
made, to the extent of available funds, on the 15th day of each month or, if any
such 15th day is not a business day, on the next succeeding business day,
beginning in April 1998 (each, a "Distribution Date"). As more fully described
herein, distributions allocable to interest accrued on each Class of the Offered
Certificates will be made on each Distribution Date based on the Pass-Through
Rate then applicable to such Class and the Class Principal Balance or, in the
case of each Class of Interest Only Certificates, the Class Notional Amount of
such Class outstanding immediately prior to such Distribution Date; provided
that the Class CP Certificates will in no event accrue interest beyond the end
of the Interest Accrual Period that occurs during March 2005. As more fully
described herein, distributions allocable to principal of the respective Classes
of Offered Certificates (other than the Interest Only Certificates) will be made
in the amounts and in accordance with the priorities described herein. The Class
CP and Class S Certificates will not have Class Principal Balances and will not
entitle their respective holders to distributions of principal. Prepayment
Premiums and Yield Maintenance Premiums (each as defined herein) actually
collected on the Mortgage Loans will be allocated among the holders of the
respective Classes of REMIC Regular Certificates as more fully described herein.
The Trust is subject to termination, and the Certificates are subject to early
retirement, at the option of the Servicer, the Special Servicer and certain
specified Certificateholders under the limited circumstances described herein.
See "Description of the Certificates--Distributions" and "--Termination" herein.
As and to the extent described herein, the Class A-2, Class A-3,
Class B, Class C and REMIC Residual Certificates (collectively, the
"Subordinate Certificates") will be subordinate to the Class CP, Class S,
Class A-1A and Class A-1B Certificates (collectively, the "Senior
Certificates"); the Class A-3, Class B, Class C and REMIC Residual
Certificates will be subordinate to the Class A-2 Certificates; the Class B,
Class C and REMIC Residual Certificates will be subordinate to the Class A-3
Certificates; the Class B-2, Class B-3, Class B-4, Class B-5, Class B-6, Class
B-7, Class C and REMIC Residual Certificates will be subordinate to the Class
B-1 Certificates; and the Class B-3, Class B-4, Class B-5, Class B-6, Class
B-7, Class C and REMIC Residual Certificates will be subordinate to the Class
B-2 Certificates. See "Description of the Certificates--Distributions" and
"--Subordination; Allocation of Realized Losses and Certain Expenses" herein.
S-4
<PAGE>
The yield to maturity of each Class of Offered Certificates will
depend on, among other things, the rate and timing of principal payments
(including by reason of prepayments, loan extensions, defaults and
liquidations) and losses on the Mortgage Loans. The yield to maturity of each
Class of Interest Only Certificates will be highly sensitive to the rate and
timing of principal payments (including by reason of prepayments, defaults and
liquidations) and losses on the Mortgage Loans. Investors in each Class of
Interest Only Certificates should fully consider the associated risks,
including the risk that an extremely rapid rate of amortization, prepayment or
other liquidation of the Mortgage Loans could result in the failure of such
investors to recoup fully their initial investments. See "Risk Factors" and
"Yield and Maturity Considerations" herein and 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 being herein referred
to as "REMIC I", "REMIC II" and "REMIC III", respectively). The Offered
Certificates will evidence "regular interests" in REMIC III. See "Certain
Federal Income Tax Consequences" herein and in the Prospectus.
There is currently no secondary market for the Offered Certificates.
The Underwriter intends to make a secondary market in the Offered
Certificates, but is not obligated to do so. There can be no assurance that a
secondary market for the Offered Certificates will develop or, if one does
develop, that it will continue. See "Risk Factors--Limited Liquidity" herein.
The Offered Certificates will not be listed on any securities exchange.
------------------------
THE OFFERED CERTIFICATES DO NOT REPRESENT OBLIGATIONS OF THE
DEPOSITOR, THE SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE REMIC
ADMINISTRATOR OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS,
TRUSTEES, BENEFICIARIES, SHAREHOLDERS, EMPLOYEES OR AGENTS. NEITHER THE
OFFERED CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON. THE OFFERED
CERTIFICATES ARE PAYABLE SOLELY FROM THE TRUST FUND, AND PROSPECTIVE INVESTORS
SHOULD MAKE AN INVESTMENT DECISION BASED UPON AN ANALYSIS OF THE SUFFICIENCY
OF THE TRUST FUND.
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT CONSTITUTE PART
OF A SEPARATE SERIES OF CERTIFICATES ISSUED BY THE DEPOSITOR AND ARE BEING
OFFERED PURSUANT TO ITS PROSPECTUS DATED FEBRUARY 17, 1998, OF WHICH THIS
PROSPECTUS SUPPLEMENT IS A PART AND WHICH ACCOMPANIES THIS PROSPECTUS
SUPPLEMENT. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION REGARDING THIS
OFFERING THAT IS NOT CONTAINED HEREIN, AND PROSPECTIVE INVESTORS ARE URGED TO
READ THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
THROUGH AND INCLUDING JUNE 3, 1998, ALL DEALERS EFFECTING
TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS TO WHICH IT RELATES. THIS DELIVERY REQUIREMENT IS IN ADDITION TO
THE OBLIGATION OF DEALERS
S-5
<PAGE>
TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS MAY BE
USED BY THE UNDERWRITER, AN AFFILIATE OF THE DEPOSITOR, IN CONNECTION WITH
OFFERS AND SALES RELATED TO MARKET-MAKING TRANSACTIONS IN THE CERTIFICATES.
THE UNDERWRITER 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.
S-6
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
TRANSACTION OVERVIEW............................................................................................S-8
SUMMARY OF PROSPECTUS SUPPLEMENT................................................................................S-9
RISK FACTORS...................................................................................................S-41
Limited Liquidity.....................................................................................S-41
Risks Associated with the Nature of the Mortgaged Properties..........................................S-41
Potential Liability to the Trust Relating to a Material Adverse Environmental Condition...............S-42
Exposure of the Mortgage Pool to Adverse Economic or Other Developments
Based on Geographic Concentration...................................................................S-43
Risks Associated with Related Parties.................................................................S-43
Increased Risk of Loss Associated with Concentrations of Mortgage Loans and Borrowers.................S-44
Increased Risk of Default Associated with Balloon Payments............................................S-44
Extension Risk Associated With Modification of Mortgage Loans with Balloon Payments...................S-44
Limited Recourse......................................................................................S-44
Risks Associated With Changes in Concentrations.......................................................S-45
Risks of Subordinate Financing........................................................................S-45
Zoning Compliance.....................................................................................S-45
Uninsured Loss; Sufficiency of Insurance..............................................................S-45
Special Prepayment and Yield Considerations...........................................................S-45
Subordination of Subordinate Certificates.............................................................S-46
Potential Conflicts of Interest.......................................................................S-47
Certain Rights of the Controlling Class...............................................................S-47
ERISA Considerations..................................................................................S-47
DESCRIPTION OF THE MORTGAGE POOL...............................................................................S-47
General...............................................................................................S-47
Origination and Underwriting..........................................................................S-51
Assignment of the Mortgage Loans......................................................................S-54
Representations and Warranties........................................................................S-55
Cures, Repurchases and Substitutions..................................................................S-56
Additional Mortgage Loan Information..................................................................S-57
Cash Management and Certain Escrows and Reserves......................................................S-61
The Showboat Loan.....................................................................................S-62
Single-Tenant Property Loans..........................................................................S-66
Other Significant Concentrations......................................................................S-67
Ground Leases.........................................................................................S-67
Subordinate Financing.................................................................................S-67
Prepayment Provisions.................................................................................S-68
Hazard, Liability and Other Insurance.................................................................S-69
SERVICING OF THE MORTGAGE LOANS................................................................................S-70
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
General...............................................................................................S-70
The Servicer .........................................................................................S-72
The Special Servicer..................................................................................S-72
Servicing and Other Compensation and Payment of Expenses..............................................S-72
Modifications, Waivers, Amendments and Consents.......................................................S-75
The Controlling Class Representative..................................................................S-76
Sale of Defaulted Mortgage Loans......................................................................S-79
Replacement of the Special Servicer...................................................................S-80
Due-On-Sale and Due-On-Encumbrance Provisions.........................................................S-80
Inspections; Collection of Operating Information......................................................S-81
DESCRIPTION OF THE CERTIFICATES................................................................................S-81
General...............................................................................................S-81
Registration and Denominations........................................................................S-82
Class Principal Balances and Class Notional Amounts...................................................S-83
Accrual of Interest...................................................................................S-84
Pass-Through Rates....................................................................................S-85
Distributions.........................................................................................S-87
Subordination; Allocation of Realized Losses and Certain Expenses.....................................S-93
P&I and Other Advances................................................................................S-94
Appraisal Reductions..................................................................................S-95
Reports to Certificateholders; Certain Available Information..........................................S-96
Voting Rights.........................................................................................S-98
Termination...........................................................................................S-98
The Trustee...........................................................................................S-98
Required Regulatory Divestiture.......................................................................S-99
YIELD AND MATURITY CONSIDERATIONS..............................................................................S-99
Yield Considerations..................................................................................S-99
Weighted Average Life and Yield Sensitivity of Certain Sequential Pay Certificates...................S-102
Yield Sensitivity of the Interest Only Certificates..................................................S-103
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................................................S-103
General..............................................................................................S-103
Discount and Premium; Prepayment Premiums............................................................S-104
Characterization of Investments in Offered Certificates..............................................S-105
Possible Taxes on Income from Foreclosure Property and Other Taxes...................................S-105
Reporting and other Administrative Matters...........................................................S-106
METHOD OF DISTRIBUTION........................................................................................S-106
LEGAL MATTERS.................................................................................................S-107
ERISA CONSIDERATIONS..........................................................................................S-107
LEGAL INVESTMENT..............................................................................................S-109
RATINGS.......................................................................................................S-110
INDEX OF PRINCIPAL DEFINITIONS................................................................................S-112
</TABLE>
S-8
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXHIBITS
EXHIBIT A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND
MORTGAGED PROPERTIES....................................................................A-1-1
EXHIBIT A-2 MORTGAGE POOL INFORMATION...................................................................A-2-1
EXHIBIT B FORM OF TRUSTEE REPORT........................................................................B-1
EXHIBIT C DECREMENT TABLES FOR CLASS A, CLASS B-1 AND
CLASS B-2 CERTIFICATES.....................................................................C-1
EXHIBIT D PRICE/YIELD TABLES FOR THE INTEREST ONLY CERTIFICATES.........................................D-1
</TABLE>
S-9
<PAGE>
TRANSACTION OVERVIEW
The following diagram is intended to present the respective Classes of
Certificates in a visual format. The diagram does not reflect the exact
proportionate interest of each Class of Certificates in the Trust Fund.
Furthermore, the diagram does not include all relevant information relating to
the Certificates or the Mortgage Loans, particularly with respect to the risks
and special considerations involved with an investment in the offered
Certificates, and is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement.
PROSPECTIVE INVESTORS IN THE OFFERED CERTIFICATES ARE ADVISED TO CAREFULLY READ,
AND SHOULD RELY SOLELY ON, THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT IN MAKING THEIR INVESTMENT DECISION.
$748,600,000
(APPROXIMATE SIZE OF PUBLICLY OFFERED CLASSES)
DLJ COMMERCIAL MORTGAGE CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-CF1
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
| -------------------------------------------------------------------------------------------------------------------------------- |
| | Servicing Fee | |
| -------------------------------------------------------------------------------------------------------------------------------- |
| -------------------------------------------------------------------------------------------------------------------------------- |
| | Class S Public AAA/AAA/Aaa | |
| | ------------------------------------------------------ | |
| | | ------------------------------------------------- | | |
| | | | | | | |
| | | | Class CP Public AAA/AAA/Aaa | | | |
| | | | ------------ | | |
| | | | | --------- | | |
| | | | ------------ |Public | | | |
| | | | | --------- | | | | |
| | | | ------------ |Public | | | ---------------------------------- | |
| | | | | --------- | | | | --------- --------- --------- | | |
| | | | ------------ |Public | | | | | |Private| |Private| |Private| ----------------------------| |
| | | | | --------- | | | | | | | | | | | | -------- -------- --------| |
| | ----- ----- |Public | | | | | | | | | | | | | |Private| |Private| |Private| |
| | | --------- | | | | | | | | | | | | | | | | | | | | |
| --------- |Public | | | | | | | | | | | | | | | | | | | | | |
| --------- | | | | | | | | | | | | | | | | | | | | | | |
| |Public | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class | | Class | | Class | | Class | | Class | | Class | | Class | | Class | | Class | | Class | | Class | | Class | |
| | A-1A | | A-1B | | A-2 | | A-3 | | B-1 | | B-2 | | B-3 | | B-4 | | B-5 | | B-6 | | B-7 | | C | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | AAA/ | | AAA/ | | AA/ | | A/ | | BBB/ | | BBB-/ | | BB+/ | | BB/ | | BB-/ | | B/ | | NR/ | | NR/ | |
| | AAA/ | | AAA/ | | AA/ | | A/ | | BBB/ | | NR/ | | BB+ | | BB/ | | NR/ | | NR/ | | B-/ | | NR/ | |
| | Aaa | | Aaa | | Aa2 | | A2 | | Baa2 | | Baa3 | | Ba1 | | NR | | NR | | NR | | NR | | NR | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- |
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Class R-I NR/NR (Noneconomic)
Class R-II NR/NR (Noneconomic)
Class R-III NR/NR (Noneconomic)
Ratings: It is a condition to their issuance that the respective Classes of
Offered Certificates be assigned ratings by S&P, Fitch, and/or Moody's.
S-10
<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 that are 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 will have the meanings specified in the
Prospectus.
<TABLE>
<CAPTION>
<S> <C>
Title of Certificates and
Designation of Classes ............................ Mortgage Pass-Through Certificates, Series 1998-CF1 (the
"Certificates"), to be issued in 18 classes (each, a "Class") to
be designated as: (i) the Class CP and Class S Certificates
(collectively, the "Interest Only Certificates"); (ii) the Class A-
1A, Class A-1B, Class A-2 and Class A-3 Certificates
(collectively, the "Class A Certificates"); (iii) the Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5, Class B-6 and
Class B-7 Certificates (collectively, the "Class B Certificates");
(iv) the Class C Certificates (collectively with the Class CP,
Class S, Class A and Class B Certificates, the "REMIC
Regular Certificates"); and (v) the Class R-I, Class R-II and
Class R-III Certificates (collectively, the "REMIC Residual
Certificates"). Only the Class CP, Class S, Class A, Class B-1
and Class B-2 Certificates (collectively, the "Offered
Certificates") are offered hereby.
The Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class C, Class
R-I, Class R-II and Class R-III Certificates (collectively, the "Private
Certificates") will not be registered under the Securities Act of 1933,
as amended (the "Securities Act") and are not offered hereby.
Accordingly, to the extent this Prospectus Supplement contains
information regarding the terms of the Private Certificates, such
information is provided because of its potential relevance to a
prospective purchaser of an Offered Certificate.
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
Trust................................................ A common law trust established by the Depositor. The assets
of the Trust (such assets collectively, the "Trust Fund") will
consist primarily of a segregated pool (the "Mortgage Pool") of
approximately 168 conventional, monthly pay, multifamily and
commercial mortgage loans (the "Mortgage Loans").
Depositor ........................................... DLJ Commercial Mortgage Corp., a Delaware corporation.
See "The Depositor" in the Prospectus.
Servicer ............................................ Banc One Mortgage Capital Markets, LLC, a Delaware limited
liability company. See "Servicing of the Mortgage
Loans--The Servicer" herein.
Special Servicer .................................... Clarion Partners, LLC, a New York limited liability company.
See "Servicing of the Mortgage Loans--The Special Servicer"
herein.
Trustee and REMIC Administrator...................... Norwest Bank Minnesota, National Association, a nationally
chartered bank. See "Description of the Certificates--The Trustee" herein
and "Certain Federal Income Tax Consequences--REMICS--Reporting and Other
Administrative Matters" in the Prospectus.
Originators.......................................... Each Mortgage Loan was originated by one of the following
entities: Column Financial, Inc., a Delaware corporation
("Column" or the "Seller"); Union Capital Investments, LLC,
a Georgia limited liability company ("Union Capital"); ARCS
Commercial Mortgage Co., L.P., a California limited
partnership ("ARCS"); and GMAC Commercial Mortgage
Corporation, a California corporation ("GMAC-CMC").
Column is affiliated with the Depositor and the Underwriter.
The other Originators collectively constitute the "Third Party
Originators". All of the Mortgage Loans were generally
originated in accordance with the underwriting standards
described herein under "Description of the Mortgage
Pool--Origination and Underwriting".
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
On the Closing Date, Column will acquire any Mortgage Loans not already
held thereby and will assign all of the Mortgage Loans to the Depositor,
which, in turn, will transfer the Mortgage Loans to the Trustee on behalf
of the holders of the Certificates (the "Certificateholders"). See
"Description of the Mortgage Pool--Assignment of the Mortgage Loans"
herein and "Description of the Pooling Agreements--Assignment of Mortgage
Assets" in the Prospectus.
Each Originator (other than GMAC-CMC) will make certain representations
and warranties with respect to the Mortgage Loans originated by it,
Column will make certain representations and warranties as to the one
Mortgage Loan originated by GMAC-CMC, and all such representations and
warranties will be assigned to the Trustee. In the event that any such
representation or warranty is breached in respect of any Mortgage Loan in
a manner that is material and adverse to the value of such Mortgage Loan
or the interests of the Certificateholders, party that made such
representation or warranty will be required to cure the breach in all
material respects or, if it fails or elects not to so cure the breach, to
repurchase or, at its option, subject to certain limitations described
herein, replace the affected Mortgage Loan. None of the Depositor, the
Underwriter, the Servicer, the Special Servicer, the Trustee or the REMIC
Administrator shall have any obligation to repurchase or replace any
Mortgage Loan if the related Originator (or, in the case of the Mortgage
Loan originated by GMAC-CMC, Column) fails to do so. Each of Column,
Union Capital and ARCS has only limited assets with which to fulfill any
repurchase or substitution obligations that may arise in respect of
breaches of its representations and warranties. Neither the Depositor nor
the Underwriter makes any representations or warranties with respect to
the financial condition of any such Originator, and there can be
</TABLE>
S-13
<PAGE>
<TABLE>
<S> <C>
no assurance that any such Originator will be able, or could be legally
compelled, to perform such obligations. See "Description of the Mortgage
Pool--Representations and Warranties" and "--Cures, Repurchases and
Substitutions" herein and "Description of the Pooling
Agreements--Representations and Warranties with respect to Mortgage
Assets; Repurchases and Other Remedies" in the Prospectus.
Cut-off Date ........................................ March 1, 1998.
Closing Date ........................................ On or about March 2, 1998.
Distribution Date.................................... The 15th day of each month or, if any such 15th day is not a
business day, then the next succeeding business day,
commencing in April 1998.
Collection Period.................................... As to any Distribution Date, the period commencing
immediately following the Determination Date in the month
immediately preceding the month in which such Distribution
Date occurs (or, in the case of the initial Distribution Date,
commencing immediately following the Cut-off Date) and
ending on and including the related Determination Date.
Determination Date................................... With respect to any Distribution Date, the earlier of (i) the 10th
day of the month in which such Distribution Date occurs or, if
such 10th day is not a business day, the immediately preceding
business day, and (ii) the fifth business day preceding such
Distribution Date.
Record Date.......................................... With respect to any Distribution Date, the last business day of
the month immediately preceding the month in which such
Distribution Date occurs.
Interest Accrual Period.............................. With respect to each Distribution Date, the calendar month
immediately preceding the month in which such Distribution
Date occurs.
Book-Entry Registration.............................. Each Class of Offered Certificates will initially be issued in
book-entry form
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
through the facilities of DTC and, accordingly, will constitute
"Book-Entry Certificates" within the meaning of the Prospectus. No person
acquiring an interest in a Book- Entry Certificate (any such person, a
"Certificate Owner") will be entitled to receive a fully registered
physical certificate (a "Definitive Certificate") evidencing such
interest, except under the limited circumstances described in the
Prospectus. See "Risk Factors--Book-Entry Registration" and "Description
of the Certificates--Book-Entry Registration and Definitive Certificates"
in the Prospectus and "Description of the Certificates--Registration and
Denominations" herein.
Denominations........................................ The Class A-1A and Class A-1B Certificates will each be
issued in minimum denominations of $10,000 initial principal
balance and in any whole dollar in excess thereof. The Interest
Only Certificates will each be issued in minimum
denominations of $10,000 initial notional amount and in any
whole dollar in excess thereof. The remaining Offered
Certificates will each be issued in minimum denominations of
$100,000 initial principal balance and in any whole dollar in
excess thereof.
The Mortgage Loans................................... The Mortgage Loans have an aggregate Cut-off Date Balance
of approximately $838,800,140 (the "Initial Pool Balance").
The "Cut-off Date Balance" of each Mortgage Loan is, in
general, the unpaid principal balance thereof as of the Cut-off
Date, after application of all payments due on or before such
date, whether or not received. All numerical information
provided herein with respect to the Mortgage Loans is
provided on an approximate basis. All weighted average
information provided herein with respect to the Mortgage
Loans reflects the weighting of the Mortgage Loans by their
respective Cut-off Date Balances. The Cut-off Date Balance
of each Mortgage Loan has been calculated, for purposes of
the numerical information provided
</TABLE>
S-15
<PAGE>
<TABLE>
<S> <C>
herein, on the assumption that no Mortgage Loan has been the subject of a
prepayment during the period subsequent to its scheduled due date, if
any, in February 1998 up to and including the Cut-off Date, and that all
payments of principal and interest, if any, due in respect thereof on or
before the Cut-off Date have been received.
In general, each Mortgage Loan is evidenced by a note or bond (a
"Mortgage Note") and is secured by a mortgage, deed of trust, deed to
secure debt or similar security instrument (a "Mortgage") creating a
first (or, in the case of one Mortgage Loan, which represents 0.2% of the
Initial Pool Balance and encumbers a Mortgaged Property that is also
encumbered by a first priority Mortgage that secures another Mortgage
Loan, a second) mortgage lien on the fee simple and/or leasehold interest
of the related mortgagor (the "Mortgagor") in real property used for
commercial or multifamily purposes (each, a "Mortgaged Property") and
security interests in certain funds and accounts and other collateral
described herein.
Eight groups of Mortgage Loans (the "Cross- Collateralized Mortgage
Loans"; and each such group, a "Cross- Collateralized Group"),
representing 5.0%, 3.3%, 1.8%, 1.8%, 1.7%, 1.5%, 1.2% and 0.3%,
respectively, of the Initial Pool Balance, are, solely as among the
Mortgage Loans in each such particular group, cross-defaulted and
cross-collateralized with each other. Certain of the Cross-Collateralized
Groups provide that the applicable cross-collateralization and
cross-default features will terminate upon satisfaction of certain
property performance targets and/or minimum debt service coverage ratio
requirements. Certain of the Cross-Collateralized Groups (as well as
certain individual Mortgage Loans that are secured by multiple parcels)
permit individual property releases upon the
</TABLE>
S-16
<PAGE>
<TABLE>
<S> <C>
satisfaction of certain criteria and/or the payment of a release price
equal to between 100% and 125% of the allocated loan amount for the
property to be released. See "Risk Factors--Certain Factors Affecting
Delinquency, Foreclosure and Loss of the Mortgage Loans--Limitations on
Enforceability of Cross-Collateralization" in the Prospectus. Except
where otherwise specifically indicated, statistical information provided
herein with respect to the Cross-Collateralized Mortgage Loans is so
provided on an individual Mortgage Loan basis without regard to the
cross-collateralization.
The Mortgage Loans are, or should be considered to be, non-recourse
obligations of the related Mortgagors. No Mortgage Loan will be insured
or guaranteed by any governmental entity or private insurer or by any
other person.
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 eight
states with the highest concentrations:
Percentage
Number of of Initial
State Mortgage Loans Pool Balance
----- -------------- ------------
New Jersey 5 13.3%
California 19 10.3%
Minnesota 9 7.6%
Illinois 10 7.5%
Texas 20 6.6%
Georgia 12 6.1%
Florida 10 5.9%
New York 12 5.8%
The remaining Mortgaged Properties are located throughout 23 other states
and the District of Columbia.
Set forth below are the number of Mortgage Loans, and the approximate
percentage of the Initial Pool Balance represented by such Mortgage
Loans, that
</TABLE>
S-17
<PAGE>
<TABLE>
<S> <C>
are secured by Mortgaged Properties operated for each indicated purpose:
Percentage
Property Number of of Initial
Type Mortgage Loans Pool Balance
-------- -------------- ------------
Retail 56 31.9%
Multifamily 45 19.2%
Office 19 14.1%
Hotel & Casino 1 11.9%
Hotel 5 8.0%
Industrial 23 7.0%
Mobile Home Park 5 3.2%
Mixed Use 5 2.3%
Other Commercial 7 1.3%
Senior Housing 1 0.9%
Self-Storage 1 0.3%
Except as described below or in a default scenario, each Mortgage Loan
bears interest at a rate per annum (a "Mortgage Rate") that is fixed for
the remaining term of the Mortgage Loan. In general, each Mortgage Loan
provides for scheduled payments ("Monthly Payments") of principal and
interest to be due on the first day of each month, or if such day is not
a business day, the next succeeding business day (each, a "Due Date").
The interest payable in respect of any Mortgage Loan on any Due Date will
be the interest accrued thereon during the most recently ended calendar
month. Interest on 54 Mortgage Loans, representing 21.7% of the Initial
Pool Balance, will be computed on the basis of a 360-day year consisting
of twelve 30-day months. Interest on the remaining 114 Mortgage Loans
(the "Non-30/360 Mortgage Loans"), representing 78.3% of the Initial Pool
Balance, will be computed on the basis of the actual number of days
elapsed each month during a 360-day year. Thirteen Mortgage Loans (the
"ARD Loans"), which collectively
</TABLE>
S-18
<PAGE>
<TABLE>
<S> <C>
represent 22.0% of the Initial Pool Balance, have original terms to
stated maturity of approximately 20 to 30 years; however, each such
Mortgage Loan provides that during the period commencing on a specified
date (the "Anticipated Repayment Date"), approximately ten years after
origination, and continuing thereafter until the Mortgage Loan is paid in
full: (1) additional interest (the "Additional Interest") will accrue on
such Mortgage Loan at a rate of 2.0% per annum (or, in the case of one
ARD Loan, representing 11.9% of the Initial Pool Balance, at a rate equal
to the lesser of (a) 5% per annum and (b) the excess, if any, of (i) the
applicable U.S. Treasury rate plus 2%, over (ii) the original Mortgage
Rate), such Additional Interest to be deferred and paid after the
outstanding principal balance of such Mortgage Loan is paid in full; and
(2) except in the case of six of the ARD Loans, representing 1.2% of the
Initial Pool Balance, excess net cash flow from the related Mortgaged
Property will be applied to amortize such Mortgage Loan on an accelerated
basis.
One hundred forty-eight of the Mortgage Loans (the "Balloon Mortgage
Loans"), representing 76.6% of the Initial Pool Balance, provide for
monthly payments of principal on each Due Date based on amortization
schedules longer than the remaining terms of such Mortgage Loans, thereby
leaving substantial amounts of principal (each such payment thereof,
together with accrued interest to the related maturity date, a "Balloon
Payment") due and payable on their respective stated maturity dates (each
a "Maturity Date"). See "Risk Factors--Increased Risk of Default
</TABLE>
S-19
<PAGE>
<TABLE>
<S> <C>
Associated with Balloon Payments" and "--Extension Risk Associated with
Modification of Mortgage Loans with Balloon Payments" herein and "Risk
Factors--Certain Factors Affecting Delinquency, Foreclosure and Loss of
the Mortgage Loans--Increased Risk of Default Associated with Balloon
Payments" in the Prospectus. As stated above, 13 Mortgage Loans,
representing 22.0% of the Initial Pool Balance, are ARD Loans. The
remaining seven Mortgage Loans, representing 1.4% of the Initial Pool
Balance, are generally fully amortizing.
The single largest Mortgage Loan is the Showboat Loan described in this
Summary under "The Showboat Loan" below. The Showboat Loan has a Cut-off
Date Balance of $99,880,087, which represents 11.9% of the Initial Pool
Balance.
Twenty-eight Mortgage Loans (the "Single-Tenant Property Loans"), which
represent 9.1% of the Initial Pool Balance, are secured by Mortgages on
Mortgaged Properties that are leased pursuant to space leases (the
"Single-Tenant Property Leases") to a single tenant. Scheduled monthly
rent payments (the "Monthly Rental Payments") under the Single-Tenant
Property Leases are, in each case, generally sufficient to pay in full
and on a timely basis all interest and principal scheduled to be paid
with respect to the related Single-Tenant Property Loan (other than any
Balloon Payment). In general, each Single-Tenant Property Lease provides
that the tenant thereunder is responsible for all costs and expenses
incurred in connection with the maintenance and operation of the related
Mortgaged Property. The Single-Tenant Property Loans are exclusive of the
Showboat Loan and the Stone Container Loans (each as defined herein).
No Mortgage Loan will be, as of the Closing Date, 30 days or more
delinquent in the payment of principal or interest.
As of their respective dates of origination, all of the Mortgage Loans
imposed restrictions on voluntary prepayments of principal ("Principal
Prepayments"), which, in all cases, commenced with a period (a "Lockout
Period") during which, with limited
</TABLE>
S-20
<PAGE>
<TABLE>
<S> <C>
exception, Principal Prepayments are prohibited. In the case of some
Mortgage Loans, the Lockout Period will remain in effect for all or
substantially all of the remaining term to maturity. In other cases, the
Lockout Period is followed by a period during which Principal Prepayments
are permitted but are required to be accompanied by the greater of a
specified percentage of the principal amount being prepaid (a "Prepayment
Premium") and a premium calculated on the basis of a yield maintenance
formula (a "Yield Maintenance Premium"), and then, commencing on a
specified date prior to maturity, by a period (an "Open Period") during
which Principal Prepayments may be made without payment of any Prepayment
Premium or Yield Maintenance Premium. In one case, the Lockout Period is
followed by a period during which Principal Prepayments must be
accompanied by the greater of a Prepayment Premium and a Yield
Maintenance Premium (calculated based on a discount rate that is a spread
over the applicable U.S. Treasury rate), then by another period during
which Principal Prepayments must be accompanied by the lesser of a
Prepayment Premium (calculated at a greater percentage than during the
prior period) and a Yield Maintenance Premium (calculated based on a
discount rate that reflects no spread over the applicable U.S. Treasury
rate), and then by an Open Period. In another case, the Lockout Period is
followed by a period during which Principal Prepayments must be
accompanied by the greater of a Prepayment Premium and a Yield
Maintenance Premium, then by another period during which Principal
Prepayments must be accompanied by a Prepayment Premium, and then by an
Open Period. In all other cases, the Lockout Period is followed directly
by an Open Period. Any period during which a Principal Prepayment is
permitted, but must be accompanied by a Prepayment Premium and/or a Yield
Maintenance Premium,is herein referred to as a
</TABLE>
S-21
<PAGE>
<TABLE>
<S> <C>
"Premium Period". In the case of 105 Mortgage Loans, representing 73.1%
of the Initial Pool Balance, the related Mortgagors are permitted to
"defease" their Mortgage Loans with United States Treasury obligations
during the Lockout Period but not earlier than two years following the
Closing Date. In the case of certain Mortgage Loans, the security for the
Mortgage Loans includes pledged funds which: (i) if certain leasing or
other economic conditions are satisfied by a specified date, will be
released to the related Mortgagor; and (ii) if such conditions are not
satisfied by such date, will be applied to pay down the Mortgage Loan
during what would otherwise be a Lockout Period. See "Description of the
Mortgage Pool--Prepayment Provisions" herein.
Set forth below is certain information regarding the Mortgage Loans and
the Mortgaged Properties expected to be applicable as of the Cut-off Date
(except as otherwise indicated). Such information is more fully
described, and additional information regarding the Mortgage Loans and
the Mortgaged Properties is set forth, in the tables on Exhibits A-1 and
A-2 hereto.
Number of Mortgage Loans................. 168
Initial Pool Balance..................... $838,800,140
Minimum Cut-off Date Balance............ $507,458
Maximum Cut-off Date Balance............ $99,880,087
Average Cut-off Date Balance............ $4,992,858
Minimum Mortgage Rate.................... 6.980%
Maximum Mortgage Rate.................... 9.250%
Weighted Average Mortgage Rate........... 7.641%
Minimum Cut-off Date LTV Ratio.......... 24.0%
Maximum Cut-off Date LTV 85.0%
</TABLE>
S-22
<PAGE>
<TABLE>
<S> <C>
Ratio..................................
Weighted Average Cut-off Date LTV
Ratio................................. 65.4%
Minimum Original Term to Maturity
(months)(1)........................... 84
Maximum Original Term to Maturity
(months)(1)........................... 240
Weighted Average Original Term to
Maturity (months)(1).................. 133
Minimum Remaining Term to Maturity
(months)(1)........................... 77
Maximum Remaining Term to Maturity
(months)(1)........................... 238
Weighted Average Remaining Term to
Maturity (months)(1).................. 130
Minimum Occupancy Rate at
Underwriting(2)....................... 82.0%
Maximum Occupancy Rate at
Underwriting(2)....................... 100.0%
Weighted Average Occupancy
Rate at Underwriting(2)............... 97.8%
Minimum Underwriting DSCR................ 1.05x
Maximum Underwriting DSCR................ 2.67x
Weighted Average Underwriting 1.35x
DSCR..................................
--------------------
(1) In the case of the ARD Loans, assumes that maturity is at the
respective Anticipated Repayment Dates. (2) Does not reflect Mortgage
Loans secured by hotel or hotel & casino properties.
"Cut-off Date LTV Ratio", "Underwriting DSCR" and "Occupancy Rate at
Underwriting" are each calculated as
</TABLE>
S-23
<PAGE>
<TABLE>
<S> <C>
described under "Description of the Mortgage Pool--Additional Mortgage
Loan Information" herein.
See "Description of the Mortgage Pool" herein.
The Showboat Loan.................................... The "Showboat Loan" has a Cut-off Date Balance of
$99,880,087. It is evidenced by a Mortgage Note on which
Showboat Land LLC, a Nevada limited liability company, is the
obligor (the "Showboat Borrower"). It is secured by, among
other things, a first mortgage lien on the Showboat Borrower's
fee interest in certain real property (the "Showboat Property")
that is (i) located on the boardwalk in Atlantic City, New
Jersey, (ii) improved by a hotel/casino (the "Showboat Hotel
and Casino") and (iii) subject to a ground lease (the "Showboat
Ground Lease") that expires in 2082. Pursuant to the
Showboat Ground Lease, the lessee thereunder, Atlantic City
Showboat, Inc., operates the Showboat Hotel and Casino. The
Mortgage for the Showboat Loan is subordinate to the tenant's
rights under the Showboat Ground Lease but not to the lien of
any leasehold mortgages that may encumber the tenant's
leasehold interest under such ground lease.
Set forth below is certain information regarding the Showboat Loan and
Showboat Property expected to be applicable as of the Cut-off Date
(except as otherwise indicated). Such information is more fully
described, and additional information regarding such Mortgage Loan and
Mortgaged Property is set forth, under "Description of the Mortgage
Pool--The Showboat Loan" and in the tables on Exhibits A-1 and A-2
hereto.
Cut-off Date Balance...................... $99,880,087
Mortgage Rate............................. 7.090%
Cut-off Date LTV Ratio.................... 24.0%
Underwriting DSCR......................... 1.14x
Anticipated Repayment Date(1)............. 2/1/08
</TABLE>
S-24
<PAGE>
<TABLE>
<S> <C>
Original Term to ARD(2)................... 120 months
Remaining Term to ARD(2).................. 119 months
Original Amortization Term................ 360 months
Remaining Amortization Term............... 359 months
Year Built................................ 1984
Year Renovated............................ 1994
--------------------
(1) The Showboat Loan is an ARD Loan.
(2) Anticipated Repayment Date.
Description of the
Certificates....................................... The Certificates will be issued on the Closing Date pursuant to
a Pooling and Servicing Agreement, to be dated as of the Cut-
off Date (the "Pooling Agreement"), among the Depositor, the
Servicer, the Special Servicer, the Trustee and the REMIC
Administrator, and will represent in the aggregate the entire
beneficial ownership interest of the Trust. See "Description of
the Certificates--General" herein.
A. Class Principal Balances and
Class Notional Amounts.......................... The Class A, Class B and Class C Certificates (collectively, the
"Sequential Pay Certificates") are the only Certificates that will
have principal balances. The aggregate principal balance of
any Class of Sequential Pay Certificates is herein referred to as
its "Class Principal Balance".
Upon initial issuance, the Class A-1A, Class A-1B, Class A-2, Class A-3,
Class B-1 and Class B-2 Certificates will have the respective Class
Principal Balances set forth on the cover page hereof (in each case,
subject to a variance of plus or minus 5%).
Upon initial issuance, the Class B-3, Class B-4, Class B-5, Class B-6,
Class B-7 and Class C Certificates will have the following Class
Principal Balances (in each case, subject to a variance of plus or minus
5%):
</TABLE>
S-25
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Initial Class
Class Principal Balance
----- -----------------
Class B-3 $10,000,000
Class B-4 $27,100,000
Class B-5 $15,000,000
Class B-6 $15,000,000
Class B-7 $ 6,300,000
Class C $16,800,140
The Class CP and Class S Certificates will not have principal balances;
however, for purposes of calculating Accrued Certificate Interest (as
defined herein) in respect thereof, each such Class of Certificates will
have an aggregate notional amount (a "Class Notional Amount"). The Class
Notional Amount of the Class S Certificates will equal the aggregate of
the Class Principal Balances of the respective Classes of Sequential Pay
Certificates outstanding from time to time, and the Class Notional Amount
of the Class CP Certificates will equal the sum of (a) the aggregate of
the Class Principal Balances of the Class A-2, Class A-3, Class B-1 and
Class B-2 Certificates outstanding from time to time and (b) the lesser
of (i) the Class Principal Balance of the Class A-1B Certificates
outstanding from time to time and (ii) $325,000,000; provided that
Accrued Certificate Interest in respect of the Class CP Certificates will
in no event accrue beyond the end of the Interest Accrual Period that
occurs during March 2005.
The Class Notional Amounts of the Class CP and Class S Certificates will,
in each such case, be deemed to consist of components (each, a
"Component"). Each full Class Principal Balance of a Class of Sequential
Pay Certificates (other than the Class A-1B Certificates) that is part of
either such Class Notional Amount will constitute a separate Component
</TABLE>
S-26
<PAGE>
<TABLE>
<S> <C>
thereof (such Component to have the same alphabetical and/or numerical
designation as the alphabetical and/or numerical Class designation for
such Class of Sequential Pay Certificates (e.g., the Class Principal
Balance of the Class A-2 Certificates outstanding from time to time will
constitute Component A-2 of each of the Class Notional Amount of the
Class CP Certificates and the Class Notional Amount of the Class S
Certificates)). The portion of the Class Principal Balance of the Class
A-1B Certificates outstanding from time to time that is equal to the
lesser of (i) the entire amount of such Class Principal Balance
outstanding from time to time and (ii) $325,000,000, will constitute
another Component (such Component being herein designated "Component
A-1B2") of each of the Class Notional Amount of the Class CP Certificates
and the Class Notional Amount of the Class S Certificates. The remaining
portion of the Class Principal Balance of the Class A-1B Certificates
outstanding from time to time will constitute the last Component (such
Component being herein designated as "Component A-1B1") of the Class
Notional Amount of the Class S Certificates. Accordingly, the Class
Notional Amount of the Class CP Certificates will initially consist of
five Components, and the Class Notional Amount of the Class S
Certificates will initially consist of 13 Components.
The REMIC Residual Certificates will not have principal balances or
notional amounts.
See "Description of the Certificates--Class Principal Balances and Class
Notional Amounts" herein.
B. Accrual of Interest............................... The respective Classes of REMIC Regular Certificates will
bear interest (herein referred to as "Accrued Certificate
Interest"). With respect to each Class of REMIC Regular
Certificates, such interest will commence accruing as of the
Cut-off
</TABLE>
S-27
<PAGE>
<TABLE>
<S> <C>
Date and, during each Interest Accrual Period, will accrue at the
applicable Pass-Through Rate on the Class Principal Balance or, in the
case of each Class of Interest Only Certificates, the Class Notional
Amount of such Class of Certificates outstanding immediately prior to the
related Distribution Date; provided that Accrued Certificate Interest in
respect of the Class CP Certificates shall in no event accrue beyond the
end of the Interest Accrual period that occurs during March 2005. Accrued
Certificate Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
The portion of the Accrued Certificate Interest in respect of any Class
of REMIC Regular Certificates that is distributable thereon, subject to
available funds, is herein referred to as "Distributable Certificate
Interest". The Distributable Certificate Interest in respect of any Class
of REMIC Regular Certificates for any Distribution Date will equal the
Accrued Certificate Interest in respect of such Class of REMIC Regular
Certificates for the related Interest Accrual Period, reduced (to not
less than zero) by the product of (a) the Net Aggregate Prepayment
Interest Shortfall (as defined herein), if any, for such Distribution
Date, multiplied by (b) a fraction (expressed as a percentage), the
numerator of which is the Accrued Certificate Interest in respect of such
Class of REMIC Regular Certificates for the related Interest Accrual
Period, and the denominator of which is the aggregate Accrued Certificate
Interest in respect of all the Classes of REMIC Regular Certificates for
the related Interest Accrual Period.
The REMIC Residual Certificates will not bear interest.
C. Pass-Through Rates................................ The Pass-Through Rates applicable to the respective Classes
of Offered Certificates for the initial Interest
</TABLE>
S-28
<PAGE>
<TABLE>
<S> <C>
Accrual Period are set forth on the cover page hereof.
The Pass-Through Rate applicable to each Class of Offered Certificates
(other than the Interest Only Certificates) is subject to change and, for
each Interest Accrual Period subsequent to the initial Interest Accrual
Period, will equal the lesser of (i) the per annum rate set forth on the
cover page hereof with respect to such Class of Certificates and (ii) the
Weighted Average Net Mortgage Rate for such Interest Accrual Period.
The Pass-Through Rate for the Class CP Certificates will be variable and,
for each Interest Accrual Period subsequent to the initial Interest
Accrual Period, will equal the weighted average of the Class CP Strip
Rates at which interest accrues on the respective Components of the Class
Notional Amount of the Class CP Certificates during such Interest Accrual
Period (weighted on the basis of the relative sizes of such Components
immediately prior to the related Distribution Date). The "Class CP Strip
Rate" in respect of any Component of the Class Notional Amount of the
Class CP Certificates for any Interest Accrual Period that occurs during
the period from the Cut-off Date through the end of the Interest Accrual
Period that occurs during March 2005, will equal the lesser of (i) the
Maximum Class CP Strip Rate (as specified below) in respect of such
component for such Interest Accrual Period and (ii) the excess, if any,
of the Weighted Average Net Mortgage Rate for such Interest Accrual
Period, over the Pass-Through Rate then applicable to the Class of
Sequential Pay Certificates whose Class Principal Balance, in whole or in
part, constitutes such Component. The "Class CP Strip Rate" in respect of
each Component of the Class Notional Amount of the Class CP Certificates
for each Interest Accrual Period that occurs subsequent to March 2005,
will be 0% per annum.
</TABLE>
S-29
<PAGE>
<TABLE>
<S> <C>
Set forth below are the "Maximum CP Strip Rates" in respect of the
respective Components of the Class Notional Amount of the Class CP
Certificates for each Interest Accrual Period that occurs during the
period from the Cut-off Date through the end of March 2005:
Maximum
Component CP Strip Rate
A-1B2 1.04%
A-2 0.86%
A-3 0.75%
B-1 0.39%
B-2 0.12%
The Pass-Through Rate applicable to the Class S Certificates will also be
variable and, for each Interest Accrual Period subsequent to the initial
Interest Accrual Period, will equal the weighted average of the Class S
Strip Rates at which interest accrues on the respective Components of the
Class Notional Amount of the Class S Certificates during such Interest
Accrual Period (weighted on the basis of the relative sizes of such
Components immediately prior to the related Distribution Date). The
"Class S Strip Rate" in respect of any Component of the Class Notional
Amount of the Class S Certificates for any Interest Accrual Period will
equal the excess, if any, of (i) the Weighted Average Net Mortgage Rate
for such Interest Accrual Period, over (ii) the Pass-Through Rate then
applicable to the Class of Sequential Pay Certificates whose Class
Principal Balance, in whole or in part, constitutes such Component, plus
(if such Interest Accrual Period occurs during or prior to March 2005)
the Class CP Strip Rate in respect of the corresponding Component of the
Class Notional Amount of the Class CP Certificates for such Interest
Accrual Period.
The respective Pass-Through Rates applicable to the Class B- 3, Class
B-4,
</TABLE>
S-30
<PAGE>
<TABLE>
<S> <C>
Class B-5, Class B-6, Class B-7 and Class C Certificates for the initial
Interest Accrual Period will equal the following per annum rates:
Class Pass-Through Rate
----- -----------------
Class B-3 7.60%
Class B-4 7.60%
Class B-5 6.41%
Class B-6 6.41%
Class B-7 6.41%
Class C 6.41%
The respective Pass-Through Rates applicable to the Class B-3 and Class
B-4 Certificates are subject to change and, in the case of each such
Class of Certificates, for each Interest Accrual Period subsequent to the
initial Interest Accrual Period, will equal the lesser of (i) the per
annum rate specified above with respect to such Class of Certificates and
(ii) the Weighted Average Net Mortgage Rate for such Interest Accrual
Period. The respective Pass-Through Rates applicable to the Class B-5,
Class B-6, Class B-7 and Class C Certificates will, in the case of each
such Class of Certificates, remain fixed at the per annum rate specified
above with respect to such Class of Certificates.
The REMIC Residual Certificates will not have Pass-Through
Rates.
The "Weighted Average Net Mortgage Rate" for any Interest Accrual Period
will equal the weighted average of the Net Mortgage Rates for the
Mortgage Loans (weighted on the basis of their respective Stated
Principal Balances (as defined herein) outstanding immediately following
the Distribution Date during such Interest Accrual Period or, in the case
of the initial Interest Accrual Period, weighted on the basis of their
respective Cut-off Date Balances).
</TABLE>
S-31
<PAGE>
<TABLE>
<S> <C>
The "Net Mortgage Rate" for any Mortgage Loan will, in general, equal (i)
the related Mortgage Rate in effect as of the Closing Date (without
regard to any modification, waiver or amendment of the terms of such
Mortgage Loan subsequent to the Closing Date), minus (ii) 10 basis
points; provided that, for purposes of calculating Pass-Through Rates on
the Offered Certificates from time to time, in the case of each
Non-30/360 Mortgage Loan, the Mortgage Rate referenced in clause (i)
above will be adjusted from time to time to a per annum rate that would
produce an equivalent amount of interest for each applicable accrual
period on the basis of a 360-day year consisting of twelve 30-day months.
Distributions on the Certificates.................... Distributions will be made by or on behalf of the Trustee on
each Distribution Date to the Certificateholders of record at the
close of business on the immediately preceding Record Date
(or, in the case of the anticipated final distribution on any Class
of Certificates, to the persons presenting and surrendering such
Certificates as described herein). All distributions made with
respect to any Class of Certificates will be allocated pro rata
among the outstanding Certificates of such Class based on the
respective Percentage Interests (as defined herein) in such
Class evidenced by such Certificates.
A. Distributions of Interest
and Principal................................... On each Distribution Date, the Available Distribution Amount
(as defined herein) for such date will be distributed among the
respective Classes of Certificateholders for the following
purposes and in the following order of priority:
(i) to make distributions of interest to the holders of the Class
CP, Class S, Class A-1A and Class A-1B Certificates, pro rata
based on entitlement, up to an amount equal to all
Distributable Certificate
</TABLE>
S-32
<PAGE>
<TABLE>
<S> <C>
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;
(ii) to make distributions of principal to the holders of the Class
A-1A and Class A-1B Certificates, allocable as between such
Classes of Certificateholders as described herein, up to an
amount equal to the lesser of (a) the aggregate of the then
outstanding Class Principal Balances of the Class A-1A and
Class A-1B Certificates and (b) the Principal Distribution
Amount (as defined below) for such Distribution Date;
(iii) to reimburse the holders of the Class A-1A and Class A-1B
Certificates, pro rata based on entitlement, up to an amount
equal to all Realized Losses and Additional Trust Fund Expenses
(each as defined herein), if any, previously allocated to each
such Class of Certificates and for which no reimbursement has
previously been received;
(iv) to make distributions of interest to the holders of the Class
A-2 Certificates, up to 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;
(v) after the Class Principal Balances of the Class A-1A
and Class A-1B Certificates have been reduced to zero, to make
distributions of principal to the holders of the Class A-2
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Class Principal Balance of the Class A-2
</TABLE>
S-33
<PAGE>
<TABLE>
<S> <C>
Certificates and (b) the excess, if any, of the Principal
Distribution Amount for such Distribution Date over the amounts,
if any, distributed on such Distribution Date pursuant to clause
(ii) above;
(vi) to reimburse the holders of the Class A-2 Certificates, up to an
amount equal to 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;
(vii) to make distributions of interest to the holders of the Class
A-3 Certificates, up to 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;
(viii) after the Class Principal Balances of the Class A-1A, Class
A-1B and Class A-2 Certificates have been reduced to zero, to
make distributions of principal to the holders of the Class A-3
Certificates, up to an amount equal to the lesser of (a) the
then outstanding Class Principal Balance of the Class A-3
Certificates and (b) the excess, if any, of the Principal
Distribution Amount for such Distribution Date over the
amounts, if any, distributed on such Distribution Date pursuant
to clauses (ii) and (v) above;
(ix) to reimburse the holders of the Class A-3 Certificates, up to
an amount equal to all Realized Losses and Additional Trust
Fund Expenses, if any, previously
</TABLE>
S-34
<PAGE>
<TABLE>
<S> <C>
allocated to such Class of Certificates and for which no
reimbursement has previously been received;
(x) to make distributions of interest to the holders of the Class
B-1 Certificates, up to 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;
(xi) after the Class Principal Balances of the Class A Certificates
have been reduced to zero, to make distributions of principal
to the holders of the Class B-1 Certificates, up to an amount
equal to the lesser of (a) the then outstanding Class Principal
Balance of the Class B-1 Certificates and (b) the excess, if
any, of the Principal Distribution Amount for such Distribution
Date over the amounts, if any, distributed on such Distribution
Date pursuant to clauses (ii), (v) and (viii) above;
(xii) to reimburse the holders of the Class B-1 Certificates, up to
an amount equal to 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;
(xiii) to make distributions of interest to the holders of the Class
B-2 Certificates, up to 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;
</TABLE>
S-35
<PAGE>
<TABLE>
<S> <C>
(xiv) after the Class Principal Balances of the Class A and Class B-1
Certificates have been reduced to zero, to make distributions
of principal to the holders of the Class B-2 Certificates, up
to an amount equal to the lesser of (a) the then outstanding
Class Principal Balance of the Class B-2 Certificates and (b)
the excess, if any, of the Principal Distribution Amount for
such Distribution Date over the amounts, if any, distributed on
such Distribution Date pursuant to clauses (ii), (v), (viii)
and (xi) above;
(xv) to reimburse the holders of the Class B-2 Certificates, up to
an amount equal to 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;
(xvi) to make distributions of interest to the holders of the Class
B-3 Certificates, up to 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;
(xvii) after the Class Principal Balances of the Class A, Class B-1
and Class B-2 Certificates have been reduced to zero, to make
distributions of principal to the holders of the Class B-3
Certificates, up to an amount equal to the lesser of (a) the
then outstanding Class Principal Balance of the Class B-3
Certificates and (b) the excess, if any, of the Principal
</TABLE>
S-36
<PAGE>
<TABLE>
<S> <C>
Distribution Amount for such Distribution Date over the
amounts, if any, distributed on such Distribution Date pursuant
to clauses (ii), (v), (viii), (xi) and (xiv) above;
(xviii) to reimburse the holders of the Class B-3 Certificates, up to
an amount equal to 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;
(xix) to make distributions of interest to the holders of the Class
B-4 Certificates, up to 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;
(xx) after the Class Principal Balances of the Class A, Class B-1,
Class B-2 and Class B-3 Certificates have been reduced to zero,
to make distributions of principal to the holders of the Class
B-4 Certificates, up to an amount equal to the lesser of (a)
the then outstanding Class Principal Balance of the Class B-4
Certificates and (b) the excess, if any, of the Principal
Distribution Amount for such Distribution Date over the
amounts, if any, distributed on such Distribution Date pursuant
to clauses (ii), (v), (viii), (xi), (xiv) and (xvii) above;
(xxi) to reimburse the holders of the Class B-4 Certificates, up to
an amount equal to all Realized Losses and Additional Trust
Fund Expenses, if any, previously
</TABLE>
S-37
<PAGE>
<TABLE>
<S> <C>
allocated to such Class of Certificates and for which no
reimbursement has previously been received;
(xxii) to make distributions of interest to the holders of the Class
B-5 Certificates, up to 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;
(xxiii) after the Class Principal Balances of the Class A, Class B-1,
Class B-2, Class B-3 and Class B-4 Certificates have been
reduced to zero, to make distributions of principal to the
holders of the Class B-5 Certificates, up to an amount equal to
the lesser of (a) the then outstanding Class Principal Balance
of the Class B-5 Certificates and (b) the excess, if any, of
the Principal Distribution Amount for such Distribution Date
over the amounts, if any, distributed on such Distribution Date
pursuant to clauses (ii), (v), (viii), (xi), (xiv), (xvii) and
(xx) above;
(xxiv) to reimburse the holders of the Class B-5 Certificates, up to
an amount equal to 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;
(xxv) to make distributions of interest to the holders of the Class
B-6 Certificates, up to an amount equal to all Distributable
Certificate Interest in respect of such Class of Certificates
for such Distribution Date and, to the
</TABLE>
S-38
<PAGE>
<TABLE>
<S> <C>
extent not previously paid, for all prior Distribution Dates;
(xxvi) after the Class Principal Balances of the Class A, Class B-1,
Class B-2, Class B-3, Class B-4 and Class B-5 Certificates have
been reduced to zero, to make distributions of principal to the
holders of the Class B-6 Certificates, up to an amount equal to
the lesser of (a) the then outstanding Class Principal Balance
of the Class B-6 Certificates and (b) the excess, if any, of
the Principal Distribution Amount for such Distribution Date
over the amounts, if any, distributed on such Distribution Date
pursuant to clauses (ii), (v), (viii), (xi), (xiv), (xvii),
(xx) and (xxiii) above;
(xxvii) to reimburse the holders of the Class B-6 Certificates, up to
an amount equal to 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;
(xxviii) to make distributions of interest to the holders of the Class
B-7 Certificates, up to 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;
(xxix) after the Class Principal Balances of the Class A, Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6
Certificates have been reduced to zero, to make distributions
of principal to the holders of the Class B-7
</TABLE>
S-39
<PAGE>
<TABLE>
<S> <C>
Certificates, up to an amount equal to the lesser of (a) the
then outstanding Class Principal Balance of the Class B-7
Certificates and (b) the excess, if any, of the Principal
Distribution Amount for such Distribution Date over the amounts,
if any, distributed on such Distribution Date pursuant to clauses
(ii), (v), (viii), (xi), (xiv), (xvii), (xx), (xxiii) and (xxvi)
above;
(xxx) to reimburse the holders of the Class B-7 Certificates, up to
an amount equal to 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;
(xxxi) to make distributions of interest to the holders of the Class C
Certificates, up to 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;
(xxxii) after the Class Principal Balances of the Class A and
Class B Certificates have been reduced to zero, to
make distributions of principal to the holders of the
Class C Certificates, up to an amount equal to the
lesser of (a) the then outstanding Class Principal
Balance of the Class C Certificates and (b) the
excess, if any, of the Principal Distribution Amount
for such Distribution Date over the amounts, if any,
distributed on such Distribution Date pursuant to
clauses (ii), (v), (viii), (xi), (xiv), (xvii), (xx), (xxiii),
(xxvi) and (xxix) above;
</TABLE>
S-40
<PAGE>
<TABLE>
<S> <C>
(xxxiii) to reimburse the holders of the Class C Certificates, up to an
amount equal to 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
(xxxiv) to make distributions to the holders of the REMIC Residual
Certificates, up to an amount equal to the excess, if any, of
(a) the Available Distribution Amount for such Distribution
Date, over (b) the aggregate distributions made in respect of
the REMIC Regular Certificates on such Distribution Date
pursuant to clauses (i) through (xxxiii) above;
provided that, on the final Distribution Date in connection with a
termination of the Trust, the distributions of principal to be made
pursuant to clauses (ii), (v), (viii), (xi), (xiv), (xvii), (xx), (xxiii),
(xxvi), (xxix) and (xxxii) above shall, in each such case, subject to the
then remaining portion of the Available Distribution Amount for such date,
be made to the holders of the relevant Class or Classes of Sequential Pay
Certificates otherwise entitled to distributions of principal pursuant to
such clause in an amount equal to the entire then remaining Class Principal
Balance (or, in the case of clause (ii) above, if applicable, the entire
aggregate of the then remaining Class Principal Balances) of such Class or
Classes of Certificates outstanding immediately prior to such final
Distribution Date.
Except under the limited circumstances described herein, distributions of
principal on the Class A-1A and Class A-1B Certificates as described in
clause
</TABLE>
S-41
<PAGE>
<TABLE>
<S> <C>
(ii) above will be paid, first, to the holders of the Class A-1A
Certificates, until the Class Principal Balance of such Class of
Certificates is reduced to zero, and thereafter, to the holders of the
Class A-1B Certificates, until the Class Principal Balance of such Class of
Certificates is reduced to zero. See "Description of the
Certificates--Distributions--Application of the Available Distribution
Amount" herein.
The "Principal Distribution Amount" for any Distribution Date will, in
general, equal the aggregate (without duplication) of the following:
(a) all payments of principal (other than Principal Prepayments)
received on the Mortgage Loans during the related Collection
Period, in each case net of any portion of the particular
payment that represents a late collection of principal for
which a P&I Advance (as defined below) was previously made for
a prior Distribution Date or that represents the principal
portion of a Monthly Payment due on or before the Cut-off Date
or on a Due Date subsequent to the related Collection Period;
(b) the principal portions of all Monthly Payments due in respect
of the Mortgage Loans for their respective Due Dates occurring
during the related Collection Period that were received prior
to the related Collection Period;
(c) all Principal Prepayments received on the Mortgage Loans during
the related Collection Period;
(d) all other collections (including Liquidation Proceeds,
Condemnation Proceeds and Insurance Proceeds (each as defined
herein)) that were received on or in respect of the
</TABLE>
S-42
<PAGE>
<TABLE>
<S> <C>
Mortgage Loans during the related Collection Period and that were
identified and applied by the Servicer as recoveries of
principal thereof, in each case net of any portion of such
collection that represents a late collection of principal due
on or before the Cut-off Date or for which a P&I Advance was
previously made for a prior Distribution Date; and
(e) the principal portion of all P&I Advances made in respect of
the Mortgage Loans with respect to such Distribution Date.
B. Distributions of Prepayment Premiums and
Yield Maintenance Premiums...................... If a Prepayment Premium is collected with respect to any
Mortgage Loan during any particular Collection Period and
either (i) the Distribution Date corresponding to such
Collection Period occurs after the end of April 2005 or (ii) the
Class Notional Amount of the Class CP Certificates will not be
affected by the distributions of principal on the Distribution
Date corresponding to such Collection Period, then the entire
amount of such Prepayment Premium will be distributed as additional
interest to the holders of the Class S Certificates on the Distribution
Date corresponding to such Collection Period.
If a Prepayment Premium is collected with respect to any Mortgage Loan
during any particular Collection Period, the Distribution Date
corresponding to such Collection Period occurs during or prior to April
2005 and the Class Notional Amount of the Class CP Certificates will be
affected by the distributions of principal on the Distribution Date
corresponding to such Collection Period, then 25% of such Prepayment
Premium will be distributed as additional interest to
</TABLE>
S-43
<PAGE>
<TABLE>
<S> <C>
the holders of the Class CP Certificates and 75% of such Prepayment
Premium will be distributed as additional interest to the holders of the
Class S Certificates, in any event on the Distribution Date corresponding
to such Collection Period.
If a Yield Maintenance Premium is collected with respect to any Mortgage
Loan during any particular Collection Period, then such Yield Maintenance
Premium will be distributed as additional interest on the Distribution
Date corresponding to such Collection Period as follows: The holders of
the Class (or Classes) of Sequential Pay Certificates then entitled to
distributions of principal on such Distribution Date will be entitled to
an aggregate amount (allocable among such Classes, if more than one, as
described below) equal to the product of (1) the amount of such Yield
Maintenance Premium, multiplied by (2) the lesser of (a) 25% and (b) a
fraction (not greater than one or less than zero), the numerator of which
is equal to the excess, if any, of the Pass-Through Rate applicable to
such Class of Sequential Pay Certificates (or, if two or more Classes are
involved, the Pass-Through Rate applicable to such of those Classes as
has the most senior right of payment and/or the earliest Assumed Final
Distribution Date) for the corresponding Interest Accrual Period, over
the relevant Discount Rate, and the denominator of which is equal to the
excess, if any, of the Mortgage Rate for the Mortgage Loan that prepaid,
over the relevant Discount Rate. If there is more than one Class of
Sequential Pay Certificates entitled to distributions of principal on
such Distribution Date, the aggregate amount described in the preceding
sentence will be allocated among such Classes on a pro rata basis in
accordance with the relative amounts of such distributions of principal.
Any portion of such Yield Maintenance Premium that may remain after such
distributions will be distributed as described above as if it were a
Prepayment Premium.
</TABLE>
S-44
<PAGE>
<TABLE>
<S> <C>
For purposes of the foregoing, the "Discount Rate" is the rate which, when
compounded monthly, is equivalent to the Treasury Rate when compounded
semi-annually (e.g., a 6% per annum Treasury Rate would equate to a 5.9263%
per annum Discount Rate). The "Treasury Rate" is the yield calculated by
the linear interpolation of the yields, as reported in Federal Reserve
Statistical Release H.15--Selected Interest Rates under the heading "U.S.
government securities/Treasury constant maturities" for the week ending
prior to the date of the relevant principal prepayment, of U.S. Treasury
constant maturities with a maturity date (one longer and one shorter) most
nearly approximating the maturity date of the prepaid Mortgage Loan. If
Release H.15 is no longer published, the Servicer will select a comparable
publication to determine the Treasury Rate.
Neither the Depositor nor the Underwriter makes any representation or
warranty as to the collectability of any Prepayment Premium or Yield
Maintenance Premium or the enforceability of any Mortgage Loan provision
requiring the payment of any such amount. Furthermore, Prepayment
Premiums and Yield Maintenance Premiums, even if collected and
distributable on any Class of Certificates as additional interest, may
not be sufficient to fully compensate the Certificateholders of such
Class for any loss in yield experienced by them in connection with the
related prepayments of principal. See "Risk Factors--Special Prepayment
and Yield Considerations" herein.
Subordination; Allocation of
Realized Losses and
Certain Expenses .................................. As and to the extent described herein, the Class A-2, Class
A-3, Class B, Class C, Class R-I, Class R-II and Class R-III
Certificates (collectively, the "Subordinate Certificates") will
be subordinate to the Class CP, Class S, Class A-1A and Class
A-1B Certificates
</TABLE>
S-45
<PAGE>
<TABLE>
<S> <C>
(collectively, the "Senior Certificates"); the Class
A-3, Class B, Class C, Class R-I, Class R-II and Class R- III
Certificates will be subordinate to the Class A-2 Certificates; the Class
B, Class C, Class R-I, Class R-II and Class R-III Certificates will be
subordinate to the Class A-3 Certificates; the Class B-2, Class B-3,
Class B-4, Class B-5, Class B-6, Class B-7, Class C, Class R-I, Class
R-II and Class R-III Certificates will be subordinate to the Class B-1
Certificates; and the Class B-3, Class B-4, Class B-5, Class B- 6, Class
B-7, Class C, Class R-I, Class R-II and Class R-III Certificates will be
subordinate to the Class B-2 Certificates. Such subordination will, in
general, be accomplished by the application of the Available Distribution
Amount on each Distribution Date in the order described in this Summary
under "Distributions on the Certificates--Distributions of Interest and
Principal" above and by the allocation of Realized Losses and Additional
Trust Fund Expenses as described in the next paragraph. No other form of
credit support will be available for the benefit of any Class of Offered
Certificateholders.
If, following the distributions to be made in respect of the Certificates
on any Distribution Date, the aggregate Stated Principal Balance of the
Mortgage Pool that will be outstanding immediately following such
Distribution Date is less than the then aggregate of the Class Principal
Balances of the respective Classes of Sequential Pay Certificates, the
Class Principal Balances of the Class C, Class B-7, Class B-6, Class B-5,
Class B-4, Class B-3, Class B-2, Class B-1, Class A-3 and Class A-2
Certificates will be reduced, sequentially in that order, until (in the
case of each such Class) such deficit (or the related Class Principal
Balance) is reduced to zero (whichever occurs first). If any portion of
such deficit remains at such time as the Class Principal Balances of such
</TABLE>
S-46
<PAGE>
<TABLE>
<S> <C>
Classes of Certificates are reduced to zero, then the respective Class
Principal Balances of the Class A-1A and Class A-1B Certificates will be
reduced, pro rata in accordance with the relative sizes of the remaining
Class Principal Balances of such Classes of Certificates, until such
deficit (or each such Class Principal Balance) is reduced to zero. Any
such deficit would, in general, be the result of Realized Losses incurred
in respect of the Mortgage Loans and/or Additional Trust Fund Expenses.
The foregoing reductions in the Class Principal Balances of the
Sequential Pay Certificates will constitute an allocation of any such
Realized Losses and Additional Trust Fund Expenses.
As more particularly described herein, "Realized Losses" are losses to
the Trust arising from the inability of the Servicer and/or the Special
Servicer to collect all amounts due and owing under any defaulted
Mortgage Loan, including by reason of the fraud or bankruptcy of the
related Mortgagor or a casualty of any nature at the related Mortgaged
Property, to the extent not covered by insurance.
As more particularly described herein, "Additional Trust Fund Expenses"
are, in general, any expenses of the Trust not specifically included in
the calculation of a "Realized Loss," that would result in the REMIC
Regular Certificateholders' receiving less than the full amount of
principal and/or interest to which they are entitled on any Distribution
Date.
See "Description of the Certificates--Subordination; Allocation of
Realized Losses and Certain Expenses" herein.
Treatment of REO Properties.......................... Notwithstanding that a Mortgaged Property securing any Mortgage Loan may
be acquired on behalf of the Certificateholders through foreclosure, deed
in lieu of foreclosure or otherwise (upon acquisition, an "REO Property"),
such Mortgage Loan will, for purposes of,
</TABLE>
S-47
<PAGE>
<TABLE>
<S> <C>
among other things, determining Pass-Through Rates of, distributions on
and allocations of Realized Losses and Additional Trust Fund Expenses to
the Certificates, as well as for purposes of calculating Servicing Fees,
Special Servicing Fees and Trustee Fees (each as defined herein),
generally be treated as having remained outstanding until such REO
Property is liquidated. In connection therewith, operating revenues and
other proceeds derived from any REO Property (exclusive of related
operating costs, including certain reimbursements payable to the Servicer
and/or Special Servicer in connection with the operation and disposition
of such REO Property) will be "applied" or treated by the Servicer as
principal, interest and other amounts "due" on the related Mortgage Loan,
and (subject to the limitations described under "Description of the
Certificates--P&I and Other Advances" herein) the Servicer (and, if
necessary, the Trustee) will be required to make P&I Advances in respect
of the related Mortgage Loan, in all cases as if such Mortgage Loan had
remained outstanding.
P&I Advances......................................... Subject to a recoverability determination as described herein,
and further subject to the reduced advancing obligations in
respect of certain Mortgage Loans as to which the related
Mortgaged Property has declined in value as described herein,
the 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 Monthly Payments
(other than Balloon Payments) and any Assumed Monthly
Payments, net of related Servicing Fees and Workout Fees, 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 Mortgagor or otherwise collected as of the
close of business on the last day of the related Collection
Period. If the
</TABLE>
S-48
<PAGE>
<TABLE>
<S> <C>
Servicer fails to make a required P&I Advance, the Trustee will be
required to make such P&I Advance
An "Assumed Monthly Payment" is an amount deemed due in respect of: (i)
any Balloon Mortgage Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its most recent
scheduled maturity date and as to which no arrangements have been agreed
to for collection of the delinquent amounts; or (ii) any Mortgage Loan as
to which the related Mortgaged Property has been acquired on behalf of
the Certificateholders through foreclosure, deed in lieu of foreclosure
or otherwise. The Assumed Monthly Payment deemed due each month on any
such Balloon Mortgage Loan delinquent as to its Balloon Payment, will
equal the Monthly Payment that would have been due thereon on the Due
Date in such month if the related Balloon Payment had not come due, but
rather such Mortgage Loan had continued to amortize in accordance with
its amortization schedule, if any, in effect immediately prior to
maturity and had continued to accrue interest (other than, if applicable,
Additional Interest) in accordance with its terms in effect immediately
prior to maturity. The Assumed Monthly Payment deemed due each month on
any such Mortgage Loan as to which the related Mortgaged Property has
become an REO Property, will equal the Monthly Payment (or, in the case
of a Mortgage Loan delinquent in respect of its Balloon Payment as
described in the prior sentence, the Assumed Monthly Payment) due on the
last Due Date prior to the acquisition of such REO Property.
As more fully described herein, the Servicer and the Trustee will each be
entitled to interest on any P&I Advance made by it, and the Servicer, the
Special Servicer and the Trustee will each be entitled to interest on
certain reimbursable servicing expenses incurred by it. Such interest
will, in general,
</TABLE>
S-49
<PAGE>
<TABLE>
<S> <C>
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 will be paid: (i) at any time, out of Default Interest (as
defined herein) and late payment charges collected in respect of the
related Mortgage Loan; and (ii) if such P&I Advance or servicing expense
has been reimbursed, out of general collections on the Mortgage Pool. See
"Description of the Certificates--P&I and Other Advances" herein.
Compensating Interest
Payments........................................... To the extent of the aggregate of its Servicing Fees (as defined
herein) for the related Collection Period, plus any Prepayment
Interest Excesses received during such Collection Period, the
Servicer will be 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
"Prepayment Interest Shortfall" is a shortfall in the collection
of a full month's interest (net of related Servicing Fees and, if
applicable, Additional Interest) on any Mortgage Loan by
reason of a full or partial Principal Prepayment being made
prior to its Due Date in any Collection Period. A "Prepayment
Interest Excess" is a payment of interest (net of related
Servicing Fees and, if applicable, Additional Interest) received
in connection with any full or partial Principal Prepayment in
respect of a Mortgage Loan that is made after its Due Date in
any Collection Period, which payment of interest is intended to
cover the period from and after such Due Date to, but not
including, the date of prepayment. The "Net Aggregate
Prepayment Interest Shortfall" for any Distribution Date will
</TABLE>
S-50
<PAGE>
<TABLE>
<S> <C>
be the amount, if any, by which (a) the aggregate of all Prepayment
Interest Shortfalls incurred during the related Collection
Period exceeds (b) the Compensating Interest Payment made by
the Servicer with respect to such Distribution Date. See "Servicing
of the Mortgage Loans--Servicing and Other Compensation and Payment of
Expenses" herein.
Controlling Class.................................... The holder (or holders) of Certificates representing a majority
interest in the Controlling Class will have the right, subject to
certain conditions described herein, to replace the Special
Servicer and, further, to select a representative (the
"Controlling Class Representative") from whom the Special
Servicer will seek advice and approval and take direction under
the various circumstances described herein. As of any date of
determination, the "Controlling Class" will, in general, be the
most subordinate Class of Sequential Pay Certificates then outstanding
that has a Class Principal Balance that is not less than 25% (or, in the
case of the Class C Certificates, 20%) of such Class' initial Class
Principal Balance as of the Closing Date. In addition, as more
particularly described herein, any single holder of Certificates
representing a majority interest in the Controlling Class will have the
option of purchasing defaulted Mortgage Loans from time to time. See
"Servicing of the Mortgage Loans--Replacement of the Special Servicer",
"--The Controlling Class Representative" and "--Sale of Defaulted
Mortgage Loans and REO Properties" herein.
Optional Termination................................. The Servicer, the Special Servicer or any single holder of
Certificates representing a majority interest in the Controlling
Class, in that order, will have an option to purchase all of the
Mortgage Loans and any REO Properties, and thereby effect
termination of the Trust and early retirement of the then
outstanding Certificates, on any
</TABLE>
S-51
<PAGE>
<TABLE>
<S> <C>
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 "Risk Factors--
Termination" in the Prospectus.
Certain Investment
Considerations .................................... The yield to maturity on any Offered Certificate will be affected
by the rate and timing of prepayments and other collections of
principal on or in respect of the Mortgage Loans. An investor
should consider, in the case of any Offered 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 Interest Only Certificate or any
other Offered 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 on the Interest Only Certificates will be highly
sensitive to the rate and timing of principal prepayments
on and other liquidations of the Mortgage Loans, and
investors in such Certificates should fully consider the
associated risks, including the risk that an extremely rapid
rate of prepayments and/or other liquidations in respect of
the Mortgage Loans could result in the failure of such
investors to recoup fully their initial investments. The
allocation to a Class of Offered Certificates of any Yield
Maintenance Premium or Prepayment Premium as additional
interest, as and to the extent described herein, may not be
sufficient to offset fully the adverse effects on the anticipated
yield that may arise out of the corresponding prepayment of
principal. See "Yield and Maturity Considerations" herein and
in the Prospectus.
Certain Federal Income Tax
Consequences ...................................... Three separate "real estate mortgage investment conduit"
("REMIC") elections
</TABLE>
S-52
<PAGE>
<TABLE>
<S> <C>
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", respectively. The assets of REMIC I will
include the Mortgage Loans, any REO Properties acquired on behalf of the
Certificateholders and the Certificate Account (as defined in the
Prospectus). For federal income tax purposes, (i) the separate
non-certificated regular interests in REMIC I will be the "regular
interests" in REMIC I and will constitute the assets of REMIC II, (ii)
the Class R-I Certificates will evidence the sole class of "residual
interests" in REMIC I, (iii) the separate non-certificated regular
interests in REMIC II will be the "regular interests" in REMIC II and
will constitute the assets of REMIC III, (iv) the Class R-II Certificates
will evidence the sole class of "residual interests" in REMIC II, (v) the
REMIC Regular Certificates will evidence the "regular interests" in, and
generally will be treated as debt obligations of, REMIC III, and (vi) the
Class R-III Certificates will evidence the sole class of "residual
interests" in REMIC III.
If the method for computing original issue discount described herein
results in a negative amount for any period, a Certificateholder, in
particular an Interest Only Certificateholder, will be permitted to
offset such amount only against the future original issue discount (if
any) from such Certificate.
The Class CP and Class S Certificates will, and the other Classes of
Offered Certificates will not, be treated as having been issued with
original issue discount for federal income tax reporting purposes. The
prepayment assumption to 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 that the Mortgage Loans (other than the ARD
</TABLE>
S-53
<PAGE>
<TABLE>
<S> <C>
Loans, which are assumed to be prepaid in their entirety on their
respective Anticipated Repayment Dates) are not voluntarily prepaid prior
to their respective Maturity Dates. However, no representation is made as
to how the Mortgage Loans will actually prepay, if at all.
Generally, except to the extent noted below, the Certificates will be
treated as "real estate assets" within the meaning of Section
856(c)(5)(A) of the Internal Revenue Code of 1986 (the "Code"). In
addition, except to the extent noted below, 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 some thrift institutions. See
"Description of the Mortgage Pool" herein. To the extent an Offered
Certificate represents ownership of an interest in any Mortgage Loan that
is secured in part by the related Mortgagor's interest in an account
containing any holdback of loan proceeds, a portion of such Certificate
may not represent ownership of assets described in Section 7701(a)(19)(C)
of the Code and "real estate assets" under Section 856(c)(5)(A) of the
Code and the interest thereon may not constitute "interest on obligations
secured by mortgages on real property" within the meaning of Section
856(c)(3)(B) of the Code. However, if 95% or more of the Mortgage Loans
are treated as assets described in the foregoing sections of the Code,
the Certificates will be treated as such assets in their entirety. The
Offered Certificates will be treated as "qualified mortgages" for another
REMIC under Section 860G(a)(3)(C) of the Code.
</TABLE>
S-54
<PAGE>
<TABLE>
<S> <C>
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
counsel 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.
The U.S. Department of Labor has issued to the Underwriter an individual
exemption, Prohibited Transaction Exemption 90- 83, which generally
exempts from the application of certain of the prohibited transaction
provisions of Section 406 of ERISA and the excise taxes imposed on such
prohibited transactions by Section 4975(a) and (b) of the Code and
Section 502(i) of ERISA, transactions relating to the purchase, sale and
holding of pass-through certificates underwritten or placed by the
Underwriter and the servicing and operation of related asset pools,
provided that certain conditions are satisfied.
To the extent described herein, the Depositor expects that Prohibited
Transaction Exemption 90-83 will generally apply to the Senior
Certificates, but it will not apply to the other Offered Certificates.
Accordingly, the Class A-2, Class A-3, Class B-1 and Class B-2
Certificates should not be acquired by, on behalf of, or with assets of a
Plan, unless the purchase and holding of any such
</TABLE>
S-55
<PAGE>
<TABLE>
<S> <C>
Certificates or interest therein, is exempt from the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the
Code under Sections I and III of Prohibited Transaction
Class Exemption 95-60, which provides an exemption from the prohibited
transaction rules for certain transactions involving an insurance company
general account. See "ERISA Considerations" herein and in the Prospectus.
Ratings.............................................. It is a condition to their issuance that the respective Classes of
Offered Certificates receive the following credit ratings from Standard &
Poor's Ratings Services, a Division of the McGraw-Hill Companies, Inc.
("S&P"), Fitch IBCA, Inc. ("Fitch") and/or Moody's Investors Service,
Inc. ("Moody's"; together with S&P and Fitch, the "Rating Agencies"):
Class S&P Fitch Moody's
----- --- ----- -------
Class CP AAA AAA Aaa
Class S AAA AAA Aaa
Class A-1A AAA AAA Aaa
Class A-1B AAA AAA Aaa
Class A-2 AA AA Aa2
Class A-3 A A A2
Class B-1 BBB BBB Baa2
Class B-2 BBB- NR(1) Baa3
---------------------
(1) "NR" means not rated.
The foregoing ratings of the Offered Certificates address the timely
payment thereon of interest and, to the extent applicable, the ultimate
payment thereon of principal on or before the Rated Final Distribution
Date. The foregoing ratings of the Offered Certificates do not address
the tax attributes of the Offered Certificates or the Trust Fund. The
respective ratings of the Interest Only Certificates do not address the
possibility that holders of such Certificates might suffer a lower than
anticipated yield due to prepayments on and/or other liquidations of the
Mortgage
</TABLE>
S-56
<PAGE>
<TABLE>
<S> <C>
Loans or that, as a consequence of a rapid rate of prepayments and/or
liquidations of Mortgage Loans, the holders of such Certificates may not
fully recover their initial investments. The ratings of the Offered
Certificates do not address certain other matters as described under
"Ratings" herein. There is no assurance that any such rating will not be
lowered, qualified or withdrawn by a Rating Agency, if, in its judgment,
circumstances so warrant. There can be no assurance whether any other
rating agency will rate any of the Offered Certificates, or if one does,
what rating such agency would assign. 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" and "Rating" in the Prospectus.
Legal Investment .................................... Upon initial issuance, the Class CP, Class S, Class A-1A,
Class A-1B and Class A-2 Certificates will, but the other
Classes of Offered Certificates will not, constitute "mortgage
related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984 ("SMMEA"). In addition,
institutions whose investment activities are subject to review by
certain regulatory authorities may be or may become subject to
restrictions on the investment by such institutions in certain
forms of mortgage derivative securities. Any such restrictions
enacted or adopted after the date hereof could alter the extent
to which such an institution may continue to hold a particular
investment. Accordingly, investors should consult their own
legal advisors to determine whether and to what extent the
Offered Certificates may be purchased by such investors. See
"Legal Investment" herein and in the Prospectus.
</TABLE>
S-57
<PAGE>
RISK FACTORS
Prospective purchasers of Offered Certificates 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.
Limited Liquidity
There is currently no secondary market for the Offered Certificates.
The Underwriter has indicated its intention to make a secondary market in the
Offered Certificates, but it is not obligated to do so. There can be no
assurance that a secondary market for the Offered Certificates will develop
or, if one does develop, that it will provide holders of Offered Certificates
with liquidity of investment or that it will continue for the life of the
Offered Certificates. The Offered Certificates will not be listed on any
securities exchange and there are several factors that may limit the liquidity
of such Certificates. See "Risk Factors--Limited Liquidity of Offered
Certificates" in the Prospectus.
Risks Associated with the Nature of the Mortgaged Properties
General. The payment performance of the Offered Certificates will be
directly related to the payment performance of the Mortgage Loans. Each
Mortgage Loan is secured by a Mortgage on a multifamily or commercial
property. Multifamily and commercial lending is generally viewed as exposing a
lender to a greater risk of loss than one- to four-family residential lending.
In addition, there are certain risks inherent to multifamily and commercial
lending that are not present (or not present to the same degree) in one- to
four-family lending. In general, the ability of the Mortgagors to repay their
Mortgage Loans and meet their obligations in a timely manner will depend on a
number of factors that typically affect multifamily and commercial properties.
See "Risk Factors--Certain Factors Affecting Delinquency, Foreclosure and Loss
of the Mortgage Loans--General" in the Prospectus.
Dependence on Operations of the Mortgaged Properties. In the case of
the Showboat Loan and the Stone Container Loans as described herein, and the
other Mortgage Loans where the Mortgaged Properties are owner-occupied or
occupied by an affiliate, the ability of the related Mortgagors to repay their
Mortgage Loans will, in each case, depend in significant part on the success
of the particular Mortgagor's or affiliate's business. In other cases, the
Mortgagors will rely on periodic lease or rental payments from third party
tenants to pay for maintenance and other operating expenses of the related
Mortgaged Properties, to fund capital improvements and to service the related
Mortgage Loans and any other outstanding debt or obligations they may have. In
several such cases (including with respect to the Single-Tenant Property
Loans), a single tenant or a relatively small number of tenants account for
all or a disproportionately large share of the rentable space or rental income
of the related Mortgaged Property. A decline in the financial condition of a
significant or sole tenant (whether as a result of enhanced competition, a
general decline in the type of business in which such tenant engages or
otherwise), or the occurrence of other adverse circumstances with respect to
such tenant (such as bankruptcy or insolvency), may
S-58
<PAGE>
have a disproportionately greater effect on the net operating income derived
from any such Mortgaged Property than would be the case if rentable space or
rental income were more evenly distributed among a greater number of tenants at
the property. See "Risk Factors--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Dependence on Tenants", " --Certain
Factors Affecting
Delinquency, Foreclosure and Loss of the Mortgage Loans--Property Location and
Condition", "--Certain Factors Affecting Delinquency, Foreclosure and Loss of
the Mortgage Loans--Competition", "--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Changes in Laws" and "--Certain
Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage
Loans--Litigation" in the Prospectus.
Dependence on Management. The Mortgaged Properties are generally
managed by a manager (which may be the Mortgagor or an affiliate of the
Mortgagor), which is responsible for responding to changes in the local market
for the facilities offered at the property, planning and implementing the rental
or pricing structure, including staggering durations of leases and establishing
levels of rent payments, and causing maintenance and capital improvements to be
carried out in a timely fashion. Management errors may adversely affect the
long-term viability of a Mortgaged Property. Accordingly, concentration of
property management of the Mortgaged Properties increases the risk that the poor
performance of a single property manager will have a widespread effect on the
Mortgage Pool. See the table headed "Manager and Location of the Mortgaged
Properties" on Exhibit A-1 hereto. See also "Risk Factors--Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans--Dependence on
Management" in the Prospectus.
Risks Particular to Retail, Multifamily, Office, Hotel/Casino, Hotel
and Industrial Properties. 92.1% of the Initial Pool Balance is secured by
Mortgages on Mortgaged Properties that constitute one of the following
property types: retail (55 Mortgaged Properties securing 31.9% of the Initial
Pool Balance); multifamily (45 Mortgaged Properties securing 19.2% of the
Initial Pool Balance); office (19 Mortgaged Properties securing 14.1% of the
Initial Pool Balance); hotel and casino (one Mortgaged Property securing 11.9%
of the Initial Pool Balance); hotel (five Mortgaged Properties securing 8.0%
of the Initial Pool Balance); and industrial (23 Mortgaged Properties securing
7.0% of the Initial Pool Balance). See "Risk Factors--Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans--Risks
Particular to Retail Properties", "Risk Factors--Certain Factors Affecting
Delinquency, Foreclosure and Loss of the Mortgage Loans--Risks Particular to
Multifamily Rental Properties", "Risk Factors--Certain Factors Affecting
Delinquency, Foreclosure and Loss of the Mortgage Loans--Risks Particular to
Office Properties", "Risk Factors--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Risks Particular to Hotel and
Motel Properties", "Risk Factors--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Risks Particular to Casino
Properties" and "Risk Factors--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Risks Particular to Industrial
Properties" in the Prospectus.
Certain Risks Particular to the Showboat Loan. Casino gaming
activities in Atlantic City are subject to the New Jersey Casino Control Act
(the "Control
S-59
<PAGE>
Act") and the supervision of the Casino Control Commission ("CCC"). The casino
operator's income is contingent upon its maintaining its gaming license. The
CCC's determination to rescind (or refuse to renew) the casino license of the
operator of the Showboat Hotel could adversely affect the ground tenant's
ability to pay the rent under the Showboat Ground Lease. In addition, to
foreclose a mortgage encumbering property being operated as a casino, the
mortgagee must first obtain a license as a non-gaming service provider, because
the mortgagee would become the landlord to a casino operator and a casino
facility. Obtaining such a license requires a hearing before and approval by the
CCC. Furthermore, in the case of the Showboat Loan, a portion of the Showboat
Hotel is located upon land that is neither owned by the Showboat Borrower nor
subject to the Showboat Mortgage. Upon foreclosure, the lender would need to
obtain the CCC's approval to sever the encumbered portion of the Showboat Hotel
from the portion located on the adjacent property.
Potential Liability to the Trust Relating to a Material Adverse
Environmental Condition
A "Phase I" environmental site assessment of each Mortgaged Property
was performed in connection with the origination of the related Mortgage Loan.
In certain cases, environmental testing in addition to the "Phase I"
assessment was performed for the purpose of further assessing possible risks
identified in the "Phase I" assessment and determining whether and to what
extent a Mortgagor should be required to maintain environmental reserves or
take remedial action. See "Description of the Mortgage Pool--Origination and
Underwriting--Environmental Assessments" herein.
It is possible that the environmental assessments did not reveal all
of the hazardous substances present at the Mortgaged Properties or the full
extent to which such substances are present in any case. In cases where
testing was not conducted for the presence of a particular substance, there
can be no assurance that testing would not have revealed the presence of such
substance. There may be material environmental liabilities of which the
Originator of the related Mortgage Loan is not aware and the environmental
condition of the Mortgaged Properties could in the future be affected by
managers, tenants and occupants or by third parties unrelated to the
Mortgagors.
The Pooling Agreement will provide that neither the Servicer nor the
Special Servicer, acting on behalf of the Trust, may acquire, at foreclosure
or by deed in lieu thereof, title to a Mortgaged Property or take over its
operation unless:
(i) the Special Servicer has previously determined in
accordance with the Servicing Standard (as defined herein), based on a
report prepared by a person who regularly conducts environmental
audits, that the Mortgaged Property is in compliance with applicable
environmental laws and regulations and there are no circumstances or
conditions present at the Mortgaged Property that have resulted in any
contamination for which investigation, testing, monitoring,
containment, clean-up or remediation could be required under any
applicable environmental laws and regulations; or
S-60
<PAGE>
(ii) in the event that the determination described in the
immediately preceding clause (i) above cannot be made, (A) the
Special Servicer has previously determined in accordance with the
Servicing Standard, on the same basis as described in the immediately
preceding clause (i) above, that it would maximize the recovery to
the Certificateholders on a present value basis to acquire title to
or possession of the Mortgaged Property and to take such remedial,
corrective and/or other further actions as are necessary to bring the
Mortgaged Property into compliance with applicable environmental laws
and regulations and to appropriately address any of the circumstances
and conditions referred to in the immediately preceding clause (i)
above, and (B) the Controlling Class Representative has not properly
objected to the Special Servicer's doing so. See "Servicing of the
Mortgage Loans--The Controlling Class Representative" herein and
"Description of the Pooling Agreements--Realization Upon Defaulted
Mortgage Loans" and "Certain Legal Aspects of Mortgage
Loans--Environmental Considerations" in the Prospectus.
Exposure of the Mortgage Pool to Adverse Economic or Other Developments
Based on Geographic Concentration
Repayments by the Mortgagors and the market value of the Mortgaged
Properties could be affected by economic conditions in regions where the
Mortgaged Properties are located, conditions in the real estate markets where
the Mortgaged Properties are located, and changes in governmental rules and
fiscal policies, acts of nature (which may result in uninsured losses), and
other factors particular to the locales of the respective Mortgaged
Properties. The Mortgaged Properties are located throughout 31 states and the
District of Columbia, with the largest concentrations in New Jersey (five
Mortgaged Properties representing security for 13.3% of the Initial Pool
Balance) and California (19 Mortgaged Properties representing security for
10.3% of the Initial Pool Balance).
The economy of any state or region in which a Mortgaged Property is
located may be adversely affected to a greater degree than that of other areas
of the country by certain developments affecting industries concentrated in
such state or region. To the extent that general economic or other relevant
conditions in states or regions in which Mortgaged Properties securing
significant portions of the aggregate unpaid principal balance of the Mortgage
Pool are located, decline and result in a decrease in commercial property,
housing or consumer demand in the region, the income from and market value of
such Mortgaged Properties may be adversely affected. See "Risk
Factors--Certain Factors Affecting Delinquency, Foreclosure and Loss of the
Mortgage Loans--Risks of Geographic Concentration" and "--Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans--Lack of
Insurance for Certain Special Hazard Losses" in the Prospectus.
Risks Associated with Related Parties
Certain Mortgagors are affiliated or under common control with one
another, and one Mortgagor, Stone Container Corporation, is the Mortgagor
under
S-61
<PAGE>
18 Mortgage Loans which represent 5.0% of the Initial Pool Balance. See
"Description of the Mortgage Pool--Significant Concentrations" herein. In
addition, commercial tenants in certain Mortgaged Properties also may be
tenants in other Mortgaged Properties, and certain commercial tenants may be
owned by affiliates of the Mortgagors or otherwise related to or affiliated
with a Mortgagor. See the table titled "Major Tenants of the Commercial
Mortgaged Properties" on Exhibit A-1. In such circumstances, any adverse
circumstances relating to any such Mortgagor or commercial tenant or a
respective affiliate and affecting one of the related Mortgage Loans or
Mortgaged Properties could arise in connection with the other related Mortgage
Loans or Mortgaged Properties. In particular, the bankruptcy or insolvency of
any such Mortgagors (in particular, Stone Container Corporation, which is not
a bankruptcy-remote entity formed specifically to be the borrower under the
Stone Container Loans) or tenants or respective affiliates could have an
adverse effect on the operation of all of the related Mortgaged Properties and
on the ability of such related Mortgaged Properties to produce sufficient cash
flow to make required payments on the related Mortgage Loans. For example, if
a person that owns or directly or indirectly controls several Mortgaged
Properties experiences financial difficulty at one Mortgaged Property, it
could defer maintenance at one or more other Mortgaged Properties in order to
satisfy current expenses with respect to the Mortgaged Property experiencing
financial difficulty, or it could attempt to avert foreclosure by filing a
bankruptcy petition that might have the effect of interrupting Monthly
Payments for an indefinite period on all the related Mortgage Loans. See
"Certain Legal Aspects of Mortgage Loans--Bankruptcy Laws" in the Prospectus.
In addition, a number of the Mortgagors are limited or general partnerships.
Under certain circumstances, the bankruptcy of the general partner in a
partnership may result in the dissolution of such partnership. The dissolution
of a Mortgagor partnership, the winding-up of its affairs and the distribution
of its assets could result in an acceleration of its payment obligations under
the related Mortgage Loan.
Increased Risk of Loss Associated with Concentrations of Mortgage Loans
and Borrowers
Several of the individual Mortgage Loans and Cross-Collateralized
Groups have Cut-off Date Balances that are substantially higher than the
average Cut-off Date Balance. The largest Mortgage Loan in the Mortgage Pool,
the Showboat Loan, has a Cut-off Date Balance that represents 11.9% of the
Initial Pool Balance. The five largest Mortgage Loans and Cross-Collateralized
Groups have Cut-off Date Balances that represent 26.5% of the Initial Pool
Balance. In mortgage pools with concentrations of loans having
larger-than-average balances, adverse circumstances relating to an individual
loan or group of cross-collateralized loans (such as a default or the
occurrence of a material casualty event with respect to a related mortgaged
property) having a larger-than-average balance can result in losses that are
more severe, relative to the size of the pool, than would be the case if the
aggregate balance of such pool were more evenly distributed.
Increased Risk of Default Associated with Balloon Payments
S-62
<PAGE>
Only seven of the Mortgage Loans are fully amortizing over their
respective terms to maturity. Thus, most of the Mortgage Loans will have a
substantial payment (that is, a Balloon Payment) due at its stated maturity
unless prepaid prior thereto. Mortgage Loans with Balloon Payments involve a
greater likelihood of default than self-amortizing loans because the ability
of a borrower to make a Balloon Payment typically will depend upon its ability
either to refinance the loan or to sell the related mortgaged property. See
"Risk Factors--Certain Factors Affecting Delinquency, Foreclosure and Loss of
the Mortgage Loans--Increased Risk of Default Associated With Balloon
Payments" in the Prospectus.
Extension Risk Associated With Modification of Mortgage Loans with Balloon
Payments
In order to maximize recoveries on defaulted Mortgage Loans, the
Pooling Agreement enables the Special Servicer to extend (for up to three
years past stated maturity) 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 reasonably foreseeable; subject, however, to the
limitations described under "Servicing of the Mortgage Loans--Modifications,
Waivers, Amendments and Consents" and "--The Controlling Class Representative"
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 by the Special Servicer, will likely extend the weighted average life of
such Class of Offered Certificates. See "Yield and Maturity Considerations"
herein and in the Prospectus.
Limited Recourse
The Mortgage Loans are nonrecourse obligations of the Mortgagors and,
accordingly, in the case of default, recourse will be limited to the related
Mortgaged Property securing the defaulted Mortgage Loan. Consequently, payment
on each Mortgage Loan prior to maturity is dependent primarily on the
sufficiency of the net operating income of the related Mortgaged Property and,
at maturity (whether at scheduled maturity or, in the event of a default under
the related Mortgage Loan, upon the acceleration of such maturity), upon the
then market value of the related Mortgaged Property or the ability of the
related borrower to refinance the Mortgaged Property. Neither the Offered
Certificates nor the Mortgage Loans are insured or guaranteed by any
governmental entity or private mortgage insurer or by any other person. See
"Risk Factors--Limited Assets" and "--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Limited Recourse Nature of the
Mortgage Loans" in the Prospectus.
Risks Associated With Changes in Concentrations
If and as payments in respect of principal (including voluntary
prepayments and prepayments resulting from casualty or condemnation, defaults
and liquidations and from repurchases and substitutions due to breaches of
representations and warranties) are received with respect to the Mortgage
Loans,
S-63
<PAGE>
the remaining Mortgage Loans as a group may exhibit increased concentration with
respect to the type of properties, property characteristics, number of
Mortgagors and affiliated Mortgagors and geographic location. Because
unscheduled collections of principal on the Mortgage Loans are payable on the
respective Classes of Sequential Pay Certificates in sequential order, such
Classes that have a lower sequential priority are relatively more likely to be
exposed to any risks associated with changes in concentrations of loan or
property characteristics.
Risks of Subordinate Financing
Although the Mortgagors are generally prohibited from incurring
additional indebtedness, there are several instances where a Mortgagor was
permitted at origination to keep secured or unsecured subordinate financing in
place, or is permitted to borrow in the future subject to certain conditions.
See "Description of the Mortgage Pool--Subordinate Financing" herein. The
existence of subordinated indebtedness 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 files for bankruptcy or is placed in
involuntary receivership, foreclosure on the affected Mortgaged Property could
be delayed. See "Certain Legal Aspects of Mortgage Loans--Subordinate
Financing" in the Prospectus.
Zoning Compliance
Due to, among other reasons, changes in applicable building and
zoning ordinances and codes ("Zoning Laws") affecting certain of the Mortgaged
Properties which have come into effect after the construction of improvements
on such Mortgaged Properties, certain improvements may not comply fully with
current Zoning Laws, including density, use, parking and set back
requirements, but qualify as permitted non-conforming uses and/or structures.
Such changes may limit the ability of the Mortgagor to rebuild the premises
"as is" in the event of a substantial casualty loss with respect thereto. See
"Description of the Mortgage Pool--Origination and Underwriting--Zoning and
Building Code Compliance" herein.
Uninsured Loss; Sufficiency of Insurance
The Mortgagors are generally required to maintain comprehensive
liability insurance, "all-risk" fire, casualty and hazard insurance, flood
insurance (if required by applicable law) and rental income insurance with
respect to the Mortgaged Properties with policy specifications, limits and
deductibles customarily carried for similar properties. Certain types of losses,
however, may be either uninsurable or not economically insurable, such as losses
due to riots or acts of war or earthquakes. Should an uninsured loss occur, a
Mortgagor could lose both its investment in and its anticipated profits and cash
flow from its Mortgaged Property, which would adversely affect the Mortgagor's
ability to make payments under its Mortgage Loan. Although, in general, the
Mortgagors have covenanted to insure their respective Mortgaged Properties at
levels generally consistent with that carried by the applicable property type
where the Mortgaged Property is located, there is a possibility of casualty
losses with respect to
S-64
<PAGE>
the Mortgaged Property for which Insurance Proceeds may not be adequate.
Consequently, there can be no assurance that any loss incurred will not exceed
the limits of policies obtained. In addition, earthquake insurance is generally
not required to be maintained by a Mortgagor, even in respect of Mortgaged
Properties located in California.
Special Prepayment and Yield Considerations
The yield to maturity on any Offered Certificate will depend on, among
other things, the rate and timing of principal payments (including voluntary
prepayments and prepayments resulting from casualty or condemnation, defaults
and liquidations and repurchases due to breaches of representations and
warranties) on the Mortgage Loans and the allocation thereof to reduce the
Certificate Principal Balance or Certificate Notional Amount (each as defined
herein) of such Certificate. The Interest Only Certificates will be especially
sensitive to the rate and timing of such principal prepayments. In addition, in
the event of any repurchase of a Mortgage Loan from the Trust Fund due to a
material breach of representation or warranty, the repurchase price paid would
be passed through to the holders of the REMIC Regular Certificates with the same
effect as if such Mortgage Loan had been prepaid in full (except that no
Prepayment Premium or Yield Maintenance Premium would be payable with respect to
any such repurchase). No representation is made as to the anticipated rate of
prepayments on the Mortgage Loans or as to the anticipated yield to maturity of
any Certificate. See "Yield and Maturity Considerations" herein and in the
Prospectus and "Risk Factors--Effect of Prepayments on Average Life of
Certificates" and "--Effect of Prepayments on Yield of Certificates" in the
Prospectus.
In general, if an Offered Certificate is purchased at a premium and
distributions in reduction of the Certificate Principal Balance or Certificate
Notional Amount thereof occur at a rate faster than anticipated at the time of
purchase, then (to the extent that any required Prepayment Premiums or Yield
Maintenance Premiums are not received or are distributable to a different
Class of Certificates) the investor's actual yield to maturity will be lower
than that assumed at the time of purchase. Conversely, if an Offered
Certificate is purchased at a discount and distributions in reduction of the
Certificate Principal Balance thereof occur at a rate slower than that assumed
at the time of purchase, the investor's actual yield to maturity will be lower
than assumed at the time of purchase.
Prepayment Premiums and Yield Maintenance Premiums, even if available
and distributable on any Class of Offered Certificates, may not be sufficient
to offset fully any loss in yield on such Class of Certificates attributable
to the related prepayments of the Mortgage Loans. Provisions requiring
Prepayment Premiums or Yield Maintenance Premiums may not be enforceable in
some states and under federal bankruptcy law, and may constitute interest for
usury purposes. Accordingly, no assurance can be given that the obligation to
pay a Prepayment Premium or Yield Maintenance Premium will be enforceable
under applicable state or federal law. In addition, even if such obligation is
enforceable, no assurance can be given that, in the event of a prepayment
resulting from a foreclosure of a Mortgage Loan, the Liquidation Proceeds will
be sufficient to make such payment.
S-65
<PAGE>
The aggregate amount of distributions on the Offered Certificates,
the yield to maturity of the Offered Certificates, the rate of principal
payments on the Offered Certificates with Certificate Principal Balances and
the weighted average life of the Offered Certificates with Certificate
Principal Balances will be affected by the rate and the timing of
delinquencies and defaults on the Mortgage Loans. The yield to holders of the
Interest Only Certificates and the Offered Certificates that are Subordinate
Certificates will be sensitive in varying degrees to the rate, timing and
magnitude of losses on the Mortgage Loans. If a purchaser of an Offered
Certificate calculates its anticipated yield based on an assumed rate of
default and amount of losses on the Mortgage Loans that is lower than the
default rate and the amount of losses actually experienced, and such
additional losses are allocable in reduction of the Certificate Principal
Balance or Certificate Notional Amount, as the case may be, of such
Certificate, such purchaser's actual yield to maturity will be lower than that
so calculated and could, under certain extreme scenarios, be negative. In
general, the earlier a loss is borne by an investor, the greater is the effect
on such investor's yield to maturity.
Regardless of whether losses ultimately result, delinquencies and
defaults on the Mortgage Loans may significantly delay the receipt of payments
by the holder of an Offered Certificate (to the extent that P&I Advances or
the subordination of another Class of Certificates does not fully offset the
effects of any such delinquency or default), and interest accrued and payable
to the Servicer or Special Servicer in respect of Advances made thereby in
connection with such defaults and delinquencies will reduce amounts available
for distribution on one or more Classes of Certificates and may ultimately
result in the reduction of the Class Principal Balance or Class Notional
Amount, as the case may be, of any such Class. Following a default by a
Mortgagor in payment of a Mortgage Loan at maturity, the Special Servicer may,
subject to certain limitations, extend the maturity of such Mortgage Loan up
to three years. The obligation of the Servicer or the Trustee, as applicable,
to make P&I Advances in respect of a Mortgage Loan that is delinquent as to
its Balloon Payment is limited to the extent described under "Description of
the Certificates--P&I and Other Advances" herein.
Subordination of Subordinate Certificates
As and to the extent described herein, the rights of the holders of the
respective Classes of Offered Certificates that are Subordinate Certificates to
receive distributions of amounts collected or advanced on or in respect of the
Mortgage Loans will be subordinated to those of the holders of each other Class
of Offered Certificates, including the Senior Certificates, with a higher
priority of payment. See "Description of the
Certificates--Distributions--Application of the Available Distribution Amount"
and "--Subordination; Allocation of Realized Losses and Certain Expenses"
herein.
Potential Conflicts of Interest
As described herein and in the Prospectus, the Special Servicer will
have considerable latitude in determining whether to liquidate or modify
defaulted
S-66
<PAGE>
Mortgage Loans. See "Servicing of the Mortgage Loans" herein and
"Description of the Pooling Agreements" in the Prospectus. It is anticipated
that the Special Servicer or an affiliate thereof will acquire an interest in
certain of the lower rated and unrated Certificates, including a significant
portion of the Class C Certificates. Investors should consider that, although
the Special Servicer will be obligated to act in accordance with the Pooling
Agreement, including the Servicing Standard set forth therein, it may have
interests when dealing with defaulted Mortgage Loans and REO Properties that
conflict with those of the holders of certain Classes of Certificates. Such
acquisition may not occur, however, and if it does, there is no assurance as
to how long the Special Servicer or its affiliate will hold such interest. See
"Risk Factors--Potential Conflicts of Interest" in the Prospectus.
Certain Rights of the Controlling Class
The holder or holders of Certificates representing a majority
interest in the Controlling Class will have the right, subject to certain
conditions described herein, to replace the Special Servicer, as well as to
elect a Controlling Class Representative that may, subject to certain
limitations described herein, direct the actions of the Special Servicer in
connection with servicing Specially Serviced Mortgage Loans. The holders of
the Controlling Class and the Controlling Class Representative may have
interests that conflict with those of the holders of certain other Classes of
Certificates.
ERISA Considerations
Due to the complexity of regulations which govern pension and other
employee benefit plans subject to ERISA and plans and other retirement
arrangements subject to Section 4975(c) of the Code, prospective investors
that are using the assets of such plans or arrangements are urged to consult
their own counsel regarding consequences under ERISA and the Code of the
acquisition, ownership and disposition of the Offered Certificates. In
particular, the purchase or holding of the Class A-2, Class A-3, Class B-1 and
Class B-2 Certificates by any such plan or arrangement may result in a
prohibited transaction or the imposition of excise taxes or civil penalties.
Accordingly, such Certificates should not be acquired by, on behalf of, or
with assets of any such plan or arrangement, unless the purchase and holding
of any such Certificates or interest therein, is exempt from the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code
under Sections I and III of Prohibited Transaction Class Exemption 95-60,
which provides an exemption from the prohibited transaction rules for certain
transactions involving an insurance company general account. See "ERISA
Considerations" herein and in the Prospectus.
DESCRIPTION OF THE MORTGAGE POOL
General
The Mortgage Pool will consist primarily of 168 conventional, monthly
pay, multifamily and commercial mortgage loans (the "Mortgage Loans") with an
S-67
<PAGE>
aggregate Cut-off Date Balance of approximately $838,800,140 (the "Initial
Pool Balance"). See "Description of the Trust Funds--General" and "--Mortgage
Loans--General" in the Prospectus. The "Cut-off Date Balance" of each Mortgage
Loan is, in general, the unpaid principal balance thereof as of March 1, 1998
(the "Cut-off Date"), after application of all payments due on or before such
date, whether or not received. All numerical information provided herein with
respect to the Mortgage Loans is provided on an approximate basis. All
weighted average information provided herein with respect to the Mortgage
Loans reflects the weighting of the Mortgage Loans by their respective Cut-off
Date Balances. The Cut-off Date Balance of each Mortgage Loan has been
calculated, for purposes of the numerical information provided herein, on the
assumption that no Mortgage Loan has been the subject of a prepayment during
the period subsequent to its scheduled due date, if any, in February 1998 up
to and including the Cut-off Date, and that all payments of principal and
interest, if any, due in respect thereof on or before the Cut-off Date have
been received.
In general, each Mortgage Loan is evidenced by a note or bond (a
"Mortgage Note") and is secured by a mortgage, deed of trust or similar
security instrument (a "Mortgage") creating a first (or, in the case of one
Mortgage Loan, which represents 0.2% of the Initial Pool Balance and encumbers
a Mortgaged Property that is also encumbered by a first priority Mortgage that
secures another of the Mortgage Loans, a second) mortgage lien on the fee
simple and/or leasehold interest of the related mortgagor (the "Mortgagor") in
real property used for commercial or multifamily purposes (each, a "Mortgaged
Property") and security interests in certain funds and accounts and other
collateral described herein.
The Mortgage Loans are not insured or guaranteed by the Depositor,
the Underwriter, the Seller, any Third Party Originator, the Servicer, the
Special Servicer, the Trustee, the REMIC Administrator or any of their
respective affiliates or by any governmental entity or private insurer. In
general, the Mortgage Loans are non-recourse loans.
Eight separate groups of Mortgage Loans (the "Cross-Collateralized
Mortgage Loans"; and each such group, a "Cross-Collateralized Group") are,
solely as among the Mortgage Loans in each such particular group,
cross-defaulted and cross-collateralized with each other. See, however, "Risk
Factors--Certain Factors Affecting Delinquency, Foreclosure and Loss of the
Mortgage Loans--Limitations on Enforceability of Cross-Collateralization" in
the Prospectus. Those eight Cross-Collateralized Groups are as follows: (i)
the Stone Container Loans (as defined herein), which represent 5.0% of the
Initial Pool Balance; (ii) the Mortgage Loans secured by the Mortgaged
Properties identified on Exhibit A-1 as Willow Creek Apartments (Foster
Portfolio), Lake Park Apartments, Plaza South Apartments, Farmwood Apartments
and Colony Apartments, which represent 3.3% of the Initial Pool Balance; (iii)
the Mortgage Loans secured by the Mortgaged Properties identified on Exhibit
A-1 as Pebble Creek Apartments and Homestead Apartments, which represent 1.8%
of the Initial Pool Balance; (iv) the two Mortgage Loans (the "Lyndale Loans")
secured by the Mortgaged Property identified on Exhibit A-1 as Shops at
Lyndale Phase II, which represent 1.8% of the Initial Pool Balance; (v) the
Mortgage Loans secured by the Mortgaged Properties identified on Exhibit A-1
as Walgreens - Kirkland, Walgreens Retail Pharmacy Store - San Francisco,
Walgreens Retail Pharmacy Store - Charleston/Torrey,
S-68
<PAGE>
Walgreens Retail Pharmacy Store - Las Vegas Boulevard and Walgreens Retail
Pharmacy Store - Paradise, which represent 1.7% of the Initial Pool Balance;
(vi) the Mortgage Loans secured by the Mortgaged Properties identified on
Exhibit A-1 as One Greenville Crossing and Two Greenville Crossing, which
represent 1.5% of the Initial Pool Balance; (vii) the Mortgage Loans (the "Curry
Loans") secured by the Mortgaged Properties identified on Exhibit A-1 as Curry
Honda Automobile Dealership, Curry Chevrolet Automobile Dealership, Curry Acura
Automobile Dealership, Curry Ford/Subaru Automobile Dealership, Curry Mitsubishi
Automobile Dealership and Curry Office Building, which represent 1.2% of the
Initial Pool Balance; and (viii)the Mortgage Loans secured by the Mortgaged
Properties identified on Exhibit A-1 as 4646 Bronze Way and 4647 Bronze Way,
which represent 0.3% of the Initial Pool Balance. In the case of three of the
Cross-Collateralized Groups, the Mortgaged Properties securing each such
Cross-Collateralized Group are located in multiple states. Certain of the
Cross-Collateralized Groups provide that the applicable cross-collateralization
and cross-default features will terminate upon satisfaction of certain property
performance targets and/or minimum debt service coverage ratio requirements.
Each Cross-Collateralized Mortgage Loan is identified on Exhibit A-1 as
corresponding to a particular Mortgaged Property (as to such Mortgage Loan, the
"Primary Mortgaged Property"); however, such Mortgaged Property, as of the
Closing Date, will secure each Mortgage Loan in the applicable
Cross-Collateralized Group. Unless the context otherwise requires, references
herein to "related Mortgaged Property" (or "related REO Property") are, in the
case of a Cross-Collateralized Mortgage Loan, references to the Mortgaged
Property that is (or the REO Property that was) designated as the Primary
Mortgaged Property for such Mortgage Loan, and references to "related Mortgage
Loan" or "related Cross-Collateralized Mortgage Loan" are, in the case of a
Mortgaged Property that secures (or an REO Property that secured) a
Cross-Collateralized Group, references to the Mortgage Loan in such Cross-
Collateralized Group as to which such Mortgaged Property has (or such REO
Property had) been designated as the Primary Mortgaged Property. Except where
otherwise specifically indicated, statistical information provided herein with
respect to the Cross-Collateralized Mortgage Loans is so provided on an
individual Mortgage Loan basis without regard to the cross-collateralization,
and each Cross-Collateralized Mortgage Loan will be deemed to be secured only by
a mortgage lien on the related Primary Mortgaged Property.
The Lyndale Loans are secured by mortgage liens on the related
Mortgaged Property and also by the pledge of a tax increment revenue note (the
"TIF Note") issued to the borrower by the Economic Development Authority of
the city of Ridgedale, Minnesota (the "Authority"). The TIF Note has an
"Appraised Value" of $3.050 million, which is less than the face amount of the
TIF Note. The TIF Note provides for semi-annual payments of principal and
interest solely from a portion of the incremental real property taxes received
by the county taxing authority in respect of the related Mortgaged Property
during the preceding six months. The Authority will have no obligation to make
payments on the TIF Note after August 1, 2010, whether or not "available tax
increments" have been sufficient to repay the TIF Note. The payment terms for
one of the Lyndale Loans (such loan, the "Lyndale TIF Loan") were established
based upon the anticipated payments on the TIF Note.
S-69
<PAGE>
In certain cases, a single Mortgage Loan may be secured by mortgage
liens on two or more properties that are contiguous or otherwise in close
proximity or are operated jointly. For purposes hereof, all such properties
will be considered to constitute one Mortgaged Property.
Certain of the Cross-Collateralized Groups and the individual
Mortgage Loans that are secured by multiple parcels permit individual property
releases upon the satisfaction of certain criteria and/or the payment of a
release price equal to between 100% and 125% of the allocated loan amount for
the property to be released.
In the case of 105 Mortgage Loans, representing 73.1% of the Initial
Pool Balance, the related Mortgagors are permitted to "defease" their
respective Mortgage Loans during the related Lockout Period but not earlier
than two years following the Closing Date. In connection with any such
defeasance, the related real property would be released and the related
Mortgagor would be required to deliver United States Treasury obligations
that, by their terms, would generate cash flows sufficient to make all
scheduled Monthly Payments on the defeased Mortgage Loan.
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 eight states with the
highest concentrations:
Percentage
Number of of Initial
State Mortgage Loans Pool Balance
- - ----- -------------- ------------
New Jersey 5 13.3%
California 19 10.3%
Minnesota 9 7.6%
Illinois 10 7.5%
Texas 20 6.6%
Georgia 12 6.1%
Florida 10 5.9%
New York 12 5.8%
The remaining Mortgaged Properties are located throughout 23 other
states and the District of Columbia.
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
Property Number of of Initial
Type Mortgage Loans Pool Balance
- - -------- -------------- ------------
Retail 56 31.9%
Multifamily 45 19.2%
Office 19 14.1%
S-70
<PAGE>
Hotel & Casino 1 11.9%
Hotel 5 8.0%
Industrial 23 7.0%
Mobile Home Park 5 3.2%
Mixed Use 5 2.3%
Other Commercial 7 1.3%
Senior Housing 1 0.9%
Self-Storage 1 0.3%
See "Description of the Trust Funds--Mortgage Loans--Mortgage Loans
Secured by Retail Properties", "--Mortgage Loans--Mortgage Loans Secured by
Multifamily Rental Properties", "--Mortgage Loans--Mortgage Loans Secured by
Office Properties", "--Mortgage Loans--Mortgage Loans Secured by Hotel and
Motel Properties", "--Mortgage Loans--Mortgage Loans Secured by Casino
Properties" and "--Mortgage Loans--Mortgage Loans Secured by Industrial
Properties" in the Prospectus.
Except as described below or in a default scenario, each Mortgage
Loan bears interest at a rate per annum (a "Mortgage Rate") that is fixed for
the remaining term of the Mortgage Loan. As of the Cut-off Date, the Mortgage
Rates of the Mortgage Loans will range from 6.980% to 9.250% per annum, and
the weighted average Mortgage Rate will be 7.641% per annum. The Mortgage
Loans provide for scheduled payments ("Monthly Payments") of principal and
interest to be due on the first day of each month, or if such day is not a
business day, the next succeeding business day (each, a "Due Date"). Interest
payable in respect of any Mortgage Loan on any Due Date will be the interest
accrued thereon during the most recently ended calendar month, computed on the
basis of a 360-day year consisting of twelve 30-day months or on the basis of
the actual number of days elapsed during such calendar month and a 360-day
year (Mortgage loans accruing interest on the latter basis being herein
referred to as "Non-30/360 Mortgage Loans"). The Showboat Loan, the Curry
Loans, the Mortgage Loan secured by the AMC Theater Complex (the "AMC Theater
Loan") and the five other Mortgage Loans secured by hotel properties
(collectively, the "ARD Loans") each: (1) has an original term to maturity of
approximately 25 years (or, in the case of the Curry Loans, the AMC Theater
Loan and the Showboat Loan, of approximately 20, 27 and 30 years,
respectively); and (2) provides that, if the Mortgage Loan is not repaid in
full by a specified date (the "Anticipated Repayment Date") approximately 10
years after origination, then thereafter, until paid in full: (a) additional
interest (the "Additional Interest") will accrue on such Mortgage Loans at a
rate equal to 2.0% per annum (or, in the case of the Showboat Loan, at a rate
equal to the lesser of (i) 5% per annum, and (ii) the excess, if any, of (A)
the applicable U.S. Treasury rate plus 2%, over (B) the original Mortgage
Rate), such Additional Interest to be deferred and paid after the outstanding
principal balance of such Mortgage Loan is paid in full; and (b) except in the
case of the Curry Loans, excess cash flow from the related Mortgaged Property
will be applied to amortize such Mortgage Loan on an accelerated basis. The 13
ARD Loans represent 22.0% of the Initial Pool Balance. The ability of a
Mortgagor under an ARD Loan to repay its Mortgage Loan on the related
Anticipated Repayment Date will generally depend on its ability to either
refinance the Mortgage Loan or sell the related Mortgaged Property. In
addition, such
S-71
<PAGE>
Mortgagor may have little incentive to repay its Mortgage Loan
on the related Anticipated Repayment Date if then prevailing interest rates
are relatively high. Accordingly, there can be no assurance that any ARD Loan
will be paid in full as of its related Anticipated Repayment Date.
One hundred forty-eight of the Mortgage Loans (the "Balloon Mortgage
Loans"), representing 76.6% of the Initial Pool Balance, provide for monthly
payments of principal on each Due Date based on amortization schedules longer
than the remaining terms of such Mortgage Loans, thereby leaving substantial
amounts of principal (each such payment thereof, together with accrued
interest to the related maturity date, a "Balloon Payment") due and payable on
their respective stated maturity dates (each a "Maturity Date"). As stated
above, 13 Mortgage Loans, representing 22.0% of the Initial Pool
Balance, are ARD Loans. The remaining seven Mortgage Loans, representing 1.4%
of the Initial Pool Balance, are generally fully amortizing. See "Risk
Factors--Increased Risk of Default Associated with Balloon Payments" and
"--Extension Risk Associated with Modification of Mortgage Loans with Balloon
Payments" herein, and "Risk Factors--Certain Factors Affecting Delinquency,
Foreclosure and Loss of the Mortgage Loans--Increased Risk of Default
Associated with Balloon Payments" in the Prospectus.
The original term to stated maturity (or, in the case of each ARD
Loan, to the Anticipated Repayment Date) of each Mortgage Loan is between 84
and 240 months. The original amortization schedules of the Mortgage Loans
range from 156 to 360 months.
None of the Mortgage Loans will be 30 days or more delinquent as of
the Closing Date, and no Mortgage Loan has been 30 days or more delinquent
during the 12 months preceding the Closing Date or, if originated during such
12-month period, since origination.
Origination and Underwriting
The Originators. One hundred forty-seven of the Mortgage Loans,
representing 89.7% of the Initial Pool Balance, were originated by Column
Financial, Inc., a Delaware corporation ("Column" or the "Seller"); 16 of the
Mortgage Loans, representing 8.0% of the Initial Pool Balance, were originated
by Union Capital Investments LLC, a Georgia limited liability company ("Union
Capital"); four of the Mortgage Loans, representing 2.1% of the Initial Pool
Balance, were originated by ARCS Commercial Mortgage Co., L.P., a California
limited partnership ("ARCS"); and one of the Mortgage Loans, representing 0.2%
of the Initial Pool Balance, was originated by GMAC Commercial Mortgage
Corporation ("GMAC-CMC"; and collectively with Column, Union Capital and ARCS,
the "Originators"). Column is affiliated with the Depositor and the
Underwriter. The other Originators collectively constitute the "Third Party
Originators".
The following information was provided by the respective Originators.
Neither the Depositor nor the Initial Purchaser takes any responsibility
therefor or makes any representation or warranty as to the accuracy thereof.
S-72
<PAGE>
Column Financial, Inc. Column underwrites and closes multifamily and
commercial mortgage loans through its own origination offices and various
correspondents in local markets across the country. Loan underwriting and
quality control procedures are undertaken principally in seven regional
offices located in Atlanta, Georgia; Bethesda, Maryland; Dallas, Texas;
Chicago, Illinois; Newport Beach, California; Norwalk, Connecticut; and San
Francisco, California. Column has closed more than $2 billion of commercial
and multifamily mortgage loans since beginning operation in 1993. Column is a
wholly-owned subsidiary of DLJ Mortgage Capital, Inc., which in turn is a
wholly-owned subsidiary of Donaldson, Lufkin & Jenrette, Inc., the parent of
the Depositor.
Union Capital Investments LLC. Union Capital is an Atlanta, Georgia
mortgage banking company, primarily involved in conduit lending which
originates, underwrites and closes first mortgage loans secured by all types
of multifamily and commercial real estate throughout the United States. The
principals of Union Capital have been involved in the conduit lending field
since January of 1993. During 1997, Union Capital closed over 26 commercial
loans totaling approximately $147 million.
ARCS Commercial Mortgage Co., L.P. Created in 1995 and headquartered
in Calabasas Hills, California, ARCS originates, underwrites, closes, and
services all types of commercial property loans through a nationwide network
of twelve offices. In 1997, ARCS closed $752 million of loans secured by 147
properties, most of which were originated under the Fannie Mae DUS Program.
ARCS has been the number one Fannie Mae DUS multifamily loan originator two
years in a row.
Each Mortgage Loan was originated by the applicable Originator in a
manner generally consistent with the underwriting standards described below.
See also "Description of the Trust Funds--Mortgage Loans--Default and Loss
Considerations with Respect to the Mortgage Loans" in the Prospectus.
Environmental Assessments. All of the Mortgaged Properties were
subject to "Phase I" environmental assessments or updates on or after November
6, 1995, in each case in connection with the origination of the related
Mortgage Loan. In several cases, additional environmental testing was
conducted. Such environmental testing at any particular Mortgaged Property did
not necessarily cover all potential environmental issues. For example, tests
for radon and lead-based paint were performed solely in the case of
multifamily properties and only when the related Originator believed such
testing was warranted under the circumstances. In each case where such
environmental assessments or updates revealed violations, the Originator was
required to determine that necessary remediation was being undertaken in a
satisfactory manner or that it be addressed post-closing and, in some
instances, the Originator required that reserves be established to cover the
estimated cost of such remediation. In addition, there can be no assurance in
any particular case that the environmental assessment identified all adverse
or potentially adverse environmental conditions at the related Mortgaged
Property.
The most common recommendation in the resulting environmental reports
related to the establishment of an operation and maintenance program (an "O&M
Program") or the taking of other remedial action in respect of asbestos-
S-73
<PAGE>
containing materials, lead-based paint and/or radon. However, in several other
cases, other environmental conditions were identified. In cases where the
environmental consultant recommended specific remediation, the Mortgagor was
generally required to effect such remediation and to deposit with the lender
cash in a sum sufficient (generally 100% to 125% of the estimated cost) to
accomplish the remediation. In this regard, Mortgagors escrowed amounts,
ranging from $450 to $150,000, and amounting to approximately $700,025 in the
aggregate, in the case of 39 Mortgage Loans. Each of two Mortgage Loans
required an escrow in the amount of $150,000 with respect to environmental
matters. One such Mortgage Loan, which is secured by the Mortgaged Property
identified on Exhibit A-1 as 127th Street Shopping Center and which represents
0.9% of the Initial Pool Balance, required the escrow in response to the
environmental consultant's estimate of the cost to ameliorate certain
contaminated soil conditions; and the other such Mortgage Loan, which is
secured by the Mortgaged Property identified on Exhibit A-1 as North Plank
Road Shopping Center and which represents 0.5% of the Initial Pool Balance,
required the escrow as security for the pending delivery of a "No Further
Action Letter" from the New York EPA. The "No Further Action Letter" relates
to remediation work previously performed by the applicable Mortgagor with
respect to certain substances released by a dry cleaning establishment on the
premises.
In several cases, the environmental report for Mortgaged Property
identified potential environmental problems at nearby properties but indicated
that Mortgaged Property had not been affected (or had been minimally affected)
and/or a person responsible for remediation had been identified.
Property Condition Assessments. Inspections of all of the Mortgaged
Properties (or updates of previously conducted inspections) were conducted by
property inspection firms on or after November 26, 1996, in each case in
connection with the origination of the related Mortgage Loan. Such inspections
were generally commissioned to inspect the exterior walls, roofing, interior
construction, mechanical and electrical systems and general condition of the
site, buildings and other improvements located at a Mortgaged Property. With
respect to certain of the Mortgage Loans, the resulting reports indicated a
variety of deferred maintenance items and recommended capital improvements.
The estimated cost of the necessary repairs or replacements at a Mortgaged
Property was included in the related property condition assessment. In each
such instance, the related Mortgagor was required to undertake necessary
repairs or replacements, and in some instances the Originator required that
reserves be established, generally in the amount of 100% to 125% of the cost
estimated in the inspection report, to fund deferred maintenance or
replacement items that the reports characterized as in need of prompt
attention. See "--Cash Management and Certain Escrows and
Reserves--Engineering Reserves" on Exhibit A-1 hereto. There can be no
assurance that another inspector would not have discovered additional
maintenance problems or risks, or arrived at different, and perhaps
significantly different, judgments regarding the problems and risks disclosed
by the respective report.
S-74
<PAGE>
Appraisals and Market Studies. An appraisal of each of the Mortgaged
Properties was performed (or an existing appraisal updated) on or after August
1, 1996, in conjunction with the origination of the related Mortgage Loan(s),
by an independent MAI or state-certified appraiser to establish that the
appraised value of such Mortgaged Property exceeded the original principal
balance of the related Mortgage Loan (or, in the case of a group of related
Cross-Collateralized Mortgage Loans, that the appraised value of all the
Mortgaged Properties securing such Cross-Collateralized Group exceeded the
aggregate original principal balance of such Cross-Collateralized Group). Each
such appraisal was intended to conform with the appraisal guidelines set forth
in Title XI of the Federal Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"); however, none of the Depositor, the
Underwriter or the Seller has independently verified such conformity. In
general, such appraisals represent the analysis and opinions of the respective
appraisers at or before the origination of the respective Mortgage Loans, have
not been updated following origination and are not guarantees of, and may not
be indicative of, present or future value. In each case there can be no
assurance that another appraiser would not have arrived at a different
valuation, even if such appraiser used the same general approach to and same
method of appraising the property. In the case of certain Mortgage Loans that
constitute acquisition financing, the Mortgagor may have acquired the related
Mortgaged Property at a price less than the appraised value on which the
Mortgage Loan was underwritten. In addition, appraisals seek to establish the
amount a typically motivated buyer would pay a typically motivated seller.
Such amount could be significantly higher than the amount obtained from the
sale of a Mortgaged Property under a distress or liquidation sale. Implicit in
the valuations set forth in each of the appraisals of the Mortgaged Properties
referred to above, is the consummation of a sale as of a specific date and the
passing of title from seller to buyer under conditions whereby:
(a) buyer and seller are typically motivated;
(b) both parties are well informed or well advised, and each
is acting in what he considers his own best interests;
(c) a reasonable time is allowed for exposure in the
open market;
(d) payment is made in terms of cash in U.S. dollars or in
terms of financial arrangements comparable thereto; and
(e) the price represents the normal consideration for the
property sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale.
Each appraisal involved a physical inspection of the related
Mortgaged Property and reflects a correlation of value based on indicated
values by the Sales Comparison Approach, the Income Approach and/or the Cost
Approach. In the "Sales Comparison Approach," the subject property is compared
to similar properties that have been sold recently or for which listing prices
or offering figures are known. Data for generally comparable properties are
used and comparisons are made to demonstrate a probable price at which the
subject property would sell if offered on the market. Under the "Income
Approach",
S-75
<PAGE>
market value is determined by using the "discounted cash flow"
method of valuation or by the "direct capitalization" method. The discounted
cash flow analysis is used in order to measure the return on a real estate
investment and to determine the present value of the future income stream
expected to be generated by the property. The future income of the property,
as projected over an anticipated holding period, and the resulting net
operating incomes or cash flows are then discounted to present value using an
appropriate discount rate. The direct capitalization method generally converts
an estimate of a single year's income expectancy (or, in some cases, a
hypothetical stabilized single years' income expectancy) into an indication of
value by dividing the income estimate by an appropriate capitalization rate.
An applicable capitalization method and appropriate capitalization rates are
developed for use in computations that lead to an indication of value. In
utilizing the Income Approach, the appraiser's method of determination of
gross income, gross expense and net operating income may vary from the method
of determining Underwriting NOI (as defined herein), resulting in variances in
the related net operating income values. Under the "Cost Approach" of valuing
a property, the estimated value of the land is added to an estimate of the
current replacement cost of the improvements less depreciation from all
sources.
Neither the Depositor nor the Underwriter has prepared or obtained a
separate independent appraisal or reappraisal or otherwise confirmed the
values of the respective Mortgaged Properties set forth in the appraisals
obtained in connection with the origination of the related Mortgaged
Properties.
Zoning and Building Code Compliance. The Originators were required to
establish that the use and operation of the related Mortgaged Properties were
in compliance in all material respects with all applicable zoning, land-use,
environmental, building, fire and health ordinances, rules, regulations and
orders applicable to the related properties. Evidence of such compliance may
have been in the form of legal opinions, certifications from government
officials and/or representations by the related Mortgagor. Where the use,
operation and/or structure of the Mortgaged Property constituted a permitted
nonconforming use and/or structure, the Originator was required to analyze (i)
the likelihood that a material casualty would occur that would prevent the
Mortgaged Property from being rebuilt in its current form and (ii) whether
existing replacement cost hazard insurance would, in the event of a material
casualty, be sufficient to satisfy the entire Mortgage Loan or, taking into
account the cost of repair, be sufficient to pay down the Mortgage Loan to a
level that the remaining collateral would constitute adequate security for the
remaining loan amount. In the case of the Showboat Loan, the Mortgagor was
required to obtain New Jersey Casino Control Commission approval for Column to
make the Mortgage Loan and sell it to the Depositor and for the Depositor to
transfer the Mortgage Loan to the Trustee.
Occupancy Statements, Operating Statements and Other Data. Each
Originator was required to review, to the extent available or applicable, rent
rolls, leases, and related information or statements of occupancy rates,
census data, market data, financial data, operating statements, tax returns,
and receipts for insurance premiums. In certain cases, credit reports or
background checks were also obtained with respect to the general partners or
principals of Mortgagors in limited partnership or limited liability company
form or for principal officers of corporate Mortgagors. In the case of office,
retail and
S-76
<PAGE>
industrial properties, the Mortgagor was generally required to
furnish available historical operating statements and operating budgets for
the current year and provide a selection of major tenant leases and, in the
case of retail properties, the Mortgagor was generally required to provide
sales information for major and anchor tenants, if and to the extent such
information was available. In some cases tenant sales information consisted of
verbal reports from the Mortgagors or tenants, and in some cases those verbal
reports were general in nature (for example, identifying the sales of a
particular tenant as within a designated range). In the case of hotel
properties, the Mortgagor was required to furnish copies of any applicable
franchise agreement. The foregoing information was used in part to make
appropriate adjustments for purposes of considering the "Underwriting NOI" of
the property as described below. However, several Mortgage Loans either
constitute acquisition financing or are secured by Mortgaged Properties with
newly constructed improvements and, accordingly, there are only limited
operating results (and, in some cases, no financial statements) for the
related Mortgaged Properties.
Assignment of the Mortgage Loans
The Seller has or, as of the Closing Date, will have acquired all of
the Mortgage Loans. The Depositor will acquire the Mortgage Loans from the
Seller on the Closing Date pursuant to a mortgage loan purchase and sale
agreement (the "Mortgage Loan Purchase and Sale Agreement") and will
simultaneously assign the Mortgage Loans to the Trustee.
Pursuant to the terms of the Mortgage Loan Purchase and Sale
Agreement, the Seller will be required to deliver or cause to be delivered 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, with respect to any Mortgage Loan, the related
"Mortgage File"): (i) the original Mortgage Note endorsed, without recourse,
to the order of the Trustee (or, if the original Mortgage Note has been lost,
a copy thereof, together with an affidavit of the Seller or a prior holder of
such Mortgage Note certifying that the original thereof has been lost); (ii)
the original or a copy of the Mortgage, together with originals or copies of
any intervening assignments of the Mortgage, in each case with (unless not yet
returned from the applicable recording office) evidence of recording indicated
thereon; (iii) the original or a copy of any related assignment of leases and
rents (if such item is a document separate from the Mortgage), together with
originals or copies of any intervening assignments of any such document, in
each case with (unless not yet returned from the applicable recording office)
evidence of recording indicated thereon; (iv) an assignment of the Mortgage
and of any separate assignment of leases and rents, in favor of the Trustee,
in recordable form; (v) originals or copies of all assumption, modification
and substitution agreements in those instances where the terms or provisions
of the Mortgage or Mortgage Note have been modified or the Mortgage Loan has
been assumed; (vi) the original or a copy of the lender's title insurance
policy issued on the date of origination of such Mortgage Loan (or a marked-up
title insurance commitment or a pro forma policy subject to delivery of the
original title insurance policy upon issuance); and (vii) any file copies of
any UCC financing statements in the possession of the Seller; provided that,
if all or any portion of the Mortgage File for any Mortgage Loan is held as of
S-77
<PAGE>
the Closing Date by an independent third party, then, in lieu of so delivering
to the Trustee or a Custodian appointed thereby the portion of
such Mortgage File so held by an independent third party, the Seller may
deliver to the Trustee on or before the Closing Date a trust receipt or
comparable instrument that unconditionally entitles the bearer thereof (and
only the bearer thereof) to claim, without payment of any outstanding debts,
the portion of such Mortgage File so held by an independent third party (which
the Trustee will be required to do promptly (and, in any event, within 15
days) following the Closing Date, at the expense and with the cooperation of
the Depositor). The Trustee or a Custodian will hold all such Mortgage Loan
documents in trust for the benefit of the Certificateholders. The Trustee or a
Custodian will be required to review each Mortgage File within a specified
period following its receipt thereof. The scope of the Trustee's review of the
Mortgage Files is, in general, limited solely to confirming that the documents
in clauses (i) through (iv) and (vi) have been received. None of the Trustee,
the Servicer, the Special Servicer or the Custodian is under any duty or
obligation to inspect, review or examine any of the documents relating to the
Mortgage Loans to determine whether any such document is valid, effective,
enforceable, in recordable form or otherwise appropriate for the represented
purpose.
The Pooling Agreement will require the Trustee, within a specified
period following the later of the Closing Date and the date on which all
recording information necessary to complete the subject document is received
by the Trustee, to cause each of the assignments described in clause (iv) of
the preceding paragraph to be submitted for recording in the real property
records of the jurisdiction in which the related Mortgaged Property is
located. Because the Mortgage Loans are, in general, newly originated, many
such assignments cannot be completed and recorded until the related Mortgage,
reflecting the necessary recording information, is returned from the
applicable recording office.
Representations and Warranties
Each of the Originators (other than GMAC-CMC) will make, as of the
Closing Date (or, in the case of ARCS, as of the date the Mortgage Loan was
originated and sold to an affiliate of the Depositor, which in no event was
earlier than November 1, 1997), certain representations and warranties with
respect to each Mortgage Loan originated thereby generally to the effect
listed below, and may make such other representations and warranties as may be
required by the Rating Agencies:
(i) certain information relating to such Mortgage Loan,
substantially similar to that set forth in the loan schedule attached
to the Pooling Agreement, will be accurate and complete in all
material respects as of the Cut-off Date;
(ii) immediately prior to its transfer and assignment of
such Mortgage Loan, such Originator had good title to, and was the
sole owner of, such Mortgage Loan;
S-78
<PAGE>
(iii) the related Mortgage constitutes a valid and, subject
to the exceptions set forth in clause (x) below, enforceable first
lien (or, in the case of one Mortgage Loan, a valid and enforceable
second lien) upon the related Mortgaged Property, free and clear of
all liens and encumbrances other than certain permitted liens and
encumbrances;
(iv) the related Mortgage has not been satisfied,
canceled, rescinded or subordinated;
(v) to the Originator's knowledge, there is no proceeding
pending for the total or partial condemnation of the related
Mortgaged Property;
(vi) the lien of the related Mortgage is insured by an
American Land Title Association or equivalent form of lender's title
insurance policy (or there exists a marked up title insurance
commitment to issue such a policy or a pro forma policy on which the
required premium has been paid) insuring the Originator, its
successors and assigns, as to the first priority lien (or, in the
case of one Mortgage Loan, the second priority lien) of the related
Mortgage in the original principal amount of such Mortgage Loan after
all advances of principal, subject only to (A) the lien of current
real property taxes, ground rents, water charges, sewer rents and
assessments not yet due and payable and (B) such other exceptions
(general and specific) set forth in such policy;
(vii) the proceeds of such Mortgage Loan have been fully
disbursed (except in those cases where the full amount of the
Mortgage Loan has been made, but a portion thereof is being held back
pending satisfaction of certain leasing criteria with respect to the
related Mortgaged property) and there is no requirement for future
advances thereunder;
(viii) if the related Mortgage is a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves;
(ix) to the Originator's knowledge, the related Mortgaged
Property is free and clear of any damage that would materially and
adversely affect its value as security for such Mortgage Loan; and
(x) each Mortgage Note, Mortgage and other agreement
executed by or on behalf of the related Mortgagor in connection with
such Mortgage Loan is the legal, valid and binding obligation of the
related maker thereof (subject to any non-recourse provisions
contained in any of the foregoing agreements and any applicable state
anti-deficiency or market value limit deficiency legislation),
enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at
law).
S-79
<PAGE>
In the case of the Mortgage Loan originated by GMAC-CMC, Column will
be making the foregoing representations and warranties as if it was the
"Originator" with respect thereto.
The representations and warranties made by Column, Union Capital and
ARCS with respect to their respective Mortgage Loans (and by Column with
respect to the Mortgage Loan originated by GMAC-CMC) will be assigned by the
Depositor to the Trustee pursuant to the Pooling Agreement.
Cures, Repurchases and Substitutions
If there exists a breach of any of the representations and warranties
made by any of Column, Union Capital and ARCS with respect to any of their
respective Mortgage Loans (or by Column with respect to the Mortgage Loan
originated by GMAC-CMC), as discussed under "--Representations and Warranties"
above, and such breach materially and adversely affects the value of the
affected Mortgage Loan or the interests of the Certificateholders therein,
then within a specified period, generally 90 days, following its being
notified of such breach, the Originator that made such representation and
warranty will be required either: (a) to cure the breach in all material
respects; or (b) subject to the discussion in the following paragraph, to
repurchase such Mortgage Loan at a price (the "Purchase Price") generally
equal to the sum of (i) the unpaid principal balance of such Mortgage Loan,
(ii) accrued and unpaid interest to but not including the Due Date occurring
in the Collection Period in which such repurchase occurs and (iii) the amount
of any related unreimbursed Servicing Advances (provided that a Third Party
Originator may be required to repurchase its Mortgage Loans at a lesser price
with the Seller to make up the difference). Notwithstanding the foregoing, if
any such breach of a representation or warranty is capable of being cured but
not within such 90-day or other specified period and the responsible
Originator has commenced and is diligently proceeding with such cure, then
(with limited exception) such Originator will have an additional 90 days to
complete such cure.
If any Originator is required to repurchase any of its Mortgage Loans
(or if Column is required to repurchase the Mortgage Loan originated by
GMAC-CMC) as a result of a material breach of any of its representations and
warranties, as contemplated by the preceding paragraph, then such Originator
may, at any time during the three-month period commencing on the Closing Date
(or at any time during the two-year period commencing on the Closing Date if the
affected Mortgage Loan is a "defective obligation" within the meaning of Section
860G(a)(4)(B)(ii) of the Code and Treasury Regulation Section 1.860G-2(f)), in
lieu of repurchasing the affected Mortgage Loan (but in no event later than such
repurchase would have to have been completed): (a) replace such Mortgage Loan
with one or more substitute mortgage loans (each, a "Replacement Mortgage Loan")
that (i) has certain payment terms comparable to the Mortgage Loan to be
replaced and (ii) is otherwise acceptable to the Controlling Class
Representative (or, if none has been appointed, to the holder(s) of Certificates
representing a majority interest in the Controlling Class); and (b) pay an
amount (a "Substitution Shortfall Amount") generally equal to the excess of the
applicable Purchase Price for the Mortgage Loan to be replaced (calculated as if
it were to be repurchased instead of replaced), over the unpaid principal
balance of the applicable
S-80
<PAGE>
Replacement Mortgage Loan(s) as of the date of substitution, after application
of all payments due on or before such date, whether or not received; provided
that no such substitution will be permitted unless, as confirmed in writing by
each Rating Agency, it would not result in a qualification, downgrade or
withdrawal of the rating then assigned to any Class of Certificates by any
Rating Agency. No Originator is obligated, however, to replace (rather than
repurchase) any Mortgage Loan as to which there is a material breach of a
representation or warranty. Any such substitution will be at the responsible
Originator's sole discretion. Furthermore, the Certificateholders of the
Controlling Class and the Controlling Class Representative, as their
representative, will generally have a disincentive to find any prospective
Replacement Mortgage Loan acceptable.
Each of Column, Union Capital and ARCS may only have limited assets
with which to fulfill any repurchase/substitution obligations that may arise in
respect of breaches of its representations or warranties. There can be no
assurance that any such Originator has or will have sufficient assets with which
to fulfill any repurchase/substitution obligations that may arise.
Additional Mortgage Loan Information
The tables appearing on Exhibits A-1 and A-2 hereto set forth
additional information with respect to the Mortgage Loans and Mortgaged
Properties. The statistics in certain of such tables were derived primarily
from information and operating statements furnished by or on behalf of the
respective Mortgagors. Such information and operating statements were
generally unaudited and have not been independently verified by the Depositor,
the Underwriter, the Seller or the Third Party Originators, by any of their
respective affiliates or by any other person. In general, and except as
described below, for purposes of presenting property information in the
tables, each of the Lyndale Loans is treated as if it is secured by a first
priority mortgage on the Shops at Lyndale Phase II Mortgaged Property. For
purposes of such tables as well as elsewhere in this Prospectus Supplement:
1. "Underwriting NOI" or "U/W NOI" as used herein with respect to any
Mortgaged Property means an estimate of the total cash flow anticipated to be
available for annual debt service on the related Mortgage Loan calculated as
the excess of Estimated Annual Revenues over Estimated Annual Operating
Expenses, each of which was generally derived in the following manner:
(i) "Estimated Annual Revenues" were generally assumed to be
equal to the annualized amounts of gross potential rents (in the case
of multifamily properties), or monthly contractual base rents as
reflected in the rent roll or leases, with vacant space at market
rental rates, plus tenant reimbursements (in the case of commercial
properties other than hotels ), or estimated average room sales (in
the case of hotels), except such revenues were generally modified by
(a) adjusting such revenues downwards by applying a combined vacancy
and rent loss (including concessions) adjustment that reflected then
current occupancy (or, in some cases, an occupancy that was itself
adjusted for historical trends or market rates of occupancy with
consideration to competitive properties), (b) adjusting such revenues
upwards to reflect, in the case of some
S-81
<PAGE>
tenants, increases in base rents scheduled to occur during the year,
(c) adjusting such revenues upwards for percentage rents based on
contractual requirements, sales history and historical trends and,
additionally, for other estimated income consisting of, among other
items, late fees, laundry income, application fees, cable television
fees, storage charges, electrical pass throughs, pet charges,
janitorial services, furniture rental and parking fees, (d) adjusting
such revenues downwards, in certain instances where rental rates were
determined to be significantly above market rates and the subject space
was then currently leased to tenants that did not have long-term leases
or were believed to be unlikely to renew their leases, and (e)
adjusting such revenues upwards, in the case of hotel properties, to
include estimated revenues from food and beverage, telephones and other
hotel related income. In the case of owner-occupied properties for
which no leases exist, including the 18 Mortgaged Properties that
represent security for the Stone Container Loans, Estimated Annual
Revenues were derived from rental rate and vacancy information for the
surrounding real estate market. In the case of the Showboat Loan,
Estimated Annual Revenues are equal to the contractual ground rents due
under the Showboat Ground Lease for calendar year 1998. "Underwriting
NOI" for the Lyndale TIF Loan is based on stabilized cash flows
expected to be collected in respect of the TIF Note.
(ii) "Estimated Annual Operating Expenses" were generally
assumed to be equal to historical expenses reflected in the operating
statements, appraisals and/or other information provided by the
Mortgagor, except that such expenses were generally modified by (a)
assuming that a management fee was payable to the property manager in
an amount equal to market rate (in most cases, approximately 3% to 5%
of net rental revenues), (b) adjusting certain historical expense
items upwards or downwards to reflect inflation and/or industry norms
for the particular type of property, (c) including the underwriting
recurring replacement reserve amounts (the "UW Recurring Replacement
Reserves") specified on the table titled "Engineering Reserves and
Recurring Replacement Reserves" on Exhibit A-1, (d) adjusting such
expenses downwards by eliminating certain items which are considered
non-recurring in nature or which are considered capital improvements,
including recurring capital improvements, and (e) for hotel
properties, adjusting historical expenses to reflect reserves for
furniture, fixtures and equipment ("FF&E") of between 4% and 5%. The
U/W Recurring Replacement Reserves set forth on Exhibit A-1 are
expressed as dollars per Unit for multifamily properties, dollars per
Leasable Square Foot for retail, office, mixed-use and industrial
properties and total departmental revenues for hotel properties. In
addition, in the case of certain office, retail and industrial
properties, adjustments were also made to account for stabilized
tenant improvements and leasing commissions at costs consistent with
historical trends or prevailing market conditions (however, for
certain tenants with longer than average lease terms or which were
considered anchor tenants (in the case of retail tenants), or in
areas which were considered to not require such improvements,
adjustments were not made to reflect tenant improvements and leasing
commissions). The amount of any such adjustments for tenant
improvements and leasing commissions (the "U/W LC & TI") in respect
of any Mortgaged
S-82
<PAGE>
Property is set forth on the table titled "Engineering Reserves and
Recurring Replacement Reserves" on Exhibit A-1. In the case of hotel
properties, historical expenses may have been adjusted upward or
downward to result in an expense to room or total revenues ratio that
approximate historical or industry norms. In the case of owner-occupied
properties for which no leases exist, including the 18 Mortgaged
Properties that represent security for the Stone Container Loans,
Estimated Annual Operating Expenses were determined on the assumption
that the Mortgaged Properties were "net leased" to a single tenant, and
that expenses consisted solely of management fees and replacement
reserves for expense or capital items generally not required to be paid
by a tenant under a net lease. Notwithstanding the foregoing, (i) in
the case of the Showboat Loan and most of the Single-Tenant Property
Loans, Estimated Annual Operating Expenses are limited to those not
covered by the lessee under the Showboat Ground Lease or the subject
Single-Tenant Property Lease and, in any event, do not include
management fees, and (ii) in the case of the Lyndale TIF Loan,
Estimated Annual Operating Expenses are zero and do not include any
expenses with respect to the Mortgaged Property.
Estimated Annual Revenues generally include: (i) for multifamily
properties, including mobile home parks, rental and other revenues; (ii) for
retail, office and industrial properties, base rent, percentage rent, expense
reimbursements and other revenues; (iii) for the hotel properties (other than
the Showboat Property), room, food and beverage, telephone and other revenues;
and (iv) in the case of the Showboat Hotel and Casino, ground rent.
"Underwriting NOI" for the Lyndale TIF Loan is based on stabilized cash flows
expected to be collected in respect of the TIF Note.
Estimated Annual Operating Expenses generally include salaries and
wages, the costs or fees of utilities, repairs and maintenance, replacement
reserves, marketing, insurance, management, landscaping, security (if provided
at the property) and the amount of taxes, general and administrative expenses,
ground lease payments and other costs, but without any deductions for debt
service, depreciation and amortization or capital expenditures or reserves
therefor (except as described above). In the case of office, industrial and
retail properties (and properties partially used for such purposes),
Estimating Annual Operating Expenses include both expenses that may be
recovered from tenants and those that are non-recoverable. In the case of
certain retail, office and industrial properties, Estimating Annual Operating
Expenses may have included leasing commissions and tenant improvement costs.
In the case of the hotel properties (other than the Showboat Property),
Estimating Annual Operating Expenses include departmental expenses, reserves
for FF&E, management fees and (where applicable) franchise fees. In the case
of the Showboat Loan and most of the Single-Tenant Property Loans, Estimated
Annual Operating Expenses are limited to those not covered by the lessee under
the Showboat Ground Lease or the subject Single-Tenant Property Lease and, in
any event, do not include management fees. In the case of the Lyndale TIF
Loan, Estimated Annual Operating Expenses are zero and do not include any
expenses with respect to the related Mortgaged Property.
S-83
<PAGE>
The historical expenses with respect to any Mortgaged Property were
generally obtained (i) from operating statements relating to a 12-month period
ended in 1995, 1996 or 1997, (ii) by annualizing the amount of expenses for
partial 1995, 1996 or 1997 periods for which operating statements were
available, with certain adjustments for items deemed inappropriate for
annualization, or (iii) calculating a stabilized estimate of operating
expenses which takes into consideration historical financial statements and
material changes in the operating position of the related Mortgaged Property
(such as newly signed leases and market data).
The management fees and reserves assumed in calculating Underwriting
NOI differ in many cases from actual management fees and reserves actually
required under the loan documents for the Mortgage Loans. Further, actual
conditions at the Mortgaged Properties will differ, and may differ
substantially, from the conditions assumed in calculating Underwriting NOI. In
particular, in the case of retail, office and industrial properties, the
assumptions regarding tenant vacancies, tenant improvements and leasing
commissions, future rental rates, future expenses and other conditions used in
calculating Underwriting NOI may differ substantially from actual conditions.
In addition, capital expenditures and leasing commissions and other
reletting costs are crucial to the operation of commercial and multifamily
properties. There can be no assurance that the actual costs of reletting and
capital improvements will not exceed those estimated or assumed in connection
with the origination of the Mortgage Loans.
No representation is made as to the future net cash flow of Mortgaged
Properties, or, in particular, that "Underwriting NOI" set forth herein
accurately represents such future net cash flow. In certain cases, Mortgaged
Properties, or commercial tenants at such properties, have been or are
expected to be subjected to new competition; however, the effects thereof may
not be fully reflected (if at all) in the Underwriting NOI for any such
Mortgaged Property. In addition, "Underwriting NOI" for the Lyndale TIF Loan
is based on stabilized cash flows expected to be collected in respect of the
TIF Note, and was determined without an "expense" component.
Underwriting NOI and the revenues and expenditures used to determine
Underwriting NOI for each Mortgaged Property are derived from generally
unaudited information furnished by the respective Mortgagors. Audits or other
verification of such information could result in changes thereto, which could
in turn result in overstated Underwriting NOI.
Net income for a Mortgaged Property as determined under generally accepted
accounting principles ("GAAP") would not be the same as the stated
Underwriting NOI for such Mortgaged Property as set forth in the tables
herein. In addition, Underwriting NOI is not a substitute for or comparable to
operating income as determined in accordance with GAAP as a measure of the
results of a property's operations nor a substitute for cash flows from
operating activities determined in accordance with GAAP as a measure of
liquidity.
2. "Appraised Value" means, for any Mortgaged Property, the greater
of the "as is" or, if provided, the "as cured" value estimate reflected in the
most
S-84
<PAGE>
recent appraisal. The appraiser's "cured value", as stated in the
appraisal, is generally calculated as the sum of the "as is" value set forth
in the related appraisal plus the estimated costs (as of the date of appraisal
of the related Mortgaged Property), if any, of implementing any deferred
maintenance required to be undertaken immediately or in the short term under
the terms of the Mortgage Loan. In general, the amount of costs assumed by the
appraiser for such purposes is based on an estimate by the individual
appraiser, an estimate by the related Mortgagor, the estimate set forth in the
property condition assessment conducted in connection with the origination of
the related Mortgage Loan or a combination of such estimates. Notwithstanding
the foregoing, for purposes of presenting "Appraised Values" in the tables on
Exhibits A-1 and A-2, the Lyndale TIF Loan is treated as secured solely by the
TIF Note and the other Lyndale Loan is treated as secured solely by the Shops
at Lyndale Phase II Mortgaged Property. In addition, the Appraised Value and
Cut-off Date LTV Ratio information set forth in the tables on Exhibits A-1 and
A-2 hereto (including the total/weighted average information for the entire
Mortgage Pool) reflects the unencumbered fee simple value of the Showboat
Hotel and Casino, Atlantic City under a foreclosure scenario, assuming that
such property is free and clear of the Showboat Ground Lease. The estimated
value (based upon an income capitalization approach) of the property securing
the Showboat Loan, taking into account that such property is encumbered by the
Showboat Ground Lease, is approximately $110 million; and based upon such
value, the Cut-off Date LTV Ratio of the Showboat Loan would be 90.8%, the
aggregate Appraised Value of all the Mortgaged Properties would be
$1,175,628,000 and the weighted average Cut-off Date LTV Ratio of the Mortgage
Pool would be 73.4%.
3. "Annual Debt Service" means, for any Mortgage Loan, twelve times
the amount of the Monthly Payment under such Mortgage Loan as of the first Due
Date in respect thereof that follows the Cut-off Date.
4. "Underwriting Debt Service Coverage Ratio", "Underwriting DSCR" or
"U/W DSCR" means, with respect to any Mortgage Loan, (a) the Underwriting NOI
for the related Mortgaged Property (or, in the case of the Lyndale TIF Loan,
for the TIF Note), divided by (b) the Annual Debt Service for such Mortgage
Loan. In the case of the Showboat Loan and each of the Single-Tenant Property
Loans, the Underwriting Debt Service Coverage Ratio will be lower (1.05x
- - -1.69x) and the Cut-off Date Loan-to-Value Ratio will be higher (24.0% -
85.0%) than for the other Mortgage Loans because of: (i) the lease term for
the Showboat Ground Lease or the related Single-Tenant Property Lease, as the
case may be; (ii) the creditworthiness of the tenant (or related lease
guarantor) in respect of the Showboat Ground Lease or related Single- Tenant
Property Lease, as the case may be; (iii) the quality of the real estate
locations; and (iv) if the related lease term is shorter than the amortization
term of the subject Mortgage Loan, the acceptability (in the view of the
Seller) of the anticipated loan balances at the end of such lease term.
5. "Cut-off Date Loan-to-Value Ratio" or "Cut-off Date LTV Ratio"
means, with respect to any Mortgage Loan, the Cut-off Date Balance of such
Mortgage Loan divided by the Appraised Value of the related Mortgaged Property
(or, in the case of the Lyndale TIF Loan, of the TIF Note). The Appraised
Value and Cut-off Date LTV Ratio information set forth in the tables on
Exhibits A-1
S-85
<PAGE>
and A-2 hereto (including the total/weighted average information
for the entire Mortgage Pool) reflects the unencumbered fee simple value of
the Showboat Hotel and Casino, Atlantic City under a foreclosure scenario,
assuming that such property is free and clear of the Showboat Ground Lease.
The estimated value (based upon an income capitalization approach) of the
property securing the Showboat Loan, taking into account that such property is
encumbered by the Showboat Ground Lease, is approximately $110 million; and
based upon such value, the Cutoff Date LTV Ratio of the Showboat Loan would be
90.8%, the aggregate Appraised Value of all the Mortgaged Properties would be
$1,175,628,000 and the weighted average Cut-off Date LTV Ratio of the Mortgage
Pool would be 73.4%.
6. "Leasable Square Footage" or "S.F." or "Sq. Ft." means, in the
case of a Mortgaged Property operated, in whole or in part, for retail,
office, or industrial or casino purposes, the square footage of the gross
leasable area utilized for such purposes.
7. "Units" means, (a) in the case of a Mortgaged Property operated,
in whole or in part, as multifamily housing, the number of apartments,
regardless of the size of or number of rooms in such apartments and (b) in the
case of a Mortgaged Property operated as a mobile home park, the number of
pads upon which a mobile home can be hooked up.
8. "Rooms" means, in the case of a Mortgaged Property operated as a
hotel, the number of hotel rooms and/or suites, without regard to the size of
or number of rooms in such hotel rooms or suites.
9. "Occupancy Rate at Underwriting" or "Occupancy Rate at U/W"
generally means the percentage of Leasable Square Footage (in the case of
commercial properties) or Units (in the case of multifamily properties or a
mobile home park) of the Mortgaged Property that were occupied or leased as of
the approximate date of the original underwriting of the related Mortgage Loan
(as updated, in certain cases when the Depositor deemed appropriate and
information was available, with more current occupancy information). All
information herein setting forth any weighted averages of "Occupancy Rates at
U/W" excludes those Mortgaged Properties (which are security for Mortgage
Loans that represent 19.9% of the Initial Pool Balance) improved by hotels
from the relevant calculations.
10. "Major Tenant" means a tenant of a commercial Mortgaged Property
that leases 10% or more of the net rentable area of such property.
11. "LC & TI" means, as to any Mortgaged Property, leasing commission
and tenant improvement.
12. "Year Built" means the year when construction of the Mortgaged
Property was principally completed. With respect to Mortgage Loans secured by
multiple properties or by properties built in phases, the Year Built or Year
Renovated, as the case may be, may relate to the earliest, latest or average
year in which such properties or phases were built/renovated, as the Depositor
deems relevant.
S-86
<PAGE>
13. "Year Renovated" means the year when the most recent substantial
renovation of a Mortgaged Property, or any particular aspect thereof, was
principally completed. With respect to Mortgage Loans secured by multiple
properties or by properties built in phases, the Year Built or Year Renovated,
as the case may be, may relate to the earliest, latest or average year in
which such properties or phases were built/renovated, as the Depositor deems
relevant.
The tables on Exhibits A-1 and A-2 set forth the indicated
characteristics of the Mortgage Loans and Mortgaged Properties. Due to
rounding, percentages in such tables may not add to 100% and amounts may not
add to the indicated total.
Cash Management and Certain Escrows and Reserves
Cash Management. In the case of 17 of the Mortgage Loans,
representing approximately 32.9% of the Initial Pool Balance, a "cash
management" system has been implemented whereby the manager of the related
Mortgaged Property is required to deposit property revenues into an account
under the joint control of the related Mortgagor and the Servicer, and such
Mortgagor is authorized to make withdrawals from such account from time to
time until the occurrence of an event of default under such Mortgage Loan, in
which case the Servicer or the Special Servicer would be entitled, under
preexisting instructions furnished to the depository institution at which such
account is maintained, to direct such depository institution to no longer
honor payment requests made by the Mortgagor. Under each of those Mortgage
Loans, central accounts ("Central Accounts") were established and, upon the
Closing Date, will be under the sole control of the Servicer, for the purpose
of holding amounts required to be on deposit as reserves for taxes and
insurance, capital improvements, FF&E and certain other purposes as
applicable.
Tax and Insurance Escrows. For a majority of the Mortgage Loans, tax
and insurance escrows (the "Tax and Insurance Escrows") were established,
either as separate accounts or, if applicable, as sub-accounts of any related
Central Account, and each related Mortgagor is generally required to deposit
on a monthly basis an amount equal to one-twelfth of the annual real estate
taxes and assessments and one-twelfth of the annual premiums payable on
insurance policies that the Mortgagor is required to maintain. If an escrow
was established, such funds will generally be applied by the Servicer to pay
for items such as taxes, assessments and insurance premiums at the related
Mortgaged Property. Under certain other Mortgage Loans, the insurance carried
by the Mortgagor is in the form of a blanket policy. In such cases, the amount
of the escrow is an estimate of the pro rata share of the premium allocable to
the related Mortgaged Property, or the Mortgagor pays the premium directly.
Under certain Mortgage Loans, a tenant at the related Mortgaged Property is
responsible for paying all or a portion of the real estate taxes and
assessments directly. In such cases, escrows generally are not required.
Recurring Replacement Reserves. The table titled "Engineering
Reserves and Recurring Replacement Reserves" on Exhibit A-1 sets forth the
replacement reserve deposits that Mortgagors are, in each case, required to
make into a separate account or, if applicable, a sub-account of any related
Central Account for certain capital replacements, repairs, FF&E, tenant
improvements and leasing
S-87
<PAGE>
commissions on the related Mortgaged Property under
the terms of the respective Mortgage Loan (a "Contractual Recurring
Replacement Reserve"). The Contractual Recurring Replacement Reserves set
forth in such table are expressed as dollars per Unit for multifamily
properties, dollars per Leasable Square Foot for retail, office, mixed-use and
industrial properties and total departmental revenues for hotel properties.
The Contractual Recurring Replacement Reserves set forth in such table for
multifamily, retail, office and industrial properties are initial amounts and
may vary over time. Such amounts include both replacement reserves and/or
reserves for tenant improvements and leasing commissions. In such cases, the
related Mortgage Note and/or other related documents may provide for
replacement reserve deposits to cease upon achieving predetermined maximum
amounts in the reserve account. In addition, in some such cases, replacement
reserves were determined for specific tenant spaces, in which cases, the
execution of a lease covering such space could result in the termination
and/or release of such reserve.
Engineering Reserves. The table titled "Engineering Reserves and
Recurring Replacement Reserves" on Exhibit A-1 sets forth the reserves (the
"Engineering Reserves") established, either as a separate account or, if
applicable, as a sub-account of any related Central Account, and pledged to the
lender, as a result of the inspections for certain Mortgaged Properties of the
Mortgaged Properties described above under " -- Origination and Underwriting --
Property Condition Assessments". The repair/replacement items for which such
reserves were established are generally items identified by the property
inspection firm as in need of repair or replacement in order to restore the
Mortgaged Property to a condition generally consistent with competitive
properties of similar age and quality or to comply with regulatory requirements.
Because the Engineering Reserve for any Mortgaged Property set forth in the
table reflects only the cost estimate determined by the respective inspection
firm for items that the related Originator determined significant enough to
require a reserve (but is generally equal to 100% to 125% of such portion),
and/or because in some cases items identified in a report were corrected prior
to closing of the Mortgage Loan, the Engineering Reserve for certain Mortgage
Loans is less than the cost estimate set forth in the related report. No
Engineering Reserve is required to be replenished. The amounts set forth in such
table represent the amounts of the Engineering Reserves required at the
respective dates of origination of the Mortgage Loans, and there can be no
assurance that the work for which reserves were required will be completed in a
timely manner or that the reserved amount will be sufficient therefor.
The Showboat Loan
The Loan. The loan (the "Showboat Loan") is evidenced by a promissory
note (the "Showboat Note") and secured by, among other things, a first
mortgage (the "Showboat Mortgage") encumbering the Showboat Borrower's fee
simple interest in land (the "Showboat Property") comprising approximately
10.4 acres of the approximately twelve (12) acres of land underlying the hotel
and casino in Atlantic City, New Jersey commonly known as the Atlantic City
Showboat Hotel and Casino (the "Showboat Hotel"). The fee simple estate is
subject to a ground lease (the "Showboat Ground Lease").
S-88
<PAGE>
The Borrower. The borrower under the Showboat Loan is Showboat Land
LLC (the "Showboat Borrower"), a newly-formed, special-purpose Nevada limited
liability company, which owns no material asset other than the Showboat
Property and related interests. Both Showboat Land Company, the managing
general partner of the managing member of the Showboat Borrower, and Showboat
Operating Company, the owner of the remaining partnership interest in the
managing member of the Showboat Borrower, are special-purpose entities that
are wholly-owned subsidiaries of Showboat, Inc., a publicly-held company whose
stock is listed on the New York Stock Exchange ("SBO").
The Property. The Showboat Mortgage covers the Showboat Borrower's
fee simple estate in the Showboat Property (but not the hotel nor any of the
related improvements, furniture, fixtures or gaming and other equipment). The
Showboat Mortgage (and the assignment of leases and rents executed in
connection therewith) also covers the Showboat Borrower's interest as landlord
under the Showboat Ground Lease (described below). The main portion of the
Showboat Hotel was constructed in 1984 and is located on the Showboat
Property. However, an additional wing (the "Additional Wing"), which was added
to the Showboat Hotel in 1994, is constructed on a parcel of land adjacent to,
but not included as part of, the Showboat Property. The fee interest in the
property upon which the Additional Wing was built is owned by an affiliate of
the Showboat Borrower. Other real property used in connection with the
operations of the Showboat Hotel and not included in the Showboat Property
consists of outlying parcels used for employee and supplementary guest
parking. The Trust will not have any lien on or interest in any such real
property that is not part of the Showboat Property. The portion of the
Showboat Hotel that is situated upon the Showboat Property includes 516 of the
total 800 guest rooms, 86,743 square feet of the total 101,743 square feet of
gaming space and 2,500 of the total 3,514 parking spaces. In addition, the
Showboat Property includes 32,156 square feet of meeting and banquet space, a
bowling alley, fitness center, swimming pool, several restaurants and certain
retail spaces. Upon the expiration (or earlier termination, including by
default) of the term of the Showboat Ground Lease, ownership of the hotel will
vest in the Showboat Borrower. The Showboat Borrower and successors would not,
however, be permitted to operate the hotel and casino without the approval of
the New Jersey Casino Control Commission (the "CCC"), which may be withheld in
its sole discretion.
The Additional Wing (which is not included as part of the Showboat
Property) added 284 guest rooms (the "Additional Hotel Rooms") and allowed the
expansion of the gaming space by an additional 15,000 square feet (the
"Additional Gaming Space"). Although the Additional Gaming Space was
constructed within the Showboat Property, such expansion was permitted by the
CCC pursuant to the New Jersey Casino Control Act (the "Control Act") as a
result of the construction of the Additional Hotel Rooms, and the Showboat
Hotel's right to operate the Additional Gaming Space is directly tied to the
inclusion of the Additional Wing in the operations of the Showboat Hotel.
Under New Jersey gaming laws, the size of a casino's gaming space is tied
directly to the number of "qualifying hotel rooms."
The Ground Lease. The Showboat Property is subject to a ninety-nine
(99) year ground lease (the "Showboat Ground Lease") to Atlantic City
Showboat, Inc.
S-89
<PAGE>
(the "Showboat Operator"), successor-by-assignment from Ocean Showboat, Inc. The
term of the Showboat Ground Lease will expire in 2082. The Showboat Ground Lease
is a "net lease" pursuant to which the Showboat Operator, in addition to the
payment of fixed rent (which is adjusted annually on April 1 of each year during
the term in accordance with the increase or decrease in the Consumer Price
Index), is responsible for all costs and expenses with respect to the use,
operation and ownership of the Showboat Property and the improvements now, or
which may in the future be, located thereon, including, but not limited to, all
maintenance and repair costs, insurance premiums, real estate taxes, assessments
and utility charges.
Priority of Ground Lease. The Showboat Borrower's fee simple interest
in the Showboat Property is subject and subordinate to the Showboat Operator's
interest under the Showboat Ground Lease but not to the lien of any leasehold
mortgages which may encumber the Showboat Operator's leasehold estate.
Accordingly, the foreclosure of the Showboat Mortgage would not extinguish the
Showboat Ground Lease; rather, the purchaser at the foreclosure sale would
acquire fee simple title to the Showboat Property subject to the Showboat
Operator's rights under the Showboat Ground Lease. In addition, upon the
foreclosure of any mortgage encumbering the Showboat Operator's leasehold
interest, the purchaser at the foreclosure sale would acquire only the
tenant's interest under the Showboat Ground Lease (and, upon the acquisition
thereof, would become obligated to perform the tenant's obligations
thereunder) .
Ground Tenant's Purchase Option. If the Showboat Borrower becomes
"unable" to act as lessor under the Showboat Ground Lease (based upon its
acceptability to the CCC as a landlord to a New Jersey casino), the tenant
under the Showboat Ground Lease has an option to purchase the Showboat
Property. However, no closing of the transfer of fee title to the Showboat
Property is to occur in connection therewith until the lien of the Showboat
Mortgage thereon has been cleared (including through defeasance).
Subleasing and Assignment. The Showboat Operator may transfer or
assign the leasehold estate, subject to the Showboat Borrower's consent, which
may not be unreasonably withheld; provided, however, that no consent is
required with or subleases involving less than five percent (5%) of the gross
square footage of the portion of the Showboat Hotel that is located upon the
Showboat Property. The Showboat Borrower has a right of first refusal if the
Showboat Operator desires to transfer its leasehold estate to a party other
than an affiliate of the Showboat Operator or a leasehold mortgagee. If the
Showboat Borrower seeks to transfer its fee simple estate other than to an
affiliate of the Showboat Borrower or in connection with a sale of all of the
Showboat Borrower's assets and liabilities, the Showboat Operator shall have a
right of first refusal to purchase the fee estate upon the same terms as
contained in the bona fide offer.
Joint and Several Liability. The Showboat Ground Lease provides, in
accordance with CCC directive, that the fee owner and the Showboat Operator
are jointly and severally liable for violations of the Control Act, regardless
of actual knowledge of such violation.
S-90
<PAGE>
Property Valuations. In connection with its origination of the
Showboat Loan, Column requested an independent third-party appraiser to
conduct several valuations with respect to the property on which the Showboat
Hotel is situated and, in particular, the portion of such property that is
covered by the Showboat Mortgage and constitutes the Showboat Property. The
property rights appraised included both: (i) the unencumbered fee simple
ownership of the land and improvements constituting the Showboat Property,
assuming the Showboat Borrower owned the Showboat Property free and clear of
the Showboat Ground Lease (any valuation thereof, an "Unencumbered Fee
Value"); and (ii) the leased fee simple ownership of the land and improvements
constituting the Showboat Property, taking into account that the Showboat
Borrower's current economic interest in the Showboat Property is limited to
its interests as landlord under the Showboat Ground Lease (any valuation
thereof, a "Leased Fee Value"). The estimates of value were conducted pursuant
to, among other methods, the income capitalization approach and the sales
comparison approach. Based upon the foregoing, it was estimated that : (i) the
Unencumbered Fee Value of the Showboat Property in the event of a default and
foreclosure as of December 1, 1997 is approximately $416,000,000; and (ii) the
Leased Fee Value of the Showboat Property as of December 1, 1997 is
approximately $110,000,000. In evaluating the foregoing information, investors
should consider that the Showboat Mortgage is subject to the Showboat Ground
Lease and direct operation of any New Jersey casino requires the appropriate
gaming license.
Proposed Acquisition of Showboat, Inc. by Harrah's Entertainment,
Inc. On December 19, 1997, Harrah's Entertainment, Inc., ("Harrah's") a
publicly-held company whose stock is listed on the New York Stock Exchange
("HET"), and Showboat, Inc. announced that they had signed a definitive
agreement whereby Harrah's will acquire Showboat, Inc. for $30.75 per share in
an all cash transaction valued at $519 million (net of options proceeds), and
assume $635 million in Showboat, Inc.'s debt. Donaldson, Lufkin & Jenrette
acted as financial advisor to Showboat, Inc. in connection with such sale.
Certain Terms of the Loan.
Lockbox and Reserves. Pursuant to the terms of a Cash Management
Agreement, the Showboat Borrower has agreed to direct the Showboat Operator to
make all payments under the Showboat Ground Lease to a bank account
established in the mortgagee's name. The payments of principal and interest
under the Showboat Loan will be made from such bank account.
Transfer of Property and Interest in Borrower; Encumbrances; Other
Debt. The Showboat Mortgage prohibits the sale by the Showboat Borrower of its
fee simple interest in the Showboat Property; provided, however, the Showboat
Borrower is permitted to transfer its interest to a single-purpose,
bankruptcy-remote entity that is at least fifty percent (50%) beneficially
owned and controlled by Showboat, Inc. (or by Harrah's after its contemplated
acquisition of Showboat, Inc.), provided that such transfer complies with the
conditions set forth in the Showboat Mortgage, including confirmation by the
rating agencies that such transfer will not affect or change the ratings of
any class of the Certificates. The Showboat Mortgage also prohibits the change
in the ownership interests in any of the Showboat Borrower's constituent
members or the
S-91
<PAGE>
encumbrance against any such membership interest. The Showboat Mortgage requires
that the Showboat Borrower obtain the mortgagee's consent to any additional
junior encumbrances upon the Showboat Property.
Approval Rights. The Showboat Borrower must obtain the mortgagee's
approval before it may take, among other things, the following actions: (i)
amend the Showboat Ground Lease; or (ii) consent to the transfer of the
tenant's interest under the Showboat Ground Lease, except that the tenant's
interest may be transferred to a single-purpose entity that is at least fifty
percent (50%) beneficially owned or controlled by Showboat, Inc. (or by
Harrah's after its contemplated acquisition of Showboat, Inc.) upon the
satisfaction of certain conditions described in the Showboat Mortgage,
including rating agency confirmation that such assignment will not affect or
change the rating of any Class of Certificates.
Guaranty of the Showboat Operator's Obligations Under the Showboat
Ground Lease. As additional collateral for the Showboat Borrower's obligations
under the Showboat Loan, Showboat, Inc. has guaranteed the Showboat Operator's
payment and performance obligations under the Showboat Ground Lease.
Property Management. The Showboat Hotel is operated and managed by
the Showboat Operator. The Showboat Operator's license to operate a casino
will expire on January 31, 2001, at which time the Showboat Operator would be
required to seek a renewal of the license.
Atlantic City Gaming; Certain Regulatory Issues.
New Jersey Gaming Market Overview. Gaming was legalized in the State
of New Jersey following a 1976 referendum. The first casino hotel opened in
1978 and, by 1990, twelve (12) casinos were operating in Atlantic City (the
Atlantis, formerly the Elsinore, closed in 1989). During the 1990's, ten (10)
casinos underwent projects to expand their existing facilities; the
construction of the Additional Wing was one of such projects.
Regulatory Matters. Casino gaming activities in Atlantic City are
subject to the Control Act and the supervision of the CCC. In addition to
imposing licensing requirements on casino operators, the CCC may require all
financial backers, investors, mortgagees, bond holders and holders of notes or
other evidence of indebtedness, either in effect or proposed, which bear any
relation to any casino project, including holders of publicly-traded securities
of an entity which holds a casino license or is an entity qualifier, subsidiary
or holding company of a casino licensee (a "Regulated Company"), to qualify as
financial sources. In the past, the CCC generally has waived the qualification
requirement for holders of less than fifteen percent (15%) of a series of
publicly-traded mortgage bonds so long as the bonds remained widely distributed
and freely traded in the public market and the holder had no ability to control
the casino licensee. As a result of the declaratory rulings issued by the CCC on
January 28, 1998 (as more particularly described below), however, no Offered
Certificateholder is required to qualify as a financial source or security
holder at this time.
S-92
<PAGE>
Declaratory Rulings. On January 28, 1998, Column received from the
CCC declaratory rulings approving the Showboat Loan and, among other things,
approving Column as a qualified financial source of a casino licensee;
determining that the qualification of the individual holders of the
Certificates is waived by the CCC; and determining that the trustee of the
Trust is exempt from qualification. All of the approvals issued by the CCC are
conditioned upon (1) submission of all final executed documents to the
Division and the CCC for approval as soon after closing as practicable; and
(2) submission of any material amendments to the Showboat Ground Lease to the
CCC for approval prior to execution thereof.
Effect of Ownership and Transfer of Offered Certificates. The Control
Act imposes certain restrictions upon the issuance, ownership and transfer of
securities of a Regulated Company and defines the term "security" to include
instruments which evidence a direct or indirect beneficial ownership or
creditor interest in a Regulated Company, including, but not limited to,
mortgages, debentures, security agreements, notes and warrants. Currently,
each of the Showboat Borrower, the Trust, the Trustee and the Showboat
Operator are deemed to be a Regulated Company, and instruments evidencing a
beneficial ownership or creditor interest therein, including the Offered
Certificates, are deemed to be the securities of a Regulated Company.
If the CCC finds that a holder of such securities is not qualified
under the Casino Control Act, it has the right to take any remedial action it
may deem appropriate, including the right to force divestiture by such
disqualified holder of such securities. In the event that certain disqualified
holders fail to divest themselves of such securities, the CCC has the power to
revoke or suspend the casino license affiliated with the Regulated Company
which issued the securities. If a holder is found unqualified, it is unlawful
for the holder (i) to exercise, directly or through any trustee or nominee,
any right conferred by such securities or (ii) to receive any dividends or
interest upon such securities or any remuneration, in any form, from its
affiliated casino licensee for services rendered or otherwise. Upon receipt of
the list of Certificateholders required to be delivered thereto following the
Closing Date, the CCC could require any particular holder or holders of
Certificates to seek qualification as a financial source, or find that any
particular holder of Certificates is disqualified. Accordingly, the Pooling
Agreement will provide that the Offered Certificates are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC,
such holder shall dispose of such securities. However, to the Depositor's
knowledge, the CCC has never had reason to exercise this authority with
respect to a security holder in the past, and the Depositor considers the
CCC's exercise of such authority with respect to Certificateholders to be a
remote possibility. See "Description of the Certificates--Required Regulatory
Disclosure" herein.
If any holder of Certificates is required to qualify under the
Control Act, that person is required to file an application for licensure or
qualification within thirty (30) days after the CCC either determines that
qualification is required or declines to waive qualification. If the CCC
declines to approve the application for licensure or otherwise determines that
the holder is unqualified, the holder will be required to divest all holdings
in
S-93
<PAGE>
any Certificates pursuant to procedures and standards specified in the
Control Act.
Conservatorship. If, at any time, it is determined by the CCC that
the Showboat Operator or any qualifier thereof has violated the Control Act or
cannot continue to meet the qualification requirements of the Control Act, the
Showboat Operator could be subject to fines or the suspension or revocation of
its license or any relevant qualification status. In the event of the
revocation, failure to renew or suspension (for more than 120 days) of the
casino license of the Showboat Operator, the Control Act authorizes the CCC to
appoint a conservator who would operate under the supervision of the CCC, and
who would take possession of the licensed premises, operate the casino
facility, and arrange for the orderly transfer of the property of the Showboat
Operator, including the payment of all debts and obligations thereof.
Impact of Casino Regulation on Mortgagee's Remedial Actions. In order
to foreclose the Showboat Mortgage, the mortgagee would first be required to
obtain a license as a non-gaming service provider, because the mortgagee would
become the landlord to a casino operator and a casino facility. Obtaining such
a license requires a hearing before and approval by the CCC.
Persons who are parties to the lease for an approved hotel building
or who have an agreement to lease a building which may, in the judgment of the
CCC, become an approved hotel building are required to hold a casino license
unless the CCC, with the concurrence of the Attorney General of the State of
New Jersey, determines that such persons do not have the ability to exercise
significant control over the building or the operation of the casino therein.
Unless otherwise determined by the CCC, agreements to lease an approved hotel
building or the land under the building must be for a durational term
exceeding thirty (30) years, must concern one hundred percent (100%) of the
entire approved hotel building or the land upon which it is located and must
include a buy-out provision conferring upon the lessee the absolute right to
purchase the lessor's entire interest for a fixed sum in the event that the
lessor is found by the CCC to be unsuitable.
As noted earlier, the Additional Wing, although incorporated into the
Showboat Hotel, is not located upon the Showboat Property. If the mortgagee
foreclosed upon the Showboat Mortgage, it would acquire the fee simple
interest subject to the Showboat Ground Lease and succeed to the landlord's
interest under the Showboat Ground Lease. If the default under the Showboat
Mortgage was occasioned by the Showboat Operator's default under the Showboat
Ground Lease, the mortgagee as fee owner would be entitled to terminate the
Showboat Ground Lease and thereby become the owner of the hotel improvements
located on the Showboat Property. The right to continue to operate the
existing casino space on the Showboat Property would require CCC approval. In
addition, the right to operate the improvements on the Showboat Property, even
if approval is obtained from the CCC, does not include any rights with respect
to the Additional Wing. If it became necessary to sever the Showboat Property
from the Additional Wing, CCC approval would be required, which could prove
difficult to obtain. If not approved, the right to operate the Additional
Gaming Space (approximately 15,000
S-94
<PAGE>
square feet), which was permitted to be constructed in 1994 as a result of the
construction of the Additional Hotel Rooms, could be lost.
Single-Tenant Property Loans
The "Single-Tenant Property Loans" consist of the 28 Mortgage Loans
that are secured by the Mortgaged Properties identified on Exhibit A-1 as: (i)
Filene's Basement Distribution Center; (ii) 4646 Bronze Way and 4647 Bronze
Way; (iii) Curry Honda Automobile Dealership, Curry Chevrolet Automobile
Dealership, Curry Acura Automobile Dealership, Curry Ford/Subaru Automobile
Dealership, Curry Mitsubishi Automobile Dealership and Curry Office Building;
(iv) Lovers Lane Animal Hospital/Clinic; (v) Walgreens - Kirkland, Walgreens
Retail Pharmacy Store - San Francisco, Walgreens Retail Pharmacy Store -
Charleston/Torrey, Walgreens Retail Pharmacy Store - Las Vegas Boulevard,
Walgreens Retail Pharmacy Store - Paradise, Walgreens - Seattle, Walgreens
Retail Building - Gresham, Walgreens Retail Building - Tucson and Walgreens
Retail Building - Portland (the "Walgreens Single-Tenant Properties"; and the
Mortgage Loans secured thereby, the "Walgreens Loans"); (vi) AMC Theater
Complex, (vii) Big V Supermarket; (viii) Rainforest Cafe Property; (ix)
Randall's Store; (x) Furr's Grocery Store; (xi) Revco Drug Store; (xii) the
Pathmark Grocery Store; (xiii) K-Mart Plaza; and (xiv) Casual Male Corporate
Office Building. The Single-Tenant Property Loans represent 9.1% of the
Initial Pool Balance.
Each Single-Tenant Property Loan covers property subject to a single
space lease (a "Single-Tenant Property Lease")with a primary lease term (the
"Primary Term") that expires on or after the scheduled final maturity date of
the related Single-Tenant Property Loan. The amount of the monthly rental
payments payable by the tenant (the "Tenant") under a Single-Tenant Property
Lease is equal to or greater than the scheduled payment of all principal,
interest and other amounts (other than any Balloon Payment) due each month on
the related Single-Tenant Property Loan.
The underwriting procedure for the Single-Tenant Property Loans is
predicated upon the applicable Mortgagor's receipt of monthly rental payments
from the Tenant under the Single-Tenant Property Lease of the applicable
Mortgaged Property. The loan underwriting for certain of the Single-Tenant
Property Loans is based, in part, upon the creditworthiness of the Tenants
under the applicable leases. Accordingly, the Single-Tenant Property Loans may
have higher loan-to-value ratios and lower debt-service-coverage ratios than
other types of Mortgage Loans.
Each Single-Tenant Property Lease generally provides that the related
Tenant must pay all real property taxes and assessments levied or assessed
against the related Mortgaged Property and all charges for utility services,
insurance and other operating expenses incurred in connection with the
operation of the related Mortgaged Property. The Tenants under such
leases are required, at their expense, to maintain their Mortgaged Properties,
including the roof and structure, in good order and repair.
Generally, each Single-Tenant Property Loan provides that if the
Tenant defaults beyond applicable notice and grace periods in the performance
of any
S-95
<PAGE>
covenant or agreement in the applicable Single-Tenant Property Lease (a
"Single- Tenant Property Lease Default"), then the holder of the related
Mortgage may require the related Mortgagor either (i) to terminate such lease
or (ii) refrain from the exercise of any of its rights thereunder.
Five of the Walgreens Loans are cross-collateralized and
cross-defaulted with each other, and eight of the Walgreens Single-Tenant
Properties are owned by the same Mortgagor.
Other Significant Concentrations
Stone Container Loans. Several groups of Mortgage Loans are made to
the same Mortgagors, have related borrowers that are affiliated with one
another through direct or indirect common ownership or are commonly managed.
The largest of these groups consists of 18 Cross-Collateralized Mortgage Loans
(the "Stone Container Loans"), with Cut-off Date Balances ranging from
$633,697 to $4,473,154 and an aggregate Cut-off Date Balance of $41,894,814.
Each Stone Container Loan is secured by a Mortgage on an industrial
property, located in one of 13 states, owned and occupied by Stone Container
Corporation ("Stone"), a multinational paper, packaging and pulp company. Each
Mortgaged Property is currently used by Stone as a corrugated box
manufacturing facility. None of the Mortgages encumbers any material amount of
personalty or equipment located at the related Mortgaged Property, as the
personalty and equipment is separately financed.
The Stone Container Loans were originated by Column. At the same
time, Column made other mortgage loans to Stone, secured by liens on other
corrugated box manufacturing facilities. Those other mortgage loans are
neither cross- defaulted nor cross-collateralized with the Stone Container
Loans. None of the Stone Container Loans requires escrows for taxes and
insurance except in the event of a default or a failure to maintain its
current rating.
Stone Container Corporation, headquartered in Chicago, Illinois, is a
publicly held company whose stock is listed on the New York Stock Exchange
("STO"). Stone currently has approximately 200 manufacturing operations
throughout 13 countries and employs approximately 24,000 persons. Stone's
products include container board, corrugated containers, kraft paper, paper
bags, market pulp and publication papers, and Stone is the world's largest
producer and converter of unbleached container board, kraft paper and
corrugated shipping containers.
Ground Leases
Three (3) Mortgage Loans, representing 2.0% of the Initial Pool
Balance, are, in each case, secured by a Mortgage solely on the related
Mortgagor's leasehold interest in the related Mortgaged Property. In addition,
two (2) Mortgage Loans, representing, in the aggregate, 2.9% of the Initial Pool
Balance, are secured by Mortgages covering a fee parcel and a ground leased
parcel. See "Certain Legal Aspects of Mortgage Loans--Foreclosure--Leasehold
Considerations" in the Prospectus.
S-96
<PAGE>
Subordinate Financing
In general, Mortgagors are prohibited from encumbering the related
Mortgaged Properties with subordinate financing. However, at the date of
origination of the related Mortgage Loans, three of the Mortgaged Properties,
representing, in the aggregate, security for 2.0% of the Initial Pool Balance,
were encumbered by an aggregate of $1,127,263 of subordinate debt (although, in
each such case, a standstill (that is, an agreement not to pursue remedies while
the Mortgage Loan is outstanding) and subordination agreement has been executed
and delivered by the particular junior lender). In certain other cases, the
Mortgagor is permitted to encumber the related Mortgaged Property with a limited
amount of subordinate financing, provided (i) certain loan to value ratio and
debt service coverage ratios are satisfied and (ii) the subordinate lender
executes a subordination and standstill agreement. In addition, certain of the
Mortgage Loans limit the aggregate amount of subordinate financing that will be
allowed. Where a borrower encumbers a mortgaged property with one or more junior
liens, the senior lender is subjected to additional risk. See "Certain Legal
Aspects of Mortgage Loans--Subordinate Financing" herein.
Except as referred to above, neither the Depositor nor the Seller is
aware of any subordinate or additional secured financing affecting the
Mortgaged Properties.
Prepayment Provisions
As of their respective dates of origination, all of the Mortgage
Loans imposed restrictions on voluntary prepayments of principal ("Principal
Prepayments"), which, in all cases commenced with a period (a "Lockout
Period") during which, with limited exception, Principal Prepayments are
prohibited. In the case of some Mortgage Loans, the Lockout Period will remain
in effect for all or substantially all of the remaining term to maturity. In
other cases, the Lockout Period is followed by a period during which Principal
Prepayments are permitted but are required to be accompanied by the greater of
a specified percentage of the principal amount being prepaid (a "Prepayment
Premium") and a premium calculated on the basis of a yield maintenance formula
(a "Yield Maintenance Premium"), and then, commencing on a specified date
prior to maturity, by a period (an "Open Period") during which Principal
Prepayments may be made without payment of any Prepayment Premium or Yield
Maintenance Premium. In one case, the Lockout Period is followed by a period
during which Principal Prepayments must be accompanied by the greater of a
Prepayment Premium and a Yield Maintenance Premium (calculated based on a
discount rate that is a spread over the applicable U.S. Treasury rate), then
by another period during which Principal Prepayments must be accompanied by
the lesser of a Prepayment Premium (calculated at a greater percentage than
during the prior period) and a Yield Maintenance Premium (calculated based on
a discount rate that reflects no spread over the applicable U.S. Treasury
rate), and then by an Open Period. In another case, the Lockout Period is
followed by a period during which Principal Prepayments must be accompanied by
the greater of a Prepayment Premium and a Yield Maintenance Premium, then by
another period during which Principal Prepayments must be accompanied by a
Prepayment Premium, and then by an Open
S-97
<PAGE>
Period. In all other cases, the Lockout Period is followed directly by an Open
Period. Any period during which a Principal Prepayment is permitted, but must be
accompanied by a Prepayment Premium and/or a Yield Maintenance Premium, is
herein referred to as a "Premium Period". In the case of 105 Mortgage Loans,
representing 73.1% of the Initial Pool Balance, the related Mortgagors are
permitted to "defease" their Mortgage Loans with United States Treasury
obligations during the Lockout Period but not earlier than two years following
the Closing Date. In the case of certain Mortgage Loans, the security for the
Mortgage Loans includes pledged funds which: (i) if certain leasing or other
economic conditions are satisfied by a specified date, will be released to the
related Mortgagor; and (ii) if such conditions are not satisfied by such date,
will be applied to pay down the Mortgage Loan during what would otherwise be a
Lockout Period.
The table titled "Characteristics of the Mortgage Loans" on Exhibit
A-1 sets forth the type of prepayment provision that corresponds to each
Mortgage Loan as of the Cut-off Date. In addition, the table titled
"Prepayment Provisions as of the Cut-off Date" on Exhibit A-2 sets forth a
breakdown of the Mortgage Loans based on (i) remaining term to stated maturity
(or, in the case of the ARD Loans, the remaining term to the respective
Anticipated Repayment Date) and (ii) the remaining Lockout Period and/or
Premium Period applicable to each. The prepayment provisions relating to each
Mortgage Loan generally do not apply to prepayments arising out of a casualty
or condemnation of the related Mortgaged Property. The aggregate
characteristics of the prepayment provisions of the Mortgage Pool will vary
over time as Lockout Periods expire and Mortgage Loans enter periods during
which a Prepayment Premium or Yield Maintenance Premium may be required in
connection with Principal Prepayments and, thereafter, enter Open Periods, and
as Mortgage Loans are prepaid, repurchased, replaced or liquidated on account
of default or delinquency.
For purposes of such provisions, the amount of the Yield Maintenance
Premium is generally equal to the product of the principal amount being
prepaid (expressed as a percentage of the outstanding principal balance of the
Mortgage Loan, prior to giving effect to the prepayment) and the excess, if
any, as of the date of determination, of (a) the present value of all future
payments of principal and interest of the related Mortgage Loan (including the
related Balloon Payment), as determined by discounting at a rate per annum
equal to the yield per annum on United States Treasury securities having a
maturity closest to the Maturity Date of the related Mortgage Loan, plus, in
some cases, a specified number of basis points, over (b) the outstanding
principal balance immediately prior to the prepayment.
Prepayment Premiums and Yield Maintenance Premiums received on the
Mortgage Loans will be allocated and distributed in the manner described in
"Description of the Certificates--Distributions--Distributions of Prepayment
Premiums and Yield Maintenance Premiums" herein.
Limitations may exist under applicable state law on the
enforceability of the provisions of the Mortgage Loans that require payment of
Prepayment Premiums or Yield Maintenance Premium. See "Certain Legal Aspects
of Mortgage Loans--Default Interest and Limitations on Prepayments" in the
Prospectus. Prepayment
S-98
<PAGE>
Premiums and Yield Maintenance Premiums are not payablein connection
with any repurchases or substitutions of Mortgage Loans by an
Originator in connection with material breaches of representations and
warranties or in connection with a prepayment of a Mortgage Loan arising out
of a casualty or condemnation at the related Mortgaged Property.
Hazard, Liability and Other Insurance
The Mortgages generally require that each Mortgaged Property be
insured by a hazard insurance policy in an amount at least equal to the lesser
of the outstanding principal balance of the related Mortgage Loan and 100% of
the full replacement cost of the improvements located on the related Mortgaged
Property, and if applicable, the related hazard insurance policy contains
appropriate endorsements to avoid the application of co-insurance and does not
permit reduction in insurance proceeds for depreciation. In some cases,
however, a Mortgagor is permitted to self-insure its Mortgaged Property
provided it maintains a specified net worth. Such hazard insurance may provide
for a customary deductible, generally in the amount of $10,000. In addition,
if any portion of a Mortgaged Property securing any Mortgage Loan was, at the
time of the origination of such Mortgage Loan, in an area identified in the
Federal Register by the Flood Emergency Management Agency as having special
flood hazards, and flood insurance was available, a flood insurance policy
meeting any requirements of the then current guidelines of the Federal
Insurance Administration is required to be in effect with a generally
acceptable insurance carrier, in an amount representing coverage not less than
the least of (1) the outstanding principal balance of such Mortgage Loan, (2)
the full insurable value of such Mortgaged Property, and (3) the maximum
amount of insurance available under the National Flood Insurance Act of 1968,
as amended. In general, the standard form of hazard insurance policy covers
physical damage to, or destruction of, the improvements on the Mortgaged
Property by fire, lightning, explosion, smoke, windstorm and hail, riot or
strike and civil commotion, subject to the conditions and exclusions set forth
in each policy. In general, however, the Mortgaged Properties, including those
in California, are not covered for earthquake risk.
Each Mortgage generally also requires the related Mortgagor to
maintain comprehensive general liability insurance against claims for personal
and bodily injury, death or property damage occurring on, in or about the
related Mortgaged Property in an amount at least equal to $1 million per
occurrence.
Each Mortgage generally further requires the related Mortgagor to
maintain business interruption insurance in an amount generally not less than
100% of the projected rental income from the related Mortgaged Property for
six months.
The Pooling Agreement will require the Servicer (or the Special
Servicer with respect to Specially Serviced Mortgage Loans) to cause each
Mortgagor to maintain such insurance coverage as is required under the related
Mortgage.
Under the terms of the Mortgages for several of the Mortgage Loans,
the Mortgagor thereunder is required to keep its Mortgaged Property insured
against loss by fire, hazards, rent loss and such other hazards, casualties,
liabilities
S-99
<PAGE>
and contingencies as the Mortgagee determines to require in its
discretion and in such amounts and for such periods as the Mortgagee
determines to require in its discretion. Under the terms of the Pooling
Agreement, the Servicer and Special Servicer will each agree to use reasonable
efforts consistent with the Servicing Standard to require the Mortgagors under
the respective Mortgage Loans for which it is responsible, to maintain
insurance generally in the amounts, type and scopes of coverage required under
the other Mortgage Loans.
With limited exception, the Mortgage Loans generally provide that
insurance and condemnation proceeds are to be applied (i) to restore the
related Mortgaged Property or (ii) towards payment of the related Mortgage
Loan.
The Pooling Agreement will require the Special Servicer to cause to
be maintained for each REO Property generally the same types of insurance
policies providing coverages in the same amounts as were previously required
under the Mortgage that covered such property.
The Pooling Agreement will also provide that the Servicer (or Special
Servicer) may satisfy its obligations regarding maintenance of the hazard
insurance policies referred to above by maintaining a blanket policy insuring
against hazard losses on all of the related Mortgage Loans. If such blanket
policy contains a deductible clause, the Servicer (or Special Servicer) will
be required, in the event of a casualty covered by such blanket policy, to
deposit or cause to be deposited in the Certificate Account all sums that
would have been deposited therein but for such deductible clause (but only to
the extent such sums would have been paid if an individual hazard insurance
policy referred to above had been in place). See "Description of the Pooling
Agreements--Hazard Insurance Policies" in the Prospectus.
The applicable Originator and its successors and assigns are the
beneficiaries under separate title insurance policies with respect to each
Mortgage Loan. Each title insurer will enter into such co-insurance and
reinsurance arrangements with respect to the title insurance policy as are
customary in the title insurance industry. Subject to certain exceptions,
including standard exceptions regarding claims made in the context of
insolvency proceedings, the title insurance policy will provide coverage to
the Trustee for the benefit of Certificateholders for claims made against the
Trustee regarding the priority and validity of the Mortgagors' title to the
Mortgaged Properties.
SERVICING OF THE MORTGAGE LOANS
General
The Servicer and the Special Servicer, either directly or through
sub-servicers, will be required to service and administer the Mortgage Loans,
for the benefit of the Certificateholders (as a collective whole), in
accordance with applicable law, the terms of the Pooling Agreement and the
terms of the respective Mortgage Loans and, to the extent consistent with the
foregoing, in accordance with the following standards (collectively, the
"Servicing Standard"): (a) with the higher of (i) the same care, skill,
prudence and diligence with
S-100
<PAGE>
which the Servicer or the Special Servicer, as the case may be, generally
services comparable mortgage loans for other third parties, giving due
consideration to customary and usual standards of practice of prudent
institutional commercial mortgage lenders and loan servicers servicing their own
mortgage loans, and (ii) the same care, skill, prudence and diligence with which
the Servicer or the Special Servicer, as the case may be, generally services
comparable mortgage loans owned by it; (b) with a view to the timely collection
of all scheduled payments of principal and interest under the Mortgage Loans,
the full collection of all Prepayment Premiums and Yield Maintenance Premiums
that may become payable under the Mortgage Loans and, if a Mortgage Loan comes
into and continues in default and no satisfactory arrangements can be made for
the collection of the delinquent payments (including Prepayment Premiums and
Yield Maintenance Premiums), the maximization of the recovery on such Mortgage
Loan to Certificateholders (as a collective whole) on a present value basis; and
(c) without regard to: (i) any relationship that it or any of its affiliates may
have with the related Mortgagor or any other party to the Pooling Agreement;
(ii) its ownership (or that of an affiliate) of any Certificate; (iii) any
obligation to make Advances (as defined below); and (iv) its right or the right
of any affiliate to receive compensation for its services or reimbursement of
costs under the Pooling Agreement or with respect to any particular transaction.
In general, the Servicer will initially be responsible for the
servicing and administration of the entire Mortgage Pool. However, the Special
Servicer will, except for certain limited duties, assume and be responsible for
special servicing and administration of any Mortgage Loan (each, a "Specially
Serviced Mortgage Loan") as to which any of the following events (each, a
"Servicing Transfer Event") occurs: (a) the related Mortgagor fails to make when
due any Balloon Payment, which failure continues unremedied, or the Servicer
determines, in its reasonable, good faith judgment, will continue unremedied,
for 30 days; (b) the related Mortgagor fails to make when due any other Monthly
Payment or any other payment required under the related Mortgage Note and
Mortgage, which failure continues unremedied, or the Servicer determines, in its
reasonable, good faith judgment, will continue unremedied, for 60 days; (c) the
Servicer determines, in its reasonable, good faith judgment, that a default in
making any Monthly Payment (including a Balloon Payment) or any other payment
required under the related Mortgage Note and Mortgage has occurred or is likely
to occur within 30 days and either (i) the related Mortgagor has requested a
material modification of the related Mortgage Loan (other than the waiver of a
"due-on-sale" clause or the extension of the related maturity date) or (ii) such
default is likely to remain unremedied for at least 60 days or, in the case of a
Balloon Payment, for at least 30 days; (d) the Servicer determines, in its
reasonable, good faith judgment, that a default (other than as described in
clause (a) or (b) above) has occurred that may materially impair the value of
the related Mortgaged Property as security for the Mortgage Loan and such
default continues unremedied for the applicable cure period under the terms of
the Mortgage Loan (or, if no cure period is specified, for 30 days); (e) certain
events of insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings occur in respect of the related Mortgagor or
the related Mortgaged Property, or the related Mortgagor takes certain actions
indicating its insolvency or its inability to pay its obligations; or (f) the
Servicer receives notice of the commencement of foreclosure or similar
proceedings with respect to
S-101
<PAGE>
the related Mortgaged Property. In addition, if title to the related Mortgaged
Property is acquired by the Trust (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.
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan
(and will become a "Corrected Mortgage Loan" as to which the Servicer will
re-assume servicing responsibilities) at such time as no circumstance
identified in clauses (a) through (f) of the preceding paragraph exists that
would cause the Mortgage Loan to continue to be characterized as a Specially
Serviced Mortgage Loan and such of the following as are applicable occur:
(w) with respect to the circumstances described in clauses
(a) and (b) of the preceding paragraph, the related Mortgagor 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 Mortgagor or by reason of a modification, waiver or amendment
granted or agreed to by the Servicer or the Special Servicer);
(x) with respect to the circumstances described in clauses
(c) and (e) of the preceding paragraph, such circumstances cease to
exist in the reasonable, good faith judgment of the Special Servicer;
(y) with respect to the circumstances described in
clause (d) of the preceding paragraph, such default is cured; and
(z) with respect to the circumstances described in clause
(f) of the preceding paragraph, such proceedings are terminated.
The Special Servicer will be required, as and to the extent described
herein, to seek advice and approval and take directions from the Controlling
Class Representative. See "--The Controlling Class Representative" herein.
The Servicer and Special Servicer will each be required to service
and administer each of the respective Cross- Collateralized Groups as a single
Mortgage Loan as and when it deems necessary and appropriate consistent with
the Servicing Standard. In connection with the transfer to the Special
Servicer of a Mortgage Loan that constitutes part of a Cross-Collateralized
Group as a result of a Servicing Transfer Event or the re-assumption of
servicing responsibilities by the Servicer with respect to any such Mortgage
Loan upon the cessation of its status as a Specially Serviced Mortgage Loan,
the Servicer and the Special Servicer shall each transfer to the other, as and
when applicable, servicing of all other Mortgage Loans constituting part of
the same Cross-Collateralized Group; provided that no Cross-Collateralized
Mortgage Loan may become a Corrected Mortgage Loan at any time that a
continuing Servicing Transfer Event exists with respect to another
Cross-Collateralized Mortgage Loan in the same Cross-Collateralized Group.
S-102
<PAGE>
Set forth below is a description of certain pertinent provisions of
the Pooling 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 additional important
information regarding the terms and conditions of the Pooling Agreement as
such terms and conditions relate to the rights and obligations of the Servicer
and the Special Servicer thereunder. For purposes of the Prospectus, the
Servicer constitutes a "Master Servicer" thereunder.
The Servicer
Banc One Mortgage Capital Markets, LLC ("Banc One"), the Master
Servicer, was organized under the laws of Delaware in 1997 as a limited
liability company. Banc One is a financial services company which provides
loan servicing and asset management for large pools of commercial and
multifamily real estate assets and originates commercial real estate loans.
Banc One's address is 1717 Main Street, 14th Floor, Dallas, Texas 75201.
As of December 31, 1997, Banc One and its affiliates were responsible
for servicing approximately 5,829 commercial and multifamily loans with an
aggregate principal balance of approximately $7.38 billion, the collateral for
which is located in 49 states, Puerto Rico and the District of Columbia. With
respect to such loans, approximately 4,441 loans with an aggregate principal
balance of approximately $4.34 billion pertain to commercial and multifamily
mortgage-backed securities. Banc One has been approved as a servicer by S&P,
Fitch and Moody's.
The information set forth herein concerning Banc One has been
provided by it, and neither the Depositor nor the Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
The Special Servicer
The duties of Special Servicer will be performed by Clarion Partners,
LLC ("Clarion"), a New York limited liability company (formerly known as Jones
Lang Wootton Realty Advisors). Clarion was established in 1982 and is
registered with the Securities and Exchange Commission as a registered
investment advisor. Clarion and its affiliated companies manage a portfolio of
over $6 billion in commercial real estate-related investments and have
completed over $2 billion in distressed commercial real estate resolutions.
Clarion, with a staff of 356 employees in 21 offices nationwide, has been
approved as a special servicer by S&P, Fitch and Moody's. It is anticipated
that Clarion or an affiliate will purchase a significant portion of the
Private Certificates (including all of the Class C Certificates, which will be
the initial Controlling Class). Clarion has offices at 335 Madison Avenue, 7th
Floor, New York, New York 10017.
The information set forth herein concerning Clarion has been provided
by it, and neither the Depositor nor the Underwriter makes any representation
or warranty as to the accuracy or completeness of such information.
Servicing and Other Compensation and Payment of Expenses
S-103
<PAGE>
The principal compensation to be paid to the Servicer in respect of
its servicing activities will be the Servicing Fee. The "Servicing Fee" will
be payable monthly on a loan-by-loan basis from amounts received in respect of
interest on each Mortgage Loan (including Specially Serviced Mortgage Loans
and Mortgage Loans as to which the related Mortgaged Property has become an
REO Property) and will accrue from time to time (on the basis of a 360-day
year consisting of twelve 30-day months) at 0.096% per annum (the "Servicing
Fee Rate") on the same principal amount as interest accrues or is deemed to
accrue from time to time on the Mortgage Loan. As additional servicing
compensation, the Servicer will be entitled to: (x) any Prepayment Interest
Excesses (as defined below) actually collected on the Mortgage Loans; and (y)
any "Default Interest" (that is, interest in excess of interest at the related
Mortgage Rate accrued in respect of any Mortgage Loan as a result of a default
thereunder) and late payment charges actually collected on the Mortgage Loans
(other than Specially Serviced Mortgage Loans and Mortgage Loans as to which
the related Mortgaged Property has become an REO Property), but only to the
extent that such items are not allocable to pay any portion of a Workout Fee
or Liquidation Fee (each as defined below) payable to the Special Servicer
with respect to the related Mortgage Loan or to cover interest payable to the
Servicer, the Special Servicer or the Trustee with respect to any Advances
made in respect of the related Mortgage Loan. In addition, the Servicer will
be authorized to invest or direct the investment of funds held in those
accounts maintained by it that constitute part of the Certificate Account (as
defined in the Prospectus) in certain government securities and other
obligations specified in the Pooling Agreement and meeting the criteria of the
Rating Agencies ("Permitted Investments"), and the Servicer will be entitled
to retain any interest or other income earned on such funds, but will be
required to cover any losses in respect of such investments (other than of
income earned thereon) from its own funds without any right to reimbursement.
If a borrower prepays a Mortgage Loan in whole or in part prior to
its Due Date in any Collection Period, the amount of interest (net of related
Servicing Fees and, if applicable, Additional Interest) that accrues on the
amount of the Principal Prepayment will be less (such shortfall, a "Prepayment
Interest Shortfall") than the corresponding amount of Trustee Fees and
interest accruing on the REMIC Regular Certificates. If such a Principal
Prepayment is made after the prepaid Mortgage Loan's Due Date in any
Collection Period, the amount of interest (net of related Servicing Fees and,
if applicable, Additional Interest) that accrues on the amount of such
Principal Prepayment will exceed (such excess, a "Prepayment Interest Excess")
the corresponding amount of Trustee Fees and interest accruing on the REMIC
Regular Certificates. Any Prepayment Interest Excesses collected will be paid
to the Servicer as additional servicing compensation. However, with respect to
each Distribution Date, the Servicer will be required to remit to the Trustee
for deposit into the Distribution Account (such remittance, a "Compensating
Interest Payment"), without any right of reimbursement therefor, an amount
equal to the lesser of (i) the aggregate of its Servicing Fees for the related
Collection Period, plus any Prepayment Interest Excesses received during such
Collection Period, and (ii) the aggregate of any Prepayment Interest
Shortfalls experienced during the related Collection Period. The Servicer is
not required to make Compensating Interest Payments to cover
S-104
<PAGE>
shortfalls in Mortgage Loan interest accruals that result from any liquidation
of a defaulted Mortgage Loan or any REO Property acquired in respect thereof or
any other action related to special servicing. If the aggregate of any
Prepayment Interest Shortfalls experienced during any Collection Period exceeds
the Compensating Interest Payment made in respect thereof, the difference will
constitute the "Net Aggregate Prepayment Interest Shortfall" for the related
Distribution Date.
The principal compensation to be paid to the Special Servicer in
respect of its special servicing activities will consist of the Special
Servicing Fee, the Workout Fee and the Liquidation Fee. As to each Specially
Serviced Mortgage Loan and each Mortgage Loan as to which the related
Mortgaged Property has become an REO Property, the "Special Servicing Fee"
will accrue from time to time (on the basis of a 360-day year consisting of
twelve 30-day months) at a rate equal to 0.35% per annum on the same principal
amount as interest accrues or is deemed to accrue from time to time on any
such Mortgage Loan; provided that, if and for so long as such principal amount
is in excess of $3,000,000, then the Special Servicing Fee will accrue on the
portion of such principal amount that is in excess of $3,000,000 at a reduced
rate of 0.25% per annum. The Special Servicing Fee with respect to any
Specially Serviced Mortgage Loan will cease to accrue if such Mortgage Loan is
liquidated or becomes a Corrected Mortgage Loan. Earned but unpaid Special
Servicing Fees will be payable monthly out of general collections on the
Mortgage Loans and any REO Properties on deposit in the Collection Account. A
"Workout Fee" will generally be payable with respect to each Corrected
Mortgage Loan. As to each Corrected Mortgage Loan, the Workout Fee will be
payable out of, and will be calculated by application of a "Workout Fee Rate"
of 1.25% to, each collection of interest and principal (net of related unpaid
or unreimbursed Servicing Fees, Special Servicing Fees, Advances and interest
on Advances) received on such Mortgage Loan for so long as it remains a
Corrected Mortgage Loan. The Workout Fee with respect to any Corrected
Mortgage Loan will cease to be payable if such Mortgage Loan again becomes a
Specially Serviced Mortgage Loan or if the related Mortgaged Property becomes
an REO Property; provided that a new Workout Fee will become payable if and
when such Mortgage Loan again becomes a Corrected Mortgage Loan. If the
Special Servicer is terminated other than for cause or resigns, it shall
retain the right to receive any and all Workout Fees payable in respect of
Mortgage Loans that became Corrected Mortgage Loans during the period that it
acted as Special Servicer and that were still Corrected Mortgage Loans at the
time of such termination or resignation (and the successor Special Servicer
shall not be entitled to any portion of such Workout Fees), in each case until
the Workout Fee for any such Mortgage Loan ceases to be payable in accordance
with the preceding sentence. A "Liquidation Fee" will be payable with respect
to each Specially Serviced Mortgage Loan or REO Property as to which the
Special Servicer receives any full or discounted payoff from the related
Mortgagor or any Liquidation Proceeds, Condemnation Proceeds or Insurance
Proceeds (other than as a result of the repurchase or substitution of any such
Specially Serviced Mortgage Loan or REO Property by an Originator in
connection with a material breach of representation or warranty or as a result
of any purchase thereof by the Special Servicer, the Servicer or any
Certificateholder with a majority interest in the Controlling Class). As to
each such Specially Serviced Mortgage Loan or REO Property, the Liquidation
Fee shall be payable out of, and shall be calculated by application
S-105
<PAGE>
of a "Liquidation Fee Rate" of 1.25% to, such full or discounted payoff,
Liquidation Proceeds, Condemnation Proceeds and/or Insurance Proceeds, in each
case net of any portion of such payment or proceeds payable or reimbursable to
the Servicer, the Special Servicer or the Trustee to cover related unpaid or
unreimbursed Servicing Fees, Advances, Special Servicing Fees and/or interest on
Advances. The Liquidation Fee with respect to any such Specially Serviced
Mortgage Loan will not be payable if such Mortgage Loan becomes a Corrected
Mortgage Loan. Notwithstanding anything herein to the contrary, no Liquidation
Fee will be payable out of, or in connection with the receipt of, Liquidation
Proceeds collected as a result of the repurchase or substitution of any
Specially Serviced Mortgage Loan or REO Property by an Originator in connection
with a material breach of representation or warranty or as a result of any
purchase thereof by the Special Servicer, the Servicer or any Certificateholder
with a majority interest in the Controlling Class. As additional servicing
compensation, the Special Servicer will be entitled to Default Interest and late
payment charges actually collected on or in respect of the Specially Serviced
Mortgage Loans and/or any Mortgage Loans as to which the related Mortgaged
Property has become an REO Property, but only to the extent that such items are
not allocable to pay any portion of a Workout Fee or Liquidation Fee payable to
the Special Servicer with respect to the related Mortgage Loan or to cover
interest payable to the Servicer, the Special Servicer or the Trustee with
respect to any Advances made in respect of the related Mortgage Loan. In
addition, the Special Servicer will be authorized to invest or direct the
investment of funds in those accounts maintained by it that constitute part of
the Certificate Account, in Permitted Investments, and the Special Servicer will
be entitled to retain any interest or other income earned on such funds as
additional servicing compensation, but will be required to cover any losses in
respect of such investments (other than of income earned thereon) from its own
funds without any right to reimbursement.
Assumption fees, assumption application fees, modification fees and
extension fees actually collected on or with respect to the Mortgage Loans
will be allocated between the Servicer and the Special Servicer as provided in
the Pooling Agreement and will be paid to each as additional servicing
compensation.
The Servicer and the Special Servicer will, in general, each be
required to pay, out of its own funds, all ordinary expenses incurred by it in
connection with its servicing activities under the Pooling 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
Agreement. In general, customary, reasonable and necessary "out of pocket"
costs and expenses required to be incurred by the Servicer or Special Servicer
in connection with the servicing of a Mortgage Loan after a default,
delinquency or other unanticipated event, or in connection with the
administration of any REO Property, will constitute "Servicing Advances"
(Servicing Advances and P&I Advances, collectively, "Advances") and, in all
cases, will be reimbursable from future payments and other collections,
including in the form of Insurance Proceeds, Condemnation Proceeds and
Liquidation Proceeds, received on or in respect of the related Mortgage Loan
or REO Property ("Related Proceeds"). Notwithstanding the foregoing, the
Servicer and the Special Servicer will each be permitted to pay, or to direct
the payment of, certain servicing expenses directly out of the
S-106
<PAGE>
Certificate Account, and at times without regard to the relationship between the
expense and the funds from which it is being paid. In addition, the Servicer
will be required to make Servicing Advances to cover certain items in respect of
Specially Serviced Mortgage Loans and REO Properties at the direction of the
Special Servicer; and, if the Special Servicer is required under the Pooling
Agreement to make any Servicing Advance but does not desire to do so, the
Special Servicer may, in its sole discretion, request that the Servicer make
such Advance, such request to be made in writing and in a timely manner that
does not adversely affect the interests of any Certificateholder. If the
Servicer is required to make any Servicing Advance at the direction of the
Special Servicer, the Special Servicer will be required to provide the Servicer
with such information and documentation regarding the subject Advance as the
Servicer may reasonably request. The Servicer will be required to make any such
Servicing Advance that it is so requested by the Special Servicer to make within
ten (10) days of the Servicer's receipt of such request. The Special Servicer
will be relieved of any obligations with respect to an Advance that it requests
the Servicer to make (regardless of whether or not the Servicer makes that
Advance).
If the Servicer or Special Servicer is required under the Pooling
Agreement to make a Servicing Advance, but neither does so within 15 days
after such Servicing Advance is required to be made, then the Trustee will, if
it has actual knowledge of such failure, be required to give the defaulting
party notice of such failure and further will, if such failure continues for
three more business days, be required to make such Servicing Advance.
The Servicer, the Special Servicer and the Trustee will be obligated
to make Servicing Advances only to the extent that such Servicing Advances
are, in the reasonable, good faith judgment of the Servicer, the Special
Servicer or the Trustee, as the case may be, ultimately recoverable from
Related Proceeds. With respect to any Servicing Advance, the Trustee will be
entitled to conclusively rely on the non-recoverability determination made by
the Servicer or Special Servicer.
As and to the extent described herein, the Servicer, the Special
Servicer and the Trustee are each entitled to receive interest at the
Reimbursement Rate on Servicing Advances made thereby. See "Description of the
Certificates--P&I and Other Advances" herein.
Modifications, Waivers, Amendments and Consents
The Special Servicer and, to the limited extent described below, the
Servicer each may (consistent with the Servicing Standard) agree to any
modification, waiver or amendment of any term of, extend the maturity of,
forgive interest (including, without limitation, Default Interest and
Additional Interest) on and principal of, forgive Prepayment Premiums, Yield
Maintenance Premiums and late payment charges on, defer the payment of
interest on, permit the release, addition or substitution of collateral
securing, and/or permit the release, addition or substitution of the or a
Mortgagor on or any guarantor of, any Mortgage Loan it is required to service
and administer, subject, however to the discussion under "--The Controlling
Class Representative--Certain Rights and Powers" below, and, further, to each
of the following limitations, conditions and restrictions:
S-107
<PAGE>
(i) with limited exception, the Servicer may not agree to
any modification, waiver or amendment of any term of, or take any of
the other above-referenced actions with respect to, any Mortgage Loan
without the consent of the Special Servicer (which consent (i) is not
to be unreasonably withheld by the Special Servicer, (ii) is to be
withheld or granted by the Special Servicer in accordance with the
Servicing Standard and (iii) shall be deemed to have been granted if
not expressly denied within 10 business days of the Special
Servicer's receipt from the Servicer of all information reasonably
requested thereby in order to make an informed decision);
(ii) with limited exception, the Special Servicer may not
agree to (or consent to the Servicer's agreeing to) any modification,
waiver or amendment of any term of, or take (or consent to the
Servicer's taking) any of the other above-referenced actions with
respect to, any Mortgage Loan that would affect the amount or timing
of any related payment of principal, interest or other amount payable
thereunder or, in the Special Servicer's good faith judgment, would
materially impair the security for such Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon, unless a
material default on such Mortgage Loan has occurred or, in the
Special Servicer's good faith judgment, a default in respect of
payment on such Mortgage Loan is reasonably foreseeable, and such
modification, waiver, amendment or other action is reasonably likely
to produce a greater recovery to Certificateholders on a present
value basis than would liquidation;
(iii) the Special Servicer may not extend (or consent to the
Servicer's extending) the date on which any Balloon Payment is
scheduled to be due on any Specially Serviced Mortgage Loan to a date
beyond the earliest of (A) the third anniversary of such Mortgage
Loan's original stated maturity date, (B) two years prior to the
Rated Final Distribution Date and (C) if such Mortgage Loan is
secured by a Mortgage solely or primarily on the related Mortgagor's
leasehold interest in the related Mortgaged Property, ten years prior
to the end of the then current term of the related ground lease; and,
furthermore, the Special Servicer may not grant (or consent to the
Servicer's granting) any such extension unless (A) the Special
Servicer's recovery determination contemplated by the immediately
preceding clause (ii) is supported by an appraisal performed within
the preceding twelve-month period and (B) the related Mortgagor
agrees, among other things, to deliver to the Special Servicer, the
Controlling Class Representative and the Trustee quarterly operating
statements with respect to the related Mortgaged Property;
(iv) neither the Servicer nor the Special Servicer may make
or permit any modification, waiver or amendment of any term of, or
take any of the other above referenced actions with respect to, any
Mortgage Loan that would cause any of REMIC I, REMIC II or REMIC III
to fail to qualify as a REMIC under the Code or result in the
imposition of any tax on "prohibited transactions" or "contributions"
after the startup date of any such REMIC under the REMIC Provisions
(as defined herein);
S-108
<PAGE>
(v) the Special Servicer may not permit (or consent to the
Servicer's permitting) any Mortgagor to add or substitute any
collateral for its Mortgage Loan, unless the Special Servicer shall
have first (A) determined, in its reasonable, good faith judgment,
based upon an environmental assessment prepared by an independent
person who regularly conducts environmental assessments, at the
expense of the Mortgagor, that such additional or substitute
collateral is in compliance with applicable environmental laws and
regulations and that there are no circumstances or conditions present
with respect to such new collateral relating to the use, management
or disposal of any hazardous materials for which investigation,
testing, monitoring, containment, clean-up or remediation would be
required under any then applicable environmental laws and/or
regulations and (B) received confirmation from
each Rating Agency that such addition or substitution of collateral
will not result in a qualification, downgrade or withdrawal of any
rating then assigned by such Rating Agency to a Class of
Certificates; and
(vi) with limited exceptions, the Special Servicer may not
release (or consent to the Servicer's releasing) any collateral
securing an outstanding Mortgage Loan;
provided that (x) the limitations, conditions and restrictions set forth in
clauses (i) through (vi) above will not apply to any of the acts referenced in
this "--Modifications, Waivers, Amendments and Consents" section with respect
to any Mortgage Loan that is required under the terms of such Mortgage Loan in
effect on the Closing Date (or, in the case of a Replacement Mortgage Loan, on
the related date of substitution) or that is solely within the control of the
related Mortgagor; and (y) notwithstanding clauses (i) through (vi) above,
neither the Servicer nor the Special Servicer will be required to oppose the
confirmation of a plan in any bankruptcy or similar proceeding involving a
Mortgagor if in its reasonable good faith judgment such opposition would not
ultimately prevent the confirmation of such plan or one substantially similar.
In addition, with respect to any ARD Loan after its Anticipated
Repayment Date, the Servicer will be permitted, in its discretion, to waive
all or any portion of accrued Additional Interest if, prior to the related
maturity date, the related Mortgagor has requested the right to prepay the
Mortgage Loan in full together with all payments required by the Mortgage Loan
in connection with such prepayment except for all or a portion of accrued
Additional Interest, provided that the Servicer's determination to waive the
right to such accrued Additional Interest is reasonably likely to produce a
greater payment to Certificateholders on a present value basis than a refusal
to waive the right to such Additional Interest. The Servicer will have no
liability to the Trust, the Certificateholders or any other person so long as
such determination is based on such criteria. The Pooling Agreement will also
limit the Servicer's and the Special Servicer's ability to institute an
enforcement action solely for the collection of Additional Interest.
All modifications, waivers, amendments and other actions entered into
or taken in respect of the Mortgage Loans are to be in writing. Each of the
Servicer
S-109
<PAGE>
and the Special Servicer is to deliver to the Trustee or the related
Custodian for deposit in the related Mortgage File, an original counterpart of
the agreement relating to each such modification, waiver, amendment or other
action agreed to thereby, promptly following the execution thereof.
The Controlling Class Representative
Election, Resignation and Removal. The Certificateholders (or, in the
case of Book-Entry Certificates, the Certificate Owners) of the Controlling
Class whose Certificates represent more than 50% of the related Class
Principal Balance shall be entitled in accordance with the Pooling Agreement
to select a representative (the "Controlling Class Representative") having
certain rights and powers described below or to replace an existing
Controlling Class Representative. Upon (i) the receipt by the Trustee of
written requests for the selection of a Controlling Class Representative from
the Certificateholders (or, in the case of Book-Entry Certificates, the
Certificate Owners) of the Controlling Class whose Certificates represent more
than 50% of the related Class Principal Balance, (ii) the resignation or
removal of the person acting as Controlling Class Representative or (iii) a
determination by the Trustee that the Controlling Class has changed, the
Trustee will be required to promptly notify the Certificateholders (or, in the
case of Book-Entry Certificates, to the extent actually known to certain
designated officers (each, a "Responsible Officer") of the Trustee, the
Certificate Owners) of the Controlling Class that they may select a
Controlling Class Representative. Such notice is to set forth the process
established by the Trustee in order to select a Controlling Class
Representative, which process may include the designation of the Controlling
Class Representative by any Certificateholder with a majority interest in the
Controlling Class by a writing delivered to the Trustee. No appointment of any
person as a Controlling Class Representative shall be effective until such
person provides the Trustee with written confirmation of its acceptance of
such appointment, an address and telecopy number for the delivery of notices
and other correspondence and a list of officers or employees of such person
with whom the parties to the Pooling Agreement may deal (including their
names, titles, work addresses and telecopy numbers).
As of any date of determination, the "Controlling Class" will be the
most subordinate Class of Sequential Pay Certificates then outstanding (the
Class A-1A and Class A-1B Certificates being treated as a single Class for
this purpose) that has a Class Principal Balance that is not less than 25%
(or, in the case of the Class C Certificates, 20%) of such Class' initial
Class Principal Balance as of the Closing Date; provided that if no Class of
Sequential Pay Certificates has a Class Principal Balance that satisfies such
requirement, then the "Controlling Class" will be the Class of Sequential Pay
Certificates with the largest Class Principal Balance then outstanding.
The Controlling Class Representative may at any time resign as such
by giving written notice to the Trustee and to each Certificateholder (or, in
the case of Book-Entry Certificates, Certificate Owner) of the Controlling
Class. The Certificateholders (or, in the case of Book-Entry Certificates, the
Certificate Owners) of the Controlling Class whose Certificates represent more
than 50% of the related Class Principal Balance shall be entitled to remove
any existing
S-110
<PAGE>
Controlling Class Representative by giving written notice to the
Trustee and to each other Certificateholder (or, in the case of Book-Entry
Certificates, Certificate Owner) of the Controlling Class.
Certain Rights and Powers. Within 60 days after the occurrence of a
Servicing Transfer Event with respect to any Mortgage Loan and the transfer of
servicing with respect to such Mortgage Loan to the Special Servicer (or, if
applicable, within 60 days after the commencement of the administration of any
REO Property by the Special Servicer), or such longer period as the
Controlling Class Representative shall approve (which approval may not be
unreasonably withheld), the Special Servicer will be required to prepare and
deliver, or cause to be prepared and delivered, to the Controlling Class
Representative and the Trustee a summary business plan (as to such Mortgage
Loan or REO Property, a "Summary Business Plan") generally outlining the
strategy which the Special Servicer contemplates using in resolving the event
giving rise to such Servicing Transfer Event or in liquidating or otherwise
disposing of such Mortgage Loan (or REO Property). If within ten business days
of receiving the Summary Business Plan (whether in its original form or, as
contemplated below, any revised form), the Controlling Class Representative
does not disapprove such Summary Business Plan in writing, the Special
Servicer will implement the recommended action as outlined in such Summary
Business Plan. If the Controlling Class Representative disapproves such
Summary Business Plan, then, subject to the discussion in the last paragraph
in this "--The Controlling Class Representative--Certain Rights and Powers"
subsection, the Special Servicer will be required to revise such plan in
response to the Controlling Class Representative's recommendations and deliver
to the Controlling Class Representative and the Trustee a new Summary Business
Plan as soon as practicable. Subject to the discussion in the last paragraph
in this "--The Controlling Class Representative--Certain Rights and Powers"
subsection, the Special Servicer must, for a period not to exceed 30 days
following its delivery to the Trustee and Controlling Class Representative of
the initial version of such Summary Business Plan, continue to so revise such
Summary Business Plan until the Controlling Class Representative either
affirmatively approves, or within a period of ten Business Days following its
receipt thereof, fails to disapprove, in writing, any particular form of such
Summary Business Plan delivered to it (whereupon the Special Servicer shall
implement the recommended action as outlined in such particular form of
Summary Business Plan). If no form of Summary Business Plan is adopted in
respect of any particular Specially Serviced Mortgage Loan or REO Property as
described above within 30 days following the Special Servicer's delivery to
the Trustee and the Controlling Class Representative of the initial version of
such Summary Business Plan, or if the Special Servicer determines in its
reasonable, good faith judgment that the Controlling Class Representative's
disapproval of any particular form of Summary Business Plan is not in the best
interests of the Certificateholders (as a collective whole), then the Special
Servicer shall implement the recommended action as outlined in the form of
Summary Business Plan most recently delivered to the Controlling Class
Representative as of such 30th day or the date of such determination, as the
case may be. The particular form of Summary Business Plan for any Specially
Serviced Mortgage Loan or REO Property, as adopted in accordance with the
foregoing discussion, shall constitute an "Approved Summary Business Plan"
with respect thereto. Notwithstanding the foregoing, at any time prior to
there being an Approved Summary Business Plan in respect of any
S-111
<PAGE>
Specially Serviced Mortgage Loan or REO Property, the Special Servicer may, in
general, take any action in respect of such Mortgage Loan or REO Property that
is consistent with the Servicing Standard, provided that its failure to do so
would, in the Special Servicer's good faith and reasonable judgment, irreparably
harm any Certificateholder and it has made a reasonable effort to notify the
Controlling Class Representative of its intention to take such action. All
Summary Business Plans submitted by the Special Servicer to the Trustee and the
Controlling Class Representative must be consistent with the terms of the
Pooling Agreement, including the Servicing Standard. If the Special Servicer is
at any time required to prepare a Summary Business Plan in respect of the
Showboat Loan or Showboat Property, it will be required to retain a casino
industry expert to assist it (the cost of such expert to be covered by and
reimbursable as a Servicing Advance).
Prior to the Special Servicer's taking any of the following actions,
the Special Servicer is required to notify the Controlling Class
Representative and the Trustee of its intention to take such action and to
supply the Controlling Class Representative with such information as the
Controlling Class Representative may reasonably request to allow the
Controlling Class Representative to make an informed decision. Subject to the
discussion in the final paragraph of this "--The Controlling Class
Representative--Certain Rights and Powers" subsection, the Special Servicer is
not to take any of the following actions to which the Controlling Class
Representative objects in writing within ten days of its receiving from the
Special Servicer written notice thereof and sufficient information to make an
informed decision (provided that if such written objection has not been
received by the Special Servicer within such ten-day period, then the
Controlling Class Representative's approval will be deemed to have been
given):
(i) any material deviation from the Approved Summary
Business Plan for any Specially Serviced Mortgage Loan or REO
Property (any material deviation from any Approved Summary Business
Plan permitted pursuant to this paragraph and the final paragraph
under this "--The Controlling Class Representative--Certain Rights
and Powers" subsection being deemed an approved modification
thereto);
(ii) unless it is part of the governing Approved Summary
Business Plan or is in connection with a termination of the Trust as
described under "Description of the Certificates--Termination"
herein, the sale of any defaulted Mortgage Loan or related REO
Property for less than the applicable Purchase Price;
(iii) unless it is part of the governing Approved Summary
Business Plan, obtain title to any Mortgaged Property by foreclosure,
deed in lieu of foreclosure or otherwise, or take any other action
with respect to any Mortgaged Property as a result of which the
Trustee, on behalf of the Certificateholders, could, in the
reasonable, good faith judgment of the Special Servicer, exercised in
accordance with the Servicing Standard, be considered to hold title
to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of CERCLA or
any comparable law, if the Special Servicer has previously
S-112
<PAGE>
determined in accordance with the Servicing Standard, based on a Phase
I environmental site assessment (and any additional environmental
testing that the Special Servicer deems necessary and prudent) of such
Mortgaged Property conducted by an independent person who regularly
conducts Phase I environmental site assessments and performed during
the twelve-month period preceding any such acquisition of title or
other action, that (A) the Mortgaged Property is not in compliance with
applicable environmental laws and regulations, or (B) there are
circumstances or conditions present at the Mortgaged Property relating
to the use, management or disposal of hazardous materials for which
investigation, testing, monitoring, containment, clean-up or
remediation could be required under any applicable environmental laws
and regulations; or
(iv) unless it is part of the governing Approved Summary
Business Plan, release any Mortgaged Property from the lien of a
related Mortgage other than in accordance with the provisions of the
related Mortgage Loan documents.
Notwithstanding anything to the contrary herein, the Special Servicer
shall not have any right or obligation to consult with or to seek and/or
obtain consent or approval from any Controlling Class Representative prior to
acting, and provisions of the Pooling Agreement requiring such shall be of no
effect, during the period prior to the initial selection of a Controlling
Class Representative and, if any Controlling Class Representative resigns or
is removed, during the period following such resignation or removal until a
replacement is selected.
No recommendation with respect to a Summary Business Plan and no
direction, objection or withholding of a required consent or approval by, of
or on the part of the Controlling Class Representative may (and the Special
Servicer will be required to act without regard to any such act or omission
by, of or on the part of the Controlling Class Representative that would): (i)
require or cause the Special Servicer to violate the terms of any Mortgage
Loan, applicable law or any provision of the Pooling Agreement (without regard
to the provisions thereof described under this "--The Controlling Class
Representative--Certain Rights and Powers" subsection), including the Special
Servicer's obligation to act in accordance with the Servicing Standard; or
(ii) adversely affect the REMIC status of or, with the exception of the
circumstances described under "Certain Federal Income Tax
Consequences--Possible Taxes on Income From Foreclosure Property and Other
Taxes" herein, result in a tax on any of REMIC I, REMIC II or REMIC III; or
(iii) expose the Depositor, the Servicer, the Special Servicer, the REMIC
Administrator or the Trustee, or their respective affiliates, officers,
directors, employees, agents or partners, or the Trust to any material claim,
suit or liability; or (iv) materially expand the scope of the Special Servicer's
responsibilities under the Pooling Agreement.
Liability. Any and all expenses of the Controlling Class
Representative are to be borne by the Certificateholders (or, if applicable,
the Certificate Owners) of the Controlling Class, pro rata according to their
respective Percentage Interests in such Class, and not by the Trust.
Notwithstanding the foregoing, if a claim is made against the Controlling
Class Representative by a
S-113
<PAGE>
Mortgagor with respect to the Pooling Agreement or any particular Mortgage Loan,
the Controlling Class Representative is to immediately notify the Trustee, the
Servicer and the Special Servicer, whereupon (if the Special Servicer or the
Trust are also named parties to the same action and, in the sole judgment of the
Special Servicer, the Controlling Class Representative had with regard to the
particular matter acted in good faith, without gross negligence or willful
misconduct, and there is no potential for the Special Servicer or the Trust to
be an adverse party in such action as regards the Controlling Class
Representative) the Special Servicer on behalf of the Trust will, subject to the
discussion under "--Certain Matters Regarding the Master Servicer, the Special
Servicer, the REMIC Administrator, the Manager and the Depositor" in the
Prospectus, assume the defense of any such claim against the Controlling Class
Representative.
The Controlling Class Representative will have no liability to the
Trust or the Certificateholders for any action taken, or for refraining from
the taking of any action, in good faith pursuant to the Pooling 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 its gross negligence, willful misconduct or
reckless disregard of its obligations and duties under the Pooling Agreement.
By its acceptance of a Certificate or interest therein, each Certificateholder
and Certificate Owner confirms its understanding that the Controlling Class
Representative may take actions that favor the interests of one or more
Classes over other Classes and that the Controlling Class Representative may
have interests that conflict with those of the Certificateholders of some
Classes; and, absent gross negligence, willful misconduct or reckless
disregard on the part of the Controlling Class Representative in the
performance of its obligations and duties under the Pooling Agreement or a
breach on the part of the Controlling Class Representative of any of its
representations, warranties or covenants set forth in the Pooling Agreement
(which breach has a material adverse effect on the Trust), each
Certificateholder and Certificate Owner agrees to take no action against the
Controlling Class Representative.
Sale of Defaulted Mortgage Loans
The Pooling Agreement grants to the Servicer, the Special Servicer
and any holder of Certificates evidencing a majority interest in the
Controlling Class a right to purchase from the Trust certain defaulted
Mortgage Loans in the priority described below. If the Special Servicer has
determined, in its reasonable, good faith judgment, that any defaulted
Mortgage Loan will become subject to foreclosure proceedings and that the sale
of such Mortgage Loan under the circumstances described below is in accordance
with the Servicing Standard, the Special Servicer will be required to promptly
so notify in writing the Trustee and the Servicer, and the Trustee will be
required, within five days after receipt of such notice, to notify any holder
of Certificates evidencing a majority interest in the Controlling Class. Such
Certificateholder may at its option purchase from the Trust, at a cash price
equal to the applicable Purchase Price, any such defaulted Mortgage Loan. If
such Certificateholder has not purchased such defaulted Mortgage Loan within
30 days of its having received notice in respect thereof, either the Special
Servicer or the Servicer may at its
S-114
<PAGE>
option purchase such defaulted Mortgage Loan from the Trust at a cash
price equal to the applicable Purchase Price. The Special Servicer may offer to
sell any such defaulted Mortgage Loan not otherwise purchased as described in
the two preceding sentences, if and when the Special Servicer determines,
consistent with the Servicing Standard, that such a sale would be in the best
economic interests of the Certificateholders (as a collective whole). Such offer
will be required to be made in a commercially reasonable manner for a period of
not less than ten days. Subject to the discussion in the next paragraph, and
further subject to any rights that the Controlling Class Representative may have
to object if the winning bid is not at least equal to the applicable Purchase
Price, the Special Servicer will be required to accept the highest cash bid
received from any person that constitutes a "fair price" (determined in
accordance with the Pooling Agreement) for such Mortgage Loan. See "--The
Controlling Class Representative--Certain Rights and Powers" above.
Notwithstanding any of the foregoing, the Special Servicer will not
be obligated to accept the highest cash bid if the Special Servicer
determines, in accordance with the Servicing Standard, that rejection of such
bid would be in the best interests of the Certificateholders (as a collective
whole); and, subject to any rights that the Controlling Class Representative
may have to object if the winning bid is not at least equal to the applicable
Purchase Price, the Special Servicer may accept a lower cash bid (from any
person or entity other than itself or an affiliate) if it determines, in
accordance with the Servicing Standard, that acceptance of such bid would be
in the best interests of the Certificateholders (as a collective whole) (for
example, if the prospective buyer making the lower bid is more likely to
perform its obligations or the terms (other than the price) offered by the
prospective buyer making the lower bid are more favorable).
Neither the Trustee, in its individual capacity, nor any of its
affiliates may bid for or purchase any defaulted Mortgage Loan or any REO
Property.
In connection with the sale of any defaulted Mortgage Loan, the
Special Servicer may charge prospective bidders, and may retain, fees that
approximate the Special Servicer's actual costs in the preparation and
delivery of information pertaining to such sales or evaluating bids without
obligation to deposit such amounts into the Certificate Account.
If a defaulted Mortgage Loan is neither sold as described above in
this "--Sale of Defaulted Mortgage Loans" section nor modified as contemplated
under "--Modifications, Waivers, Amendments and Consents", the Special
Servicer is to proceed with respect thereto as described under "Description of
the Pooling Agreements--Realization Upon Defaulted Mortgage Loans" in the
Prospectus.
Replacement of the Special Servicer
The Pooling Agreement will permit the holder (or holders) of the
majority of the Voting Rights allocated to the Controlling Class to terminate
an existing Special Servicer and to appoint a successor thereto. Any such
appointment of a successor Special Servicer will be subject to, among other
things, (i) written confirmation from each of the Rating Agencies that the
appointment will not
S-115
<PAGE>
result in a qualification, downgrade or withdrawal of any of the
ratings then assigned thereby to any Class of Certificates, and (ii)
the written agreement of the proposed Special Servicer to be bound by the
terms and conditions of the Pooling Agreement, together with an opinion of
counsel regarding, among other things, the enforceability of the Pooling
Agreement against the proposed Special Servicer. Subject to the foregoing, any
Certificateholder or affiliate thereof may be appointed as Special Servicer.
If the termination of an existing Special Servicer was without cause, the
costs and expenses of any related transfer of servicing duties are to be paid
by the successor Special Servicer or the holders of the Controlling Class that
voted to remove the terminated Special Servicer, as such parties may agree.
Due-On-Sale and Due-On-Encumbrance Provisions
Each of the Mortgage Loans generally contains a due-on-sale clause
that, subject to a one-time (or, in some cases, a multiple-time) right to
transfer in accordance with the requirements of the related Mortgage Loan
documents, 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. Each of the Mortgage Loans also generally contains a
due-on-encumbrance clause that, subject to certain limited exceptions,
entitles the lender to accelerate the maturity of the Mortgage Loan upon the
creation of any other lien or encumbrance upon the Mortgaged Property effected
without the lender's consent. See, however, "Risk Factors--Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans--Limitations
on Enforceability of Due-on-Sale and Debt-Acceleration Clauses" and "Certain
Legal Aspects of Mortgage Loans--Due-on- Sale and Due-on-Encumbrance
Provisions" in the Prospectus. The Servicer (with respect to Mortgage Loans
other than Specially Serviced Mortgage Loans) and the Special Servicer (with
respect to Specially Serviced Mortgage Loans), on behalf of the Trustee as the
mortgagee of record, will be required to evaluate any right to transfer and
enforce the restrictions contained in the related Mortgage on transfers or
further encumbrances of the related Mortgaged Property and on transfers of
interests in the related Mortgagor, unless the Servicer or the Special
Servicer, as appropriate, has determined, in its reasonable, good faith
judgment, that waiver of such restrictions would be in accordance with the
Servicing Standard; provided that neither the Servicer nor the Special
Servicer may waive any right it has, or grant any consent that it is otherwise
entitled to withhold, under any related "due-on-encumbrance" clause (or, if it
involves any Mortgage Loan or Cross- Collateralized Group representing 5% or
more of the Initial Pool Balance, under any related "due-on-sale" clause)
until it has received written confirmation from each Rating Agency that such
action would not result in the qualification, downgrade or withdrawal of the
rating then assigned by such Rating Agency to any Class of Certificates; and
provided, further that the Servicer may not waive any right it has, or grant any
consent that it is otherwise entitled to withhold, under any related
"due-on-encumbrance" or "due-on-sale" clause without the consent of the Special
Servicer (which consent (i) is not to be unreasonably withheld by the Special
Servicer, (ii) is to be withheld or granted by the Special Servicer in
accordance with the Servicing Standard and (iii) shall be deemed to have been
granted if not expressly denied within 10 business days of the Special
Servicer's receipt from the Servicer of all information reasonably requested
thereby in order to make an informed
S-116
<PAGE>
decision). Notwithstanding the foregoing, neither the Servicer nor the Special
Servicer may (to the extent it is within the control thereof to prohibit such
event) consent to the transfer of any Mortgaged Property which secured a Cross-
Collateralized Group unless all of the Mortgaged Properties securing such
Cross-Collateralized Group are transferred simultaneously by the respective
Mortgagor.
Inspections; Collection of Operating Information
The Special Servicer will be required to inspect or cause an
inspection of the related Mortgaged Property as soon as practicable after any
Mortgage Loan becomes a Specially Serviced Mortgage Loan. In addition,
beginning in 1999, the Servicer will be required to inspect or cause an
inspection of each Mortgaged Property at least once per calendar year (or, in
the case of Mortgage Loans with Stated Principal Balances of, in each case,
under $2,000,000, once every two years) if the Special Servicer has not
already done so in that period as described in the preceding sentence. The
Servicer and Special Servicer will each be required to prepare a written
report of each such inspection performed by it that generally describes the
condition of the Mortgaged Property and that specifies (i) any sale, transfer
or abandonment of the property or (ii) any change in the property's condition,
occupancy or value that the Servicer or the Special Servicer, as the case may
be, considers material in its reasonable, good faith judgment. The reasonable
costs of travel incurred by the Special Servicer in connection with any
property inspections that are required to be performed by it will constitute
reimbursable Servicing Advances.
The Special Servicer, in the case of any Specially Serviced Mortgage
Loans, and the Servicer, in the case of all other Mortgage Loans, is also
required to use reasonable efforts to collect from the related Mortgagor and
review the annual operating statements, budgets and rent rolls of the related
Mortgaged Property, and the financial statements of such Mortgagor, and the
Special Servicer is required to cause annual operating statements, budgets and
rent rolls to be prepared for each REO Property. However, there can be no
assurance that any operating statements required to be delivered will in fact
be delivered, nor is the Servicer or Special Servicer likely to have any
practical means of compelling such delivery.
DESCRIPTION OF THE CERTIFICATES
General
The Depositor is forming a trust (the "Trust") for the purpose of
issuing its Series 1998-CF1 Commercial Mortgage Pass-Through Certificates (the
"Certificates"). The Trust will be formed, and the Certificates will be
issued, on or about March 2, 1998 (the "Closing Date") pursuant to a Pooling
and Servicing Agreement dated as of the Cut-off Date (the "Pooling Agreement")
among the Depositor, the Servicer, the Special Servicer, the REMIC
Administrator and the Trustee. The Certificates will represent in the
aggregate the entire beneficial ownership interest in the Trust, the assets of
which (such assets, collectively, the "Trust Fund") will consist primarily of:
(i) the Mortgage Loans and all payments and other collections in respect of
the Mortgage Loans
S-117
<PAGE>
received or due after the Cut-off Date (exclusive of scheduled payments of
principal and interest due on or before the Cut-off Date or, in the case of a
Replacement Mortgage Loan, on or before the related date of substitution); (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 incidental to the representations and warranties made by
the Originators (other than GMAC-CMC) as described under "Description of the
Mortgage Pool--Representations and Warranties" and "--Cures, Repurchases and
Substitutions" herein.
The Certificates will consist of 17 classes (each, a "Class") to be
designated as: (i) the Class CP and Class S Certificates (collectively, the
"Interest Only Certificates"); (ii) the Class A-1A Certificates, the Class
A-1B Certificates, the Class A-2 Certificates and the Class A-3 Certificates
(collectively, the "Class A Certificates"); (iii) the Class B-1 Certificates,
the Class B-2 Certificates, the Class B-3 Certificates, the Class B-4
Certificates, the Class B-5 Certificates, the Class B-6 Certificates and the
Class B-7 Certificates (collectively, the "Class B Certificates"); (iv) the
Class C Certificates (collectively with the Class CP, Class S, Class A and
Class B Certificates, the "REMIC Regular Certificates"); and (v) the Class R-I
Certificates, the Class R-II Certificates and the Class R-III Certificates
(collectively, the "REMIC Residual Certificates"). The Interest Only
Certificates, the Class A Certificates, the Class B-1 Certificates and the
Class B-2 Certificates (collectively, the "Offered Certificates") are the only
securities offered hereby.
The Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class C,
Class R-I, Class R-II and Class R-III Certificates (collectively, the "Private
Certificates") will not be registered under the Securities Act of 1933, as
amended (the "Securities Act") and are not offered hereby. Accordingly, to the
extent this Prospectus Supplement contains information regarding the terms of
the Private Certificates, such information is provided because of its
potential relevance to a prospective purchaser of an Offered Certificate.
Registration and Denominations
The Class A-1A and Class A-1B Certificates will be issued in
denominations of not less than $10,000 initial principal balance (initial
"Certificate Principal Balance") and in any whole dollar denomination in
excess thereof. The Interest Only Certificates will be issued in denominations
of not less than $10,000 initial notional amount (initial "Certificate
Notional Amount") and in any whole dollar denomination in excess thereof. The
remaining Offered Certificates will be issued in denominations of not less
than $100,000 initial Certificate Principal Balance and in any whole dollar
denomination in excess thereof.
Each Class of Offered Certificates will initially be issued in
book-entry form through the facilities of The Depositary Trust Company ("DTC")
and, accordingly, will constitute Book-Entry Certificates within the meaning
of the Prospectus. In connection therewith, each Class of Offered Certificates
will
S-118
<PAGE>
initially be represented by one or more fully registered physical
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 a Book Entry Certificate (each, a "Certificate Owner") will be entitled to
receive a fully registered physical certificate (a "Definitive Certificate")
representing its interest in such Certificate, except under the limited
circumstances described under "Description of the Certificates--Book-Entry
Registration and Definitive Certificates" in the Prospectus. Unless and until
Definitive Certificates are issued in respect of the Offered Certificates,
beneficial ownership interests in each such Class of Certificates will be
maintained and transferred on the book-entry records of DTC and its
participating organizations (the "DTC Participants"), and all references to
actions by holders of each such Class of Certificates will refer to actions
taken by DTC upon instructions received from the related Certificate Owners
through the DTC Participants in accordance with DTC procedures, and all
references herein to payments, notices, reports and statements to the holders
of each such Class of 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 its 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. See "Description of
the Certificates--Book-Entry Registration and Definitive Certificates" and
"Risk Factors--Book-Entry Registration" in the Prospectus.
The Trustee will initially serve as registrar (in such capacity, the
"Certificate Registrar") for purposes of recording and otherwise providing for
the registration of the Offered Certificates and, if and to the extent
Definitive Certificates are issued in respect thereof, of transfers and
exchanges of the Offered Certificates.
Class Principal Balances and Class Notional Amounts
Only the Class A, Class B and Class C Certificates (collectively, the
"Sequential Pay Certificates") will have Certificate Principal Balances. The
Certificate Principal Balance of any Sequential Pay Certificate, as of any
date of determination, will equal the product of (i) the initial Certificate
Principal Balance of such Certificate as of the Closing Date, as specified on
the face thereof, multiplied by (ii) a fraction, the numerator of which is the
Class Principal Balance of the related Class then outstanding, and the
denominator of which is the initial Class Principal Balance of the related
Class as of the Closing Date.
The "Class Principal Balance" of any Class of Sequential Pay
Certificates is the aggregate principal balance thereof outstanding from time
to time and represents the maximum amount that the holders thereof are
entitled to receive (subject to available funds and the payment priorities
described herein) as distributions allocable to principal from the cash flow
on the Mortgage Loans and the other assets constituting the Trust Fund. The
Class Principal Balance of each Class of Sequential Pay Certificates will be
reduced on each Distribution Date by: (i) any distributions of principal
actually made on such Class of Certificates on such Distribution Date; and
(ii) any Realized Losses and
S-119
<PAGE>
Additional Trust Fund Expenses allocated to such Class of Certificates on such
Distribution Date. See "--Distributions" and "--Subordination; Allocation of
Realized Losses and Certain Expenses" herein.
Upon initial issuance, the respective Classes of Sequential Pay
Certificates will have Class Principal Balances set forth below (in each case,
subject to a variance of plus or minus 5%):
Approximate
Initial Class Percentage of
Class Principal Balance Initial Pool Balance
- - ----- ----------------- --------------------
Class A-1A...................... $125,000,000 14.90%
Class A-1B...................... $466,300,000 55.59%
Class A-2....................... $50,400,000 6.01%
Class A-3....................... $50,300,000 6.00%
Class B-1....................... $41,900,000 5.00%
Class B-2....................... $14,700,000 1.75%
Class B-3....................... $10,000,000 1.19%
Class B-4....................... $27,100,000 3.23%
Class B-5....................... $15,000,000 1.79%
Class B-6....................... $15,000,000 1.79%
Class B-7....................... $6,300,000 0.75%
Class C......................... $16,800,140 2.00%
The Class CP and Class S Certificates will not have Certificate
Principal Balances or entitle the respective holders thereof to distributions
of principal. However, each such Certificate will accrue interest as described
herein on its Certificate Notional Amount. The Certificate Notional Amount of
any Interest Only Certificate, as of any date of determination, will equal the
product of (i) the initial Certificate Notional Amount of such Certificate as
of the Closing Date, as specified on the face thereof, multiplied by (ii) a
fraction, the numerator of which is the Class Notional Amount of the related
Class then outstanding, and the denominator of which is the initial Class
Notional Amount of the related Class as of the Closing Date.
The "Class Notional Amount" of each Class of Interest Only
Certificates is the aggregate notional amount thereof outstanding from time to
time, used for purposes of calculating Accrued Certificate Interest in respect
of such Class of Certificates. The Class Notional Amount of the Class S
Certificates will equal the aggregate of the Class Principal Balances of the
respective Classes of Sequential Pay Certificates outstanding from time to
time, and the Class Notional Amount of the Class CP Certificates will equal
the sum of (a) the aggregate of the Class Principal Balances of the Class A-2,
Class A-3, Class B-1 and Class B-2 Certificates outstanding from time to time
and (b) the lesser of (i) the Class Principal Balance of the Class A-1B
Certificates outstanding from time to time and (ii) $325,000,000; provided
that Accrued Certificate Interest in respect of the Class CP Certificates will
in no event accrue beyond the end of the Interest Accrual Period that occurs
during March 2005.
S-120
<PAGE>
Upon initial issuance, the respective Classes of Interest Only
Certificates will have the Class Notional Amounts set forth below (in each
case, subject to a variance of plus or minus 5%):
Initial Class
Class Notional Amount
- - ----- ---------------
Class CP....................... $482,300,000
Class S........................ $838,800,140
The Class Notional Amounts of the Class CP and Class S Certificates
will, in each such case, be deemed to consist of components (each, a
"Component"). Each full Class Principal Balance of a Class of Sequential Pay
Certificates (other than the Class A-1B Certificates) that is part of either
such Class Notional Amount will constitute a separate Component thereof (such
Component to have the same alphabetical and/or numerical designation as the
alphabetical and/or numerical Class designation for such Class of Sequential
Pay Certificates (e.g., the Class Principal Balance of the Class A-2
Certificates outstanding from time to time will constitute Component A-2 of
each of the Class Notional Amount of the Class CP Certificates and the Class
Notional Amount of the Class S Certificates)). The portion of the Class
Principal Balance of the Class A-1B Certificates outstanding from time to time
that is equal to the lesser of (i) the entire amount of such Class Principal
Balance outstanding from time to time and (ii) $325,000,000, will constitute
another Component (such Component being herein designated "Component A-1B2")
of each of the Class Notional Amount of the Class CP Certificates and the
Class Notional Amount of the Class S Certificates. The remaining portion of
the Class Principal Balance of the Class A-1B Certificates outstanding from
time to time will constitute the last Component (such Component being herein
designated as "Component A-1B1") of the Class Notional Amount of the Class S
Certificates. Accordingly, the Class Notional Amount of the Class CP
Certificates will initially consist of five Components, and the Class Notional
Amount of the Class S Certificates will initially consist of thirteen
Components.
The REMIC Residual Certificates will not have Certificate Principal
Balances or Certificate Notional Amounts.
Accrual of Interest
The respective Classes of REMIC Regular Certificates will bear
interest (herein referred to as "Accrued Certificate Interest"). With respect
to each Class of REMIC Regular Certificates, such interest will commence
accruing as of the Cut-off Date and, during each Interest Accrual Period, will
accrue at the applicable Pass-Through Rate on the Class Principal Balance or,
in the case of each Class of Interest Only Certificates, the Class Notional
Amount of such Class of Certificates outstanding immediately prior to the
related Distribution Date; provided that Accrued Certificate Interest in
respect of the Class CP Certificates shall in no event accrue beyond the end
of the Interest Accrual Period that occurs during March 2005. Accrued
Certificate Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
S-121
<PAGE>
The portion of the Accrued Certificate Interest in respect of any
Class of REMIC Regular Certificates that is distributable thereon, subject to
available funds, is herein referred to as "Distributable Certificate
Interest". The Distributable Certificate Interest in respect of any Class of
REMIC Regular Certificates for any Distribution Date will equal the Accrued
Certificate Interest in respect of such Class of REMIC Regular Certificates
for the related Interest Accrual Period, reduced (to not less than zero) by
the product of (a) the Net Aggregate Prepayment Interest Shortfall (as defined
herein), if any, for such Distribution Date, multiplied by (b) a fraction
(expressed as a percentage), the numerator of which is the Accrued Certificate
Interest in respect of such Class of REMIC Regular Certificates for the
related Interest Accrual Period, and the denominator of which is the aggregate
Accrued Certificate Interest in respect of all the Classes of REMIC Regular
Certificates for the related Interest Accrual Period.
The REMIC Residual Certificates will not bear interest.
The "Interest Accrual Period" with respect to any Distribution Date
will be the calendar month immediately preceding the month in which such
Distribution Date occurs.
Pass-Through Rates
The Pass-Through Rates applicable to the respective Classes of
Sequential Pay Certificates for the initial Interest Accrual Period will equal
the per annum rates set forth below:
Class Pass-Through Rate
- - ----- -----------------
Class A-1A................................... 6.14%
Class A-1B................................... 6.41%
Class A-2.................................... 6.59%
Class A-3.................................... 6.70%
Class B-1.................................... 7.06%
Class B-2.................................... 7.33%
Class B-3.................................... 7.60%
Class B-4.................................... 7.60%
Class B-5.................................... 6.41%
Class B-6.................................... 6.41%
Class B-7.................................... 6.41%
Class C...................................... 6.41%
The respective Pass-Through Rates applicable to the Class A-1A, Class
A-1B, Class A-2, Class A-3, Class B-1, Class B-2, Class B-3 and Class B-4
Certificates is subject to change and, in the case of each such Class of
Certificates, for each Interest Accrual Period subsequent to the initial
Interest Accrual Period, will equal the lesser of (i) the per annum rate set
forth above with respect to such Class of Certificates and (ii) the Weighted
Average Net Mortgage Rate for such Interest Accrual Period. The respective
Pass-Through Rates applicable to the Class B-5, Class B-6, Class B-7 and Class
C Certificates
S-122
<PAGE>
will, in the case of each such Class of Certificates, remain fixed at the per
annum rate specified above with respect to such Class of Certificates.
The Pass-Through Rates applicable to the Class CP and Class S
Certificates for the initial Interest Accrual Period will equal approximately
0.9064% and 0.7181% per annum, respectively.
The Pass-Through Rate for the Class CP Certificates will be variable
and, for each Interest Accrual Period subsequent to the initial Interest
Accrual Period, will equal the weighted average of the Class CP Strip Rates at
which interest accrues on the respective Components of the Class Notional
Amount of the Class CP Certificates during such Interest Accrual Period
(weighted on the basis of the relative sizes of such Components immediately
prior to the related Distribution Date). The "Class CP Strip Rate" in respect
of any Component of the Class Notional Amount of the Class CP Certificates for
any Interest Accrual Period that occurs during the period from the Cut-off
Date through the end of the Interest Accrual Period that occurs during March
2005, will equal the lesser of (i) the Maximum Class CP Strip Rate (as
specified below) in respect of such Component for such Interest Accrual Period
and (ii) the excess, if any, of the Weighted Average Net Mortgage Rate for
such Interest Accrual Period, over the Pass-Through Rate then applicable to
the Class of Sequential Pay Certificates whose Class Principal Balance, in
whole or in part, constitutes such Component. The "Class CP Strip Rate" in
respect of each Component of the Class Notional Amount of the Class CP
Certificates for each Interest Accrual Period that occurs after the end of
March 2005, will be 0% per annum.
Set forth below are the "Maximum CP Strip Rates" in respect of the
respective Components of the Class Notional Amount of the Class CP
Certificates for each Interest Accrual Period that occurs during the period
from the Cut-off Date through the end of March 2005:
Component Maximum CP Strip Rate
--------- ---------------------
A-1B2 1.04%
A-2 0.86%
A-3 0.75%
B-1 0.39%
B-2 0.12%
The Pass-Through Rate applicable to the Class S Certificates will
also be variable and, for each Interest Accrual Period subsequent to the
initial Interest Accrual Period, will equal the weighted average of the Class
S Strip Rates at which interest accrues on the respective Components of the
Class Notional Amount of the Class S Certificates during such Interest Accrual
Period (weighted on the basis of the relative sizes of such Components
immediately prior to the related Distribution Date). The "Class S Strip Rate"
in respect of any Component of the Class Notional Amount of the Class S
Certificates for any Interest Accrual Period will equal the excess, if any, of
(i) the Weighted Average Net Mortgage Rate for such Interest Accrual Period,
over (ii) the Pass-Through Rate then applicable to the Class of Sequential Pay
Certificates whose Class Principal Balance, in whole or in part, constitutes
such Component, plus (if such Interest Accrual Period
S-123
<PAGE>
occurs during or prior to March 2005) the Class CP Strip Rate in respect of the
corresponding Component of the Class Notional Amount of the Class CP
Certificates for such Interest Accrual Period.
The REMIC Residual Certificates will not bear interest and will not
have Pass-Through Rates.
The "Weighted Average Net Mortgage Rate" for any Interest Accrual
Period will equal the weighted average of the Net Mortgage Rates for the
Mortgage Loans (weighted on the basis of their respective Stated Principal
Balances (as defined herein) outstanding immediately following the
Distribution Date during such Interest Accrual Period or, in the case of the
initial Interest Accrual Period, weighted on the basis of their respective
Cut-off Date Balances).
The "Net Mortgage Rate" for any Mortgage Loan will, in general, equal
(i) the related Mortgage Rate in effect as of the Closing Date (without regard
to any modification, waiver or amendment of the terms of such Mortgage Loan
subsequent to the Closing Date), minus (ii) 10 basis points; provided that,
for purposes of calculating Pass-Through Rates on the Offered Certificates
from time to time, in the case of each Non-30/360 Mortgage Loan, the Mortgage
Rate referenced in clause (i) above will be adjusted from time to time to a
per annum rate that would produce an equivalent amount of interest for each
applicable accrual period on the basis of a 360-day year consisting of twelve
30-day months.
The "Stated Principal Balance" of each Mortgage Loan will generally
equal the Cut-off Date Balance thereof (or, in the case of a Replacement
Mortgage Loan, the unpaid principal balance thereof as of the related date of
substitution, after application of all payments of principal due thereon on or
before such date, whether or not received), permanently reduced on each
subsequent Distribution Date (to not less than zero) by (i) that portion, if
any, of the Principal Distribution Amount for such Distribution Date
attributable to such Mortgage Loan, and (ii) the principal portion of any
Realized Loss incurred in respect of such Mortgage Loan during the related
Collection Period.
The "Collection Period" with respect to any Distribution Date will be
the period commencing immediately following the Determination Date in the
calendar month immediately preceding the month in which such Distribution Date
occurs (or, in the case of the initial Distribution Date, commencing
immediately following the Closing Date) and ending on and including the
Determination Date in the month in which such Distribution Date occurs.
The "Determination Date" with respect to any Distribution Date will
be the earlier of (i) the 10th day of the month in which such Distribution
Date occurs or, if such 10th day is not a business day, the immediately
preceding business day and (ii) the fifth business day preceding such
Distribution Date.
Distributions
General. Distributions on the Certificates will be made by or on
behalf of the Trustee, to the extent of available funds, on the 15th day of
each month or, if any such 15th day is not a business
S-124
<PAGE>
day, then on the next succeeding business day, commencing in April 1998 (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 (each, a
"Record Date"). As to each such person, such distributions will be made by wire
transfer in immediately available funds to the account specified by the
Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder has provided the Trustee in writing with
wiring instructions no less than five business days prior to the related Record
Date, or otherwise by check mailed to such Certificateholder. Until Definitive
Certificates are issued in respect thereof, Cede & Co. will be the registered
holder of the Book-Entry Certificates. See "--Registration and Denominations"
above. The final distribution on any Certificate (determined, in the case of a
Sequential Pay Certificate, without regard to any possible future reimbursement
of any Realized Loss or Additional Trust Fund Expense previously deemed
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. Any distribution that is to be made with
respect to a Sequential Pay Certificate in reimbursement of a Realized Loss or
Additional Trust Fund Expense previously allocated thereto, which reimbursement
is to occur after the date on which such Certificate is surrendered as
contemplated by the preceding sentence (the likelihood of any such distribution
being remote), will be made by check mailed to the Certificateholder that
surrendered such Certificate. All distributions made with respect to a Class of
Certificates will be allocated pro rata among the outstanding Certificates of
such Class based on their respective Percentage Interests in such Class. The
"Percentage Interest" in the related Class evidenced by any Offered Certificate
will be a fraction, expressed as a percentage, the numerator of which is the
initial Certificate Principal Balance or Certificate Notional Amount, as the
case may be, of such Certificate on the Closing Date as set forth on the face
thereof, and the denominator of which is the initial Class Principal Balance or
Class Notional Amount, as the case may be, of the related Class on the Closing
Date.
The Available Distribution Amount. With respect to any Distribution
Date, distributions of interest on and principal of the Certificates will be
made from the Available Distribution Amount for such date. The "Available
Distribution Amount" for any Distribution Date will, in general, equal (a) all
amounts on deposit in the Certificate Account (see "Description of the Pooling
Agreements--Certificate Account" in the Prospectus) as of the close of
business on the related Determination Date, exclusive of any portion thereof
that represents one or more of the following:
(i) Monthly Payments collected but due on a Due Date
subsequent to the related Collection Period;
(ii) Prepayment Premiums and Yield Maintenance Premiums
(which are distributable to the holders of the REMIC Regular
Certificates separate from the Available Distribution Amount);
S-125
<PAGE>
(iii) amounts that are payable or reimbursable to any person
other than the Certificateholders (including amounts payable to the
Servicer, the Special Servicer, any sub-servicers or the Trustee as
compensation (including Trustee Fees, Servicing Fees, Special
Servicing Fees, Workout Fees, Liquidation Fees, Default Interest and
late payment charges (to the extent not otherwise applied to cover
interest on Advances), and assumption fees, assumption application
fees, modification fees and extension fees), amounts payable in
reimbursement of outstanding Advances, together with interest
thereon, and amounts payable in respect of other Additional Trust
Fund Expenses); and
(iv) amounts deposited in the Certificate Account in
error; plus
(b) to the extent not already included in clause (a), any P&I Advances and/or
Compensating Interest Payment made in respect of such Distribution Date.
Application of the Available Distribution Amount. On each
Distribution Date, the Available Distribution Amount for such date will be
distributed to the Certificateholders for the following purposes and in the
following order of priority:
(i) to make distributions of interest to the holders of the
Class CP, Class S, Class A-1A and Class A-1B Certificates, pro rata
based on entitlement, up to 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;
(ii) to make distributions of principal to the holders of
the Class A-1A and Class A-1B Certificates, allocable as between such
Classes of Certificateholders as described herein, up to an amount
equal to the lesser of (a) the aggregate of the then outstanding
Class Principal Balances of the Class A-1A and Class A-1B
Certificates and (b) the Principal Distribution Amount (as defined
below) for such Distribution Date;
(iii) to reimburse the holders of the Class A-1A and Class
A-1B Certificates, pro rata based on entitlement, up to an amount
equal to all Realized Losses and Additional Trust Fund Expenses (each
as defined herein), if any, previously allocated to each such Class
of Certificates and for which no reimbursement has previously been
received;
(iv) to make distributions of interest to the holders of the
Class A-2 Certificates, up to 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;
(v) after the Class Principal Balances of the Class A-1A and
Class A-1B Certificates have been reduced to zero, to make
distributions of principal to the holders of the Class A-2
Certificates, up to an amount
S-126
<PAGE>
equal to the lesser of (a) the then outstanding Class Principal Balance
of the Class A-2 Certificates and (b) the excess, if any, of the
Principal Distribution Amount for such Distribution Date over the
amounts, if any, distributed on such Distribution Date pursuant to
clause (ii) above;
(vi) to reimburse the holders of the Class A-2 Certificates,
up to an amount equal to 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;
(vii) to make distributions of interest to the holders of
the Class A-3 Certificates, up to 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;
(viii) after the Class Principal Balances of the Class A-1A,
Class A-1B and Class A-2 Certificates have been reduced to zero, to
make distributions of principal to the holders of the Class A-3
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Class Principal Balance of the Class A-3 Certificates and
(b) the excess, if any, of the Principal Distribution Amount for such
Distribution Date over the amounts, if any, distributed on such
Distribution Date pursuant to clauses (ii) and (v) above;
(ix) to reimburse the holders of the Class A-3 Certificates,
up to an amount equal to 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;
(x) to make distributions of interest to the holders of the
Class B-1 Certificates, up to 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;
(xi) after the Class Principal Balances of the Class A
Certificates have been reduced to zero, to make distributions of
principal to the holders of the Class B-1 Certificates, up to an
amount equal to the lesser of (a) the then outstanding Class
Principal Balance of the Class B-1 Certificates and (b) the excess,
if any, of the Principal Distribution Amount for such Distribution Date
over the amounts, if any, distributed on such Distribution Date
pursuant to clauses (ii), (v) and (viii) above;
(xii) to reimburse the holders of the Class B-1
Certificates, up to an amount equal to 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;
(xiii) to make distributions of interest to the holders of
the Class B-2 Certificates, up to an amount equal to all
Distributable
S-127
<PAGE>
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;
(xiv) after the Class Principal Balances of the Class A and
Class B-1 Certificates have been reduced to zero, to make
distributions of principal to the holders of the Class B-2
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Class Principal Balance of the Class B-2 Certificates and
(b) the excess, if any, of the Principal Distribution Amount for such
Distribution Date over the amounts, if any, distributed on such
Distribution Date pursuant to clauses (ii), (v), (viii) and (xi)
above;
(xv) to reimburse the holders of the Class B-2 Certificates,
up to an amount equal to 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;
(xvi) to make distributions of interest to the holders of
the Class B-3 Certificates, up to 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;
(xvii) after the Class Principal Balances of the Class A,
Class B-1 and Class B-2 Certificates have been reduced to zero, to
make distributions of principal to the holders of the Class B-3
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Class Principal Balance of the Class B-3 Certificates and
(b) the excess, if any, of the Principal Distribution Amount for such
Distribution Date over the amounts, if any, distributed on such
Distribution Date pursuant to clauses (ii), (v), (viii), (xi) and
(xiv) above;
(xviii) to reimburse the holders of the Class B-3
Certificates, up to an amount equal to 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;
(xix) to make distributions of interest to the holders of
the Class B-4 Certificates, up to 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;
(xx) after the Class Principal Balances of the Class A,
Class B-1, Class B-2 and Class B-3 Certificates have been reduced to
zero, to make distributions of principal to the holders of the Class
B-4 Certificates, up to an amount equal to the lesser of (a) the then
outstanding Class Principal Balance of the Class B-4 Certificates and
(b) the excess, if any, of the Principal Distribution Amount for such
Distribution Date over
S-128
<PAGE>
the amounts, if any, distributed on such Distribution Date pursuant to
clauses (ii), (v), (viii), (xi), (xiv) and (xvii) above;
(xxi) to reimburse the holders of the Class B-4
Certificates, up to an amount equal to 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;
(xxii) to make distributions of interest to the holders of
the Class B-5 Certificates, up to 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;
(xxiii) after the Class Principal Balances of the Class A,
Class B-1, Class B-2, Class B-3 and Class B-4 Certificates have been
reduced to zero, to make distributions of principal to the holders of
the Class B-5 Certificates, up to an amount equal to the lesser of
(a) the then outstanding Class Principal Balance of the Class B-5
Certificates and (b) the excess, if any, of the Principal
Distribution Amount for such Distribution Date over the amounts, if
any, distributed on such Distribution Date pursuant to clauses (ii),
(v), (viii), (xi), (xiv), (xvii) and (xx) above;
(xxiv) to reimburse the holders of the Class B-5
Certificates, up to an amount equal to 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;
(xxv) to make distributions of interest to the holders of
the Class B-6 Certificates, up to 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;
(xxvi) after the Class Principal Balances of the Class A,
Class B-1, Class B-2, Class B-3, Class B-4 and Class B-5 Certificates
have been reduced to zero, to make distributions of principal to the
holders of the Class B-6 Certificates, up to an amount equal to the
lesser of (a) the then outstanding Class Principal Balance of the
Class B-6 Certificates and (b) the excess, if any, of the Principal
Distribution Amount for such Distribution Date over the amounts, if
any, distributed on such Distribution Date pursuant to clauses (ii),
(v), (viii), (xi), (xiv), (xvii), (xx) and (xxiii) above;
(xxvii) to reimburse the holders of the Class B-6
Certificates, up to an amount equal to 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;
(xxviii) to make distributions of interest to the holders of
the Class B-7 Certificates, up to an amount equal to all
Distributable
S-129
<PAGE>
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;
(xxix) after the Class Principal Balances of the Class A,
Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6
Certificates have been reduced to zero, to make distributions of
principal to the holders of the Class B-7 Certificates, up to an
amount equal to the lesser of (a) the then outstanding Class
Principal Balance of the Class B-7 Certificates and (b) the excess,
if any, of the Principal Distribution Amount for such Distribution
Date over the amounts, if any, distributed on such Distribution Date
pursuant to clauses (ii), (v), (viii), (xi), (xiv), (xvii), (xx),
(xxiii) and (xxvi) above;
(xxx) to reimburse the holders of the Class B-7
Certificates, up to an amount equal to 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;
(xxxi) to make distributions of interest to the holders of
the Class C Certificates, up to 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;
(xxxii) after the Class Principal Balances of the Class A
and Class B Certificates have been reduced to zero, to make
distributions of principal to the holders of the Class C
Certificates, up to an amount equal to the lesser of (a) the then
outstanding Class Principal Balance of the Class C Certificates and
(b) the excess, if any, of the Principal Distribution Amount for such
Distribution Date over the amounts, if any, distributed on such
Distribution Date pursuant to clauses (ii), (v), (viii), (xi), (xiv),
(xvii), (xx), (xxiii), (xxvi) and (xxix) above;
(xxxiii) to reimburse the holders of the Class C
Certificates, up to an amount equal to 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
(xxxiv) to make distributions to the holders of the REMIC
Residual Certificates, up to an amount equal to the excess, if any,
of (a) the Available Distribution Amount for such Distribution Date,
over (b) the aggregate distributions made in respect of the REMIC
Regular Certificates on such Distribution Date pursuant to clauses
(i) through (xxxiii) above;
provided that, on the final Distribution Date in connection with a termination
of the Trust, the distributions of principal to be made pursuant to clauses
(ii), (v), (viii), (xi), (xiv), (xvii), (xx), (xxiii), (xxvi), (xxix) and
(xxxii) above shall, in each such case, subject to the then remaining portion
of the Available Distribution Amount for such date, be made to the holders of
the
S-130
<PAGE>
relevant Class or Classes of Sequential Pay Certificates otherwise
entitled to distributions of principal pursuant to such clause in an amount
equal to the entire then remaining Class Principal Balance (or, in the case of
clause (ii) above, if applicable, the entire aggregate of the then remaining
Class Principal Balances) of such Class or Classes of Certificates outstanding
immediately prior to such final Distribution Date.
On each Distribution Date prior to the earlier of (i) the Senior
Principal Distribution Cross-Over Date and (ii) the final Distribution Date in
connection with the termination of the Trust, all distributions of principal
on the Class A-1A and Class A-1B Certificates will be paid, first, to the
holders of the Class A-1A Certificates, until the Class Principal Balance of
such Class of Certificates is reduced to zero, and thereafter, to the holders
of the Class A-1B Certificates, until the Class Principal Balance of such
Class of Certificates is reduced to zero. On each Distribution Date coinciding
with and following the Senior Principal Distribution Cross-Over Date, and in
any event on the final Distribution Date in connection with the termination of
the Trust, distributions of principal on the Class A-1A and Class A-1B
Certificates will be paid to the holders of such two Classes of Certificates,
pro rata, in accordance with their respective Class Principal Balances
outstanding immediately prior to such Distribution Date, until the Class
Principal Balance of each such Class of Certificates is reduced to zero. The
"Senior Principal Distribution Cross-Over Date" will be the first Distribution
Date as of which the aggregate Class Principal Balance of the Class A-1A and
Class A-1B Certificates outstanding immediately prior thereto equals or
exceeds the sum of (a) the aggregate Stated Principal Balance of the Mortgage
Pool that will be outstanding immediately following such Distribution Date,
plus (b) the lesser of (i) the Principal Distribution Amount for such
Distribution Date and (ii) the portion of the Available Distribution Amount
for such Distribution Date that will remain after the distributions of
interest to be made on the Senior Certificates on such Distribution Date have
been so made.
The "Principal Distribution Amount" for any Distribution Date will,
in general, equal the aggregate (without duplication) of the following:
(a) all payments of principal (other than Principal
Prepayments) received on the Mortgage Loans during
the related Collection Period, in each case net of
any portion of the particular payment that
represents a late collection of principal for which
a P&I Advance was previously made for a prior
Distribution Date or that represents the principal
portion of a Monthly Payment due on or before the
Cut-off Date or on a Due Date subsequent to the
related Collection Period;
(b) the principal portions of all Monthly Payments due
in respect of the Mortgage Loans for their
respective Due Dates occurring during the related
Collection Period that were received prior to the
related Collection Period;
(c) all Principal Prepayments received on the Mortgage
Loans during the related Collection Period;
S-131
<PAGE>
(d) all other collections (including Liquidation
Proceeds, Condemnation Proceeds and Insurance
Proceeds (each as defined herein)) that were
received on or in respect of the Mortgage Loans
during the related Collection Period and that were
identified and applied by the Servicer as
recoveries of principal thereof, in each case net
of any portion of such collection that represents
a late collection of principal due on or before the
Cut-off Date or for which a P&I Advance was
previously made for a prior Distribution Date; and
(e) the principal portion of all P&I Advances made in
respect of the Mortgage Loans with respect to such
Distribution Date.
Distributions of Prepayment Premiums and Yield Maintenance Premiums.
If a Prepayment Premium is collected with respect to any Mortgage Loan during
any particular Collection Period and either (i) the Distribution Date
corresponding to such Collection Period occurs after the end of April 2005 or
(ii) the Class Notional Amount of the Class CP Certificates will not be
affected by the distributions of principal on the Distribution Date
corresponding to such Collection Period, then the entire amount of such
Prepayment Premium will be distributed as additional interest to the holders
of the Class S Certificates on the Distribution Date corresponding to such
Collection Period.
If a Prepayment Premium is collected with respect to any Mortgage
Loan during any particular Collection Period, the Distribution Date
corresponding to such Collection Period occurs during or prior to April 2005
and the Class Notional Amount of the Class CP Certificates will be affected by
the distributions of principal on the Distribution Date corresponding to such
Collection Period, then 25% of such Prepayment Premium will be distributed as
additional interest to the holders of the Class CP Certificates and 75% of
such Prepayment Premium will be distributed as additional interest to the
holders of the Class S Certificates, in any event on the Distribution Date
corresponding to such Collection Period.
If a Yield Maintenance Premium is collected with respect to any
Mortgage Loan during any particular Collection Period, then such Yield
Maintenance Premium will be distributed as additional interest on the
Distribution Date corresponding to such Collection Period as follows: The
holders of the Class (or Classes) of Sequential Pay Certificates then entitled
to distributions of principal on such Distribution Date will be entitled to an
aggregate amount (allocable among such Classes, if more than one, as described
below) equal to the product of (1) the amount of such Yield Maintenance
Premium, multiplied by (2) the lesser of (a) 25% and (b) a fraction (not
greater than one or less than zero), the numerator of which is equal to the
excess, if any, of the Pass-Through Rate applicable to such Class of
Sequential Pay Certificates (or, if two or more Classes are involved, the
Pass-Through Rate applicable to such of those Classes as has the most senior
right of payment and/or the earliest Assumed Final Distribution Date) for the
corresponding Interest Accrual Period, over the relevant Discount Rate, and
the denominator of which is equal to the excess, if any, of the Mortgage Rate
for the Mortgage Loan that prepaid over the relevant Discount Rate.
If there is more
S-132
<PAGE>
than one Class of Sequential Pay Certificates entitled to distributions of
principal on such Distribution Date, the aggregate amount described in the
preceding sentence will be allocated among such Classes on a pro rata basis in
accordance with the relative amounts of such distributions of principal. Any
portion of such Yield Maintenance Premium that may remain after such
distributions will be distributed as described above as if it were a Prepayment
Premium.
For purposes of the foregoing, the "Discount Rate" is the rate which,
when compounded monthly, is equivalent to the Treasury Rate when compounded
semi-annually (e.g., a 6% Treasury Rate would equate to a 5.9263% Discount
Rate). The "Treasury Rate" is the yield calculated by the linear interpolation
of the yields, as reported in Federal Reserve Statistical Release
H.15--Selected Interest Rates under the heading "U.S. government
securities/Treasury constant maturities" for the week ending prior to the date
of the relevant principal prepayment, of U.S. Treasury constant maturities
with a maturity date (one longer and one shorter) most nearly approximating
the maturity date of the prepaid Mortgage Loan. If Release H.15 is no longer
published, the Servicer will select a comparable publication to determine the
Treasury Rate.
Neither the Depositor nor the Underwriter makes any representation or
warranty as to the collectability of any Prepayment Premium or Yield
Maintenance Premium or the enforceability of any Mortgage Loan provision
requiring the payment of any such amount. Furthermore, Prepayment Premiums and
Yield Maintenance Premiums, even if collected and distributable on any Class
of Certificates as additional interest, may not be sufficient to fully
compensate the Certificateholders of such Class for any loss in yield
experienced by them in connection with the related prepayments of principal.
See "Risk Factors--Special Prepayment and Yield Considerations" herein.
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, for
purposes of, among other things, determining Pass-Through Rates of,
distributions on and allocations of Realized Losses and Additional Trust Fund
Expenses to the Certificates, as well as the amount of Servicing Fees, Special
Servicing Fees and Trustee Fees payable under the Pooling Agreement, be
treated as having remained outstanding until such REO Property is liquidated.
In connection therewith, operating revenues and other proceeds derived from
such REO Property (exclusive of related operating costs) will be "applied" by
the Servicer as principal, interest and other amounts "due" on such Mortgage
Loan; and (subject to the limitations set forth under "--P&I and Other
Advances" below), the Servicer (and, if necessary, the Trustee)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. In particular, references
to "Mortgage Loan" and "Mortgage Loans" in the definitions of "Principal
Distribution Amount" and "Weighted Average Net Mortgage Rate" are intended to
include any Mortgage Loan or Mortgage Loans as to which the related Mortgaged
Property has become an REO Property.
Subordination; Allocation of Realized Losses and Certain Expenses
S-133
<PAGE>
As and to the extent described herein, the Class A-2, Class A-3,
Class B, Class C, Class R-I, Class R-II and Class R-III Certificates
(collectively, the "Subordinate Certificates") will be subordinate to the
Class CP, Class S, Class A-1A and Class A-1B Certificates (collectively, the
"Senior Certificates"); the Class A-3, Class B, Class C, Class R-I, Class R-II
and Class R-III Certificates will be subordinate to the Class A-2
Certificates; the Class B, Class C, Class R-I, Class R-II and Class R-III
Certificates will be subordinate to the Class A-3 Certificates; the Class B-2,
Class B-3, Class B-4, Class B-5, Class B-6, Class B-7, Class C, Class R-I,
Class R-II and Class R-III Certificates will be subordinate to the Class B-1
Certificates; and the Class B-3, Class B-4, Class B-5, Class B-6, Class B-7,
Class C, Class R-I, Class R-II and Class R-III Certificates will be
subordinate to the Class B-2 Certificates. 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 the Class A-1A and Class A-1B Certificates
of principal in an amount equal to the entire respective Class Principal
Balances thereof. Similarly, but to decreasing degrees, this subordination is
also intended to enhance the likelihood of timely receipt by the holders of
the other Classes of Offered 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
Classes of Certificates of principal equal to the entire respective Class
Principal Balances thereof. This subordination will be accomplished by 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. No
other form of credit support will be available for the benefit of any Class of
Offered Certificateholders.
If, following the distributions to be made in respect of the
Certificates on any Distribution Date, the aggregate Stated Principal Balance
of the Mortgage Pool that will be outstanding immediately following such
Distribution Date is less than the then aggregate of the Class Principal
Balances of the respective Classes of Sequential Pay Certificates, the Class
Principal Balances of the Class C, Class B-7, Class B-6, Class B-5, Class B-4,
Class B-3, Class B-2, Class B-1, Class A-3 and Class A-2 Certificates will be
reduced, sequentially in that order, in the case of each such Class until such
deficit (or the related Class Principal Balance) is reduced to zero (whichever
occurs first). If any portion of such deficit remains at such time as the
Class Principal Balances of such Classes of Certificates are reduced to zero,
then the respective Class Principal Balances of the Class A-1A and Class A-1B
Certificates will be reduced, pro rata in accordance with the relative sizes
of the remaining Class Principal Balances of such Classes of Certificates,
until such deficit (or each such Class Principal Balance) is reduced to zero.
Any such deficit will, in general, be the result of Realized Losses incurred
in respect of the Mortgage Loans and/or Additional Trust Fund Expenses. The
foregoing reductions in the Class Principal Balances of the Sequential Pay
Certificates will constitute an allocation of any such Realized Losses and
Additional Trust Fund Expenses.
"Realized Losses" are losses to the Trust arising from the inability
of the Servicer and Special Servicer to collect all amounts due and owing
under any
S-134
<PAGE>
defaulted Mortgage Loan, including by reason of fraud or bankruptcy of the
related mortgagor or a casualty of any nature at the related Mortgaged Property,
to the extent not covered by insurance. The Realized Loss, if any, in respect of
a liquidated Mortgage Loan (or related REO Property) will generally equal the
excess, if any, of (a) the outstanding principal balance of such Mortgage Loan
as of the date of liquidation, together with all accrued and unpaid interest
thereon at the related Mortgage Rate through the Due Date in the Collection
Period of Liquidation (exclusive, however, of any portion of such accrued and
unpaid interest that constitutes Additional Interest), over (b) the aggregate
amount of Liquidation Proceeds, if any, recovered in connection with such
liquidation (net of any portion of such Liquidation Proceeds that is payable or
reimbursable in respect of related unpaid liquidation expenses and unreimbursed
Servicing Advances). If the Mortgage Rate on any Mortgage Loan is reduced or a
portion of the debt due under any 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 a bankruptcy or similar proceeding
involving the related mortgagor, the resulting reduction in interest (other than
Additional Interest) paid or the amount (other than Additional Interest) so
forgiven, as the case may be, also will be treated as a Realized Loss.
"Additional Trust Fund Expenses" are any expenses of the Trust Fund
not specifically included in the calculation of a "Realized Loss," that would
result in the REMIC Regular Certificateholders' receiving less than the full
amount of the principal and/or interest to which they are entitled on any
Distribution Date. Additional Trust Fund Expenses include, among other things:
(a) any interest paid to the Servicer, Special Servicer and/or Trustee in
respect of unreimbursed Advances (to the extent not paid out of late payment
charges and Default Interest actually collected on the related Mortgage Loan);
(b) all Special Servicing Fees, Workout Fees and Liquidation Fees payable to
the Special Servicer; (c) any of certain unanticipated, non-Mortgage Loan
specific expenses of the Trust Fund, including, but not limited to, (i)
certain reimbursements and indemnification to the Trustee and certain related
persons described under "Description of the Pooling Agreements--Certain
Matters Regarding the Trustee" in the Prospectus, (ii) certain reimbursements
and indemnification to the Depositor, the Servicer, the Special Servicer, the
REMIC Administrator and certain related persons described under "Description
of the Pooling Agreements--Certain Matters regarding the Master Servicer, the
Special Servicer, the REMIC Administrator, the Manager and the Depositor" in
the Prospectus, (iii) certain taxes payable from the assets of the Trust Fund
and described under "Certain Federal Income Tax Consequences--Possible Taxes
on Income from Foreclosure Property and Other Taxes" herein and "Certain
Federal Income Tax Consequences--REMICs--Prohibited Transactions Tax and Other
Taxes" in the Prospectus, (iv) the costs and expenses of any tax audits with
respect to the Trust and certain other tax-related expenses and (v) the cost
of various opinions of counsel required to be obtained in connection with the
servicing of the Mortgage Loans and administration of the Trust Fund; and (d)
any other expense of the Trust Fund not specifically included in the
calculation of "Realized Loss" for which there is no corresponding collection
from a Mortgagor.
P&I and Other Advances
S-135
<PAGE>
On or about each Distribution Date, the 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 Agreement, from funds held
in the Certificate Account that are not required to be distributed to
Certificateholders on such Distribution Date, in an amount that is generally
equal to the aggregate of all Monthly Payments (other than Balloon Payments)
and any Assumed Monthly Payments, net of related Servicing Fees and Workout
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 Mortgagor or otherwise collected
as of the close of business on the related Determination Date. Notwithstanding
the foregoing, if it is determined that an Appraisal Reduction Amount exists
with respect to any Required Appraisal Mortgage 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 interest portion of any
P&I Advance required to be made in respect of such Mortgage Loan will be
reduced (no reduction to be made in the principal portion, however) to equal
to the product of (i) the amount of the interest portion of such P&I Advance
that would otherwise be required to be made for such Distribution Date without
regard to this sentence, multiplied by (ii) a fraction (expressed as a
percentage), the numerator of which will equal the Stated Principal Balance of
such Mortgage Loan, net of such Appraisal Reduction Amount, and the
denominator of which will equal the Stated Principal Balance of such Mortgage
Loan. See "--Appraisal Reductions" below.
An "Assumed Monthly Payment" is an amount deemed due in respect of:
(i) any Balloon Mortgage Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its most recent
scheduled maturity date and as to which no arrangements have been agreed to
for collection of the delinquent amounts; or (ii) any Mortgage Loan as to
which the related Mortgaged Property has been acquired on behalf of the
Certificateholders through foreclosure, deed in lieu of foreclosure or
otherwise. The Assumed Monthly Payment deemed due each month on any such
Balloon Mortgage Loan delinquent as to its Balloon Payment, will equal the
Monthly Payment that would have been due thereon on the Due Date in such month
if the related Balloon Payment had not come due, but rather such Mortgage Loan
had continued to amortize in accordance with its amortization schedule, if
any, in effect immediately prior to maturity and had continued to accrue
interest (other than Additional Interest) in accordance with its terms in
effect immediately prior to maturity. The Assumed Monthly Payment deemed due
each month on any such Mortgage Loan as to which the related Mortgaged
Property has become an REO Property, will equal the Monthly Payment (or, in
the case of a Mortgage Loan delinquent in respect of its Balloon Payment as
described in the prior sentence, the Assumed Monthly Payment) due on the last
Due Date prior to the acquisition of such REO Property.
If the full amount of all P&I Advances, if any, required to be made
in respect of any Distribution Date is not deposited in the Distribution
Account, then the Trustee will be required to make the portion of such P&I
Advances that was required to be, but was not, made by the Servicer. See
"--The Trustee" below.
S-136
<PAGE>
The Servicer and the Trustee will each be entitled to recover any P&I
Advance made out of its own funds from any Related Proceeds collected in
respect of the Mortgage Loan as to which such P&I Advance was made; provided
that neither the Servicer nor the Trustee will be obligated to make any P&I
Advance that it determines, in its reasonable, good faith judgment, would, if
made, constitute a Nonrecoverable Advance, and the Servicer and the Trustee
will each be entitled to recover any P&I Advance made by it that it later
determines to be a Nonrecoverable Advance out of general funds on deposit in
the Certificate Account. With respect to any P&I Advance, the Trustee will be
entitled to conclusively rely on the non-recoverability determination made by
the Servicer.
The Servicer and the Trustee will each be entitled, with respect to
any Advance made thereby, and the Special Servicer will be entitled, with
respect to any Servicing Advance made thereby, to interest accrued on the
amount of such Advance for so long as it is outstanding 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. Such interest on any Advance will be payable to the
Servicer, the Special Servicer or the Trustee, as the case may be: (i) at any
time, out of Default Interest and late payment charges actually collected in
respect of the related Mortgage Loan; and (ii) if such Advance has been
reimbursed, out of any amounts then on deposit in the Certificate Account. To
the extent not offset by Default Interest and late payment charges collected
in respect of any defaulted Mortgage Loan, interest accrued on outstanding
Advances made in respect thereof will result in a reduction in amounts payable
on the Certificates.
In addition to the foregoing, the Trustee will be required to
advance, to the extent known to it, any amounts collected on or in respect of
the Mortgage Pool that the Servicer is required but fails to remit to the
Trustee by a specified time on or about the related Distribution Date. The
Trustee will be entitled to interest at the Reimbursement Rate accrued on the
amount of such advance for so long as it is outstanding.
Appraisal Reductions
Promptly following the earliest of (i) the date on which any Mortgage
Loan becomes a Modified Mortgage Loan (as defined below), (ii) the 60th day
(or, in the case of a Modified Mortgage Loan or a Mortgage Loan as to which
the related Mortgagor has been the subject of a bankruptcy or insolvency
proceeding since the Closing Date, the 30th day) after the occurrence of any
uncured delinquency in Monthly Payments with respect to any Mortgage Loan,
(iii) the date on which a receiver is appointed and continues in such capacity
in respect of the Mortgaged Property securing any Mortgage Loan and (iv) the
date on which the Mortgaged Property securing any Mortgage Loan becomes an REO
Property (each such Mortgage Loan, a "Required Appraisal Loan"), the Special
Servicer will be required to obtain an appraisal of the related Mortgaged
Property from an independent MAI-designated appraiser, unless such an
appraisal had previously been obtained within the prior twelve months. The
cost of such appraisal is to be covered by, and reimbursable as, a Servicing
Advance. As a result of any such appraisal, it may be determined that an
Appraisal Reduction Amount exists with respect to the
S-137
<PAGE>
related Required Appraisal Loan. The "Appraisal Reduction Amount" for
any Required Appraisal Loan will, in general, be an amount, determined as of the
Determination Date immediately succeeding the date on which the appraisal is
obtained (or, if determined based on an earlier appraisal, as of the
Determination Date immediately succeeding the earliest of the relevant dates
described in the first sentence of this paragraph), equal to the excess, if any,
of (a) the sum of (i) the Stated Principal Balance of such Required Appraisal
Loan, (ii) to the extent not previously advanced by the Servicer or the Trustee,
all unpaid interest on the Required Appraisal Loan at the related Mortgage Rate
through the most recent Due Date prior to such Determination Date (net of
related Servicing Fees and, if applicable, Additional Interest), (iii) all
accrued but unpaid Servicing Fees and Special Servicing Fees in respect of such
Required Appraisal Loan, (iv) all related unreimbursed Advances made by or on
behalf of the Servicer, the Special Servicer or the Trustee with respect to such
Required Appraisal Loan, together with interest accrued thereon at the
Reimbursement Rate, and (v) all currently due and unpaid real estate taxes and
assessments, insurance premiums, and, if applicable, ground rents in respect of
the related Mortgaged Property or REO Property, net of any escrow reserves held
by the Servicer or the Special Servicer with respect to any such item, over (b)
90% of the appraised value (as is) of the related Mortgaged Property or REO
Property as determined by the most recent relevant appraisal, net of any
mortgage liens that are prior to the lien of such Mortgage Loan. Notwithstanding
the foregoing, if an appraisal is not obtained from an independent
MAI-designated appraiser within 90 days following the earliest of the dates
described in clauses (i)-(iv) of the first sentence of this paragraph, then
until such appraisal is obtained the Appraisal Reduction Amount will equal 30%
of the Stated Principal Balance of the related Required Appraisal Loan. Upon
receipt of an appraisal from an independent MAI-designated appraiser, however,
the Appraisal Reduction Amount for such Required Appraisal Loan will be
recalculated in accordance with the second preceding sentence.
With respect to each Required Appraisal Loan (unless such Mortgage
Loan has become a Corrected Mortgage Loan and has remained current for twelve
consecutive Monthly Payments, and no other Servicing Transfer Event has
occurred with respect thereto during such twelve-month period, in which case
it will cease to be a Required Appraisal Loan), the Special Servicer is
required, within 30 days of each anniversary of such loan's becoming a
Required Appraisal Loan, to order an update of the prior appraisal (the cost
of which is to be covered by, and reimbursable as, a Servicing Advance). Based
upon such appraisal, the Special Servicer will be required to redetermine and
report to the Trustee the then applicable Appraisal Reduction Amount, if any,
with respect to such Required Appraisal Loan.
A "Modified Mortgage Loan" is any Mortgage Loan as to which any
Servicing Transfer Event has occurred and which has been modified by the
Special Servicer in a manner that: (A) affects the amount or timing of any
payment of principal or interest due thereon (other than, or in addition to,
bringing current Monthly Payments with respect to such Mortgage Loan); (B)
except as expressly contemplated by the related Mortgage, results in a release
of the lien of the Mortgage on any material portion of the related Mortgaged
Property without a corresponding Principal Prepayment in an amount not less
than the fair market
S-138
<PAGE>
value (as is) of the property to be released; or (C) in the reasonable, good
faith judgment of the Special Servicer, otherwise materially impairs the
security for such Mortgage Loan or reduces the likelihood of timely payment of
amounts due thereon.
Reports to Certificateholders; Certain Available Information
Trustee Reports. Based solely on information provided in monthly
reports prepared by the Servicer and the Special Servicer and delivered to the
Trustee, the Trustee will prepare and forward on each Distribution Date to
each Certificateholder a statement (the "Trustee Report") substantially in the
form of Exhibit B hereto, detailing the distributions on such Distribution
Date and the performance, both in the aggregate and individually to the extent
available, of the Mortgage Loans and Mortgaged Properties.
Until such time as Definitive Certificates are issued in respect of
the Offered Certificates, the foregoing information will be available to the
Certificate Owners through DTC and the DTC Participants. Any Certificate Owner
of a Book-Entry Certificate who does not receive information through DTC or
the DTC Participants may request that Trustee Reports be mailed directly to it
(at its cost) by written request (accompanied by verification of such
Certificate Owner's ownership interest) to the Trustee at the Trustee's
corporate trust office primarily responsible for administering the Trust Fund
(the "Corporate Trust Office"). The manner in which notices and other
communications are conveyed by DTC to DTC Participants, and by DTC
Participants to the Certificate Owners of Book-Entry Certificates, will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. The Servicer, the Special
Servicer, the Trustee, the REMIC Administrator 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.
Information Available Electronically. After the Underwriter has sold
all the Certificates, the Trustee will make available each month, to any
interested party, the Trustee Report via the Trustee's Internet Website,
electronic bulletin board and fax-on-demand service. In addition, after the
Underwriter has sold all the Certificates, the Trustee will also make certain
Mortgage Loan information as presented in the CSSA loan setup file and CSSA
loan periodic update file formats available to any Certificateholder, any
Certificate Owner, the Rating Agencies, the parties to the Pooling Agreement
or any other interested party via the Trustee's Website. The Trustee's Website
will be located at "www.securitieslink.net/cmbs". The Trustee's electronic
bulletin board may be accessed by calling (301) 815-6620, and its
fax-on-demand service may be accessed by calling (301) 815-6610. For
assistance with regard to the above-mentioned services, investors may call
(301) 815-6600.
Also, after the Underwriter has sold all the Certificates, the
Servicer will make available certain additional Mortgage Loan information on
its Internet Website, "http://www.DOMCM". In addition, pursuant to the Pooling
Agreement, the Trustee will make available, as a convenience for interested
parties (and not in furtherance of the distribution of the Prospectus or the
Prospectus Supplement
S-139
<PAGE>
under the securities laws), the Pooling Agreement, the Prospectus and this
Prospectus Supplement via the Trustee's Website. The Trustee will make no
representations or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefor.
In connection with providing access to the Trustee's and/or the
Servicer's Website or electronic bulletin board, the Trustee or the Servicer,
as the case may be, may require registration and the acceptance of a
disclaimer. Neither the Servicer nor the Trustee shall be liable for the
dissemination of information in accordance with the Pooling Agreement.
Other Information. The Pooling Agreement requires that the Trustee
make available at its offices, during normal business hours, upon reasonable
advance written notice, for review by any holder or Certificate Owner of an
Offered Certificate or any person identified to the Trustee by any such holder
or Certificate Owner as a prospective transferee of an Offered Certificate or
any interest therein, subject to the discussion in the following paragraph,
originals or copies of, among other things, the following items: (a) the
Pooling Agreement and any amendments thereto; (b) all Trustee Reports
delivered to holders of the relevant Class of Offered Certificates since the
Closing Date; (c) all officer's certificates delivered to the Trustee by the
Servicer and/or Special Servicer since the Closing Date as described under
"Description of the Pooling Agreements--Evidence as to Compliance" in the
Prospectus; (d) all accountant's reports delivered to the Trustee in respect
of the Servicer and/or Special Servicer since the Closing Date as described
under "Description of the Pooling Agreements--Evidence as to Compliance" in
the Prospectus; (e) the most recent inspection report in respect of each
Mortgaged Property prepared by the Servicer or the Special Servicer and
delivered to the Trustee as described under "Servicing of the Mortgage
Loans--Inspections; Collection of Operating Information" herein; (f) the most
recent appraisal, if any, with respect to each Mortgaged Property obtained by
the Servicer or the Special Servicer and delivered to the Trustee (see
"--Appraisal Reductions" above); (g) the most recent quarterly and annual
operating statement and rent roll for each Mortgaged Property and financial
statements of the related Mortgagor collected by the Servicer or the Special
Servicer and delivered to the Trustee as described under "Servicing of the
Mortgage Loans--Inspections; Collection of Operating Information" herein; and
(h) the Mortgage Files, including all documents (e.g. modifications, waivers
and amendments of the Mortgage Loans) that are to be added thereto from time
to time. Copies of any and all of the foregoing items will be available from
the Trustee upon request; however, the Trustee will be permitted to require
payment of a sum sufficient to cover the reasonable costs and expenses of
providing such services.
The Trustee will make available, upon reasonable advance written
notice and at the expense of the requesting party, copies of the items
referred to in the prior paragraph that are maintained thereby, to
Certificateholders, Certificate Owners and prospective purchasers of
Certificates and interests therein; provided that the Trustee may require (a)
in the case of a Certificate Owner, a written confirmation executed by the
requesting person or entity, in a form reasonably acceptable to the Trustee,
generally to the effect that such person or entity is a beneficial owner of
Offered Certificates, is requesting the information solely for use in
evaluating such person's or entity's investment in
S-140
<PAGE>
such Certificates and will otherwise keep such information confidential and (b)
in the case of a prospective purchaser, confirmation executed by the requesting
person or entity, in a form reasonably acceptable to the Trustee, generally to
the effect that such person or entity is a prospective purchaser of Offered
Certificates or an interest therein, is requesting the information solely for
use in evaluating a possible investment in such Certificates and will otherwise
keep such information confidential. Certificateholders, by the acceptance of
their Certificates, will be deemed to have agreed to keep such information
confidential. Notwithstanding the foregoing, however, no Certificateholder,
Certificate Owner or prospective Certificateholder or Certificate Owner will be
required to keep confidential any information received from the Trustee as
described above that has previously been made available via the Trustee's
Internet Website or has previously been filed with the Securities and Exchange
Commission (the "SEC"), and the Trustee will not be required to obtain either of
the confirmations referred to in the second preceding sentence in connection
with providing any information that has previously been made available via the
Trustee's Internet Website or has previously been filed with the SEC.
Voting Rights
At all times during the term of the Pooling Agreement, 99% of the
voting rights for the series offered hereby (the "Voting Rights") will be
allocated among the respective Classes of Sequential Pay Certificates in
proportion to the Class Principal Balances thereof, and 1% of the Voting
Rights will be allocated between the two Classes of Interest Only Certificates
in proportion to the Class Notional Amounts thereof. Voting Rights allocated
to a Class of Certificates will be allocated among such Certificates in
proportion to the Percentage Interests in such Class evidenced thereby.
Termination
The obligations created by the Pooling Agreement will terminate
following the earliest of (i) the final payment (or advance in respect
thereof) or other liquidation of the last Mortgage Loan or related REO
Property remaining in the Trust Fund, and (ii) the purchase of all of the
Mortgage Loans and REO Properties remaining in the Trust Fund by the Servicer,
the Special Servicer or any single holder of Certificates representing a
majority interest in the Controlling Class. Written notice of termination of
the Pooling Agreement will be given to each Certificateholder, and the final
distribution with respect to each Certificate will be made only upon surrender
and cancellation of such Certificate at the office of the Certificate
Registrar or at such other location specified in such notice of termination.
Any such purchase by the Servicer, the Special Servicer or a majority
holder of the Controlling Class (in that order of preference) of all of the
Mortgage Loans and REO Properties remaining in the Trust Fund is required to
be made at a price equal to (a) the sum of (i) the aggregate Purchase Price of
all of the Mortgage Loans then included in the Trust Fund (other than any
Mortgage Loans as to which the related Mortgaged Property has become an REO
Property) and (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
Servicer and the
S-141
<PAGE>
Trustee, minus (b) (solely in the case of a purchase by the Servicer or the
Special Servicer) the aggregate of all amounts payable or reimbursable to the
party effecting the purchase under the Pooling Agreement. Such purchase will
effect early retirement of the then outstanding Certificates, but the right of
the Servicer, the Special Servicer or any majority holder of the Controlling
Class 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 by the Servicer, the Special
Servicer or a majority holder of the Controlling Class, 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 Trustee
Norwest Bank Minnesota, National Association ("Norwest Bank") will
act as Trustee pursuant to the Pooling Agreement. Norwest Bank, a direct,
wholly owned subsidiary of Norwest Corporation, is a national banking
association originally chartered in 1872 and is engaged in a wide range of
activities typical of a national bank. Norwest Bank's principal office is
located at Norwest Center, Sixth and Marquette, Minneapolis, Minnesota
55479-0113. Certificate transfer services are conducted at Norwest Bank's
offices in Minneapolis. Norwest Bank otherwise conducts its trustee and
securities administration services at its offices in Columbia, Maryland. Its
address there is 11000 Broken Land Parkway, Columbia, Maryland 21044-3562. In
addition, Norwest Bank maintains a trust office in New York located at 3 New
York Plaza, New York, New York 10004. Certificateholders and other interested
parties should direct their inquiries to the New York office.
The telephone number is (212) 509-7900.
The Trustee is at all times required to be a corporation, bank, trust
company or association organized and doing business under the laws of the United
States of America or any State thereof or the District of Columbia, authorized
under such laws to exercise trust powers, having a combined capital and surplus
of at least $50,000,000 and subject to supervision or examination by federal or
state authority. If such corporation, bank, trust company or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of the foregoing, the combined capital and surplus of such corporation,
bank, trust company or association shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
The Depositor, the Servicer, the Special Servicer and their
respective affiliates may from time to time enter into normal banking and
trustee relationships with the Trustee and its affiliates. The Trustee and any
of its respective affiliates may hold Certificates in their own names. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Servicer and the Trustee acting jointly shall have the
power to appoint a co-trustee or separate trustees of all or any part of the
Trust Fund. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee and such separate trustee or
co-trustee jointly, or,
S-142
<PAGE>
in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee.
Pursuant to the Pooling Agreement, the Trustee will be entitled to
receive a monthly fee (the "Trustee Fee") generally equal to one month's
interest in respect of each Mortgage Loan (including each Mortgage Loan as to
which the related Mortgaged Property became an REO Property) accrued (on the
basis of a 360-day year consisting of twelve 30-day months) at 0.004% per
annum (the "Trustee Fee Rate") on the Stated Principal Balance of such
Mortgage Loan from time to time.
See also "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.
Required Regulatory Divestiture
If the CCC or any other applicable gaming authority does not waive
the qualification requirements as to any holder or beneficial owner of a
Certificate and requires that such person be qualified under the Control Act,
then, in such event, such person must qualify under the Control Act and, if it
fails to do so, must promptly dispose of its interests in the Certificates in
accordance with applicable gaming laws. If any such nonqualified person does
not so dispose of its Certificates or interests therein, the Depositor will be
authorized to sell such Certificates or interests therein on behalf of such
nonqualified person and to deliver thereto the proceeds of such sale. If, in
connection therewith, any nonqualified person does not tender its Certificates
to the purchaser thereof, the Trustee will be required, at the direction of
the Depositor, to cancel such Certificates and to execute, authenticate and
deliver new Certificates of the same Class in authorized denominations
representing the same aggregate Percentage Interest to such purchaser. See
"Description of the Mortgage Pool--The Showboat Loan--Atlantic City Gaming;
Certain Regulatory Issues" herein.
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, (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 or otherwise result in reduction of the
S-143
<PAGE>
Certificate Principal Balance or Certificate Notional Amount of such
Certificate, (iii) the rate, timing and severity of Realized Losses and
Additional Trust Fund Expenses and the extent to which such losses and
shortfalls are allocable in reduction of the Certificate Principal Balance or
Certificate Notional Amount of such Certificate, 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 such Certificate.
Pass-Through Rates. The Pass-Through Rates applicable to the Class CP
and Class S Certificates will be variable and, in each case, will equal the
weighted average of the applicable strip rates at which interest accrues on
the respective Components of the related Class Notional Amount from time to
time. Each such strip rate (as well as the Pass-Through Rate for each other
Class of Offered Certificates) will, in turn, be calculated based on the
weighted average of the Net Mortgage Rates for the Mortgage Loans from time to
time. Accordingly, the yield on each Class of Offered Certificates will be
sensitive to changes in the relative composition of the Mortgage Pool as a
result of scheduled amortization, voluntary prepayments and liquidations of
Mortgage Loans following default. In addition, the Pass-Through Rates for the
two Classes of Interest Only Certificates will each vary with changes in the
relative sizes of the Class Principal Balances of the respective Classes of
Sequential Pay Certificates. See "Description of the Certificates--Pass-
Through Rates" and "Description of the Mortgage Pool" herein and "--Rate
and Timing of Principal Payments" below.
Rate and Timing of Principal Payments. The yield to holders of the
Interest Only 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 Principal Balances or Certificate Notional
Amounts of such Certificates. In turn, the rate and timing of principal
payments that are distributed or otherwise result in reduction of the Class
Principal Balance or Class Notional Amount, as the case may be, of each Class
of Offered Certificates will be directly related to the rate and timing of
principal payments on or in respect of the Mortgage Loans, which will 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 or other
removals of Mortgage Loans out of the Trust Fund). Prepayments and, assuming
the respective Maturity Dates therefor have not occurred, liquidations of the
Mortgage Loans will result in distributions on the Sequential Pay Certificates
of amounts that would otherwise be distributed over the remaining terms of the
Mortgage Loans and will tend to shorten the weighted average lives of those
Certificates. Defaults on the Mortgage Loans, particularly at or near their
Maturity Dates, may result in significant delays in payments of principal on
the Mortgage Loans (and, accordingly, on the Sequential Pay Certificates)
while work-outs are negotiated or foreclosures are completed, and such delays
will tend to lengthen the weighted average lives of those Certificates. See
"Servicing of The Mortgage Loans--Modifications, Waivers and Amendments"
herein. Furthermore, the ability of a Mortgagor under an ARD Loan to repay its
Mortgage Loan on the related Anticipated Repayment Date will generally depend
on its ability to either refinance the Mortgage Loan or sell the related
Mortgaged Property. In addition, such Mortgagor may have little incentive to
repay its Mortgage Loan on the related
S-144
<PAGE>
Anticipated Repayment Date if then prevailing interest rates are
relatively high. Accordingly, there can be no assurance that any ARD Loan will
be paid in full as of its related Anticipated Repayment Date.
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 are in turn
distributed or otherwise result in a reduction of the Class Principal Balance
or Class Notional Amount 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 the anticipated
yield and, in the case of any Interest Only Certificate or any other Offered
Certificate purchased at a premium, the risk that a faster 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. In general,
the earlier a payment of principal on the Mortgage Loans is distributed or
otherwise results in reduction of the Certificate Notional Amount of an
Interest Only Certificate or the Certificate Principal Balance of any other
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 Interest
Only Certificates should fully consider the risk that an extremely rapid rate
of principal payments on the Mortgage Loans could result in the failure of
such investors to fully 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 applied to reduce the
Class Principal Balances of the Sequential Pay Certificates in the following
order: first, to the Class C Certificates until the Class Principal Balance
thereof has been reduced to zero; then to the Class B-7, Class B-6, Class B-5,
Class B-4, Class B-3, Class B-2 and Class B-1 Certificates, in that order,
until the remaining Class Principal Balance of each such Class of Certificates
has been reduced to zero; then to the Class A-3 and Class A-2 Certificates, in
that order, until the remaining Class Principal Balance of each such Class of
Certificates has been reduced to zero; and finally to the Class A-1A and Class
A-1B Certificates, pro rata in accordance with their respective remaining
Class Principal Balances, until the remaining Class Principal Balance of each
such Class of Certificates is reduced to zero. Any Realized Loss or
Additional Trust
S-145
<PAGE>
Fund Expense so allocated to the Sequential Pay Certificates will cause a
corresponding reduction of the Class Notional Amount of the Class S
Certificates; and any Realized Loss or Additional Trust Fund Expense so
allocated to the Class A-2 Certificates, the Class A-3 Certificates, the Class
B-1 Certificates, the Class B-2 Certificates and (at such time as the Class
Principal Balance thereof is at or below $325,000,000) the Class A-1B
Certificates will (unless it occurs after the end of March 2005) cause a
corresponding reduction of the Class Notional Amount of the Class CP
Certificates. As described herein, any Net Aggregate Prepayment Interest
Shortfalls will, in general, be allocated in reduction of the Distributable
Certificate Interest for the respective Classes of REMIC Regular Certificates on
a pro rata basis.
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, provisions requiring
Lockout Periods, provisions requiring the payment of Prepayment Premiums
and/or Yield Maintenance Premiums 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 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" herein and 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 Rate, the related Mortgagor has an incentive to refinance its
Mortgage Loan. A requirement that a prepayment be accompanied by a Prepayment
Premium or Yield Maintenance Premium may not provide a sufficient economic
disincentive to deter a Mortgagor from refinancing at a more favorable
interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some mortgagors 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
mortgagors 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 which a default will have occurred as of any date or as to the
overall rate of prepayment or default on the Mortgage Loans.
CPR Model. Prepayments on mortgage loans are commonly measured
relative to a prepayment standard or model. The prepayment model used in this
Prospectus Supplement is the "constant prepayment rate" model ("CPR"), which
represents an assumed constant rate of prepayment each month (which is quoted
on a per annum
S-146
<PAGE>
basis) relative to the then outstanding principal balance of a
pool of mortgage loans for the life of such mortgage loans. CPR does not
purport to be either an historical description of the prepayment experience of
any pool of mortgage loans or a prediction of the anticipated rate of
prepayment of any pool of mortgage loans, including the Mortgage Pool. The
Depositor does not make any representations about the appropriateness of the
CPR model.
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.
Weighted Average Life and Yield Sensitivity of Certain Sequential
Pay Certificates
For purposes hereof, weighted average life refers to the average
amount of time that will elapse from the date of issuance of a security until
each dollar of principal of such security will be repaid to the investor
(assuming no losses). For purposes of this "Yield and Maturity Considerations"
section and Exhibit C to this Prospectus Supplement, the weighted average life
of a Sequential Pay Certificate (such as a Class A, Class B-1 or Class B-2
Certificate) is determined by (i) multiplying the amount of each principal
distribution thereon by the number of years from the Assumed Settlement Date
(as defined below) to the related Distribution Date, (ii) summing the results
and (iii) dividing the sum by the aggregate amount of the reductions in the
Certificate Principal Balance of such Sequential Pay Certificate. The weighted
average life of any Sequential Pay Certificate will be influenced by, among
other things, the rate at which principal of the Mortgage Loans is paid, which
may be in the form of scheduled amortization, Balloon Payments, prepayments or
liquidations and any extensions or modifications made by the Special Servicer
with respect to Specially Serviced Mortgage Loans as described herein. The
weighted average life of any Sequential Pay Certificate may also be affected
to the extent that additional distributions in reduction of the Certificate
Principal Balance of such Certificate occur as a result of the purchase of a
Mortgage Loan from the Trust or the optional termination of the Trust as
described under "Description of the Certificates--Termination" herein. Such a
purchase from the Trust will have the same effect on distributions to the
holders of Certificates as if the related Mortgage Loan(s) had prepaid in
full, except that no Prepayment Premiums or Yield Maintenance Premiums are
made in respect thereof.
The tables set forth on Exhibit C hereto have been prepared on the
basis of the following assumptions (the "Modeling Assumptions") regarding the
characteristics of the Certificates and the Mortgage Loans and the performance
thereof: (i) as of the date of issuance of the Certificates, the Mortgage
Loans
S-147
<PAGE>
have the terms identified in the table titled "Characteristics of the
Mortgage Loans" in Exhibit A-1; (ii) the monthly cash flow of each Mortgage
Loan (except for the Balloon Payment) is the monthly payment of principal and
interest set forth in the table titled "Characteristics of the Mortgage Loans"
in Exhibit A-1; (iii) each ARD Loan is paid in full on its Anticipated
Repayment Date, no Mortgage Loan is prepaid during its Lockout Period, during
its Premium Period or during any period that defeasance thereof may be
required and, otherwise, each Mortgage Loan is assumed to prepay at the
specified level of CPR; (iv) no Mortgage Loan is repurchased or replaced as a
result of a material breach of a representation or warranty, and none of the
Servicer, the Special Servicer or any holder of Certificates evidencing a
majority interest in the Controlling Class exercises its option to purchase
the Mortgage Loans and thereby cause a termination of the Trust; (v) there are
no delinquencies or Realized Losses on the Mortgage Loans, and there is no
extension of the Maturity Date of any Mortgage Loan; (vi) payments on the
Certificates will be made on the 15th day of each month, commencing in April
1998; (vii) payments on the Mortgage Loans earn no reinvestment return; (viii)
there are no additional ongoing Trust expenses payable out of the Trust Fund
other than the Servicing Fee and the Trustee Fee (which will accrue at a
combined rate of 0.10% per annum), and there are no Additional Trust Fund
Expenses; (ix) the respective Classes of REMIC Regular Certificates will, in
each such case, be issued with the initial Class Principal Balance or Class
Notional Amount set forth in the tables on pages S-83 and S-84 hereof; (x) the
Pass- Through Rates for the respective Classes of REMIC Regular Certificates
will be as set forth herein; and (xi) the Certificates will be settled on
March 5, 1998 (the "Assumed Settlement Date").
The actual characteristics and performance of the Mortgage Loans will
differ from the Modeling Assumptions used in calculating the tables set forth
on Exhibit C hereto, which is hypothetical in nature and are provided only to
give a general sense of how the principal cash flows might behave under the
assumed prepayment and loss scenarios. Any difference between such assumptions
and the actual characteristics and performance of the Mortgage Loans, or
actual prepayment or loss experience, will affect the percentages of initial
Class Principal Balances outstanding over time and the weighted average lives
of the respective Classes of Sequential Pay Certificates.
Subject to the foregoing discussion and assumptions, the tables set
forth on Exhibit C hereto indicate the respective weighted average lives of
those Classes of the Offered Certificates with Class Principal Balances, and
set forth the percentages of the respective initial Class Principal Balances
of such Classes of Offered Certificates that would be outstanding after each
of the Distribution Dates shown.
Yield Sensitivity of the Interest Only Certificates
The yield to investors on the Interest Only Certificates will be
highly sensitive to the rate and timing of principal payments (including
prepayments) on the Mortgage Loans. Investors in the Interest Only
Certificates should fully consider the associated risks, including the risk
that an extremely rapid rate of prepayment on and/or liquidation of the
Mortgage Loans could result in the failure of such investors to fully recoup
their initial investments.
S-148
<PAGE>
The tables set forth on Exhibit D hereto show pre-tax corporate bond
equivalent ("CBE") yields for each Class of Interest Only Certificates based
on the Modeling Assumptions and assuming the specified purchase prices and the
indicated prepayment scenarios. Assumed purchase prices are, in the case of
each such Class, expressed in 32nds (e.g., 4-20 means 4 20/32 %) as a
percentage of the related initial Class Notional Amount and exclusive of
accrued interest.
The yields set forth in the tables on Exhibit D hereto were
calculated by determining the monthly discount rates that, when applied to the
assumed stream of cash flows to be paid on each Class of Interest Only
Certificates, would cause the discounted present value of each assumed stream
of cash flows to equal the assumed aggregate purchase prices of the such Class
of Certificates, plus accrued interest at the initial Pass-Through Rate for
such Class of Certificates from and including the Cut-off Date to but
excluding the Assumed Settlement Date, and converting such monthly rates to
corporate bond equivalent rates. Such calculations do 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 either Class of
Interest Only Certificates and consequently do not purport to reflect the
return on any investment on either such Class of Certificates when such
reinvestment rates are considered.
There can be no assurance that the Mortgage Loans will prepay in
accordance with the assumptions used in preparing the tables on Exhibit D
hereto, that the Mortgage Loans will prepay as assumed at any of the rates
shown in such tables, that the Mortgage Loans will not experience losses, that
Mortgage Loans will not be liquidated during any applicable Lockout Period,
that the ARD Loans will be paid in full on their respective Anticipated
Repayment Dates, that the cash flows on either Class of Interest Only
Certificates will correspond to the cash flows shown herein or that the
aggregate purchase price of either Class of Interest Only Certificates will be
as assumed. It is unlikely that the Mortgage Loans will prepay as assumed at
any of the specified percentages of CPR until maturity or that all of the
Mortgage Loans will so prepay at the same rate. Actual yields to maturity for
investors in the Interest Only Certificates may be materially different than
those indicated below and, under certain circumstances, could be negative.
Timing of changes in rate of prepayments and other liquidations may
significantly affect the actual yield to maturity to investors, even if the
average rate of principal prepayments and other liquidations is consistent
with the expectations of investors. Investors must make their own decisions as
to the appropriate prepayment, liquidation and loss assumptions to be used in
deciding whether to purchase any Interest Only Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
Upon the issuance of the Certificates, Sidley & Austin, counsel to
the Depositor, will deliver its opinion generally to the effect that, assuming
compliance with the Pooling Agreement (and subject to certain other
assumptions set forth in such opinion), the portions of the Trust Fund
designated as "REMIC I", "REMIC II" and "REMIC III", respectively, will each
qualify as a REMIC under
S-149
<PAGE>
the Code. The assets of REMIC I will include the Mortgage Loans, any REO
Properties acquired on behalf of the Certificateholders and the Certificate
Account (as defined in the Prospectus). For federal income tax purposes, (a) the
separate non-certificated 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 evidence the sole class of "residual interests" in REMIC
I, (c) the separate non-certificated 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 evidence the sole class of "residual interests"
in REMIC II, (e) the REMIC Regular Certificates will evidence the "regular
interests" in REMIC III and will be generally treated as representing ownership
of debt instruments of REMIC III, and (f) the Class R-III Certificates will
evidence the sole class of "residual interests" in REMIC III.
Discount and Premium; Prepayment Premiums
For federal income tax reporting purposes, it is anticipated that the
Class CP and Class S Certificates will, and the other Classes of Offered
Certificates will not, be treated as having been issued with original issue
discount. The prepayment assumption that will be used in determining the rate
of accrual of market discount and premium, if any, for federal income tax
purposes will be based on the assumption (the "Prepayment Assumption") that
subsequent to the date of any determination the Mortgage Loans (other than the
ARD Loans which are assumed to pay in full on their respective Anticipated
Repayment Dates) will not prepay, and there will be no extensions of maturity
for any Mortgage Loan. However, no representation is made as to the actual
rate at which the Mortgage Loans will prepay, if at all. See "Certain Federal
Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates" in the Prospectus.
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 an Interest Only 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 an
Interest Only 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. Purchasers of the Offered Certificates should be aware that the OID
Regulations and Section 1272(a)(6) of the Code do not adequately address
certain issues relevant to, or are not applicable to, prepayable securities
such as the Offered Certificates. Prospective purchasers of the Offered
Certificates are advised to consult their tax advisors concerning the tax
treatment of such Certificates.
S-150
<PAGE>
Certain Classes of the Offered Certificates may be treated for
federal income tax purposes as having been issued at a premium. Whether any
holder of such a Class of Certificates will be treated as holding a
Certificate with amortizable bond premium will depend on such
Certificateholder's purchase price and the distributions remaining to be made
on such Certificate at the time of its acquisition by such Certificateholder.
On December 31, 1997, the IRS published final regulations under Section 171 of
the Code with respect to the amortization of bond premium, but those
regulations specifically do not apply to debt instruments subject to Section
1272 (a)(6) of the Code, such as the Offered Certificates. However, the
Committee Report states that in the absence of regulations, the rules
described in the Prospectus with respect to the accrual of market discount,
which rules require the use of the Prepayment Assumption and a constant yield
method, should be applied in amortizing bond premium. Holders of such Classes
of Certificates should consult their own tax advisors regarding the
possibility of making an election to amortize such premium. See "Certain
Federal Income Tax Consequences--REMICs--Taxation of Owners of REMIC Regular
Certificates--Premium" in the Prospectus.
Prepayment Premiums and Yield Maintenance Premiums actually collected
on the Mortgage Loans will be distributed to the holders of each Class of
Certificates entitled thereto as described herein. It is not entirely clear
under the Code when the amount of a Prepayment Premium or Yield Maintenance
Premium should be taxed to the holder of a Class of Certificates entitled
thereto. For federal income tax reporting purposes, Prepayment Premiums or Yield
Maintenance Premiums will be treated as income to the holders of a Class of
Certificates entitled thereto only after the Servicer's actual receipt thereof.
It appears that Prepayment Premiums and Yield Maintenance Premiums are to be
treated as ordinary income rather than capital gain. However, the correct
characterization of such income is not entirely clear and Certificateholders
should consult their own tax advisors concerning the treatment of Prepayment
Premiums and Yield Maintenance Premiums.
Characterization of Investments in Offered Certificates
In general, except to the extent noted below, the Offered
Certificates will be "real estate assets" within the meaning of Section
856(c)(5)(A) of the Code in the same proportion that the assets of the Trust
would be so treated. 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. Moreover, if 95% or more of the assets of the
Trust qualify for any of the foregoing characterizations at all times during a
calendar year, the Offered Certificates will qualify for the corresponding
status in their entirety for that calendar year. Interest (including original
issue discount) on the Offered 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. The determination as to the percentage of the Trust Fund that
constitutes assets described in the foregoing sections of the Code will be
made with respect to each calendar quarter based on the average
S-151
<PAGE>
adjusted basis of each category of the assets included in the Trust Fund during
such calendar quarter. In addition, the Offered Certificates will be "qualified
mortgages" within the meaning of Section 860G(a)(3) of the Code.
However, the Trust Fund will include, in addition to the Mortgage
Loans, payments on Mortgage Loans held pending distribution on the
Certificates, certain amounts in reserve accounts and property acquired by
foreclosure held pending sale. It is unclear whether property acquired by
foreclosure held pending sale, 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 of the Code) otherwise would receive the same
treatment as the Mortgage Loans for purposes of all of the foregoing sections
of the Code. In addition, to the extent an Offered Certificate represents
ownership of an interest in any Mortgage Loan which is secured in part by the
related Mortgagor's interest in an account containing a holdback of loan
proceeds, a portion of such Certificate may not represent ownership of assets
described in Section 7701(a)(19)(C) of the Code and "real estate assets" under
Section 856(c)(5)(A) of the Code and the interest thereon may not constitute
"interest on obligations secured by mortgages on real property" within the
meaning of Section 856(c)(3)(B) of the Code. The REMIC Regulations (as defined
in the Prospectus) do provide, however, that cash received from 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.
See "Description of the Mortgage Pool" herein and "Certain Federal
Income Tax Consequences --REMICs--Characterization of Investments of REMIC
Certificates" in the Prospectus.
Possible Taxes on Income from Foreclosure Property and Other Taxes
In general, the Special Servicer will be obligated to operate and
manage any Mortgaged Property acquired as REO Property in a manner that would,
to the extent commercially reasonable, maximize the Trust's net after-tax
proceeds from such property, without causing such REO Property to cease to be
treated as "foreclosure property" within the meaning of the REMIC Provisions.
After the Special Servicer reviews the operation of such property and consults
with the REMIC Administrator to determine the Trust's federal income tax
reporting position with respect to income it is anticipated that the Trust
would derive from such property, the Special Servicer could determine that it
would not be commercially reasonable 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 the REMIC Regulations 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
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%) and (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"
S-152
<PAGE>
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's income from an REO Property would reduce the
amount available for distribution to Certificateholders. Certificateholders are
advised to consult their own tax advisors regarding the possible imposition of
REO Taxes in connection with the operation of commercial REO Properties
by REMICs. The Special Servicer and REMIC Administrator will each be entitled,
at the expense of the Trust, to consult with attorneys and tax accountants in
respect of the foregoing.
To the extent permitted by then applicable laws, any Prohibited
Transactions Tax, Contributions Tax (each as defined in the Prospectus) or tax
on "net income from foreclosure property" that may be imposed on REMIC I,
REMIC II or REMIC III will be borne by the REMIC Administrator, the Trustee,
the Servicer or the Special Servicer, 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
certain provisions of the Pooling Agreement. Any such tax not borne by the
REMIC Administrator, the Trustee, the Servicer or the Special Servicer will be
charged against the Trust Fund resulting in a reduction in amounts available
for distribution to the Certificateholders. See "Certain Federal Income Tax
Consequences--REMICs--Prohibited Transactions Tax and Other Taxes" in the
Prospectus.
Reporting and other Administrative Matters
Reporting of interest income, including any original issue discount,
if any, 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 Certificates 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 Trust 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.
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 Trust may not have, such regulations
only require that
S-153
<PAGE>
information pertaining to the appropriate proportionate method of accruing
market discount be provided.
The "tax matters person" for each REMIC will be the holder of REMIC
Residual Certificates evidencing the largest percentage interest in the
applicable Class of REMIC Residual Certificates. All holders of REMIC Residual
Certificates will irrevocably designate the REMIC Administrator as agent for
such "tax matters person" in all respects.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in an Underwriting
Agreement dated February 20, 1998 (the "Underwriting Agreement") between the
Depositor and the Underwriter, the Underwriter has agreed to purchase and the
Depositor has agreed to sell to the Underwriter each Class of the Offered
Certificates. It is expected that delivery of the Certificates will be made to
the Underwriter in book-entry form through the Same Day Funds Settlement
System of DTC on or about March 2, 1998, against payment therefor in
immediately available funds.
The Underwriting Agreement provides that the obligation of the
Underwriter to pay for and accept delivery of the Offered Certificates is
subject to, among other things, the receipt of certain legal opinions and to
the conditions, among others, that no stop order suspending the effectiveness
of the Depositor's Registration Statement shall be in effect, and that no
proceedings for such purpose shall be pending before or threatened by the
Commission.
The distribution of the Offered Certificates by the Underwriter may
be effected from time to time in one or more 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 108.1% of the
aggregate Certificate Principal Balance of the Offered Certificates plus
accrued interest thereon from the Cut-off Date. The 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 the Underwriter for whom they act as agent. In
connection with the sale of the Offered Certificates, the Underwriter may be
deemed to have received compensation from the Depositor in the form of
underwriting compensation. The Underwriter and any dealers that participate with
such 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.
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriter, and that under limited circumstances the Underwriter will
indemnify the Depositor, against certain civil liabilities under the
Securities Act or contribute to payments required to be made in respect
thereof.
S-154
<PAGE>
The Depositor has also been advised by the Underwriter that the
Underwriter presently intends to make a market in the Offered Certificates;
however, the Underwriter has no 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 "Risk Factors--Limited Liquidity of Offered
Certificates" in the Prospectus.
If and to the extent required by applicable law or regulation, this
Prospectus Supplement and the Prospectus will be used by the Underwriter in
connection with offers and sales related to market-making transactions in the
Offered Certificates with respect to which the Underwriter acts as principal.
The Underwriter may also act as agent in such transactions. Sales may be made
at negotiated prices determined at the time of sale.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed
upon for each of the Depositor and the Underwriter by Sidley & Austin, New
York, New York.
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 and separate accounts in which such
plans, accounts or arrangements are invested, including insurance company
general accounts, that is subject to ERISA, or Section 4975 of the Code (each,
a "Plan") should 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.
The DOL issued an individual administrative exemption, Prohibited
Transaction Exemption 90-83 (the "Exemption"), to the Underwriter, which
generally exempts from the application of the prohibited transaction
provisions of Section 406 of ERISA, and the excise taxes imposed on such
prohibited transactions pursuant to Section 4975 (a) and (b) of the Code,
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 or placed by (i) the Underwriter, (ii) any person
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with the Underwriter and (iii) any
member of the underwriting syndicate or selling group of which the Underwriter
or a person described in (ii) is a manager or co-manager with respect to a
Class of Offered Certificates, provided that certain conditions set forth in
the Exemption are satisfied (each such person, an "Exemption-Favored Party").
The Exemption sets forth six general conditions which must be
satisfied for a transaction involving the purchase, sale and holding of
Offered
S-155
<PAGE>
Certificates to be eligible for exemptive relief thereunder. 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 Exemption only applies to Offered Certificates
evidencing rights and interests not subordinated to the rights and interests
evidenced by the other Offered Certificates of the same series. 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 S&P, Fitch, Moody's
or Duff & Phelps Credit Rating Co. ("DCR"). Fourth, the Trustee cannot be an
affiliate of any other member of the "Restricted Group", which, in addition to
the Trustee, consists of any Exemption-Favored Party, the Depositor, the
Servicer, the Special Servicer, any sub-servicer, the Seller, any Third Party
Originator, the provider of any credit support, any Mortgagor with respect to
Mortgage Loans constituting more than 5% of the aggregate unamortized
principal balance of the Mortgage Loans as of the date of initial issuance of
the Offered Certificates and any affiliates of the foregoing parties. Fifth,
the sum of all payments made to and retained by the Exemption-Favored Parties
in connection with the sale of Certificates must represent not more than
reasonable compensation for underwriting the Offered 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 Servicer, the Special Servicer and any sub-servicer must
represent not more than reasonable compensation for such person's services
under the 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.
Because the Senior Certificates are not subordinated to any other
Class of Offered Certificates, the second general condition set forth above is
satisfied with respect to such Certificates. It is a condition of their
issuance that each Class of Senior Certificates be rated not lower than "AAA"
or "Aaa", as applicable, by each Rating Agency. Accordingly, upon initial
issuance, the third general condition set forth above will be satisfied with
respect to the Senior Certificates. As of the Closing Date, the fourth general
condition set forth above will be satisfied with respect to the Senior
Certificates. A fiduciary of a Plan contemplating purchasing a Senior
Certificate in the secondary market must make its own determination that, at
the time of such purchase, such Certificate continues to satisfy the second,
third and fourth general conditions set forth above. In addition, a fiduciary
of a Plan contemplating the purchase of a Senior Certificate, whether in the
initial issuance of such Certificate or in the secondary market, must make its
own determination that the first, fifth and sixth general conditions set forth
above will be satisfied with respect to such Certificate.
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
generic categories of S&P, Moody's, DCR or Fitch for at least one year prior
to the Plan's acquisition of Senior Certificates; and (iii) certificates in
such other
S-156
<PAGE>
investment pools must have been purchased by investors other than
Plans for at least one year prior to any Plan's acquisition of Senior
Certificates.
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 Senior Certificates acquired by a Plan upon initial issuance from
the Depositor or an Exemption- Favored Party when the Depositor, the Seller,
the Servicer, the Special Servicer, the Trustee or any Third Party Originator,
sub-servicer, provider of credit support, Exemption-Favored Party or Mortgagor
is a Party in Interest 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 continued 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 a
Senior Certificate on behalf of an "Excluded Plan" (as defined in the
following sentence) 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.
Moreover, if the general conditions of the Exemption, as well as
certain other conditions set forth in the Exemption, are satisfied, the
Exemption may also 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 (i) the direct or indirect sale,
exchange or transfer of Senior Certificates in the initial issuance of Senior
Certificates between the Depositor or an Exemption-Favored Party and a Plan
when the person who has discretionary authority or renders investment advice
with respect to the investment of Plan assets in such Certificates is (a) a
Mortgagor with respect to 5% or less of the fair market value of the Mortgage
Loans or (b) an affiliate of such a person, (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.
Further, if the general conditions of the Exemption, as well as
certain other 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 Fund.
Lastly, if the general conditions of the Exemption are satisfied, 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 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 (as defined in the Prospectus) 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.
S-157
<PAGE>
Before purchasing a Senior Certificate, a fiduciary of a Plan should
itself confirm (i) that the Senior Certificates constitute "certificates" for
purposes of the Exemption and (ii) that the general and other conditions set
forth in the Exemption and the other requirements set forth in the Exemption
would be satisfied at the time of such purchase.
In addition to making its own determination as to the availability of
the exemptive relief provided in the Exemption, the Plan fiduciary considering
an investment in Senior Certificates should consider the availability of any
other prohibited transaction exemptions. See "ERISA Considerations" in the
Prospectus. There can be no assurance that any such class exemptions will
apply with respect to any particular Plan investment in Senior Certificates
or, even if it were deemed to apply, that any exemption would apply to all
prohibited transactions that may occur in connection with such investment. A
purchaser of Senior Certificates 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 which might be
construed as prohibited transactions.
Because the characteristics of the Class A-2, Class A-3, Class B-1
and Class B-2 Certificates do not meet the requirements of the Exemption, the
purchase or holding of such Certificates by a Plan may result in a prohibited
transaction or the imposition of excise taxes or civil penalties. As a result,
no transfer of a Class A-2, Class A-3, Class B-1 or Class B-2 Certificate or
any interest therein may be made to a Plan or to any person who is directly or
indirectly purchasing such Certificate or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of a Plan unless the
purchase and continued holding of such Certificate or interest therein is
exempt from the prohibited transaction provisions of Section 406 of ERISA and
Section 4975 of the Code under Sections I and III of Prohibited Transaction
Class Exemption 95-60, which provides an exemption from the prohibited
transaction rules for certain transactions involving an insurance company
general account. Any person to whom a transfer of any such Certificate or
interest therein is made shall be deemed to have represented to the Depositor,
the Underwriter, the Servicer, the Special Servicer and the Trustee that
either (i) it is not a Plan and is not directly or indirectly purchasing such
Certificate or interest therein on behalf of, as named fiduciary of, as
trustee of, or with assets of a Plan or (ii) the purchase and continued
holding of such Certificate or interest therein is so exempt on the basis of
Sections I and III of Prohibited Transaction Class Exemption 95-60.
Any Plan fiduciary considering whether to purchase an Offered
Certificate on behalf of a Plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the Code to such investment.
LEGAL INVESTMENT
Upon issuance, the Class CP, Class S, Class A-1A, Class A-1B and Class
A-2 Certificates (the "SMMEA Certificates") will constitute "mortgage
S-158
<PAGE>
related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"). However, in order to remain
"mortgage related securities", the SMMEA Certificates must, among other things,
continue to be rated in one of the two highest rating categories by at least one
nationally recognized statistical rating organization. In addition, the SMMEA
Certificates will constitute "mortgage related securities" in part because they
evidence interest in notes secured by first (or effectively first) mortgage
liens on one or more parcels of real estate upon which is located a
residential, commercial or mixed residential and commercial structure. No
representation is made as to the effect on their status as "mortgage related
securities" if any of the Mortgagors entitled to do so elect to defease their
respective Mortgage Loans. Such defeasance may not occur within two years of the
Closing Date.
The Class A-3 Certificates, the Class B-1 Certificates and the Class
B-2 Certificates will not be "mortgage related securities" for purposes of
SMMEA. As a result, the appropriate characterization of such Offered
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase such Offered
Certificates, is subject to significant interpretive uncertainties.
The Depositor makes no representation as to the ability of particular
investors to purchase any of 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.
All depository institutions considering an investment in the Offered
Certificates 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.
S-159
<PAGE>
See "Legal Investment" in the Prospectus.
RATINGS
It is a condition to the issuance of the Certificates that the
respective Classes of Offered Certificates receive the following credit
ratings from Standard & Poor's Ratings Services, a Division of the McGraw-Hill
Companies, Inc. ("S&P"), Fitch IBCA, Inc. ("Fitch") and/or Moody's Investors
Service, Inc. ("Moody's"; and, together with S&P and Fitch, the "Rating
Agencies"):
Class S&P Fitch Moody's
----- --- ----- -------
Class CP AAA AAA Aaa
Class S AAA AAA Aaa
Class A-1A AAA AAA Aaa
Class A-1B AAA AAA Aaa
Class A-2 AA AA Aa2
Class A-3 A A A2
Class B-1 BBB BBB Baa2
Class B-2 BBB- NR(1) Baa3
- - --------------------
(1) "NR" means not rated.
The ratings on the Offered Certificates address the likelihood of the
timely receipt by holders thereof of all payments of interest to which they
are entitled on each Distribution Date and, in the case of the Class A, Class
B-1 and Class B-2 Certificates, the ultimate receipt by the holders thereof of
all payments of principal to which they are entitled on or before the
Distribution Date in February 2031 (the "Rated Final Distribution Date"). The
Rated Final Distribution Date is set at the first Distribution Date following
the third anniversary of the end of the amortization term for the Mortgage
Loan with the longest remaining amortization term as of the Closing Date. 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 of interest and/or principal required under the Offered Certificates.
The ratings on the respective Classes of Offered Certificates do not represent
any assessment of (i) the likelihood or frequency of principal prepayments,
whether voluntary or involuntary, 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, Yield Maintenance Premiums
and/or Default Interest will be received. Also a security rating does not
represent any assessment of the yield to maturity that investors may
experience, the possibility that the Class CP and/or Class S
Certificateholders might not fully recover their investment in the event of
rapid prepayments and/or other liquidations of the Mortgage Loans. In general,
the ratings thus address credit risk and not prepayment risk. As described
herein, the amounts payable with respect to each Class of Interest Only
Certificates consist only of interest (and, to the extent described herein,
may consist of a portion of the Yield Maintenance Premiums and Prepayment
Premiums actually collected on the Mortgage Loans). If the entire pool were to
prepay in the initial month, with the result that each Class of Interest Only
S-160
<PAGE>
Certificateholders receive only a single month's
Distributable Certificate 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 respective ratings
received on the Interest Only Certificates. The Class Notional Amount of each
Class of Interest Only Certificates is subject to reduction by the payment of
principal on, and the allocation of Realized Losses and Additional Trust Fund
Expenses to, some or all of the respective Classes of Sequential Pay
Certificates as described herein. The ratings of the Interest Only Certificates
do not address the timing or magnitude of reduction of the Class Notional
Amounts of such Certificates, but only the obligation to pay interest timely on
such Class Notional Amounts as so reduced from time to time. Accordingly, the
ratings of the Interest Only Certificates should be evaluated independently from
similar ratings on other types of securities.
There can be no assurance as to whether any rating agency not
requested to rate the Offered Certificates will nonetheless issue a rating to
any Class thereof and, if so, what such rating would be. A rating assigned to
any Class of Offered Certificates by a rating agency that has not been
requested by the Depositor to do so may be lower than the rating assigned
thereto by either Rating Agency.
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
organization. Each security rating should be evaluated independently of any
other security rating. See "Risk Factors--Limited Nature of Ratings" in the
Prospectus.
S-161
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
Accrued Certificate Interest.......................................S-20, S-84
Additional Gaming Space...................................................S-62
Additional Hotel Rooms....................................................S-62
Additional Interest.................................................S-14, S-50
Additional Trust Fund Expenses......................................S-33, S-94
Additional Wing ........................................................S-62
Advances ........................................................S-74
AMC Theater Loan ........................................................S-50
Annual Debt Service.......................................................S-60
Anticipated Repayment Date..........................................S-14, S-50
Appraisal Reduction Amount................................................S-95
Appraised Value ........................................................S-59
Approved Summary Business Plan............................................S-77
ARCS ..................................................S-10, S-51
ARD Loans ..................................................S-14, S-50
Assumed Final Distribution Date............................................S-2
Assumed Monthly Payment.............................................S-34, S-94
Assumed Settlement Date..................................................S-102
Authority ........................................................S-49
Available Distribution Amount.............................................S-87
Balloon Mortgage Loans..............................................S-15, S-50
Balloon Payment ..................................................S-15, S-50
Banc One ........................................................S-72
Book-Entry Certificates...................................................S-11
CBE .......................................................S-103
CCC ..................................................S-42, S-62
Central Accounts ........................................................S-61
Certificate Notional Amount...............................................S-82
Certificate Owner ..................................................S-11, S-82
Certificate Principal Balance.............................................S-82
Certificate Registrar.....................................................S-82
Certificateholders.............................................S-2, S-10, S-87
Certificates ..............................................S-1, S-9, S-81
Clarion ........................................................S-72
Class ..............................................S-1, S-9, S-82
Class A Certificates............................................S-1, S-9, S-82
Class B Certificates............................................S-1, S-9, S-82
Class CP Strip Rate.................................................S-21, S-85
Class Notional Amount..........................................S-1, S-19, S-83
Class Principal Balance........................................S-1, S-19, S-83
Class S Strip Rate..................................................S-22, S-86
Closing Date ..................................................S-11, S-81
Code ........................................................S-37
Collection Period ..................................................S-11, S-86
Column ..................................................S-10, S-51
Compensating Interest Payment.......................................S-35, S-73
Component ..................................................S-20, S-84
Component A-1B1 ..................................................S-20, S-84
Component A-1B2 ..................................................S-20, S-84
Contractual Recurring
Replacement Reserve.....................................................S-61
Control Act ..................................................S-42, S-62
Controlling Class ............................................S-35, S-76, S-77
Controlling Class Representative....................................S-35, S-76
Corporate Trust Office....................................................S-96
Corrected Mortgage Loan...................................................S-71
Cost Approach ........................................................S-53
CPR .......................................................S-101
Cross-Collateralized Group..........................................S-12, S-48
Cross-Collateralized Mortgage Loans.................................S-12, S-48
Curry Loans ........................................................S-48
Custodian ........................................................S-54
Cut-off Date ..................................................S-11, S-47
Cut-off Date Balance................................................S-12, S-47
Cut-off Date Loan-to-Value Ratio..........................................S-60
Cut-off Date LTV Ratio....................................................S-60
DCR .......................................................S-108
Default Interest ........................................................S-72
Definitive Certificate..............................................S-11, S-82
Depositor ....................................................S-1, S-9
Determination Date..................................................S-11, S-86
Discount Rate ..................................................S-31, S-92
Distributable Certificate Interest..................................S-21, S-84
Distribution Date .............................................S-2, S-11, S-87
DTC ........................................................S-82
DTC Participants ........................................................S-82
Due Date ..................................................S-14, S-50
Engineering Reserves......................................................S-61
ERISA ........................................................S-38
Estimated Annual Operating Expenses.......................................S-58
Estimated Annual Revenues.................................................S-57
Exemption .......................................................S-107
Exemption-Favored Party..................................................S-107
FF&E ........................................................S-58
FIRREA ........................................................S-53
Fitch ............................................S-2, S-39, S-110
GAAP ........................................................S-59
GMAC-CMC ..................................................S-10, S-51
Harrah's ........................................................S-64
HET ........................................................S-64
Income Approach ........................................................S-53
Initial Pool Balance................................................S-12, S-47
Interest Accrual Period.............................................S-11, S-85
Interest Only Certificates......................................S-1, S-9, S-82
S-162
<PAGE>
IRS .......................................................S-104
LC & TI ........................................................S-60
Leasable Square Footage...................................................S-60
Leased Fee Value ........................................................S-63
Liquidation Fee ........................................................S-73
Liquidation Fee Rate......................................................S-73
Lockout Period ..................................................S-15, S-68
Lyndale Loans ........................................................S-48
Lyndale TIF Loan ........................................................S-49
Major Tenant ........................................................S-60
Maturity Date ..................................................S-15, S-50
Maximum CP Strip Rates..............................................S-22, S-86
Modeling Assumptions.....................................................S-102
Modified Mortgage Loan....................................................S-96
Monthly Payments ..................................................S-14, S-50
Monthly Rental Payments...................................................S-15
Moody's ..................................................S-2, S-110
Moody's ........................................................S-39
Mortgage ..................................................S-12, S-48
Mortgage File ........................................................S-54
Mortgage Loan Purchase
and Sale Agreement......................................................S-54
Mortgage Loans ..............................................S-2, S-9, S-47
Mortgage Note ..................................................S-12, S-48
Mortgage Pool ....................................................S-2, S-9
Mortgage Rate ..................................................S-14, S-50
Mortgaged Property..................................................S-12, S-48
Mortgagor ..................................................S-12, S-48
Net Aggregate Prepayment
Interest Shortfall................................................S-35, S-73
Net Mortgage Rate ..................................................S-23, S-86
Non-30/360 Mortgage Loans...........................................S-14, S-50
Norwest Bank ........................................................S-98
NR .........................................................S-2
O&M Program ........................................................S-52
Occupancy Rate at U/W.....................................................S-60
Occupancy Rate at Underwriting............................................S-60
Offered Certificates............................................S-1, S-9, S-82
OID Regulations .......................................................S-104
Open Period ..................................................S-16, S-68
Originators ..................................................S-10, S-51
P&I Advance ..................................................S-34, S-94
Pass-Through Rate .........................................................S-1
Percentage Interest.......................................................S-87
Permitted Investments.....................................................S-72
Plan .................................................S-38, S-107
Pooling Agreement .............................................S-2, S-19, S-81
Premium Period ..................................................S-16, S-68
Prepayment Assumption....................................................S-104
Prepayment Interest Excess..........................................S-35, S-73
Prepayment Interest Shortfall.......................................S-35, S-73
Prepayment Premium..................................................S-16, S-68
Primary Mortgaged Property................................................S-48
Primary Term ........................................................S-66
Principal Distribution Amount.......................................S-30, S-91
Principal Prepayments...............................................S-15, S-68
Private Certificates.................................................S-9, S-82
Purchase Price ........................................................S-56
Rated Final Distribution Date.......................................S-2, S-111
Rating Agencies ............................................S-2, S-39, S-110
Realized Losses ..................................................S-33, S-93
Record Date ..................................................S-11, S-87
Regulated Company ........................................................S-64
Reimbursement Rate..................................................S-35, S-95
Related Proceeds ........................................................S-74
REMIC ...................................................S-3, S-37
REMIC Administrator..................................................S-2, S-10
REMIC I ............................................S-3, S-37, S-103
REMIC II ............................................S-3, S-37, S-103
REMIC III ............................................S-3, S-37, S-103
REMIC Regular Certificates......................................S-1, S-9, S-82
REMIC Residual Certificates.....................................S-1, S-9, S-82
REO Property ..................................................S-33, S-71
REO Tax .......................................................S-105
Replacement Mortgage Loan.................................................S-56
Required Appraisal Loan...................................................S-95
Responsible Officer.......................................................S-76
Restricted Group .......................................................S-108
Rooms ........................................................S-60
S.F. ........................................................S-60
S&P ............................................S-2, S-39, S-110
Sales Comparison Approach.................................................S-53
SBO ........................................................S-62
SEC ........................................................S-98
Securities Act ...................................................S-9, S-82
Seller ..................................................S-10, S-51
Senior Certificates............................................S-3, S-32, S-93
Senior Principal Distribution
Cross-Over Date ........................................................S-91
Sequential Pay Certificates.........................................S-19, S-83
Servicer ....................................................S-2, S-9
Servicing Advances........................................................S-74
Servicing Fee ........................................................S-72
Servicing Fee Rate........................................................S-72
Servicing Standard........................................................S-70
Servicing Transfer Event..................................................S-70
Showboat Borrower ..................................................S-18, S-62
Showboat Ground Lease.........................................S-18, S-62, S-63
Showboat Hotel ........................................................S-62
Showboat Hotel and Casino.................................................S-18
Showboat Loan ..................................................S-18, S-62
Showboat Mortgage ........................................................S-62
S-163
<PAGE>
Showboat Note ........................................................S-62
Showboat Operator ........................................................S-63
Showboat Property ..................................................S-18, S-62
Single-Tenant Property Lease..............................................S-66
SMMEA Certificates.......................................................S-109
Special Servicer ....................................................S-2, S-9
Special Servicing Fee.....................................................S-73
Specially Serviced Mortgage Loan..........................................S-70
Sq. Ft. ........................................................S-60
Stated Principal Balance..................................................S-86
STO ........................................................S-67
Stone ........................................................S-67
Stone Container Loans.....................................................S-67
Subordinate Certificates.......................................S-3, S-32, S-93
Substitution Shortfall Amount.............................................S-56
Summary Business Plan.....................................................S-77
Tax and Insurance Escrows.................................................S-61
Tenant ........................................................S-66
Third Party Originators.............................................S-10, S-51
TIF Note ........................................................S-49
Treasury Rate ..................................................S-31, S-92
Trust ..............................................S-1, S-9, S-81
Trust Fund ..............................................S-2, S-9, S-81
Trustee ...................................................S-2, S-10
Trustee Fee ........................................................S-99
Trustee Fee Rate ........................................................S-99
Trustee Report ........................................................S-96
U/W DSCR ........................................................S-60
U/W LC & TI ........................................................S-58
U/W NOI ........................................................S-57
Underwriter .........................................................S-1
Underwriting Agreement...................................................S-106
Underwriting Debt Service Coverage Ratio..................................S-60
Underwriting DSCR ........................................................S-60
Underwriting NOI ........................................................S-57
Unencumbered Fee Value....................................................S-63
Union Capital ..................................................S-10, S-51
Units ........................................................S-60
UW Recurring Replacement Reserves.........................................S-58
Voting Rights ........................................................S-98
Walgreens Loans ........................................................S-66
Walgreens Single-Tenant Properties........................................S-66
Weighted Average Net Mortgage Rate..................................S-23, S-86
Workout Fee ........................................................S-73
Workout Fee Rate ........................................................S-73
Year Built ........................................................S-60
Year Renovated ........................................................S-61
Yield Maintenance Premium...........................................S-16, S-68
Zoning Laws ........................................................S-45
Single-Tenant Property Lease Default......................................S-67
Single-Tenant Property Leases.............................................S-15
Single-Tenant Property Loans........................................S-15, S-66
SMMEA .................................................S-40, S-109
S-164
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT A-1
CERTAIN CHARACTERISTICS OF THE
MORTGAGE LOANS AND MORTGAGED PROPERTIES
See the following 18 pages for tables
titled:
Managers and Locations of the Mortgaged Properties
Descriptions of the Mortgaged Properties
Characteristics of the Mortgage Loans
Engineering Reserves and Recurring Replacement Reserves
Major Tenants of the Commercial Mortgaged Properties
A-1-1
<PAGE>
Mortgage Pool Information
The Appraised Value and Cut-off Date LTV Ratio information set forth in the
following tables reflects the unencumbered fee simple value of the Showboat
Hotel & Casino, Atlantic City under a foreclosure scenario, assuming that such
property is free and clear of the Showboat Ground Lease. The estimated value
(based upon an income capitalization approach) of the property securing the
Showboat Loan, taking into account that such property is encumbererd by the
Showboat Ground Lease, is approximately $110 million. Based upon such value, the
aggregate Appraised Value of all the Mortgaged Properties would be
$1,175,628,000, the Cut-off Date LTV Ratio of the Showboat Loan would be 90.8%
and the weighted average Cut-off Date LTV Ratio of the Mortgage Pool would be
73.4%.
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Property Name Manager
<S> <C> <C>
1 Showboat Hotel & Casino, Atlantic City Atlantic City Showboat, Inc.
2 Stone Container - Santa Fe Springs (1A) Stone Container Corporation/Owner Occupied
3 Stone Container - Mansfield (1A) Stone Container Corporation/Owner Occupied
4 Stone Container - San Jose (1A) Stone Container Corporation/Owner Occupied
5 Stone Container - Minneapolis (1A) Stone Container Corporation/Owner Occupied
6 Stone Container - Springfield (1A) Stone Container Corporation/Owner Occupied
7 Stone Container - Salinas (1A) Stone Container Corporation/Owner Occupied
8 Stone Container - Harahan (1A) Stone Container Corporation/Owner Occupied
9 Stone Container - Rogers (1A) Stone Container Corporation/Owner Occupied
10 Stone Container - Keokuk (1A) Stone Container Corporation/Owner Occupied
11 Stone Container - Portland (1A) Stone Container Corporation/Owner Occupied
12 Stone Container - Saltillo (1A) Stone Container Corporation/Owner Occupied
13 Stone Container - Columbus (1A) Stone Container Corporation/Owner Occupied
14 Stone Container - North Tonawanda (1A) Stone Container Corporation/Owner Occupied
15 Stone Container - St. Cloud (1A) Stone Container Corporation/Owner Occupied
16 Stone Container - Jackson (1A) Stone Container Corporation/Owner Occupied
17 Stone Container - Collierville (1A) Stone Container Corporation/Owner Occupied
18 Stone Container - Bloomington (1A) Stone Container Corporation/Owner Occupied
19 Stone Container - Danville (1A) Stone Container Corporation/Owner Occupied
20 Washington Marriott Hotel Marriott Hotel Services, Inc.
21 Willow Creek Apartments (Foster Portfolio) (1B) Foster Management Co.
22 Lake Park Apartments (1B) Foster Management Co.
23 Plaza South Apartments (1B) Foster Management Co.
24 Farmwood Apartments (1B) Foster Management Co.
25 Colony Apartments (1B) Foster Management Co.
26 Southwest Plaza I and II Shopping Center Charles E. Robbins, Realtor
27 The Rosedale Corporate Plaza Texas Property Advisors, Inc.
28 Bayvue Apartments Southern Management Corporation
29 Lake Calhoun Executive Center Texas Property Advisors, Inc.
30 Pebble Creek Apartments (1C) Gainesville Real Estate Management Company, Inc.
31 Homestead Apartments (1C) Gainesville Real Estate Management Company, Inc.
32 Shops at Lyndale Phase II (1D) CSM Corporation
33 Shops at Lyndale Phase II - TIF (1D) CSM Corporation
34 Walgreens - Kirkland (1E) Walgreens
35 Walgreens Retail Pharmacy Store-San Francisco (1E) Walgreens
36 Walgreens Retail Pharmacy Store-Charleston/Torrey (1E) Walgreens
37 Walgreens Retail Pharmacy Store-Las Vegas Boulevard (1E) Walgreens
38 Walgreens Retail/Pharmacy Store-Paradise (1E) Walgreens
39 Country Village MHP Owner Managed
40 414 N. Orleans St. Spectrum Real Estate Services Incorporated
41 Two Greenville Crossing (1F) E.B.D. Management, Inc.
42 One Greenville Crossing (1F) E.B.D. Management, Inc.
43 Wesley Chapel Square Akin Venture, Ltd.
44 Mercado del Lago Shopping Center Westwood Financial Inc.
45 Curry Honda Automobile Dealership (1G) 3854 Crompond Road Corp. and 727 Central Avenue
46 Curry Chevrolet Automobile Dealership (1G) 3854 Crompond Road Corp. and 727 Central Avenue
47 Curry Acura Automobile Dealership (1G) 3854 Crompond Road Corp. and 727 Central Avenue
48 Curry Ford/Subaru Automobile Dealership (1G) 3854 Crompond Road Corp. and 727 Central Avenue
49 Curry Mitsubishi Automobile Dealership (1G) 3854 Crompond Road Corp. and 727 Central Avenue
</TABLE>
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Zip
Address City State Code
<S> <C> <C> <C> <C>
1 801 Boardwalk Atlantic City NJ 08401
2 13833 East Freeway Drive Santa Fe Springs CA 90670
3 47 Maple Street Mansfield MA 02048
4 1901 Junction Ave. San Jose CA 95131
5 50 37th Avenue N.E. Minneapolis MN 55421
6 2705 West Battlefield Road Springfield MO 65807
7 1078 Merrill Street Salinas CA 93912
8 5301 Jefferson Highway Harahan LA 70123
9 2021 South Fifth Street Rogers AR 72756
10 3972 Main Street Keokuk IA 52832
11 74 Pickering Street Portland CT 06480
12 Turner Industrial Park Saltillo MS 38866
13 3101 State Street Columbus IN 47201
14 7393 Shawnee Road North Tonawanda NY 14120
15 655 41st Avenue North St. Cloud MN 56303
16 1345 Flowood Drive Jackson MS 39208
17 550 South Street East Collierville TN 38017
18 Route 150 South Bloomington IL 61702
19 1501 East Voorhees Street Danville IL 61832
20 1221 22nd Street, N.W. Washington DC 20037
21 100 Stagecoach Road Winston-Salem NC 27105
22 549 Arbor Hill Road Kernersville NC 27284
23 3501 Plaza Hollow Drive Winston-Salem NC 27107
24 120 Farmwood Drive Kernersville NC 37284
25 4240 Brownsboro Road Winston-Salem NC 27105
26 SWC Veterans Parkway & Wabash Avenue Springfield IL 62704
27 2685 Long Lake Road Roseville MN 55113
28 1293 Bayside Avenue Woodbridge VA 22191
29 3033 Excelsior Boulevard Minneapolis MN 55416
30 2360 SW Archer Road Gainesville FL 32608
31 3611 SW 34th Street Gainesville FL 32608
32 NWC Interstate 494 and Lyndale Avenue Richfield MN 55423
33 NWC Interstate 494 and Lyndale Avenue Richfield MN 55423
34 12405 NE 85TH Street Kirkland WA 98033
35 1189 Potrero Avenue San Francisco CA 94110
36 6401 Charleston Boulevard Las Vegas NV 89102
37 2280 Las Vegas Boulevard Las Vegas NV 89030
38 7576 Skyway Paradise CA 95969
39 1463 South Village Court Oregon City OR 97045
40 414 N. Orleans St. Chicago IL 60610
41 4001 Kennett Pike Greenville DE 19807
42 4007-4025 Kennett Pike Greenville DE 19807
43 2375 Wesley Chapel Road Decatur GA 30035
44 NWC of Santa Margarita & Antonio Parkways Rancho Santa Margarita CA 92688
45 5525 Peachtree Industrial Boulevard Chamblee GA 30341
46 3845 Crompond Road Yorktown NY 10598
47 685 Central Park Avenue Scarsdale NY 10583
48 3493 Crompond Road Yorktown NY 10598
49 3505 Crompond Road Yorktown NY 10598
</TABLE>
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Property Name Manager
<S> <C> <C>
50 Curry Office Building (1G) 3854 Crompond Road Corp. and 727 Central Avenue
51 708 Broadway / 404 Lafayette Street Firstmark Management Corporation
52 360-386 East Fordham Road Marco Realty Associates, L.P.
53 Hampton Inn - Houston Galleria Ridgewood Hotels, Inc.
54 Holiday Inn Southwest and Viking Conference Center Owner Managed
55 Valley Central Center Henry Investments
56 Centrum Office Building Summit Property Management Corp.
57 237-269 East Fordham Road Val-Ford Realty Inc.
58 Dietrich Meadows S/C Midland Development Group, Inc.
59 Schaumburg Villas Apartments Mid America Management Corp.
60 Vista Ridge Retail Center International Capital, Inc.
61 Trade Centre South Hughes Richardson Realty, Inc.
62 Loehman's Plaza Titan Management, L.P.
63 Southwind Plaza Slewa Investment, Inc.
64 127th Street Shopping Center Owner Managed
65 Filene's Basement Distribution Center Liberty Properties Corp.
66 Holiday Inn Express Hotel Richfield Hospitality Services, Inc.
67 Forest Pines Retirement Residence Holiday Retirement Corp.
68 Hammond Springs Shopping Center The Simpson Organization, Inc.
69 AMC Theater Complex Owner Managed
70 Roosevelt Plaza Shopping Center The Cotswold Group, Inc.
71 Johnson Square Office Park Pinnacle Realty Management Company, Inc.
72 Comfort Inn - Cleveland Pietro Properties Limited Partnership
73 Gateway Business Center Ambricourt Management Associates, LP
74 Good Samaritan Medical Plaza Santa Clara Valley Corporation
75 Spring Tree Apartments ConAm Management Corporation
76 Walgreen's Plaza Owner Managed
77 Candler McAfee Shopping Center Infinity Property Management Corp.
78 Heritage Hills Apartments Real Estate Equities / Village Green, LLC
79 Big V Supermarket Columbia Management Group
80 1333 N. Kingsbury Street Planned Realty Management, Inc.
81 Wellington Place North Summit Property Management Corp.
82 Woodstock Square Shopping Center Ackerman & Co.
83 Willow Creek Apartments ConAm Management Corporation
84 Rainforest Caf Property Owner Managed
85 Randall's Store Tenant Managed
86 34-38 Industrial Way East (Eatontown) North Jersey Management Corp.
87 Red Cedar Building Polinger Shannon and Luchs Company
88 Vineyard Crossing Apartments Westmark Management Company
89 Ojai Oaks Mobile Home Park Star Mobile Home Park Management
90 Highlands Ranch Town Center Westwood Financial Corp.
91 Greyberry Apartments of Wayne Owner Managed
92 Sunset Pecos Plaza The Equity Group
93 Carls Furniture/Sound Advice Myron Roberts Investments Company
94 Eldorado Estates Mobile Home Park Missouri Modular Park Corp.
95 North Plank Road ShopRite Center Empire Potomac Management Inc.
96 Colony Plaza Shopping Center Gregory Commercial, Inc.
97 10 North Ridgewood Road Roseland Management Co., L.L.C.
98 Doral Centre Shopping Plaza Larkin Schmidt Weidenbaum Commercial Real Estate
</TABLE>
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Zip
Address City State Code
<S> <C> <C> <C> <C>
50 721 Central Park Avenue Scarsdale NY 10583
51 708 Broadway New York NY 10003
52 360-386 East Fordham Road Bronx NY 10458
53 4500 Post Oak Parkway Houston TX 77027
54 10709 Watson Road Sunset Hills MO 63127
55 NWC of Valley Central Way and Avenue J Lancaster CA 93536
56 24901 Northwestern Highway Southfield MI 48075
57 237-269 East Fordham Road Bronx NY 10458
58 13918-13952 Manchester Road St. Louis MO 63011
59 1010 Knollwood Drive Schaumburg IL 60194
60 2403 S. Stemmons Freeway Lewisville TX 75067
61 100 Trade Centre Drive Champaign IL 61820
62 4076-4128 PGA Boulevard Palm Beach Gardens FL 33480
63 917/921 West Holmes & 3525/3615 South MLK Blvd Lansing MI 48910
64 12700 Biscayne Boulevard North Miami FL 33181
65 26 Millbury Street Auburn MA 01501
66 1401 Bloomfield Ave. Baltimore MD 21227
67 1720 Devonshire Drive Columbia SC 29204
68 5975 Roswell Road Sandy Springs GA 30328
69 1310 Third Street Santa Monica CA 90404
70 6501 Roosevelt Boulevard Philadelphia PA 19149
71 1501 - 1523 Johnson Ferry Road Marietta GA 30062
72 1800 Euclid Avenue Cleveland OH 44115
73 1333 and 1335 Gateway Drive Melbourne FL 32901
74 393 Blossom Hill Road San Jose CA 95123
75 1423 Graves Avenue El Cajon CA 92020
76 3860-3954 Decoto Road Fremont CA 94555
77 1950 Candler Road Atlanta GA 30317
78 3901 and 3909 Heritage Hills Drive Bloomington MN 55437
79 486-496 Albany Post Road Hyde Park NY 12538
80 1333 N. Kingsbury Street Chicago IL 60622
81 30445 Northwestern Hwy. Farmington Hills MI 48334
82 Highway 92 / Alabama Road Woodstock GA 30188
83 13656 Hilleary Place Poway CA 92064
84 605 N. Clark Street Chicago IL 60610
85 5800 New Territory Blvd. Sugar Land TX 77479
86 34-38 Industrial Way East Eatontown NJ 07724
87 44425 Pecan Court California MD 20619
88 3411 Old Vineyard Road Winston-Salem NC 27103
89 950 Woodland Avenue Ojai CA 93105
90 SWC of S. Broadway & Highlands Ranch Parkway Highlands Ranch CO 80126
91 3609 Hannan Road Wayne MI 48184
92 3460 Sunset Road and 6420 South Pecos Road Las Vegas NV 89120
93 17651 N. Biscayne Blvd. Aventura FL 33160
94 1 Eldorado Court St. Peters MO 63376
95 NW Corner of Route 32 and Chestnut Lane Newburgh NY 12550
96 State Highway 121 at Main Street The Colony TX 75056
97 10 North Ridgewood Road South Orange NJ 07079
98 9555 NW 41st Street Miami FL 33178
</TABLE>
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Property Name Manager
<S> <C> <C>
99 Carmel Woods Apartments Con Am Management Corporation
100 Seven Corners Professional Buildings Ominex, Inc.
101 Sunnydale MHP Missouri Modular Park, Corp.
102 Provence North Apartments First Communities Management, Inc.
103 Courtyard Garden Apartments Roybal Properties, Inc.
104 Walgreens - Seattle Walgreens
105 Apache Village Apartments Midwest Management, Inc.
106 Walgreens Retail Building - Gresham Walgreens
107 Westridge Plaza Barry J. Sands & Brian L. Burton
108 University Village Apartments Owner Managed
109 The Plaza at Stonebridge Christon Property Management Inc.
110 Henderson Plaza HPSC Management Company, L.L.C.
111 East Town Plaza Intra-State Property Management, L.L.C.
112 Lake Chabot Medical Center Thomas R. Powers
113 Garden City Town Center David M. Tisdale Management Company
114 Las Brisas Apartments Tucson Realty & Trust Co.
115 Bear Ground Apartments I, II, III Brothers Management Company, Inc.
116 Walgreens Retail Building - Tucson Transmark Company, Inc.
117 Mark Apartments Hughes Management, Inc.
118 Bank Properties Wareham Property Group, Inc.
119 4646 Bronze Way (1H) Owner Managed
120 4647 Bronze Way (1H) Owner Managed
121 Aspenwood Apartments LEDIC Management Group, Inc.
122 Lauderdale Parc Apartments FEIT Management Company
123 West County Plaza Center Management Company
124 Sheldon Plaza Retail Center Jennings & Co. Property Management, Inc.
125 Olde Falls Village Indus Associates
126 The Highland Office Building Sinco International Investments, Inc.
127 A-1 Storage of Lafayette Owner Managed
128 The Gaither Center Greater Potomac, Inc.
129 Willowbrook North Townhome Apartment Complex Carlisle Apartments, Inc.
130 Casual Male Corporate Office Building Owner Managed
131 Walgreens Retail Building - Portland Walgreens
132 Lake Placid Village Apartments Capital Management Group, Inc.
133 Cumberland Apartments Mid America Management, Inc.
134 Rainbow Shopping Center NKE, Inc.
135 Snowfall Plaza Owner Managed
136 Finley Terrace Apartments Hartex Property Group, Inc.
137 417 W. Barry Avenue/3030 N. Sheridan Road Water Tower Realty Management Company
138 Bradford Gwinnett Apartments Jupiter Western National, L.L.C.
139 Furr's Grocery Store Owner Managed
140 South Brunswick Industrial Park Quick Property Management Inc.
141 Villager Square Shopping Center Sevo Miller, Inc.
142 Flint Hill Building MJB Enterprises, Inc.
143 Peppertree Apartments Fulcrum Properties, Inc.
144 Star Ranch Plaza Griffis/Blessing, Inc.
145 Morehead Hills Apartments Westmark Management Company
146 Forest Park Apartments Westmark Management Company
147 Freeway Plaza Building Coldwell Banker Commercial Grand Realty
</TABLE>
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Zip
Address City State Code
<S> <C> <C> <C> <C>
99 3500 San Clemente Avenue Modesto CA 95356
100 6305 & 6319 Castle Place & 2946 Sleepy Hollow Rd Falls Church VA 22042
101 301 Sunnydale Drive St. Charles MO 63301
102 6558 Roswell Road Atlanta GA 30328
103 4040 Badillo Circle Baldwin Park CA 91706
104 14330-14350 Lake City Way Northeast Seattle WA 98125
105 3839 Hart Boulevard Columbia Heights MN 55241
106 1950 N.E. Burnside Road Gresham OR 97030
107 25001-25099 Center Ridge Road Westlake OH 44145
108 659 Elm Street Terre Haute IN 47807
109 NEC of El Dorado Parkway and Lake Forest Drive McKinney TX 75070
110 2307 U.S. Highway 79 Henderson TX 75654
111 1126 Elida Avenue Delphos OH 45833
112 20055 Lake Chabot Road Castro Valley CA 94546
113 5836-5940 Middlebelt Road Garden City MI 48135
114 2200 Las Brisas Way Sierra Vista AZ 85635
115 South 2nd and 5th Street Waco TX 76706
116 1550 West Valencia Road Tucson AZ 85746
117 3315 North Hills Street Meridian MS 39305
118 1120 Nye Street San Rafael CA 94901
119 4646 Bronze Way Dallas TX 75236
120 4647 Bronze Way Dallas TX 75236
121 3235 S. Mendenhall Road Memphis TN 38115
122 3333 Davie Boulevard Fort Lauderdale FL 33312
123 1613 Northwest County Road Odessa TX 79763
124 1502-1590 Coburg Road Eugene OR 97401
125 245 East Street Village of Honeoye Falls NY 14472
126 885 Arapahoe Avenue Boulder CO 80302
127 530 Stacy Court Lafayette CO 80026
128 9083 Gaither Rd. & 15900-15944 Luanne Drive Gaithersburg MD 20877
129 2018 W. Rundberg Austin TX 78758
130 437 Turnpike Street Canton MA 02021
131 3 N.E. 82ND Avenue Portland OR 97220
132 5801 Kingsport Drive Atlanta GA 30342
133 4600 N. Cumberland Avenue Chicago IL 60656
134 NEC of Rainbow Blvd & Spring Mountain Rd Las Vegas NV 89102
135 Route 7A Manchester VT 05255
136 2504 Finley Road Irving TX 75062
137 417 W. Barry Avenue/3030 N. Sheridan Road Chicago IL 60657
138 100 Castor Drive Norcross GA 30071
139 5514 Alameda Avenue El Paso TX 79905
140 110 Melrich Road South Brunswick NJ 08846
141 9012-9142 West Ken Caryl Ave. Littleton CO 80127
142 11601-11631 Nebel Street Rockville MD 20852
143 4203 Buford Highway Atlanta GA 30345
144 3647 Star Ranch Road Colorado Springs CO 80906
145 500 Cobb Street Durham NC 27701
146 33 Cunningham Road Taylors SC 29687
147 West 1500 Fourth Avenue Spokane WA 99204
</TABLE>
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Property Name Manager
<S> <C> <C>
148 Coconut Creek Apartments Diversified Managed Investments, Inc.
149 The Colonial Arms Apartments Brothers Management Company, Inc.
150 Norwood Park North Office Building Myers Commercial, Inc.
151 Chevy Chase Arcade Zuckerman Gravely Management, Inc.
152 Holcombe Medical Building The Centra Group, L.L.C.
153 Youngstown Mobile Home Park Owner Managed
154 Kinston Marketplace Koll Management Services, Inc.
155 Versailles Apartments Coastal Property Services, Inc.
156 Chaparral Apartments Hardin Properties, Inc.
157 Revco Drug Store Richard W. McKee Revocable Trust
158 Oakwood Estates Apartments Fulcrum Properties, Inc.
159 Innsbruck Villa Apartments Midwest Management, Inc.
160 The Pathmark Grocery Store Commerce Management Corp.
161 La Carre Apartments Fulcrum Properties, Inc.
162 Westside Plaza Shopping Center Larry A. Brotman
163 Woodhollow Apartments Barge Properties Mangement Company, Ltd.
164 Park View Place Apartments S&S Property Management, Inc.
165 2500 Packard Road Dietz Management Company
166 K-Mart Plaza Roebling of New York, Inc.
167 Portland Contessa Apartments Westmark Management Company
168 Lovers Lane Animal Hospital/Clinic Pinnacle Realty Management Company
</TABLE>
<PAGE>
Managers and Locations of the Mortgaged Properties
<TABLE>
<CAPTION>
Zip
Address City State Code
<S> <C> <C> <C> <C>
148 370 Sunshine Drive Coconut Creek FL 33066
149 5901, 5817, 5701 Edmond Waco TX 76710
150 1550 Norwood Drive Hurst TX 76054
151 5520 Connecticut Avenue, N.W. Washington DC 20015
152 2201 W. Holcombe Houston TX 77030
153 911 N. McDowell Boulevard Petaluma CA 94952
154 1030 New Bern Road Kinston NC 28501
155 1110 West Poplar Street Griffin GA 30344
156 603 W. Eagle Denton TX 76201
157 Keith Street at Tucker Street Cleveland TN 37311
158 1457 Oakwood Drive Greenville MS 38701
159 2395 Third Street Northwest New Brighton MN 55112
160 407-411 Valley Street S. Orange Village Township NJ 07079
161 700 N. Indian Creek Drive Clarkston GA 30021
162 400-440 S. Ventura Road Oxnard CA 93030
163 2451 Lake Road Huntsville TX 77340
164 6226 Barnes Road South Jacksonville FL 32216
165 2500 Packard Road Ann Arbor MI 48104
166 4545 South Noland Road Independence MO 64051
167 410 Lang Road Portland TX 78374
168 4660 West Lovers Lane Dallas TX 75207
</TABLE>
(1A) The Mortgage Loans secured by the 18 Stone Container industrial
properties, respectively, are cross-collateralized and cross-defaulted.
(1B) The Mortgage Loans secured by Willow Creek Apartments (Foster Portfolio),
Lake Park Apartments, Plaza South Apartments, Farmwood Apartments, and
Colony Apartments, respectively, are cross-collateralized and
cross-defaulted.
(1C) The Mortgage Loans secured by Pebble Creek Apartments and Homestead
Apartments, respectively, are cross-collateralized and cross-defaulted.
(1D) The Mortgage Loans secured by Shops at Lyndale Phase II and Shops at
Lyndale Phase II - TIF, respectively, are cross-collateralized and
cross-defaulted.
(1E) The Mortgage Loans secured by Walgreens - Kirkland, Walgreens Retail
Pharmacy Store - San Francisco, Walgreens Retail Pharmacy Store -
Charleston/Torrey, Walgreens Retail Pharmacy Store - Las Vegas Boulevard,
and Walgreens/Pharmacy Store - Paradise, respectively, are
cross-collateralized and cross-defaulted.
(1F) The Mortgage Loans secured by Two Greenville Crossing and One Greenville
Crossing, respectively, are cross-collateralized and cross-defaulted.
(1G) The Mortgage Loans secured by Curry Honda Automobile Dealership, Curry
Chevrolet Automobile Dealership, Curry Acura Automobile Dealership, Curry
Ford/Subaru Automobile Dealership, Curry Mitsubishi Automobile Dealership,
and Curry Office Building, respectively, are cross-collateralized and
cross-defaulted.
(1H) The Mortgage Loans secured by 4646 Bronze Way and 4647 Bronze Way,
respectively, are cross-collateralized and cross-defaulted.
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Later
of Year
Units/ Built/ Occupancy
Sq. Ft./ Fee Simple/ Year Rate at
Property Name (1) Property Type Rooms Leasehold Renovated U/W
<S> <C> <C> <C> <C> <C> <C>
1 Showboat Hotel & Casino, Atlantic City Hotel & Casino 516 Fee 1994 N/A
2 Stone Container - Santa Fe Springs (1A) Industrial 200,460 Fee 1966 100.0%
3 Stone Container - Mansfield (1A) Industrial 167,368 Fee 1971 100.0%
4 Stone Container - San Jose (1A) Industrial 164,100 Fee 1967 100.0%
5 Stone Container - Minneapolis (1A) Industrial 250,750 Fee 1980 100.0%
6 Stone Container - Springfield (1A) Industrial 200,880 Fee 1968 100.0%
7 Stone Container - Salinas (1A) Industrial 183,000 Fee 1969 100.0%
8 Stone Container - Harahan (1A) Industrial 138,355 Fee 1976 100.0%
9 Stone Container - Rogers (1A) Industrial 185,260 Fee 1987 100.0%
10 Stone Container - Keokuk (1A) Industrial 180,803 Fee 1972 100.0%
11 Stone Container - Portland (1A) Industrial 163,868 Fee 1979 100.0%
12 Stone Container - Saltillo (1A) Industrial 168,034 Fee 1989 100.0%
13 Stone Container - Columbus (1A) Industrial 136,112 Fee 1968 100.0%
14 Stone Container - North Tonawanda (1A) Industrial 156,710 Fee 1967 100.0%
15 Stone Container - St. Cloud (1A) Industrial 202,200 Fee 1992 100.0%
16 Stone Container - Jackson (1A) Industrial 157,955 Fee 1970 100.0%
17 Stone Container - Collierville (1A) Industrial 79,300 Fee 1980 100.0%
18 Stone Container - Bloomington (1A) Industrial 58,560 Fee 1971 100.0%
19 Stone Container - Danville (1A) Industrial 52,980 Fee 1967 100.0%
20 Washington Marriott Hotel Hotel 418 Fee 1995 N/A
21 Willow Creek Apartments (Foster Portfolio) (1B) Multifamily 302 Fee 1978 95.0%
22 Lake Park Apartments (1B) Multifamily 210 Fee 1983 97.0%
23 Plaza South Apartments (1B) Multifamily 239 Fee 1995 97.0%
24 Farmwood Apartments (1B) Multifamily 254 Fee 1974 96.0%
25 Colony Apartments (1B) Multifamily 119 Fee 1974 96.0%
26 Southwest Plaza I and II Shopping Center Retail 225,889 Fee 1989 97.0%
27 The Rosedale Corporate Plaza Office 233,987 Fee 1987 100.0%
28 Bayvue Apartments Multifamily 670 Fee 1996 96.0%
29 Lake Calhoun Executive Center Office 156,149 Fee/Leasehold 1989 98.0%
30 Pebble Creek Apartments (1C) Multifamily 168 Fee 1996 99.0%
31 Homestead Apartments (1C) Multifamily 253 Fee 1994 96.0%
32 Shops at Lyndale Phase II (1D) Retail 114,640 Fee 1996 100.0%
33 Shops at Lyndale Phase II - TIF (1D) Retail 114,640 Fee 1996 100.0%
34 Walgreens - Kirkland (1E) Retail 13,905 Fee 1997 100.0%
35 Walgreens Retail Pharmacy Store - San Francisco (1E) Retail 14,026 Fee 1996 100.0%
36 Walgreens Retail Pharmacy Store - Charleston/Torrey (1E) Retail 13,905 Fee 1996 100.0%
37 Walgreens Retail Pharmacy Store - Las Vegas Boulevard (1E) Retail 15,120 Fee 1996 100.0%
38 Walgreens Retail/Pharmacy Store - Paradise (1E) Retail 13,905 Fee 1996 100.0%
39 Country Village MHP Mobile Home Park 477 Fee 1995 99.0%
40 414 N. Orleans St. Office 185,717 Fee 1985 100.0%
41 Two Greenville Crossing (1F) Mixed Use 66,177 Fee 1990 100.0%
42 One Greenville Crossing (1F) Retail 63,012 Fee 1988 96.0%
43 Wesley Chapel Square Retail 215,096 Fee 1987 100.0%
44 Mercado del Lago Shopping Center Retail 68,055 Fee 1989 100.0%
45 Curry Honda Automobile Dealership (1G) Other Commercial 49,973 Fee 1994 100.0%
46 Curry Chevrolet Automobile Dealership (1G) Other Commercial 32,340 Fee 1964 100.0%
47 Curry Acura Automobile Dealership (1G) Other Commercial 14,632 Fee 1980 100.0%
48 Curry Ford/Subaru Automobile Dealership (1G) Other Commercial 28,065 Fee 1986 100.0%
49 Curry Mitsubishi Automobile Dealership (1G) Other Commercial 16,073 Fee 1990 100.0%
50 Curry Office Building (1G) Other Commercial 14,460 Fee 1964 100.0%
51 708 Broadway / 404 Lafayette Street Office 148,778 Fee 1988 100.0%
52 360-386 East Fordham Road Retail 46,480 Fee 1990 90.0%
</TABLE>
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Cut-off
Date LTV U/W
Property Name (1) Appraised Value Ratio U/W NOI DSCR
<S> <C> <C> <C> <C> <C>
1 Showboat Hotel & Casino, Atlantic City $416,000,000 (3) 24.0% (3) $9,182,326 1.14 x
2 Stone Container - Santa Fe Springs (1A) 6,000,000 74.6% 631,913 1.46
3 Stone Container - Mansfield (1A) 5,800,000 74.6% 589,938 1.41
4 Stone Container - San Jose (1A) 5,650,000 74.6% 518,728 1.27
5 Stone Container - Minneapolis (1A) 5,150,000 74.6% 520,462 1.40
6 Stone Container - Springfield (1A) 4,700,000 74.6% 529,771 1.56
7 Stone Container - Salinas (1A) 4,025,000 74.6% 442,677 1.52
8 Stone Container - Harahan (1A) 3,800,000 74.6% 364,824 1.33
9 Stone Container - Rogers (1A) 3,150,000 74.6% 286,412 1.26
10 Stone Container - Keokuk (1A) 2,350,000 74.6% 240,060 1.42
11 Stone Container - Portland (1A) 2,300,000 74.6% 253,339 1.53
12 Stone Container - Saltillo (1A) 2,020,000 74.6% 191,323 1.31
13 Stone Container - Columbus (1A) 2,000,000 74.6% 236,835 1.64
14 Stone Container - North Tonawanda (1A) 2,000,000 74.6% 255,955 1.77
15 Stone Container - St. Cloud (1A) 2,000,000 74.6% 224,341 1.55
16 Stone Container - Jackson (1A) 1,850,000 74.6% 175,252 1.31
17 Stone Container - Collierville (1A) 1,500,000 74.6% 130,290 1.20
18 Stone Container - Bloomington (1A) 1,050,000 74.6% 103,314 1.36
19 Stone Container - Danville (1A) 850,000 74.6% 81,907 1.34
20 Washington Marriott Hotel 75,000,000 45.3% 4,827,019 1.62
21 Willow Creek Apartments (Foster Portfolio) (1B) 9,600,000 74.7% 725,870 1.23
22 Lake Park Apartments (1B) 8,600,000 79.9% 788,705 1.40
23 Plaza South Apartments (1B) 7,350,000 79.9% 627,486 1.30
24 Farmwood Apartments (1B) 7,325,000 79.9% 622,969 1.30
25 Colony Apartments (1B) 3,175,000 69.2% 224,623 1.25
26 Southwest Plaza I and II Shopping Center 24,500,000 74.4% 1,900,809 1.24
27 The Rosedale Corporate Plaza 24,500,000 73.4% 2,051,784 1.42
28 Bayvue Apartments 21,800,000 79.5% 1,841,006 1.25
29 Lake Calhoun Executive Center 20,900,000 76.8% 1,867,029 1.29
30 Pebble Creek Apartments (1C) 9,900,000 75.6% 843,466 1.33
31 Homestead Apartments (1C) 9,450,000 77.0% 793,316 1.28
32 Shops at Lyndale Phase II (1D) 17,750,000 74.7% 1,489,606 1.28
33 Shops at Lyndale Phase II - TIF (1D) 3,050,000 48.4% 309,514 1.68
34 Walgreens - Kirkland (1E) 4,300,000 80.0% 375,939 1.26
35 Walgreens Retail Pharmacy Store - San Francisco (1E) 4,600,000 73.9% 371,562 1.26
36 Walgreens Retail Pharmacy Store - Charleston/Torrey (1E) 3,400,000 80.7% 299,309 1.25
37 Walgreens Retail Pharmacy Store - Las Vegas Boulevard (1E) 3,400,000 80.7% 299,188 1.25
38 Walgreens Retail/Pharmacy Store - Paradise (1E) 2,450,000 74.5% 199,884 1.26
39 Country Village MHP 20,313,000 64.9% 1,419,941 1.35
40 414 N. Orleans St. 17,470,000 74.3% 1,417,274 1.24
41 Two Greenville Crossing (1F) 12,600,000 60.2% 950,141 1.54
42 One Greenville Crossing (1F) 8,600,000 60.4% 671,453 1.59
43 Wesley Chapel Square 15,950,000 71.1% 1,415,979 1.32
44 Mercado del Lago Shopping Center 14,600,000 77.2% 1,185,927 1.26
45 Curry Honda Automobile Dealership (1G) 5,100,000 65.4% 503,369 1.41
46 Curry Chevrolet Automobile Dealership (1G) 3,500,000 59.7% 299,258 1.33
47 Curry Acura Automobile Dealership (1G) 2,500,000 65.7% 226,767 1.29
48 Curry Ford/Subaru Automobile Dealership (1G) 2,400,000 68.4% 232,697 1.32
49 Curry Mitsubishi Automobile Dealership (1G) 1,500,000 64.4% 136,147 1.31
50 Curry Office Building (1G) 1,000,000 64.7% 96,845 1.39
51 708 Broadway / 404 Lafayette Street 14,000,000 71.3% 1,193,749 1.38
52 360-386 East Fordham Road 18,000,000 55.4% 1,601,351 1.93
</TABLE>
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Later
of Year
Units/ Built/ Occupancy
Sq. Ft./ Fee Simple/ Year Rate at
Property Name (1) Property Type Rooms Leasehold Renovated U/W(2)
<S> <C> <C> <C> <C> <C> <C>
53 Hampton Inn - Houston Galleria Hotel 176 Fee 1995 N/A
54 Holiday Inn Southwest and Viking Conference Center Hotel 212 Fee 1997 N/A
55 Valley Central Center Retail 110,870 Fee 1990 94.0%
56 Centrum Office Building Office 193,665 Fee 1995 98.0%
57 237-269 East Fordham Road Retail 24,200 Fee 1992 100.0%
58 Dietrich Meadows S/C Retail 70,325 Fee 1997 100.0%
59 Schaumburg Villas Apartments Multifamily 300 Fee 1970 98.0%
60 Vista Ridge Retail Center Retail 52,280 Fee 1996 100.0%
61 Trade Centre South Office 101,945 Fee/Leasehold 1990 93.0%
62 Loehman's Plaza Retail 99,059 Fee 1992 100.0%
63 Southwind Plaza Retail 133,044 Fee 1969 89.0%
64 127th Street Shopping Center Retail 167,612 Leasehold 1989 100.0%
65 Filene's Basement Distribution Center Industrial 456,920 Fee 1987 100.0%
66 Holiday Inn Express Hotel Hotel 177 Fee 1993 N/A
67 Forest Pines Retirement Residence Senior Housing 115 Fee 1996 100.0%
68 Hammond Springs Shopping Center Retail 62,414 Fee 1987 92.0%
69 AMC Theater Complex Retail 35,000 Fee 1989 100.0%
70 Roosevelt Plaza Shopping Center Retail 121,595 Fee 1987 93.0%
71 Johnson Square Office Park Office 116,325 Fee 1980 91.0%
72 Comfort Inn - Cleveland Hotel 130 Leasehold 1995 N/A
73 Gateway Business Center Mixed Use 116,010 Fee 1993 94.0%
74 Good Samaritan Medical Plaza Office 44,000 Fee 1995 100.0%
75 Spring Tree Apartments Multifamily 148 Fee 1986 98.0%
76 Walgreen's Plaza Retail 35,797 Fee 1994 100.0%
77 Candler McAfee Shopping Center Retail 167,784 Fee 1992 100.0%
78 Heritage Hills Apartments Multifamily 135 Fee 1996 98.0%
79 Big V Supermarket Retail 52,500 Fee 1997 100.0%
80 1333 N. Kingsbury Street Office 96,008 Fee 1990 99.0%
81 Wellington Place North Office 93,974 Fee 1986 99.0%
82 Woodstock Square Shopping Center Retail 77,411 Fee 1988 100.0%
83 Willow Creek Apartments Multifamily 107 Fee 1985 100.0%
84 Rainforest Cafe Property Retail 20,322 Fee 1997 100.0%
85 Randall's Store Retail 59,000 Fee 1996 100.0%
86 34-38 Industrial Way East (Eatontown) Industrial 105,858 Fee 1988 95.0%
87 Red Cedar Building Office 58,948 Fee 1997 100.0%
88 Vineyard Crossing Apartments Multifamily 192 Fee 1981 97.0%
89 Ojai Oaks Mobile Home Park Mobile Home Park 125 Fee 1996 99.0%
90 Highlands Ranch Town Center Retail 39,089 Fee 1997 87.0%
91 Greyberry Apartments of Wayne Multifamily 124 Fee 1991 100.0%
92 Sunset Pecos Plaza Retail 36,456 Fee 1997 90.0%
93 Carls Furniture/Sound Advice Retail 57,000 Fee 1996 100.0%
94 Eldorado Estates Mobile Home Park Mobile Home Park 400 Fee 1972 99.0%
95 North Plank Road ShopRite Center Retail 54,776 Fee 1984 100.0%
96 Colony Plaza Shopping Center Retail 33,494 Fee 1997 100.0%
97 10 North Ridgewood Road Multifamily 66 Fee 1938 97.0%
98 Doral Centre Shopping Plaza Retail 35,032 Fee 1996 100.0%
99 Carmel Woods Apartments Multifamily 120 Fee 1985 96.0%
100 Seven Corners Professional Buildings Office 56,027 Fee 1959 94.0%
101 Sunnydale MHP Mobile Home Park 296 Fee 1967 99.0%
102 Provence North Apartments Multifamily 112 Fee 1966 96.0%
103 Courtyard Garden Apartments Multifamily 87 Fee 1995 100.0%
104 Walgreens - Seattle Retail 13,905 Fee 1996 100.0%
</TABLE>
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Cut-off
Date LTV U/W
Property Name (1) Appraised Value Ratio U/W NOI DSCR
<S> <C> <C> <C> <C> <C>
53 Hampton Inn - Houston Galleria $14,300,000 69.8% $1,306,619 1.44 x
54 Holiday Inn Southwest and Viking Conference Center 14,600,000 66.5% 1,360,645 1.43
55 Valley Central Center 11,700,000 79.8% 1,004,496 1.26
56 Centrum Office Building 13,300,000 67.6% 1,192,679 1.53
57 237-269 East Fordham Road 11,400,000 76.7% 963,000 1.36
58 Dietrich Meadows S/C 11,200,000 74.9% 926,046 1.26
59 Schaumburg Villas Apartments 11,200,000 71.3% 900,112 1.39
60 Vista Ridge Retail Center 9,900,000 79.8% 878,008 1.31
61 Trade Centre South 10,900,000 72.3% 876,951 1.29
62 Loehman's Plaza 9,800,000 79.8% 863,378 1.28
63 Southwind Plaza 10,000,000 75.9% 831,546 1.34
64 127th Street Shopping Center 10,200,000 73.4% 843,953 1.39
65 Filene's Basement Distribution Center 14,340,000 52.2% 1,065,682 1.54
66 Holiday Inn Express Hotel 10,000,000 74.8% 978,132 1.41
67 Forest Pines Retirement Residence 9,600,000 75.3% 866,932 1.36
68 Hammond Springs Shopping Center 8,950,000 79.1% 848,901 1.39
69 AMC Theater Complex 10,000,000 69.9% 1,000,430 1.69
70 Roosevelt Plaza Shopping Center 11,100,000 62.0% 802,766 1.28
71 Johnson Square Office Park 8,200,000 78.9% 746,511 1.39
72 Comfort Inn - Cleveland 8,000,000 74.9% 855,030 1.58
73 Gateway Business Center 7,600,000 77.4% 677,230 1.28
74 Good Samaritan Medical Plaza 8,200,000 68.8% 648,695 1.28
75 Spring Tree Apartments 7,100,000 78.3% 593,249 1.27
76 Walgreen's Plaza 7,000,000 74.2% 571,007 1.31
77 Candler McAfee Shopping Center 6,400,000 80.6% 639,487 1.26
78 Heritage Hills Apartments 6,400,000 79.5% 555,466 1.27
79 Big V Supermarket 6,900,000 73.7% 652,383 1.43
80 1333 N. Kingsbury Street 6,700,000 74.8% 576,466 1.29
81 Wellington Place North 9,500,000 52.6% 618,998 1.43
82 Woodstock Square Shopping Center 6,550,000 76.2% 577,210 1.38
83 Willow Creek Apartments 6,750,000 73.7% 520,356 1.24
84 Rainforest Cafe Property 7,050,000 70.4% 676,984 1.26
85 Randall's Store 6,165,000 77.7% 552,112 1.31
86 34-38 Industrial Way East (Eatontown) 6,240,000 73.6% 491,190 1.25
87 Red Cedar Building 6,100,000 71.9% 482,355 1.28
88 Vineyard Crossing Apartments 8,000,000 53.7% 462,119 1.29
89 Ojai Oaks Mobile Home Park 5,840,000 73.4% 472,694 1.28
90 Highlands Ranch Town Center 6,350,000 66.7% 523,830 1.32
91 Greyberry Apartments of Wayne 5,650,000 74.1% 502,607 1.45
92 Sunset Pecos Plaza 6,150,000 66.5% 550,772 1.48
93 Carls Furniture/Sound Advice 5,700,000 70.7% 536,495 1.35
94 Eldorado Estates Mobile Home Park 11,155,000 34.3% 856,548 2.67
95 North Plank Road ShopRite Center 5,100,000 74.4% 441,511 1.33
96 Colony Plaza Shopping Center 5,200,000 72.9% 421,268 1.29
97 10 North Ridgewood Road 4,700,000 80.6% 424,292 1.30
98 Doral Centre Shopping Plaza 5,200,000 72.8% 462,021 1.37
99 Carmel Woods Apartments 4,900,000 77.2% 402,932 1.27
100 Seven Corners Professional Buildings 5,000,000 74.8% 432,738 1.35
101 Sunnydale MHP 7,840,000 47.6% 616,708 1.97
102 Provence North Apartments 4,575,000 79.4% 385,440 1.25
103 Courtyard Garden Apartments 4,700,000 74.3% 396,332 1.33
104 Walgreens - Seattle 4,500,000 72.7% 357,509 1.26
</TABLE>
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Later
of Year
Units/ Built/ Occupancy
Sq. Ft./ Fee Simple/ Year Rate at
Property Name (1) Property Type Rooms Leasehold Renovated U/W(2)
<S> <C> <C> <C> <C> <C> <C>
105 Apache Village Apartments Multifamily 145 Fee 1994 99.0%
106 Walgreens Retail Building - Gresham Retail 13,905 Fee 1997 100.0%
107 Westridge Plaza Retail 98,833 Fee 1975 95.0%
108 University Village Apartments Multifamily 47 Fee 1994 100.0%
109 The Plaza at Stonebridge Retail 33,700 Fee 1997 94.0%
110 Henderson Plaza Retail 120,050 Fee 1968 100.0%
111 East Town Plaza Retail 79,425 Fee 1989 95.0%
112 Lake Chabot Medical Center Office 26,195 Leasehold 1985 100.0%
113 Garden City Town Center Retail 44,747 Fee 1989 88.0%
114 Las Brisas Apartments Multifamily 132 Fee 1986 98.0%
115 Bear Ground Apartments I, II, III Multifamily 188 Fee 1993 95.0%
116 Walgreens Retail Building - Tucson Retail 17,089 Fee 1996 100.0%
117 Mark Apartments Multifamily 96 Fee 1986 100.0%
118 Bank Properties Office 22,879 Fee 1984 100.0%
119 4646 Bronze Way (1H) Industrial 85,376 Fee 1997 100.0%
120 4647 Bronze Way (1H) Industrial 57,804 Fee 1997 100.0%
121 Aspenwood Apartments Multifamily 120 Fee 1992 99.0%
122 Lauderdale Parc Apartments Multifamily 120 Fee 1992 99.0%
123 West County Plaza Retail 111,789 Fee 1994 93.0%
124 Sheldon Plaza Retail Center Retail 59,201 Fee 1975 100.0%
125 Olde Falls Village Multifamily 112 Fee 1989 98.0%
126 The Highland Office Building Office 15,660 Fee 1979 100.0%
127 A-1 Storage of Lafayette Self Storage 73,876 Fee 1996 83.0%
128 The Gaither Center Retail 36,280 Fee 1978 100.0%
129 Willowbrook North Townhome Apartment Complex Multifamily 76 Fee 1985 99.0%
130 Casual Male Corporate Office Building Mixed Use 53,000 Fee 1997 100.0%
131 Walgreens Retail Building - Portland Retail 13,737 Fee 1997 100.0%
132 Lake Placid Village Apartments Multifamily 98 Fee 1970 96.0%
133 Cumberland Apartments Multifamily 84 Fee 1971 96.0%
134 Rainbow Shopping Center Retail 19,875 Fee 1994 90.0%
135 Snowfall Plaza Retail 15,510 Fee 1994 100.0%
136 Finley Terrace Apartments Multifamily 142 Fee 1993 96.0%
137 417 W. Barry Avenue/3030 N. Sheridan Road Multifamily 50 Fee 1995 100.0%
138 Bradford Gwinnett Apartments Multifamily 196 Fee 1995 98.0%
139 Furr's Grocery Store Retail 45,096 Fee 1995 100.0%
140 South Brunswick Industrial Park Industrial 117,430 Fee 1985 100.0%
141 Villager Square Shopping Center Retail 37,455 Fee 1994 100.0%
142 Flint Hill Building Mixed Use 19,950 Fee 1983 94.0%
143 Peppertree Apartments Multifamily 61 Fee 1978 98.0%
144 Star Ranch Plaza Retail 35,204 Fee 1986 96.0%
145 Morehead Hills Apartments Multifamily 75 Fee 1979 100.0%
146 Forest Park Apartments Multifamily 80 Fee 1979 100.0%
147 Freeway Plaza Building Office 40,016 Fee 1980 82.0%
148 Coconut Creek Apartments Multifamily 66 Fee 1973 95.0%
149 The Colonial Arms Apartments Multifamily 123 Fee 1964 98.0%
150 Norwood Park North Office Building Office 42,716 Fee 1981 95.0%
151 Chevy Chase Arcade Mixed Use 12,318 Fee 1996 100.0%
152 Holcombe Medical Building Office 26,767 Fee 1983 97.0%
153 Youngstown Mobile Home Park Mobile Home Park 102 Fee 1975 100.0%
154 Kinston Marketplace Retail 52,230 Fee 1997 100.0%
155 Versailles Apartments Multifamily 80 Fee 1988 98.0%
156 Chaparral Apartments Multifamily 172 Fee 1994 93.0%
</TABLE>
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Cut-off
Date LTV U/W
Property Name (1) Appraised Value Ratio U/W NOI DSCR
<S> <C> <C> <C> <C> <C>
105 Apache Village Apartments $4,290,000 75.1% $366,050 1.35 x
106 Walgreens Retail Building - Gresham 4,150,000 76.9% 348,779 1.26
107 Westridge Plaza 6,050,000 52.7% 434,253 1.48
108 University Village Apartments 4,400,000 71.5% 358,384 1.36
109 The Plaza at Stonebridge 4,190,000 74.9% 366,056 1.34
110 Henderson Plaza 4,175,000 74.6% 355,816 1.29
111 East Town Plaza 3,960,000 77.5% 392,021 1.40
112 Lake Chabot Medical Center 4,600,000 65.1% 425,159 1.63
113 Garden City Town Center 4,300,000 69.4% 377,344 1.37
114 Las Brisas Apartments 4,100,000 71.7% 332,492 1.27
115 Bear Ground Apartments I, II, III 3,800,000 76.1% 321,819 1.28
116 Walgreens Retail Building - Tucson 3,400,000 85.0% 289,321 1.05
117 Mark Apartments 3,650,000 77.9% 337,062 1.43
118 Bank Properties 3,800,000 73.5% 296,786 1.17
119 4646 Bronze Way (1H) 2,200,000 72.9% 206,074 1.36
120 4647 Bronze Way (1H) 1,500,000 72.4% 131,977 1.29
121 Aspenwood Apartments 3,400,000 76.2% 309,669 1.43
122 Lauderdale Parc Apartments 3,500,000 72.3% 315,448 1.33
123 West County Plaza 3,450,000 73.0% 287,565 1.30
124 Sheldon Plaza Retail Center 3,700,000 67.4% 287,712 1.29
125 Olde Falls Village 3,600,000 69.2% 323,716 1.51
126 The Highland Office Building 3,800,000 65.4% 306,668 1.21
127 A-1 Storage of Lafayette 3,400,000 72.2% 304,694 1.34
128 The Gaither Center 3,800,000 61.6% 328,910 1.55
129 Willowbrook North Townhome Apartment Complex 3,000,000 77.2% 253,500 1.31
130 Casual Male Corporate Office Building 3,050,000 75.2% 266,021 1.29
131 Walgreens Retail Building - Portland 2,950,000 77.4% 249,856 1.26
132 Lake Placid Village Apartments 2,800,000 74.9% 226,499 1.31
133 Cumberland Apartments 2,850,000 73.5% 237,987 1.35
134 Rainbow Shopping Center 2,650,000 78.2% 242,725 1.28
135 Snowfall Plaza 3,365,000 60.7% 251,946 1.29
136 Finley Terrace Apartments 2,600,000 78.5% 243,786 1.29
137 417 W. Barry Avenue/3030 N. Sheridan Road 2,720,000 73.4% 230,639 1.38
138 Bradford Gwinnett Apartments 3,500,000 56.9% 329,694 1.67
139 Furr's Grocery Store 2,800,000 71.2% 279,236 1.43
140 South Brunswick Industrial Park 3,800,000 52.3% 285,314 1.42
141 Villager Square Shopping Center 2,800,000 69.8% 247,847 1.42
142 Flint Hill Building 2,600,000 74.8% 230,858 1.30
143 Peppertree Apartments 2,375,000 79.9% 198,244 1.29
144 Star Ranch Plaza 2,700,000 70.1% 227,850 1.26
145 Morehead Hills Apartments 3,050,000 61.9% 193,460 1.25
146 Forest Park Apartments 2,500,000 71.1% 185,550 1.27
147 Freeway Plaza Building 2,700,000 65.7% 203,801 1.29
148 Coconut Creek Apartments 2,200,000 79.7% 198,292 1.23
149 The Colonial Arms Apartments 2,125,000 79.8% 204,304 1.45
150 Norwood Park North Office Building 2,200,000 69.1% 169,345 1.26
151 Chevy Chase Arcade 2,100,000 71.3% 169,273 1.30
152 Holcombe Medical Building 2,100,000 71.3% 164,390 1.28
153 Youngstown Mobile Home Park 3,190,000 46.9% 228,817 1.83
154 Kinston Marketplace 2,200,000 68.0% 170,331 1.33
155 Versailles Apartments 2,050,000 72.9% 187,324 1.24
156 Chaparral Apartments 2,600,000 57.0% 240,385 1.39
</TABLE>
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Later
of Year
Units/ Built/ Occupancy
Sq. Ft./ Fee Simple/ Year Rate at
Property Name (1) Property Type Rooms Leasehold Renovated U/W(2)
<S> <C> <C> <C> <C> <C> <C>
157 Revco Drug Store Retail 10,722 Fee 1997 100.0%
158 Oakwood Estates Apartments Multifamily 80 Fee 1990 98.0%
159 Innsbruck Villa Apartments Multifamily 74 Fee 1994 95.0%
160 The Pathmark Grocery Store Retail 46,500 Fee 1986 100.0%
161 La Carre Apartments Multifamily 50 Fee 1970 100.0%
162 Westside Plaza Shopping Center Retail 10,673 Fee 1996 91.0%
163 Woodhollow Apartments Multifamily 84 Fee 1973 95.0%
164 Park View Place Apartments Multifamily 68 Fee 1967 96.0%
165 2500 Packard Road Office 24,227 Fee 1969 91.0%
166 K-Mart Plaza Retail 104,000 Fee 1967 100.0%
167 Portland Contessa Apartments Multifamily 64 Fee 1994 97.0%
168 Lovers Lane Animal Hospital/Clinic Other Commercial 7,020 Fee 1991 100.0%
Total/Weighted Average: 1989 97.8% (2)
====================
Maximum: 1997 100.0%
Minimum: 1938 82.0%
</TABLE>
<PAGE>
Descriptions of the Mortgaged Properties
<TABLE>
<CAPTION>
Cut-off
Date LTV U/W
Property Name (1) Appraised Value Ratio U/W NOI DSCR
<S> <C> <C> <C> <C> <C>
157 Revco Drug Store $1,900,000 76.8% $174,678 1.22 x
158 Oakwood Estates Apartments 1,800,000 79.8% 157,475 1.26
159 Innsbruck Villa Apartments 1,830,000 74.9% 171,468 1.49
160 The Pathmark Grocery Store 2,175,000 61.2% 198,263 1.25
161 La Carre Apartments 1,650,000 78.7% 133,351 1.25
162 Westside Plaza Shopping Center 1,950,000 66.3% 152,857 1.23
163 Woodhollow Apartments 1,550,000 77.2% 138,331 1.26
164 Park View Place Apartments 1,450,000 74.7% 124,892 1.32
165 2500 Packard Road 1,400,000 74.6% 130,464 1.26
166 K-Mart Plaza 2,750,000 25.4% 82,905 1.29
167 Portland Contessa Apartments 1,000,000 63.9% 66,720 1.25
168 Lovers Lane Animal Hospital/Clinic 700,000 72.5% 93,122 1.65
Total/Weighted Average: $1,481,628,000 (3) 65.4% (3) $98,706,045 1.35 x
================================================
Maximum: $416,000,000 (3) 85.0% (3) $9,182,326 2.67 x
Minimum: $700,000 (3) 24.0% (3) $66,720 1.05 x
</TABLE>
(1A) The Mortgage Loans secured by the 18 Stone Container industrial
properties, respectively, are cross-collateralized and cross-defaulted.
(1B) The Mortgage Loans secured by Willow Creek Apartments (Foster Portfolio),
Lake Park Apartments, Plaza South Apartments, Farmwood Apartments, and
Colony Apartments, respectively, are cross-collateralized and
cross-defaulted.
(1C) The Mortgage Loans secured by Pebble Creek Apartments and Homestead
Apartments, respectively, are cross-collateralized and cross-defaulted.
(1D) The Mortgage Loans secured by Shops at Lyndale Phase II and Shops at
Lyndale Phase II - TIF, respectively, are cross-collateralized and
cross-defaulted.
(1E) The Mortgage Loans secured by Walgreens - Kirkland, Walgreens Retail
Pharmacy Store - San Francisco, Walgreens Retail Pharmacy Store -
Charleston/Torrey, Walgreens Retail Pharmacy Store - Las Vegas Boulevard,
and Walgreens/Pharmacy Store - Paradise, respectively, are
cross-collateralized and cross-defaulted.
(1F) The Mortgage Loans secured by Two Greenville Crossing and One Greenville
Crossing, respectively, are cross-collateralized and cross-defaulted.
(1G) The Mortgage Loans secured by Curry Honda Automobile Dealership, Curry
Chevrolet Automobile Dealership, Curry Acura Automobile Dealership, Curry
Ford/Subaru Automobile Dealership, Curry Mitsubishi Automobile Dealership,
and Curry Office Building, respectively, are cross-collateralized and
cross-defaulted.
(1H) The Mortgage Loans secured by 4646 Bronze Way and 4647 Bronze Way,
respectively, are cross-collateralized and cross-defaulted.
(2) Does not reflect any Mortgage Loans secured by hotel properties.
(3) The Appraised Value for the Showboat Hotel & Casino, Atlantic City and the
aggregate Appraised Value of all the Mortgaged Properties set forth above
reflects, and the Cut-off Date LTV Ratio of the Showboat Loan and the
weighted average Cut-off Date LTV Ratio of the Mortgage Pool set forth
above is based upon, the unencumbered fee simple value of the Showboat
Hotel & Casino, Atlantic City under a foreclosure scenario, assuming that
such property is free and clear of the Showboat Ground Lease. The
estimated value (based upon an income capitalization approach) of the
property securing the Showboat Loan, taking into account that such
property is encumbered by the Showboat Ground Lease, is approximately $110
million. Based upon such value, the aggregate Appraised Value of all the
Mortgaged Properties would be $1,175,628,000, the Cut-off Date LTV Ratio
of the Showboat Loan would be 90.8% and the weighted average Cut-off Date
LTV Ratio of the Mortgage Pool would be 73.4%.
<PAGE>
Characteristics of the Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining
Percentage Amortiz- Amortiz-
Original Cut-off of Initial ation ation
Principal Date Pool Term Term
Property Name (1) Balance Balance Balance (months) (months)
<S> <C> <C> <C> <C> <C> <C>
1 Showboat Hotel & Casino, Atlantic City $100,000,000 $99,880,087 11.9% 360 359
2 Stone Container - Santa Fe Springs (1A) 4,500,000 4,473,154 0.5% 300 294
3 Stone Container - Mansfield (1A) 4,350,000 4,324,049 0.5% 300 294
4 Stone Container - San Jose (1A) 4,237,500 4,212,220 0.5% 300 294
5 Stone Container - Minneapolis (1A) 3,862,500 3,839,457 0.5% 300 294
6 Stone Container - Springfield (1A) 3,525,000 3,503,971 0.4% 300 294
7 Stone Container - Salinas (1A) 3,018,750 3,000,741 0.4% 300 294
8 Stone Container - Harahan (1A) 2,850,000 2,832,998 0.3% 300 294
9 Stone Container - Rogers (1A) 2,362,500 2,348,406 0.3% 300 294
10 Stone Container - Keokuk (1A) 1,762,500 1,751,985 0.2% 300 294
11 Stone Container - Portland (1A) 1,725,000 1,714,709 0.2% 300 294
12 Stone Container - Saltillo (1A) 1,515,000 1,505,962 0.2% 300 294
13 Stone Container - Columbus (1A) 1,500,000 1,491,051 0.2% 300 294
14 Stone Container - North Tonawanda (1A) 1,500,000 1,491,051 0.2% 300 294
15 Stone Container - St. Cloud (1A) 1,500,000 1,491,051 0.2% 300 294
16 Stone Container - Jackson (1A) 1,387,500 1,379,222 0.2% 300 294
17 Stone Container - Collierville (1A) 1,125,000 1,118,288 0.1% 300 294
18 Stone Container - Bloomington (1A) 787,500 782,802 0.1% 300 294
19 Stone Container - Danville (1A) 637,500 633,697 0.1% 300 294
20 Washington Marriott Hotel 34,000,000 33,946,529 4.0% 300 299
21 Willow Creek Apartments (Foster Portfolio) (1B) 7,180,000 7,167,328 0.9% 360 358
22 Lake Park Apartments (1B) 6,880,000 6,867,858 0.8% 360 358
23 Plaza South Apartments (1B) 5,880,000 5,869,623 0.7% 360 358
24 Farmwood Apartments (1B) 5,860,000 5,849,658 0.7% 360 358
25 Colony Apartments (1B) 2,200,000 2,196,117 0.3% 360 358
26 Southwest Plaza I and II Shopping Center 18,250,000 18,218,954 2.2% 360 358
27 The Rosedale Corporate Plaza 18,000,000 17,978,284 2.1% 360 359
28 Bayvue Apartments 17,400,000 17,339,084 2.1% 360 355
29 Lake Calhoun Executive Center 16,100,000 16,051,053 1.9% 360 355
30 Pebble Creek Apartments (1C) 7,500,000 7,479,928 0.9% 300 298
31 Homestead Apartments (1C) 7,300,000 7,280,463 0.9% 300 298
32 Shops at Lyndale Phase II (1D) 13,300,000 13,263,359 1.6% 360 356
33 Shops at Lyndale Phase II - TIF (1D) 1,500,000 1,477,531 0.2% 156 152
34 Walgreens - Kirkland (1E) 3,450,000 3,440,377 0.4% 360 356
35 Walgreens Retail Pharmacy Store - San Francisco (1E) 3,410,000 3,400,488 0.4% 360 356
36 Walgreens Retail Pharmacy Store - Charleston/Torrey (1E) 2,750,000 2,742,329 0.3% 360 356
37 Walgreens Retail Pharmacy Store - Las Vegas Boulevard (1E) 2,750,000 2,742,329 0.3% 360 356
38 Walgreens Retail/Pharmacy Store - Paradise (1E) 1,830,000 1,824,895 0.2% 360 356
39 Country Village MHP 13,200,000 13,184,033 1.6% 360 359
40 414 N. Orleans St. 13,000,000 12,973,451 1.5% 360 357
41 Two Greenville Crossing (1F) 7,600,000 7,586,457 0.9% 360 358
42 One Greenville Crossing (1F) 5,200,000 5,190,734 0.6% 360 358
43 Wesley Chapel Square 11,400,000 11,341,188 1.4% 300 295
44 Mercado del Lago Shopping Center 11,300,000 11,274,478 1.3% 360 357
45 Curry Honda Automobile Dealership (1G) 3,350,000 3,334,572 0.4% 240 237
46 Curry Chevrolet Automobile Dealership (1G) 2,100,000 2,090,328 0.2% 240 237
47 Curry Acura Automobile Dealership (1G) 1,650,000 1,642,401 0.2% 240 237
48 Curry Ford/Subaru Automobile Dealership (1G) 1,650,000 1,642,401 0.2% 240 237
49 Curry Mitsubishi Automobile Dealership (1G) 970,000 965,533 0.1% 240 237
50 Curry Office Building (1G) 650,000 647,006 0.1% 240 237
51 708 Broadway / 404 Lafayette Street 10,000,000 9,988,136 1.2% 300 299
52 360-386 East Fordham Road 10,000,000 9,977,096 1.2% 360 357
53 Hampton Inn - Houston Galleria 10,000,000 9,975,993 1.2% 300 298
54 Holiday Inn Southwest and Viking Conference Center 9,750,000 9,705,557 1.2% 300 295
55 Valley Central Center 9,360,000 9,339,649 1.1% 360 357
56 Centrum Office Building 9,000,000 8,987,509 1.1% 360 358
57 237-269 East Fordham Road 8,750,000 8,739,535 1.0% 360 359
58 Dietrich Meadows S/C 8,400,000 8,382,670 1.0% 360 357
59 Schaumburg Villas Apartments 8,000,000 7,987,281 1.0% 360 358
60 Vista Ridge Retail Center 7,920,000 7,896,817 0.9% 360 356
61 Trade Centre South 7,900,000 7,883,369 0.9% 360 357
62 Loehman's Plaza 7,850,000 7,823,899 0.9% 360 355
63 Southwind Plaza 7,600,000 7,586,522 0.9% 360 358
</TABLE>
<PAGE>
Characteristics of the Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining
Term to Term to
Stated Stated Mort- First
Maturity Maturity gage Monthly Payment Maturity Prepayment Provision Defeasance
(months)(2) (months)(2) Rate Payment Date Date(2) as of Cut-Off Date(2) Provision
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 120 119 7.090% $671,358 3/1/98 2/1/08 L (9.92) Yes
2 120 114 8.450% 36,084 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
3 120 114 8.450% 34,881 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
4 120 114 8.450% 33,979 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
5 120 114 8.450% 30,972 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
6 120 114 8.450% 28,266 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
7 120 114 8.450% 24,206 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
8 120 114 8.450% 22,853 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
9 120 114 8.450% 18,944 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
10 120 114 8.450% 14,133 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
11 120 114 8.450% 13,832 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
12 120 114 8.450% 12,148 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
13 120 114 8.450% 12,028 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
14 120 114 8.450% 12,028 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
15 120 114 8.450% 12,028 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
16 120 114 8.450% 11,126 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
17 120 114 8.450% 9,021 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
18 120 114 8.450% 6,315 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
19 120 114 8.450% 5,112 10/1/97 8/31/07 L (2.5), YM 1% (6.5), O (0.5) No
20 120 119 7.375% 248,499 3/1/98 2/1/08 L (9.42), O (0.5) Yes
21 120 118 7.250% 48,980 2/1/98 1/1/08 L (9.33), O (0.5) Yes
22 120 118 7.250% 46,934 2/1/98 1/1/08 L (9.33), O (0.5) Yes
23 120 118 7.250% 40,112 2/1/98 1/1/08 L (9.33), O (0.5) Yes
24 120 118 7.250% 39,976 2/1/98 1/1/08 L (9.33), O (0.5) Yes
25 120 118 7.250% 15,008 2/1/98 1/1/08 L (9.33), O (0.5) Yes
26 144 142 7.480% 127,357 2/1/98 1/1/10 L (4.83), YM 1% (4.5), O (2.5) No
27 120 119 7.020% 119,996 3/1/98 2/1/08 L (9.42), O (0.5) Yes
28 120 115 7.550% 122,260 11/1/97 10/1/07 L (9.58) Yes
29 120 115 8.180% 120,163 11/1/97 10/1/07 L (9.08), O (0.5) Yes
30 120 118 6.980% 52,913 2/1/98 1/1/08 L (9.33), O (0.5) Yes
31 120 118 6.980% 51,502 2/1/98 1/1/08 L (9.33), O (0.5) Yes
32 240 236 7.920% 96,850 12/1/97 11/1/17 L (16.67), O (3) Yes
33 156 152 7.840% 15,362 12/1/97 11/1/10 L (12.17), O (0.5) Yes
34 240 236 7.850% 24,955 12/1/97 11/1/17 L (16.58), O (3.08) Yes
35 240 236 7.850% 24,666 12/1/97 11/1/17 L (16.58), O (3.08) Yes
36 240 236 7.850% 19,892 12/1/97 11/1/17 L (16.58), O (3.08) Yes
37 240 236 7.850% 19,892 12/1/97 11/1/17 L (16.58), O (3.08) Yes
38 240 236 7.850% 13,237 12/1/97 11/1/17 L (16.58), O (3.08) Yes
39 120 119 6.990% 87,731 3/1/98 2/1/08 L (9.42), O (0.5) Yes
40 120 117 7.950% 94,937 1/1/98 12/1/07 L (9.25), O (0.5) Yes
41 120 118 7.190% 51,536 2/1/98 1/1/08 L (9.25), O (0.58) Yes
42 120 118 7.190% 35,262 2/1/98 1/1/08 L (9.25), O (0.58) Yes
43 240 235 8.200% 89,503 11/1/97 10/1/17 L (19.08), O (0.5) Yes
44 120 117 7.450% 78,625 1/1/98 12/1/07 L (9.25), O (0.5) Yes
45 120 117 8.850% 29,818 1/1/98 12/1/07 L (9.17), O (0.58) Yes
46 120 117 8.850% 18,692 1/1/98 12/1/07 L (9.17), O (0.58) Yes
47 120 117 8.850% 14,687 1/1/98 12/1/07 L (9.17), O (0.58) Yes
48 120 117 8.850% 14,687 1/1/98 12/1/07 L (9.17), O (0.58) Yes
49 120 117 8.850% 8,634 1/1/98 12/1/07 L (9.17), O (0.58) Yes
50 120 117 8.850% 5,786 1/1/98 12/1/07 L (9.17), O (0.58) Yes
51 120 119 7.250% 72,281 3/1/98 2/1/08 L (9.33), O (0.58) Yes
52 120 117 7.380% 69,102 1/1/98 12/1/07 L (9.25), O (0.5) Yes
53 120 118 7.780% 75,730 2/1/98 1/1/08 L (9.33), O (0.5) Yes
54 120 115 8.630% 79,366 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
55 120 117 7.640% 66,346 1/1/98 12/1/07 L (9.25), O (0.5) Yes
56 120 118 7.850% 65,100 2/1/98 1/1/08 L (4.83), YM 1% (4.42), O (0.58) No
57 120 119 7.120% 58,921 3/1/98 2/1/08 L (9.42), O (0.5) Yes
58 144 141 7.900% 61,052 1/1/98 12/1/09 L (11.25), O (0.5) Yes
59 120 118 7.170% 54,141 2/1/98 1/1/08 L (9.33), O (0.5) Yes
60 120 116 7.610% 55,976 12/1/97 11/1/07 L (9.17), O (0.5) Yes
61 120 117 7.800% 56,870 1/1/98 12/1/07 L (4.75), YM 1% (4.5), O (0.5) No
62 120 115 7.783% 56,417 11/1/97 10/1/07 L (9.08), O (0.5) Yes
63 120 118 7.220% 51,691 2/1/98 1/1/08 L (9.33), O (0.5) Yes
</TABLE>
<PAGE>
Characteristics of the Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining
Percentage Amortiz- Amortiz-
Original Cut-off of Initial ation ation
Principal Date Pool Term Term
Property Name (1) Balance Balance Balance (months) (months)
<S> <C> <C> <C> <C> <C> <C>
64 127th Street Shopping Center $7,500,000 $7,491,030 0.9% 360 359
65 Filene's Basement Distribution Center 7,500,000 7,482,356 0.9% 300 298
66 Holiday Inn Express Hotel 7,500,000 7,476,221 0.9% 300 297
67 Forest Pines Retirement Residence 7,250,000 7,224,844 0.9% 300 297
68 Hammond Springs Shopping Center 7,100,000 7,079,914 0.8% 360 356
69 AMC Theater Complex 7,000,000 6,984,577 0.8% 324 322
70 Roosevelt Plaza Shopping Center 6,900,000 6,877,403 0.8% 300 297
71 Johnson Square Office Park 6,480,000 6,468,853 0.8% 360 358
72 Comfort Inn - Cleveland 6,000,000 5,990,825 0.7% 300 299
73 Gateway Business Center 5,900,000 5,882,185 0.7% 360 355
74 Good Samaritan Medical Plaza 5,650,000 5,638,966 0.7% 360 357
75 Spring Tree Apartments 5,570,000 5,557,546 0.7% 360 357
76 Walgreen's Plaza 5,200,000 5,191,154 0.6% 360 358
77 Candler McAfee Shopping Center 5,170,000 5,157,582 0.6% 360 355
78 Heritage Hills Apartments 5,110,000 5,089,022 0.6% 360 354
79 Big V Supermarket 5,100,000 5,087,488 0.6% 300 298
80 1333 N. Kingsbury Street 5,025,000 5,009,336 0.6% 360 355
81 Wellington Place North 5,000,000 4,993,061 0.6% 360 358
82 Woodstock Square Shopping Center 5,000,000 4,991,453 0.6% 360 358
83 Willow Creek Apartments 4,985,000 4,973,854 0.6% 360 357
84 Rainforest Cafe Property 5,000,000 4,959,525 0.6% 216 212
85 Randall's Store 4,800,000 4,790,197 0.6% 360 357
86 34-38 Industrial Way East (Eatontown) 4,600,000 4,590,019 0.5% 360 357
87 Red Cedar Building 4,400,000 4,387,331 0.5% 360 356
88 Vineyard Crossing Apartments 4,300,000 4,294,977 0.5% 360 359
89 Ojai Oaks Mobile Home Park 4,300,000 4,284,628 0.5% 360 355
90 Highlands Ranch Town Center 4,250,000 4,235,811 0.5% 324 320
91 Greyberry Apartments of Wayne 4,200,000 4,187,000 0.5% 360 356
92 Sunset Pecos Plaza 4,100,000 4,086,934 0.5% 360 355
93 Carls Furniture/Sound Advice 4,050,000 4,028,322 0.5% 240 237
94 Eldorado Estates Mobile Home Park 3,835,000 3,823,417 0.5% 360 356
95 North Plank Road ShopRite Center 3,800,000 3,793,970 0.5% 360 358
96 Colony Plaza Shopping Center 3,800,000 3,789,211 0.5% 360 356
97 10 North Ridgewood Road 3,800,000 3,787,272 0.5% 360 355
98 Doral Centre Shopping Plaza 3,800,000 3,784,662 0.5% 360 354
99 Carmel Woods Apartments 3,790,000 3,781,526 0.5% 360 357
100 Seven Corners Professional Buildings 3,750,000 3,739,241 0.4% 360 356
101 Sunnydale MHP 3,740,000 3,728,703 0.4% 360 356
102 Provence North Apartments 3,650,000 3,634,487 0.4% 360 354
103 Courtyard Garden Apartments 3,500,000 3,492,436 0.4% 360 357
104 Walgreens - Seattle 3,280,000 3,270,851 0.4% 360 356
105 Apache Village Apartments 3,235,000 3,223,550 0.4% 360 355
106 Walgreens Retail Building - Gresham 3,200,000 3,191,074 0.4% 360 356
107 Westridge Plaza 3,200,000 3,189,605 0.4% 300 297
108 University Village Apartments 3,150,000 3,144,624 0.4% 360 358
109 The Plaza at Stonebridge 3,150,000 3,139,728 0.4% 360 355
110 Henderson Plaza 3,125,000 3,115,214 0.4% 360 355
111 East Town Plaza 3,080,000 3,068,204 0.4% 360 354
112 Lake Chabot Medical Center 3,000,000 2,995,195 0.4% 360 358
113 Garden City Town Center 3,000,000 2,983,679 0.4% 300 295
114 Las Brisas Apartments 2,950,000 2,939,927 0.4% 300 297
115 Bear Ground Apartments I, II, III 2,900,000 2,890,437 0.3% 360 355
116 Walgreens Retail Building - Tucson 2,900,000 2,889,908 0.3% 252 250
117 Mark Apartments 2,850,000 2,843,433 0.3% 360 357
118 Bank Properties 2,800,000 2,792,828 0.3% 360 356
119 4646 Bronze Way (1H) 1,610,000 1,603,376 0.2% 300 296
120 4647 Bronze Way (1H) 1,090,000 1,085,515 0.1% 300 296
121 Aspenwood Apartments 2,600,000 2,592,037 0.3% 360 356
122 Lauderdale Parc Apartments 2,550,000 2,531,065 0.3% 300 293
123 West County Plaza 2,525,000 2,518,042 0.3% 360 356
124 Sheldon Plaza Retail Center 2,500,000 2,493,800 0.3% 300 298
125 Olde Falls Village 2,500,000 2,490,876 0.3% 300 297
126 The Highland Office Building 2,500,000 2,483,249 0.3% 240 236
</TABLE>
<PAGE>
Characteristics of the Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining
Term to Term to
Stated Stated Mort- First
Maturity Maturity gage Monthly Payment Maturity Defeasance
(months)(2) (months)(2) Rate Payment Date Date(2) Prepayment Provision(2) Provision
<S> <C> <C> <C> <C> <C> <C> <C> <C>
64 120 119 7.120% $50,504 3/1/98 2/1/08 L (4.92), O (5) Yes
65 180 178 7.930% 57,539 2/1/98 1/1/13 L (6.83), YM 1% (5), O (3) No
66 120 117 8.000% 57,886 1/1/98 12/1/07 L (9.25), O (0.5) Yes
67 120 117 7.440% 53,294 1/1/98 12/1/07 L (3.75), YM 1% (5.5), O (0.5) No
68 120 116 7.780% 51,013 12/1/97 11/1/07 L (9.17), O (0.5) Yes
69 119 117 7.260% 49,340 2/1/98 12/1/07 L (9.17), O (0.58) Yes
70 180 177 7.800% 52,344 1/1/98 12/1/12 L (14.25), O (0.5) Yes
71 120 118 7.410% 44,910 2/1/98 1/1/08 L (9.33), O (0.5) Yes
72 120 119 7.720% 45,202 3/1/98 2/1/08 L (4.92), YM 1% (4.5), O (0.5) No
73 120 115 8.210% 44,159 11/1/97 10/1/07 L (9.08), O (0.5) Yes
74 120 117 8.170% 42,129 1/1/98 12/1/07 L (4.75), YM 1% (4.5), O (0.5) No
75 84 81 7.510% 38,984 1/1/98 12/1/04 L (3.75), YM 1% (2.5), O (0.5) No
76 120 118 7.480% 36,288 2/1/98 1/1/08 L (9.33), O (0.5) Yes
77 115 110 9.180% 42,270 11/1/97 5/1/07 L (8.75), O (0.42) Yes
78 120 114 7.720% 36,503 10/1/97 9/1/07 L (4.5), YM 1% (4.5), O (0.5) No
79 180 178 7.620% 38,088 2/1/98 1/1/13 L (6.83), YM 1% (5), O (3) No
80 120 115 8.070% 37,117 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
81 120 118 7.850% 36,167 2/1/98 1/1/08 L (4.83), YM 1% (4.5), O (0.5) No
82 120 118 7.450% 34,790 2/1/98 1/1/08 L (9.33), O (0.5) Yes
83 84 81 7.510% 34,890 1/1/98 12/1/04 L (3.75), YM 1% (2.5), O (0.5) No
84 180 176 8.350% 44,813 12/1/97 11/1/12 L (5.67), YM 1% (6), O (3) No
85 240 237 7.950% 35,054 1/1/98 12/1/17 L (19.25), O (0.5) Yes
86 120 117 7.650% 32,638 1/1/98 12/1/07 L (9.25), O (0.5) Yes
87 120 116 7.700% 31,370 12/1/97 11/1/07 L (9.67) Yes
88 84 83 7.400% 29,772 3/1/98 2/1/05 L (4.92), O (2) No
89 120 115 7.750% 30,806 11/1/97 10/1/07 L (9.08), O (0.5) Yes
90 120 116 8.320% 32,983 12/1/97 11/1/07 L (9.17), O (0.5) Yes
91 120 116 7.330% 28,880 12/1/97 11/1/07 L (9.17), O (0.5) Yes
92 120 115 8.320% 31,004 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
93 180 177 7.650% 32,999 1/1/98 12/1/12 L (6.75), YM 1% (5), O (3) No
94 240 236 7.460% 26,710 12/1/97 11/1/17 L (14.67), O (5) Yes
95 120 118 7.920% 27,671 2/1/98 1/1/08 L (9.33), O (0.5) Yes
96 120 116 7.770% 27,276 12/1/97 11/1/07 L (4.67), YM 1% (4.5), O (0.5) No
97 120 115 7.750% 27,224 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
98 120 114 8.070% 28,069 10/1/97 9/1/07 L (4.5), YM 1% (4.5), O (0.5) No
99 84 81 7.510% 26,526 1/1/98 12/1/04 L (3.75), YM 1% (2.5), O (0.5) No
100 120 116 7.710% 26,762 12/1/97 11/1/07 L (4.67), YM 1% (4.5), O (0.5) No
101 240 236 7.460% 26,048 12/1/97 11/1/17 L (14.67), O (5) Yes
102 120 114 7.560% 25,671 10/1/97 9/1/07 L (9), O (0.5) Yes
103 120 117 7.670% 24,881 1/1/98 12/1/07 L (9.25), O (0.5) Yes
104 240 236 7.850% 23,725 12/1/97 11/1/17 L (16.67), O (3) Yes
105 120 115 7.500% 22,620 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
106 240 236 7.850% 23,147 12/1/97 11/1/17 L (16.67), O (3) Yes
107 120 117 7.850% 24,381 1/1/98 12/1/07 L (4.75), YM 1% (4.5), O (0.5) No
108 120 118 7.460% 21,939 2/1/98 1/1/08 L (4.83), YM 1% (4.5), O (0.5) No
109 240 235 7.870% 22,829 11/1/97 10/1/17 L (19.08), O (0.5) Yes
110 120 115 8.050% 23,039 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
111 120 114 8.330% 23,312 10/1/97 9/1/07 L (4.5), YM 1% (4.5), O (0.5) No
112 120 118 7.860% 21,721 2/1/98 1/1/08 L (4.83), YM 1% (4.5), O (0.5) No
113 120 115 7.870% 22,897 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
114 120 117 7.540% 21,877 1/1/98 12/1/07 L (9.25), O (0.5) Yes
115 120 115 7.820% 20,916 11/1/97 10/1/07 L (9.08), O (0.5) Yes
116 240 238 7.550% 22,976 2/1/98 1/1/18 L (19.33), O (0.5) Yes
117 120 117 7.350% 19,636 1/1/98 12/1/07 L (9.25), O (0.5) Yes
118 120 116 8.280% 21,095 12/1/97 11/1/07 L (9.17), O (0.5) Yes
119 120 116 8.190% 12,630 12/1/97 11/1/07 L (9.17), O (0.5) Yes
120 120 116 8.190% 8,550 12/1/97 11/1/07 L (9.17), O (0.5) Yes
121 120 116 7.390% 17,984 12/1/97 11/1/07 L (9.17), O (0.5) Yes
122 120 113 8.070% 19,800 9/1/97 8/1/07 L (8.83), O (0.58) Yes
123 120 116 7.910% 18,369 12/1/97 11/1/07 L (4.67), YM 1% (4.5), O (0.5) No
124 120 118 7.540% 18,540 2/1/98 1/1/08 L (9.33), O (0.5) Yes
125 120 117 7.130% 17,877 1/1/98 12/1/07 L (9.25), O (0.5) Yes
126 240 236 8.190% 21,208 12/1/97 11/1/17 L (19.17), O (0.5) Yes
</TABLE>
<PAGE>
Characteristics of the Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining
Percentage Amortiz- Amortiz-
Original Cut-off of Initial ation ation
Principal Date Pool Term Term
Property Name (1) Balance Balance Balance (months) (months)
<S> <C> <C> <C> <C> <C> <C>
127 A-1 Storage of Lafayette $2,465,000 $2,454,422 0.3% 300 296
128 The Gaither Center 2,350,000 2,342,218 0.3% 300 297
129 Willowbrook North Townhome Apartment Complex 2,320,000 2,314,750 0.3% 360 357
130 Casual Male Corporate Office Building 2,300,000 2,292,234 0.3% 300 297
131 Walgreens Retail Building - Portland 2,290,000 2,283,612 0.3% 360 356
132 Lake Placid Village Apartments 2,100,000 2,096,318 0.2% 360 358
133 Cumberland Apartments 2,100,000 2,095,286 0.2% 360 357
134 Rainbow Shopping Center 2,075,000 2,071,134 0.2% 360 357
135 Snowfall Plaza 2,050,000 2,042,910 0.2% 360 354
136 Finley Terrace Apartments 2,050,000 2,042,133 0.2% 360 353
137 417 W. Barry Avenue/3030 N. Sheridan Road 2,000,000 1,995,501 0.2% 360 357
138 Bradford Gwinnett Apartments 2,000,000 1,992,538 0.2% 240 238
139 Furr's Grocery Store 2,000,000 1,992,432 0.2% 240 238
140 South Brunswick Industrial Park 2,000,000 1,986,343 0.2% 240 236
141 Villager Square Shopping Center 1,960,000 1,955,119 0.2% 300 298
142 Flint Hill Building 1,950,000 1,943,583 0.2% 300 297
143 Peppertree Apartments 1,900,000 1,896,571 0.2% 360 358
144 Star Ranch Plaza 1,900,000 1,892,296 0.2% 300 296
145 Morehead Hills Apartments 1,890,000 1,887,770 0.2% 360 359
146 Forest Park Apartments 1,780,000 1,777,900 0.2% 360 359
147 Freeway Plaza Building 1,774,628 1,773,435 0.2% 357 356
148 Coconut Creek Apartments 1,760,000 1,754,320 0.2% 300 297
149 The Colonial Arms Apartments 1,700,000 1,696,083 0.2% 360 357
150 Norwood Park North Office Building 1,525,000 1,520,873 0.2% 360 356
151 Chevy Chase Arcade 1,500,000 1,496,899 0.2% 360 357
152 Holcombe Medical Building 1,500,000 1,496,758 0.2% 360 357
153 Youngstown Mobile Home Park 1,500,000 1,496,585 0.2% 360 357
154 Kinston Marketplace 1,500,000 1,495,688 0.2% 360 356
155 Versailles Apartments 1,510,000 1,494,732 0.2% 240 234
156 Chaparral Apartments 1,500,000 1,482,588 0.2% 180 176
157 Revco Drug Store 1,465,000 1,459,757 0.2% 240 238
158 Oakwood Estates Apartments 1,440,000 1,436,008 0.2% 360 356
159 Innsbruck Villa Apartments 1,375,000 1,370,133 0.2% 360 355
160 The Pathmark Grocery Store 1,350,000 1,330,993 0.2% 180 175
161 La Carre Apartments 1,300,000 1,297,728 0.2% 360 358
162 Westside Plaza Shopping Center 1,300,000 1,292,143 0.2% 300 294
163 Woodhollow Apartments 1,200,000 1,196,524 0.1% 360 355
164 Park View Place Apartments 1,087,000 1,083,214 0.1% 360 355
165 2500 Packard Road 1,050,000 1,044,303 0.1% 300 294
166 K-Mart Plaza 700,000 698,338 0.1% 300 298
167 Portland Contessa Apartments 640,000 639,252 0.1% 360 359
168 Lovers Lane Animal Hospital/Clinic 512,000 507,458 0.1% 240 234
Total/Weighted Average: $841,054,878 $838,800,140 100.0% 339 336
=========================================================
Maximum: $100,000,000 $99,880,087 11.9% 360 359
Minimum: $512,000 $507,458 0.1% 156 152
</TABLE>
<PAGE>
Characteristics of the Mortgage Loans
<TABLE>
<CAPTION>
Original Remaining
Term to Term to
Stated Stated Mort- First
Maturity Maturity gage Monthly Payment Maturity Prepayment Provision Defeasance
(months)(2) (months)(2) Rate Payment Date Date(2) as of Cut-off Date(2) Provision
<S> <C> <C> <C> <C> <C> <C> <C> <C>
127 120 116 7.930% $18,911 12/1/97 11/1/07 L (9.17), O (0.5) Yes
128 120 117 7.740% 17,735 1/1/98 12/1/07 L (4.75), YM 1% (4.5), O (0.5) No
129 120 117 7.440% 16,127 1/1/98 12/1/07 L (9.25), O (0.5) Yes
130 84 81 7.610% 17,162 1/1/98 12/1/04 L (6.25), O (0.5) Yes
131 240 236 7.850% 16,564 12/1/97 11/1/17 L (16.67), O (3) Yes
132 120 118 7.290% 14,383 2/1/98 1/1/08 L (9.33), O (0.5) Yes
133 120 117 7.490% 14,669 1/1/98 12/1/07 L (4.75), > YM 1% (2), < YM 2% (2), O (1) No
134 120 117 8.400% 15,808 1/1/98 12/1/07 L (9.25), O (0.5) Yes
135 120 114 8.830% 16,245 10/1/97 9/1/07 L (4.5), YM 1% (4.5), O (0.5) No
136 84 77 8.500% 15,763 9/1/97 8/1/04 L (0.42), YM 1% (2), 1% (2), O (2) No
137 120 117 7.470% 13,943 1/1/98 12/1/07 L (9.25), O (0.5) Yes
138 120 118 7.740% 16,407 2/1/98 1/1/08 L (9.33), O (0.5) Yes
139 240 238 7.610% 16,247 2/1/98 1/1/18 L (19.33), O (0.5) Yes
140 120 116 8.030% 16,766 12/1/97 11/1/07 L (9.17), O (0.5) Yes
141 120 118 7.510% 14,497 2/1/98 1/1/08 L (9.33), O (0.5) Yes
142 180 177 7.770% 14,755 1/1/98 12/1/12 L (14.25), O (0.5) Yes
143 120 118 7.110% 12,781 2/1/98 1/1/08 L (9.33), O (0.5) Yes
144 120 116 8.280% 15,019 12/1/97 11/1/07 L (9.17), O (0.5) Yes
145 84 83 7.280% 12,932 3/1/98 2/1/05 L (4.92), O (2) No
146 84 83 7.280% 12,179 3/1/98 2/1/05 L (4.92), O (2) No
147 117 116 8.100% 13,172 3/1/98 11/1/07 L (9.17), O (0.5) Yes
148 120 117 7.900% 13,468 1/1/98 12/1/07 L (9.17), O (0.58) Yes
149 120 117 7.350% 11,713 1/1/98 12/1/07 L (9.25), O (0.5) Yes
150 120 116 8.000% 11,190 12/1/97 11/1/07 L (9.17), O (0.5) Yes
151 120 117 7.890% 10,892 1/1/98 12/1/07 L (9.25), O (0.5) Yes
152 120 117 7.670% 10,663 1/1/98 12/1/07 L (9.25), O (0.5) Yes
153 120 117 7.420% 10,406 1/1/98 12/1/07 L (9.25), O (0.5) Yes
154 120 116 7.700% 10,694 12/1/97 11/1/07 L (9.17), O (0.5) Yes
155 240 234 8.010% 12,640 10/1/97 9/1/17 L (19), O (0.5) Yes
156 180 176 8.060% 14,387 12/1/97 11/1/12 L (14.17), O (0.5) Yes
157 240 238 7.600% 11,892 2/1/98 1/1/18 L (19.33), O (0.5) Yes
158 120 116 7.880% 10,446 12/1/97 11/1/07 L (4.67), YM 1% (4.5), O (0.5) No
159 120 115 7.500% 9,614 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
160 180 175 8.450% 13,254 11/1/97 10/1/12 L (6.58), YM 1% (5), O (3) No
161 120 118 7.310% 8,921 2/1/98 1/1/08 L (9.33), O (0.5) Yes
162 120 114 8.370% 10,354 10/1/97 9/1/07 L (4.5), YM 1% (4.5), O (0.5) No
163 120 115 8.390% 9,134 11/1/97 10/1/07 L (4.58), YM 1% (4.5), O (0.5) No
164 120 115 7.880% 7,885 11/1/97 10/1/07 L (9.08), O (0.5) Yes
165 180 174 8.750% 8,633 10/1/97 9/1/12 L (6.5), YM 1% (5), O (3) No
166 120 118 7.860% 5,338 2/1/98 1/1/08 L (9.33), O (0.5) Yes
167 84 83 7.400% 4,431 3/1/98 2/1/05 L (4.83), O (2.08) No
168 120 114 9.250% 4,689 10/1/97 9/1/07 L (4.58), YM 1% (4.33), O (0.58) No
133 130 7.641% $6,095,098 1/2/98 12/19/08
==============================================================
240 238 9.250% $671,358 3/1/98 1/1/18
84 77 6.980% $4,431 9/1/97 8/1/04
</TABLE>
(1A) The Mortgage Loans secured by the 18 Stone Container industrial
properties, respectively, are cross-collateralized and cross-defaulted.
(1B) The Mortgage Loans secured by Willow Creek Apartments (Foster Portfolio),
Lake Park Apartments, Plaza South Apartments, Farmwood Apartments, and
Colony Apartments, respectively, are cross-collateralized and
cross-defaulted.
(1C) The Mortgage Loans secured by Pebble Creek Apartments and Homestead
Apartments, respectively, are cross-collateralized and cross-defaulted.
(1D) The Mortgage Loans secured by Shops at Lyndale Phase II and Shops at
Lyndale Phase II - TIF, respectively, are cross-collateralized and
cross-defaulted.
(1E) The Mortgage Loans secured by Walgreens - Kirkland, Walgreens Retail
Pharmacy Store - San Francisco, Walgreens Retail Pharmacy Store -
Charleston/Torrey, Walgreens Retail Pharmacy Store - Las Vegas Boulevard,
and Walgreens/Pharmacy Store - Paradise, respectively, are
cross-collateralized and cross-defaulted.
(1F) The Mortgage Loans secured by Two Greenville Crossing and One Greenville
Crossing, respectively, are cross-collateralized and cross-defaulted.
(1G) The Mortgage Loans secured by Curry Honda Automobile Dealership, Curry
Chevrolet Automobile Dealership, Curry Acura Automobile Dealership, Curry
Ford/Subaru Automobile Dealership, Curry Mitsubishi Automobile Dealership,
and Curry Office Building, respectively, are cross-collateralized and
cross-defaulted.
(1H) The Mortgage Loans secured by 4646 Bronze Way and 4647 Bronze Way,
respectively, are cross-collateralized and cross-defaulted.
(2) In the case of the Showboat Hotel & Casino, Atlantic City, Washington
Marriott Hotel, the 6 Curry Loans Hampton Inn - Houston Galleria, Holiday
Inn Southwest and Viking Conference Center, Holiday Inn Express Hotel,
AMC Theater Complex, and the Comfort Inn - Cleveland, the maturity date
is assumed to be the Anticipated Repayment Date. See "Description of the
Mortgage Pool - General" in the Prospectus Supplement.
<PAGE>
Engineering Reserves and Recurring Replacement Reserves
<TABLE>
<CAPTION>
Contractual U/W U/W
Engineering Recurring Recurring LC&TI
Reserve at Replacement Replacement Per
Property Name Property Type Origination Reserve Reserve Sq. Ft.
<S> <C> <C> <C> <C> <C> <C>
1 Showboat Hotel & Casino, Atlantic City Hotel & Casino N/A N/A N/A N/A
2 Stone Container - Santa Fe Springs (1A) Industrial $136,397 N/A $0.20 N/A
3 Stone Container - Mansfield (1A) Industrial N/A N/A $0.20 N/A
4 Stone Container - San Jose (1A) Industrial $20,642 N/A $0.20 N/A
5 Stone Container - Minneapolis (1A) Industrial $18,922 N/A $0.20 N/A
6 Stone Container - Springfield (1A) Industrial $182,339 N/A $0.20 N/A
7 Stone Container - Salinas (1A) Industrial $41,571 N/A $0.20 N/A
8 Stone Container - Harahan (1A) Industrial N/A N/A $0.20 N/A
9 Stone Container - Rogers (1A) Industrial $240,826 N/A $0.20 N/A
10 Stone Container - Keokuk (1A) Industrial N/A N/A $0.20 N/A
11 Stone Container - Portland (1A) Industrial N/A N/A $0.20 N/A
12 Stone Container - Saltillo (1A) Industrial N/A N/A $0.20 N/A
13 Stone Container - Columbus (1A) Industrial N/A N/A $0.20 N/A
14 Stone Container - North Tonawanda (1A) Industrial $328,268 N/A $0.20 N/A
15 Stone Container - St. Cloud (1A) Industrial $89,163 N/A $0.20 N/A
16 Stone Container - Jackson (1A) Industrial $55,619 N/A $0.20 N/A
17 Stone Container - Collierville (1A) Industrial $108,716 N/A $0.20 N/A
18 Stone Container - Bloomington (1A) Industrial N/A N/A $0.20 N/A
19 Stone Container - Danville (1A) Industrial N/A N/A $0.20 N/A
20 Washington Marriott Hotel Hotel $42,500 $4.0% 5.0% N/A
21 Willow Creek Apartments (Foster Portfolio) (1B) Multifamily $39,875 $250 $250 N/A
22 Lake Park Apartments (1B) Multifamily $34,629 $250 $250 N/A
23 Plaza South Apartments (1B) Multifamily $14,125 $249 $250 N/A
24 Farmwood Apartments (1B) Multifamily $10,813 $252 $250 N/A
25 Colony Apartments (1B) Multifamily $57,465 $250 $250 N/A
26 Southwest Plaza I and II Shopping Center Retail $17,500 N/A $0.15 $0.34
27 The Rosedale Corporate Plaza Office N/A $0.15 $0.15 $1.06
28 Bayvue Apartments Multifamily $10,000 $250 $250 N/A
29 Lake Calhoun Executive Center Office $27,913 $0.15 $0.15 $1.73
30 Pebble Creek Apartments (1C) Multifamily N/A $200 $250 N/A
31 Homestead Apartments (1C) Multifamily $6,250 $250 $300 N/A
32 Shops at Lyndale Phase II (1D) Retail N/A N/A $0.10 $0.40
33 Shops at Lyndale Phase II - TIF (1D) Retail N/A N/A N/A N/A
34 Walgreens - Kirkland (1E) Retail N/A N/A $0.10 N/A
35 Walgreens Retail Pharmacy Store - San Francisco (1E) Retail N/A N/A $0.10 N/A
36 Walgreens Retail Pharmacy Store - Charleston/Torrey (1E) Retail N/A N/A $0.10 N/A
37 Walgreens Retail Pharmacy Store - Las Vegas Boulevard (1E) Retail N/A N/A $0.10 N/A
38 Walgreens Retail/Pharmacy Store - Paradise (1E) Retail N/A N/A $0.10 N/A
39 Country Village MHP Mobile Home Park $3,750 N/A $ 50 N/A
40 414 N. Orleans St. Office $18,750 N/A $0.15 $1.05
41 Two Greenville Crossing (1F) Mixed Use $1,250 N/A $0.30 $1.51
42 One Greenville Crossing (1F) Retail $1,875 N/A $0.09 $0.88
43 Wesley Chapel Square Retail $23,750 N/A $0.12 $0.23
44 Mercado del Lago Shopping Center Retail $10,000 $0.20 $0.18 $0.70
45 Curry Honda Automobile Dealership (1G) Other Commercial $394,533 $0.29 $0.15 $0.71
46 Curry Chevrolet Automobile Dealership (1G) Other Commercial $255,322 $0.29 $0.15 $0.71
47 Curry Acura Automobile Dealership (1G) Other Commercial $115,519 $0.29 $0.15 $0.71
48 Curry Ford/Subaru Automobile Dealership (1G) Other Commercial $221,571 $0.29 $0.15 $0.72
</TABLE>
<PAGE>
Engineering Reserves and Recurring Replacement Reserves
<TABLE>
<CAPTION>
Contractual U/W U/W
Engineering Recurring Recurring LC&TI
Reserve at Replacement Replacement Per
Property Name Property Type Origination Reserve Reserve Sq. Ft.
<S> <C> <C> <C> <C> <C> <C>
49 Curry Mitsubishi Automobile Dealership (1G) Other Commercial $126,895 $0.29 $0.15 $0.71
50 Curry Office Building (1G) Other Commercial $114,161 $0.29 N/A $0.71
51 708 Broadway / 404 Lafayette Street Office N/A $0.16 $0.16 $1.12
52 360-386 East Fordham Road Retail N/A N/A $0.15 $2.45
53 Hampton Inn - Houston Galleria Hotel N/A 4.0% 5.0% N/A
54 Holiday Inn Southwest and Viking Conference Center Hotel $37,742 4.0% 4.0% N/A
55 Valley Central Center Retail N/A $0.12 $0.10 $0.29
56 Centrum Office Building Office $12,188 N/A $0.15 $1.15
57 237-269 East Fordham Road Retail $15,250 N/A $0.15 $3.44
58 Dietrich Meadows S/C Retail N/A N/A $0.10 $0.27
59 Schaumburg Villas Apartments Multifamily N/A $250 $250 N/A
60 Vista Ridge Retail Center Retail N/A N/A $0.10 $0.62
61 Trade Centre South Office $3,688 N/A $0.15 $1.00
62 Loehman's Plaza Retail N/A $0.15 $0.15 $0.55
63 Southwind Plaza Retail $22,250 $0.15 $0.15 $0.32
64 127th Street Shopping Center Retail $5,500 $0.15 $0.18 $0.37
65 Filene's Basement Distribution Center Industrial $27,500 N/A $0.17 $0.42
66 Holiday Inn Express Hotel Hotel $27,450 4.0% 4.0% N/A
67 Forest Pines Retirement Residence Senior Housing N/A $200 $300 N/A
68 Hammond Springs Shopping Center Retail $87,500 N/A $0.35 $1.34
69 AMC Theater Complex Retail N/A N/A $0.14 N/A
70 Roosevelt Plaza Shopping Center Retail $17,000 N/A $0.13 $0.92
71 Johnson Square Office Park Office $44,063 N/A $0.20 $1.23
72 Comfort Inn - Cleveland Hotel $18,650 4.0% 4.0% N/A
73 Gateway Business Center Mixed Use $16,500 $0.10 $0.10 $0.71
74 Good Samaritan Medical Plaza Office $1,250 N/A $0.21 $1.19
75 Spring Tree Apartments Multifamily $6,250 $250 $250 N/A
76 Walgreen's Plaza Retail N/A N/A $0.15 $0.79
77 Candler McAfee Shopping Center Retail $6,125 $0.15 $0.16 $0.28
78 Heritage Hills Apartments Multifamily $87,500 $250 $250 N/A
79 Big V Supermarket Retail N/A N/A $0.10 N/A
80 1333 N. Kingsbury Street Office $6,000 N/A $0.15 $0.89
81 Wellington Place North Office N/A N/A $0.15 $1.07
82 Woodstock Square Shopping Center Retail N/A $0.20 $0.20 $0.45
83 Willow Creek Apartments Multifamily N/A $250 $250 N/A
84 Rainforest Cafe Property Retail N/A N/A $0.05 N/A
85 Randall's Store Retail N/A N/A $0.10 N/A
86 34-38 Industrial Way East (Eatontown) Industrial N/A N/A $0.15 $0.60
87 Red Cedar Building Office N/A N/A $0.10 $1.31
88 Vineyard Crossing Apartments Multifamily $13,750 $250 $ 250 N/A
89 Ojai Oaks Mobile Home Park Mobile Home Park $13,625 $50 $ 50 N/A
90 Highlands Ranch Town Center Retail N/A N/A $0.10 $1.15
91 Greyberry Apartments of Wayne Multifamily $4,531 $200 $250 N/A
92 Sunset Pecos Plaza Retail $303,000 N/A $0.10 $1.13
93 Carls Furniture/Sound Advice Retail N/A N/A $0.15 $0.72
94 Eldorado Estates Mobile Home Park Mobile Home Park N/A N/A $ 50 N/A
95 North Plank Road ShopRite Center Retail $28,650 $0.15 $0.15 $0.24
96 Colony Plaza Shopping Center Retail $1,313 N/A $0.15 $1.36
</TABLE>
<PAGE>
Engineering Reserves and Recurring Replacement Reserves
<TABLE>
<CAPTION>
Contractual U/W U/W
Engineering Recurring Recurring LC&TI
Reserve at Replacement Replacement Per
Property Name Property Type Origination Reserve Reserve Sq. Ft.
<S> <C> <C> <C> <C> <C> <C>
97 10 North Ridgewood Road Multifamily $340,000 $250 $250 N/A
98 Doral Centre Shopping Plaza Retail $1,375 $0.15 $0.15 $1.22
99 Carmel Woods Apartments Multifamily $1,875 $250 $250 N/A
100 Seven Corners Professional Buildings Office $48,625 N/A $0.23 $1.95
101 Sunnydale MHP Mobile Home Park N/A N/A $50 N/A
102 Provence North Apartments Multifamily $53,250 $250 $250 N/A
103 Courtyard Garden Apartments Multifamily $21,063 $250 $250 N/A
104 Walgreens - Seattle Retail N/A N/A $0.10 N/A
105 Apache Village Apartments Multifamily $89,000 $250 $250 N/A
106 Walgreens Retail Building - Gresham Retail N/A N/A $0.10 N/A
107 Westridge Plaza Retail $3,031 N/A $0.15 $0.76
108 University Village Apartments Multifamily $3,500 $300 $ 300 N/A
109 The Plaza at Stonebridge Retail N/A N/A $0.15 $1.16
110 Henderson Plaza Retail $28,508 $0.15 $0.15 $0.61
111 East Town Plaza Retail $61,500 N/A $0.15 $0.44
112 Lake Chabot Medical Center Office N/A N/A $0.25 $1.37
113 Garden City Town Center Retail $19,178 N/A $0.15 $0.92
114 Las Brisas Apartments Multifamily N/A $250 $250 N/A
115 Bear Ground Apartments I, II, III Multifamily $10,625 $250 $250 N/A
116 Walgreens Retail Building - Tucson Retail N/A N/A $0.10 N/A
117 Mark Apartments Multifamily $6,250 $250 $352 N/A
118 Bank Properties Office N/A N/A $0.21 $1.62
119 4646 Bronze Way (1H) Industrial $131,188 N/A $0.15 $0.24
120 4647 Bronze Way (1H) Industrial $9,750 N/A $0.28 $0.24
121 Aspenwood Apartments Multifamily $63,813 $250 $272 N/A
122 Lauderdale Parc Apartments Multifamily $11,250 $250 $250 N/A
123 West County Plaza Retail N/A $0.15 $0.15 $0.25
124 Sheldon Plaza Retail Center Retail $105,023 N/A $0.23 $0.62
125 Olde Falls Village Multifamily $55,675 $250 $250 N/A
126 The Highland Office Building Office N/A N/A $0.23 $0.58
127 A-1 Storage of Lafayette Self Storage N/A N/A $0.15 N/A
128 The Gaither Center Retail N/A $0.14 $0.23 $0.96
129 Willowbrook North Townhome Apartment Complex Multifamily $18,325 $250 $257 N/A
130 Casual Male Corporate Office Building Mixed Use $10,000 $0.25 $0.25 N/A
131 Walgreens Retail Building - Portland Retail N/A N/A $0.10 N/A
132 Lake Placid Village Apartments Multifamily $19,875 $255 $255 N/A
133 Cumberland Apartments Multifamily $2,750 $250 $250 N/A
134 Rainbow Shopping Center Retail N/A $0.33 $0.33 $1.13
135 Snowfall Plaza Retail N/A $0.20 $0.17 $1.33
136 Finley Terrace Apartments Multifamily $48,125 $250 $250 N/A
137 417 W. Barry Avenue/3030 N. Sheridan Road Multifamily $2,500 $250 $250 N/A
138 Bradford Gwinnett Apartments Multifamily $24,063 $250 $300 N/A
139 Furr's Grocery Store Retail $3,438 N/A $0.15 N/A
140 South Brunswick Industrial Park Industrial $37,188 N/A $0.22 $0.41
141 Villager Square Shopping Center Retail $56,875 $0.32 $0.32 $0.80
142 Flint Hill Building Mixed Use N/A N/A $0.36 $0.95
143 Peppertree Apartments Multifamily $8,438 $250 $250 N/A
144 Star Ranch Plaza Retail $1,500 N/A $0.28 $0.78
145 Morehead Hills Apartments Multifamily $21,438 $250 $250 N/A
146 Forest Park Apartments Multifamily $32,438 $250 $250 N/A
147 Freeway Plaza Building Office N/A $0.20 0.20 $1.02
</TABLE>
<PAGE>
Engineering Reserves and Recurring Replacement Reserves
<TABLE>
<CAPTION>
Contractual U/W U/W
Engineering Recurring Recurring LC&TI
Reserve at Replacement Replacement Per
Property Name Property Type Origination Reserve Reserve Sq. Ft.
<S> <C> <C> <C> <C> <C> <C>
148 Coconut Creek Apartments Multifamily N/A $250 $250 N/A
149 The Colonial Arms Apartments Multifamily $16,250 $250 $250 N/A
150 Norwood Park North Office Building Office $8,000 N/A $0.18 $0.98
151 Chevy Chase Arcade Mixed Use $4,750 N/A $0.15 $0.97
152 Holcombe Medical Building Office $1,125 N/A $0.22 $1.50
153 Youngstown Mobile Home Park Mobile Home Park N/A $35 $ 50 N/A
154 Kinston Marketplace Retail $9,775 N/A $0.21 $0.20
155 Versailles Apartments Multifamily $39,750 $250 $267 N/A
156 Chaparral Apartments Multifamily $9,625 $250 $300 N/A
157 Revco Drug Store Retail N/A N/A $0.15 N/A
158 Oakwood Estates Apartments Multifamily $133,750 $250 $250 N/A
159 Innsbruck Villa Apartments Multifamily $77,125 $250 $250 N/A
160 The Pathmark Grocery Store Retail $8,475 N/A N/A N/A
161 La Carre Apartments Multifamily $98,750 $250 $250 N/A
162 Westside Plaza Shopping Center Retail N/A N/A $0.12 $0.95
163 Woodhollow Apartments Multifamily $100,560 $275 $300 N/A
164 Park View Place Apartments Multifamily $126,625 $250 $250 N/A
165 2500 Packard Road Office $18,569 N/A $0.17 $0.73
166 K-Mart Plaza Retail $352,625 $0.15 $0.15 N/A
167 Portland Contessa Apartments Multifamily $154,313 $250 $250 N/A
168 Lovers Lane Animal Hospital/Clinic Other Commercial $12,850 N/A $0.15 $1.29
Total: $5,949,528
==========
</TABLE>
(1A) The Mortgage Loans secured by the 18 Stone Container industrial
properties, respectively, are cross-collateralized and cross-defaulted.
(1B) The Mortgage Loans secured by Willow Creek Apartments (Foster Portfolio),
Lake Park Apartments, Plaza South Apartments, Farmwood Apartments, and
Colony Apartments, respectively, are cross-collateralized and
cross-defaulted.
(1C) The Mortgage Loans secured by Pebble Creek Apartments and Homestead
Apartments, respectively, are cross-collateralized and cross-defaulted.
(1D) The Mortgage Loans secured by Shops at Lyndale Phase II and Shops at
Lyndale Phase II - TIF, respectively, are cross-collateralized and
cross-defaulted.
(1E) The Mortgage Loans secured by Walgreens - Kirkland, Walgreens Retail
Pharmacy Store - San Francisco, Walgreens Retail Pharmacy Store -
Charleston/Torrey, Walgreens Retail Pharmacy Store - Las Vegas Boulevard,
and Walgreens/Pharmacy Store - Paradise, respectively, are
cross-collateralized and cross-defaulted.
(1F) The Mortgage Loans secured by Two Greenville Crossing and One Greenville
Crossing, respectively, are cross-collateralized and cross-defaulted.
(1G) The Mortgage Loans secured by Curry Honda Automobile Dealership, Curry
Chevrolet Automobile Dealership, Curry Acura Automobile Dealership, Curry
Ford/Subaru Automobile Dealership, Curry Mitsubishi Automobile Dealership,
and Curry Office Building, respectively, are cross-collateralized and
cross-defaulted.
(1H) The Mortgage Loans secured by 4646 Bronze Way and 4647 Bronze Way,
respectively, are cross-collateralized and cross-defaulted.
<PAGE>
Major Tenants of the Commercial Mortgaged Properties (1)
<TABLE>
<CAPTION>
Major
Tenant
#1
Property Name Property Type Sq. Ft. Major Tenant #1 Name Sq. Ft.
<S> <C> <C> <C> <C> <C>
1 Showboat Hotel & Casino, Atlantic City Hotel & Casino 453,024 Atlantic City Showboat, Inc. 453,024
2 Stone Container - Santa Fe Springs Industrial 200,460 N/A N/A
3 Stone Container - Mansfield Industrial 167,368 N/A N/A
4 Stone Container - San Jose Industrial 164,100 N/A N/A
5 Stone Container - Minneapolis Industrial 250,750 N/A N/A
6 Stone Container - Springfield Industrial 200,880 N/A N/A
7 Stone Container - Salinas Industrial 183,000 N/A N/A
8 Stone Container - Harahan Industrial 138,355 N/A N/A
9 Stone Container - Rogers Industrial 185,260 N/A N/A
10 Stone Container - Keokuk Industrial 180,803 N/A N/A
11 Stone Container - Portland Industrial 163,868 N/A N/A
12 Stone Container - Saltillo Industrial 168,034 N/A N/A
13 Stone Container - Columbus Industrial 136,112 N/A N/A
14 Stone Container - North Tonawanda Industrial 156,710 N/A N/A
15 Stone Container - St. Cloud Industrial 202,200 N/A N/A
16 Stone Container - Jackson Industrial 157,955 N/A N/A
17 Stone Container - Collierville Industrial 79,300 N/A N/A
18 Stone Container - Bloomington Industrial 58,560 N/A N/A
19 Stone Container - Danville Industrial 52,980 N/A N/A
26 Southwest Plaza I and II Shopping Center Retail 225,889 Best Buy 58,000
27 The Rosedale Corporate Plaza Office 233,987 Secure Computing Corp. 65,546
29 Lake Calhoun Executive Center Office 156,149 John Ryan Company 43,000
32 Shops at Lyndale Phase II Retail 114,640 Baby Superstore 42,050
33 Shops at Lyndale Phase II - TIF Retail 114,640 Baby Superstore 42,050
34 Walgreens - Kirkland Retail 13,905 Walgreen Co. 13,905
35 Walgreens Retail Pharmacy Store - San Francisco Retail 14,026 Walgreen Co. 14,026
36 Walgreens Retail Pharmacy Store - Charleston/Torrey Retail 13,905 Walgreen Co. 13,905
37 Walgreens Retail Pharmacy Store - Las Vegas Boulevard Retail 15,120 Walgreen Co. 15,120
38 Walgreens Retail/Pharmacy Store - Paradise Retail 13,905 Walgreen Co. 13,905
40 414 N. Orleans St. Office 185,717 N/A N/A
41 Two Greenville Crossing Mixed Use 66,177 N/A N/A
42 One Greenville Crossing Retail 63,012 Janssen's 14,693
43 Wesley Chapel Square Retail 215,096 K-Mart 104,231
44 Mercado del Lago Shopping Center Retail 68,055 Payless Drugs 23,714
45 Curry Honda Automobile Dealership Other Commercial 49,973 The Curry Corporation d/b/a Curry Honda 49,973
46 Curry Chevrolet Automobile Dealership Other Commercial 32,340 B.F. Curry Inc. d/b/a Chevrolette/Geo 32,340
47 Curry Acura Automobile Dealership Other Commercial 14,632 Scarsdale Motors, Inc. d/b/a Curry Acura 14,632
48 Curry Ford/Subaru Automobile Dealership Other Commercial 28,065 Mohansic Corp., d/b/a Curry Ford-Subaru 28,065
49 Curry Mitsubishi Automobile Dealership Other Commercial 16,073 Yorktown Motors Inc. 16,073
50 Curry Office Building Other Commercial 14,460 The Curry Corporation 14,460
51 708 Broadway / 404 Lafayette Street Office 148,778 708 Gym Corp. 33,900
52 360-386 East Fordham Road Retail 46,480 Fordham Kiddie Fashions 10,100
55 Valley Central Center Retail 110,870 Foot 4 Less 52,924
56 Centrum Office Building Office 193,665 Sinai Hospital of Greater Detroit 32,364
57 237-269 East Fordham Road Retail 24,200 Discovery Zone 12,500
58 Dietrich Meadows S/C Retail 70,325 Designer Shoe Warehouse 25,700
60 Vista Ridge Retail Center Retail 52,280 Borders, Inc. 25,000
61 Trade Centre South Office 101,945 Wolfram Research 39,551
62 Loehman's Plaza Retail 99,059 Loehmann's Inc. 23,350
63 Southwind Plaza Retail 133,044 Kroger 60,214
64 127th Street Shopping Center Retail 167,612 S. Florida Center for Applied Research 50,213
65 Filene's Basement Distribution Center Industrial 456,920 Filene's Basement Corp. 456,920
68 Hammond Springs Shopping Center Retail 62,414 Kinko's 8,100
69 AMC Theater Complex Retail 35,000 American Multi-Cinema, Inc. 35,000
70 Roosevelt Plaza Shopping Center Retail 121,595 Bingo Hall 20,000
71 Johnson Square Office Park Office 116,325 N/A N/A
73 Gateway Business Center Mixed Use 116,010 Computer Task Group, Inc. 12,954
74 Good Samaritan Medical Plaza Office 44,000 Columbia - GSH 9,357
76 Walgreen's Plaza Retail 35,797 Walgreen's 14,400
77 Candler McAfee Shopping Center Retail 167,784 Heilig Meyers 45,600
79 Big V Supermarket Retail 52,500 ShopRite 52,500
80 1333 N. Kingsbury Street Office 96,008 M & L International 24,284
81 Wellington Place North Office 93,974 A.J. Etkin Construction 22,534
82 Woodstock Square Shopping Center Retail 77,411 Ingles 32,000
84 Rainforest Cafe Property Retail 20,322 Rain Forest Cafe 20,322
85 Randall's Store Retail 59,000 Randall's Food & Drug 59,000
86 34-38 Industrial Way East (Eatontown) Industrial 105,858 Algen Design 31,117
87 Red Cedar Building Office 58,948 McDonnell Douglas 14,600
90 Highlands Ranch Town Center Retail 39,089 Bacchus Wine & Spirits 6,117
92 Sunset Pecos Plaza Retail 36,456 Panini Restaurant 5,240
93 Carls Furniture/Sound Advice Retail 57,000 Carl's Furniture 42,000
95 North Plank Road ShopRite Center Retail 54,776 Big V Supermarket 41,676
96 Colony Plaza Shopping Center Retail 33,494 Lady of America 4,509
98 Doral Centre Shopping Plaza Retail 35,032 Blockbuster Video 6,000
100 Seven Corners Professional Buildings Office 56,027 N/A N/A
104 Walgreens - Seattle Retail 13,905 Walgreen Co. 13,905
106 Walgreens Retail Building - Gresham Retail 13,905 Walgreen Co. 13,905
107 Westridge Plaza Retail 98,833 Leisure Time Warehouse 18,540
109 The Plaza at Stonebridge Retail 33,700 Video Update 5,500
110 Henderson Plaza Retail 120,050 Tractor Supply Co. 34,762
</TABLE>
<PAGE>
Major Tenants of the Commercial Mortgaged Properties (1)
<TABLE>
<CAPTION>
Major Major Major
Tenant #1 Major Tenant #2 Major Tenant #3
Lease Tenant Lease Tenant Lease
Expiration #2 Expiration #3 Expiration
Date Major Tenant #2 Name Sq. Ft. Date Major Tenant #3 Name Sq. Ft. Date
<S> <C> <C> <C> <C> <C> <C> <C>
1 01/01/82 N/A N/A N/A N/A N/A N/A
2 N/A N/A N/A N/A N/A N/A N/A
3 N/A N/A N/A N/A N/A N/A N/A
4 N/A N/A N/A N/A N/A N/A N/A
5 N/A N/A N/A N/A N/A N/A N/A
6 N/A N/A N/A N/A N/A N/A N/A
8 N/A N/A N/A N/A N/A N/A N/A
9 N/A N/A N/A N/A N/A N/A N/A
10 N/A N/A N/A N/A N/A N/A N/A
11 N/A N/A N/A N/A N/A N/A N/A
12 N/A N/A N/A N/A N/A N/A N/A
13 N/A N/A N/A N/A N/A N/A N/A
14 N/A N/A N/A N/A N/A N/A N/A
15 N/A N/A N/A N/A N/A N/A N/A
16 N/A N/A N/A N/A N/A N/A N/A
17 N/A N/A N/A N/A N/A N/A N/A
18 N/A N/A N/A N/A N/A N/A N/A
19 N/A N/A N/A N/A N/A N/A N/A
26 06/30/10 Barnes & Noble 37,196 01/31/09 Office Depot 27,352 12/31/05
27 02/01/06 MN State Lottery 61,426 05/01/03 N/A N/A N/A
29 12/31/99 A.M. Miller & Associates 38,096 05/01/01 Burnett Realty, Inc. 28,553 07/01/03
32 09/01/11 Border's Books 25,449 04/01/17 David's Bridal, Inc. 11,690 10/01/06
33 09/01/11 Border's Books 25,449 04/01/17 David's Bridal, Inc. 11,690 10/01/06
34 04/01/57 N/A N/A N/A N/A N/A N/A
35 07/01/66 N/A N/A N/A N/A N/A N/A
36 09/01/56 N/A N/A N/A N/A N/A N/A
37 05/01/56 N/A N/A N/A N/A N/A N/A
38 07/01/56 N/A N/A N/A N/A N/A N/A
40 N/A N/A N/A N/A N/A N/A N/A
41 N/A N/A N/A N/A N/A N/A N/A
42 12/01/08 Happy Harry, Inc. 11,582 01/01/01 N/A N/A N/A
43 04/01/16 Kroger 59,134 02/01/07 N/A N/A N/A
44 01/31/14 N/A N/A N/A N/A N/A N/A
45 08/31/17 N/A N/A N/A N/A N/A N/A
46 08/31/17 N/A N/A N/A N/A N/A N/A
47 08/31/17 N/A N/A N/A N/A N/A N/A
48 08/31/17 N/A N/A N/A N/A N/A N/A
49 04/01/02 N/A N/A N/A N/A N/A N/A
50 08/31/17 N/A N/A N/A N/A N/A N/A
51 10/01/08 Workman Publishing 32,478 04/01/03 City of New York Department 24,150 01/01/05
of Transportation
52 04/01/03 Easy Pickins 9,400 02/01/06 Paramount Silk 5,900 1/01/01
55 05/01/10 Petsmart 24,931 02/01/09 N/A N/A N/A
56 02/01/01 N/A N/A N/A N/A N/A N/A
57 04/01/04 J. Baker / Casual Male 3,500 02/01/03 Kinney Shoes / Foot Locker 2,700 01/01/03
58 08/01/09 Tandy Corporation 18,425 10/01/12 Party City Corporation 10,400 08/01/07
60 08/31/16 Larry's Shoes 9,000 10/31/06 N/A N/A N/A
61 03/01/02 N/A N/A N/A N/A N/A N/A
62 10/01/13 General Cinema 20,000 03/01/03 N/A N/A N/A
63 03/01/13 N/A N/A N/A N/A N/A N/A
64 01/31/13 Publix Supermarket 41,740 06/02/12 Parkway Medical Center 18,000 08/14/02
65 04/30/02 N/A N/A N/A N/A N/A N/A
68 05/01/99 N/A N/A N/A N/A N/A N/A
69 01/01/25 N/A N/A N/A N/A N/A N/A
70 MTM N/A N/A N/A N/A N/A N/A
71 N/A N/A N/A N/A N/A N/A N/A
73 08/31/00 N/A N/A N/A N/A N/A N/A
74 01/01/02 Unimed - SJMG 8,703 01/01/07 N/A N/A N/A
76 07/01/44 Hollywood Video 7,000 06/01/04 N/A N/A N/A
77 09/01/09 U.S. Corp Flea Market 39,960 05/01/09 Wayfield Foods 26,250 04/01/00
79 10/01/22 N/A N/A N/A N/A N/A N/A
80 03/01/02 Communicate Direct 13,316 02/01/99 Superior Lighting 13,000 03/01/01
81 03/01/04 Dragon Corporation 15,238 01/01/00 Swistak and Levine 9,823 11/01/00
82 08/31/08 Big B Drugs / Revco 11,343 08/01/08 N/A N/A N/A
84 01/09/12 N/A N/A N/A N/A N/A N/A
85 11/01/22 N/A N/A N/A N/A N/A N/A
86 05/01/00 Telecom Analysis Systems 22,170 11/01/98 Magnet Resources 11,074 04/01/99
87 08/31/02 Jorge Scientific Corp. 14,600 08/31/04 Delex Systems, Inc. 6,916 08/31/02
90 04/01/07 Julie's Hallmark 4,368 04/01/02 N/A N/A N/A
92 09/30/02 Osaka Restaurant 4,267 09/01/07 N/A N/A N/A
93 09/30/16 Sound Advise 15,000 11/11/11 N/A N/A N/A
95 05/01/08 Just A Buck 6,500 02/01/09 N/A N/A N/A
96 06/30/02 N/A N/A N/A N/A N/A N/A
98 10/01/01 Lady of America Fitness 4,500 03/01/02 N/A N/A N/A
100 N/A N/A N/A N/A N/A N/A N/A
104 10/01/56 N/A N/A N/A N/A N/A N/A
106 07/01/56 N/A N/A N/A N/A N/A N/A
107 08/01/01 EPA 14,731 08/01/05 USA Baby 12,000 08/01/98
109 09/01/07 Dr. Nelson 3,500 09/01/02 N/A N/A N/A
110 04/01/07 Baskins Department Store 20,238 05/01/02 Beall's 16,800 12/01/02
</TABLE>
<PAGE>
Major Tenants of the Commercial Mortgaged Properties (1)
<TABLE>
<CAPTION>
Major
Tenant
#1
Property Name Property Type Sq. Ft. Major Tenant #1 Name Sq. Ft.
<S> <C> <C> <C> <C> <C>
111 East Town Plaza Retail 79,425 Chief Supermarket 33,119
112 Lake Chabot Medical Center Office 26,195 N/A N/A
113 Garden City Town Center Retail 44,747 Craftique 8,973
116 Walgreens Retail Building - Tucson Retail 17,089 Walgreen Arizona Drug Co. 17,089
118 Bank Properties Office 22,879 Pacific Coast Title 10,004
119 4646 Bronze Way Industrial 85,376 NEI Webworld, Inc. 85,376
120 4647 Bronze Way Industrial 57,804 NEI Webworld, Inc. 57,804
123 West County Plaza Retail 111,789 Fiesta Foods 31,200
124 Sheldon Plaza Retail Center Retail 59,201 Thrifty Payless 27,900
126 The Highland Office Building Office 15,660 Sinco International 1,950
127 A-1 Storage of Lafayette Self Storage 73,876 N/A N/A
128 The Gaither Center Retail 36,280 Lawrence Lomax Antiques 6,000
130 Casual Male Corporate Office Building Mixed Use 53,000 The Casual Male Big & Tall 53,000
131 Walgreens Retail Building - Portland Retail 13,737 Walgreen Co. 13,737
134 Rainbow Shopping Center Retail 19,875 Mahoney's Inc. 3,600
135 Snowfall Plaza Retail 15,510 Bass Shoe 7,760
139 Furr's Grocery Store Retail 45,096 Furr's Supermarkets, Inc. 45,096
140 South Brunswick Industrial Park Industrial 117,430 Mercury Marine 58,900
141 Villager Square Shopping Center Retail 37,455 Pedal & Pleasure 4,400
142 Flint Hill Building Mixed Use 19,950 Tempchin/Tash 2,500
144 Star Ranch Plaza Retail 35,204 Broadmoor Medical Clinic 5,600
147 Freeway Plaza Building Office 40,016 State of Washington 10,490
150 Norwood Park North Office Building Office 42,716 U.S. Food Service, Inc. 8,263
151 Chevy Chase Arcade Mixed Use 12,318 Heritage Area Planners, Inc. 2,393
152 Holcombe Medical Building Office 26,767 The HMS Houston General 5,107
154 Kinston Marketplace Retail 52,230 Food Lion 30,720
157 Revco Drug Store Retail 10,722 Revco Discount Drug Centers, Inc. 10,722
160 The Pathmark Grocery Store Retail 46,500 Pathmark Stores, Inc. 46,500
162 Westside Plaza Shopping Center Retail 10,673 Blockbuster Video 6,000
165 2500 Packard Road Office 24,227 Future Problem SP 2,740
166 K-Mart Plaza Retail 104,000 Kmart 104,000
168 Lovers Lane Animal Hospital/Clinic Other Commercial 7,020 Lovers Lane Animal Medical Center, L.L.P. 7,020
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Major Major Major
Tenant #1 Major Tenant #2 Major Tenant #3
Lease Tenant Lease Tenant Lease
Expiration #2 Expiration #3 Expiration
Date Major Tenant #2 Name Sq. Ft. Date Major Tenant #3 Name Sq. Ft. Date
<S> <C> <C> <C> <C> <C> <C> <C>
111 02/01/10 Val Department Store 25,080 07/01/04 N/A N/A N/A
112 N/A N/A N/A N/A N/A N/A N/A
113 02/01/02 Autoworks 5,152 08/01/00 N/A N/A N/A
116 06/01/56 N/A N/A N/A N/A N/A N/A
118 03/31/99 Wareham Property Group 8,237 12/01/02 N/A N/A N/A
119 09/30/17 N/A N/A N/A N/A N/A N/A
120 09/30/17 N/A N/A N/A N/A N/A N/A
123 05/01/04 C.R. Anthony's 20,920 01/01/01 Perry's 14,040 02/01/08
124 10/01/12 Champion Factory Outlet 7,800 07/10/98 N/A N/A N/A
126 01/01/98 Cell Port Labs 1,940 09/01/97 N/A N/A N/A
127 N/A N/A N/A N/A N/A N/A N/A
128 08/31/02 Community Psychiatric Clinic, Inc. 5,520 10/01/02 J. Beard, A. Pappano and 3,700 12/31/08
V. Pappano
130 01/01/08 N/A N/A N/A N/A N/A N/A
131 07/01/56 N/A N/A N/A N/A N/A N/A
134 02/01/00 Avanti Italian 3,000 08/01/05 Perfect Press 2,400 06/01/99
135 03/01/98 11/30 Corporation 4,900 08/01/98 G. Beene 2,850 04/01/00
139 09/01/17 N/A N/A N/A N/A N/A N/A
140 11/01/98 Fitzpak 37,000 05/01/02 Scholar's Bookshelf 17,000 11/01/97
141 03/31/01 Movie Reel 4,250 01/31/01 N/A N/A N/A
142 10/01/99 Daycon Products Co. 2,450 10/01/98 N/A N/A N/A
144 05/31/99 China Doll Restaurant 4,978 07/31/02 Star Ranch Video 4,935 01/31/99
147 05/31/99 John L. Scott 6,873 02/28/01 City University 4,850 06/30/02
150 01/01/01 Soft Thoughts Systems, Inc. 8,022 11/01/99 Lucent Technologies Inc. 5,975 03/01/98
151 01/01/00 Avant Garde Custom Framing & Art Gallery 1,307 04/01/02 CL Photo, Inc. 1,235 03/31/06
152 12/01/04 Rheumatology Associates 3,144 02/01/02 N/A N/A N/A
154 11/01/05 Family Dollar Stores of NC, Inc. 6,800 12/01/02 N/A N/A N/A
157 10/01/17 N/A N/A N/A N/A N/A N/A
160 01/01/02 N/A N/A N/A N/A N/A N/A
162 09/01/06 Dry Cleaners 1,383 02/21/06 Masters Donuts 1,190 03/31/06
165 11/01/01 N/A N/A N/A N/A N/A N/A
166 04/30/01 N/A N/A N/A N/A N/A N/A
168 07/01/17 N/A N/A N/A N/A N/A N/A
</TABLE>
(1) Only those tenants which occupy 10% or more of the property area.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT A-2
MORTGAGE POOL INFORMATION
See the following 9 pages for tables titled:
Mortgage Rates
Cut-off Date Balances
Original Amortization Terms
Original Terms to Stated Maturity
Remaining Amortization Terms
Remaining Terms to Stated Maturity
Years Built/Years Renovated
Occupancy Rates at Underwriting
Underwriting Debt Service Coverage Ratios
Cut-off Date Loan-to-Value Ratios
Mortgage Loans by State
Mortgage Loans by Property Type
Prepayment Provision as of the Cut-off Date
Mortgage Pool Prepayment Profile
A-2-1
<PAGE>
Mortgage Rates
<TABLE>
<CAPTION>
Weighted
Weighted Average Weighted
Aggregate Percentage of Aggregate Average Weighted Occupancy Average
Range of Number Cut-off Date Initial Appraised Cut-off Date Aggregate Average Rate at Year Built/
Mortgage Rates of Loans Balance Pool Balance Value LTV Ratio U/W NOI U/W DSCR U/W (1) Renovated (2)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6.500% - 7.499% 45 $378,899,821 45.2% $ 842,618,000 56.4% $42,837,520 1.36 x 97.8% 1989
7.500% - 7.999% 66 285,996,926 34.1% 396,340,000 73.2% 33,448,528 1.33 97.7% 1990
8.000% - 8.499% 45 143,081,209 17.1% 197,605,000 72.7% 18,205,464 1.34 97.9% 1985
8.500% - 8.999% 10 25,157,144 3.0% 37,965,000 66.6% 3,481,924 1.37 98.9% 1989
9.000% - 9.500% 2 5,665,040 0.7% 7,100,000 79.9% 732,609 1.29 100.0% 1992
-----------------------------------------------------------------------------------------------------------
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000 65.4% $98,706,045 1.35 x 97.8% 1989
===========================================================================================================
</TABLE>
Maximum Mortgage Rate: 9.250% per annum
Minimum Mortgage Rate: 6.980% per annum
Wtd. Avg. Mortgage Rate: 7.641% per annum
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
Cut-off Date Balances
<TABLE>
<CAPTION>
Weighted
Aggregate Percentage of Aggregate Average
Range of Number Cut-off Date Initial Appraised Cut-off Date
Cut-off Date Balances of Loans Balance Pool Balance Value LTV Ratio
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 500,000 - 1,499,999 29 $ 34,881,849 4.2% $ 52,695,000 68.9%
1,500,000 - 2,499,999 37 73,888,287 8.8% 105,680,000 70.6%
2,500,000 - 3,499,999 26 78,305,668 9.3% 107,040,000 73.7%
3,500,000 - 4,499,999 21 83,720,342 10.0% 124,760,000 69.7%
4,500,000 - 5,499,999 12 60,023,426 7.2% 84,255,000 72.2%
5,500,000 - 6,499,999 7 41,257,656 4.9% 53,775,000 76.9%
6,500,000 - 7,499,999 11 79,411,923 9.5% 111,740,000 72.1%
7,500,000 - 9,999,999 14 121,860,490 14.5% 172,900,000 71.3%
10,000,000 - 14,999,999 5 62,036,508 7.4% 86,083,000 72.3%
15,000,000 - 28,499,999 4 69,587,375 8.3% 91,700,000 76.0%
28,500,000 - $100,000,000 2 133,826,615 16.0% 491,000,000 29.4%
----------------------------------------------------------------------
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000 65.4%
======================================================================
<CAPTION>
Weighted
Average Weighted
Weighted Occupancy Average
Range of Aggregate Average Rate at Year Built/
Cut-off Date Balances U/W NOI U/W DSCR U/W (1) Renovated (2)
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 500,000 - 1,499,999 $ 4,667,423 1.38 x 98.3% 1983
1,500,000 - 2,499,999 9,068,891 1.34 97.5% 1984
2,500,000 - 3,499,999 9,324,733 1.33 98.3% 1990
3,500,000 - 4,499,999 10,765,142 1.44 97.8% 1980
4,500,000 - 5,499,999 7,103,112 1.34 98.9% 1991
5,500,000 - 6,499,999 4,771,170 1.35 95.9% 1988
6,500,000 - 7,499,999 9,558,153 1.39 97.3% 1989
7,500,000 - 9,999,999 14,848,721 1.42 96.8% 1990
10,000,000 - 14,999,999 6,928,727 1.29 99.8% 1991
15,000,000 - 28,499,999 7,660,628 1.30 97.8% 1990
28,500,000 - $100,000,000 14,009,345 1.26 N/A 1994
---------------------------------------------------
Total/Weighted Average: $98,706,045 1.35 x 97.8% 1989
===================================================
</TABLE>
Maximum Cut-off Date Balance: $99,880,087
Minimum Cut-off Date Balance: $ 507,458
Average Cut-off Date Balance: $ 4,992,838
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
<PAGE>
Original Amortization Terms
<TABLE>
<CAPTION>
Range of
Original Aggregate Percentage of Aggregate
Amortization Number Cut-off Date Initial Appraised
Terms (Months) of Loans Balance Pool Balance Value
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
156 - 216 4 $ 9,250,638 1.1% $ 14,875,000
217 - 264 15 29,156,979 3.5% 43,650,000
265 - 300 49 208,738,562 24.9% 324,935,000
301 - 336 2 11,220,389 1.3% 16,350,000
337 - 360 98 580,433,572 69.2% 1,081,818,000
===================================================
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000
===================================================
<CAPTION>
Weighted
Range of Weighted Average Weighted
Original Average Weighted Occupancy Average
Amortization Cut-off Date Aggregate Average Rate at Year Built/
Terms (Months) LTV Ratio U/W NOI U/W DSCR U/W (1) Renovated (2)
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
156 - 216 63.4% $ 1,425,146 1.35 x 98.9% 1995
217 - 264 67.8% 3,976,935 1.33 99.8% 1988
265 - 300 66.7% 27,318,773 1.43 98.3% 1988
301 - 336 68.7% 1,524,260 1.55 95.1% 1992
337 - 360 64.8% 64,460,931 1.32 97.6% 1989
==========================================================
Total/Weighted Average: 65.4% $98,706,045 1.35 x 97.8% 1989
==========================================================
</TABLE>
Maximum Original Amortization Term (Months): 360
Minimum Original Amortization Term (Months): 156
Wtd. Avg. Original Amortization Term (Months): 339
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
Original Terms to Stated Maturity (1)
<TABLE>
<CAPTION>
Range of Aggregate Percentage of Aggregate
Original Terms Number Cut-off Date Initial Appraised
to Maturity (Months) of Loans Balance Pool Balance Value
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
84 - 108 9 $ 27,247,191 3.2% $ 38,950,000
109 - 120 128 675,934,605 80.6% 1,243,313,000
121 - 168 3 28,079,155 3.3% 38,750,000
169 - 240 28 107,539,188 12.8% 160,615,000
========================================================
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000
========================================================
<CAPTION>
Weighted
Weighted Average Weighted
Range of Average Weighted Occupancy Average
Original Terms Cut-off Date Aggregate Average Rate at Year Built/
to Maturity (Months) LTV Ratio U/W NOI U/W DSCR U/W (2) Renovated (3)
- - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
84 - 108 71.2% $ 2,934,193 1.27 x 98.2% 1986
109 - 120 64.2% 79,064,941 1.35 97.5% 1988
121 - 168 73.1% 3,136,369 1.27 98.1% 1992
169 - 240 69.4% 13,570,542 1.38 99.0% 1991
====================================================================
Total/Weighted Average: 65.4% $98,706,045 1.35 x 97.8% 1989
====================================================================
</TABLE>
Maximum Original Term to Maturity (Months): 240
Minimum Original Term to Maturity (Months): 84
Wtd. Avg. Original Term to Maturity (Months): 133
(1) In the case of the Showboat Hotel & Casino, Atlantic City, Washington
Marriott Hotel,the 6 Curry Loans, Hampton Inn - Houston Galleria,
Holiday Inn Southwest and Viking Conference Center, Holiday Inn
Express Hotel, AMC Theater Complex, and the Comfort Inn - Cleveland,
the Anticipated Repayment Date is assumed to be the maturity date. See
"Description of the Mortgage Pool - General" in the Prospectus
Supplement.
(2) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(3) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
<PAGE>
Remaining Amortization Terms
<TABLE>
<CAPTION>
Aggregate Percentage of Aggregate
Range of Remaining Number Cut-off Date Initial Appraised
Amort. Terms (Months) of Loans Balance Pool Balance Value
- - ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
144 - 204 3 $ 4,291,112 0.5% $ 7,825,000
205 - 228 1 4,959,525 0.6% 7,050,000
229 - 240 14 26,267,071 3.1% 40,250,000
241 - 276 1 2,889,908 0.3% 3,400,000
277 - 300 49 208,738,562 24.9% 324,935,000
301 - 348 2 11,220,389 1.3% 16,350,000
349 - 360 98 580,433,572 69.2% 1,081,818,000
--------------------------------------------------------------
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000
==============================================================
<CAPTION>
Weighted
Weighted Average Weighted
Average Weighted Occupancy Average
Range of Remaining Cut-off Date Aggregate Average Rate at Year Built/
Amort. Terms (Months) LTV Ratio U/W NOI U/W DSCR U/W (1) Renovated (2)
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
144 - 204 55.4% $ 748,162 1.45 x 97.6% 1992
205 - 228 70.4% 676,984 1.26 100.0% 1997
229 - 240 65.9% 3,687,614 1.36 99.7% 1987
241 - 276 85.0% 289,321 1.05 100.0% 1996
277 - 300 66.7% 27,318,773 1.43 98.3% 1988
301 - 348 68.7% 1,524,260 1.55 95.1% 1992
349 - 360 64.8% 64,460,931 1.32 97.6% 1989
-----------------------------------------------------------------
Total/Weighted Average: 65.4% $98,706,045 1.35 x 97.8% 1989
=================================================================
</TABLE>
Maximum Remaining Amortization Term (Months): 359
Minimum Remaining Amortization Term (Months): 152
Wtd. Avg. Remaining Amortization Term (Months): 336
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
Remaining Terms to Stated Maturity (1)
<TABLE>
<CAPTION>
Weighted
Aggregate Percentage of Aggregate Average
Range of Remaining Terms Number Cut-off Date Initial Appraised Cut-off Date
to Stated Maturity (Months) of Loans Balance Pool Balance Value LTV Ratio
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
72 - 108 9 $ 27,247,191 3.2% $ 38,950,000 71.2%
109 - 120 128 675,934,605 80.6% 1,243,313,000 64.2%
121 - 144 2 26,601,624 3.2% 35,700,000 74.5%
145 - 168 1 1,477,531 0.2% 3,050,000 48.4%
169 - 216 9 34,236,562 4.1% 53,865,000 64.7%
217 - 240 19 73,302,625 8.7% 106,750,000 71.6%
-----------------------------------------------------------------------------
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000 65.4%
=============================================================================
<CAPTION>
Weighted
Average Weighted
Weighted Occupancy Average
Range of Remaining Terms Aggregate Average Rate at Year Built/
to Stated Maturity (Months) U/W NOI U/W DSCR U/W (2) Renovated (3)
- - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
72 - 108 $ 2,934,193 1.27 x 98.2% 1986
109 - 120 79,064,941 1.35 97.5% 1988
121 - 144 2,826,855 1.25 97.9% 1992
145 - 168 309,514 1.68 100.0% 1996
169 - 216 4,534,280 1.37 97.7% 1990
217 - 240 9,036,262 1.38 99.6% 1991
-------------------------------------------------------
Total/Weighted Average: $98,706,045 1.35 x 97.8% 1989
=======================================================
</TABLE>
Maximum Remaining Term to Maturity (Months): 238
Minimum Remaining Term to Maturity (Months): 77
Wtd. Avg. Remaining Term to Maturity (Months): 130
(1) In the case of the Showboat Hotel & Casino, Atlantic City, Washington
Marriott Hotel, the 6 Curry Loans, Hampton Inn - Houston Galleria,
Holiday Inn Southwest and Viking Conference Center, Holiday Inn
Express Hotel, AMC Theater Complex, and the Comfort Inn - Cleveland,
the Anticipated Repayment Date is assumed to be the maturity date.
See "Description of the Mortgage Pool - General" in the Prospectus
Supplement.
(2) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(3) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
<PAGE>
Years Built/Years Renovated (1)
<TABLE>
<CAPTION>
Weighted
Range of Aggregate Percentage of Aggregate Average
Years Number Cut-off Date Initial Appraised Cut-off Date
Built/Renovated of Loans Balance Pool Balance Value LTV Ratio
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1920 - 1950 1 $ 3,787,272 0.5% $ 4,700,000 80.6%
1951 - 1960 1 3,739,241 0.4% 5,000,000 74.8%
1961 - 1970 21 56,890,634 6.8% 81,540,000 71.8%
1971 - 1980 25 67,899,324 8.1% 101,670,000 69.7%
1981 - 1990 47 264,564,508 31.5% 377,255,000 71.1%
1991 - 1997 73 441,919,161 52.7% 911,463,000 60.3%
-----------------------------------------------------------------------------
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000 65.4%
=============================================================================
<CAPTION>
Weighted
Average Weighted
Range of Aggregate Weighted Occupancy Average
Years Underwriting Average Rate at Year Built/
Built/Renovated U/W NOI U/W DSCR U/W (2) Renovated
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1920 - 1950 $ 424,292 1.30 x 97.0% 1938
1951 - 1960 432,738 1.35 94.0% 1959
1961 - 1970 7,261,178 1.42 97.5% 1968
1971 - 1980 8,547,540 1.42 97.0% 1976
1981 - 1990 31,376,889 1.37 97.7% 1987
1991 - 1997 50,663,408 1.31 98.3% 1995
---------------------------------------------------------
Total/Weighted Average: $98,706,045 1.35 x 97.8% 1989
=========================================================
</TABLE>
Most Recent Year Built/Renovated: 1997
Oldest Year Built/Renovated: 1938
Wtd. Avg. Year Built/Renovated: 1989
(1) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
(2) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
Occupancy Rates at Underwriting (1)
<TABLE>
<CAPTION>
Range of Aggregate Percentage of Aggregate
Occupancy Number Cut-off Date Initial Appraised
Rates at U/W of Loans Balance Pool Balance Value
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
80.0% - 84.9% 2 $ 4,227,857 0.5% $ 6,100,000
85.0% - 89.9% 3 14,806,012 1.8% 20,650,000
90.0% - 94.9% 16 74,826,166 8.9% 106,440,000
95.0% - 100.0% 141 577,964,894 68.9% 810,538,000
--------------------------------------------------------------
Total/Weighted Average: 162 $671,824,929 80.1% $943,728,000
==============================================================
<CAPTION>
Weighted
Weighted Average Weighted
Range of Average Weighted Occupancy Average
Occupancy Cut-off Date Aggregate Average Rate at Year Built/
Rates at U/W LTV Ratio U/W NOI U/W DSCR U/W(1) Renovated (2)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
80.0% - 84.9% 69.5% $ 508,495 1.32 x 82.6% 1989
85.0% - 89.9% 71.9% 1,732,720 1.34 88.2% 1981
90.0% - 94.9% 71.4% 9,192,626 1.40 92.3% 1988
95.0% - 100.0% 72.4% 68,762,433 1.35 98.9% 1987
---------------------------------------------------------------------
Total/Weighted Average: 72.3% $80,196,274 1.36 x 97.8% 1987
=====================================================================
</TABLE>
Maximum Occupancy Rate at Underwriting: 100.0%
Minimum Occupancy Rate at Underwriting: 82.0%
Wtd. Avg. Occupancy Rate at Underwriting: 97.8%
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
<PAGE>
Underwriting Debt Service Coverage Ratios
<TABLE>
<CAPTION>
Weighted
Aggregate Percentage of Aggregate Average
Range of Number Cut-off Date Initial Appraised Cut-off Date Aggregate
U/W DSCRs of Loans Balance Pool Balance Value LTV Ratio U/W NOI
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.000 x - 1.090 1 $ 2,889,908 0.3% $ 3,400,000 85.0% $ 289,321
1.100 - 1.190 2 102,672,915 12.2% 419,800,000 25.4% 9,479,112
1.200 - 1.290 69 298,664,999 35.6% 404,340,000 74.5% 33,293,513
1.300 - 1.390 50 206,104,138 24.6% 280,773,000 73.7% 24,067,647
1.400 - 1.490 23 108,775,000 13.0% 155,015,000 71.0% 13,957,561
1.500 - 1.590 11 49,781,448 5.9% 77,265,000 65.4% 6,837,739
1.600 - 1.690 7 49,394,879 5.9% 98,850,000 51.7% 7,221,773
1.700 - 1.790 1 1,491,051 0.2% 2,000,000 74.6% 255,955
1.800 - 1.890 1 1,496,585 0.2% 3,190,000 46.9% 228,817
1.900 - 1.990 2 13,705,799 1.6% 25,840,000 53.3% 2,218,059
2.000 3.000x 1 3,823,417 0.5% 11,155,000 34.3% 856,548
===============================================================================================
Total/Weighted Average: 168 $838,800,140 100.0% $1,481,628,000 65.4% $ 98,706,045
===============================================================================================
<CAPTION>
Average Weighted
Weighted Occupancy Average
Range of Average Rate at Year Built/
U/W DSCRs U/W DSCR U/W (1) Renovated (2)
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
1.000 x - 1.090 1.05 x 100.0% 1996
1.100 - 1.190 1.14 100.0% 1994
1.200 - 1.290 1.26 97.8% 1989
1.300 - 1.390 1.34 97.4% 1987
1.400 - 1.490 1.43 98.6% 1988
1.500 - 1.590 1.55 99.0% 1987
1.600 - 1.690 1.64 99.7% 1993
1.700 - 1.790 1.77 100.0% 1967
1.800 - 1.890 1.83 100.0% 1975
1.900 - 1.990 1.94 92.4% 1984
2.000 3.000x 2.67 99.0% 1972
===============================================
Total/Weighted Average: 1.35 x 97.8% 1989
===============================================
</TABLE>
Maximum Underwriting DSCR: 2.67x
Minimum Underwriting DSCR: 1.05x
Wtd. Avg. Underwriting DSCR: 1.35x
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated. `
Cut-off Date Loan-to-Value Ratios
<TABLE>
<CAPTION>
Weighted
Range of Aggregate Percentage of Aggregate Average
Cut-off Date Number Cut-off Date Initial Appraised Cut-off Date Aggregate
LTV Ratios of Loans Balance Pool Balance Value LTV Ratio U/W NOI
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
20.00% - 29.99% 2 $ 100,578,424 12.0% $ 418,750,000 24.0% $ 9,265,231
30.00% - 39.99% 1 3,823,417 0.5% 11,155,000 34.3% 856,548
40.00% - 49.99% 4 40,649,349 4.8% 89,080,000 45.6% 5,982,058
50.00% - 59.99% 9 37,488,892 4.5% 69,290,000 54.2% 5,337,054
60.00% - 69.99% 32 122,609,206 14.6% 186,428,000 65.9% 15,552,498
70.00% - 79.99% 114 512,891,056 61.1% 681,325,000 75.4% 59,385,120
80.00% - 90.00% 6 20,759,797 2.5% 25,600,000 81.1% 2,327,536
====================================================================================================
Total/Weighted Average: 168 $ 838,800,140 100.0% $ 1,481,628,000 65.4% $ 98,706,045
====================================================================================================
<CAPTION> Weighted
Average Weighted
Range of Weighted Occupancy Average
Cut-off Date Average Rate at Year Built/
LTV Ratios U/W DSCR U/W (1) Renovated (2)
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C>
20.00% - 29.99% 1.14 x 100.0% 1994
30.00% - 39.99% 2.67 99.0% 1972
40.00% - 49.99% 1.66 99.4% 1992
50.00% - 59.99% 1.58 96.1% 1985
60.00% - 69.99% 1.42 97.1% 1991
70.00% - 79.99% 1.32 98.0% 1988
80.00% - 90.00% 1.24 99.5% 1985
====================================================
Total/Weighted Average: 1.35 x 97.8% 1989
====================================================
</TABLE>
Maximum Cut-off Date LTV Ratio: 85.0%
Minimum Cut-off Date LTV Ratio: 24.0%
Wtd. Avg. Cut-off Date LTV Ratio: 65.4%
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
<PAGE>
Mortgage Loans by State
<TABLE>
<CAPTION>
Weighted
Aggregate Percentage of Aggregate Average
Number Cut-off Date Initial Appraised Cut-off Date Aggregate
State of Loans Balance Pool Balance Value LTV Ratio U/W NOI
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New Jersey 5 $ 111,574,714 13.3% $ 432,915,000 28.9% $ 10,581,385
California 19 86,007,065 10.3% 117,055,000 73.9% 10,064,501
Minnesota 9 63,783,440 7.6% 85,870,000 74.7% 7,555,720
Illinois 10 62,539,201 7.5% 85,290,000 73.4% 7,002,443
Texas 20 55,693,380 6.6% 75,555,000 74.0% 6,680,433
Georgia 12 50,785,935 6.1% 68,100,000 75.1% 6,192,009
Florida 10 49,139,088 5.9% 65,000,000 75.7% 5,658,491
New York 12 48,555,822 5.8% 71,900,000 68.5% 6,423,379
North Carolina 8 35,629,019 4.2% 49,300,000 73.5% 3,815,563
District of Columbia 2 35,443,428 4.2% 77,100,000 46.4% 4,996,292
Missouri 6 29,842,655 3.6% 52,245,000 62.3% 4,372,623
Michigan 6 29,782,074 3.6% 44,150,000 68.5% 3,653,638
Oregon 4 21,152,519 2.5% 31,113,000 68.4% 2,306,288
Virginia 2 21,078,325 2.5% 26,800,000 78.7% 2,273,744
Maryland 4 16,149,353 1.9% 22,500,000 72.1% 2,020,255
Massachusetts 3 14,098,639 1.7% 23,190,000 62.8% 1,921,641
Colorado 5 13,020,897 1.6% 19,050,000 68.4% 1,610,889
Delaware 2 12,777,191 1.5% 21,200,000 60.3% 1,621,594
Ohio 3 12,248,634 1.5% 18,010,000 69.8% 1,681,304
Nevada 4 11,642,726 1.4% 15,600,000 75.2% 1,391,994
South Carolina 2 9,002,744 1.1% 12,100,000 74.4% 1,052,482
Washington 3 8,484,663 1.0% 11,500,000 74.2% 937,249
Mississippi 4 7,164,625 0.9% 9,320,000 76.9% 861,112
Pennsylvania 1 6,877,403 0.8% 11,100,000 62.0% 802,766
Arizona 2 5,829,834 0.7% 7,500,000 78.3% 621,813
Tennessee 3 5,170,082 0.6% 6,800,000 76.0% 614,637
Indiana 2 4,635,676 0.6% 6,400,000 72.5% 595,219
Louisiana 1 2,832,998 0.3% 3,800,000 74.6% 364,824
Arkansas 1 2,348,406 0.3% 3,150,000 74.6% 286,412
Vermont 1 2,042,910 0.2% 3,365,000 60.7% 251,946
Iowa 1 1,751,985 0.2% 2,350,000 74.6% 240,060
Connecticut 1 1,714,709 0.2% 2,300,000 74.6% 253,339
===================================================================================================
Total/Weighted Average: 168 $ 838,800,140 100.0% $1,481,628,000 65.4% $ 98,706,045
===================================================================================================
<CAPTION>
Weighted
Average Weighted
Weighted Occupancy Average
Average Rate at Year Built/
State U/W DSCR U/W (1) Renovated (2)
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
New Jersey 1.16 x 97.1% 1992
California 1.34 98.9% 1987
Minnesota 1.35 99.2% 1991
Illinois 1.28 97.8% 1986
Texas 1.34 97.9% 1991
Georgia 1.35 97.1% 1985
Florida 1.32 98.2% 1992
New York 1.50 97.8% 1988
North Carolina 1.30 96.7% 1982
District of Columbia 1.61 100.0% 1995
Missouri 1.62 99.6% 1986
Michigan 1.43 94.9% 1985
Oregon 1.32 99.4% 1993
Virginia 1.27 95.6% 1989
Maryland 1.38 98.7% 1991
Massachusetts 1.46 100.0% 1984
Colorado 1.31 92.0% 1991
Delaware 1.56 98.4% 1989
Ohio 1.51 95.0% 1988
Nevada 1.34 94.7% 1996
South Carolina 1.34 100.0% 1993
Washington 1.27 96.2% 1993
Mississippi 1.35 99.6% 1984
Pennsylvania 1.28 93.0% 1987
Arizona 1.16 99.0% 1991
Tennessee 1.32 99.5% 1991
Indiana 1.45 100.0% 1986
Louisiana 1.33 100.0% 1976
Arkansas 1.26 100.0% 1987
Vermont 1.29 100.0% 1994
Iowa 1.42 100.0% 1972
Connecticut 1.53 100.0% 1979
===================================================
Total/Weighted Average: 1.35 x 97.8% 1989
===================================================
</TABLE>
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
<PAGE>
Mortgage Loans by Property Type
<TABLE>
<CAPTION>
Weighted
Aggregate Percentage of Aggregate Average
Number Cut-off Date Initial Appraised Cut-off Date Aggregate
Property Type of Loans Balance Pool Balance Value LTV Ratio U/W NOI
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retail 56 $ 267,703,187 31.9% $ 372,530,000 72.8% $ 31,791,905
Multifamily 45 161,040,755 19.2% 215,565,000 75.2% 17,996,887
Office 19 118,207,066 14.1% 165,370,000 71.9% 13,801,842
Hotel & Casino 1 99,880,087 11.9% 416,000,000 24.0% 9,182,326
Hotel 5 67,095,124 8.0% 121,900,000 57.9% 9,327,445
Industrial 23 58,642,423 7.0% 84,275,000 70.8% 7,957,578
Mobile Home Park 5 26,517,366 3.2% 48,338,000 58.4% 3,594,708
Mixed Use 5 19,201,359 2.3% 27,950,000 69.6% 2,293,523
Other Commercial 7 10,829,699 1.3% 16,700,000 65.0% 1,588,205
Senior Housing 1 7,224,844 0.9% 9,600,000 75.3% 866,932
Self Storage 1 2,454,422 0.3% 3,400,000 72.2% 304,694
------------------------------------------------------------------------------------------------
Total/Weighted Average: 168 $ 838,800,140 100.0% $ 1,481,628,000 65.4% $ 98,706,045
================================================================================================
<CAPTION>
Weighted
Average Weighted
Weighted Occupancy Average
Average Rate at Year Built/
Property Type U/W DSCR U/W (1) Renovated (2)
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail 1.35 x 97.5% 1991
Multifamily 1.31 97.4% 1985
Office 1.35 97.9% 1987
Hotel & Casino 1.14 N/A 1994
Hotel 1.54 N/A 1995
Industrial 1.42 99.6% 1978
Mobile Home Park 1.64 99.1% 1987
Mixed Use 1.39 97.6% 1992
Other Commercial 1.36 100.0% 1983
Senior Housing 1.36 100.0% 1996
Self Storage 1.34 83.0% 1996
------------------------------------------------
Total/Weighted Average: 1.35 x 97.8% 1989
================================================
</TABLE>
(1) Does not include any Mortgage Loans secured by hotel or hotel & casino
properties.
(2) Year Built/Renovated reflects the later of the Year Built or the Year
Renovated.
<PAGE>
Prepayment Provision as of the Cut-off Date (1)
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Remaining Remaining Weighted
Range of Aggregate Percentage of Lockout Lockout Plus Average
Remaining Terms to Number of Cut-off Date Initial Period Premium Period Maturity
Stated Maturity (years) Loans Balance Pool Balance (years) (years) (years) (1)
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
6.0 - 6.9 9 $ 27,247,191 3.2% 4.1 5.7 6.8
9.0 - 9.9 128 675,934,605 80.6% 8.1 9.3 9.8
11.0 - 11.9 2 26,601,624 3.2% 6.9 9.9 11.8
12.0 - 12.9 1 1,477,531 0.2% 12.2 12.2 12.7
14.0 - 14.9 9 34,236,562 4.1% 8.9 12.5 14.8
19.0 - 19.9 19 73,302,625 8.7% 17.5 17.5 19.7
===================================================================================
Total/Weighted Average: 168 $ 838,800,140 100.0% 8.8 10.0 10.8
===================================================================================
</TABLE>
(1) In the case of the Showboat Hotel & Casino, Atlantic City, Washington
Marriott Hotel, the 6 Curry Loans, Hampton Inn - Houston Galleria,
Holiday Inn Southwest and Viking Conference Center, Holiday
Inn Express Hotel, AMC Theater Complex, and the Comfort Inn -
Cleveland, the Anticipated Repayment Date is assumed to be the maturity
date. See "Description of the Mortgage Pool -
General" in the Prospectus Supplement.
<PAGE>
Mortgage Pool Prepayment Profile (1)
<TABLE>
<CAPTION>
Prepayment
Provision
As of % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool
Cut-off Date Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lock out 100.0% 99.8% 99.8% 94.8% 92.3% 75.1% 74.5% 74.6% 74.6% 73.7%
Yield Maint
Premium 0.0% 0.2% 0.2% 5.0% 7.5% 22.8% 23.3% 24.5% 24.4% 24.1%
1% to 4%
Prepayment
Premium 0.0% 0.0% 0.0% 0.2% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Open Period 0.0% 0.0% 0.0% 0.0% 0.0% 2.2% 2.2% 0.9% 0.9% 2.2%
-----------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=======================================================================================================================
Outstanding
Balance (mm) $838.8 $830.2 $820.9 $810.9 $800.0 $788.2 $775.6 $736.9 $722.5 $706.9
Number of
Loans 168 168 168 168 168 168 168 159 159 159
<CAPTION>
Prepayment
Provision
As of % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool % of Pool
Cut-off Date Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lock out 69.7% 69.9% 80.8% 81.3% 82.0% 89.1% 88.9% 32.2% 30.6% 28.6%
Yield Maint
Premium 15.8% 15.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
1% to 4%
Prepayment
Premium 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Open Period 14.4% 14.6% 19.2% 18.7% 18.0% 10.9% 11.1% 67.8% 69.4% 71.4%
-----------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=======================================================================================================================
Outstanding
Balance (mm) $111.2 $107.5 $80.9 $77.2 $73.3 $51.5 $48.9 $46.1 $43.1 $39.8
Number of
Loans 31 31 29 28 28 19 19 19 19 19
</TABLE>
(1) Calculated assuming that no Mortgage Loan prepays prior to stated
maturity, except that the Mortgage Loans secured by the Showboat Hotel &
Casino, Atlantic City, Washington Marriott Hotel, the 6 Curry Loans,
Hampton Inn - Houston Galleria, Holiday Inn Southwest Conference Center,
Holiday Inn Express Hotel, AMC Theater Complex, and the Comfort Inn -
Cleveland, respectively, are assumed to pay in full on their respective
Anticipated Repayment Dates. Otherwise calculated based on Modeling
Assumptions. See "Description of the Mortgage Pool - General" and "Yield
and Maturity Considerations" in the Prospectus Supplement.
<PAGE>
EXHIBIT B
FORM OF TRUSTEE REPORT
See the following 17 pages.
B-1
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
TRUSTEE REPORT
Table of Contents
STATEMENT SECTIONS PAGE(s)
------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Other Required Information 4
Ratings Detail 5
Current Mortgage Loan and Property Stratification Tables 6-8
Mortgage Loan Detail 9
Principal Prepayment Detail 10
Historical Detail 11
Reconciliation Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Detail 16
Liquidated Loan Detail 17
<TABLE>
<CAPTION>
Underwriter Servicer Special Servicer
<S> <C> <C>
Donaldson, Lufkin & Jenrette Banc One Mortgage Capital Markets, LLC Clarion Partners
Securities Corporation 1717 Main Street, 14th Floor 335 Madison Avenue, 7th Floor
277 Park Avenue Dallas, TX 75201 New York, NY 10017
New York, NY 10172
Contact: N. Dante LaRocca Contact: Paul G. Smyth Contact: Bruce G. Morrison
Phone Number: (212)892-3000 Phone Number: (214)290-2505 Phone Number:(212)883-2500
</TABLE>
This report has been compiled from information provided to Norwest by various
third parties, which may include the Servicer, Master Servicer, Special Servicer
and others. Norwest has not independently confirmed the accuracy of information
received from these third parties and assumes no duty to do so. Norwest
expressly disclaims any responsibility for the accuracy or completeness of
information furnished by third parties.
Copyright 1997, Norwest Bank Minnesota, N.A. Page 1 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Certificate Distribution Detail
<TABLE>
<CAPTION>
Pass-Through Original Beginning Principal Interest
Class CUSIP Rate Balance Balance Distribution Distribution
- - ----- ----- ------------ -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
A-1A 0.000000% 0.00 0.00 0.00 0.00
A-1B 0.000000% 0.00 0.00 0.00 0.00
A-2 0.000000% 0.00 0.00 0.00 0.00
A-3 0.000000% 0.00 0.00 0.00 0.00
B-1 0.000000% 0.00 0.00 0.00 0.00
B-2 0.000000% 0.00 0.00 0.00 0.00
B-3 0.000000% 0.00 0.00 0.00 0.00
B-4 0.000000% 0.00 0.00 0.00 0.00
B-5 0.000000% 0.00 0.00 0.00 0.00
B-6 0.000000% 0.00 0.00 0.00 0.00
B-7 0.000000% 0.00 0.00 0.00 0.00
C 0.000000% 0.00 0.00 0.00 0.00
D 0.000000% 0.00 0.00 0.00 0.00
R-I 0.000000% 0.00 0.00 0.00 0.00
R-II 0.000000% 0.00 0.00 0.00 0.00
R-III 0.000000% 0.00 0.00 0.00 0.00
- - -----------------------------------------------------------------------------
Totals 0.00 0.00 0.00 0.00
=============================================================================
<CAPTION>
Realized Loss/ Current
Prepayment Additional Trust Total Ending Subordination
Class Penalties Fund Expenses Distribution Balance Level(1)
- - ----- ---------- ---------------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
A-1A 0.00 0.00 0.00 0.00 0.00%
A-1B 0.00 0.00 0.00 0.00 0.00%
A-2 0.00 0.00 0.00 0.00 0.00%
A-3 0.00 0.00 0.00 0.00 0.00%
B-1 0.00 0.00 0.00 0.00 0.00%
B-2 0.00 0.00 0.00 0.00 0.00%
B-3 0.00 0.00 0.00 0.00 0.00%
B-4 0.00 0.00 0.00 0.00 0.00%
B-5 0.00 0.00 0.00 0.00 0.00%
B-6 0.00 0.00 0.00 0.00 0.00%
B-7 0.00 0.00 0.00 0.00 0.00%
C 0.00 0.00 0.00 0.00 0.00%
D 0.00 0.00 0.00 0.00 0.00%
R-I 0.00 0.00 0.00 0.00 0.00%
R-II 0.00 0.00 0.00 0.00 0.00%
R-III 0.00 0.00 0.00 0.00 0.00%
- - -----------------------------------------------------------------------------
Totals 0.00 0.00 0.00
=============================================================================
</TABLE>
<TABLE>
<CAPTION>
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Balance Amount Distribution Penalties Distribution Amount
- - ----- ----- ------------ ------- --------- ------------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CP 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
S 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending certificate balance of the designated
class and (ii) the ending certificate balance of all classes which are not
subordinate to the designated class and dividing the result by (A).
Copyright 1997, Norwest Bank Minnesota, N.A. Page 2 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Certificate Factor Detail
<TABLE>
<CAPTION>
Realized Loss/
Additional
Beginning Principal Interest Prepayment Trust Ending
Class CUSIP Balance Distribution Distribution Penalties Fund Expenses Balance
- - ----- ------ ----------- ------------ ------------ --------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1A 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-1B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-3 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B-3 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B-4 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B-5 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B-6 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B-7 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-III 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
</TABLE>
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Penalties Amount
- - ------- ----- ------------ ------------ ----------- ---------
CP 0.00000000 0.00000000 0.00000000 0.00000000
S 0.00000000 0.00000000 0.00000000 0.00000000
Copyright 1997, Norwest Bank Minnesota, N.A. Page 3 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Other Required Information
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Trust Fund Expenses 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
Appraisal Reduction Amount
Appraisal Date Appraisal
Loan Reduction Reduction
Number Amount Effected
- - ------ --------- --------------
- - -----------------------------------------------------
Total
=====================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 4 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Ratings Detail
Original Ratings Current Ratings (1)
---------------- -------------------
Class CUSIP DCR Fitch Moody's S & P DCR Fitch Moody's S & P
- - ----- ----- --- ----- ------- ----- --- ----- ------- -----
CP
S
A-1A
A-1B
A-2
A-3
B-1
B-2
B-3
B-4
B-5
B-6
B-7
C
NR - Designates that the class was not rated by the above agency at the
time of original issuance.
X - Designates that the above rating agency did not rate any classes
in this transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any particular
rating agency, no request has been made subsequent to issuance to obtain rating
information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date
listed above. The ratings may have changed since they were obtained. Because the
ratings may have changed, you may want to obtain current ratings directly from
the rating agencies.
Duff & Phelps Credit Rating Co. Fitch IBCA, Inc.
55 East Monroe Street One State Street Plaza
Chicago, Illinois 60603 New York, New York 10004
(312) 368-3100 (212) 908-0500
Moody's Investors Service Standard & Poor's Rating Services
99 Church Street 26 Broadway
New York, New York 10007 New York, New York 10004
(212) 553-0300 (212) 208-8000
Copyright 1997, Norwest Bank Minnesota, N. A. Page 5 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Current Mortgage Loan and Property Stratification Tables
Scheduled Balance
% of
# of Scheduled Agg. WAM Weighted
Scheduled Balance Loans Balance Bal. (2) WAC Avg DSCR(1)
- - ----------------- ------ --------- ----- ---- --- -----------
Totals
State (3)
% of
# of Scheduled Agg. WAM Weighted
State Props. Balance Bal. (2) WAC Avg DSCR(1)
- - ----- ------ ---------- ---- ---- --- -----------
Totals
See footnotes on last page of this section.
Copyright 1997, Norwest Bank Minnesota, N.A. Page 6 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Current Mortgage Loan and Property Stratification Tables
<TABLE>
<CAPTION>
Debt Service Coverage Ratio
% of
Debt Service # of Scheduled Agg. WAM Weighted
Coverage Ratio Loans Balance Bal. (2) WAC Avg DSCR (1)
-------------- ----- --------- ----- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
----- --------- ----- --- --- ------------
Totals
===== ========= ===== === === ============
</TABLE>
<TABLE>
<CAPTION>
Property Type (3)
% of
# of Scheduled Agg. WAM Weighted
Property Type Loans Balance Bal. (2) WAC Avg DSCR (1)
------------- ----- --------- ----- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
----- --------- ----- --- --- ------------
Totals
===== ========= ===== === === =============
</TABLE>
<TABLE>
<CAPTION>
Note Rate
% of
# of Scheduled Agg. WAM Weighted
Note Rate Loans Balance Bal. (2) WAC Avg DSCR (1)
--------- ----- --------- ----- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
----- --------- ----- --- --- ------------
Totals
===== ========= ===== === === ============
</TABLE>
<TABLE>
<CAPTION>
Seasoning
% of
# of Scheduled Agg. WAM Weighted
Seasoning Loans Balance Bal. (2) WAC Avg DSCR (1)
--------- ----- --------- ---- --- --- ------------
<S> <C> <C> <C> <C> <C> <C>
----- --------- ---- --- --- ------------
Totals
===== ========= ==== === === ============
</TABLE>
See footnotes on last page of this section.
Page 7 of 17
Copyright 1997, Norwest Bank Minnesota, N.A.
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Current Mortgage Loan and Property Stratification Tables
<TABLE>
<CAPTION>
Anticipated Remaining Term (ARD and Balloon Loans)
% of
Anticipated Remaining # of Scheduled Agg. WAM Weighted
Term (2) Loans Balance Bal. (2) WAC Avg DSCR (1)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------
Totals
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Remaining Stated Term (Fully Amortizing Loans)
% of
Remaining Stated # of Scheduled Agg. WAM Weighted
Term Loans Balance Bal. (2) WAC Avg DSCR (1)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------
Totals
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Remaining Amortization Term (ARD and Balloon Loans)
% of
Remaining Amortization # of Scheduled Agg. WAM Weighted
Term Loans Balance Bal. (2) WAC Avg DSCR (1)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------
Totals
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Age of Most Recent NOI
% of
Age of Most # of Scheduled Agg. WAM Weighted
Recent NOI Loans Balance Bal. (2) WAC Avg DSCR (1)
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------
Totals
===================================================================================================================
</TABLE>
(1) Debt Service Coverage Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures become available from
borrowers on an asset level. The Trustee makes no representations as to the
accuracy of the data provided by the borrower for this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term
from the current month to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date
(3) Data in this table was calculated by allocating pro-rata the current loan
information to the properties based upon the Cut-off Date Balance of the
related mortgage loan as disclosed in the offering document.
Note: "Scheduled Balance" has the meaning assigned thereto in the CSSA Standard
Information Package.
An ARD Loan constitutes a "Hyper-Amortization Loan" as defined in the offering
document.
Page 8 of 17
Copyright 1997, Norwest Bank Minnesota, N.A.
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Mortgage Loan Detail
<TABLE>
<CAPTION>
Anticipated
Loan Property Interest Principal Gross Repayment Maturity
Number ODCR Type(1) City State Payment Payment Coupon Date Date
- - ------- ---- ------- ---- ----- -------- ----------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
Totals
===================================================================================================================================
<CAPTION>
Neg. Beginning Ending Paid Appraisal Appraisal Res. Mod.
Loan Amort Scheduled Scheduled Thru Reduction Reduction Strat. Code
Number (Y/N) Balance Balance Date Date Amount (2) (3)
- - ------- ------- ---------- --------- ------ ------------ ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
Totals
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(1) Property Type Code (2) Resolution Strategy Code (3) Modification Code
------------------------ ----------------------------- -----------------------
<S> <C> <C>
MF - Multi-Family OF - Office 1 - Modification 7 - REO 1 - Maturity Date Extension
RT - Retail MU - Mixed Use 2 - Foreclosure 8 - Resolved 2 - Amortization Change
HC - Health Care LO - Lodging 3 - Bankruptcy 9 - Pending Return 3 - Principal Write-Off
IN - Industrial SS - Self Storage 4 - Extension to Master Servicer 4 - Combination
WH - Warehouse OT - Other 5 - Note Sale 10 - Deed In Lieu Of
MH - Mobile Home Park 6 - DPO Foreclosure
</TABLE>
Copyright 1997, Norwest Bank Minnesota, N.A. Page 9 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Principal Prepayment Detail
<TABLE>
<CAPTION>
Offering Document Principal Prepayment Amount Prepayment Penalties
--------------------------- ---------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Prepayment Premium Yield Maintenance Premium
- - ----------- ------------------ ------------- ------------------ ------------------ -------------------------
<S> <C> <C> <C> <C> <C>
Totals
</TABLE>
Copyright 1997, Norwest Bank Minnesota, N.A. Page 10 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Historical Detail
<TABLE>
<CAPTION>
Delinquencies
--------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications
Date # Balance # Balance # Balance # Balance # Balance # Balance
- - ------------ ------------- ------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
<CAPTION>
Prepayments Rate and Maturities
------------------------------------------- -----------------------------------------------
Distribution Curtailments Payoff Next Weighted Avg.
Date # Amount # Amount Coupon Remit WAM
- - ------------ ---------------- ------------------ ----------------------------- --------
<S> <C> <C> <C> <C>
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
Page 11 of 17
Copyright 1997, Norwest Bank Minnesota, N.A.
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Reconciliation Detail
Advance Summary Servicing Fee Breakdowns
P & I Advances Outstanding 0.00 Current Period Accrued Servicing Fees 0.00
Servicing Advances Outstanding 0.00 Less Delinquent Servicing Fees 0.00
Less Reductions to Servicing Fees 0.00
Plus Servicing Fees for Delinquent
Payments Received 0.00
Plus Adjustments for Prior Servicing
Calculation 0.00
Total Servicing Fees Collected 0.00
<TABLE>
<CAPTION>
Certificate Interest Reconciliation
Accrued Net Aggregate Distributable Distributable Additional Interest Remaining Unpaid
Certificate Prepayment Certificate Certificate Interest Trust Fund Distribution Distributable
Class Interest Interest Shortfall Interest Adjustment Expenses Certificate Interest
- - ----- ----------- ------------------ ------------- -------------------- ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CP
S
A-1A
A-1B
A-2
A-3
B-1
B-2
B-3
B-4
B-5
B-6
B-7
C
- - -----------------------------------------------------------------------------------------------------------------------------------
Total
===================================================================================================================================
</TABLE>
Copyright 1997, Norwest Bank Minnesota, N.A.
Page 12 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Delinquency Loan Detail
<TABLE>
<CAPTION>
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P & I P & I Mortgage Strategy Servicing Foreclosure
Loan Number Cross-Reference Delinq. Date Advances Advances** Loan (1) Code (2) Transfer Date Date
- - ----------- --------------- ------- ------------- -------- ------------ ---------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- - ----------- --------------- ------- ------------- -------- ------------ ---------- -------- ------------- ----------
Totals
- - ----------- --------------- ------- ------------- -------- ------------ ---------- -------- ------------- ----------
<CAPTION>
Current Outstanding
Servicing Servicing REO
Loan Number Advances Advances Bankruptcy Date Date
- - ----------- ----------- ------------ ----------------- -------
<S> <C> <C> <C> <C>
- - ----------- ----------- ------------ ----------------- -------
Totals
- - ----------- ----------- ------------ ----------------- -------
</TABLE>
(1) Status of Mortgage Loan
---------------------------
A - Payment Not Received 2 - Two Months Delinquent
But Still in Grace Period 3 - Three Or More Months Delinquent
B - Late Payment But Less 4 - Assumed Scheduled Payment
Than 1 Month Delinquent (Performing Matured Balloon)
0 - Current 7 - Foreclosure
1 - One Month Delinquent 9 - REO
(2) Resolution Strategy Code
---------------------------
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed In Lieu Of
6 - DPO Foreclosure
** Outstanding P & I Advances include the current period advance
Copyright 1997, Norwest Bank Minnesota, N.A. Page 13 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
<TABLE>
<CAPTION>
Specially Serviced Loan Detail - Part 1
Offering Servicing Resolution
Distribution Loan Document Transfer Strategy Scheduled Property
Date Number Cross-Reference Date Code(1) Balance Type(2) State
- - ------------- ------ --------------- ---------- ----------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Net Remaining
Distribution Interest Actual Operating NOI Note Maturity Amortization
Date Rate Balance Income Date DSCR Date Date Term
- - ------------ -------- -------- ---------- ----- ---- ------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(1) Resolution Strategy Code (2) Property Type Code
---------------------------- ----------------------
<S> <C>
1 - Modification 7 - REO MF - Multi-Family OF - Office
2 - Foreclosure 8 - Resolved RT - Retail MU - Mixed Use
3 - Bankruptcy 9 - Pending Return HC - Health Care LO - Lodging
4 - Extension to Master Servicer IN - Industrial SS - Self Storage
5 - Note Sale 10 - Deed In Lieu Of WH - Warehouse OT - Other
6 - DPO Foreclosure MH - Mobile Home Park
</TABLE>
Copyright 1997, Norwest Bank Minnesota, N. A. Page 14 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Specially Serviced Loan Detail - Part 2
<TABLE>
<CAPTION>
Offering Resolution Site
Distribution Loan Document Strategy Inspection Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Phase 1 Date Date Value Property Revenue Comment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(1) Resolution Strategy Code
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed In Lieu Of
6 - DPO Foreclosure
Copyright 1997, Norwest Bank Minnesota, N.A. Page 15 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Modified Loan Detail
Offering
Loan Document Pre-Modification Modification Modification
Number Cross-Reference Balance Date Description
- - ------ --------------- ----------------- ------------ -------------
Total
Copyright 1997, Norwest Bank Minnesota, N.A. Page 16 of 17
<PAGE>
[LOGO] For Additional Information,
please contact
Leslie Gaskill
(212) 509-1630
Reports Available on the
World Wide Web
Norwest Bank Minnesota, N.A. @www.securitieslink.net/cmbs
Corporate Trust Services
3 New York Plaza, 15th Floor Payment Date: 4/15/98
New York, NY 10004 Record Date: 3/31/98
DLJ Commercial Mortgage Corp.
Commercial Mortgage Pass-Through Certificates
Series 1998-CF1
Liquidated Loan Detail
<TABLE>
<CAPTION>
Gross
Final Proceeds
Recovery Offering as a % of
Loan Determination Document Appraisal Appraisal Actual Gross Actual
Number Date Cross-Reference Date Value Balance Proceeds Balance
- - ------ ------------- --------------- --------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
------------- --------------- --------- ---------- ------- -------- --------
Current Total
------------- --------------- --------- ---------- ------- -------- --------
Cumulative Total
============= =============== ========= ========== ======= ======== ========
</TABLE>
Aggregate Net Net Proceeds Repurchased
Loan Liquidation Liquidation as a % of Realized by Seller
Number Expenses* Proceeds Actual Balance Loss (Y/N)
- - ------ ----------- ----------- -------------- -------- -----------
------------- --------------- --------- ----------
Current Total
------------- --------------- --------- ----------
Cumulative Total
============= =============== ========= ==========
* Aggregate liquidation expenses also include outstanding P & I advances
and unpaid fees (servicing, trustee, etc.).
Copyright 1997, Norwest Bank Minnesota, N.A. Page 17 of 17
<PAGE>
EXHIBIT C
DECREMENT TABLES FOR CLASS A, CLASS B-1
AND CLASS B-2 CERTIFICATES
Percentage of Initial Class Principal Balance Outstanding For:
Class A-1A Certificates
<TABLE>
<CAPTION>
Distribution Date 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ----------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Closing Date....................... 100% 100% 100% 100% 100%
March 15, 1999..................... 93% 93% 93% 93% 93%
March 15, 2000..................... 86% 86% 86% 86% 86%
March 15, 2001..................... 78% 78% 78% 78% 78%
March 15, 2002..................... 69% 69% 69% 69% 69%
March 15, 2003..................... 60% 59% 58% 57% 46%
March 15, 2004..................... 49% 46% 42% 39% 36%
March 15, 2005..................... 18% 16% 14% 13% 13%
March 15, 2006..................... 7% 4% 2% 2% 1%
March 15, 2007 and thereafter...... 0% 0% 0% 0% 0%
Wtd. Avg. Life (yrs):.............. 5.2 5.1 5.0 4.9 4.8
</TABLE>
Class A-1B Certificates
<TABLE>
<CAPTION>
Distribution Date 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ----------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Closing Date....................... 100% 100% 100% 100% 100%
March 15, 1999..................... 100% 100% 100% 100% 100%
March 15, 2000..................... 100% 100% 100% 100% 100%
March 15, 2001..................... 100% 100% 100% 100% 100%
March 15, 2002..................... 100% 100% 100% 100% 100%
March 15, 2003..................... 100% 100% 100% 100% 100%
March 15, 2004..................... 100% 100% 100% 100% 100%
March 15, 2005..................... 100% 100% 100% 100% 100%
March 15, 2006..................... 100% 100% 100% 100% 100%
March 15, 2007..................... 99% 97% 97% 97% 95%
March 15, 2008 and thereafter...... 0% 0% 0% 0% 0%
Wtd Avg Life (yrs):................ 9.7 9.7 9.6 9.6 9.3
</TABLE>
C-1
<PAGE>
Percentage of Initial Class Principal Balance Outstanding For:
Class A-2 Certificates
<TABLE>
<CAPTION>
Distribution Date 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ----------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Closing Date....................... 100% 100% 100% 100% 100%
March 15, 1999..................... 100% 100% 100% 100% 100%
March 15, 2000..................... 100% 100% 100% 100% 100%
March 15, 2001..................... 100% 100% 100% 100% 100%
March 15, 2002..................... 100% 100% 100% 100% 100%
March 15, 2003..................... 100% 100% 100% 100% 100%
March 15, 2004..................... 100% 100% 100% 100% 100%
March 15, 2005..................... 100% 100% 100% 100% 100%
March 15, 2006..................... 100% 100% 100% 100% 100%
March 15, 2007..................... 100% 100% 100% 100% 100%
March 15, 2008 and thereafter...... 0% 0% 0% 0% 0%
Wtd Avg Life (yrs):................ 9.9 9.9 9.9 9.9 9.5
</TABLE>
Class A-3 Certificates
<TABLE>
<CAPTION>
Distribution Date 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ----------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Closing Date....................... 100% 100% 100% 100% 100%
March 15, 1999..................... 100% 100% 100% 100% 100%
March 15, 2000..................... 100% 100% 100% 100% 100%
March 15, 2001..................... 100% 100% 100% 100% 100%
March 15, 2002..................... 100% 100% 100% 100% 100%
March 15, 2003..................... 100% 100% 100% 100% 100%
March 15, 2004..................... 100% 100% 100% 100% 100%
March 15, 2005..................... 100% 100% 100% 100% 100%
March 15, 2006..................... 100% 100% 100% 100% 100%
March 15, 2007..................... 100% 100% 100% 100% 100%
March 15, 2008 and thereafter...... 0% 0% 0% 0% 0%
Wtd Avg Life (yrs):................ 9.9 9.9 9.9 9.9 9.9
</TABLE>
C-2
<PAGE>
Percentage of Initial Class Principal Balance Outstanding For:
Class B-1 Certificates
<TABLE>
<CAPTION>
Distribution Date 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ----------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Closing Date....................... 100% 100% 100% 100% 100%
March 15, 1999..................... 100% 100% 100% 100% 100%
March 15, 2000..................... 100% 100% 100% 100% 100%
March 15, 2001..................... 100% 100% 100% 100% 100%
March 15, 2002..................... 100% 100% 100% 100% 100%
March 15, 2003..................... 100% 100% 100% 100% 100%
March 15, 2004..................... 100% 100% 100% 100% 100%
March 15, 2005..................... 100% 100% 100% 100% 100%
March 15, 2006..................... 100% 100% 100% 100% 100%
March 15, 2007..................... 100% 100% 100% 100% 100%
March 15, 2008..................... 15% 8% 1% 0% 0%
March 15, 2009..................... 6% 0% 0% 0% 0%
March 25, 2010 and thereafter...... 0% 0% 0% 0% 0%
Wtd. Avg. Life (yrs):.............. 10.1 10.0 9.9 9.9 9.9
</TABLE>
Class B-2 Certificates
<TABLE>
<CAPTION>
Distribution Date 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ----------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Closing Date....................... 100% 100% 100% 100% 100%
March 15, 1999..................... 100% 100% 100% 100% 100%
March 15, 2000..................... 100% 100% 100% 100% 100%
March 15, 2001..................... 100% 100% 100% 100% 100%
March 15, 2002..................... 100% 100% 100% 100% 100%
March 15, 2003..................... 100% 100% 100% 100% 100%
March 15, 2004..................... 100% 100% 100% 100% 100%
March 15, 2005..................... 100% 100% 100% 100% 100%
March 15, 2006..................... 100% 100% 100% 100% 100%
March 15, 2007..................... 100% 100% 100% 100% 100%
March 15, 2008..................... 100% 100% 100% 77% 33%
March 15, 2009..................... 100% 77% 44% 21% 11%
March 25, 2010 and thereafter...... 0% 0% 0% 0% 0%
Wtd. Avg. Life (yrs):.............. 11.8 11.4 11.0 10.6 10.2
</TABLE>
C-3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT D
PRICE/YIELD TABLES FOR THE INTEREST ONLY CERTIFICATES
Corporate Bond Equivalent (CBE) Yield of the Class S Certificates
at Various CPRs
0.7181% Initial Pass-Through Rate
Initial Class Notional Amount $838,800,140
<TABLE>
<CAPTION>
Price (32nds)* 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ------------- --------- ---------- ---------- ---------- -----------
CBE CBE CBE CBE CBE
Yield % Yield % Yield % Yield % Yield %
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
4-08 9.55 9.37 9.22 9.06 8.44
4-12 8.95 8.77 8.62 8.45 7.82
4-16 8.38 8.20 8.04 7.87 7.24
4-20 7.83 7.65 7.49 7.32 6.68
4-24 7.31 7.13 6.96 6.79 6.14
4-28 6.81 6.62 6.46 6.28 5.63
5-00 6.33 6.14 5.97 5.79 5.14
5-04 5.87 5.67 5.50 5.32 4.66
5-08 5.42 5.22 5.05 4.87 4.20
</TABLE>
- - ---------------------
* Exclusive of accrued interest
Corporate Bond Equivalent (CBE) Yield of the Class CP Certificates
at Various CPRs
0.9064% Initial Pass-Through Rate
Initial Class Notional Amount $482,300,000
<TABLE>
<CAPTION>
Price (32nds)* 0.00% CPR 25.00% CPR 50.00% CPR 75.00% CPR 100.00% CPR
- - ------------- --------- ---------- ---------- ---------- -----------
CBE CBE CBE CBE CBE
Yield % Yield % Yield % Yield % Yield %
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
4-20 9.08 9.08 9.08 9.08 9.08
4-24 8.22 8.22 8.23 8.23 8.23
4-28 7.40 7.40 7.40 7.41 7.41
5-00 6.61 6.61 6.62 6.62 6.62
5-04 5.85 5.86 5.86 5.86 5.86
5-08 5.12 5.12 5.12 5.13 5.13
5-12 4.42 4.42 4.42 4.42 4.42
5-16 3.73 3.74 3.74 3.74 3.74
5-20 3.07 3.08 3.08 3.08 3.08
</TABLE>
- - --------------------
* Exclusive of accrued interest
D-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
DLJ COMMERCIAL MORTGAGE CORP.
Mortgage Pass-Through Certificates
The mortgage pass-through certificates offered hereby (the "Offered
Certificates") and by the supplements hereto (each, a "Prospectus Supplement")
will be offered from time to time in series (each, a "Series"). The Offered
Certificates of any Series, together with any other mortgage pass-through
certificates of such Series, are collectively referred to herein as the
"Certificates". Each Series will consist of one or more classes (each, a
"Class") of Certificates.
Each Series will represent in the aggregate the entire beneficial
ownership interest in a trust fund (with respect to any Series, the "Trust
Fund") to be formed by DLJ Commercial Mortgage Corp. (the "Depositor") and
including a segregated pool (a "Mortgage Asset Pool") of various types of
multifamily and commercial mortgage loans ("Mortgage Loans"), mortgage-backed
securities ("MBS") 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 MBS (collectively, "Mortgage Assets"). The
Mortgage Loans in (and the mortgage loans underlying the MBS in) any Trust Fund
will be secured by first or junior liens on, or security interests in, fee
and/or leasehold estates in one or more of the following types of real property:
(i) residential properties consisting of multiple rental or cooperatively-owned
dwelling units and mobile home parks; (ii) commercial properties consisting of
office buildings, retail facilities related to the sales of products and goods
and facilities related to providing entertainment, recreation or personal
services, hotels and motels, casinos, health care-related facilities,
recreational vehicle parks, warehouse facilities, mini-warehouse facilities,
self-storage facilities, industrial facilities, parking lots and restaurants;
and (iii) mixed use properties (that is, any combination of the foregoing) and
unimproved land. Retail properties, multifamily properties consisting of
multiple rental or cooperatively owned dwellings, office properties, hotel and
motel properties and casino properties will represent security for a material
concentration of the Mortgage Loans (and the mortgage loans underlying the MBS)
constituting the Trust Fund for any Series, based on principal balance at the
time such Series is issued. If so specified in the related Prospectus
Supplement, the Trust Fund for a Series may also include letters of credit,
surety bonds, insurance policies, guarantees, reserve funds, guaranteed
investment contracts, interest rate exchange agreements, interest rate cap or
floor agreements, or other agreements designed to reduce the effects of interest
rate fluctuations on the Mortgage Assets. See "Description of the Trust Funds",
"Description of the Certificates" and "Description of Credit Support".
The yield on each Class of a Series will be affected by, among other
things, the rate of payment of principal (including prepayments) on the Mortgage
Assets in the related Trust Fund and the timing of receipt of such payments as
described herein and in the related Prospectus Supplement. See "Yield and
Maturity Considerations". A Trust Fund may be subject to early termination under
the circumstances described herein and in the related Prospectus Supplement. See
"Description of the Certificates--Termination; Retirement of the Certificates".
(cover continued on next page)
--------
PROCEEDS OF THE ASSETS IN THE RELATED 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, DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION, THE MASTER SERVICER, THE SPECIAL SERVICER, THE
TRUSTEE, THE REMIC ADMINISTRATOR OR ANY OF THEIR RESPECTIVE AFFILIATES,
OFFICERS, DIRECTORS, TRUSTEES, BENEFICIARIES, SHAREHOLDERS, EMPLOYEES OR AGENTS.
NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE ASSETS WILL BE GUARANTEED OR
INSURED BY THE DEPOSITOR OR ANY OF ITS AFFILIATES OR, UNLESS OTHERWISE SPECIFIED
IN THE RELATED PROSPECTUS SUPPLEMENT, BY ANY 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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------
Prospective investors should review the information appearing on page
16 herein under the caption "Risk Factors" and such information as may be set
forth under the caption "Risk Factors" in the related Prospectus Supplement
before purchasing any Offered Certificate.
The Offered Certificates of any Series may be offered through one or
more different methods, including offerings through underwriters, as described
herein under "Method of Distribution" and in the related Prospectus Supplement.
There will be no secondary market for the Offered Certificates of any
Series prior to the offering thereof. There can be no assurance that a secondary
market for any Offered Certificates will develop or, if one does develop, that
it will continue. Unless otherwise provided in the related Prospectus
Supplement, the Certificates will not be listed on any securities exchange.
Retain this Prospectus for future reference. 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.
-1-
-----------
The date of this Prospectus is February 17, 1998.
<PAGE>
(cover continued from prior page)
As described in the related Prospectus Supplement, the Certificates of
each Series, including the Offered Certificates of such Series, may consist of
one or more Classes of Certificate that: (i) provide for the accrual of interest
thereon based on a fixed, variable or adjustable interest rate; (ii) are senior
or subordinate to one or more other Classes of Certificates in entitlement to
certain distributions on the Certificates; (iii) are entitled to distributions
of principal, with disproportionate, nominal or no distributions of interest;
(iv) are entitled to distributions of interest, with disproportionate, nominal
or no distributions of principal; (v) provide for distributions of interest
thereon or principal thereof 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 thereof
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 thereof to be made, subject to
available funds, based on a specified principal payment schedule or other
methodology. Distributions in respect of the Certificates of each Series will be
made on a monthly, quarterly, semi-annual, annual or other periodic basis as
specified in the related Prospectus Supplement. See "Description of the
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" (each, a "REMIC") for
federal income tax purposes. If applicable, the Prospectus Supplement for the
Offered Certificates of any Series will specify which Class or Classes of
Certificates of such Series will be considered to be regular interests in the
related REMIC and which Class of Certificates of such Series or other interests
will be designated as the residual interest in the related REMIC. See "Certain
Federal Income Tax Consequences".
An Index of Principal Definitions is included at the end of this
Prospectus specifying the location of definitions of important or frequently
used defined terms.
PROSPECTUS SUPPLEMENT
As more particularly described herein, the Prospectus Supplement
relating to the Offered Certificates of each Series will, among other things,
set forth, as and to the extent appropriate: (i) a description of the Class or
Classes of such Offered Certificates, including the payment provisions with
respect to each such Class, the aggregate principal amount, if any, of each such
Class, the rate at which interest accrues from time to time, if at all, with
respect to each such Class or the method of determining such rate, and whether
interest with respect to each such Class will accrue from time to time on its
aggregate principal amount, if any, or on a specified notional amount, if at
all; (ii) information with respect to any other Classes of Certificates of the
same Series; (iii) the respective dates on which distributions are to be made;
(iv) information as to the assets, including the Mortgage Assets, constituting
the related Trust Fund (all such assets, with respect to 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, if so, the designation of the "regular
interests" and "residual interests" in each REMIC to be created and the identity
of the REMIC Administrator (as defined herein) responsible for the various
tax-related duties in respect of each REMIC to be created; (viii) information
concerning the Trustee (as defined herein) of the related Trust Fund; (ix) if
the related Trust Fund includes Mortgage Loans, information concerning the
Master Servicer and any Special Servicer (each as defined herein) of such
Mortgage Loans and the circumstances under which all or a portion, as specified,
of the servicing of a Mortgage Loan would transfer from the Master Servicer to
the Special Servicer; (x) information as to the nature and extent of
subordination of any Class of Certificates of such Series, including a Class of
Offered Certificates; and (xi) whether such Offered Certificates will be
initially issued in definitive or book-entry form.
-2-
<PAGE>
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 will 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, 500
West Madison, 14th Floor, Chicago, Illinois 60661; New York Regional Office,
Seven World Trade Center, New York, New York 10048. Copies of such material can
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates and electronically
through the Commission's Electronic Data Gathering, Analysis and Retrieval
system at the Commission's Web site (http://www.sec.gov).
No dealer, salesman, or other person has been authorized to give any
information, or to make any representations, other than those contained in this
Prospectus or any related Prospectus Supplement, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Depositor or any other person. Neither the delivery of this Prospectus or
any related Prospectus Supplement nor any sale made hereunder or thereunder
shall under any circumstances create an implication that there has been no
change in the information herein since the date hereof or therein since the date
thereof. This Prospectus and any related Prospectus Supplement are not an offer
to sell or a solicitation of an offer to buy any security in any jurisdiction in
which it is unlawful to make such offer or solicitation.
The Master Servicer, the Trustee or another specified person will cause
to be provided to registered holders of the Offered Certificates of each Series
periodic unaudited reports concerning the related Trust Fund. If beneficial
interests in a Class or Series 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. Conveyance of notices and other communications 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 Certificateholders" and
"--Book-Entry Registration and Definitive Certificates".
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. The Depositor intends to make a
written request to the staff of the Commission that the staff either (i) issue
an order pursuant to Section 12(h) of the Exchange Act exempting the Depositor
from certain reporting requirements under the Exchange Act with respect to each
Trust Fund or (ii) state that the staff will not recommend that the Commission
take enforcement action if the Depositor fulfills its reporting obligations as
described in its written request. If such request is granted, the Depositor will
file or cause to be filed with the Commission as to each Trust Fund the periodic
unaudited reports to holders of the Offered Certificates referenced in the
preceding paragraph; however, because of the nature of the Trust Funds, it is
unlikely that any significant additional information will be filed. In addition,
because of the limited number of Certificateholders expected for each Series,
the Depositor anticipates that a significant portion of such reporting
requirements will be permanently suspended following the first fiscal year for
the related Trust Fund.
-3-
<PAGE>
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 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, upon written or oral request of such
person, 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 Classes of such Offered Certificates, other than the exhibits to
such documents (unless such exhibits are specifically incorporated by reference
in such documents). Such requests to the Depositor should be directed in writing
to the Depositor at 277 Park Avenue, 9th Floor, New York, New York 10172,
Attention: N. Dante LaRocca, or by telephone at (212) 892-3000.
-4-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
SUMMARY OF PROSPECTUS.............................................................................................8
RISK FACTORS.....................................................................................................16
Limited Liquidity of Offered Certificates...............................................................16
Limited Assets..........................................................................................16
Credit Support Limitations..............................................................................17
Effect of Prepayments on Average Life of Certificates...................................................17
Effect of Prepayments on Yield of Certificates..........................................................18
Limited Nature of Ratings...............................................................................19
Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans.......................19
Inclusion of Delinquent and Nonperforming Mortgage Loans in a Mortgage Asset Pool.......................26
Certain Federal Tax Considerations Regarding REMIC Residual Certificates................................26
Book-Entry Registration.................................................................................27
Potential Conflicts of Interest.........................................................................27
Termination.............................................................................................27
DESCRIPTION OF THE TRUST FUNDS...................................................................................28
General.................................................................................................28
Mortgage Loans..........................................................................................28
MBS.....................................................................................................35
Undelivered Mortgage Assets.............................................................................36
Certificate Accounts....................................................................................36
Credit Support..........................................................................................37
Cash Flow Agreements....................................................................................37
YIELD AND MATURITY CONSIDERATIONS................................................................................37
General.................................................................................................37
Pass-Through Rate.......................................................................................37
Payment Delays..........................................................................................37
Certain Shortfalls in Collections of Interest...........................................................38
Yield and Prepayment Considerations.....................................................................38
Weighted Average Life and Maturity......................................................................39
Other Factors Affecting Yield, Weighted Average Life and Maturity.......................................40
THE DEPOSITOR....................................................................................................42
DESCRIPTION OF THE CERTIFICATES..................................................................................42
General.................................................................................................42
Distributions...........................................................................................43
Distributions of Interest on the Certificates...........................................................43
Distributions of Principal of the Certificates..........................................................44
Distributions on the Certificates in Respect of Prepayment Premiums or in Respect
of Equity Participations................................................................................45
Allocation of Losses and Shortfalls.....................................................................45
Advances in Respect of Delinquencies....................................................................45
Reports to Certificateholders...........................................................................46
Voting Rights...........................................................................................47
Termination.............................................................................................47
Book-Entry Registration and Definitive Certificates.....................................................47
DESCRIPTION OF THE POOLING AGREEMENTS............................................................................49
General.................................................................................................49
Assignment of Mortgage Assets...........................................................................49
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
Representations and Warranties with respect to Mortgage Assets; Repurchases and Other Remedies..........50
Collection and Other Servicing Procedures with respect to Mortgage Loans................................51
Sub-Servicers...........................................................................................53
Collection of Payments on MBS...........................................................................53
Certificate Account.....................................................................................54
Modifications, Waivers and Amendments of Mortgage Loans.................................................57
Realization Upon Defaulted Mortgage Loans...............................................................57
Hazard Insurance Policies...............................................................................58
Due-on-Sale and Due-on-Encumbrance Provisions...........................................................59
Servicing Compensation and Payment of Expenses..........................................................59
Evidence as to Compliance...............................................................................60
Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC Administrator,
the Manager and the Depositor.........................................................................61
Events of Default.......................................................................................62
Rights Upon Event of Default............................................................................62
Amendment...............................................................................................63
List of Certificateholders..............................................................................64
The Trustee.............................................................................................64
Duties of the Trustee...................................................................................64
Certain Matters Regarding the Trustee...................................................................64
Resignation and Removal of the Trustee..................................................................65
DESCRIPTION OF CREDIT SUPPORT....................................................................................65
General.................................................................................................65
Subordinate Certificates................................................................................65
Insurance or Guarantees with Respect to Mortgage Loans..................................................66
Letter of Credit........................................................................................66
Certificate Insurance and Surety Bonds..................................................................66
Reserve Funds...........................................................................................66
Credit Support with Respect to MBS......................................................................67
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS..........................................................................67
General.................................................................................................67
Types of Mortgage Instruments...........................................................................67
Leases and Rents........................................................................................68
Personalty..............................................................................................68
Foreclosure.............................................................................................68
Bankruptcy Laws.........................................................................................71
Environmental Considerations............................................................................72
Due-on-Sale and Due-on-Encumbrance Provisions...........................................................74
Junior Liens; Rights of Holders of Senior Liens.........................................................74
Subordinate Financing...................................................................................75
Default Interest and Limitations on Prepayments.........................................................75
Applicability of Usury Laws.............................................................................75
Certain Laws and Regulations............................................................................75
Americans with Disabilities Act.........................................................................76
Soldiers' and Sailors' Civil Relief Act of 1940.........................................................76
Forfeitures in Drug and RICO Proceedings................................................................76
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........................................................................77
General.................................................................................................77
REMICs..................................................................................................77
Grantor Trust Funds.....................................................................................92
STATE AND OTHER TAX CONSEQUENCES................................................................................100
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ERISA CONSIDERATIONS............................................................................................100
General................................................................................................100
Plan Asset Regulations.................................................................................100
Prohibited Transaction Exemptions......................................................................101
Insurance Company General Accounts.....................................................................102
Consultation With Counsel..............................................................................102
Tax Exempt Investors...................................................................................102
LEGAL INVESTMENT................................................................................................102
USE OF PROCEEDS.................................................................................................104
METHOD OF DISTRIBUTION..........................................................................................104
LEGAL MATTERS...................................................................................................105
FINANCIAL INFORMATION...........................................................................................105
RATING..........................................................................................................106
INDEX OF PRINCIPAL DEFINITIONS..................................................................................107
</TABLE>
-7-
<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 with the offering of Offered Certificates of such
Series. An Index of Principal Definitions is included at the end of this
Prospectus.
<TABLE>
<S> <C>
Securities Offered................................. Mortgage pass-through certificates.
Depositor.......................................... DLJ Commercial Mortgage Corp., a Delaware corporation. See
"The Depositor".
Trustee............................................ The trustee (the "Trustee") for each Series will be named in the
related Prospectus Supplement. See "Description of the Pooling
Agreements--The Trustee".
Master Servicer.................................... If a Trust Fund includes Mortgage Loans, then the master servicer
(the "Master Servicer") for the corresponding Series will be named
in the related Prospectus Supplement. See "Description of the
Pooling Agreements--Certain Matters Regarding the Master
Servicer, the Special Servicer, the REMIC Administrator, the
Manager and the Depositor".
Special Servicer................................... If a Trust Fund includes Mortgage Loans, then the special servicer
(the "Special Servicer") for the corresponding Series will be
named, or the circumstances under which a Special Servicer may
be appointed will be described, in the related Prospectus
Supplement. See "Description of the Pooling
Agreements--Collection and Other Servicing Procedures with
respect to Mortgage Loans".
MBS Administrator.................................. If a Trust Fund includes MBS, then the entity responsible for
administering such MBS (the "MBS Administrator") will be
named in the related Prospectus Supplement. If an entity other
than the Trustee or the Master Servicer is the MBS Administrator,
such entity will be referred to herein as the "Manager".
REMIC Administrator................................ The person (the "REMIC Administrator") responsible for the
various tax-related administration duties for a Series as to which
one or more REMIC elections have been made will be named in
the related Prospectus Supplement. See "Certain Federal Income
Tax Consequences--REMICs--Reporting and Other
Administrative Matters".
The Mortgage Assets................................ The Mortgage Assets will be the primary assets of any Trust Fund.
The Mortgage Assets with respect to each Series will, in general,
consist of a pool of mortgage loans ("Mortgage Loans") secured by
first or junior liens on, or security interests in, fee and/or leasehold
estates in one or more of the following
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C>
types of real property: (i) residential properties consisting of
multiple rental or cooperatively- owned dwelling units in high-rise,
mid-rise or garden apartment buildings or other residential structures,
and mobile home parks; (ii) commercial properties consisting of office
buildings, retail shopping facilities (such as shopping centers, malls,
automotive sales centers and individual stores, shops and businesses
related to sales of products and goods), facilities related to providing
entertainment, recreation or personal services (such as movie theaters,
fitness centers, bowling alleys, salons, dry cleaners and automotive
service centers), hotels and motels, casinos, health care-related
facilities (such as hospitals, skilled nursing facilities, nursing
homes, congregate care facilities and senior housing), recreational
vehicle parks, warehouse facilities, warehouses, warehouse facilities,
self-storage facilities, industrial facilities, parking lots and
restaurants; and (iii) mixed use properties (that is, any combination of
the foregoing) and unimproved land. The Mortgage Loans 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. If so
specified in the related Prospectus Supplement, some Mortgage Loans may
be delinquent or nonperforming as of the date the related Trust Fund is
formed.
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 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,
(iii) may be fully amortizing or may be partially amortizing or
nonamortizing, with a balloon payment due on its stated maturity date,
(iv) may prohibit over its term or for a certain period prepayments
and/or require payment of a premium or a yield maintenance payment in
connection with certain prepayments and (v) may provide for payments of
principal, interest or both, on due dates that occur monthly, quarterly,
semi-annually or at such other interval as is specified in the related
Prospectus Supplement. Each Mortgage Loan will have had an original term
to maturity of not more than approximately 40 years. No Mortgage Loan
will have been originated by the Depositor. See "Description of the
Trust Funds--Mortgage Loans".
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C>
If any Mortgage Loan, or group of related Mortgage Loans (by reason of
cross-collateralization, common borrower or affiliation of borrowers),
constitutes a material concentration of credit risk, financial
statements or other financial information with respect to the related
Mortgaged Property or Mortgaged Properties will be included in the
related Prospectus Supplement. See "Description of the Trust
Funds--Mortgage Loans--Mortgage Loan Information in Prospectus
Supplements".
If and to the extent specified in the related Prospectus Supplement, the
Mortgage Assets with respect to a Series may also include, or consist
of, mortgage participations, mortgage pass-through certificates,
collateralized mortgage obligations and/or other mortgage-backed
securities (collectively, "MBS"), that evidence an interest in, or are
secured by a pledge of, one or more mortgage loans that conform to the
descriptions of the Mortgage Loans contained herein and which may or may
not be issued, insured or guaranteed by the United States or an agency
or instrumentality thereof. See "Description of the Trust Funds--MBS".
Unless otherwise specified in the related Prospectus Supplement, the
aggregate outstanding principal balance of a Mortgage Asset Pool as of
the date it is formed (the "Cut-off Date") will equal or exceed the
aggregate outstanding principal balance of the related Series as of the
date the Certificates of such Series are initially issued (the "Closing
Date"). In the event that the Mortgage Assets initially delivered do not
have an aggregate outstanding principal balance as of the related
Cut-off Date at least equal to the aggregate outstanding principal
balance of the related Series as of the related Closing Date, the
Depositor may deposit cash or Permitted Investments (as defined herein)
on an interim basis with the Trustee for such Series on the related
Closing Date in lieu of delivering Mortgage Assets (the "Undelivered
Mortgage Assets") with an aggregate outstanding principal balance as of
the related Cut-off Date equal to the shortfall amount. During the
90-day period following the related Closing Date, the Depositor will be
entitled to obtain a release of such cash or Permitted Investments to
the extent that the Depositor delivers a corresponding amount of the
Undelivered Mortgage Assets. If and to the extent that all the
Undelivered Mortgage Assets are not delivered during the 90-day period
following the related Closing Date, such cash or, following liquidation,
such Permitted Investments will be applied to pay a corresponding amount
of principal of the Certificates of such Series to the extent set forth,
and on the dates specified, in the related Prospectus Supplement.
The Certificates................................... Each Series will be issued in one or more Classes of Certificates
pursuant to a pooling and servicing agreement or other agreement
specified in the related Prospectus Supplement (in any case, a
"Pooling Agreement") and will represent in the aggregate the
entire beneficial ownership interest in the related Trust Fund.
As described in the related Prospectus Supplement, the Certificates of
each Series, including the Offered Certificates of such Series, may
consist of one or more Classes of Certificates that, among other things:
(i) are senior (collectively, "Senior Certificates") or subordinate
(collectively, "Subordinate Certificates") to one or more other Classes
of Certificates of the same Series in entitlement to certain
distributions on the Certificates; (ii) are entitled to distributions of
principal, with disproportionate, nominal or no
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C>
distributions of interest (collectively, "Stripped Principal
Certificates"); (iii) are entitled to distributions of interest, with
disproportionate, nominal or no distributions of principal
(collectively, "Stripped Interest Certificates"); (iv) provide for
distributions of interest thereon or principal thereof 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 thereof 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 thereof to be made, subject
to available funds, based on a specified principal payment schedule or
other methodology; or (vii) provide for distributions based on
collections on the Mortgage Assets in the related Trust Fund
attributable to prepayment premiums, yield maintenance payments or
equity participations.
If so specified in the related Prospectus Supplement, a Series may
include one or more "Controlled Amortization Classes", which will
entitle the holders thereof to receive principal distributions according
to a specified principal payment schedule. Although prepayment risk
cannot be eliminated entirely for any Class of Certificates, a
Controlled Amortization Class will generally provide a relatively stable
cash flow so long as the actual rate of prepayment 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. Prepayment risk with
respect to a given Mortgage Asset Pool does not disappear, however, and
the stability afforded to a Controlled Amortization Class comes at the
expense of one or more other Classes of Certificates of the same Series,
any of which other Classes of Certificates may also be a Class of
Offered Certificates. See "Risk Factors--Effect of Prepayments on
Average Life of Certificates" and "--Effect of Prepayments on Yield of
Certificates".
Each Certificate, other than certain Stripped Interest Certificates and
certain REMIC Residual Certificates (as defined herein), will have an
initial stated principal amount (a "Certificate Principal Balance"); and
each Certificate, other than certain Stripped Principal Certificates and
certain REMIC Residual Certificates, will accrue interest on its
Certificate Principal Balance or, in the case of certain Stripped
Interest Certificates, on a notional amount (a "Certificate Notional
Amount"), based on a fixed, variable or adjustable interest rate (a
"Pass-Through Rate"). The related Prospectus Supplement will specify the
aggregate Certificate Principal Balance, aggregate Certificate Notional
Amount and/or Pass-Through Rate (or, in the case of a variable or
adjustable PassThrough Rate, the method for determining such rate), as
applicable, for each Class of Offered Certificates.
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C>
If so specified in the related Prospectus Supplement, a Class of Offered
Certificates may have two or more component parts, each having
characteristics that are otherwise described herein as being
attributable to separate and distinct Classes.
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 or entity, unless otherwise provided in the related
Prospectus Supplement. See "Risk Factors--Limited Assets".
Distributions of Interest on the Certificates...... Interest on each Class of Offered Certificates (other than certain
Classes of Stripped Principal Certificates and certain Classes of
REMIC Residual Certificates) of each Series will accrue at the
applicable Pass-Through Rate on the aggregate Certificate
Principal Balance or, in the case of certain Classes of Stripped
Interest Certificates, the aggregate Certificate 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 Principal Balance thereof or
otherwise deferred as described in the related Prospectus
Supplement. 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--Effect
of Prepayments on Average Life of Certificates" and "--Effect of
Prepayments on Yield of Certificates", "Yield and Maturity
Considerations--Certain Shortfalls in Collections of Interest" and
"Description of the Certificates--Distributions of Interest on the
Certificates".
Distributions of Principal of the Certificates..... Each Class of Certificates of each Series (other than certain Classes
of Stripped Interest Certificates and certain Classes of REMIC
Residual Certificates) will have an aggregate Certificate Principal
Balance. The aggregate Certificate Principal Balance of a Class of
Certificates outstanding from time to time will represent the
maximum amount that the holders thereof are then entitled to
receive in respect of principal from future cash flow on the assets
in the related Trust Fund. Unless otherwise specified in the related
Prospectus Supplement, the initial aggregate Certificate Principal
Balance of all Classes of a Series will not be greater than the
outstanding principal balance of the related Mortgage Assets as of
the related Cut-off Date. As and to the extent described in each
Prospectus Supplement, distributions of principal with respect to
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C>
the related Series will be made on each Distribution Date to the holders
of the Class or Classes of Certificates of such Series then entitled
thereto until the Certificate Principal 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) 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; (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; (iii) may be made, subject to certain
limitations, based on a specified principal payment schedule; or (iv)
may be contingent on the specified principal payment schedule for
another 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
Offered Certificates will be made on a pro rata basis among all of the
Certificates of such Class. See "Description of the
Certificates--Distributions of Principal of the Certificates".
Credit Support and Cash Flow Agreements............ 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, which may include a letter of credit, a surety bond, an
insurance policy, a guarantee, a reserve fund, or a combination
thereof (any such coverage with respect to the Certificates of any
Series, "Credit Support"). If so provided in the related Prospectus
Supplement, a Trust Fund may include: (i) 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; or (ii) interest rate exchange agreements, interest rate cap or
floor agreements, or other agreements designed to reduce the
effects of interest rate fluctuations on the Mortgage Assets or on
one or more Classes of Certificates (any such agreement, in the
case of clause (i) or (ii), a "Cash Flow Agreement"). Certain
relevant information regarding any Credit Support or Cash Flow
Agreement applicable to the Offered Certificates of any Series will
be set forth in the related Prospectus Supplement. See "Risk
Factors--Credit Support Limitations", "Description of the Trust
Funds--Credit Support" and "--Cash Flow Agreements" and
"Description of Credit Support".
Advances........................................... If and to the extent provided in the related Prospectus Supplement,
if a Trust Fund includes Mortgage Loans, the Master Servicer, the
Special Servicer, the Trustee, any provider of Credit Support
and/or any other specified person may be obligated to make, or
</TABLE>
-13-
<PAGE>
<TABLE>
<S> <C>
have the option of making, certain advances with respect to delinquent
scheduled payments of principal and/or interest on such Mortgage Loans.
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. See "Description of the Certificates--Advances in
Respect of Delinquencies". If and to the extent provided in the
Prospectus Supplement for the Offered Certificates of any Series, any
entity making such advances may be entitled to receive interest thereon
for a specified period during which certain or all of such advances 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 MBS, any comparable advancing obligation of a
party to the related Pooling Agreement, or of a party to the related MBS
Agreement, will be described in the related Prospectus Supplement.
Optional Termination............................... If so specified in the related Prospectus Supplement, a Trust Fund
may be subject to optional early termination through the repurchase
of the Mortgage Assets included in such Trust Fund by the party or
parties specified in such Prospectus Supplement, under the
circumstances and in the manner set forth therein, thereby resulting
in early retirement for the Certificates of the related Series. If so
provided in the related Prospectus Supplement, upon the reduction
of the aggregate Certificate Principal Balance of a specified Class
or Classes of Certificates by a specified percentage or amount or
upon a specified date, a party specified therein may be authorized
or required to solicit bids for the purchase of all of the Mortgage
Assets of the related 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. See
"Description of the Certificates--Termination".
Certain Federal Income Tax Consequences............ The Certificates of each Series will constitute or evidence
ownership of 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. Investors are
advised to consult their tax advisors concerning the specific tax
consequences to them of the purchase, ownership and disposition
of the Offered Certificates and to review "Certain Federal Income
Tax Consequences" herein and in the related Prospectus
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
</TABLE>
-14-
<PAGE>
<TABLE>
<S> <C>
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 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 4975 of the Code. See "ERISA Considerations" herein and in the
related Prospectus Supplement.
Legal Investment................................... The Offered Certificates will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"), only if so
specified in the related Prospectus Supplement. Investors whose
investment authority is subject to legal restrictions should consult
their 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 (each, a
"Rating Agency"). See "Rating" herein and in the related
Prospectus Supplement.
</TABLE>
-15-
<PAGE>
RISK FACTORS
In considering an investment in the Offered Certificates of any Series,
investors should consider, among other things, the following risk 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 MBS included in such Trust Fund.
Limited Liquidity of Offered Certificates
General. The Offered Certificates of any Series may have limited or no
liquidity. Accordingly, an investor may be forced to bear the risk of its
investment in any Offered Certificates for an indefinite period of time.
Furthermore, 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".
Lack of a Secondary Market. 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 that it
will continue for as long as such Certificates remain outstanding. The
Prospectus Supplement for the Offered Certificates of any Series may indicate
that an underwriter specified therein intends to establish a secondary market in
such Offered Certificates; however, no underwriter will be obligated to do so.
Any such secondary market may provide less liquidity to investors than any
comparable market for securities that evidence interests in single-family
mortgage loans. Unless otherwise provided in the related Prospectus Supplement,
the Certificates will not be listed on any securities exchange.
Limited Nature of Ongoing Information. The primary source of ongoing
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 to be 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 ongoing
information regarding the Offered Certificates of any Series will be available
through any other source. The limited nature of such information in respect of
the Offered Certificates of any Series may adversely affect the liquidity
thereof, even if a secondary market for such Certificates does develop.
Sensitivity to Fluctuations in Prevailing Interest Rates. Insofar as a
secondary market does develop with respect to Offered Certificates of any Series
or with respect to any Class thereof, the market value of such Certificates will
be affected by several factors, including the perceived liquidity thereof, the
anticipated cash flow thereon (which may vary widely depending upon the
prepayment and default assumptions applied in respect of the underlying Mortgage
Loans) and prevailing interest rates. The price payable at any given time in
respect of certain Classes of Offered Certificates (in particular, a Class with
a relatively long average life, a Companion Class (as defined herein) or a Class
of Stripped Interest Certificates or Stripped Principal Certificates) may be
extremely sensitive to small fluctuations in prevailing interest rates; and the
relative change in price for an Offered Certificate in response to an upward or
downward movement in prevailing interest rates may not necessarily equal the
relative change in price for such Offered Certificate in response to an equal
but opposite movement in such rates. Accordingly, the sale of Offered
Certificates by a holder in any secondary market that may develop may be at a
discount from the price paid by such holder. The Depositor is not aware of any
source through which price information about the Offered Certificates will be
generally available on an ongoing basis.
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
or entity; and no Offered Certificate of any Series will represent a claim
against or security interest in the Trust Fund for any other Series.
Accordingly, if the related Trust Fund has insufficient assets to make payments
on a Series of Offered Certificates, no other assets will be available for
payment
-16-
<PAGE>
of the deficiency, and the holders of one or more Classes of such
Offered Certificates will be required to bear the consequent loss. Furthermore,
certain amounts on deposit from time to time in certain funds or accounts
constituting part of a Trust Fund, including the Certificate Account (as defined
herein) and any accounts maintained as Credit Support, may be withdrawn under
certain conditions, if and to the extent described in the related Prospectus
Supplement, for purposes other than the payment of principal of or interest on
the Certificates of the related Series. If and to the extent so provided in the
Prospectus Supplement relating to a Series 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, all or a
portion of 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.
Credit Support Limitations
Limitations Regarding Types of Losses Covered. The Prospectus
Supplement for the Offered Certificates of any 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;
for example, Credit Support may or may not cover loss by reason of fraud or
negligence by a mortgage loan originator or other parties. Any such losses not
covered by Credit Support may, at least in part, be allocated to one or more
Classes of Offered Certificates.
Disproportionate Benefits to Certain Classes and Series. A Series 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 likelihood of temporary
shortfalls and ultimate losses to holders of Senior Certificates, the amount of
subordination will be limited and may decline under certain circumstances. In
addition, if principal payments on one or more Classes of Offered Certificates
of a Series are made in a specified order of priority, any related Credit
Support may be exhausted before the principal of the later paid Classes of
Offered Certificates of such Series has been repaid in full. As a result, the
impact of losses and shortfalls experienced with respect to the Mortgage Assets
may fall primarily upon those Classes of Offered Certificates having a later
right of payment. Moreover, if a form of Credit Support covers the Offered
Certificates of more than one Series and losses on the related Mortgage Assets
exceed the amount of such Credit Support, it is possible that the holders of
Offered Certificates of one (or more) such Series will be disproportionately
benefited by such Credit Support to the detriment of the holders of Offered
Certificates of one (or more) other such Series.
Limitations Regarding the Amount of Credit Support. The amount of any
applicable Credit Support supporting one or more Classes of Offered
Certificates, including the subordination of one or more other 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 certain
other factors. There can, however, be no assurance that the loss experience on
the related Mortgage Assets will not exceed such assumed levels. See
"Description of the Certificates--Allocation of Losses and Shortfalls" and
"Description of Credit Support". If the losses on the related Mortgage Assets do
exceed such assumed levels, the holders of one or more Classes of Offered
Certificates will be required to bear such additional losses.
Effect of Prepayments on Average Life of Certificates
As a result of prepayments on the Mortgage Loans in any 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 Certificates of the related Series than if
payments on such Mortgage Loans were made as scheduled. Thus, the prepayment
experience on the Mortgage Loans in a Trust Fund may affect the average life of
one or more Classes of Certificates of the related Series, 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,
demographic, geographic, social, tax and legal factors. For example, if
prevailing interest rates fall significantly below the Mortgage Rates borne by
the Mortgage Loans included in
-17-
<PAGE>
a Trust Fund, then, subject to the particular terms of the Mortgage
Loans (e.g., provisions that prohibit voluntary prepayments during specified
periods or impose penalties in connection therewith) and the ability of
borrowers to obtain new financing, principal prepayments on such Mortgage Loans
are likely to be higher than if prevailing interest 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, then principal prepayments on such Mortgage Loans are likely to
be lower than if prevailing interest rates remain at or below the Mortgage Rates
borne by those Mortgage Loans. There can be no assurance as to the actual rate
of prepayment on the Mortgage Loans in any Trust Fund or that such rate of
prepayment 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, and the average
life thereof could be significantly shorter or longer, 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 and provisions 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 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 the prepayments on the Mortgage Loans in the related Trust Fund
increases the likelihood of early retirement of such Class ("Call Risk") if the
rate of prepayment is relatively fast; while a Class of Certificates that
entitles the holders thereof to a disproportionately small share of the
prepayments on the Mortgage Loans in the related Trust Fund increases the
likelihood of an extended average life of such Class ("Extension Risk") if the
rate of prepayment is relatively slow. 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 may include one or more Controlled Amortization Classes, which
will entitle the holders thereof to receive principal distributions according to
a specified principal payment schedule. Although prepayment risk cannot be
eliminated entirely for any Class of Certificates, a Controlled Amortization
Class will generally provide a relatively stable cash flow so long as the actual
rate of prepayment 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.
Prepayment risk with respect to a given Mortgage Asset Pool does not disappear,
however, and the stability 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 may 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/or may entitle the holders thereof to a
disproportionately small share of prepayments on the Mortgage Loans in the
related Trust Fund when the rate of prepayment is relatively slow. As and to the
extent described in the related Prospectus Supplement, a Companion Class absorbs
some (but not all) of the Call Risk and/or Extension Risk that would otherwise
belong to the related Controlled Amortization Class if all payments of principal
of the Mortgage Loans in the related Trust Fund were allocated on a pro rata
basis.
Effect of Prepayments on Yield of Certificates
A Series may 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 recover its original investment under some prepayment scenarios.
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
-18-
<PAGE>
discount or premium and the amount and timing of distributions thereon. 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".
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
such Offered Certificates will receive payments to which such Certificateholders
are entitled under the related Pooling Agreement. Such rating will not
constitute an assessment of the likelihood that principal prepayments on the
related Mortgage Loans will be made, the degree to which the rate of such
prepayments might differ from that originally anticipated or the likelihood of
early optional termination of the related Trust Fund. Furthermore, such rating
will not address the possibility that prepayment of the related Mortgage Loans
at a higher or lower rate than anticipated by an investor may cause such
investor to experience a lower than anticipated yield or that an investor that
purchases an Offered Certificate at a significant premium might fail to recover
its initial investment under certain prepayment scenarios. Hence, a rating
assigned by a Rating Agency does not guarantee or ensure the realization of any
anticipated yield on a Class of Offered Certificates.
The amount, type and nature of Credit Support, if any, provided with
respect to a Series will be determined on the basis of criteria established by
each Rating Agency rating one or more 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. As a result, the
Credit Support required in respect of the Offered Certificates of any Series may
be insufficient to fully protect the holders thereof from losses on the related
Mortgage Asset Pool. See "Description of Credit Support" and "Rating".
Certain Factors Affecting Delinquency, Foreclosure and Loss of the
Mortgage Loans
General. The payment performance of the Offered Certificates of any
Series will be directly related to the payment performance of the underlying
Mortgage Loans. Set forth below is a discussion of certain factors that will
affect the full and timely payment of the Mortgage Loans in any Trust Fund. In
addition, a description of certain material considerations associated with
investments in mortgage loans is included herein under "Certain Legal Aspects of
Mortgage Loans".
The Offered Certificates will be directly or indirectly backed by
mortgage loans secured by multifamily and/or commercial properties. Mortgage
loans made on the security of multifamily or commercial property may have a
greater likelihood of delinquency and foreclosure, and a greater likelihood of
loss in the event thereof, than loans made on the security of an owner-occupied
single-family property. See "Description of the Trust Funds--Mortgage
Loans--Default and Loss Considerations with Respect to the Mortgage Loans". 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 or a small number of significant tenants. Accordingly,
a decline in the financial condition of the borrower or a significant 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 factors generally incident to
interests in real property, including changes in general or local economic
conditions and/or specific
-19-
<PAGE>
industry segments; declines in real estate values; declines in rental or
occupancy rates; increases in interest rates, real estate tax rates and other
operating expenses; changes in governmental rules, regulations and fiscal
policies, including environmental legislation; natural disasters and civil
disturbances such as earthquakes, hurricanes, floods, eruptions or riots; and
other circumstances, conditions or events beyond the control of a Master
Servicer or a Special Servicer.
Additional considerations may be presented by the type and use of a
particular Mortgaged Property. For instance, Mortgaged Properties that operate
as hospitals, nursing homes and other health care-related facilities, as well as
casinos, may present special risks to lenders due to the significant
governmental regulation of the ownership, operation, maintenance and/or
financing of such properties. Hotel, motel and restaurant properties are often
operated pursuant to franchise, management or operating agreements, which may be
terminable by the franchisor or operator. Moreover, the transferability of a
hotel's or restaurant's operating, liquor and other licenses upon a transfer of
the hotel or restaurant, as the case may be, whether through purchase or
foreclosure, is subject to local law requirements. Properties used as gas
stations, drycleaners and industrial facilities may be more likely to have
environmental issues. If any specific type of Mortgaged Property secures or
underlies 10% or more of the Mortgage Assets included in any Trust Fund (based
on aggregate principal balance of the Mortgage Assets in such Trust Fund at the
time it is formed), the related Prospectus Supplement will include as part of
the "Risk Factors" section therein a discussion of the risks particular to such
type of property.
In addition, 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 Particular to Retail Properties. In addition to risks generally
associated with real estate, Mortgage Loans secured by retail properties are
also affected significantly by adverse changes in consumer spending patterns,
local competitive conditions (such as the supply of retail space or the
existence or construction of new competitive shopping centers or shopping
malls), alternative forms of retailing (such as direct mail, video shopping
networks and selling through the Internet, which reduce the need for retail
space by retail companies), the quality and management philosophy of management,
the attractiveness of the properties and the surrounding neighborhood to tenants
and their customers, the public perception of the safety of customers (at
shopping malls and shopping centers, for example) and the need to make major
repairs or improvements to satisfy the needs of major tenants.
Retail properties may be adversely affected if an anchor or other
significant tenant ceases operations at such locations (which may occur on
account of a voluntary decision not to renew a lease, bankruptcy or insolvency
of such tenant, such tenant's general cessation of business activities or for
other reasons). Significant tenants at a retail property play an important part
in generating customer traffic and making a retail property a desirable location
for other tenants at such property. In addition, certain tenants at retail
properties may be entitled to terminate their leases if an anchor tenant ceases
operations at such property. In such cases, there can be no assurance that any
such anchor or other significant tenants will continue to occupy space at the
related property.
Risks Particular to Multifamily Rental Properties. Adverse economic
conditions, either local, regional or national, may limit the amount of rent
that can be charged for rental units, may adversely affect tenants' ability to
pay rent and may result in a reduction in timely rent payments or a reduction in
occupancy levels without a corresponding decrease in expenses. Occupancy and
rent levels may also be affected by construction of additional housing units,
local military base closings, company relocations and closings and national and
local politics, including current or future rent stabilization and rent control
laws and agreements. Multifamily apartment units are typically leased on a
short-term basis, and consequently, the occupancy rate of a multifamily rental
property may be subject to rapid decline, including for some of the foregoing
reasons. In addition, the level of mortgage interest rates may encourage tenants
in multifamily rental properties to purchase single-family housing rather than
continue to lease housing or the characteristics of the neighborhood in which a
multifamily rental property is located may change over time or in relation to
newer developments. Further, the cost of operating a multifamily rental property
may increase, including the cost of utilities and the costs of required capital
expenditures. Also, multifamily rental properties may be subject to rent control
laws which could impact the future cash flows of such properties.
-20-
<PAGE>
Certain multifamily rental properties are eligible to receive
low-income housing tax credits pursuant to Section 42 of the Code ("Section 42
Properties"). However, rent limitations associated therewith 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. Furthermore, some eligible tenants may not
find any differences in rents between the Section 42 Properties and other
multifamily rental properties in the same area to be a sufficient economic
incentive to reside at a Section 42 Property, which may have fewer amenities or
otherwise be less attractive as a residence. All of these conditions and events
may increase the possibility that a borrower may be unable to meet its
obligations under its Mortgage Loan.
Risks Particular to Cooperatively-Owned Apartment Buildings. Generally,
a tenant-shareholder of a cooperative corporation must make a monthly
maintenance payment to the cooperative corporation that owns the subject
apartment building representing such tenant-shareholder's pro rata share of the
corporation's payments in respect of the Mortgage Loan secured by, and all real
property taxes, maintenance expenses and other capital and ordinary expenses
with respect to, such property, less any other income that the cooperative
corporation may realize. Adverse economic conditions, either local regional or
national, may adversely affect tenant-shareholders' ability to make required
maintenance payments, either because such adverse economic conditions have
impaired the individual financial conditions of such tenant-shareholders or
their ability to sub-let the subject apartments. To the extent that a large
number of tenant-shareholders in a cooperativelyowned apartment building rely on
sub-letting their apartments to make maintenance payments, the lender on any
mortgage loan secured by such building will be subject to all the risks that it
would have in connection with lending on the security of a multifamily rental
property. See "--Risks Particular to Multifamily Rental Properties" above. In
addition, if in connection with any cooperative conversion of an apartment
building, the sponsor holds the shares allocated to a large number of the
apartment units, any lender secured by a mortgage on such building will be
subject to a risk associated with such sponsor's creditworthiness.
Risks Particular to Office Properties. In addition to risks generally
associated with real estate, Mortgage Loans secured by office properties are
also affected significantly by adverse changes in population and employment
growth (which generally creates demand for office space), local competitive
conditions (such as the supply of office space or the existence or construction
of new competitive office buildings), the quality and management philosophy of
management, the attractiveness of the properties to tenants and their customers
or clients, the attractiveness of the surrounding neighborhood and the need to
make major repairs or improvements to satisfy the needs of major tenants. Office
properties that are not equipped to accommodate the needs of modern business may
become functionally obsolete and thus noncompetitive. In addition, office
properties may be adversely affected by an economic decline in the businesses
operated by their tenants. Such decline may result in one or more significant
tenants ceasing operations at such locations (which may occur on account of a
voluntary decision not to renew a lease, bankruptcy or insolvency of such
tenants, such tenants' general cessation of business activities or for other
reasons). The risk of such an economic decline is increased if revenue is
dependent on a single tenant or if there is a significant concentration of
tenants in a particular business or industry.
Risks Particular to Hotel and Motel Properties. Hotel and motel
properties are subject to operating risks common to the lodging industry. These
risks include, among other things, a high level of continuing capital
expenditures to keep necessary furniture, fixtures and equipment updated,
competition from other hotels and motels, increases in operating costs (which
increases may not necessarily in the future be offset by increased room rates),
dependence on business and commercial travelers and tourism, increases in energy
costs and other expenses of travel and adverse effects of general and local
economic conditions. These factors could adversely affect the related borrower's
ability to make payments on the related Mortgage Loans. Since limited service
hotels and motels are relatively quick and inexpensive to construct and may
quickly reflect a positive value, an over-building of such hotels and motels
could occur in any given region, which would likely adversely affect occupancy
and daily room rates. Further, because hotel and motel rooms are generally
rented for short periods of time, hotel and motel properties tend to be more
sensitive to adverse economic conditions and competition than many other
commercial properties. Additionally, the revenues of certain hotels and motels,
particularly those located in regions whose economies depend upon tourism, may
be highly seasonal in nature.
-21-
<PAGE>
A hotel or motel property may present additional risks as compared to
other commercial property types in that: (i) hotels and motels may be operated
pursuant to franchise, management and operating agreements that may be
terminable by the franchisor, the manager or the operator; (ii) the
transferability of any operating, liquor and other licenses to the entity
acquiring such hotel or motel (either through purchase or foreclosure) is
subject to local law requirements; (iii) it may be difficult to terminate an
ineffective operator of a hotel or motel property subsequent to a foreclosure of
such property; and (iv) future occupancy rates may be adversely affected by,
among other factors, any negative perception of a hotel or motel based upon its
historical reputation.
Hotel and motel properties may be operated pursuant to franchise
agreements. The continuation of franchises is typically subject to specified
operating standards and other terms and conditions. The franchisor periodically
inspects its licensed properties to confirm adherence to its operating
standards. The failure of the hotel or motel property to maintain such standards
or adhere to such other terms and conditions could result in the loss or
cancellation of the franchise license. It is possible that the franchisor could
condition the continuation of a franchise license on the completion of capital
improvements or the making of certain capital expenditures that the related
borrower determines are too expensive or are otherwise unwarranted in light of
general economic conditions or the operating results or prospects of the
affected hotels. In that event, the related borrower may elect to allow the
franchise license to lapse. In any case, if the franchise is terminated, the
related borrower may seek to obtain a suitable replacement franchise or to
operate such hotel or motel property independently of a franchise license. The
loss of a franchise license could have a material adverse effect upon the
operations or the underlying value of the hotel or motel covered by the
franchise because of the loss of associated name recognition, marketing support
and centralized reservation systems provided by the franchisor.
Risks Particular to Casino Properties. The income generated by a casino
is subject to several factors such as local, regional and national economic
conditions. Casinos are dependent on the willingness of patrons to gamble and,
accordingly, the availability of disposable income for such purposes. Additional
risks include, among others, a high level of continuing capital expenditure to
maintain attractive facilities, competition from other casinos, increases in
operating costs (which may not be able to be passed through to patrons) and,
depending on the geographic location, a dependence on tourism. In addition, to
avoid criminal influence, the ownership and operation of casino properties is
often subject to local or state governmental regulation. Gaming licenses are not
transferable (including in connection with a foreclosure), and there can be no
assurance that the Trustee, Special Servicer or other purchaser in foreclosure
or otherwise will be able to obtain the requisite approvals to operate the
subject property as a casino. The loss of a gaming license could have a material
adverse effect on the value of a casino property. In addition, any given state
or municipality that currently allows legalized gambling could pass legislation
banning it. In general, Mortgaged Properties operated as casinos will also be
operated as a hotel and prospective investors should also consider the risks
associated with hotel properties.
Risks Particular to Industrial Properties. Industrial properties may be
adversely affected by reduced demand for industrial space occasioned by a
decline in a particular industry segment and/or by a general slow-down in the
economy, and an industrial property that suited the particular needs of its
original tenant may be difficult to relet to another tenant or may become
functionally obsolete relative to newer properties. Furthermore, industrial
properties may be adversely affected by the availability of labor sources or a
change in the proximity of supply sources. Because industrial properties
frequently have a single tenant, any such property is heavily dependent on the
success of such tenant's business.
Limited Recourse Nature of the Mortgage Loans. 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 any
such Mortgage Loan, 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. See "Certain Legal Aspects of Mortgage
Loans-Foreclosure--Anti-Deficiency Legislation".
Dependence on Management. In general, a Mortgaged Property will be
managed by a manager (which may be the borrower or an affiliate of the
borrower), which is responsible for responding to changes in the local market
for the
-22-
<PAGE>
facilities offered at the property, planning and implementing the rental or
pricing structure, including staggering durations of leases and establishing
levels of rent payments, and causing maintenance and capital improvements to be
carried out in a timely fashion. Management errors may adversely affect the
long-term viability of a Mortgaged Property. In the case of certain Trust Funds,
multiple Mortgaged Properties may be managed by the same property manager. A
concentration of property management of Mortgaged Properties securing or
underlying the Mortgage Assets in any Trust Fund will increase the risk that the
poor performance of a single property manager will have widespread effect on the
related Mortgage Asset Pool.
Dependence on Tenants. In most cases, the Mortgaged Properties will be
subject to leases, and the related borrowers will rely on periodic lease or
rental payments from tenants to pay for maintenance and other operating expenses
of such Mortgaged Properties, to fund capital improvements at such Mortgaged
Properties and to service the related Mortgage Loans and any other outstanding
debt or obligations they may have outstanding. Generally, there will be existing
leases that expire during the term of the related Mortgage Loans. There can be
no guaranty that tenants will renew leases upon expiration or, in the case of a
commercial tenant, that it will continue operations throughout the term of its
lease. Such borrowers' income would be adversely affected if tenants were unable
to pay rent, if space were unable to be rented on favorable terms or at all, or
if a significant tenant were to become a debtor in a bankruptcy case under the
United States Bankruptcy Code. For example, if any such borrower were to relet
or renew the existing leases for a significant amount of retail or office space
at rental rates significantly lower than expected rates, then such borrower's
funds from operations may be adversely affected. Changes in payment patterns by
tenants may result from a variety of social, legal and economic factors,
including, without limitation, the rate of inflation and unemployment levels and
may be reflected in the rental rates offered for comparable space. In addition,
upon reletting or renewing existing leases at commercial properties, borrowers
will likely be required to pay leasing commissions and tenant improvement costs
which may adversely affect cash flow from the related Mortgaged Property. There
can be no assurances whether, or to what extent, economic, legal or social
factors will affect future rental or repayment patterns.
In the case of Mortgaged Properties used for certain commercial
purposes, the performance and liquidation value of such properties may be
dependent upon the business operated by tenants, the creditworthiness of such
tenants and/or the number of tenants. In some cases, a single tenant or a
relatively small number of tenants may account for all or a disproportionately
large share of the rentable space or rental income of a Mortgaged Property.
Accordingly, a decline in the financial condition of a significant or sole
tenant, as the case may be, or other adverse circumstances of such a tenant
(such as bankruptcy or insolvency), may have a disproportionately greater effect
on the net operating income derived from such property than would be the case if
rentable space or rental income were more evenly distributed among a greater
number of tenants at such property.
Property Location and Condition. The location and construction quality
of a particular Mortgaged Property may affect the occupancy level as well as the
rents that may be charged. The characteristics of an area or neighborhood in
which a Mortgaged Property is located may change over time or in relation to
competing facilities. The effects of poor construction quality will increase
over time in the form of increased maintenance and capital improvements. Even
good construction will deteriorate over time if the management company does not
schedule and perform adequate maintenance in a timely fashion. Although the
Master Servicer or the Special Servicer, as applicable, generally will be
required to inspect the related Mortgaged Properties (but not mortgaged
properties securing mortgage loans underlying MBS) periodically, there can be no
assurance that such inspections will detect damage or prevent a default.
Competition. Other comparable multifamily/commercial properties located
in the same areas will compete with the Mortgaged Properties to attract
residents, retail sellers, tenants, customers, patients and/or guests. The
leasing of real estate is highly competitive. The principal means of competition
are price, location and the nature and condition of the facility to be leased. A
mortgagor competes with all lessors and developers of comparable types of real
estate in the area in which the related Mortgaged Property is located. Such
lessors or developers could have lower rents, lower operating costs, more
favorable locations or better facilities. While a mortgagor may renovate,
refurbish or expand the related Mortgaged Property to maintain such Mortgaged
Property and remain competitive, such renovation, refurbishment or expansion may
itself entail significant risks. Increased competition could adversely affect
income from and the market value
-23-
<PAGE>
of the Mortgaged Properties. In addition, the business conducted at each
Mortgaged Property may face competition from other industries and industry
segments.
Changes in Laws. Increases in income, service or other taxes (other
than real estate taxes) in respect of a Mortgaged Property generally are not
passed through to tenants under leases and may adversely affect the related
mortgagor's funds from operations. Similarly, changes in laws increasing the
potential liability for environmental conditions existing on a Mortgaged
Property or increasing the restrictions on discharges or other conditions may
result in significant unanticipated expenditures, which could adversely affect
the related mortgagor's funds from operations. See "--Risks of Liability Arising
From Environmental Conditions" herein. In the case of properties used as a
casino, gambling could cease to be permitted.
Litigation. There may be legal proceedings pending and, from time to
time, threatened against certain mortgagors under the Mortgage Loans, managers
of the Mortgaged Properties and their respective affiliates arising out of the
ordinary business of such mortgagors, managers and affiliates. There can be no
assurance that such litigation may not have a material adverse effect on
distributions to Certificateholders of the related Trust Fund.
Limitations on Enforceability of Assignments of Leases and Rents. In
general, any Mortgage Loan that is secured by a Mortgaged Property subject to
leases, 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--Leases and Rents".
Limitations on Enforceability of Cross-Collateralization. A Mortgage
Asset Pool may include groups of Mortgage Loans which are cross-collateralized
and cross-defaulted. These arrangements are designed primarily to ensure that
all of the collateral pledged to secure the respective Mortgage Loans in a
cross-collateralized group, and the cash flows generated thereby, are available
to support debt service on, and ultimate repayment of, the aggregate
indebtedness evidenced by those Mortgage Loans. These arrangements thus seek to
reduce the risk that the inability of one or more of the Mortgaged Properties
securing any such group of Mortgage Loans to generate net operating income
sufficient to pay debt service will result in defaults and ultimate losses.
There may not be complete identity of ownership of the Mortgaged
Properties securing a group of crosscollateralized Mortgage Loans. In such an
instance, creditors of one or more of the related borrowers could challenge the
cross-collateralization arrangement as a fraudulent conveyance. Generally, under
federal and state fraudulent conveyance statutes, the incurring of an obligation
or the transfer of property by a person will be subject to avoidance under
certain circumstances if the person did not receive fair consideration or
reasonably equivalent value in exchange for such obligation or transfer and was
then insolvent or was rendered insolvent by such obligation or transfer.
Accordingly, a creditor seeking to realize against a Mortgaged Property subject
to such cross-collateralization to repay such creditor's claim against the
related borrower could assert (i) that such borrower was insolvent at the time
the cross-collateralized Mortgage Loans were made and (ii) that such borrower
did not, when it allowed its property to be encumbered by a lien securing the
indebtedness represented by the other Mortgage Loans in the group of
cross-collateralized Mortgage Loans, receive fair consideration or reasonably
equivalent value for, in effect, "guaranteeing" the performance of the other
borrowers. Although the borrower making such "guarantee" will be receiving
"guarantees" from each of the other borrowers in return, there can be no
assurance that such exchanged "guarantees" would be found to constitute fair
consideration or be of reasonably equivalent value, and no unqualified legal
opinion to that effect will be obtained.
The cross-collateralized Mortgage Loans constituting any group thereof
may be secured by mortgage liens on Mortgaged Properties located in different
states. 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
-24-
<PAGE>
exercise jurisdiction over property in another state, it may be necessary upon a
default under any such 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 related Mortgages is not impaired or released.
Increased Risk of Default Associated With Balloon Payments. Certain of
the Mortgage Loans included in a Trust Fund may be nonamortizing or only
partially amortizing over their terms to maturity and, thus, will require
substantial payments of principal and interest (that is, balloon payments) at
their stated maturity. Mortgage Loans of this type involve a greater likelihood
of default than self-amortizing loans because the ability of a borrower to make
a balloon payment typically will depend upon its ability either to refinance the
loan or to sell the related Mortgaged Property. 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 multifamily or
commercial, as the case may be, real properties generally. Neither the Depositor
nor any of its affiliates will be required to refinance any Mortgage Loan.
If and to the extent described herein and in the related Prospectus
Supplement, in order to maximize recoveries on defaulted Mortgage Loans, the
Master Servicer or the 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. See "Description of the Pooling
Agreements--Realization Upon Defaulted Mortgage Loans". While the Master
Servicer or the Special Servicer generally will be required to determine that
any such extension or modification is reasonably likely to produce a greater
recovery than liquidation, taking into account the time value of money, 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.
Limitations on Enforceability of Due-on-Sale and Debt-Acceleration
Clauses. 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 also may include a debtacceleration clause, which permits
the lender to accelerate the debt upon a monetary or nonmonetary default of the
mortgagor. Such clauses are generally enforceable subject to certain exceptions.
The courts of all states will enforce clauses providing for acceleration in the
event of a material payment default. The equity courts of any state, however,
may refuse the foreclosure of a mortgage or deed of trust when an acceleration
of the indebtedness would be inequitable or unjust or the circumstances would
render the acceleration unconscionable.
Risk of Liability Arising From Environmental Conditions. 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, as amended, 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 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. Unless otherwise specified in the related Prospectus Supplement,
if a Trust Fund includes Mortgage Loans, then the related Pooling Agreement will
contain provisions generally to the effect that neither the Master Servicer nor
the Special Servicer may, on behalf of the Trust Fund, acquire title to a
Mortgaged Property or assume control of its operation unless the Special
Servicer, based upon a report 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". See "Certain Legal
Aspects of Mortgage Loans--Environmental Considerations".
Lack of Insurance Coverage for Certain Special Hazard Losses. Unless
otherwise specified in a Prospectus Supplement, the Master Servicer and Special
Servicer for the related Trust Fund will be required to cause the borrower on
each Mortgage Loan in such Trust Fund to maintain such insurance coverage in
respect of the related Mortgaged Property
-25-
<PAGE>
as is required under the related Mortgage, including hazard insurance; provided
that, as and to the extent described herein and in the related Prospectus
Supplement, each of the Master Servicer and the Special Servicer may satisfy its
obligation to cause hazard insurance to be maintained with respect to any
Mortgaged Property through acquisition of a blanket policy. In general, the
standard form of fire and extended coverage policy covers physical damage to or
destruction of the improvements of the property by fire, lightning, explosion,
smoke, windstorm and hail, and riot, strike and civil commotion, subject to the
conditions and exclusions specified in each policy. Although the policies
covering the Mortgaged Properties will be underwritten by different insurers
under different state laws in accordance with different applicable state forms,
and therefore will not contain identical terms and conditions, most such
policies typically do not cover any physical damage resulting from war,
revolution, governmental actions, floods and other water-related causes, earth
movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and certain other kinds of risks. Unless the related
Mortgage specifically requires the mortgagor to insure against physical damage
arising from such causes, then, to the extent any consequent losses are not
covered by Credit Support, such losses may be borne, at least in part, by the
holders of one or more Classes of Offered Certificates of the related Series.
See "Description of the Pooling Agreements--Hazard Insurance Policies".
Risks of Geographic Concentration. Certain geographic regions of the
United States from time to time will experience weaker regional economic
conditions and housing markets, and, consequently, will experience higher rates
of loss and delinquency than will be experienced on mortgage loans generally.
For example, a region's economic condition and housing market may be directly,
or indirectly, adversely affected by natural disasters or civil disturbances
such as earthquakes, hurricanes, floods, eruptions or riots. The economic impact
of any of these types of events may also be felt in areas beyond the region
immediately affected by the disaster or disturbance. The Mortgage Loans
underlying certain Series may be concentrated in these regions, and such
concentration may present risk considerations in addition to those generally
present for similar mortgage-backed securities without such concentration.
Inclusion of Delinquent and Nonperforming Mortgage Loans in a
Mortgage Asset Pool
If so provided in the related Prospectus Supplement, the Trust Fund for
a particular Series may include Mortgage Loans that are past due or are
nonperforming. If so specified in the related Prospectus Supplement, the
servicing of such Mortgage Loans will be performed by the Special Servicer;
however, the same entity may act as both Master Servicer and Special Servicer.
Credit Support provided with respect to a particular Series 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 in respect of the
subject Mortgage Asset Pool and the yield on the Offered Certificates of such
Series. See "Description of the Trust Funds--Mortgage Loans--General".
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 related REMIC, regardless of the amount or timing of their
possible receipt of cash payments, if any, from such REMIC, as described under
"Certain Federal Income Tax Consequences--REMICs". REMIC Residual Certificates
may have "phantom income" associated with them. That is, taxable income may be
reportable with respect to a REMIC Residual Certificate early in the term of the
related REMIC with a corresponding amount of tax losses reportable in later
years of that REMIC's term. Under these circumstances, the present value of the
tax detriments with respect to the related REMIC Residual Certificate may
significantly exceed the present value of the related tax benefits accruing
later. 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, and certain REMIC Residual Certificates may
have a negative "value". The requirement that holders of REMIC Residual
Certificates report their pro rata share of the taxable income and net loss of
the related REMIC will continue until the Certificate Principal Balances of all
Certificates of the related Series have been reduced to zero. All or a portion
of such Certificateholder's share of the related REMIC's 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. Moreover,
because an amount
-26-
<PAGE>
of gross income equal to the fees and non-interest expenses of each REMIC will
be allocated to the REMIC Residual Certificates, but such expenses will be
deductible by holders of REMIC Residual Certificates who are individuals only as
miscellaneous itemized deductions, REMIC Residual Certificates will generally
not be appropriate investments for individuals, estates or trusts or for
pass-through entities (including partnerships and S corporations) beneficially
owned by, or having as partners or shareholders, one or more individuals,
estates or trusts. In addition, REMIC Residual Certificates are subject to
certain restrictions on transfer, including, but not limited to prohibition on
transfers to investors that are not U.S. persons.
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 ("DTC Participants").
In addition, the access of Certificate Owners to information regarding the
Book-Entry Certificates in which they hold interests may be limited. Conveyance
of notices and other communications by DTC to DTC Participants, and directly and
indirectly through such DTC 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 suffer 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 physical certificate evidencing
such interest. See "Description of the Certificates--Book-Entry Registration and
Definitive Certificates".
Potential Conflicts of Interest
If so specified in the related Prospectus Supplement, the Master
Servicer may also perform the duties of Special Servicer, and the Master
Servicer, the Special Servicer or the Trustee may also perform the duties of
REMIC Administrator and/or MBS Administrator, as applicable. If so specified in
the related Prospectus Supplement, an affiliate of the Depositor, or the
Mortgage Asset Seller or an affiliate thereof, may perform the functions of
Master Servicer, Special Servicer, REMIC Administrator and/or MBS Administrator,
as applicable. In addition, any party to a Pooling Agreement or any affiliate
thereof may own Certificates. Investors in the Offered Certificates should
consider that any resulting conflicts of interest could affect the performance
of duties under the related Pooling Agreement. For example, if the Master
Servicer or Special Servicer for any Trust Fund owns a significant portion of
any Class of Certificates of the related Series, then, notwithstanding the
applicable servicing standard imposed by the related Pooling Agreement, such
fact could influence servicing decisions in respect of the Mortgage Loans in
such Trust Fund. Also, if specified in the related Prospectus Supplement, the
holders of a specified Class or Classes of Subordinate Certificates may have the
ability to replace the Special Servicer or direct the Special Servicer's actions
in connection with liquidating or modifying defaulted Mortgage Loans. Investors
in such specified Class or Classes of Subordinate Certificates may have
interests when dealing with defaulted Mortgage Loans that are in conflict with
those of the holders of the Offered Certificates of the same Series.
Termination
If so provided in the related Prospectus Supplement, upon a specified
date or upon the reduction of the aggregate Certificate Principal Balance of a
specified Class or Classes of Certificates to a specified amount, a party
designated therein may be authorized or required to solicit bids for the
purchase of all the Mortgage Assets of the related 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. The solicitation of
bids will be conducted in a commercially reasonable manner and, generally,
assets will be sold at their fair market value. In addition, if so specified in
the related Prospectus Supplement, upon the reduction of the aggregate principal
balance of some or all of the Mortgage Assets to a specified amount, a party or
parties designated therein may be authorized to purchase such Mortgage Assets,
generally at a price equal to, in the case of any Mortgage Asset, the unpaid
principal balance thereof plus accrued interest (or, in some cases, at fair
market value). However, circumstances may
-27-
<PAGE>
arise in which such fair market value may be less than the unpaid balance of the
related Mortgage Assets sold or purchased, together with interest thereon, and
therefore, as a result of such a sale or purchase, the Certificateholders of one
or more Classes of Certificates may receive an amount less than the aggregate
Certificate Principal Balance of, and accrued unpaid interest on, their
Certificates. See "Description of the Certificates--Termination".
DESCRIPTION OF THE TRUST FUNDS
General
The primary assets of each Trust Fund will consist of (i) various types
of multifamily or commercial mortgage loans ("Mortgage Loans"), (ii) mortgage
participations, pass-through certificates, collateralized mortgage obligations
or other mortgage-backed securities ("MBS") 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 MBS
(collectively, "Mortgage Assets"). Each Trust Fund will be established by 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 MBS. 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 MBS included in a particular
Trust Fund.
Mortgage Loans
General. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") that create first or junior liens on fee or
leasehold estates in properties (the "Mortgaged Properties") consisting of one
or more of the following types of real property: (i) residential properties
("Multifamily Properties") consisting of multiple rental or cooperatively-owned
dwelling units in high-rise, mid-rise or garden apartment buildings or other
residential structures, and mobile home parks; (ii) commercial properties
("Commercial Properties") consisting of office buildings, retail shopping
facilities (such as shopping centers, malls, automotive sales centers and
individual stores, shops and businesses related to sales of products and goods),
facilities related to providing entertainment, recreation and personal services
(such as movie theaters, fitness centers, bowling alleys, salons, drycleaners
and automotive service centers), hotels or motels, casinos, health care-related
facilities (such as hospitals, skilled nursing facilities, nursing homes,
congregate care facilities and senior housing), recreational vehicle parks,
warehouse facilities, mini-warehouse facilities, self-storage facilities,
industrial facilities, parking lots and restaurants; and (iii) mixed use
properties (that is, any combination of the foregoing) and unimproved land. The
Multifamily Properties may include mixed commercial and residential structures
and 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 fee
estate in a Mortgaged Property. If a Mortgage creates a lien on a borrower's
leasehold estate in a property, then, 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 ten years. Unless otherwise specified in the
related Prospectus Supplement, each Mortgage Loan will have been originated by a
person (the "Originator") other than the Depositor.
If so provided in the related Prospectus Supplement, Mortgage Assets
for a Series may include Mortgage Loans secured by junior liens, and the loans
secured by the related senior liens ("Senior Liens") may not be included in the
Mortgage Asset Pool. The primary risk to holders of Mortgage Loans secured by
junior liens is the possibility that adequate funds will not be received in
connection with a foreclosure of the related Senior Liens to satisfy fully both
the Senior Liens and the Mortgage Loan. In the event that a holder of a Senior
Lien forecloses on a Mortgaged Property, the proceeds of the foreclosure or
similar sale will be applied first to the payment of court costs and fees in
connection with the foreclosure, second to real estate taxes, third in
satisfaction of all principal, interest, prepayment or acceleration penalties,
if any, and any other sums due and owing to the holder of the Senior Liens. The
claims of the holders of the Senior Liens will be satisfied in full out of
proceeds of the liquidation of the related Mortgaged Property, if such proceeds
are sufficient, before the Trust
-28-
<PAGE>
Fund as holder of the junior lien receives any payments in respect of the
Mortgage Loan. If the Master Servicer were to foreclose on any Mortgage Loan, it
would do so subject to any related Senior Liens. In order for the debt related
to such Mortgage Loan to be paid in full at such sale, a bidder at the
foreclosure sale of such Mortgage Loan would have to bid an amount sufficient to
pay off all sums due under the Mortgage Loan and any Senior Liens or purchase
the Mortgaged Property subject to such Senior Liens. In the event that such
proceeds from a foreclosure or similar sale of the related Mortgaged Property
are insufficient to satisfy all Senior Liens and the Mortgage Loan in the
aggregate, the Trust Fund, as the holder of the junior lien, and, accordingly,
holders of one or more Classes of the Certificates of the related Series bear
(i) the risk of delay in distributions while a deficiency judgment against the
borrower is obtained and (ii) the risk of loss if the deficiency judgment is not
obtained and satisfied. Moreover, deficiency judgments may not be available in
certain jurisdictions, or the particular Mortgage Loan may be a nonrecourse
loan, 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.
If so specified in the related Prospectus Supplement, the Mortgage
Assets for a particular Series may include Mortgage Loans that are delinquent or
nonperforming 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 nonperformance,
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.
Mortgage Loans Secured by Retail Properties. Retail properties
generally derive all or a substantial percentage of their income from lease
payments from commercial tenants. Income from and the market value of retail
properties is dependent on various factors including, but not limited to, the
ability to lease space in such properties, the ability of tenants to meet their
lease obligations, the possibility of a significant tenant becoming bankrupt or
insolvent, as well as fundamental aspects of real estate such as location and
market demographics.
The correlation between the success of tenant businesses and property
value is more direct with respect to retail properties than other types of
commercial property because a significant component of the total rent paid by
retail tenants is often tied to a percentage of gross sales. Declines in tenant
sales will likely cause a corresponding decline in percentage rents and may
cause such tenants to become unable to pay their rent or other occupancy costs.
The default by a tenant under its lease could result in delays and costs in
enforcing the lessor's rights. Repayment of the related mortgage loans will be
affected by the expiration of space leases and the ability of the respective
borrowers to renew or relet the space on comparable terms. Even if vacated space
is successfully relet, the costs associated with reletting, including tenant
improvements, leasing commissions and free rent, could be substantial and could
reduce cash flow from the retail properties. The correlation between the success
of tenant businesses and property value is increased when the property is a
single tenant property.
Whether a retail property is "anchored" or "unanchored" is also an
important distinction. Anchor tenants in shopping centers traditionally have
been a major factor in the public's perception of a shopping center. The anchor
tenants at a shopping center play an important part in generating customer
traffic and making a center a desirable location for other tenants of the
center. The failure of an anchor tenant to renew its leases, 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 tenant (notwithstanding
any continued payment of rent) can have a material negative effect on the
economic performance of a retail property. Furthermore, the correlation between
the success of tenant businesses and property value is increased when the
property is a single tenant property.
Unlike certain other types of commercial properties, retail properties
also face competition from sources outside a given real estate market. Catalogue
retailers, home shopping networks, telemarketing, selling through the Internet,
and outlet centers all compete with more traditional retail properties for
consumer dollars. Continued growth of these alternative retail outlets (which
are often characterized by lower operating costs) could adversely affect the
rents collectible at retail properties.
-29-
<PAGE>
Mortgage Loans Secured by Multifamily Rental Properties. Significant
factors determining the value and successful operation of a multifamily rental
property are the location of the property, the number of competing residential
developments in the local market (such as apartment buildings, manufactured
housing communities and site-built single family homes), the physical attributes
of the multifamily building (such as its age and appearance) and state and local
regulations affecting such property. In addition, the successful operation of an
apartment building will depend upon other factors such as its reputation, the
ability of management to provide adequate maintenance and insurance, and the
types of services it provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection. For
example, there are provisions that limit the basis on which a landlord may
terminate a tenancy or increase its rent or prohibit a landlord from terminating
a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment buildings.
These ordinances may limit rent increases to fixed percentages, to percentages
of increases in the consumer price index, to increases set or approved by a
governmental agency, or to increases determined through mediation or binding
arbitration. In many cases, the rent control laws do not provide for decontrol
of rental rates upon vacancy of individual units. Any limitations on a
borrower's ability to raise property rents may impair such borrower's ability to
repay its Mortgage Loan from its net operating income or the proceeds of a sale
or refinancing of the related Mortgaged Property.
Adverse economic conditions, either local, regional or national, may
limit the amount of rent that can be charged, may adversely affect tenants'
ability to pay rent and may result in a reduction in timely rent payments or a
reduction in occupancy levels. Occupancy and rent levels may also be affected by
construction of additional housing units, local military base closings, company
relocations and closings and national and local politics, including current or
future rent stabilization and rent control laws and agreements. Multifamily
apartment units are typically leased on a short-term basis, and consequently,
the occupancy rate of a multifamily rental property may be subject to rapid
decline, including for some of the foregoing reasons. In addition, the level of
mortgage interest rates may encourage tenants to purchase single-family housing
rather than continue to lease housing. The location and construction quality of
a particular building may affect the occupancy level as well as the rents that
may be charged for individual units. The characteristics of a neighborhood may
change over time or in relation to newer developments.
Mortgage Loans Secured by Cooperatively-Owned Apartment Buildings. A
cooperative apartment building and the land under the building are owned or
leased by a non-profit cooperative corporation. The cooperative corporation is
in turn owned by tenant-shareholders who, through ownership of stock, shares or
membership certificates in the corporation, receive proprietary leases or
occupancy agreements which confer exclusive rights to occupy specific apartments
or units. Generally, a tenant-shareholder of a cooperative corporation must make
a monthly maintenance payment to the corporation representing such
tenant-shareholder's pro rata share of the corporation's payments in respect of
any mortgage loan secured by, and all real property taxes, maintenance expenses
and other capital and ordinary expenses with respect to, the real property owned
by such cooperative corporation, less any other income that the cooperative
corporation may realize. Such payments to the cooperative corporation are in
addition to any payments of principal and interest the tenant-shareholder must
make on any loans of the tenant-shareholder secured by its shares in the
corporation.
A cooperative corporation is directly responsible for building
management and payment of real estate taxes and hazard and liability insurance
premiums. A cooperative corporation's ability to meet debt service obligations
on a mortgage loan secured by the real property owned by such corporation, as
well as all other operating expenses of such property, is dependent primarily
upon the receipt of maintenance payments from the tenant-shareholders, together
with any rental income from units or commercial space that the cooperative
corporation might control. Unanticipated expenditures may in some cases have to
be paid by special assessments on the tenant-shareholders. A cooperative
corporation's ability to pay the
-30-
<PAGE>
amount of any balloon payment due at the maturity of a mortgage loan secured by
the real property owned by such cooperative corporation depends primarily on its
ability to refinance the mortgage loan. Neither the Depositor nor any other
person will have any obligation to provide refinancing for any of the Mortgage
Loans.
In a typical cooperative conversion plan, the owner of a rental
apartment building contracts to sell the building to a newly formed cooperative
corporation. Shares are allocated to each apartment unit by the owner or
sponsor, and the current tenants have a certain period to subscribe at prices
discounted from the prices to be offered to the public after such period. As
part of the consideration for the sale, the owner or sponsor receives all the
unsold shares of the cooperative corporation. The sponsor usually also controls
the corporation's board of directors and management for a limited period of
time.
Each purchaser of shares in the cooperative corporation generally
enters into a long-term proprietary lease which provides the shareholder with
the right to occupy a particular apartment unit. However, many cooperative
conversion plans are "non-eviction" plans. Under a non-eviction plan, a tenant
at the time of conversion who chooses not to purchase shares is entitled to
reside in the unit as a subtenant from the owner of the shares allocated to such
apartment unit. Any applicable rent control or rent stabilization laws would
continue to be applicable to such subtenancy, and the subtenant may be entitled
to renew its lease for an indefinite number of times, with continued protection
from rent increases above those permitted by any applicable rent control and
rent stabilization laws. The shareholder is responsible for the maintenance
payments to the cooperative without regard to its receipt or non-receipt of rent
from the subtenant, which may be lower than maintenance payments on the unit.
Newly-formed cooperative corporations typically have the greatest concentration
of non-tenant shareholders.
Mortgage Loans Secured by Office Properties. Significant factors
affecting the value of office properties include, without limitation, the
quality of the tenants in the building, the physical attributes of the building
in relation to competing buildings, the location of the building with respect to
the central business district or population centers, demographic trends within
the metropolitan area to move away from or towards the central business
district, social trends combined with space management trends (which may change
towards options such as telecommuting or hoteling to satisfy space needs), tax
incentives offered to businesses by cities or suburbs adjacent to or near the
city where the building is located and the strength and stability of the market
area as a desirable business location. Office properties may be adversely
affected by an economic decline in the businesses operated by their tenants. The
risk of such an economic decline is increased if revenue is dependent on a
single tenant or if there is a significant concentration of tenants in a
particular business or industry.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a building's age,
condition, design (including floor sizes and layout), access to transportation,
availability of parking and ability to offer certain amenities to its tenants
(including sophisticated building systems, such as fiberoptic cables, satellite
communications or other base building technological features). Office properties
that are not equipped to accommodate the needs of modern business may become
functionally obsolete and thus non-competitive.
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for example,
may be affected by such factors as labor cost and quality, tax environment and
quality of life matters, such as schools and cultural amenities. A central
business district may have a substantially different economy from that of a
suburb. The local economy will affect an office property's ability to attract
stable tenants on a consistent basis. In addition, the cost of refitting office
space for a new tenant is often higher than for other property types.
Mortgage Loans Secured by Hotel and Motel Properties. Hotel and motel
properties may involve different types of hotels and motels, including full
service hotels, resort hotels with many amenities, limited service hotels,
hotels and motels associated with national franchise chains, hotels and motels
associated with regional franchise chains and hotels that are not affiliated
with any franchise chain but may have their own brand identity. Various factors,
including location, quality and franchise affiliation affect the economic
performance of a hotel or motel. Adverse economic conditions, either local,
regional or national, may limit the amount that can be charged for a room and
may result in a reduction in occupancy levels. The construction of competing
hotels and motels can have similar effects. To meet competition in the industry
and to maintain economic values, continuing expenditures must be made for
modernizing, refurbishing, and maintaining existing facilities
-31-
<PAGE>
prior to the expiration of their anticipated useful lives. Because hotel and
motel rooms generally are rented for short periods of time, hotels and motels
tend to respond more quickly to adverse economic conditions and competition than
do other commercial properties. Furthermore, the financial strength and
capabilities of the owner and operator of a hotel or motel may have an impact on
such hotel's or motel's quality of service and economic performance.
Additionally, the lodging industry, in certain locations, is seasonal in nature
and this seasonality can be expected to cause periodic fluctuations in room and
other revenues, occupancy levels, room rates and operating expenses. The demand
for particular accommodations may also be affected by changes in travel patterns
caused by changes in energy prices, strikes, relocation of highways, the
construction of additional highways and other factors.
The viability of any hotel or motel property that is part of a national
or regional hotel or motel chain depends in part on the continued existence and
financial strength of the franchisor, the public perception of the franchise
service mark and the duration of the franchise licensing agreement. The
transferability of franchise license agreements may be restricted and, in the
event of a foreclosure on any such hotel or motel property, the consent of the
franchisor for the continued use the franchise license by the hotel or motel
property would be required. Conversely, a lender may be unable to remove a
franchisor that it desires to replace following a foreclosure. Further, in the
event of a foreclosure on a hotel or motel property, it is unlikely that the
purchaser of such hotel or motel property (or the trustee, servicer or special
servicer, as the case may be) would be entitled to the rights under any
associated liquor license, and such party would be required to apply in its own
right for such license. There can be no assurance that a new license could be
obtained or that it could be obtained promptly.
Mortgage Loans Secured by Casino Properties. Various factors, including
location and appearance affect the economic performance of a casino. Adverse
economic conditions, either local, regional or national, may limit the amount of
disposable income that potential patrons may have for gambling. The construction
of competing casinos can also have an adverse affect on the performance of a
casino property. To meet competition, continuing expenditures must be made for
modernizing, refurbishing and maintaining existing facilities. Because of the
nature of the business, casinos tend to respond more quickly to adverse economic
conditions and competition then do certain other commercial properties.
Depending on the geographic location of a casino property, it may be heavily
dependent on tourism for its clientele. In addition, to avoid criminal
influence, the ownership and operation of casino properties is often subject to
local or state governmental regulation. The appropriate government agency or
authority may also have jurisdiction over or influence with respect to the
foreclosure of a casino property and/or the bankruptcy of its owner or operator.
Gaming licenses are not transferable (including in connection with foreclosure),
and there can be no assurance that the Trustee, Special Servicer or other
purchaser in foreclosure or otherwise will be able to obtain the requisite
approvals to operate the subject property as a casino. The loss of a gaming
license could have a material adverse affect on the value of a casino property.
Further, any given state or municipality that currently allows legalized
gambling could pass legislation banning it. Depending upon what alternative use
may be made of a casino property, such legislation could have a material adverse
affect on the value of such property. In general, Mortgaged Properties operated
as casinos will also be operated as a hotel and prospective investors should
also consider the risks associated with hotel properties.
Mortgage Loans Secured by Industrial Properties. Significant factors
that affect the value of industrial properties are the quality of tenants,
building design and adaptability, the functionality of the finish-out and the
location of the property. Industrial properties may be adversely affected by
reduced demand for industrial space occasioned by a decline in a particular
industry segment and/or by a general slow-down in the economy, and an industrial
property that suited the particular needs of its original tenant may be
difficult to relet to another tenant or may become functionally obsolete
relative to newer properties. Furthermore, industrial properties may be
adversely affected by the availability of labor sources or a change in the
proximity of supply sources. Because industrial properties frequently have a
single tenant, any such property is heavily dependent on the success of such
tenant's business.
Aspects of building site, design and adaptability affect the value of
an industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, number of bays and bay depths,
divisibility, floor loading capacities, truck turning radius and overall
functionality and accessibility. Nevertheless, site characteristics of an
industrial property suitable for one tenant may not be appropriate for other
potential tenants, which may make it difficult to relet the property.
-32-
<PAGE>
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Further, industrial properties may be adversely affected by economic declines in
the industry segment of their tenants.
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, as noted above, some or all of the
Mortgage Loans included in a particular Trust Fund may be nonrecourse loans.
Lenders typically look to the Debt Service Coverage Ratio of a loan
secured by income-producing property as an important factor in evaluating the
likelihood 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 derived from the
related Mortgaged Property for a twelve-month period to (ii) the annualized
scheduled payments of principal and/or interest on the Mortgage Loan and any
other loans senior thereto that are secured by the related Mortgaged Property.
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)
noncash items such as depreciation and amortization, (ii) capital expenditures
and (iii) debt service on the related Mortgage Loan or on any other loans that
are secured by such Mortgaged Property. The Net Operating Income of a Mortgaged
Property will generally fluctuate over time and may or may not be sufficient to
cover debt service on the related Mortgage Loan at any given time. As the
primary source of the operating revenues of a nonowner-occupied,
income-producing property, rental income (and, with respect to a Mortgage Loan
secured by a Cooperative apartment building, maintenance payments from
tenantstockholders 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, recreational vehicle parks, and
mini-warehouse 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 facilities. Commercial Properties may be owner-occupied or leased to
a small number of tenants. Thus, the Net Operating Income of such a Mortgaged
Property may depend substantially on the financial condition of the borrower or
a tenant, and Mortgage Loans secured by liens on such properties may pose a
greater likelihood of default and loss than loans secured by liens on
Multifamily Properties or on multi-tenant 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 to changes in governmental rules, regulations and
fiscal policies, may also affect the likelihood 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 ("Net
Leases"). However, the existence of such "net of expense" provisions will result
in stable Net Operating 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.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
factor in evaluating the likelihood of loss if a property must be liquidated
following a default. Unless otherwise defined in the related Prospectus
Supplement, the "Loanto-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 any other loans senior thereto that are secured by the
related Mortgaged Property to (ii) the Value of the related Mortgaged Property.
Unless otherwise specified in the related Prospectus Supplement, the "Value" of
a Mortgaged Property will be its fair market value as determined by an appraisal
of such property conducted by or on behalf of the Originator in connection with
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 (a) the
greater the incentive of the borrower to perform under the terms of the related
Mortgage Loan (in order to protect such equity) and (b) the greater the cushion
provided to the lender against loss on liquidation following a default.
-33-
<PAGE>
Loan-to-Value Ratios will not necessarily constitute an accurate
measure of the likelihood 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 Certificates of the related Series may be less than the Value determined at
loan origination, and will likely continue to fluctuate from time to time based
upon certain factors including 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 and discount 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 the
likelihood of default and loss, is even more difficult.
Although there may be multiple methods for determining the Value of a
Mortgaged Property, Value will in all cases be affected by property performance.
As a result, if a Mortgage Loan defaults because the income generated by the
related Mortgaged Property is insufficient to cover operating costs and expenses
and pay debt service, then the Value of the Mortgaged Property will reflect such
and a liquidation loss may occur.
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 can be 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--Certain Factors
Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans--General" and
"--Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage
Loans--Increased Risk of Default Associated With Balloon Payments".
Payment Provisions of the Mortgage Loans. All of the Mortgage Loans
will (i) have had original terms to maturity of not more than approximately 40
years and (ii) provide for scheduled payments of principal, interest or both, to
be made on specified dates ("Due Dates") that occur monthly, quarterly,
semi-annually or annually. A Mortgage Loan (i) may provide for no accrual of
interest or for accrual of interest thereon at 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 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, (iii) may be fully amortizing or may be partially
amortizing or nonamortizing, with a balloon payment due on its stated maturity
date, and (iv) may prohibit over its term or for a certain period prepayments
(the period of such prohibition, a "Lock-out Period" and its date of expiration,
a "Lock-out Date") and/or require payment of a premium or a yield maintenance
payment (a "Prepayment Premium") in connection with certain prepayments, 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 appreciation of the
related Mortgaged Property, or profits realized from the operation or
disposition of such Mortgaged Property or the benefit, if any, resulting from
the refinancing of the Mortgage Loan (any such provision, an "Equity
Participation"), as described in the related Prospectus Supplement.
Mortgage Loan Information in Prospectus Supplements. Each Prospectus
Supplement will contain certain information pertaining to the Mortgage Loans in
the related Trust Fund, which, to the extent then applicable, will generally
include the following: (i) the aggregate outstanding principal balance and the
largest, smallest and average outstanding principal balance of the Mortgage
Loans, (ii) the type or types of property that provide security for repayment of
the Mortgage Loans, (iii) the earliest and latest origination date and maturity
date of the Mortgage Loans, (iv) the original and remaining terms to maturity of
the Mortgage Loans, or the respective ranges thereof, and the weighted average
original and remaining terms to maturity of the Mortgage Loans, (v) the
Loan-to-Value Ratios of the Mortgage Loans (either at origination or as of a
more recent date), or the range thereof, and the weighted average of such
Loan-to-Value Ratios, (vi) the Mortgage Rates borne by the Mortgage Loans, or
the range thereof, and the weighted average Mortgage Rate borne by the Mortgage
-34-
<PAGE>
Loans, (vii) 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, (viii) information regarding the
payment characteristics of the Mortgage Loans, including, without limitation,
balloon payment and other amortization provisions, Lock-out Periods and
Prepayment Premiums, (ix) the Debt Service Coverage Ratios of the Mortgage Loans
(either at origination or as of a more recent date), or the range thereof, and
the weighted average of such Debt Service Coverage Ratios, and (x) the
geographic distribution of the Mortgaged Properties on a state-by-state basis.
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 provide 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 fifteen days following such issuance.
If any Mortgage Loan, or group of related Mortgage Loans, constitutes a
concentration of credit risk, financial statements or other financial
information with respect to the related Mortgaged Property or Mortgaged
Properties will be included in the related Prospectus Supplement.
If and to the extent available and relevant to an investment decision
in the Offered Certificates of the related Series, information regarding the
prepayment experience of a Master Servicer's multifamily and/or commercial
mortgage loan servicing portfolio will be included in the related Prospectus
Supplement. However, many servicers do not maintain records regarding such
matters or, at least, not in a format that can be readily aggregated. In
addition, the relevant characteristics of a Master Servicer's servicing
portfolio may be so materially different from those of the related Mortgage
Asset Pool that such prepayment experience would not be meaningful to an
investor. For example, differences in geographic dispersion, property type
and/or loan terms (e.g., mortgage rates, terms to maturity and/or prepayment
restrictions) between the two pools of loans could render the Master Servicer's
prepayment experience irrelevant. Because of the nature of the assets to be
serviced and administered by a Special Servicer, no comparable prepayment
information will be presented with respect to the Special Servicer's multifamily
and/or commercial mortgage loan servicing portfolio.
MBS
MBS may include (i) private-label (that is, not issued, insured or
guaranteed by the United States or any agency or instrumentality thereof)
mortgage participations, mortgage pass-through certificates, collateralized
mortgage obligations or other mortgage-backed securities or (ii) certificates
issued and/or insured or guaranteed by the Federal Home Loan Mortgage
Corporation ("FHLMC"; and such certificates issued and/or insured or guaranteed
thereby, "FHLMC Certificates"), the Federal National Mortgage Association
("FNMA"; and such certificates issued and/or insured or guaranteed thereby,
"FNMA Certificates"), the Governmental National Mortgage Association ("GNMA";
and such certificates issued and/or insured or guaranteed thereby, "GNMA
Certificates") or the Federal Agricultural Mortgage Corporation ("FAMC"; and
such certificates issued and/or insured or guaranteed thereby, "FAMC
Certificates"), provided that, unless otherwise specified in the related
Prospectus Supplement, each MBS 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.
Except in the case of a pro rata mortgage participation in a single
mortgage loan or a pool of mortgage loans, each MBS included in a Mortgage Asset
Pool: (a) either will (i) have been acquired (other than from the Depositor or
an affiliate thereof) in bona fide secondary market transactions or (ii) if so
specified in the related Prospectus Supplement, be part of the Depositor's (or
an affiliate's) unsold allotments from the Depositor's (or an affiliate's)
previous offerings; and (b) unless it was issued by the Depositor or a trust
established thereby, will either (i) have been previously registered under the
Securities Act, (ii) be exempt from such registration requirements or (iii) have
been held for at least the holding period specified in Rule 144(k) under the
Securities Act.
Any MBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(an "MBS Agreement"). The issuer of the MBS (the "MBS Issuer") and/or
-35-
<PAGE>
the servicer of the underlying mortgage loans (the "MBS Servicer") will be
parties to the MBS Agreement, generally together with a trustee (the "MBS
Trustee") or, in the alternative, with the original purchaser or purchasers of
the MBS.
The MBS may have been issued in one or more classes with
characteristics similar to the Classes of Certificates described herein.
Distributions in respect of the MBS will be made by the MBS Issuer, the MBS
Servicer or the MBS Trustee on the dates specified in the related Prospectus
Supplement. The MBS Issuer or the MBS Servicer or another person specified in
the related Prospectus Supplement may have the right or obligation to repurchase
or substitute assets underlying the MBS 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 MBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and 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 MBS, or by the initial purchasers of the MBS.
The Prospectus Supplement for a Series that evidence interests in MBS
will specify: (i) the aggregate approximate initial and outstanding principal
amount(s) and type of the MBS to be included in the Trust Fund, (ii) the
original and remaining term(s) to stated maturity of the MBS, if applicable,
(iii) the pass-through or bond rate(s) of the MBS or the formula for determining
such rate(s), (iv) the payment characteristics of the MBS, (v) the MBS Issuer,
MBS Servicer and MBS Trustee, as applicable, of each of the MBS, (vi) a
description of the related credit support, if any, (vii) the circumstances under
which the related underlying mortgage loans, or the MBS themselves, may be
purchased prior to their maturity, (viii) the terms on which mortgage loans may
be substituted for those originally underlying the MBS, (ix) the type of
mortgage loans underlying the MBS and, to the extent appropriate under the
circumstances, such other information in respect of the underlying mortgage
loans described under "--Mortgage Loans--Mortgage Loan Information in Prospectus
Supplements", and (x) the characteristics of any cash flow agreements that
relate to the MBS.
The Depositor will provide the same information regarding the MBS in
any Trust Fund in its reports filed under the Exchange Act with respect to such
Trust Fund as was provided by the related MBS Issuer in its own such reports if
such MBS was publicly offered or the reports the related MBS Issuer provides the
related MBS Trustee if such MBS was privately issued.
Undelivered Mortgage Assets
Unless otherwise specified in the related Prospectus Supplement, the
aggregate outstanding principal balance of a Mortgage Asset Pool as of the
related Cut-off Date will equal or exceed the aggregate Certificate Principal
Balance of the related Series as of the related Closing Date. In the event that
Mortgage Assets initially delivered do not have an aggregate outstanding
principal balance as of the related Cut-off Date at least equal to the aggregate
Certificate Principal Balance of the related Series as of the related Closing
Date, the Depositor may deposit cash or Permitted Investments on an interim
basis with the Trustee for such Series on the related Closing Date in lieu of
delivering Mortgage Assets with an aggregate outstanding principal balance as of
the related Cut-off Date equal to the shortfall amount. During the 90-day period
following the related Closing Date, the Depositor will be entitled to obtain a
release of such cash or Permitted Investments to the extent that the Depositor
delivers a corresponding amount of the Undelivered Mortgage Assets. If and to
the extent all the Undelivered Mortgage Assets are not delivered during the
90-day period following the related Closing Date, such cash or, following
liquidation, such Permitted Investments will be applied to pay a corresponding
amount of principal of the Certificates of such Series to the extent set forth,
and on the dates specified, in the related Prospectus Supplement.
Certificate Accounts
Each Trust Fund will include a Certificate Account consisting of one or
more accounts established and maintained on behalf of the Certificateholders
into which all payments and collections received or advanced with respect to the
Mortgage Assets and other assets in the Trust Fund will be deposited to the
extent described herein and in the related Prospectus Supplement. See
"Description of the Pooling Agreements--Certificate Account".
-36-
<PAGE>
Credit Support
If so provided in the Prospectus Supplement for the Offered
Certificates of any Series, 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 such Series in the form of subordination
of one or more other Classes of Certificates of such Series or by one or more
other types of Credit Support, which may include a letter of credit, a surety
bond, an insurance policy, a guarantee, a reserve fund or any combination
thereof. The amount and types of such 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 Certificate of any Series. See "Risk Factors--Credit Support
Limitations" and "Description of Credit Support".
Cash Flow Agreements
If so provided in the Prospectus Supplement for the Offered
Certificates of any Series, the related Trust Fund may include guaranteed
investment contracts pursuant to which moneys held in the funds and accounts
established for such Series will be invested at a specified rate. The Trust Fund
may also include interest rate exchange agreements, interest rate cap or floor
agreements, or other agreements designed to reduce the effects of interest rate
fluctuations on the Mortgage Assets on one or more Classes of Certificates. The
principal terms of any such 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 related
Prospectus Supplement. The related Prospectus Supplement will also identify the
obligor under the Cash Flow Agreement.
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--Effect of
Prepayments on Average Life of Certificates". The following discussion
contemplates a Trust Fund that consists solely of Mortgage Loans. While the
characteristics and behavior of mortgage loans underlying an MBS 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 MBS. If a Trust Fund includes MBS, the related Prospectus
Supplement will discuss the effect, if any, that the payment characteristics of
the MBS may have on the yield to maturity and weighted average lives of the
Offered Certificates of the related Series.
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 Offered 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 PassThrough Rate of one or
more Classes of such Offered Certificates; and whether the distributions of
interest on any Class of such Offered Certificates 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, 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 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 on the amount of such
prepayment only through the date of such prepayment, instead of through the Due
Date for the next succeeding scheduled payment. However, interest accrued on the
Offered Certificates of any Series and distributable thereon on any Distribution
Date will generally correspond to interest accrued on the Mortgage Loans to
their respective Due Dates during the related Due Period. A "Due Period" will be
a specified time
-37-
<PAGE>
period (generally corresponding in length to the period between
Distribution Dates) and all scheduled payments on the Mortgage Loans in the
related Trust Fund that are due during a given Due Period will, to the extent
received the related Determination Date (as defined herein) or otherwise
advanced by the related Master Servicer, Special Servicer or other specified
person, be distributed to the holders of the Certificates of such Series on the
next succeeding Distribution Date. 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 to the Due Date for
such Mortgage Loan in the related Due Period, then 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 the Offered Certificates of each Series will describe the manner
in which any such shortfalls will be allocated among the respective Classes of
Certificates of such Series. The related Prospectus Supplement will also
describe any amounts available to offset such shortfalls.
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 Certificate Principal Balance (or the
Certificate Notional Amount, if applicable) of such Certificate. The rate of
principal payments on the Mortgage Loans in any Trust Fund will in turn be
affected by the amortization schedules thereof (which, in the case of ARM Loans,
may change periodically to accommodate adjustments to the Mortgage Rates
thereon), the dates on which any balloon payments are due, and the rate of
principal prepayments thereon (including for this purpose, voluntary prepayments
by borrowers and also prepayments resulting from liquidations of Mortgage Loans
due to defaults, casualties or condemnations affecting the related Mortgaged
Properties, or purchases of Mortgage Loans out of the related 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 described below),
no assurance can be given as to such rate.
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 aggregate
Certificate Notional Amount thereof). 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 on
such Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield. In addition, if an investor purchases an
Offered Certificate at a discount (or premium), and principal payments are made
in reduction of the Certificate Principal Balance or Certificate Notional Amount
of such investor's Offered Certificate at a rate slower (or faster) than the
rate anticipated by the investor during any particular period, any consequent
adverse effects on such investor's yield would not be fully offset by a
subsequent like increase (or decrease) in the rate of principal payments.
In general, the aggregate Certificate 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 aggregate
-38-
<PAGE>
Certificate Principal Balance of one or more of the other Classes of
Certificates of the same Series. Accordingly, the yield on such Stripped
Interest Certificates will be inversely related to the rate at which payments
and other collections of principal are received on such Mortgage Assets or
distributions are made in reduction of the aggregate Certificate Principal
Balance of such Class or Classes of Certificates, as the case may be.
Consistent with the foregoing, 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. If the Offered Certificates of a Series
include any such Certificates, the related Prospectus Supplement will include a
table showing the effect of various constant assumed levels of prepayment on
yields on such Certificates. Such tables will be intended to illustrate the
sensitivity of yields to various constant assumed prepayment rates and will not
be intended to predict, or to provide information that will enable investors to
predict, yields or prepayment rates.
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 general,
those factors which increase the attractiveness of selling a Mortgaged Property
or refinancing a Mortgage Loan or which enhance a borrower's ability to do so,
as well as those factors which increase the likelihood of default under a
Mortgage Loan, would be expected to cause the rate of prepayment in respect of
any Mortgage Asset Pool to accelerate. In contrast, those factors having an
opposite effect would be expected to cause the rate of prepayment of any
Mortgage Asset Pool to slow.
The rate of principal payments on the Mortgage Loans in any Trust Fund
may also be affected by the existence of Lock-out Periods and requirements that
principal prepayments be accompanied by Prepayment Premiums, and by the extent
to which such provisions may be practicably enforced. To the extent enforceable,
such provisions could constitute either an absolute prohibition (in the case of
a Lock-out Period) or a disincentive (in the case of a Prepayment Premium) to a
borrower's voluntarily prepaying its Mortgage Loan, thereby slowing the rate of
prepayments.
The rate of prepayment on a pool of mortgage loans 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 coupon, a borrower may have an increased incentive to refinance its
mortgage loan. Even in the case of ARM Loans, as prevailing market interest
rates decline, and without regard to whether the Mortgage Rates on such ARM
Loans decline in a manner consistent therewith, the related borrowers 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 a
different index, margin or rate cap or floor on another adjustable rate mortgage
loan. Therefore, as prevailing market interest rates decline, prepayment speeds
would be expected to accelerate.
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
makes 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 the related Series. Unless
otherwise specified in the related Prospectus Supplement, weighted average life
refers to the average amount of time that will elapse from the date of issuance
of an instrument until each dollar allocable as principal of such instrument is
repaid to the investor.
-39-
<PAGE>
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 by
borrowers and also prepayments resulting from liquidations of Mortgage Loans due
to default, casualties or condemnations affecting the related Mortgaged
Properties 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 mortgage 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 mortgage 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 thirtieth month. Beginning in the thirtieth 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 mortgage loans.
Moreover, the CPR and SPA models were developed based upon historical prepayment
experience for single-family mortgage 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 the Offered Certificates of
any Series will contain tables, if applicable, setting forth the projected
weighted average life of each Class of Offered Certificates of such Series with
an aggregate Certificate Principal Balance, and the percentage of the initial
aggregate Certificate Principal 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.
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 possibility 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 the 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
to occur (that is, Mortgage Loans that provide for the current payment of
interest calculated at a rate lower than the rate at which interest accrues
thereon, with the unpaid portion of such interest being added to the related
principal balance). Negative amortization on one or more Mortgage Loans in any
Trust Fund may result in negative amortization on the Offered Certificates of
the related Series. 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
-40-
<PAGE>
respective Classes of Certificates of the related Series. The portion of any
Mortgage Loan negative amortization allocated to a Class of Certificates may
result in a deferral of some or all of the interest payable thereon, which
deferred interest may be added to the aggregate Certificate Principal Balance
thereof. In addition, an ARM Loan that permits negative amortization would be
expected during a period of increasing interest rates to amortize at a slower
rate (and perhaps not at all) than if interest rates were declining or were
remaining constant. Such slower rate of Mortgage Loan amortization would
correspondingly be reflected in a slower 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 that would bear the effects of a slower rate of amortization on
such Mortgage Loans) may increase as a result of such feature.
Negative amortization may occur in respect of an ARM Loan that (i)
limits the amount by which its scheduled payment may adjust in response to a
change in its Mortgage Rate, (ii) provides that its scheduled payment will
adjust less frequently than its Mortgage Rate or (iii) provides for constant
scheduled payments notwithstanding adjustments to its Mortgage Rate.
Accordingly, 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, thereby resulting in the accelerated amortization of
such Mortgage Loan. Any such acceleration in amortization of its principal
balance will shorten the weighted average life of such Mortgage Loan and,
correspondingly, the weighted average lives of those Classes of Certificates
entitled to a portion of the principal payments on such Mortgage Loan.
The extent to which the yield on any Offered Certificate will be
affected by the inclusion in the related Trust Fund of Mortgage Loans that
permit negative amortization, will depend upon (i) whether such Offered
Certificate was purchased at a premium or a discount and (ii) the extent to
which the payment characteristics of such Mortgage Loans delay or accelerate the
distributions of principal on such Certificate (or, in the case of a Stripped
Interest Certificate, delay or accelerate the reduction of the Certificate
Notional Amount thereof). See "--Yield and Prepayment Considerations" above.
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 or otherwise, 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 Loans 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 be effected by (i) a reduction in the entitlements to interest and/or the
aggregate Certificate Principal Balances of one or more such Classes of
Certificates and/or (ii) establishing a priority 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
Loans in the related Trust Fund.
Additional Certificate Amortization. In addition to entitling the
holders thereof to a specified portion (which may during specified periods range
from none to all) of the principal payments received on the Mortgage Assets in
the related
-41-
<PAGE>
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 accrued on the 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 is likely to have any material
effect on the rate at which such Certificates are amortized and the consequent
yield with respect thereto.
THE DEPOSITOR
The Depositor was incorporated in the State of Delaware on July 10,
1997 and is a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette Inc., a
Delaware corporation. The Depositor was organized, among other things, for the
purposes of issuing debt securities and establishing trusts, selling beneficial
interests therein and acquiring and selling mortgage assets to such trusts. The
principal executive offices of the Depositor are located at 277 Park Avenue, New
York, New York 10172. Its telephone number is (212) 892-3000. The Depositor does
not have and is not expected to have any significant assets.
DESCRIPTION OF THE CERTIFICATES
General
Each Series will represent the entire beneficial ownership interest in
the Trust Fund created pursuant to the related Pooling Agreement. As described
in the related Prospectus Supplement, the Certificates of each Series, including
the Offered Certificates of such Series, may consist of one or more Classes of
Certificates that, among other things: (i) provide for the accrual of interest
on the aggregate Certificate Principal Balance or Certificate Notional Amount
thereof at a fixed, variable or adjustable rate; (ii) constitute Senior
Certificates or Subordinate Certificates; (iii) constitute Stripped Interest
Certificates or Stripped Principal Certificates; (iv) provide for distributions
of interest thereon or principal thereof 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 thereof
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 thereof to be made, subject to available
funds, based on a specified principal payment schedule or other methodology; or
(vii) provide for distributions based on collections on the Mortgage Assets in
the related Trust Fund attributable to Prepayment Premiums and Equity
Participations.
If so specified in the related Prospectus Supplement, a Class of
Offered Certificates may have two or more component parts, each having
characteristics that are otherwise described herein as being attributable to
separate and distinct Classes. For example, a Class of Offered Certificates may
have an aggregate Certificate Principal Balance on which it accrues interest at
a fixed, variable or adjustable rate. Such Class of Offered Certificates may
also have certain characteristics attributable to Stripped Interest Certificates
insofar as it may also entitle the holders thereof to distributions of interest
accrued on an aggregate Certificate Notional Amount at a different fixed,
variable or adjustable rate. In addition, a Class of Certificates may accrue
interest on one portion of its aggregate Certificate Principal Balance or
Certificate
-42-
<PAGE>
Notional Amount at one fixed, variable or adjustable rate and on another portion
of its aggregate Certificate Principal Balance or Certificate Notional Amount at
a different fixed, variable or adjustable rate.
Each Class of Offered Certificates of a Series will be issued in
minimum denominations corresponding to the Certificate Principal Balances or, in
case of certain Classes of Stripped Interest Certificates or REMIC Residual
Certificates, Certificate 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 charges, 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. If so specified in the
related Prospectus Supplement, arrangements may be made for clearance and
settlement through CEDEL, S.A. or the Euroclear System, if they are participants
in DTC.
Distributions
Distributions on the Certificates of each Series will be made on each
Distribution Date 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 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 holders of Certificates of such Series on such date. The
particular components of the Available Distribution Amount for any Series and
Distribution Date will be more specifically described in the related Prospectus
Supplement. In general, the Distribution Date for a Series will be the 25th day
of each month (or, if any such 25th day is not a business day, the next
succeeding business day), commencing in the month immediately following the
month in which such Series is issued.
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 rata among the outstanding Certificates in such Class
in proportion to the respective Percentage Interests evidenced thereby unless
otherwise specified in the related Prospectus Supplement. 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 person required to make
such payments with wiring instructions no later than the related Record Date or
such other 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. The undivided percentage interest (the "Percentage
Interest") in any particular Class of Offered Certificates represented by any
Certificate of such Class will be equal to the percentage obtained by dividing
the initial Certificate Principal Balance or Certificate Notional Amount, as
applicable, of such Certificate by the initial aggregate Certificate Principal
Balance or Certificate Notional Amount, as the case may be, of such Class.
Distributions of Interest on the Certificates
Each Class of Certificates of each Series (other than certain Classes
of Stripped Principal Certificates and certain Classes of REMIC Residual
Certificates that have no Pass-Through Rate) may have a different Pass-Through
Rate, which
-43-
<PAGE>
in each case 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 of Offered Certificates. 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 any Class of Certificates
(other than a Class of Accrual Certificates, which will be entitled to
distributions of accrued interest commencing only on the Distribution Date, or
under the circumstances, specified in the related Prospectus Supplement, 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 that portion, if
any, 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 aggregate Certificate Principal
Balance thereof on each Distribution Date or otherwise deferred as described in
the related Prospectus Supplement. With respect to each Class of Certificates
(other than certain Classes of Stripped Interest Certificates and certain
Classes of REMIC Residual Certificates), the "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 most recently ended calendar
month) on the aggregate Certificate Principal Balance of such Class of
Certificates outstanding immediately prior to such Distribution Date. Unless
otherwise provided in the related Prospectus Supplement, the Accrued Certificate
Interest for each Distribution Date with respect to a Class of Stripped Interest
Certificates will be similarly calculated except that it will accrue on an
aggregate Certificate Notional Amount that, in general, will either be (i) based
on the principal balances of some or all of the Mortgage Assets in the related
Trust Fund or (ii) equal to the aggregate Certificate Principal Balances of one
or more other Classes of Certificates of the same Series. Reference to a
Certificate Notional Amount with respect to a Stripped Interest Certificate 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 aggregate Certificate Principal Balance of) one or
more Classes of the Certificates of a Series may 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 that are applied to offset the amount of 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 aggregate Certificate Principal 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 aggregate Certificate Principal Balance of such Class. See "Risk
Factors--Effect of Prepayments on Average Life of Certificates" and "--Effect of
Prepayments on Yield of Certificates" and "Yield and Maturity
Considerations--Certain Shortfalls in Collections of Interest".
Distributions of Principal of the Certificates
Each Class of Certificates of each Series (other than certain Classes
of Stripped Interest Certificates and certain Classes of REMIC Residual
Certificates) will have an aggregate Certificate Principal Balance, which, at
any time, will equal the then maximum amount that the holders of Certificates of
such Class will be entitled to receive as principal out of the future cash flow
on the Mortgage Assets and other assets included in the related Trust Fund. The
aggregate outstanding Certificate Principal Balance of a Class of Certificates
will be reduced by distributions of principal made thereon from time to time
and, if and to the extent 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 aggregate
Certificate Principal 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
being 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
-44-
<PAGE>
Certificate Interest in respect thereof (reduced as described above). Unless
otherwise specified in the related Prospectus Supplement, the initial aggregate
Certificate Principal Balance of all Classes of a Series will not be greater
than the aggregate outstanding principal balance of the related Mortgage Assets
as of the related Cut-off Date. The initial aggregate Certificate Principal
Balance of each Class of Offered Certificates will be specified in the related
Prospectus Supplement. As and to the extent described in the related Prospectus
Supplement, distributions of principal with respect to a Series 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 Principal 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. Distributions of principal with respect to one or more
Classes of Certificates 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.
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. Distributions
of principal with respect to one or more other 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
Offered 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. Alternatively, such items may be retained by the
Depositor or any of its affiliates or by any other specified person and/or may
be excluded as Trust Assets.
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 be effected by (i) a reduction in the entitlements to interest and/or the
aggregate Certificate Principal Balances of one or more such Classes of
Certificates and/or (ii) establishing a priority of payments among such Classes
of Certificates. See "Description of Credit Support".
Advances in Respect of Delinquencies
If and to the extent provided in the related Prospectus Supplement, if
a Trust Fund includes Mortgage Loans, the Master Servicer, the Special Servicer,
the Trustee, any provider of Credit Support and/or any other specified person
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 for such Distribution Date, an amount up to the
aggregate of any payments of principal (other than the principal portion of any
balloon payments) and 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.
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 out of a specific entity's own funds will be
reimbursable out of related recoveries on the Mortgage Loans (including amounts
drawn under any fund or instrument constituting Credit Support) with respect to
which such advances were made
-45-
<PAGE>
(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, if so
identified, collections on other Mortgage Assets 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 a Master
Servicer, Special Servicer or Trustee if, in the judgment of the Master
Servicer, Special Servicer or Trustee, as the case may be, 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, Special Servicer or Trustee, a Nonrecoverable Advance will
be reimbursable thereto 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 by a Master Servicer, Special Servicer,
Trustee or other entity from excess funds in a Certificate Account, such Master
Servicer, Special Servicer, Trustee or other entity, as the case may be, will be
required to replace such funds in such Certificate Account on or prior to any
future Distribution Date to the extent that funds in such Certificate Account on
such Distribution Date are less than payments required to be made to the related
Series of Certificateholders on such date. If so specified in the related
Prospectus Supplement, the obligation of a Master Servicer, Special Servicer,
Trustee or other entity 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 on certain or
all of such advances for a specified period during which 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 the related Series of Certificateholders or as otherwise provided in the
related Pooling Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for the Offered Certificates of any Series
evidencing an interest in a Trust Fund that includes MBS will describe any
comparable advancing obligation of a party to the related Pooling Agreement or
of a party to the related MBS 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, Manager or Trustee, as provided in the related Prospectus Supplement,
will forward to each such holder, a statement (a "Distribution Date Statement")
substantially in the form, or specifying the information, set forth in the
related Prospectus Supplement. In general, the Distribution Date Statement for
each Distribution Date will detail the distributions on the Certificates of the
related Series on such Distribution Date and the performance of the Mortgage
Assets in the related Trust Fund.
Within a reasonable period of time after the end of each calendar year,
the Master Servicer, Manager or Trustee, as the case may be, for a Series will
be required to furnish to each person who at any time during the calendar year
was a holder of an Offered Certificate of such Series a statement containing
information regarding the principal, interest and other distributions on the
applicable Class of Offered Certificates, 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, "--Book-Entry
Registration and Definitive Certificates" below.
If the Trust Fund for a Series includes MBS, the ability of the related
Master Servicer, Manager or Trustee, as the case may be, to include in any
Distribution Date Statement information regarding the mortgage loans underlying
such MBS will depend on the reports received with respect to such MBS. 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.
-46-
<PAGE>
Voting Rights
The voting rights evidenced by each Series (as to such Series, the
"Voting Rights") will be allocated among the respective Classes of Certificates
of such Series in the manner described in the related Prospectus Supplement.
Certificateholders will generally not have a right to vote, except with
respect 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 right to act as a group to remove the related
Trustee and also upon the occurrence of certain events which if continuing would
constitute an Event of Default on the part of the related Master Servicer,
Special Servicer or REMIC Administrator. See "Description of the Pooling
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 will
terminate following (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 payment (or
provision for payment) to the Certificateholders of that Series of all amounts
required to be paid to them pursuant to such Pooling Agreement. 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, the Certificates
of any Series may be subject to optional early retirement through 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.
In addition, if so provided in the related Prospectus Supplement, upon
the reduction of the aggregate Certificate Principal Balance of a specified
Class or Classes of Certificates by a specified percentage or amount or upon a
specified date, a party designated therein may be authorized or required to
solicit bids for the purchase of all the Mortgage Assets of the related Trust
Fund, or of a sufficient portion of such Mortgage Assets to retire such Class or
Classes of Certificates, under the circumstances and in the manner set forth
therein. The solicitation of bids will be conducted in a commercially reasonable
manner and, generally, assets will be sold at their fair market value.
Circumstances may arise in which such fair market value may be less than the
unpaid balance of the Mortgage Loans sold and therefore, as a result of such a
sale, the Certificateholders of one or more Classes of Certificates may receive
an amount less than the aggregate Certificate Principal Balance of, and accrued
unpaid interest on, their Certificates.
Book-Entry Registration and Definitive Certificates
If so provided in the Prospectus Supplement for the Offered
Certificates of any Series, one or more Classes of such Offered Certificates
will be offered in book-entry format through the facilities of DTC, and each
such Class will be represented by one or more global Certificates registered in
the name of DTC or its nominee. If so provided in the Prospectus Supplement,
arrangements may be made for clearance and settlement through the Euroclear
System or CEDEL, S.A., if they are participants in DTC.
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
was created to hold securities for DTC Participants and facilitate the clearance
and settlement of securities transactions between DTC Participants through
electronic computerized book-entry changes in their accounts, thereby
eliminating the need for physical movement of securities certificates. DTC
Participants that maintain accounts with DTC include securities brokers and
dealers, banks, trust companies and clearing corporations and may include other
organizations. DTC is owned by a number of DTC Participants and by the New York
Stock Exchange, Inc., the
-47-
<PAGE>
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
banks, brokers, dealers and trust companies that directly or indirectly clear
through or maintain a custodial relationship with a DTC Participant that
maintains as account with DTC. The rules applicable to DTC and DTC Participants
are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made
by or through, and will be recorded on the records of, the brokerage firm, bank,
thrift institution or other financial intermediary (each, a "Financial
Intermediary") that maintains the beneficial owner's account for such purpose.
In turn, the Financial Intermediary's ownership of such Certificates will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on the
records of DTC, if the beneficial owner's Financial Intermediary is not a DTC
Participant). Therefore, the beneficial owner must rely on the foregoing
procedures to evidence its beneficial ownership of such Certificates. The
beneficial ownership interest of the owner of a Book-Entry Certificate (a
"Certificate Owner") may only be transferred by compliance with the rules,
regulations and procedures of such Financial Intermediaries and DTC
Participants.
DTC has no knowledge of the actual Certificate Owners; DTC's records
reflect only the identity of the DTC Participants to whose accounts such
Certificates are credited, which may or may not be the Certificate Owners. The
DTC Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC
Participants and by DTC Participants to Financial Intermediaries and 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 DTC 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 DTC Participants to Financial
Intermediaries and 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 DTC Participant (and not of DTC, the Depositor or
any Trustee, Master Servicer, Special Servicer or Manager), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Accordingly, 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 Book-Entry Certificates will be the nominee of DTC, and the Certificate
Owners will not be recognized as Certificateholders under the Pooling Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Pooling Agreement only indirectly through
the DTC Participants who in turn will exercise their rights through DTC. The
Depositor has been 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
DTC Participants to whose account with DTC interests in the Book-Entry
Certificates are credited. DTC may take conflicting actions with respect to the
Book- Entry Certificates to the extent that such actions are taken on behalf of
Financial Intermediaries whose holdings include such Certificates.
Because DTC can act only on behalf of DTC Participants, who in turn act
on behalf of Financial Intermediaries 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 discharge properly 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
-48-
<PAGE>
occurrence of either of the events described in the preceding sentence, DTC will
be required to notify all DTC 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 registration, the Trustee for the related Series 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 and within the meaning of the related Pooling
Agreement.
DESCRIPTION OF THE POOLING AGREEMENTS
General
The Certificates of each Series will be issued pursuant to a Pooling
Agreement. In general, the parties to a Pooling Agreement will include the
Depositor, the Trustee, the Master Servicer, the Special Servicer and, if one or
more REMIC elections have been made with respect to the Trust Fund, the REMIC
Administrator. However, a Pooling Agreement that relates to a Trust Fund that
includes MBS may include a Manager as a party, but may not include a Master
Servicer, Special 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. If so specified in the related
Prospectus Supplement, the Mortgage Asset Seller or an affiliate thereof may
perform the functions of Master Servicer, Special Servicer, Manager or REMIC
Administrator. If so specified in the related Prospectus Supplement, the Master
Servicer may also perform the duties of Special Servicer, and the Master
Servicer, the Special Servicer or the Trustee may also perform the duties of
REMIC Administrator. Any party to a Pooling Agreement or any affiliate thereof
may own Certificates issued thereunder; however, except in limited circumstances
(including with respect to required consents to certain amendments to a Pooling
Agreement), Certificates issued thereunder that are held by the Master Servicer
or Special Servicer for the related Series will not be allocated Voting Rights.
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. The Prospectus Supplement for the Offered Certificates
of any Series will describe any provision of the related Pooling Agreement that
materially differs from the description thereof contained in this Prospectus.
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 and the description of such provisions in the
related Prospectus Supplement. The Depositor will provide a copy of the Pooling
Agreement (without exhibits) that relates to any Series without charge upon
written request of a holder of a Certificate of such Series addressed to it at
its principal executive offices specified herein under "The Depositor".
Assignment of Mortgage Assets
General. At the time of initial issuance of any Series, the Depositor
will assign (or cause to be assigned) to the designated Trustee the Mortgage
Assets 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 Assets after the related Cut-off
Date, other than principal and interest due on or before the related Cut-off
Date. The Trustee will, concurrently with such assignment, deliver the
Certificates of such Series to or at the direction of the Depositor in exchange
for the Mortgage Assets and the other assets to be included in the related Trust
Fund. Each Mortgage Asset 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 Asset included in the
related Trust Fund, which information will typically include: (i) in the case of
a Mortgage Loan, 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 amortization term, and the original and
outstanding principal balance; and (ii) in the case of an MBS, the outstanding
principal balance and the pass-through rate or coupon rate.
-49-
<PAGE>
Delivery of Mortgage Loans. In addition, unless otherwise specified in
the related Prospectus Supplement, the Depositor will, as to each Mortgage Loan
to be included in a Trust Fund, deliver, or cause to be delivered, to the
related Trustee (or to a custodian appointed by the Trustee as described below)
the Mortgage Note endorsed, without recourse, either in blank or to the order of
such Trustee (or its nominee), the Mortgage with evidence of recording indicated
thereon (except for any Mortgage not returned from the public recording office),
an assignment of the Mortgage in blank or to the Trustee (or its nominee) in
recordable form, together with any intervening assignments of the Mortgage with
evidence of recording thereon (except for any such assignment not returned from
the public recording office), and, if applicable, any riders or modifications to
such Mortgage Note and Mortgage, together with certain other documents at such
times as set forth in the related Pooling Agreement. Such assignments may be
blanket assignments covering Mortgages on Mortgaged Properties located in the
same county, if permitted by law. Notwithstanding the foregoing, a Trust Fund
may include Mortgage Loans where the original Mortgage Note is not delivered to
the Trustee if the Depositor delivers, or causes to be delivered, to the related
Trustee (or such custodian) a copy or a duplicate original of the Mortgage Note,
together with an affidavit of the Depositor or a prior holder of such Mortgage
Note certifying that the original thereof has been lost or destroyed. In
addition, if the Depositor cannot deliver, with respect to any Mortgage Loan,
the Mortgage or any intervening assignment with evidence of recording thereon
concurrently with the execution and delivery of the related Pooling Agreement
because of a delay caused by the public recording office, the Depositor will
deliver, or cause to be delivered, to the related Trustee (or such custodian) a
true and correct photocopy of such Mortgage or assignment as submitted for
recording. The Depositor will deliver, or cause to be delivered, to the related
Trustee (or such custodian) such Mortgage or assignment with evidence of
recording indicated thereon after receipt thereof from the public recording
office. If the Depositor cannot deliver, with respect to any Mortgage Loan, the
Mortgage or any intervening assignment with evidence of recording thereon
concurrently with the execution and delivery of the related Pooling Agreement
because such Mortgage or assignment has been lost, the Depositor will deliver,
or cause to be delivered, to the related Trustee (or such custodian) a true and
correct photocopy of such Mortgage or assignment with evidence of recording
thereon. Unless otherwise specified in the related Prospectus Supplement,
assignments of Mortgage to the Trustee (or its nominee) will be recorded in the
appropriate public recording office, except in states where, in the opinion of
counsel acceptable to the Trustee, such recording is not required to protect the
Trustee's interests in the Mortgage Loan against the claim of any subsequent
transferee or any successor to or creditor of the Depositor or the originator of
such Mortgage Loan.
The Trustee (or a custodian appointed by the Trustee) for a Series will
be required to review the Mortgage Loan documents delivered to it within a
specified period of days after receipt thereof, and the Trustee (or such
custodian) will hold such documents in trust for the benefit of the
Certificateholders of such Series.
The Trustee will be authorized at any time to appoint one or more
custodians pursuant to a custodial agreement to hold title to the Mortgage Loans
in any Trust Fund and to maintain possession of and, if applicable, to review
the documents relating to such Mortgage Loans, in any case as the agent of the
Trustee.
Delivery of MBS. Unless otherwise specified in the related Prospectus
Supplement, the related Pooling Agreement will provide that such steps will be
taken as will be necessary to cause the Trustee to become the registered owner
of each MBS which is included in a Trust Fund and to provide for all
distributions on each such MBS to be made either directly to the Trustee or to
an MBS Administrator other than the Trustee, if any.
Representations and Warranties with respect to Mortgage Assets;
Repurchases and Other Remedies
Unless otherwise provided in the Prospectus Supplement for the Offered
Certificates of any Series, the Depositor will, with respect to each Mortgage
Asset in the related Trust Fund, make or assign, or cause to be made or
assigned, 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 Asset
on the schedule of Mortgage Loans appearing as an exhibit to the related Pooling
Agreement; (ii) the Warranting Party's title to the Mortgage Loan and the
authority of the Warranting Party to sell the Mortgage Loan; and (iii) in the
case of a Mortgage Loan, the enforceability of the related Mortgage Note and
Mortgage, the existence of title insurance insuring the lien priority of the
related Mortgage, the payment status of the Mortgage Loan and the delivery of
all documents required to be delivered with respect to the Mortgage Loan as
contemplated under "--Assignment of Mortgage Assets--Delivery of Mortgage Loans"
above. It is
-50-
<PAGE>
expected that in most cases the Warranting Party will be the Mortgage Asset
Seller; however, the Warranting Party may also be the Depositor, an affiliate of
the Mortgage Asset Seller or the Depositor, the Master Servicer, the Special
Servicer or another person acceptable to the Depositor. The Warranting Party, if
other than the Mortgage Asset Seller, will be identified in the related
Prospectus Supplement.
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 Asset that
materially and adversely affects the interests of the Certificateholders of the
related Series. 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 Asset from the Trustee at a price not less
than the unpaid principal balance of such Mortgage Asset as of the date of
purchase, together with interest thereon at the related Mortgage Rate (or, in
the case of an MBS, at the related pass-through rate or coupon rate) to a date
on or about the date of purchase (in any event, the "Purchase Price"). If so
provided in the Prospectus Supplement for the Offered Certificates of any
Series, in lieu of repurchasing a Mortgage Asset as to which a breach has
occurred, a Warranting Party will have the option, exercisable upon certain
conditions and/or within a specified period after initial issuance of such
Series, to replace such Mortgage Asset with one or more other mortgage loans or
mortgage-backed securities that conform to the description of "Mortgage Asset"
herein, 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 the Certificates of any Series or to the related Trustee
on their behalf for a breach of representation and warranty by a Warranting
Party, and no other person or entity will be obligated to purchase or replace a
Mortgage Asset if a Warranting Party defaults on its obligation to do so.
In some cases, representations and warranties will have been made in
respect of a Mortgage Asset as of a date prior to the date upon which the
related Series is initially issued, and thus may not address events that may
occur following the date as of which they were made. The date as of which the
representations and warranties regarding the Mortgage Assets in any Trust Fund
were made will be specified in the related Prospectus Supplement.
Collection and Other Servicing Procedures with respect to Mortgage Loans
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer and the Special Servicer for any Mortgage Asset Pool, directly
or through Sub-Servicers, will each be obligated under the related Pooling
Agreement to service and administer the Mortgage Loans in such Mortgage Asset
Pool for the benefit of the related Certificateholders, in accordance with
applicable law and further in accordance with the terms of such Pooling
Agreement, such Mortgage Loans and any instrument of Credit Support included in
the related Trust Fund. Subject to the foregoing, the Master Servicer and the
Special Servicer will each have full power and authority to do any and all
things in connection with such servicing and administration that it may deem
necessary and desirable.
As part of its servicing duties, each of the Master Servicer and the
Special Servicer will be required to make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans that it
services and will be obligated to follow such collection procedures as it would
follow with respect to mortgage loans that are comparable to such Mortgage Loans
and held for its own account, provided (i) such procedures are consistent with
the terms of the related Pooling Agreement and (ii) do not impair recovery under
any instrument of Credit Support included in the related Trust Fund. Consistent
with the foregoing, the Master Servicer and the Special Servicer will each be
permitted, in its discretion, unless otherwise specified in the related
Prospectus Supplement, to waive any Prepayment Premium, late payment charge or
other charge in connection with any Mortgage Loan.
The Master Servicer and the Special Servicer for any Trust Fund, either
separately or jointly, directly or through Sub-Servicers, will also be required
to perform as to the Mortgage Loans in such Trust Fund various other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts, if required under the related Pooling Agreement, for payment
of taxes, insurance premiums, ground rents and similar items, or otherwise
monitoring the timely payment of those items; attempting to collect delinquent
payments; supervising foreclosures; negotiating
-51-
<PAGE>
modifications; conducting property inspections on a periodic or other basis;
managing (or overseeing the management of) Mortgaged Properties acquired on
behalf of such Trust Fund through foreclosure, deed-in-lieu of foreclosure or
otherwise (each, an "REO Property"); and maintaining servicing records relating
to such Mortgage Loans. The related Prospectus Supplement will specify when and
the extent to which servicing of a Mortgage Loan is to be transferred from the
Master Servicer to the Special Servicer. In general, and subject to the
discussion in the related Prospectus Supplement, a Special Servicer will be
responsible for the servicing and administration of: (i) Mortgage Loans that are
delinquent in respect of a specified number of scheduled payments; (ii) Mortgage
Loans as to which the related borrower has entered into or consented to
bankruptcy, appointment of a receiver or conservator or similar insolvency
proceeding, or the related borrower has become the subject of a decree or order
for such a proceeding which shall have remained in force undischarged or
unstayed for a specified number of days; and (iii) REO Properties. If so
specified in the related Prospectus Supplement, a Pooling Agreement also may
provide that if a default on a Mortgage Loan has occurred or, in the judgment of
the related Master Servicer, a payment default is reasonably foreseeable, the
related Master Servicer may elect to transfer the servicing thereof, in whole or
in part, to the related Special Servicer. Unless otherwise provided in the
related Prospectus Supplement, when the circumstances no longer warrant a
Special Servicer's continuing to service a particular Mortgage Loan (e.g., the
related borrower is paying in accordance with the forbearance arrangement
entered into between the Special Servicer and such borrower), the Master
Servicer will resume the servicing duties with respect thereto. If and to the
extent provided in the related Pooling Agreement and described in the related
Prospectus Supplement, a Special Servicer may perform certain limited duties in
respect of Mortgage Loans for which the Master Servicer is primarily responsible
(including, if so specified, performing property inspections and evaluating
financial statements); and a Master Servicer may perform certain limited duties
in respect of any Mortgage Loan for which the Special Servicer is primarily
responsible (including, if so specified, continuing to receive payments on such
Mortgage Loan (including amounts collected by the Special Servicer), making
certain calculations with respect to such Mortgage Loan and making remittances
and preparing certain reports to the Trustee and/or Certificateholders with
respect to such Mortgage Loan. 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".
A mortgagor'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 mortgagor that is unable to make Mortgage Loan payments may also be
unable to make timely payment of taxes and otherwise to maintain and insure the
related Mortgaged Property. In general, the related Special Servicer 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 mortgagor if cure is likely, inspect
the related Mortgaged Property and take such other actions as it deems necessary
and appropriate. A significant period of time may elapse before the Special
Servicer is able to assess the success of any such corrective action or the need
for additional initiatives. The time within which the Special 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 of the related Series
may vary considerably depending on the particular Mortgage Loan, the Mortgaged
Property, the mortgagor, 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 mortgagor files a bankruptcy petition, the Special Servicer may
not be permitted to accelerate the maturity of the Mortgage Loan or to foreclose
on the related Mortgaged Property for a considerable period of time. See
"Certain Legal Aspects of Mortgage Loans--Bankruptcy Laws".
Mortgagors may, from time to time, request partial releases of the
Mortgaged Properties, easements, consents to alteration or demolition and other
similar matters. In general, the Master Servicer may approve such a request if
it has determined, exercising its business judgment in accordance with the
applicable servicing standard, that such approval will not adversely affect the
security for, or the timely and full collectability of, the related Mortgage
Loan. Any fee collected by the Master Servicer for processing such request will
be retained by the Master Servicer as additional servicing compensation.
In the case of Mortgage Loans secured by junior liens on the related
Mortgaged Properties, unless otherwise provided in the related Prospectus
Supplement, the Master Servicer will be required to file (or cause to be filed)
of record a request for notice of any action by a superior lienholder under the
Senior Lien for the protection of the related Trustee's
-52-
<PAGE>
interest, where permitted by local law and whenever applicable state law does
not require that a junior lienholder be named as a party defendant in
foreclosure proceedings in order to foreclose such junior lienholder's equity of
redemption. Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer also will be required to notify any superior lienholder in
writing of the existence of the Mortgage Loan and request notification of any
action (as described below) to be taken against the mortgagor or the Mortgaged
Property by the superior lienholder. If the Master Servicer is notified that any
superior lienholder has accelerated or intends to accelerate the obligations
secured by the related Senior Lien, or has declared or intends to declare a
default under the mortgage or the promissory note secured thereby, or has filed
or intends to file an election to have the related Mortgaged Property sold or
foreclosed, then, unless otherwise specified in the related Prospectus
Supplement, the Master Servicer and the Special Servicer will each be required
to take, on behalf of the related Trust Fund, whatever actions are necessary to
protect the interests of the related Certificateholders and/or to preserve the
security of the related Mortgage Loan, subject to the application of the REMIC
Provisions (as defined herein). Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer or Special Servicer, as applicable,
will be required to advance the necessary funds to cure the default or reinstate
the Senior Lien, if such advance is in the best interests of the related
Certificateholders and the Master Servicer or Special Servicer, as applicable,
determines such advances are recoverable out of payments on or proceeds of the
related Mortgage Loan.
Sub-Servicers
A Master Servicer or Special Servicer may delegate its servicing
obligations in respect of the Mortgage Loans serviced thereby to one or more
third-party servicers (each, a "Sub-Servicer"); provided that, unless otherwise
specified in the related Prospectus Supplement, such Master Servicer or Special
Servicer will remain obligated under the related Pooling Agreement. Unless
otherwise provided in the related Prospectus Supplement, each sub-servicing
agreement between a Master Servicer or Special Servicer, as applicable, and a
Sub-Servicer (a "Sub-Servicing Agreement") must provide for servicing of the
applicable Mortgage Loans consistent with the related Pooling Agreement. The
Master Servicer and Special Servicer in respect of any Mortgage Asset Pool will
each be required to monitor the performance of Sub-Servicers retained by it and
will have the right to remove a Sub-Servicer retained by it at any time it
considers such removal to be in the best interests of Certificateholders.
Unless otherwise provided in the related Prospectus Supplement, a
Master Servicer or Special Servicer will be solely liable for all fees owed by
it to any Sub-Servicer, irrespective of whether the Master Servicer's or Special
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 or
Special Servicer, as the case may be, that retained it for certain expenditures
which it makes, generally to the same extent such Master Servicer or Special
Servicer would be reimbursed under a Pooling Agreement. See "--Certificate
Account" and "--Servicing Compensation and Payment of Expenses".
Collection of Payments on MBS
Unless otherwise specified in the related Prospectus Supplement, the
MBS, if any, included in the Trust Fund for any Series will be registered in the
name of the Trustee. All distributions thereon will be made either directly to
the Trustee or to an MBS Administrator other than the Trustee, if any. Unless
otherwise specified in the related Prospectus Supplement, the related Pooling
Agreement will provide that, if the Trustee or such other MBS Administrator, as
applicable, has not received a distribution with respect to any MBS by a
specified day after the date on which such distribution was due and payable
pursuant to the terms of such MBS, the Trustee or such other MBS Administrator,
as applicable, is to request the issuer or guarantor, if any, of such MBS to
make such payment as promptly as possible and legally permitted and is to take
such legal action against such issuer or guarantor as the Trustee or such other
MBS Administrator, as applicable, deems appropriate under the circumstances,
including the prosecution of any claims in connection therewith. The reasonable
legal fees and expenses incurred by the Trustee or such other MBS Administrator,
as applicable, in connection with the prosecution of any such legal action will
be reimbursable thereto (with interest) out of the proceeds of any such action
and will be retained by the Trustee or such other MBS Administrator, as
applicable, prior to the deposit of any remaining proceeds in the Certificate
Account pending distribution thereof to Certificateholders of the affected
Series. In the event that the Trustee or such other MBS Administrator, as
applicable, has reason to believe that the proceeds of any such legal action may
be insufficient to reimburse it (with interest) for its projected legal fees and
expenses, the Trustee or such other MBS
-53-
<PAGE>
Administrator, as applicable, will notify the Certificateholders of the affected
Series that it is not obligated to pursue any such available remedies unless
adequate indemnity for its legal fees and expenses is provided by such
Certificateholders.
Certificate Account
General. The related Trustee and any related Master Servicer, Special
Servicer and/or Manager, as applicable, will establish and maintain, or cause to
be established and maintained, in respect of each Trust Fund, one or more
accounts (collectively, the "Certificate Account"), 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. A Certificate Account may be
maintained as an interest-bearing or a noninterest-bearing account and the funds
held therein may be invested pending each succeeding Distribution Date in United
States government securities and other obligations that are acceptable to each
Rating Agency that has rated any one or more Classes of Certificates of the
related Series ("Permitted Investments"). Unless otherwise provided in the
related Prospectus Supplement, any interest or other income earned on funds in a
Certificate Account will be paid to the related Trustee, Master Servicer,
Special Servicer and/or Manager, as applicable, as additional compensation. A
Certificate Account may be maintained with the related Trustee, Master Servicer,
Special Servicer, Manager or Mortgage Asset Seller or with a depository
institution that is an affiliate of any of the foregoing or of the Depositor,
provided that it complies with applicable Rating Agency standards. If permitted
by the applicable Rating Agency or Agencies, 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 assets owned by the
related Master Servicer or Special Servicer or serviced by either on behalf of
others.
Deposits. Unless otherwise provided in the related Pooling Agreement
and described in the related Prospectus Supplement, the following payments and
collections in respect of the Trust Assets included in any Trust Fund, that are
received or made by the Trustee, the Master Servicer, the Special Servicer, the
MBS Administrator or the Manager, as applicable, subsequent to the Cut-off Date
(other than payments due on or before the Cut-off Date), are to be deposited in
the Certificate Account for such Trust Fund within a certain period following
receipt (in the case of collections on or in respect of the Trust Assets) or
otherwise as provided in the related Pooling Agreement:
(i) if such Trust Fund includes Mortgage Loans, all payments
on account of principal, including principal prepayments, on such
Mortgage Loans;
(ii) if such Trust Fund includes Mortgage Loans, all payments
on account of interest on such Mortgage Loans, including any default
interest collected, in each case net of any portion thereof retained by
the Master Servicer or the Special Servicer as its servicing
compensation or as compensation to the Trustee;
(iii) if such Trust Fund includes Mortgage Loans, 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 or in connection with the full or partial condemnation of
a Mortgaged Property (other than proceeds applied to the restoration of
the property or released to the related borrower) ("Insurance Proceeds"
and "Condemnation Proceeds", respectively) 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 (such amounts, together with those amounts listed in
clause (vii) below, "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;
(v) if such Trust Fund includes Mortgage Loans, any advances
made with respect to delinquent scheduled payments of principal and
interest on such Mortgage Loans;
(vi) any amounts paid under any Cash Flow Agreement for the
related Series;
-54-
<PAGE>
(vii) if such Trust Fund includes Mortgage Loans, 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 "--Representations and Warranties
with respect to Mortgage Assets; Repurchases and Other Remedies", all
proceeds of the purchase of any defaulted Mortgage Loan as described
under "--Realization Upon Defaulted Mortgage Loans", and all proceeds
of any Mortgage Loan purchased as described under "Description of the
Certificates--Termination";
(viii) if such Trust Fund includes Mortgage Loans, and to the
extent that any such item does not constitute additional servicing
compensation to the Master Servicer or the Special Servicer and is not
otherwise retained by the Depositor or another specified person, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations with respect to
the Mortgage Loans;
(ix) if such Trust Fund includes Mortgage Loans, all payments
required to be deposited in the Certificate Account with respect to any
deductible clause in any blanket insurance policy as described under
"--Hazard Insurance Policies";
(x) any amount required to be deposited by the Master
Servicer, the Special Servicer, the Manager or the Trustee in
connection with losses realized on investments for the benefit of the
Master Servicer, the Special Servicer, the Manager or the Trustee, as
the case may be, of funds held in the Certificate Account;
(xi) if such Trust Fund includes MBS, all payments on such
MBS;
(xii) if such Trust Fund includes MBS, all proceeds of the
purchase of any MBS by the Depositor or any other specified person as
described under "--Representations and Warranties with respect to
Mortgage Assets; Repurchases and Other Remedies" and all proceeds of
any MBS purchased as described under "Description of the
Certificates--Termination";
(xiii) any other amounts received on or in respect of the
Mortgage Assets 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 Trustee, Master Servicer,
Special Servicer or Manager, as applicable, in respect of any Trust Fund may
make withdrawals from the Certificate Account for such Trust Fund for any of the
following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) if such Trust Fund includes Mortgage Loans, then as and
to the extent, and from the sources, described in the related
Prospectus Supplement, to pay the related Master Servicer or Special
Servicer any servicing fees and other compensation to which it is
entitled in respect of such Mortgage Loans and that was not previously
retained thereby;
(iii) if such Trust Fund includes Mortgage Loans, to reimburse
the related Master Servicer, the related Special Servicer or any other
specified person for unreimbursed advances of delinquent scheduled
payments of principal and interest made by it, and certain unreimbursed
servicing expenses incurred by it, with respect to such Mortgage Loans
and any properties acquired in respect thereof, such reimbursement to
be made out of amounts that represent late payments collected on the
particular Mortgage Loans, Liquidation Proceeds, Insurance Proceeds and
Condemnation Proceeds collected on the particular Mortgage Loans and
properties, and net operating income collected on the particular
properties, with respect to which such advances were made or such
expenses were incurred or out of amounts drawn under any form of Credit
Support with respect to such Mortgage Loans and properties, or if in
the judgment of the Master Servicer, the Special Servicer or such other
person, as applicable,
-55-
<PAGE>
such advances and/or expenses will not be recoverable from such
amounts, such reimbursement to be made from amounts collected on other
Mortgage Assets in the same 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 Assets that is otherwise distributable on one or
more Classes of Subordinate Certificates of the related Series;
(iv) if and to the extent, and from the sources, described in
the related Prospectus Supplement, to pay the related Master Servicer,
the related Special Servicer or any other specified person interest
accrued on the advances and servicing expenses, if any, described in
clause (iii) above made or incurred by it while such advances and
servicing expenses remain outstanding and unreimbursed;
(v) if such Trust Fund includes Mortgage Loans, to pay any
servicing expenses not otherwise required to be advanced by the related
Master Servicer, the related Special Servicer or any other specified
person, including, if applicable, 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";
(vi) to reimburse the Depositor, the related Trustee, any
related Master Servicer, Special Servicer, REMIC Administrator or
Manager and/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, the Special Servicer,
the REMIC Administrator, the Manager and the Depositor" and "--Certain
Matters Regarding the Trustee";
(vii) if and to the extent, and from the sources, described in
the related Prospectus Supplement, to pay the fees of the related
Trustee and of any related REMIC Administrator, Manager, provider of
Credit Support and obligor on a Cash Flow Agreement;
(viii) if and to the extent, and from the sources, described
in the related Prospectus Supplement, to reimburse prior draws on any
form of Credit Support in respect of the related Series;
(ix) to pay the related Master Servicer, the related Special
Servicer, the related Manager and/or the related Trustee, as
appropriate, interest and investment income earned in respect of
amounts held in the Certificate Account as additional compensation;
(x) if one or more elections have been made to treat such
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--Prohibited Transactions Tax and Other
Taxes";
(xi) to pay for the cost of various opinions of counsel
obtained pursuant to the related Pooling Agreement for the benefit of
Certificateholders or otherwise in connection with the servicing or
administration of the related Trust Assets;
(xii) to make any other withdrawals permitted by the related
Pooling Agreement and described in the related Prospectus Supplement;
and
(xiii) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
-56-
<PAGE>
Modifications, Waivers and Amendments of Mortgage Loans
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer and the Special Servicer may each agree to modify, waive or
amend any term of any Mortgage Loan serviced by it in a manner consistent with
the applicable servicing standard to be described in the related Prospectus
Supplement; provided that the modification, waiver or amendment (i) will not
affect the amount or timing of any scheduled payments of principal or interest
on the Mortgage Loan, and (ii) will not, in the judgment of the Master Servicer
or the Special Servicer, as the case may be, 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, the
Special Servicer also may agree to any other modification, waiver or amendment
if, in its judgment (i) a material default on the Mortgage Loan has occurred or
a payment default is reasonably foreseeable, (ii) such modification, waiver or
amendment is reasonably likely to produce a greater recovery with respect to the
Mortgage Loan, taking into account the time value of money, than would
liquidation and (iii) such modification, waiver or amendment will not adversely
affect the coverage under any applicable instrument of Credit Support.
Realization Upon Defaulted Mortgage Loans
If a default on a Mortgage Loan has occurred or, in the Special
Servicer's judgment, a payment default is imminent, the Special 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. Unless otherwise specified in the
related Prospectus Supplement, the Special Servicer may not, however, acquire
title to any Mortgaged Property, have a receiver of rents appointed with respect
to any Mortgaged Property or take any other action with respect to any Mortgaged
Property that would cause the Trustee, for the benefit of the related Series of
Certificateholders, 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 Special Servicer has previously received a report prepared by a
person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund) and either:
(i) such report indicates that (a) the Mortgaged Property is
in compliance with applicable environmental laws and regulations and
(b) there are no circumstances or conditions present at the Mortgaged
Property that have resulted in any contamination for which
investigation, testing, monitoring, containment, clean-up or
remediation could be required under any applicable environmental laws
and regulations; or
(ii) the Special Servicer, based solely (as to environmental
matters and related costs) on the information set forth in such report,
determines that taking such actions as are necessary to bring the
Mortgaged Property into compliance with applicable environmental laws
and regulations and/or taking the actions contemplated by clause (i)(b)
above, is reasonably likely to produce a greater recovery, taking into
account the time value of money, than not taking such actions. See
"Certain Legal Aspects of Mortgage Loans--Environmental
Considerations".
A Pooling Agreement may grant to the Master Servicer, the 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 price (which, if less than the
Purchase Price specified herein, 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 Special Servicer may offer to sell any defaulted
Mortgage Loan if and when the Special Servicer determines, consistent with its
normal servicing procedures, that such a sale would produce a greater recovery,
taking into account the time value of money, than would liquidation of the
related Mortgaged Property. In the absence of any such sale, the Special
Servicer will generally be required to proceed against the related Mortgaged
Property, subject to the discussion above.
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 Special Servicer, on behalf of the Trust Fund, will
be required to sell the Mortgaged Property prior to the close of the third
taxable year following the taxable year in which the
-57-
<PAGE>
Trust Fund acquires such Mortgaged Property, unless (i) the IRS 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 thereafter will not result in the imposition of a tax on the Trust
Fund or cause the Trust Fund (or any designated portion thereof) to fail to
qualify as a REMIC under the Code at any time that any Certificate is
outstanding. Subject to the foregoing and any other tax-related limitations, the
Special Servicer will generally be required to attempt to sell any Mortgaged
Property so acquired on the same terms and conditions it would if it were the
owner. 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 Special Servicer will also be required to ensure
that the Mortgaged Property is administered so that it constitutes "foreclosure
property" within the meaning of Code Section 860G(a)(8) at all times. If the
Trust Fund acquires title to any Mortgaged Property, the Special 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 Special Servicer of its obligation to manage such Mortgaged
Property as required under the related Pooling Agreement. The Special Servicer
may be authorized to allow the Trust Fund to incur a federal income or other tax
if doing so would, in the reasonable discretion of the Special Servicer,
maximize the net after-tax proceeds to Certificateholders.
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 Special Servicer and/or the Master Servicer in
connection with such Mortgage Loan, then, to the extent that such shortfall is
not covered by any instrument or fund constituting Credit Support, the Trust
Fund will realize a loss in the amount of such shortfall. The Special Servicer
and/or the Master Servicer will be entitled to reimbursement out of the
Liquidation Proceeds recovered on any defaulted Mortgage Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, any and all
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. In addition, if and to the extent set forth in the related
Prospectus Supplement, amounts otherwise distributable on the Certificates may
be further reduced by interest payable to the Master Servicer and/or Special
Servicer on such servicing expenses and advances.
If any Mortgaged Property suffers damage such that the proceeds, if
any, of the related hazard insurance policy are insufficient to restore fully
the damaged property, neither the Special Servicer nor the Master Servicer will
be required to expend its own funds to effect such restoration 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 Special Servicer or the Master Servicer, as the case may be, for its
expenses and (ii) that such expenses will be recoverable by it from related
Insurance Proceeds, Condemnation Proceeds, Liquidation Proceeds and/or amounts
drawn on any instrument or fund constituting Credit Support.
Hazard Insurance Policies
Unless otherwise specified in the related Prospectus Supplement, if a
Trust Fund includes Mortgage Loans, the related Pooling Agreement will require
the Master Servicer (or the Special Servicer with respect to Mortgage Loans
serviced thereby) to use reasonable efforts 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 Master
Servicer's (or Special Servicer's) normal servicing procedures. 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 related Mortgaged Property. The ability of
a Master Servicer (or Special 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 a Master Servicer (or
Special 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 (or Special 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 Master
Servicer (or Special Servicer) may satisfy its obligation to cause each borrower
-58-
<PAGE>
to maintain such a hazard insurance policy by maintaining a blanket policy
insuring against hazard losses on the Mortgage Loans in a Trust Fund. If such
blanket policy contains a deductible clause, the Master Servicer (or Special
Servicer) will be required, in the event of a casualty covered by such blanket
policy, to deposit in the related Certificate Account all additional sums that
would have been deposited therein under an individual policy but were not
because of 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 and domestic animals. Accordingly, a Mortgaged
Property may not be insured for losses arising from any such cause unless the
related Mortgage specifically requires, or permits the holder thereof to
require, such coverage.
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
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 (or Special Servicer) will determine whether to exercise any right the
Trustee may have under any such provision in a manner consistent with the Master
Servicer's (or Special Servicer's) normal servicing procedures. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer or Special
Servicer, as applicable, 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- Due-on-Sale
and Due-on-Encumbrance Provisions".
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 will
come from the periodic payment to it of a specified portion of the interest
payments on each Mortgage Loan in the related Trust Fund, including Mortgage
Loans serviced by the related Special Servicer. If and to the extent described
in the related Prospectus Supplement, a Special Servicer's primary compensation
with respect to a Series may consist of any or all of the following components:
(i) a specified portion of the interest payments on each Mortgage Loan in the
related Trust Fund, whether or not serviced by it; (ii) an additional specified
portion of the interest payments on each Mortgage Loan then currently serviced
by it; and (iii) subject to any specified limitations, a fixed percentage of
some or all of the collections and proceeds received with respect to each
Mortgage Loan which was at any time serviced by it, including Mortgage Loans for
which servicing was returned to the Master Servicer. Insofar as any portion of
the Master Servicer's or Special Servicer's compensation consists of a specified
portion of the interest payments on a Mortgage Loan, such compensation will
generally be based on a percentage of the principal balance of such Mortgage
Loan outstanding from time to time and, accordingly, will decrease with the
amortization of the Mortgage Loan. As additional compensation, a Master Servicer
or Special Servicer may be entitled to retain all or a portion of late payment
charges,
-59-
<PAGE>
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 related
Certificate Account. A more detailed description of each Master Servicer's and
Special Servicer's compensation will be provided in the related Prospectus
Supplement. Any Sub-Servicer will receive as its sub-servicing compensation a
portion of the servicing compensation to be paid to the Master Servicer or
Special Servicer that retained such Sub-Servicer.
In addition to amounts payable to any Sub-Servicer, a Master Servicer
or Special 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, payment of fees and disbursements of
the Trustee and any custodians appointed thereby 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,
may be required to be borne by the Trust Fund.
Evidence as to Compliance
Unless otherwise specified in the related Prospectus Supplement, if a
Trust Fund includes Mortgage Loans, the related Master Servicer and Special
Servicer will each be required, at its expense, to cause a firm of independent
public accountants to furnish to the Trustee, on or before a specified date in
each year, beginning the first such date that is at least a specified number of
months after the Cut-off Date, a statement generally to the effect that such
firm has examined such documents and records as it has deemed necessary and
appropriate relating to the Master Servicer's or Special Servicer's as the case
may be, servicing of the Mortgage Loans under the Pooling Agreement or servicing
of mortgage loans similar to the Mortgage Loans under substantially similar
agreements for the preceding calendar year (or during the period from the date
of commencement of the Master Servicer's or Special Servicer's, as the case may
be, duties under the Pooling Agreement until the end of such preceding calendar
year in the case of the first such statement) and that the assertion of the
management of the Master Servicer or Special Servicer, as the case may be, that
it maintained an effective internal control system over servicing of the
Mortgage Loans or similar mortgage loans is fairly stated in all material
respects, based upon established criteria, which statement meets the standards
applicable to accountants' reports intended for general distribution. In
rendering its report such firm may rely, as to the matters relating to the
direct servicing of commercial and multifamily mortgage loans by sub-servicers,
upon comparable reports of firms of independent public accountants rendered on
the basis of examinations conducted in accordance the same standards (rendered
within one year of such report) with respect to those sub-servicers. The
Prospectus Supplement may provide that additional reports of independent
certified public accountants relating to the servicing of mortgage loans may be
required to be delivered to the Trustee.
If a Trust Fund includes Mortgage Loans, the related Pooling Agreement
will also provide that, on or before a specified date in each year, beginning
the first such date that is at least a specified number of months after the
Cut-off Date, the Master Servicer and Special Servicer shall each deliver to the
related Trustee an annual statement signed by one or more officers of the Master
Servicer or the Special Servicer, as the case may be, to the effect that, to the
best knowledge of each such officer, the Master Servicer or the Special
Servicer, as the case may be, has fulfilled in all material respects its
obligations under the Pooling Agreement throughout the preceding year or, if
there has been a material default in the fulfillment of any such obligation,
such statement shall specify each such known default and the nature and status
thereof. Such statement may be provided as a single form making the required
statements as to more than one Pooling Agreement.
Unless otherwise specified in the related Prospectus Supplement, copies
of the annual accountants' statement and the annual statement of officers of a
Master Servicer or Special Servicer may be obtained by Certificateholders upon
written request to the Trustee.
-60-
<PAGE>
Certain Matters Regarding the Master Servicer, the Special Servicer, the REMIC
Administrator, the Manager and the Depositor
Unless otherwise specified in the Prospectus Supplement for a Series,
the related Pooling Agreement will permit any related Master Servicer, Special
Servicer, REMIC Administrator or Manager to resign from its obligations in such
capacity thereunder only upon (a) the appointment of, and the acceptance of such
appointment by, a successor thereto and receipt by the Trustee of written
confirmation from each applicable Rating Agency that such resignation and
appointment will not have an adverse effect on the rating assigned by such
Rating Agency to any Class of Certificates of such Series or (b) 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. No such resignation will become effective until the Trustee or other
successor has assumed the obligations and duties of the resigning Master
Servicer, Special Servicer, REMIC Administrator or Manager, as the case may be,
under the related Pooling Agreement. Each Master Servicer, Special Servicer and,
if it receives distributions on MBS, Manager for a Trust Fund will be required
to maintain a fidelity bond and errors and omissions policy or their equivalent
that provides coverage against losses that may be sustained as a result of an
officer's or employee's misappropriation of funds or errors and omissions,
subject to certain limitations as to amount of coverage, deductible amounts,
conditions, exclusions and exceptions permitted by the related Pooling
Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Pooling Agreement will further provide that none of the Depositor, any related
Master Servicer, Special Servicer, REMIC Administrator or Manager, or any
director, officer, employee or agent of any 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 such Pooling Agreement or for errors in
judgment; provided, however, that no such person or entity will be protected
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 Depositor, any related Master
Servicer, Special Servicer, REMIC Administrator and Manager, and any director,
officer, employee or agent of any of them will be entitled to indemnification by
the related Trust Fund against any loss, liability or expense incurred in
connection with any legal action that relates to such Pooling Agreement or the
related Series; provided, however, that such indemnification will not extend to
any loss, liability or expense incurred by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties under such
Pooling Agreement, or by reason of reckless disregard of such obligations or
duties. In addition, each Pooling Agreement will provide that neither the
Depositor nor any related Master Servicer, Special Servicer, REMIC Administrator
or Manager 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, any such party may 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 related Series of
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 related Series of Certificateholders, and the Depositor, the
Master Servicer, the Special Servicer, the REMIC Administrator or the Manager,
as the case may be, will be entitled to charge the related Certificate Account
therefor.
Any person into which a Master Servicer, a Special Servicer, a REMIC
Administrator, a Manager or the Depositor may be merged or consolidated, or any
person resulting from any merger or consolidation to which a Master Servicer, a
Special Servicer, a REMIC Administrator, a Manager or the Depositor is a party,
or any person succeeding to the business of a Master Servicer, a Special
Servicer, a REMIC Administrator, a Manager or the Depositor, will be the
successor of the Master Servicer, the Special Servicer, the REMIC Administrator,
the Manager or the Depositor, as the case may be, under the related Pooling
Agreement.
Unless otherwise specified in the related Prospectus Supplement, a
REMIC Administrator will be entitled to perform any of its duties under the
related Pooling Agreement either directly or by or through agents or attorneys,
and the REMIC Administrator will not be responsible for any willful misconduct
or gross negligence on the part of any such agent or attorney appointed by it
with due care.
-61-
<PAGE>
Events of Default
Unless otherwise provided in the Prospectus Supplement for the Offered
Certificates of any Series, "Events of Default" under the related Pooling
Agreement will include, without limitation, (i) any failure by a Master Servicer
or a Manager to distribute or cause to be distributed to the Certificateholders
of such Series, or to remit to the related Trustee for distribution to such
Certificateholders, any amount required to be so distributed or remitted, which
failure continues unremedied for five days after written notice thereof has been
given to the Master Servicer or the Manager, as the case may be, by any other
party to the related Pooling Agreement, or to the Master Servicer or the
Manager, as the case may be, with a copy to each other party to the related
Pooling Agreement, 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 a Special Servicer to remit to the
related Master Servicer or Trustee, as applicable, any amount required to be so
remitted, which failure continues unremedied for five days after written notice
thereof has been given to the Special Servicer by any other party to the related
Pooling Agreement, or to the Special Servicer, with a copy to each other party
to the related Pooling Agreement, by the Certificateholders entitled to not less
than 25% (or such other percentage specified in the related Prospectus
Supplement) of the Voting Rights of such Series; (iii) any failure by a Master
Servicer, a Special Servicer or a Manager duly to observe or perform in any
material respect any of its other covenants or obligations under the related
Pooling Agreement, which failure continues unremedied for sixty days after
written notice thereof has been given to the Master Servicer, the Special
Servicer or the Manager, as the case may be, by any other party to the related
Pooling Agreement, or to the Master Servicer, the Special Servicer or the
Manager, as the case may be, with a copy to each other party to the related
Pooling Agreement, 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; (iv) any failure by a REMIC Administrator duly to
observe or perform in any material respect any of its covenants or obligations
under the related Pooling Agreement, which failure continues unremedied for
sixty days after written notice thereof has been given to the REMIC
Administrator by any other party to the related Pooling Agreement, or to the
REMIC Administrator, with a copy to each other party to the related Pooling
Agreement, 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 (v) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings in respect of or
relating to a Master Servicer, a Special Servicer, a Manager or a REMIC
Administrator, and certain actions by or on behalf of any such party 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
If an Event of Default occurs with respect to a Master Servicer, a
Special Servicer, a Manager or a REMIC Administrator (other than the Trustee)
under a Pooling Agreement, then, in each and every such case, so long as the
Event of Default remains unremedied, and unless otherwise specified in the
related Prospectus Supplement, the Depositor or the Trustee will be authorized,
and at the direction of Certificateholders of the related Series entitled to not
less than 25% (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 defaulting party as Master
Servicer, Special Servicer, MBS Administrator or REMIC Administrator, as
applicable, under the Pooling Agreement, whereupon the Trustee (except under the
circumstances contemplated in the next paragraph) will succeed to all of the
responsibilities, duties and liabilities of the defaulting party as Master
Servicer, Special Servicer, Manager or REMIC Administrator, as applicable, under
the Pooling Agreement (except that if the defaulting party is required to make
advances thereunder regarding delinquent Mortgage Loans, but the Trustee is
prohibited by law from obligating itself to make such advances, 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 of the related Series entitled to not less than 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 or other
appropriate entity that (unless otherwise provided in the related Prospectus
Supplement) is acceptable to each applicable Rating Agency to act as
-62-
<PAGE>
successor to the Master Servicer, Special Servicer, Manager or REMIC
Administrator, as the case may be, under the Pooling Agreement. Pending such
appointment, the Trustee will be obligated to act in such capacity.
Notwithstanding the foregoing, if the same entity is acting as both
Trustee and REMIC Administrator, it may be removed in both such capacities as
described under "--Resignation and Removal of the Trustee" below.
No Certificateholder will have any right under a Pooling Agreement to
institute any proceeding with respect to such Pooling Agreement unless such
holder previously has given to the Trustee written notice of default and the
continuance thereof and unless the holders of Certificates of the related Series
entitled to not less than 25% of the Voting Rights for such Series have made
written request upon the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity and the
Trustee for sixty days after receipt of such request and indemnity has neglected
or refused to institute any such proceeding. However, the Trustee will be under
no obligation to exercise any of the trusts or powers vested in it by the
Pooling Agreement 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 covered by such Pooling Agreement, 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
Except as otherwise specified in the related Prospectus Supplement,
each Pooling Agreement may be amended by the parties thereto, without the
consent of any of the holders of Certificates covered by such Pooling Agreement:
(i) to cure any ambiguity; (ii) to correct, modify or supplement any provision
therein which may be inconsistent with any other provision therein or to correct
any error; (iii) to add any other provisions with respect to matters or
questions arising thereunder which shall not be inconsistent with the provisions
thereof; (iv) if a REMIC election has been made with respect to any portion of
the related Trust Fund, to relax or eliminate any requirement thereunder imposed
by the provisions of the Code relating to REMICs if such provisions are amended
or clarified such that any such requirement may be relaxed or eliminated; (v) to
relax or eliminate any requirement thereunder imposed by the Securities Act or
the rules thereunder if the Securities Act or such rules are amended or
clarified such that any requirement may be relaxed or eliminated; (vi) if a
REMIC election has been made with respect to any portion of the related Trust
Fund, and if such amendment, as evidenced by an opinion of counsel delivered to
the related Trustee and REMIC Administrator, is reasonably necessary to comply
with any requirements imposed by the Code or any successor or amendatory statute
or any temporary or final regulation, revenue ruling, revenue procedure or other
written official announcement or interpretation relating to federal income tax
laws or any such proposed action which, if made effective, would apply
retroactively to any REMIC created under such Pooling Agreement at least from
the effective date of such amendment, or would be necessary to avoid the
occurrence of a prohibited transaction or to reduce the incidence of any tax
that would arise from any actions taken with respect to the operation of any
REMIC created under such Pooling Agreement; (vii) if a REMIC election has been
made with respect to any portion of the related Trust Fund, to modify, add to or
eliminate certain transfer restrictions relating to REMIC Residual Certificates;
or (viii) for any other purpose; provided that such amendment of a Pooling
Agreement (other than any amendment for any of the specific purposes described
in clauses (vi) and (vii) above) may not, as evidenced by an opinion of counsel
obtained by or delivered to the Trustee, adversely affect in any material
respect the interests of any holder of Certificates of the related Series; and
provided further that any amendment covered solely by clause (viii) above may
not adversely affect the then current rating assigned to any Class of
Certificates of the related Series by any Rating Agency, as evidenced by written
confirmation to such effect from each applicable Rating Agency obtained by or
delivered to the Trustee.
Except as otherwise specified in the related Prospectus Supplement,
each Pooling Agreement may also be amended by the parties thereto, with the
consent of the holders of Certificates of the respective Classes affected
thereby evidencing, in the aggregate, not less than 66-2/3% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
allocated to such Classes, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of such Pooling
Agreement or of modifying in any manner the rights of the holders of
Certificates covered by such Pooling Agreement, except that no such amendment of
a Pooling Agreement may (i) reduce in any manner the amount of, or delay the
timing of, payments received on the related Mortgage Assets which are required
to be distributed on a Certificate of the related Series without the consent of
the holder of such Certificate, (ii) adversely affect in any material
-63-
<PAGE>
respect the interests of the holders of any Class of Certificates of the related
Series in a manner other than as described in the immediately preceding clause
(i) without the consent of the holders of all Certificates of such Class or
(iii) modify the provisions of such Pooling Agreement relating to amendments
thereof without the consent of the holders of all Certificates of the related
Series then outstanding.
Notwithstanding the foregoing, if a REMIC election has been made with
respect to the related Trust Fund, the Trustee will not be required to consent
to any amendment to a Pooling Agreement without having first received an opinion
of counsel to the effect that such amendment or the exercise of any power
granted to any party to such Pooling Agreement or any other specified person in
accordance with such amendment will not result in the imposition of a tax on the
related Trust Fund or cause such Trust Fund (or any designated portion thereof)
to fail to qualify as a REMIC.
List of Certificateholders
Unless otherwise specified in the related Prospectus Supplement, upon
written request of three or more Certificateholders 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 Certificateholders access during normal
business hours to the most recent list of Certificateholders of that Series held
by such person. If such list is as of a date more than 90 days prior to the date
of receipt of such Certificateholders' request, then such person, if not the
registrar for the Certificates of such Series, will be required to request from
such registrar a current list and to afford such requesting Certificateholders
access thereto promptly upon receipt.
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, Special Servicer or REMIC Administrator and its affiliates.
Duties of the Trustee
The Trustee for each Series will make no representation as to the
validity or sufficiency of the related Pooling Agreement, the Certificates of
such Series or any underlying Mortgage Asset or related document and will not be
accountable for the use or application by or on behalf of any other party to the
related Pooling Agreement of any funds paid to such party in respect of the
Certificates or the Mortgage Assets. If no Event of Default has occurred and is
continuing, the Trustee for each Series 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 related Pooling Agreement, a
Trustee will be required to examine such documents and to determine whether they
conform to the requirements of such agreement.
Certain Matters Regarding the Trustee
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.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each Series will be entitled to indemnification, from amounts held
in the Certificate Account for such Series, 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 incurred by reason of willful misfeasance, bad faith or gross 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
duties.
-64-
<PAGE>
Unless otherwise specified in the related Prospectus Supplement, the
Trustee for each Series will be entitled to execute any of its trusts or powers
under the related Pooling Agreement or perform any of this duties thereunder
either directly or by or through agents or attorneys, and the Trustee will not
be responsible for any willful misconduct or gross negligence on the part of any
such agent or attorney appointed by it with due care.
Resignation and Removal of the Trustee
The Trustee for any Series may resign at any time, in which event the
Depositor will be obligated to appoint a successor Trustee. The Depositor may
also remove the Trustee for any Series if such Trustee ceases to be eligible to
continue as such under the related Pooling Agreement or if such Trustee becomes
insolvent. Upon becoming aware of such circumstances, the Depositor will be
obligated to appoint a successor Trustee. Unless otherwise specified in the
related Prospectus Supplement, a Trustee may also be removed at any time by the
holders of Certificates of the applicable Series evidencing not less than 51%
(or such other percentage specified in the related Prospectus Supplement) of the
Voting Rights for such Series; provided that if such removal was without cause,
the Certificateholders effecting such removal may be responsible for any costs
and expenses incurred by the terminated Trustee in connection with its removal.
Any resignation or removal of a Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee. Notwithstanding anything herein to the contrary, if any entity is
acting as both Trustee and REMIC Administrator for any Series, then any
resignation or removal of such entity as Trustee will also constitute the
resignation or removal of such entity as REMIC Administrator, and the successor
Trustee will also serve as the successor REMIC Administrator as well.
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 a letter of credit, the subordination of
one or more other Classes of Certificates, the use of a surety bond, an
insurance policy or a guarantee, the establishment of one or more reserve funds,
or any combination of the foregoing. If and to the extent so provided in the
related Prospectus Supplement, any of the foregoing forms of Credit Support may
provide credit enhancement for more than one Series.
The Credit Support may 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 related Credit Support or that are
of a type not covered by such Credit Support, Certificateholders will bear their
allocable share of deficiencies. Moreover, if a form of Credit Support covers
the Offered Certificates of more than one Series and losses on the related
Mortgage Assets exceed the amount of such Credit Support, it is possible that
the holders of Offered Certificates of one (or more) such Series will be
disproportionately benefited by such Credit Support to the detriment of the
holders of Offered Certificates of one (or more) other such Series.
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, if
any, under any instrument of Credit Support. See "Risk Factors--Credit Support
Limitations".
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
-65-
<PAGE>
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 of Certificates may apply only in the
event of certain types of losses or shortfalls. The related Prospectus
Supplement will set forth information concerning the method and amount of
subordination provided by a Class or Classes of Subordinate Certificates in a
Series and the circumstances under which such subordination will be available.
If the Mortgage Assets in any Trust Fund are divided into separate
groups, each supporting a separate Class or Classes of Certificates of the
related 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 related Prospectus Supplement, Mortgage Loans
included in any Trust Fund will be covered for certain default risks by
insurance policies or guarantees. The related Prospectus Supplement will
describe the nature of such default risks and the extent of such coverage.
Letter of Credit
If so provided in the Prospectus Supplement for a Series, 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 other
financial institution specified in such Prospectus Supplement (the "Letter of
Credit Bank"). Under a letter of credit, the Letter of Credit 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 some or
all of the related Mortgage Assets on the related Cut-off Date or of the initial
aggregate Certificate Principal 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 Letter
of Credit Bank under the letter of credit for any Series will expire at the
earlier of the date specified in the related Prospectus Supplement or the
termination of the related Trust Fund.
Certificate Insurance and Surety Bonds
If so provided in the Prospectus Supplement for a Series, deficiencies
in amounts otherwise payable on such Certificates or certain Classes thereof
will be covered by insurance policies 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 or 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. The related Prospectus Supplement will describe any
limitations on the draws that may be made under any such instrument.
Reserve Funds
If so provided in the Prospectus Supplement for a Series, 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 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
certain collections received on the related Mortgage Assets.
-66-
<PAGE>
Amounts on deposit in any reserve fund for a Series 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 MBS
If so provided in the Prospectus Supplement for a Series, any MBS
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 will specify, as to each such form of Credit
Support, the information indicated above with respect thereto, to the extent
such information is material and available.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of mortgage 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 MBS) 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". If a significant percentage of
Mortgage Loans (or mortgage loans underlying MBS), by balance, are secured by
properties in a particular state, relevant state laws, to the extent they vary
materially from this discussion, will be discussed in the Prospectus Supplement.
For purposes of the following discussion, "Mortgage Loan" includes a mortgage
loan underlying an MBS.
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.
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
contrast, 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, irrevocably until the debt is
paid, in trust and generally with
-67-
<PAGE>
a power of sale, to the trustee to secure repayment of the indebtedness
evidenced by the related note. A deed to secure debt typically has two parties,
pursuant to which 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 because legal title to the property is held by a land
trustee under a land trust agreement for the benefit of the borrower. At
origination of a mortgage loan involving a land trust, the borrower may execute
a separate undertaking to make payments on the mortgage note. In no event is the
land trustee personally liable for the mortgage note obligation. 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.
Leases and Rents
Mortgages that encumber income-producing property often contain an
assignment of rents and leases and/or may be accompanied by a separate
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 room rates and must
file continuation statements, generally every five years, to maintain perfection
of such security interest. In certain cases, Mortgage Loans secured by hotels or
motels may be included in a Trust Fund even if the security interest in the room
rates was not perfected or the requisite UCC filings were allowed to lapse. Even
if the lender's security interest in room rates is perfected under applicable
nonbankruptcy law, it will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to enforce its
rights to collect the room rates following a default. In the bankruptcy setting,
however, the lender will be stayed from enforcing its rights to collect room
rates, but those room rates (in light of certain revisions to the Bankruptcy
Code which are effective for all bankruptcy cases commenced on or after October
22, 1994) constitute "cash collateral" and therefore cannot be used by the
bankruptcy debtor without a hearing or lender's consent and unless the lender's
interest in the room rates is given adequate protection (e.g., cash payment for
otherwise encumbered funds or a replacement lien on unencumbered property, in
either case equal in value to the amount of room rates that the debtor proposes
to use, or other similar relief). 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. In certain cases, Mortgage Loans secured in part by personal
property may be included in a Trust Fund even if the security interest in such
personal property was not perfected or the requisite UCC filings were allowed to
lapse.
Foreclosure
General. Foreclosure is a legal procedure that allows the lender to
recover its mortgage debt by enforcing its rights and available legal remedies
under the mortgage. 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.
-68-
<PAGE>
Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and nonjudicial foreclosure pursuant to a power of sale 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 several years to complete.
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 defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
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.
Equitable and Other 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 nonmonetary default, such as a
failure to adequately maintain the mortgaged property or an impermissible
further encumbrance of 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.
In addition, some states may have statutory protection such as the
right of the borrower to reinstate mortgage loans after commencement of
foreclosure proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale. In states permitting nonjudicial
foreclosure proceedings, foreclosure of a deed of trust is generally
accomplished by a nonjudicial 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 allows a nonjudicial 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 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. Generally, state law governs the procedure for
public sale, the parties entitled to notice, the method of giving notice and the
applicable time periods.
-69-
<PAGE>
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale because of the difficulty in determining the exact
status of title to the property (due to, among other things, redemption rights
that may exist) and because of the possibility that physical deterioration of
the property may have occurred during the foreclosure proceedings. Therefore, 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, or for a
lesser amount in order to preserve its right to seek a deficiency judgment if
such is available under state law and under the terms of the Mortgage Loan
documents. (The Mortgage Loans, however, may be nonrecourse. See "Risk
Factors--Certain Factors Affecting Delinquency, Foreclosure and Loss of the
Mortgage Loans--Limited Recourse Nature of the Mortgage Loans".) 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 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 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 (nonstatutory) 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 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 foreclosure
or sale under a deed of trust. 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
-70-
<PAGE>
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 fair market value of the property at the time of the sale.
Leasehold Considerations. 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, the
leasehold mortgagee would lose its security. This risk may be lessened if the
ground lease requires the lessor to give the leasehold mortgagee notices of
lessee defaults and an opportunity to cure them, permits the leasehold estate to
be assigned to and by the leasehold mortgagee or the purchaser at a foreclosure
sale, and contains certain other protective provisions typically included in a
"mortgageable" ground lease. Certain Mortgage Loans, however, may be secured by
ground leases which do not contain these provisions.
Cooperative Shares. Mortgage Loans may be secured by a security
interest on the borrower's ownership interest in shares, and the proprietary
leases appurtenant thereto, allocable to cooperative dwelling units that may be
vacant or occupied by nonowner tenants. Such loans are subject to certain risks
not associated with mortgage loans secured by a lien on the fee estate of a
borrower in real property. Such a loan typically is subordinate to the mortgage,
if any, on the Cooperative's building which, if foreclosed, could extinguish the
equity in the building and the proprietary leases of the dwelling units derived
from ownership of the shares of the Cooperative. Further, transfer of shares in
a Cooperative are subject to various regulations as well as to restrictions
under the governing documents of the Cooperative, and the shares may be canceled
in the event that associated maintenance charges due under the related
proprietary leases are not paid. Typically, a recognition agreement between the
lender and the Cooperative provides, among other things, the lender with an
opportunity to cure a default under a proprietary lease.
Under the laws applicable in many states, "foreclosure" on Cooperative
shares is accomplished by a sale in accordance with the provisions of Article 9
of the UCC and the security agreement relating to the shares. Article 9 of the
UCC requires that a sale be conducted in a "commercially reasonable" manner,
which may be dependent upon, among other things, the notice given the debtor and
the method, manner, time, place and terms of the sale. 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. A recognition agreement, however, generally provides
that the lender's right to reimbursement is subject to the right of the
Cooperative to receive sums due under the proprietary leases.
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
such 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 may stay
the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender 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, the outstanding amount of the loan 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 or
lien avoidance proceeding, 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,
-71-
<PAGE>
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 mortgage loan 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 a secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property. Under the Bankruptcy
Code, a lender may 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. Recent amendments to the
Bankruptcy code, however, may minimize the impairment of the lender's ability to
enforce the borrower's assignment of rents and leases. In addition to the
inclusion of hotel revenues within the definition of "cash collateral" as noted
previously in the section entitled "--Leases and Rents", the amendments provide
that a pre-petition security interest in rents or hotel revenues is designed to
overcome those cases holding that a security interest in rents is unperfected
under the laws of certain states until the lender has taken some further action,
such as commencing foreclosure or obtaining a receiver prior to activation of
the assignment of rents.
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 case 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 (except potentially to the extent of
any security deposit) 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 (a) 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 plus (b) unpaid rent to the earlier of the surrender of the
property or the lessee's bankruptcy filing.
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 or disposal
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. A secured lender may be liable as an "owner" or "operator" of
a contaminated mortgaged property if agents or employees of the lender 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
-72-
<PAGE>
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. Excluded from CERCLA's definition of
"owner" or "operator", however, is a person who without participating in the
management of the facility, holds indicia of ownership primarily to protect his
security interest. This is the so called "secured creditor exemption".
The Asset Conservation, Lender Liability and Deposit Insurance Act of
1996 (the "Lender Liability Act") amended, among other things, the provisions of
CERCLA with respect to lender liability and the secured creditor exemption. The
Lender Liability Act offers substantial protection to lenders by defining the
activities in which a lender can engage and still have the benefit of the
secured creditor exemption. In order for a lender to be deemed to have
participated in the management of a mortgaged property, the lender must actually
participate in the operational affairs of the property of the borrower. The
Lender Liability Act provides that "merely having the capacity to influence, or
unexercised right to control" operations does not constitute participation in
management. A lender will lose the protection of the secured creditor exemption
only if it exercises decision-making control over the borrower's environmental
compliance and hazardous substance handling and disposal practices, or assumes
day-to-day management of operational functions of the mortgaged property. The
Lender Liability Act also provides that a lender will continue to have the
benefit of the secured creditor exemption even if it forecloses on a mortgaged
property, purchases it at a foreclosure sale or accepts a deed-in-lieu of
foreclosure provided that the lender seeks to sell the mortgaged property at the
earliest practicable commercially reasonable time on commercially reasonable
terms.
Certain Other Federal and State Laws. Many states have statutes similar
to CERCLA, and not all those statutes provide for a secured creditor exemption.
In addition, under federal law, there is potential liability relating to
hazardous wastes and underground storage tanks under the federal Resource
Conservation and Recovery Act.
Certain federal, state and local laws, regulations and ordinances
govern the management, removal, encapsulation or disturbance of
asbestos-containing materials ("ACMs"). Such laws, as well as common law
standards, may impose liability for releases of or exposure to ACMs and may
provide for third parties to seek recovery from owners or operators of real
properties for personal injuries associated with such releases.
Recent federal legislation will in the future require owners of
residential housing constructed prior to 1978 to disclose to potential residents
or purchasers any known lead-based paint hazards and will impose treble damages
for any failure to so notify. In addition, the ingestion of lead-based paint
chips or dust particles by children can result in lead poisoning, and the owner
of a property where such circumstances exist may be held liable for such
injuries and for the costs of removal or encapsulation of the lead-based paint.
Testing for lead-based paint or lead in the water was conducted with respect to
certain of the Mortgaged Properties, generally based on the age and/or condition
thereof.
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.
Federal, state and local environmental regulatory requirements change
often. It is possible that compliance with a new regulatory requirement could
impose significant compliance costs on a borrower. Such costs 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 the owner or operator who created
the
-73-
<PAGE>
environmental hazard, but that individual or entity 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 Agreement will provide that
neither the Master Servicer nor the Special Servicer, acting on behalf of the
Trustee, may acquire title to a Mortgaged Property or take over its operation
unless the Special Servicer, based solely (as to environmental matters) on a
report prepared by a person who regularly conducts environmental audits, has
made the determination that certain conditions relating to environmental
matters, as described under "Description of the Pooling Agreements-Realization
Upon Defaulted Mortgage Loans", have been satisfied.
If a lender forecloses on a mortgage secured by a property, the
operations on which are subject to environmental laws and regulations, the
lender will 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.
Environmental Site Assessments. In most cases, an environmental site
assessment of each Mortgaged Property will have been performed in connection
with the origination of the related Mortgage Loan or at some time prior to the
issuance of the related Certificates. Environmental site assessments, however,
vary considerably in their content, quality and cost. Even when adhering to good
professional practices, environmental consultants will sometimes not detect
significant environmental problems because to do an exhaustive environmental
assessment would be far too costly and time-consuming to be practical.
Due-on-Sale and Due-on-Encumbrance Provisions
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. However, the Garn-St Germain Depository Institutions Act of 1982
(the "Garn Act") generally preempts state laws that prohibit the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limitations as set forth in the Garn Act
and the regulations promulgated thereunder. Accordingly, 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,
without regard to the Master Servicer's ability to demonstrate that a sale
threatens its legitimate security interest.
Junior Liens; Rights of Holders of Senior Liens
If so provided in the related Prospectus Supplement, the Mortgage
Assets for a Series may include Mortgage Loans secured by junior liens, and the
loans secured by the related Senior Liens may not be included in the Mortgage
Asset Pool. The primary risk to holders of Mortgage Loans secured by junior
liens is the possibility that adequate funds will not be received in connection
with a foreclosure of the related Senior Liens to satisfy fully both the Senior
Liens and the Mortgage Loan. In the event that a holder of a Senior Lien
forecloses on a Mortgaged Property, the proceeds of the foreclosure or similar
sale will be applied first to the payment of court costs and fees in connection
with the foreclosure, second to real estate taxes, third in satisfaction of all
principal, interest, prepayment or acceleration penalties, if any, and any other
sums due and owing to the holder of the Senior Liens. The claims of the holders
of the Senior Liens will be satisfied in full out of proceeds of the liquidation
of the related Mortgaged Property, if such proceeds are sufficient, before the
Trust Fund as holder of the junior lien receives any payments in respect of the
Mortgage Loan. In the event that such proceeds from a foreclosure or similar
sale of the related Mortgaged Property are insufficient to satisfy all Senior
Liens and the Mortgage Loan in the aggregate, the Trust Fund, as the holder of
the junior lien, and, accordingly, holders of one or more Classes of
-74-
<PAGE>
the Certificates of the related Series bear (i) the risk of delay in
distributions while a deficiency judgment against the borrower is obtained and
(ii) the risk of loss if the deficiency judgment is not realized upon. Moreover,
deficiency judgments may not be available in certain jurisdictions or the
Mortgage Loan may be nonrecourse.
Subordinate Financing
The terms of 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, or such restrictions may be unenforceable. 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 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.
Certain Laws and Regulations
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a Mortgaged Property which could, together with the
possibility of limited alternative uses for a particular
-75-
<PAGE>
Mortgaged Property (i.e., a nursing or convalescent home or hospital), result in
a failure to realize the full principal amount of the related Mortgage Loan.
Americans with Disabilities Act
Under Title III of the Americans with Disabilities Act of 1990 and
rules promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which 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. In addition to imposing a possible
financial burden on the borrower in its capacity as owner or landlord, the ADA
may also impose such requirements on a foreclosing lender who succeeds to the
interest of the borrower as owner or landlord. Furthermore, 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.
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 a Master Servicer or
Special 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, 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 Master Servicer or
Special 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.
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 "Crime
Control Act"), 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.
-76-
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of Offered
Certificates of any Series, to the extent it relates to matters of law or legal
conclusions with respect thereto, represents the opinion of counsel to the
Depositor with respect to that Series on the material matters associated with
such consequences, subject to any qualifications set forth herein. Unless
otherwise specified in the related Prospectus Supplement, counsel to the
Depositor for each Series will be Sidley & Austin. This discussion is directed
to Certificateholders that hold the Certificates as "capital assets" within the
meaning of Section 1221 of the Code and does not purport to discuss all federal
income tax consequences that may be applicable to the individual circumstances
of particular investors, some of which (such as banks, insurance companies and
foreign investors) may be subject to special treatment under the Code. 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. Prospective investors should note that no rulings have been or
will be sought from the IRS with respect to any of the federal income tax
consequences discussed below, and no assurance can be given the IRS will not
take contrary positions. Taxpayers and preparers of tax returns (including those
filed by any REMIC or other issuer) should be aware that under applicable
Treasury regulations a provider of advice on specific issues of law is not
considered an income tax return preparer unless the advice (i) is given with
respect to events that have occurred at the time the advice is rendered and is
not given with respect to the consequences of contemplated actions, and (ii) is
directly relevant to the determination of an entry on a tax return. Accordingly,
taxpayers should consult their tax advisors and tax return preparers regarding
the treatment of any item on their tax returns, even where the anticipated tax
consequences have been discussed herein. In addition to the federal income tax
consequences described herein, potential investors are advised to consult their
tax advisors concerning the state, local or other tax consequences to them of
the purchase, ownership and disposition of Offered Certificates. See "State and
Other Tax Consequences".
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 REMIC Administrator 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) 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 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.
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 anticipated material tax
consequences associated with such Cash Flow Agreements also will be discussed in
the related Prospectus Supplement. See "Description of the Trust Funds--Cash
Flow Agreements".
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. With respect to each 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 and certain
-77-
<PAGE>
other documents (and subject to certain assumptions set forth therein), 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 REMIC Regular Certificates or REMIC Residual Certificates
in that REMIC within the meaning of the REMIC Provisions. The following general
discussion of the anticipated federal income tax consequences of the purchase,
ownership and disposition of REMIC Certificates, to the extent it relates to
matters of law or legal conclusions with respect thereto, represents the opinion
of counsel to the Depositor for the applicable Series as specified in the
related Prospectus Supplement, subject to any qualifications set forth herein.
In addition, counsel to the Depositor have prepared or reviewed the statements
in this Prospectus under the heading "Certain Federal Income Tax
Consequences--REMICs", and are of the opinion that such statements are correct
in all material respects. Such statements are intended as an explanatory
discussion of the possible effects of the classification of any Trust Fund (or
applicable portion thereof) as a REMIC for federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to an investor's specific tax circumstances that would be provided by
an investor's own tax advisor. Accordingly, each investor is advised to consult
its own tax advisors with regard to the tax consequences to it of investing in
REMIC Certificates.
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 may lose its status as a REMIC
for such year and thereafter. In that event, such entity may be taxable as a
corporation, 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 in 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
inadvertently 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). Moreover, if 95% or more of the assets
of the REMIC qualify for any of the foregoing characterizations 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 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 in the hands of
another REMIC, and will be "permitted assets" under Section 860L(c)(1)(G) for a
"financial asset securitization investment trust" or FASIT. 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 REMIC Administrator will report
those determinations to Certificateholders in the manner and at the times
required by 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 any 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 of the Code)
otherwise would receive the same treatment as the Mortgage Loans for purposes of
all of the foregoing sections of the Code. In addition, in some instances
Mortgage Loans may not be treated entirely as assets described in the foregoing
sections of the Code. If so, the related Prospectus Supplement will describe the
Mortgage Loans that may not be so treated. Treasury regulations do provide,
however, that cash received from payments
-78-
<PAGE>
on Mortgage Loans held pending distribution is 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 separate REMICs ("Tiered REMICs") for federal income tax
purposes. As to each such Series of REMIC Certificates, in the opinion of
counsel to the Depositor, 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, 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 the cash method of accounting will be required to report income with
respect to REMIC Regular Certificates under the 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 "constant yield" 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 reasonable 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 that have not yet 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 or that such Prepayment Assumption
will not be challenged by the Internal Revenue Service (the "IRS") on audit.
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 related Closing Date,
the issue price for such Class will be the fair market value of such Class on
such 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" is interest that is unconditionally payable at least annually (during
the entire term of the instrument) at a single fixed rate, or at a "qualified
floating rate", an "objective rate", a combination of a single fixed rate and
one or more "qualified floating rates"
-79-
<PAGE>
or one "qualified inverse floating rate", or at 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
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 IRS.
Certain Classes of the REMIC Regular Certificates may provide for the
first interest payment with respect to such Certificates to be made more than
one month after the date of issuance, a period which is longer than the
subsequent monthly intervals between interest payments. Assuming the "accrual
period" (as defined below) for original issue discount is each monthly period
that ends on a Distribution Date, in some cases, as a consequence of this "long
first accrual period", some or all interest payments may be required to be
included in the stated redemption price of the REMIC Regular Certificate and
accounted for as original issue discount. Because interest on REMIC Regular
Certificates must in any event be accounted for under an accrual method,
applying this analysis would result in only a slight difference in the timing of
the inclusion in income of the yield on the REMIC Regular Certificates.
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 maturity. For this
purpose, the weighted average maturity 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 issue 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" below 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.
-80-
<PAGE>
As to each "accrual period", that is, unless otherwise stated in the
related Prospectus Supplement, each period that begins on a date that
corresponds to a Distribution Date (or in the case of the first such period,
begins on the Closing Date) and ends on the day preceding the immediately
following Distribution 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 (i) 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, (ii) using a discount rate equal to the
original yield to maturity of the Certificate and (iii) taking into account
events (including actual prepayments) that have occurred before the close of the
accrual period. 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 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.
If the foregoing method for computing original issue discount results
in a negative amount of original issue discount as to any accrual period with
respect to a REMIC Regular Certificate, the amount of original issue discount
allocable to such accrual period will be zero. That is, no current deduction of
such negative amount will be allowed to the holder of such Certificate. The
holder will instead only be permitted to offset such negative amount against
future positive original issue discount (if any) attributable to such a
Certificate. Although not free from doubt, it is possible that a
Certificateholder may be permitted to deduct a loss to the extent his or her
basis in the Certificate exceeds the maximum amount of payments such
Certificateholder could ever receive with respect to such Certificate. However,
any such loss may be a capital loss, which is limited in its deductibility. The
foregoing considerations are particularly relevant to Stripped Interest
Certificates which can have negative yields under certain circumstances that are
not default related. See "Risk Factors -- Effect of Prepayments on Yield of
Certificates" herein.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount (other than a de minimis amount), 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
some of all of the 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.
-81-
<PAGE>
The OID Regulations also permit a Certificateholder to elect to accrue
all interest and discount (including de minimis market or original issue
discount) in income as interest, and to amortize premium, 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 include currently 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" below. Each of
the elections in this and the preceding paragraph to accrue interest, discount
and premium with respect to a Certificate on a constant yield method or as
interest would be irrevocable except with the approval of the IRS.
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" above. 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 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, however, has elected to include market discount in income currently as
it accrues, the interest deferral rule described above would not apply.
-82-
<PAGE>
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. On June 27, 1996, the IRS published in the Federal Register proposed
regulations on the amortization of bond premium. Under those regulations, if a
holder elects to amortize bond premium, bond premium would be amortized on a
constant yield method and would be applied against qualified stated interest.
The proposed regulations generally would be effective for Certificates acquired
on or after the date 60 days after the date final regulations are published in
the Federal Register. Holders of each such Class of Certificates should consult
their tax advisors regarding the possibility of making an election to amortize
such premium. 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" above. 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 Mortgage 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 Certificate 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 Mortgage 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. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC generally is not subject to entity-level taxation, except with
regard to prohibited transactions and certain other transactions. See
"--Prohibited Transactions Tax and Other Taxes" below. Rather, the taxable
income or net loss of a REMIC is generally taken into account by the holder of
the REMIC Residual Certificates. Accordingly, 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.
A 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 until the
REMIC's termination. Ordinary income
-83-
<PAGE>
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 from
the seller of such 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 distributions received by such REMIC Residual Certificateholders for the
corresponding period may significantly adversely affect such REMIC Residual
Certificateholders' after-tax rate of return. Such disparity between income and
distributions may not be offset by corresponding losses or reductions of income
attributable to the REMIC Residual Certificateholder until subsequent tax years
and, then, may not be completely offset due to changes in the Code, tax rates or
character of the income or loss. REMIC Residual Certificates may in some
instances have negative "value". See "Risk Factors--Certain Federal Tax
Considerations Regarding REMIC Residual Certificates".
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),
for amortization of any premium on the Mortgage Loans, for 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 REMIC
Administrator 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.
-84-
<PAGE>
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 yield 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.
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 noninterest 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" below. 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
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,
-85-
<PAGE>
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 REMIC. 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" below. 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" above.
Excess Inclusions. Any "excess inclusions" with respect to a REMIC
Residual Certificate will 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
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.
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 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
interests. In addition, based on the Prepayment Assumption, the anticipated
weighted average life of the REMIC Residual Certificates must equal or exceed 20
percent of the anticipated weighted average life of the REMIC, based on the
Prepayment Assumption and on any required or permitted clean up calls or
required liquidation provided for in the REMIC's organizational documents. The
related Prospectus Supplement will disclose whether offered REMIC Residual
Certificates may be considered to have "significant value" under the REMIC
-86-
<PAGE>
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.
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.
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 clean up calls, or required liquidation provided for in
the REMIC's organizational documents, (1) 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 (2) 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 "--Foreign Investors in REMIC Certificates" below for
additional restrictions applicable to transfers of certain REMIC Residual
Certificates to foreign persons.
Mark-to-Market Rules. The IRS recently released regulations under
Section 475 of the Code (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 is not
treated as a security for purposes of Section 475 of the Code, and thus is not
subject to the mark-to-market rules. Prospective purchasers of a REMIC Residual
Certificate should consult their tax advisors regarding the Mark-to-Market
Regulations.
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 2% 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 (i) 3% 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 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 consult with their 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
above under "--Taxation of Owners of REMIC Residual Certificates--Basis Rules,
Net Losses and Distributions". Except as described below, 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 lower rates as to mid-term capital gains, and still lower rates as to
long-term capital gains, than those applicable to the short-term capital gains
and ordinary income realized or received by individuals. 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 a 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 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), 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
-87-
<PAGE>
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" 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 such 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 any REMIC will engage in any prohibited transactions as to
which it would be subject to a material Prohibited Transaction Tax.
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 income from foreclosure property other than qualifying
rents and other qualifying income for a real estate investment trust. Under
certain circumstances, the Special Servicer may be authorized to incur a tax if
doing so would, in the reasonable discretion of the Special Servicer, maximize
the net after-tax proceeds to Certificateholders.
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.
-88-
<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 REMIC Administrator, Master Servicer, Special Servicer, Manager 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. Any
such tax not borne by a REMIC Administrator, Master Servicer, Special Servicer,
Manager or Trustee would 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) 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 clean up 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 (i) residual interests in
such entity are not held by disqualified organizations and (ii) 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 each Pooling Agreement, and will be discussed 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 (i) such holder's social security number and a statement
under penalties of perjury that such social security number is that of the
record holder or (ii) a statement under penalties 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 Federal Home Loan Mortgage Corporation), (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
-89-
<PAGE>
Residual Certificate is less than the REMIC Residual Certificateholder's
adjusted basis in such Certificate, such REMIC Residual Certificateholder should
(but may not) be treated as realizing a capital loss equal to the amount of such
difference.
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, the REMIC
Administrator, which 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 REMIC Administrator, subject to certain
notice requirements and various restrictions and limitations, generally will
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 generally will be required to
report such REMIC items consistently with their treatment on the related REMIC's
tax return and may in some circumstances be bound by a settlement agreement
between the REMIC Administrator, as tax matters person, and the IRS concerning
any such REMIC item. Adjustments made to the REMIC's 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 nonindividuals 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 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".
Unless otherwise specified in the related Prospectus Supplement, the
responsibility for complying with the foregoing reporting rules will be borne by
the REMIC Administrator.
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
-90-
<PAGE>
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.
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 as to which (i) a court in the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more United
States fiduciaries have the right 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
nonresident 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. The following general discussion of the
anticipated federal income tax consequences of the purchase, ownership and
disposition of Grantor Trust Certificates, to the extent it relates to matters
of law or legal conclusions with respect thereto, represents the opinion of
counsel to the Depositor for the applicable Series as specified in the related
Prospectus Supplement, subject to any qualifications set forth herein. In
addition, counsel to the Depositor have prepared or reviewed the statements in
this Prospectus under the heading "Certain Federal Income Tax
Consequences--Grantor Trust Funds", and are of the opinion that such statements
are correct in all material respects. Such statements are intended as an
explanatory discussion of the possible effects of the classification of any
Grantor Trust Fund as a grantor trust for federal income tax purposes on
investors generally and of related tax matters affecting investors generally,
but do not purport to furnish information in the level of detail or with the
attention to an investor's specific tax circumstances that would be provided by
an investor's own tax advisor. Accordingly, each investor is advised to consult
its own tax advisors with regard to the tax consequences to it of investing in
Grantor Trust Certificates.
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
-91-
<PAGE>
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 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) "loans . . . secured by an interest in real property" within
the meaning of Section 7701(a)(19)(C)(v) of the Code (but generally only to the
extent that the underlying Mortgage Loans have been made with respect to
property that is used for residential or certain other prescribed purposes);
(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) of the Code; (iii) "permitted
assets" within the meaning of Section 860L(a)(1)(C) of the Code; and (iv) "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.
Grantor Trust Strip Certificates. Even if Grantor Trust Strip
Certificates evidence an interest in a Grantor Trust Fund consisting of Mortgage
Loans that are "loans . . . secured by an interest in real property" within the
meaning of Section 7701(a)(19)(C)(v) 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)(A) of the Code, it is unclear whether the Grantor
Trust Strip Certificates, and the income therefrom, will be so characterized.
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 and, in general, "permitted assets" within the
meaning of Section 860L(a)(1)(C) 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) 3% 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 such
holder's 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
-92-
<PAGE>
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 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. 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.
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) 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" below. 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 of 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" below) and the yield of such
Grantor Trust Fractional Interest Certificate to such holder. Such yield would
be computed as 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 ownership interest in the Mortgage Loans retained by the Depositor, the
Master Servicer, the 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.
Legislation enacted on August 5, 1997 extends the scope of that section to any
pool of debt instruments the yield on which may be affected by reason of
prepayments, effective for taxable years beginning after enactment. The precise
application of the new legislation is unclear in certain respects. For example,
it is uncertain whether a prepayment assumption will be applied collectively to
all a taxpayer's investments in pools of debt instruments or will be applied on
an investment-by-investment basis. Similarly, as to investments in Grantor Trust
Fractional Interest Certificates, it is not clear whether the assumed prepayment
rate is to 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
-93-
<PAGE>
are advised to consult their tax advisors concerning 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.
In the absence of statutory or administrative clarification, it is
currently intended that information reports or returns to the IRS and
Certificateholders will be based on a prepayment assumption (the "Prepayment
Assumption") determined when Certificates are offered and sold hereunder and
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
Prepayment Assumption or any other rate or that the Prepayment Assumption will
not be challenged by the IRS on audit. Certificateholders also 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 "--Taxation of Owners
of Grantor Trust Fractional Interest Certificates--If Stripped Bond Rules Do Not
Apply" and "--Market Discount" below.
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. In that case, the original
issue discount rules will apply, even if the stripped bond rules do not 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. For a definition of "stated redemption price," see
"--Taxation of Owners of REMIC Regular Certificates--Original Issue Discount"
above. 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 "teaser," or below-market interest rate. The determination as to
whether original issue discount will be considered to be de minimis will be
calculated using the same test as in the REMIC discussion. See "--Taxation of
Owners of REMIC Regular Certificates--Original Issue Discount" above.
-94-
<PAGE>
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 by the Trustee or
Master Servicer, as applicable, in preparing information returns to the
Certificateholders and the IRS.
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. Under
legislation enacted on August 5, 1997, Section 1272(a)(6) of the Code requires
that a prepayment assumption be used in computing yield with respect to any pool
of debt instruments, the yield on which may be affected by prepayments,
effective for taxable years beginning after enactment. The precise application
of the new legislation is unclear in certain respects. For example, it is
uncertain whether a prepayment assumption will be applied collectively to all a
taxpayer's investments in pools of debt instruments or will be applied on an
investment-by-investment basis. Similarly, as to investments in Grantor Trust
Fractional Interest Certificates, it is not clear whether the assumed prepayment
rate is to be determined at the time of the first sale of the Grantor Trust
Fractional Interest Certificate or, with respect to any holder, at the time of
that holder's purchase of the Grantor Trust Fractional Interest Certificate.
Certificateholders should consult their own tax advisors concerning reporting
original issue discount with respect to Grantor Trust Fractional Interest
Certificates and 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.
In the absence of statutory or administrative clarification, it is
currently intended that information reports or returns to the IRS and
Certificateholders will be based on a prepayment assumption (the "Prepayment
Assumption") determined when Certificates are offered and sold hereunder and
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
Prepayment Assumption or any other rate or that the Prepayment Assumption will
not be challenged by the IRS on audit. Certificateholders also 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.
Market Discount. If the stripped bond rules do not apply to a 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
-95-
<PAGE>
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 under rules similar to
those described in "--Taxation of Owners of REMIC Regular Interests--Market
Discount" above.
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
holder'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 used (or that would be used) in calculating the accrual of
original issue discount, if any, is also 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, market 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 may be considered to be
de minimis and, if so, will be includible in income under de minimis rules
similar to those described above in "--REMICs--Taxation of Owners of REMIC
Regular Certificates--Original Issue Discount" above.
Further, under the rules described above in "--REMICs--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).
Under legislation enacted on August 5, 1997, it appears that a
prepayment assumption should be used in computing amortization of premium
allowable under Section 171 of the Code, effective for taxable years beginning
after enactment. If so, premium amortization would be accounted for under a
method similar to that described for taking account of premium on REMIC Regular
Certificates. See "--REMICs--Taxation of Owners of REMIC Regular
Certificates--Premium" above.
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 "--Taxation of Owners of Grantor
Trust Fractional Interest Certificates-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
-96-
<PAGE>
Strip Certificates. Accordingly, holders of Grantor Trust Strip Certificates
should consult their 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.
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 "--Taxation of Owners of Grantor Trust Fractional
Interest Certificates--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. It appears that those
provisions would apply to Grantor Trust Strip Certificates. It is uncertain
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.
If the method for computing original issue discount under Section
1272(a)(6) results in a negative amount of original issue discount as to any
accrual period with respect to a REMIC Regular Certificate, the amount of
original issue discount allocable to such accrual period will be zero. That is,
no current deduction of such negative amount will be allowed to the holder of
such Certificate. The holder will instead only be permitted to offset such
negative amount against future positive original issue discount (if any)
attributable to such a Certificate. Although not free from doubt, it is possible
that a Certificateholder may be permitted to deduct a loss to the extent his or
her basis in the Certificate exceeds the maximum amount of payments such
Certificateholder could ever receive with respect to such Certificate. However,
any such loss may be a capital loss, which is limited in its deductibility. The
foregoing considerations are particularly relevant to Stripped Interest
Certificates, which can have negative yields under circumstances that are not
default related. See "Risk Factors--Effect of Prepayments on Yield of
Certificates" herein.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower using a prepayment assumption 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 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 Prepayment
Assumption or at any other rate or that the Prepayment Assumption will not be
challenged by the IRS on audit. Certificateholders also 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 tax advisors regarding the use of
the Prepayment Assumption.
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
-97-
<PAGE>
by any distributions with respect to such Grantor Trust Certificate. The Code as
of the date of this Prospectus provides for lower rates as to mid-term capital
gains, and still lower rates as to long-term capital gains, than those
applicable to the short-term capital gains and ordinary income realized or
received by individuals. 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, the Trustee or Master Servicer, as applicable,
will furnish, within a reasonable time after the end of each calendar year, to
each holder of a Grantor Trust Certificate who was such a holder at any time
during such year, information regarding the amount of servicing compensation
received by the Master Servicer, the Special Servicer or any Sub-Servicer, and
such other 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
initial Certificateholders that bought their Certificates at the representative
initial offering price used in preparing such reports.
Backup Withholding. In general, the rules described above in
"--REMICs--Backup Withholding with Respect to REMIC Certificates" will also
apply to Grantor Trust Certificates.
Foreign Investors. In general, the discussion with respect to REMIC
Regular Certificates in "--REMICs--Foreign Investors in REMIC Certificates"
above applies to Grantor Trust Certificates except that Grantor Trust
Certificates will, unless otherwise disclosed in the related Prospectus
Supplement, be eligible for exemption from U.S. 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 nonresident alien individual.
-98-
<PAGE>
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 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 tax advisors with respect
to the various tax consequences of investments in the Offered Certificates.
ERISA CONSIDERATIONS
General
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, Keogh plans and collective
investment funds and separate accounts (and as applicable, insurance company
general 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 ("Plans"), and on persons who are fiduciaries with respect to
such 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, Section 406 of ERISA and Section 4975 of the
Code prohibit a broad range of transactions involving assets of a Plan and
persons ("parties in interest" within the meaning of ERISA and "disqualified
persons" within the meaning of the Code; collectively, "Parties in Interest")
who have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. The types of transactions between Plans
and Parties in Interest that are prohibited include: (a) sales, exchanges or
leases of property, (b) loans or other extensions of credit and (c) the
furnishing of goods and services. 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 or a penalty imposed pursuant to Section 502(i) of
ERISA, unless a statutory or administrative exemption is available. In addition,
the persons involved in the prohibited transaction may have to rescind the
transaction and pay an amount to the Plan for any losses realized by the Plan or
profits realized by such persons, individual retirement accounts involved in the
transaction may be disqualified resulting in adverse tax consequences to the
owner of such account and certain other liabilities could result that would have
a significant adverse effect on such person.
Plan Asset Regulations
A Plan's investment in Offered Certificates may cause the underlying
Mortgage Assets and other assets included in a related Trust Fund to be deemed
assets of such Plan. Section 2510.3-101 of the regulations (the "Plan Asset
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 apply, including that the equity
participation in the entity by "benefit plan investors" (i.e., Plans and certain
employee benefit plans not subject to ERISA) is not "significant", both as
defined therein. For this purpose, in general, equity participation by benefit
plan investors will be "significant" on any date if 25% or more of the value of
any class of equity interests in the entity is held by benefit plan investors
(determined by not including the investments of persons with discretionary
authority or control over the assets of such entity, of any person who provides
investment advice for a fee (direct or indirect) with respect to such assets,
and "affiliates" (as defined in the DOL regulations relating to Plan assets) of
such persons). Equity participation in a Trust Fund will be significant on any
date if immediately
-99-
<PAGE>
after the most recent acquisition of any Certificate, 25% or more of any Class
of Certificates is held by benefit plan investors (determined by not including
the investments of the Depositor, the Trustee, the Master Servicer, the Special
Servicer, any other parties with discretionary authority over the assets of a
Trust Fund and their respective affiliates).
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 Mortgage Assets and other assets included in a Trust Fund
constitute Plan assets, then any party exercising management or discretionary
control regarding those assets, such as a Master Servicer, a Special Servicer,
any Sub-Servicer, a Trustee, the obligor under any related credit enhancement
mechanism, or certain affiliates thereof may be deemed to be a Plan "fiduciary"
with respect to the investing Plan and thus subject to the fiduciary
responsibility provisions of ERISA. In addition, if the underlying assets of a
Trust Fund constitute Plan assets, the Depositor, any related REMIC
Administrator, any related Manager, any mortgagor with respect to a related
Mortgage Loan or a mortgage loan underlying a related MBS, as well as each of
the parties described in the preceding sentence, may become Parties in Interest
with respect to an investing Plan (or of a Plan holding an interest in an
investing entity). Thus, if the Mortgage Assets and other assets included in a
Trust Fund constitute Plan assets, the operation of the Trust Fund, may involve
a prohibited transaction under ERISA or the Code. For example, if a person who
is a Party in Interest with respect to an investing Plan is a mortgagor with
respect to a Mortgage Loan included in a Trust Fund, the purchase of
Certificates by the Plan could constitute a prohibited loan between a Plan and a
Party in Interest.
The Plan Asset Regulations provide that where a Plan acquires a
"guaranteed governmental mortgage pool certificate", the Plan's assets include
such certificate but do not solely by reason of the Plan's holdings of such
certificate include any of the mortgages underlying such certificate. The Plan
Asset Regulations include in the definition of a "guaranteed governmental
mortgage pool certificate" certain FHLMC Certificates, GNMA Certificates and
FNMA Certificates, but do not include FAMC Certificates. Accordingly, even if
such types of MBS (other than FAMC Certificates) included in a Trust Fund were
deemed to be assets of Plan investors, the mortgages underlying such MBS (other
than FAMC Certificates) would not be treated as assets of such Plans. Thus, the
prohibited transaction described in the preceding paragraph (regarding a
prohibited loan) would not occur with respect to such types of MBS (other than
FAMC Certificates) held in a Trust Fund, even if such MBS were treated as assets
of Plans. Private label mortgage participations, mortgage pass-through
certificates, FAMC Certificates or other mortgage-backed securities are not
"guaranteed governmental mortgage pool certificates" within the meaning of the
Plan Asset Regulations.
In addition, and without regard to whether the Mortgage Assets and
other assets included in a Trust Fund constitute Plan assets, the acquisition or
holding of Offered Certificates by or on behalf of a Plan could give rise to a
prohibited transaction if the Depositor, the related Trustee or any related
Underwriter, Master Servicer, Special Servicer, Sub-Servicer, REMIC
Administrator, Manager, mortgagor or obligor under any credit enhancement
mechanism, or any of certain affiliates thereof, is or becomes a Party in
Interest with respect to an investing Plan. Accordingly, potential Plan
investors should consult their counsel and review the ERISA discussion in the
related Prospectus Supplement before purchasing any such Certificates.
Prohibited Transaction Exemptions
In considering an investment in the Offered Certificates, a Plan
fiduciary should consider the availability of prohibited transaction exemptions
promulgated by the DOL including, among others, Prohibited Transaction Class
Exemption ("PTCE") 75-1, which exempts certain transactions involving Plans and
certain broker-dealers, reporting dealers and banks; PTCE 90-1, which exempts
certain transactions between insurance company separate accounts and Parties in
Interest; PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties in Interest; PTCE 84-14, which exempts certain
transactions effected on behalf of a Plan by a "qualified professional asset
manager"; PTCE 95-60, which exempts certain transactions between insurance
company general accounts and Parties in Interest; and PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an "in-house asset
manager". There can be no assurance that any of these class exemptions will
apply with respect to any particular Plan investment in the Certificates or,
even if it were deemed to apply, that any exemption would apply to all
transactions that may occur in
-100-
<PAGE>
connection with such investment. The Prospectus Supplement with respect to the
Offered Certificates of any Series may contain additional information regarding
the availability of other exemptions with respect to such Offered Certificates.
Insurance Company General Accounts
In addition to any exemption that may be available under PTCE 95-60 for
the purchase and holding of Offered Certificates by an insurance company general
account, the Small Business Job Protection Act of 1996 added a new Section
401(c) to ERISA, which provides certain exemptive relief from the provisions of
Part 4 of Title I of ERISA and Section 4975 of the Code, including the
prohibited transaction restrictions imposed by ERISA and the related excise
taxes imposed by the Code, for transactions involving an insurance company
general account. Pursuant to Section 401(c) of ERISA, the DOL is required to
issue final regulations ("401(c) Regulations") no later than December 31, 1997,
which are to provide guidance for the purpose of determining, in cases where
insurance policies supported by an insurer's general account are issued to or
for the benefit of a Plan on or before December 31, 1998, which general account
assets constitute Plan assets. Section 401(c) of ERISA generally provides that,
until the date which is 18 months after the 401(c) Regulations become final, no
person shall be subject to liability under Part 4 of Title I of ERISA and
Section 4975 of the Code on the basis of a claim that the assets of an insurance
company general account constitute Plan assets, unless (i) as otherwise provided
by the Secretary of Labor in the 401(c) Regulations to prevent avoidance of the
regulations or (ii) an action is brought by the Secretary of Labor for certain
breaches of fiduciary duty which would also constitute a violation of federal or
state criminal law. Any assets of an insurance company general account which
support insurance policies issued to a Plan after December 31, 1998 or issued to
Plans on or before December 31, 1998 for which the insurance company does not
comply with the 401(c) Regulations may be treated as Plan assets. In addition,
because Section 401(c) does not relate to insurance company separate accounts,
separate account assets are still treated as Plan assets of any Plan invested in
such separate account. Insurance companies contemplating the investment of
general account assets in Offered Certificates should consult with their legal
counsel with respect to the applicability of Section 401(c) of ERISA, including
the general account's ability to continue to hold such Certificates after the
date which is 18 months after the date the 401(c) Regulations become final.
Consultation With Counsel
Any Plan fiduciary which proposes to purchase Offered Certificates on
behalf of or with assets of a Plan should consider its general fiduciary
obligations under ERISA and should consult with its counsel with respect to the
potential applicability of ERISA and the Code to such investment and the
availability of any prohibited transaction exemption in connection therewith.
Tax Exempt Investors
A Plan that is exempt from federal income taxation pursuant to Section
501 of the Code (a "Tax Exempt Investor") nonetheless will be subject to federal
income taxation to the extent that its income is "unrelated business taxable
income" ("UBTI") within the meaning of Section 512 of the Code. All "excess
inclusions" of a REMIC allocated to a REMIC Residual Certificate held by a
Tax-Exempt Investor will be considered UBTI and thus will be subject to federal
income tax. See "Certain Federal Income Tax Consequences--REMICs--Taxation of
Owners of REMIC Residual Certificates-Excess Inclusions".
LEGAL INVESTMENT
If and to the extent so specified in the related Prospectus Supplement,
the Offered Certificates of any Series will constitute "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, 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.
-101-
<PAGE>
Prior to December 31, 1996, only Classes of Offered Certificates that
(i) were rated in one of the two highest rating categories by one or more Rating
Agencies and (ii) were 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, and originated by the types of originators specified in SMMEA, would
be "mortgage related securities" for purposes of SMMEA. Furthermore, under SMMEA
as originally enacted, if a state enacted legislation prior to October 3, 1991
that specifically limited the legal investment authority of any the entities
referred to in the preceding paragraph with respect to "mortgage related
securities" under such definition, Offered Certificates would constitute legal
investments for entities subject to such legislation only to the extent provided
in such legislation.
Effective December 31, 1996, the definition of "mortgage related
securities" was modified to include among the types of loans to which such
securities may relate, loans secured by "one or more parcels of real estate upon
which is located one or more commercial structures". In addition, the related
legislative history states 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 "mortgage related securities" under this expanded
definition 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.
The Federal Financial Institutions Examination Council has issued a
supervisory policy statement (the "Policy Statement") applicable to all
depository institutions, setting forth guidelines for and significant
restrictions on investments in "high-risk mortgage securities". The Policy
Statement has been adopted by the Federal Reserve Board, the Office of the
Comptroller of the Currency, the FDIC and the OTS (as defined herein). The
Policy Statement generally indicates that a mortgage derivative product will be
deemed to be high risk if it exhibits greater price volatility than a standard
fixed rate thirty-year mortgage security. According to the Policy Statement,
prior to purchase, a depository institution will be required to determine
whether a mortgage derivative product that it is considering acquiring is
high-risk, and if so that the proposed acquisition would reduce the
institution's overall interest rate risk. Reliance on analysis and documentation
obtained from a securities dealer or other outside party without internal
analysis by the institution would be unacceptable. There can be no assurance as
to which Classes of Certificates, including Offered Certificates, will be
treated as high-risk under the Policy Statement.
-102-
<PAGE>
The predecessor to the Office of Thrift Supervision (the "OTS") issued
a bulletin, entitled "Mortgage Derivative Products and Mortgage Swaps", which is
applicable to thrift institutions regulated by the OTS. The bulletin established
guidelines for the investment by savings institutions in certain "high-risk"
mortgage derivative securities and limitations on the use of such securities by
insolvent, undercapitalized or otherwise "troubled" institutions. According to
the bulletin, such "high-risk" mortgage derivative securities include securities
having certain specified characteristics, which may include certain Classes of
Offered Certificates. In addition, the National Credit Union Administration has
issued regulations governing federal credit union investments which prohibit
investment in certain specified types of securities, which may include certain
Classes of Offered Certificates. Similar policy statements have been issued by
regulators having jurisdiction over other types of depository institutions.
There may be other restrictions on the ability of certain investors
either to purchase certain Classes of Offered Certificates or to purchase any
Class of Offered Certificates representing more than a specified percentage of
the investor's assets. The Depositor makes no representations as to the proper
characterization of any Class of Offered Certificates for legal investment or
other purposes, or as to the ability of particular investors to purchase any
Class of Offered Certificates under applicable legal investment restrictions.
These uncertainties may adversely affect the liquidity of any Class of Offered
Certificates. Accordingly, all investors whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their legal advisors in
determining whether and to what extent the Offered Certificates of any Class and
Series constitute legal investments or are subject to investment, capital or
other restrictions.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, 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 to cover expenses related thereto. 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.
METHOD OF DISTRIBUTION
The Certificates offered hereby and by the related Prospectus
Supplements will be offered in Series through one or more of the methods
described below. The Prospectus Supplement prepared for the Offered Certificates
of each Series will describe the method of offering being utilized for such
Offered Certificates and will state the net proceeds to the Depositor from the
sale of such Offered Certificates.
The Depositor intends that Offered Certificates will be offered through
the following methods from time to time and that offerings may be made
concurrently through more than one of these methods or that an offering of the
Offered Certificates of a particular Series may be made through a combination of
two or more of these methods. Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting
and public offering by one or more underwriters specified
in the related Prospectus Supplement;
2. By placements by the Depositor with institutional investors
through dealers; and
3. By direct placements by the Depositor with institutional
investors.
In addition, if specified in the related Prospectus Supplement, the
Offered Certificates of a Series may be offered in whole or in part to the
seller of the related Mortgage Assets that would comprise the Trust Fund for
such Certificates.
-103-
<PAGE>
If underwriters are used in a sale of any Offered Certificates (other
than in connection with an underwriting on a best efforts basis), such
Certificates will be acquired by the underwriters for their own account and may
be resold from time to time in one or more transactions, including negotiated
transactions, at fixed public offering prices or at varying prices to be
determined at the time of sale or at the time of commitment therefor. The
managing underwriter or underwriters with respect to the offer and sale of
Offered Certificates of a particular Series will be set forth on the cover of
the Prospectus Supplement relating to such Series and the members of the
underwriting syndicate, if any, will be named in such Prospectus Supplement.
In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of the Offered
Certificates in the form of discounts, concessions or commissions. Underwriters
and dealers participating in the distribution of the Offered Certificates may be
deemed to be underwriters in connection with such Certificates, and any
discounts or commissions received by them from the Depositor and any profit on
the resale of Offered Certificates by them may be deemed to be underwriting
discounts and commissions under the Securities Act.
It is anticipated that the underwriting agreement pertaining to the
sale of the Offered Certificates of any Series will provide that the obligations
of the underwriters will be subject to certain conditions precedent, that the
underwriters will be obligated to purchase all such Certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that, in limited circumstances, the Depositor will indemnify the
several underwriters and the underwriters will indemnify the Depositor against
certain civil liabilities, including liabilities under the Securities Act, or
will contribute to payments required to be made in respect thereof.
The Prospectus Supplement with respect to any Series offered by
placements through dealers 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.
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.
Holders of Offered Certificates should consult with their legal advisors in this
regard prior to any such reoffer or sale.
As to any Series, only those Classes rated in an investment grade
rating category by any Rating Agency will be offered hereby. Any unrated Class
may be initially retained by the Depositor, and may be sold by the Depositor at
any time to one or more institutional investors.
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 Sidley & Austin.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series, and no
Trust Fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related Series. Accordingly, no
financial statements with respect to any Trust Fund will be included in this
Prospectus or in the related Prospectus Supplement. The Depositor has determined
that its financial statements will not be material to the offering of any
Offered Certificates.
-104-
<PAGE>
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 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 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 might, in certain
cases fail to recoup their initial investments. Furthermore, ratings on mortgage
pass-through certificates do not address the price of such certificates or the
suitability of such certificates to the investor.
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.
-105-
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
401(c) Regulations........................................................102
Accrual Certificates.......................................................12
Accrued Certificate Interest...............................................44
ACMs.......................................................................73
ADA .......................................................................76
ARM Loans..................................................................35
Available Distribution Amount..............................................43
Book-Entry Certificates....................................................43
Call Risk .................................................................18
Cash Flow Agreement........................................................13
CERCLA ....................................................................72
Certificate Account........................................................54
Certificate Notional Amount................................................11
Certificate Owner .........................................................48
Certificate Principal Balance..............................................11
Certificates ...............................................................1
Class.......................................................................1
Closing Date ..............................................................10
Code ......................................................................14
Commercial Properties......................................................28
Commission..................................................................3
Committee Report...........................................................79
Companion Class............................................................45
Condemnation Proceeds......................................................54
Contributions Tax .........................................................89
Controlled Amortization Class..............................................45
Controlled Amortization Classes............................................11
Cooperatives...............................................................28
CPR .......................................................................40
Credit Support.............................................................13
Crime Control Act .........................................................76
Cut-off Date...............................................................10
Debt Service Coverage Ratio................................................33
Definitive Certificates....................................................43
Depositor...................................................................1
Determination Date.........................................................43
Distribution Date .........................................................12
Distribution Date Statement................................................46
DOL.......................................................................100
DTC.........................................................................3
DTC Participants ..........................................................27
Due Dates .................................................................34
Due Period.................................................................38
Equity Participation.......................................................34
ERISA......................................................................15
Events of Default .........................................................62
Excess Funds...............................................................42
Exchange Act................................................................3
Extension Risk.............................................................18
FAMC.......................................................................35
FAMC Certificates .........................................................35
FHLMC......................................................................35
FHLMC Certificates.........................................................35
Financial Intermediary.....................................................48
FNMA.......................................................................35
FNMA Certificates .........................................................35
Garn Act...................................................................74
GNMA.......................................................................35
GNMA Certificates .........................................................35
Grantor Trust Certificates.................................................14
Grantor Trust Fractional Interest Certificate..............................92
Grantor Trust Fund.........................................................77
Grantor Trust Strip Certificate............................................93
Insurance Proceeds.........................................................54
IRS........................................................................79
Issue Premium..............................................................85
Lender Liability Act.......................................................73
Letter of Credit Bank......................................................66
Liquidation Proceeds.......................................................54
Loan-to-Value Ratio........................................................33
Lock-out Date..............................................................34
Lock-out Period ...........................................................34
Manager.....................................................................8
Mark-to-Market Regulations.................................................87
Master Servicer.............................................................8
MBS....................................................................10, 28
MBS Administrator ..........................................................8
MBS Agreement..............................................................35
MBS Issuer.................................................................35
MBS Servicer...............................................................36
MBS Trustee ...............................................................36
Mortgage Asset Pool.........................................................1
Mortgage Asset Seller......................................................28
Mortgage Assets.........................................................1, 28
Mortgage Loan..............................................................67
Mortgage Loans.......................................................1, 8, 28
Mortgage Notes.............................................................28
Mortgage Rate...............................................................9
Mortgaged Properties.......................................................28
Mortgages .................................................................28
Multifamily Properties.....................................................28
Net Leases.................................................................33
Net Operating Income.......................................................33
Nonrecoverable Advance.....................................................46
OCC.......................................................................103
Offered Certificates........................................................1
OID Regulations............................................................77
Originator.................................................................28
-106-
<PAGE>
OTS.......................................................................104
Parties in Interest.......................................................100
Pass-Through Rate .........................................................11
Percentage Interest........................................................43
Permitted Investments......................................................54
Plan Asset Regulations....................................................100
Plans.....................................................................100
Policy Statement ........................................................103
Pooling Agreement .........................................................10
Prepayment Assumption..............................................79, 95, 96
Prepayment Interest Shortfall..............................................38
Prepayment Premium.........................................................34
Prohibited Transactions Tax................................................89
Prospectus Supplement.......................................................1
PTCE......................................................................101
Purchase Price.............................................................51
Rating Agency..............................................................15
Record Date................................................................43
Related Proceeds...........................................................46
Relief Act.................................................................76
REMIC...................................................................2, 77
REMIC Administrator.........................................................8
REMIC Certificates.........................................................77
REMIC Provisions .........................................................77
REMIC Regular Certificates.................................................14
REMIC Regulations .........................................................77
REMIC Residual Certificates................................................14
REO Property...............................................................52
RICO.......................................................................76
Section 42 Properties......................................................21
Securities Act..............................................................3
Senior Certificates........................................................10
Senior Liens...............................................................28
Series......................................................................1
SMMEA......................................................................15
SPA........................................................................40
Special Servicer ...........................................................8
Stripped Interest Certificates.............................................11
Stripped Principal Certificates............................................11
Sub-Servicer...............................................................53
Sub-Servicing Agreement....................................................53
Subordinate Certificates...................................................10
Tax Exempt Investor.......................................................102
Tiered REMICs..............................................................79
Title V ...................................................................75
Trust Assets................................................................2
Trust Fund..................................................................1
Trustee.....................................................................8
UBTI......................................................................102
UCC........................................................................68
Undelivered Mortgage Assets................................................10
United States Person.......................................................92
Value......................................................................33
Voting Rights..............................................................47
Warranting Party...........................................................50
-107-
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
The attached diskette contains one spreadsheet file (the "Spreadsheet File")
that can be put on a user-specified hard drive or network drive. This file is
"DLJ98CF1.XLS". The file "DLJ98CF1.XLS" is a Microsoft Excel(1), Version 5.0
spreadsheet. The file provides, in electronic format, certain statistical
information that appears under the caption "Description of the Mortgage Pool" in
the Prospectus Supplement. Defined terms used in the Spreadsheet File but not
otherwise defined therein shall have the respective meanings assigned to them in
the Prospectus Supplement. All the information contained in the Spreadsheet File
is subject to the same limitations and qualifications contained in the
Prospectus Supplement. Prospective Investors are strongly urged to read the
Prospectus Supplement and accompanying Prospectus in its entirety prior to
accessing the Spreadsheet File.
- - --------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this Prospectus Supplement and
the 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
Underwriter. This Prospectus Supplement and the 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. Neither the delivery of this Prospectus
Supplement and the 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
Prospectus.
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Table of Contents............................................S-5
Transaction Overview.........................................S-8
Summary of Prospectus Supplement.............................S-9
Risk Factors................................................S-41
Description of the Mortgage Pool............................S-47
Servicing of the Mortgage Loans.............................S-70
Description of the Certificates.............................S-81
Yield and Maturity Considerations...........................S-99
Certain Federal Income Tax Consequences....................S-103
Method of Distribution.....................................S-106
Legal Matters..............................................S-107
ERISA Considerations.......................................S-107
Legal Investment...........................................S-109
Ratings....................................................S-110
Index of Principal Definitions.............................S-112
Exhibit A-1................................................A-1-1
Exhibit A-2................................................A-2-1
Exhibit B....................................................B-1
Exhibit C....................................................C-1
Exhibit D....................................................D-1
Prospectus
Prospectus Supplement..........................................2
Available Information..........................................3
Incorporation of Certain Information by Reference..............4
Table of Contents..............................................5
Summary of Prospectus..........................................8
Risk Factors..................................................16
Description of the Trust Funds................................28
Yield and Maturity Considerations.............................37
The Depositor.................................................42
Description of the Certificates...............................42
Description of the Pooling Agreements.........................49
Description of Credit Support.................................65
Certain Legal Aspects of Mortgage Loans.......................67
Certain Federal Income Tax Consequences.......................77
State and Other Tax Consequences............................100
ERISA Considerations.........................................100
Legal Investment.............................................102
Use of Proceeds..............................................104
Method of Distribution.......................................104
Legal Matters................................................105
Financial Information........................................105
Rating.......................................................106
Index of Principal Definitions...............................107
DLJ COMMERCIAL MORTGAGE CORP.
(Depositor)
$748,600,000
(Approximate)
Commercial Mortgage Pass-Through
Certificates, Series 1998-CF1
Class CP, Class S, Class A-1A,
Class A-1B, Class A-2, Class A-3,
Class B-1 and Class B-2
PROSPECTUS SUPPLEMENT
Donaldson, Lufkin & Jenrette
Securities Corporation
Dated February 20, 1998
